BSE outbreaks in the United States and Canada and the Impact on Trade

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BSE outbreaks in the United States and Canada and
the Impact on Trade

• Hyun J. JinWon W. Koo
• Center for Agricultural Policy and Trade
  StudiesNorth Dakota State University

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BSE

• BSE (Bovine Spongiform Encephalophthy), widely
  known as mad Cow Disease is a lethal, central
  nervous system disease targeting cattle.

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Occurrence of BSE in Europe

• First outbreak in the U.K. (1986)
• The total number of infected cattle in Europe
• over 34,000 by 1992.
• over 180,000 by 2000.
• The U.K. government announced the linkage between
  BSE and Creuzfledt-Jocob disease (vCJD) on March
  20, 1996 major alert on consumption of infected
  beef.
• Approximately 135 people worldwide have been
  infected with vCJD from outbreak in Europe.

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Effects

• Major reductions in domestic consumption of beef.
• Major reductions in exports - most countries
  banned imports of European beef/cattle.
• Increases in imports of beef from uninfected
  countries, mainly the U.S. and Australia.

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Occurrence of BSE in Japan

• First case in Chiba in September 2001.
• Second case in Hokkaido in November 2001.
• Two additional cases in December 2001.

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Effects

• Major reduction in beef consumption in Japan
• About 60 of Japanese consumers have stopped
  eating beef since the first outbreak of BSE.
• Major reduction in beef exports
• S. Korea, Singapore, China, Malaysia, and
  Philippines banned imports of Japanese beef.
• Increase in imports of beef from uninfected
  countries such as Australia and the U.S.
• Increase in domestic consumption of beef
  substitutes.

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• Jin and Koo conducted a study to test whether
  there was a structural change in Japanese
  consumers demand for meat as a result of the BSE
  outbreak.
• Method non-parametric approach using WARP test.
• Results experiencing structural change in meat
  consumption.

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BSE outbreak in Canada

• First case in May 2003.

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Effects

• The United States, a major importer of Canadian
  beef/cattle, banned imports of Canadian beef and
  cattle and ruminant animal products to minimize
  BSE risk to the U.S. livestock industry.
• Other major importers also banned Canadian
  beef/cattle.
• Moderate reduction in Canadian domestic
  consumption of beef.
• No significant changes in meat consumption
  pattern in Canada.

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BSE outbreak in the United States

• First case in the state of Washington in December
  2003.

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Effects

• Major reductions in domestic and export demand
• 5 - 10 reductions in domestic consumption of
  beef.
• Importers banned imports of U.S. beef.
• No significant changes in meat consumption
  pattern in the U.S.

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Recent Research

• Jin, Skripnitchenko, and Koo conducted a study to
  analyze the effects of the U.S. BSE outbreak on
  the beef and cattle industry.
• Method econometric simulation model.

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• Jin, Kim and Koo conducted another study to
  analyze the effects on U.S. agribusiness firms.
• Method Event Study

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Cumulative Excess and Abnormal Daily Returns for the Sectors Cumulative Excess and Abnormal Daily Returns for the Sectors Cumulative Excess and Abnormal Daily Returns for the Sectors Cumulative Excess and Abnormal Daily Returns for the Sectors Cumulative Excess and Abnormal Daily Returns for the Sectors Cumulative Excess and Abnormal Daily Returns for the Sectors
Sector 12/24/03 12/24/03 12/24/03 12/29/03 12/24/03 01/02/04 12/24/03 01/06/04 12/24/03 01/08/04
Ranch and Dairy -0.116 0.010 -0.461 -1.168 -2.085
Mixed Meats -1.443 -3.095 -3.237 -3.330 -3.477
Other Meats 8.817 8.863 8.940 9.190 8.595
Grain Marketing 1.572 0.835 0.959 1.005 1.164
Farm Machine Equip. -2.402 -2.596 -2.531 -3.194 -2668
Other Foods -0.581 0.031 0.011 0.218 -0.310
Notes The superscript denotes significance at the 5 level. Notes The superscript denotes significance at the 5 level. Notes The superscript denotes significance at the 5 level. Notes The superscript denotes significance at the 5 level. Notes The superscript denotes significance at the 5 level. Notes The superscript denotes significance at the 5 level.
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Thank you!