PR 96/16 - BSE CRISIS ON WORLD MEAT ECONOMY

PRELIMINARY UN FOOD AND AGRICULTURE ORGANIZATION STUDY PROJECTS LITTLE IMPACT FROM BOVINE SPONGIFORM ENCEPHALOPATHY (BSE) CRISIS ON WORLD MEAT ECONOMY

Rome, 8 May -- The UN Food and Agriculture Organization (FAO), in a report released today, said that the world meat economy would be little affected in the medium-term by the current Bovine Spongiform Encephalopathy (BSE) crisis. In its initial assessment, FAO used a model that simulates the impact of some possible changes in European Union (EU) policy and consumption behaviour, as well as linkages between the food and feed commodities.

BSE, or Mad Cow Disease, was elevated to crisis level, severely disrupting meat markets of the European Union, when the Spongiform Encephalopathy Advisory Committee of the United Kingdom (UK) announced on 20 March that the most likely explanation for ten cases of Variant Creutzfeldt-Jakob Disease (V-CJD) in people under 42 was ingestion of beef products from cattle with BSE.

The FAO report was based on results obtained from its World Food Model, which "suggest that the global impact of the BSE crisis on prices, production, consumption and trade of the main livestock products is likely to be small."

Should, however, a link between BSE and V-CJD eventually be proven, the effects would be much more profound and long lasting, the report said, adding,"the effects of the steps that have already been taken and the reactions by consumers, indicate that the economic problems which would have to be faced could be considerable."

Assuming the culling of half of the dairy and beef herds in the UK, in the absence of definite policy decisions, and a 10 percent drop in beef consumption in the UK and a 5 percent reduction in consumption in other countries of the EU, the changes in global production, consumption and trade by the year 2000 do not exceed 1 percent of the baseline projections. The impact on bovine meat prices is expected to remain small, the increases reaching nearly 2.5 percent in 2000. The simulations also suggest that world prices of feedgrains and oilmeals will not be subject to notable changes.

According to the report: "The overall impact on usage of feedgrains and oilmeals will essentially depend on the extent of decline in overall meat consumption and of the substitution that will take place between different meat products. If human health is found not to be affected, most other effects are likely to be temporary, depending on the success of governments, particularly of the UK, in reassuring consumers about the safety of UK beef. This will depend on their ability to contain and then eradicate the BSE from the cattle and dairy herds."

The FAO report was based on a number of assumptions on the extent and timing of culling of dairy cattle and cows used to produce beef calves in the UK, the pattern of herd rebuilding in the UK, the expected reduction in beef consumption and the consequent shift to other types of meat in the EU. On the supply side, the report uses a single scenario to capture the effects of slaughtering, herd rebuilding and the resulting changes in the off-take rates in the UK. The report assumes the combined effects on UK beef production are spread over 6 years, leading to reductions of 6 percent in 1996 from the 1995 level and a gradual fall to about 3 percent of the 1995 level in 2001. With no detailed policies announced by the UK at the time of writing, the report concedes" it is not possible to determine the degree of "realism" embodied in this particular scenario."

The report says that the major impact will be felt in the EU, where production of bovine meat is expected to be affected negatively thoughout the 15-year projection period, while the negative impact on the consumption of bovine products in the EU was seen as significant only in the short run.

The FAO report was produced for its Intergovernmental Group on Meat, meeting in Bologna, 8-10 May. It provides basic information on the current state of knowledge on BSE and the possible linkages between BSE and V-CJD and it assesses the possible impact of the crisis on the world meat economy using FAO¦s World Food Model, based on certain assumptions rather than firm policy decisions.

The model used for the FAO report covers the impact of BSE on meat prices, meat and poultry production levels, global meat consumption, trade, and feed demand.