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The value of market uncertainty in a livestock epidemic

Author

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  • Niemi, Jarkko K.
  • Lehtonen, Heikki

Abstract

Introduction of foot and mouth disease (FMD) into country typically initiates eradication procedures which remove animals from the market, and halts the export of livestock products from the infected country. The magnitude of these effects can be highly uncertain. This paper presents a stochastic dynamic programming model which simulates possible market implications of alternative FMD and export scenarios in the Finnish pig sector. It takes into account dynamics and adjustment of the animal stock, price movements and uncertainty related to the duration of the trade ban. Results suggest that losses to pig producers can increase considerably when the risk of prolonged export ban increases. Production adjustments also strengthen. Consumers can gain from a trade ban, because options to adjust supply in the short run are limited.

Suggested Citation

  • Niemi, Jarkko K. & Lehtonen, Heikki, 2008. "The value of market uncertainty in a livestock epidemic," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6158, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea08:6158
    DOI: 10.22004/ag.econ.6158
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    Cited by:

    1. Niemi, Jarkko K. & Lyytikainen, Tapani & Sahlstrom, Leena & Virtanen, Terhi & Lehtonen, Heikki, 2009. "Risk Classification in Animal Disease Prevention: Who Benefits from Differentiated Policy?," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49307, Agricultural and Applied Economics Association.

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