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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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Presentation Transcript
slide1

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

slide2

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

slide3

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

slide4

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

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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

slide6

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

slide7

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

slide8

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

slide9

9

Facts: the BSE crisis of 2000 /5

Impact on market prices

European Commission - Agriculture Directorate-General May 31 2001

slide10

10

Facts: the BSE crisis of 2000 /6

Impact on

Production

of beef meat

European Commission - Agriculture Directorate-General May 31 2001

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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

slide12

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

slide13

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

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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

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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

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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

slide17

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

slide18

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

slide19

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

slide20

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

slide21

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

slide22

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

slide23

Measures: FMD 2001 /3

23

Culling (stamping out)

Updated: 21/5/2001

European Commission - Agriculture Directorate-General May 31 2001

slide24

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

slide25

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

slide26

Projections (provisional): Beef and Veal

26

European Commission - Agriculture Directorate-General May 31 2001

slide27

Projections (provisional): Pig meat

27

European Commission - Agriculture Directorate-General May 31 2001

slide28

Projections (provisional): Poultry Meat

28

European Commission - Agriculture Directorate-General May 31 2001

slide29

Projections (provisional): Per capita consumption

29

European Commission - Agriculture Directorate-General May 31 2001

slide30

End

30

European Commission - Agriculture Directorate-General May 31 2001