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Foot and Mouth/BSE crisis Impact on the European livestock sector

1. Foot and Mouth/BSE crisis Impact on the European livestock sector. Stresa 31 May - 1 June 2001. European Commission - Agriculture Directorate-General - May 31 2001. 2. Overview. - Impact of BSE and FMD on the European livestock sector - Focus on beef

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Foot and Mouth/BSE crisis Impact on the European livestock sector

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  1. 1 Foot and Mouth/BSE crisis Impact on the European livestock sector Stresa 31 May - 1 June 2001 European Commission - Agriculture Directorate-General - May 31 2001

  2. 2 Overview - Impact of BSE and FMD on the European livestock sector - Focus on beef - Possible effects on the world markets Coverage Limits - Both crisis are not over, yet - Projections are still provisional Structure - Facts - previous crisis / background - current crisis / update - Measures - in place - proposed - Effects - short term - long term European Commission - Agriculture Directorate-General May 31 2001

  3. Facts: the BSE crisis of 1996 /1 3 - Scrapie, a brain wasting disease that affect sheep, has been known for centuries - BSE (Bovine Spongiform Encephalopathy) was first diagnosed in cattle in 1986 BSE: an old problem March 1996 - Scientific recognition of a possible link between BSE and the human variant of the Creutzfeld-Jakob disease Impact - Consumption - sharp drop in beef consumption (more than 7% at European level in the first year) European Commission - Agriculture Directorate-General May 31 2001

  4. Facts: the BSE crisis of 1996 /2 4 2 Slaughter schemes: - OTMS (Over Thirty Months Scheme) UK around 4.8 million animals (at the end of 2000) - Selective Cull around 100 thousand animals (at the end of 2000) Measures 2 Emergency supply-side schemes: - Calf processing around 2.8 million animals (at the end of the scheme in 99) - Early marketing around 3.5 million animals Impact on production European Commission - Agriculture Directorate-General May 31 2001

  5. 5 Facts: the BSE crisis of 2000 /1 France (anticipate the testing of over-thirty-months animals) - October 2000: - increasing number of BSE cases unveiled - discovery of fraud in slaughterings - TV coverage on nvCJD Chronology Germany - 24/11/2000: - first case of BSE in a country considered as BSE free Spain 22/11/2000 Italy 17/01/2001 Currently only 4 Member States have not reported any cases of BSE: Austria, Sweden, Finland and Greece European Commission - Agriculture Directorate-General May 31 2001

  6. 6 Facts: the BSE crisis of 2000 /2 Impact on Consumption of beef meat According to the Beef Management Committee (% change compared to the same months of the previous year) European Commission - Agriculture Directorate-General May 31 2001

  7. 7 Facts: the BSE crisis of 2000 /3 Impact on Consumption of beef meat According to Household consumption surveys (F, I, UK, D) (% change compared to the same period of the previous year) European Commission - Agriculture Directorate-General May 31 2001

  8. 8 Facts: the BSE crisis of 2000 /4 Impact on Consumption of beef meat: Comparison between 2000 => and 1996 => European Commission - Agriculture Directorate-General May 31 2001

  9. 9 Facts: the BSE crisis of 2000 /5 Impact on market prices European Commission - Agriculture Directorate-General May 31 2001

  10. 10 Facts: the BSE crisis of 2000 /6 Impact on Production of beef meat European Commission - Agriculture Directorate-General May 31 2001

  11. 11 Facts: the BSE crisis of 2000 /7 Impact on Exports of beef meat EU exports of beef meat (request for export certificates meat + live in cwe) European Commission - Agriculture Directorate-General May 31 2001

  12. 12 Measures: the BSE crisis of 2000 /1 Reaction plan in three steps 1 Emergency measures MBM ban, Purchase for destruction, SRM ban... 2 Limited changes to the current system 7 points plan 3 Include beef in the Midterm Review 2002 European Commission - Agriculture Directorate-General May 31 2001

  13. 13 Measures: the BSE crisis of 2000 /2 OBJECTIVES MEASURES Detail of objectives and measures (other than OTMS in UK) MBM ban Compulsory testing of >30months animals Extension of SRM (specific risk materials) Ban on mechanically recovered meat Restore consumer confidence in beef PfD Purchase for Destruction >30 months non tested animals More flexible criteria for intervention Reduce surplus/ sustain prices Reduce future production “7 Points plan” proposal European Commission - Agriculture Directorate-General May 31 2001

  14. 14 Measures: the BSE crisis of 2000 /3 OBJECTIVES TOOL Detail of the Seven Points Plan 1. Extensification Reducing stocking density (2 => 1.8) 2. Extensification Making the 90 heads limit compulsory 3. Reduce surplus Introducing a Special Purchase scheme 4. Reduce surplus Allowing larger intervention buying in 5. Reduce incentives Individual premium rights for male bov. 6. Reduce incentives More heifers in the suckler cow quota 7. Boost organic farming Allowing some crops to be grown on set aside land in organic farms Already approved by the beef Management Committee Already agreed by Council and European Parliament The remaining 5 points will be discussed at the June Council European Commission - Agriculture Directorate-General May 31 2001

  15. 15 Effects: the BSE crisis of 2000 /1 How will beef consumption evolve? Beef Management Committee estimates + yearly profiles (% change compared to the same months of the previous year) European Commission - Agriculture Directorate-General May 31 2001

  16. 16 Effects: the BSE crisis of 2000 /2 In theory What drives consumption during a food scare? Lower demand Lower producer price Lower retail price Higher demand Full price transmission In practice Imperfect price transmission (time lag, pricing policies) Lower demand Lower producer price Slightly Lower retail price Which demand level? Psychological factors See standard equation Psychological factors Consumption=f(own price, substitute price, income, ) European Commission - Agriculture Directorate-General May 31 2001

  17. 17 Effects: the BSE crisis of 2000 /3 How will beef production react? Short term response • Extreme short term disturbances • The dramatic drop in beef prices caused a huge retention of animals at the end of 2000 and the beginning of 2001 • Destruction schemes and intervention have withdrawn large quantities of beef meat form the market • However, the delay between production decision and their actual realization, in term of production volumes, take more than one year and therefore beef production is not flexible in the short term to adapt to a different consumption pattern Medium/long term response • A prolonged period of low prices and high stocks could undermine investments in the beef sector and reduce production in the long run. European Commission - Agriculture Directorate-General May 31 2001

  18. 18 Effects: the BSE crisis of 2000 /4 How to measure the long term response? The modeling framework European Commission - Agriculture Directorate-General May 31 2001

  19. 19 Effects: the BSE crisis of 2000 /5 How will beef production react? Possible developments of beef production following different assumption on the consumption drop European Commission - Agriculture Directorate-General May 31 2001

  20. United Kingdom 20/2 - 1664 Ireland 22/3 22/3 1 France 13/3 23/3 2 The Netherlands 20/3 15/4 26 Facts: FMD - Foot and Mouth Disease 2001 /1 20 - The EU has been free of FMD for almost a decade (with some sporadic outbreaks in 1993 (Italy and Greece) and some problems at the Greek border with Turkey) FMD again - EU wide prophylactic vaccination of cattle has been abandoned in 1991 First case Last case Number of cases (until 30/5/2001)) Chronology graph European Commission - Agriculture Directorate-General May 31 2001

  21. Measures: FMD 2001 /1 21 • Export ban and movement restrictions Which strategy against FMD? • Culling (stamping out) of animals • Vaccination European Commission - Agriculture Directorate-General May 31 2001

  22. Measures: FMD 2001 /2 22 • Market closed Movement restrictions • Total interdiction of animal movement between farms • Difficulties in the throughput Export ban • Commission Decision following the advice of the SVC • Own initiatives of affected Member States • Unilateral ban of third countries European Commission - Agriculture Directorate-General May 31 2001

  23. Measures: FMD 2001 /3 23 Culling (stamping out) Updated: 21/5/2001 European Commission - Agriculture Directorate-General May 31 2001

  24. Measures: FMD 2001 /4 24 Description Consequences for exports POLICY Emergency measure to help the killing and the destruction of animals FMD free status 3 months after the last case Suppressive vaccination FMD free status one year after the last case; vaccinated animals excluded from trade Does not require the killing and the destruction of animals Protective vaccination Vaccination of the entire herd (usually cattle) as preventive measure Withdrawal of FMD free status Prophylactic vaccination European Commission - Agriculture Directorate-General May 31 2001

  25. Consequences of FMD 2001 /1 25 UK Sheep Short term Oversupply due to export restrictions i.e. NL pigs Long term Lower production due to reduced herd (i.e. milk deliveries in UK) EU sheep and goat production European Commission - Agriculture Directorate-General May 31 2001

  26. Projections (provisional): Beef and Veal 26 European Commission - Agriculture Directorate-General May 31 2001

  27. Projections (provisional): Pig meat 27 European Commission - Agriculture Directorate-General May 31 2001

  28. Projections (provisional): Poultry Meat 28 European Commission - Agriculture Directorate-General May 31 2001

  29. Projections (provisional): Per capita consumption 29 European Commission - Agriculture Directorate-General May 31 2001

  30. End 30 European Commission - Agriculture Directorate-General May 31 2001

  31. Annex 1: EU demand for meat products

  32. Annex 2: FMD in UK

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