Can Another Swine Flu Outbreak Increase the Price of Bacon?

MILWAUKEE, Feb. 19, 2020 /PRNewswire-PRWeb/ -- The swine flu (H1N1) was the virus that spread from animals to humans in America in 2009. The foot-and-mouth disease (FMD) is a potential new outbreak. Although the U.S. has eradicated this disease after its first and only occurrence in 1929, it is present in more than two-thirds of countries in the world, posing a risk from trading partners.

In a new article released in the Applied Economic Perspectives and Policy, Berna Karali from the University of Georgia along with Matthew Houser from Mather Economics LLC dive deeper into the economic impacts of food safety and animal disease outbreaks.

Karali says, "Results show that food scares contribute to market uncertainty and sharp price fluctuations in livestock futures markets. An important finding is the spillover effect between the two markets. Volatility in the nearby hog futures market is found to lower the volatility in the live cattle market, indicating that uncertainty in one market stabilized fluctuations in a substitute commodity. This possibly stems from increased demand in cattle when pork supplies are variable, suggesting that food scares affecting the hog market increases certainty in the live cattle market."

She continued, "Daily return on cattle futures dropped by about 3 percentage points and variance increased by 0.2 after the first BSE outbreak in the U.S. For hogs, daily return dropped by about 2 percentage points and variance increase by 0.4 following the first H1N1 outbreak."

View the article "How Scary are Food Scares? Evidence from Animal Disease Outbreaks" online. For setting up an interview with Karali, please contact Allison Scheetz in the AAEA Business Office.

ABOUT AAEA: Established in 1910, the Agricultural & Applied Economics Association (AAEA) is the leading professional association for agricultural and applied economists, with 2,500 members in more than 60 countries. Members of the AAEA work in academic or government institutions as well as in industry and not-for-profit organizations, and engage in a variety of research, teaching, and outreach activities in the areas of agriculture, the environment, food, health, and international development. The AAEA publishes two journals, the American Journal of Agricultural Economics and Applied Economic Perspectives & Policy, as well as the online magazine Choices and the online open access publication series Applied Economics Teaching Resources. To learn more, visit http://www.aaea.org.

 

SOURCE Agricultural & Applied Economics Association

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