On the basis of a dynamic econometric model of the UK beef and dairy sector, developed by the Dairy Information and Policy Unit (DIPU) of agri-food economic and policy consultants Promar CEAS International, it is estimated that the medium to long term effect of foot-and-mouth disease (FMD) will cost the UK dairy and beef industry up to £330 million in revenue foregone. This potential revenue loss is in addition to short term costs such as export loss, displacement of domestic trade through imports etc. which have been widely reported.

"This estimate is based on a model which compares the medium to long term size of the national dairy and beef herds assuming no change and an estimated 2% and 3% cull in the dairy and beef cow herds respectively due to FMD", explains Dr. Oliver.

It is estimated that a 2% reduction in the size of the national dairy herd due to FMD will require a five year recovery period to levels expected without a cull and result in income foregone by dairy farmers of £150 million.  By 2006 the size of the herd will have returned to its non-FMD baseline trend with 2.18 million cows, as compared to 2.38 million cows in 2000.

A 3% reduction in the national beef breeding herd will require a seven year recovery period to return to a herd size of 1.86 million animals as compared to 2.0 million animals in 2000. Dr Oliver concludes that, "Revenue foregone could amount to a further £180 million".

NOTES FOR EDITORS:

Most estimates of the cost of foot-and-mouth disease (FMD) to UK livestock and dairy farming do not take into account the complex dynamics of the dairy and the beef breeding herds and, therefore, ignore both the costs of adjustment, as well as future income foregone.  Dairy and breeding herds follow adjustment paths that depend on fertility and replacement rates, as well as on milk and beef prices and feed costs with the adjustment usually following a cyclical pattern.  This suggests that culling due to FMD may amplify normal troughs and dampen the normal peaks of the herd size evolution.  This is likely to result in additional costs in future as outlined above in terms of income foregone, unless price levels change sufficiently enough to alter herd adjustment rates. A 2% cull in the dairy herd equates to some 45,000 dairy cows, whilst a 3% cull in the beef cow herd is approximately equal to 58,000 beef cows. To date approximately 25,000 cattle have been slaughtered.

For further information please contact:

Dr Edward Oliver
Dairy Information and Policy Unit
Promar CEAS International
Tel:  01233 812181
Fax:  01233 813309
e-mail: edward.oliver@promar-ceas.com