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to $US4 billion (Seebeck, 2007). NAO Risk assessment and management of animal disease-related biosecurity 5 (2002) estimates that the UK government spent approximately £1.3 billion ($US2.6 billion) in controlling and eradicating the 2001 FMD outbreak. Cupp, Walker and Hillison (2004) estimate that the US 1983–1984 avian influenza outbreaks cost $US63 million and the 2002 case led to a producer loss of $US130–140 million. Disease-related costs also include farmer compensation for livestock-related losses. In the 2001 UK FMD outbreak, this cost £1.4 billion ($US2.7 billion; NAO, 2002). Disease control and management measures such as quarantine zones and restricted movements can further increase business revenue losses (Breeze, 2004). NAO (2002) indicate that tourism and supporting industries suffered the largest financial impact in the 2001 UK FMD outbreak. Visitors were deterred by the movement ban and media images of mass carcass disposal pyres. Environmental costs also arise, including the value of lost wildlife plus environmental damages from disposal of contaminated carcasses (Sumner, Bervejillo and Jarvis, 2005). 2.2.2 Costs associated with market and trade disruptions Burton and Young (1996) find that animal disease outbreaks reduce consumer confidence and decrease consumption of directly affected meat products. Immediately after the 1996 UK announcement of a possible link between bovine spongiform encephalopathy (BSE) and it is human version, vCJD, sales of beef products decreased by 40% and household consumption decreased by 26% (Leeming and Tuner, 2004). McCluskey et al. (2005) find that Japanese beef consumption dropped by 70% immediately after the 2001 Japanese BSE discovery. Schlenker and Villa Boss (2006) find a beef sales reduction following the first US BSE discovery, but that the effect dissipated over three months. Atkinson (1999) found consumption effects differing for different cuts of beef with burgers and mince experiencing larger BSE induced effects than better cuts. Outbreaks affect meat prices and change price margins along the supply chain and across products. Leeming and Turner (2004) report that during the 1995–1997 UK BSE outbreaks, cattle price fell by 21% while the price of sheep and pigs rose by 19–21%. Lloyd et al. (2001) indicate that UK beef prices at retail, wholesale and producer levels fell by 1.7, 2.25 and 3.0 pence per kilogram following the 1996 UK BSE discovery. Sanjuan and Dawson (2003) and Lloyd et al. (2006) find that retail-to-farm price margin of beef increased following the UK BSE discovery in 1996. These findings suggest that animal disease outbreaks may cause differential impacts along the supply chain, which changes the price margin. As a result, the relative profit at the farm, wholesale and retail levels will change as well. Other studies have investigated the impact of food scares on stock, equity and futures prices. Henson and Mazzocchi (2002) found that the 1996 UK BSE discovery had a negative impact on stock prices of 24 UK companies. Schlenker and Villas-Boas (2006) find that the first US BSE discovery caused futures prices to drop compared with the estimated retail price change, but contracts with longer maturity had a smaller drop. Market distortions can be regional, national or even international. Following the 1996 UK BSE event, the European Union banned UK beef exports. The lost exports were worth about £600 million, plus there was a loss of £70 million in live calf value (Atkinson, 1999). Japan immediately stopped beef imports from the US after the 2003 US BSE case, which caused an export loss of $US1.7 billion (CIDRAP, 2005). International trade regulations, per OIE (The Office International des Epizooties), restrict 6 Y. Jin, B.A. McCarl and L. Elbakidze trade into FMD disease-free countries from areas that have had outbreaks or have used vaccination strategies (Breeze, 2004). 2.2.3 Additional or enhanced consequences of intentional introductions of animal pathogens Unintentional animal disease outbreaks have caused market and trade disruptions associated with the affected and related commodities. With greater fear and terror resulting from a deliberate attack using animal pathogens, we envision even greater market consequences. A terrorist agent will exploit vulnerabilities, selecting animal pathogens that pose a national security risk, with easy dissemination, high degree of contagion and/or great potential to cause public fear and social disruption (Blancou and Pearson, 2003; Chalk, 2004; Cupp, Walker and Hillison, 2004). OIE lists FMD, Bluetongue, Rift Valley Fever, BSE and avian influenza as pathogens that can cause enormous economic and social consequences. Cupp, Walker and Hillison (2004) indicate that a terrorist agent is likely to introduce animal pathogen(s) at several critical points along the supply chain. Pendell et al. (2007) show that economic damages would be substantially higher if FMD outbreaks were started at five large feedlots simultaneously rather than at a single medium size feedlot or in a single cow–calf herd. It is likely that intentional animal disease outbreaks will cause greater economic and social disruptions than unintentional outbreaks. Blancou and Pearson (2003) argue that even a declaration of deliberate infection would likely cause immediate and severe losses. For example, Cupp, Walker and Hillison (2004) indicate that a veterinarian, who noticed and reported possible signs of FMD disease in Kansas that turned out to be false 48 hours later, led to plummeting market prices for cattle futures and a loss estimated at $US50 million. 3 Animal disease risk management Given the vulnerabilities of agriculture and the potentially enormous consequences of infectious animal disease outbreaks, especially of deliberate outbreaks, there is a need to improve security measures to make the exploitation of the vulnerabilities harder and to minimise the overall costs. We address three key issues associated with animal disease risk management: 1 Distinctions between ex ante and ex post strategies as well as identification of strategies that can be used both ex ante and ex post. 2 Balancing between ex ante and ex post