Foot-and-Mouth Disease in Brazil: Export Impacts of the October 2005 Outbreak:

The announcement on October 8, 2005, of an outbreak of foot-and-mouth disease (FMD) in Brazil’s important beef producing state of Mato Grosso do Sul (MGS) raised concerns over adjustments that will likely become necessary in global meat markets due to Brazil’s status as the world’s largest beef and poultry exporter and third-largest pork exporter.

Hogs/Pork:

Fourth-quarter pork production is expected to be slightly more than 2 percent above the same period a year ago, with prices for 51-52 percent lean live equivalent hogs between $43 and $45 per hundredweight (cwt) for the quarter. For the year, 2005 production is expected to be 1 percent above last year. Third-quarter exports were almost 29 percent higher than a year ago; on a cumulated basis, exports are running almost 26 percent ahead of the first three-quarters of 2004. Pork imports in the first three-quarters of 2005 were more than 11 percent below the same time last year. January-September 2005 live swine imports were almost 7 percent lower than the same period last year.

Impacts of the October 2005 Outbreak of Foot-and-Mouth Disease in Brazil

The announcement on October 8, 2005, of an outbreak of foot-and-mouth disease (FMD) in Brazil’s important beef producing state of Mato Grosso do Sul (MGS) raised concerns over adjustments that will likely become necessary in global meat markets due to Brazil’s status as the world’s largest beef and poultry exporter and third-largest pork exporter. To date, 50 countries have imposed restrictions on Brazilian beef and pork exports from MGS, with sales from two neighboring States—São Paulo and Paraná—also being affected (see map and table 1). Mato Grosso do Sul (MGS), which shares its western border with Paraguay, is Brazil’s largest cattle producing state, with over 19.8 million head (12 percent of the country’s cattle herd) in 2004. It also accounts for the largest share of cattle slaughter in the country--16 percent (5.5 million head). The 2004 slaughter represents an increase of nearly 40 percent since 1995, highlighting the significant growth of the MGS cattle sector in the past 10 years. MGS was the second-largest beef exporting state of Brazil in 2004.

Prior to the outbreak, Brazil was forecast to export 1.9 million tons of beef in 2005, equivalent to 26 percent of global beef trade (FAS/USDA). Beef exports from January through September of this year were 30 percent higher than exports in the same period in 2004 and double the exports in January through September 2003. Current forecast projects Brazil’s exports in 2005 and 2006 to be 1.8 million tons as beef exports are shifted to areas which are free of the disease. If outbreaks occur in other Brazilian States, trade losses for Brazil could be more significant, even with recognition of regionalization by world importers. Despite the trade reduction, Brazil will still remain a significant player in world beef markets (FAS/USDA).

Official controls to limit the spread of FMD in the country include notification to the World Organisation for Animal Health (OIE), banning the sale of meat and byproducts in MGS, and setting up sanitary checkpoints throughout a 25-kilometer (16 mile) buffer zone around the site of the initial outbreak. The disruption in trade from the current outbreak is estimated by the Ministry of Agriculture, Livestock, and Food Supply (MAPA) to be as high as $2 billion in annual livestock sales. But the impact is likely to rise above that due to restrictions on commerce with neighbouring States that are beginning to affect other products, such as poultry, dairy, grains, and fruit.

More importantly, the recent outbreak represents a significant setback of the last decade’s efforts by Brazil to gain access to the important consumer markets for fresh, chilled, and frozen beef and pork products of NAFTA members—the United States, Canada, and Mexico—as well as Japan, South Korea, and Taiwan. These countries had been restricting imports of fresh/frozen beef and pork products from Brazil due to its FMD disease status. The outbreak delays the evaluation of Brazil’s request to export fresh beef and pork products to the United States.

Following the initial report of the outbreak in the municipality of Eldorado in MGS, government officials at the Department of Animal Health (DSA), and MAPA have reported 41 additional municipalities “at risk” for FMD. In early November 2005, the industry gained some respite as DSA confirmed that Paraná state had tested negative for FMD. An outbreak in this state had been feared to put at further risk the key pork producing state of Santa Catarina the only state in Brazil recognized by the MAPA (but not the OIE) as free of FMD without vaccination.

Brazil’s Efforts to Eradicate FMD

Since 1998, the Government of Brazil has actively implemented efforts to eradicate FMD under the National Program for FMD Eradication (Programa Nacional de Erradicação da Febre Aftosa - PNEFA). The objective of the program was to eradicate the disease by the end of 2005. To complement these efforts, and to gain a firmer foothold in international markets, Brazil began making efforts to improve meat safety in 2002 by creating a livestock traceability program SISBOV (Brazilian System of Identification and Certification of Origin for Cattle) to identify and document the origin of each animal slaughtered, its genetic make-up, the conditions under which it was raised, its feed, its environment, and the conditions of its slaughter.

Following the guidelines of the OIE and the WTO’s sanitary and phytosanitary (SPS) agreement, Brazil divided its territory into five regional markets (“circuitos” in Portuguese) in an effort to manage sanitary controls more effectively. Prior to the October 2005 outbreak, OIE recognized the states of São Paulo, Paraná, Santa Catarina, Rio Grande Do Sul, Rio de Janeiro, Mato Grosso, Mato Grosso do Sul, Goiás, Minas Gerais, Espírito Santo, Distrito Federal, Tocantins, Bahia, Sergipe, Rondonia, and the State of Acre along with two adjacent municipalities of the Amazon state as being free of FMD, with vaccination.

Mato Grosso do Sul, in the Southern Circuito, had two previous outbreaks, in 1998 and in 1999, both confined to single municipalities. The extensive number of municipalities in the recent outbreak—42—poses a more difficult task for regaining sanitary control over the area as officials estimate that over 20,000 animals will be destroyed to contain the outbreak.

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