Framework for Estimating Indirect Costs in Animal Health Using Time Series Analysis.

Traditionally, cost-benefit analyses (CBAs) focus on the direct costs of animal disease, including animal mortality, morbidity, and associated response costs. However, such approaches often fail to capture the wider, dynamic market impacts that could arise. The duration of these market dislocations could last well after an initial disease outbreak. More generally, current approaches also muddle definitions of indirect costs, confusing debate on the scope of the totalities of disease-induced economic impacts. The aim of this work was to clarify definitions of indirect costs in the context of animal diseases and to apply this definition to a time series methodological framework to estimate the indirect costs of animal disease control strategies, using a foot and mouth disease (FMD) outbreak in Scotland as a case study. Time series analysis is an econometric method for analyzing statistical relationships between data series over time, thus allowing insights into how market dynamics may change following a disease outbreak. First an epidemiological model simulated FMD disease dynamics based on alternative control strategies. Output from the epidemiological model was used to quantify direct costs and applied in a multivariate vector error correction model to quantify the indirect costs of alternative vaccine stock strategies as a result of FMD. Indirect costs were defined as the economic losses incurred in markets after disease freedom is declared. As such, our definition of indirect costs captures the knock-on price and quantity effects in six agricultural markets after a disease outbreak. Our results suggest that controlling a FMD epidemic with vaccination is less costly in direct and indirect costs relative to a no vaccination (i.e., "cull only") strategy, when considering large FMD outbreaks in Scotland. Our research clarifies and provides a framework for estimating indirect costs, which is applicable to both exotic and endemic diseases. Standard accounting CBAs only capture activities in isolation, ignore linkages across sectors, and do not consider price effects. However, our framework not only delineates when indirect costs start, but also captures the wider knock-on price effects between sectors, which are often omitted from CBAs but are necessary to support decision-making in animal disease prevention and control strategies.

Correction: A framework for estimating society's economic welfare following the introduction of an animal disease: The case of Johne's disease.

[This corrects the article DOI: 10.1371/journal.pone.0198436.].

A framework for estimating society's economic welfare following the introduction of an animal disease: The case of Johne's disease.

Animal diseases are global issues affecting the productivity and financial profitability of affected farms. Johne's disease is distributed on farms worldwide and is an endemic contagious bacterial infection in ruminants caused by Mycobacterium avium subspecies paratuberculosis. In cattle, the clinical disease manifests itself as chronic enteritis resulting in reduced production, weight loss, and eventually death. Johne's disease is prevalent in the UK, including Scotland. Direct costs and losses associated with Johne's disease have been estimated in previous research, confirming an important economic impact of the disease in UK herds. Despite this, the distributional impact of Johne's disease among milk consumers and producers in Scotland has not been estimated. In this paper, we evaluate the change in society's economic welfare, namely to dairy producers (i.e. infected and uninfected herds) and milk consumers in Scotland induced by the introduction of Johne's disease in the national Scottish dairy herd. At the national-level, we conclude that the economic burden falls mainly on producers of infected herds and, to a lesser extent, milk consumers, while producers of uninfected herds benefit from the presence of Johne's. An infected producer's loss per cow is approximately two times larger in magnitude than that of an uninfected producer's gain. Such economic welfare estimates are an important comparison of the relative costs of national herd prevalence and the wider economic welfare implications for both producers and consumers. This is particularly important from a policy, public good, cost sharing, and human health perspective. The economic welfare framework presented in this paper can be applied to other diseases to examine the relative burden of society's economic welfare of alternative livestock disease scenarios. In addition, the sensitivity analysis evaluates uncertainty in economic welfare given limited data and uncertainty in the national herd prevalence, and other input parameters, associated with Johne's disease in Scotland. Therefore, until the prevalence of Johne's is better understood, the full economic cost to Scottish dairy herds remains uncertain but in the meantime the sensitivity analysis evaluates the robustness of economic welfare to such uncertainties.

Financial Vulnerability of Dairy Farms Challenged by Johne's Disease to Changes in Farm Payment Support.

Johne's disease is an endemic contagious bacterial infection of ruminants which is prevalent in the United Kingdom and elsewhere. It can lower financial returns on infected farms by reducing farm productivity through output losses and control expenditures. A farm-level analysis of the economics of the disease was conducted taking account of farm variability and different disease prevalence levels. The aim was to assess the financial impacts of a livestock disease on farms and determine their financial vulnerability if farm support payments were to be removed under future policy reforms. A farm-level optimization model, ScotFarm, was used on 50 Scottish dairy farms taken from the Farm Business Survey to determine the impacts of the disease. A counterfactual comparison of five alternative "disease" scenarios with a "no-disease" scenario was carried out to evaluate economic impact of the disease. The extent of a farm's reliance on direct support payments was considered to be an indicator of their financial vulnerability. Under this definition, farms were grouped into three financial vulnerability risk categories; "low risk," "medium risk," and "high risk" farms. Results show that farms are estimated to incur a loss of 32% on average of their net profit under a standard disease prevalence level. Farms in the "low risk" and "medium risk" categories were estimated to have a lower financial impact of the disease (22 and 28% reduction on farm net profit, respectively) which, along with their lower reliance on farm direct support payments, indicate they would be more resilient to the disease under future changes in farm payment support. On the contrary, farms in the "high risk" category were estimated to have a reduction of 50% on their farm net profit. A majority of these farms (61%) in the "high risk" category move from being profitable to loss making under the standard disease scenario when farm support payments are removed. Of these, 15% do so because of the impact of the disease. These farms will be more vulnerable if changes were to be made in farm support payments under future agricultural policy reforms.