What kinds of financial arrangements are in place for affected businesses in the event of an outbreak of foot and mouth disease in Australia?
Australia’s nationally agreed plan for responding to an emergency animal disease outbreak recognizes that compensation to directly affected parties is necessary to encourage early notification of emergency diseases.
He adds that compensation is important to ensure that people who report suspected illness early are not financially disadvantaged.
So who would receive help in the event of an outbreak of disease, and would this constitute substantial compensation?
Beef Central and Sheep Central have explored this issue over the past week to help readers understand what the current rules in place allow.
How the compensation to be paid would be shared by governments and industry is detailed in Australia’s Animal Disease Emergency Response Agreement, called EADRA.
Under EADRA, governments agree to fund 80% of the costs of responding to an outbreak of foot-and-mouth disease, while industry would fund 20%.
Who can receive compensation?
A reading of the EADRA documents indicates that although a stipend is given for financial aid, there are limits as to who can receive it and the amount of compensation they would receive.
For example, existing agreements under EADRA relate to the sharing of the costs of financial assistance to those whose animals or other property are destroyed to control the disease, who would generally be breeders or processors.
No allowances are provided for other businesses in the livestock industry that could also be heavily impacted, such as stock and station agents, livestock transporters, veterinarians, agricultural suppliers, etc.
Compensation would be limited to the gate value of livestock that either die of FMD infection or are destroyed as part of an official emergency animal disease response in the event of an emergency. epidemic of foot-and-mouth disease.
Compensation would not include the value of lost future production. EADRA stipulates that “no compensation will be awarded for loss of profit, loss caused by breach of contract, loss of production or any other consequential loss whatsoever”.
Questions about the timing of the assessment
The timing of farmgate value determination for compensation purposes is important, as it is widely believed that an outbreak of foot and mouth disease in Australia would trigger a reduction in the value of livestock, due to the likely immediate loss of livestock. important export products. markets within the framework of the trade agreements in force.
If taken on the day the stocks die or are destroyed, the value of the affected stocks could obviously be much lower than where they were just before the outbreak.
EADRA’s Cost Sharing Document states that for the purpose of calculating the value of the stock or property, “this value shall be calculated on the basis of a sale at the location where the stock or well at the time of its destruction or where the stock was when it died of the disease, i.e. the farmgate value”.
However, it also indicates that at the time of restocking after the epidemic, there is a “complementary” payment, which corresponds to the difference between the compensation paid at the time and the value of the stock at the time of restocking. -storage.
But the information in the AUSVETPLAN Assessment and Compensation Handbook (which can be downloaded here) seems to describe a different approach.
It states that the “current value” of animals will be determined by the prices paid at the “last substantial dispersal sale/livestock market or the published MLA prices of the most recent sale at two sale yards.”
It states that beef cattle would be valued according to their market category, weight and condition, and the value will be the average of Meat & Livestock Australia’s published prices, from the most recent sale in each of the two largest sales parks. close to the affected area, if available, for that category, for the average crowd weight.
The formulation for dairy cows is slightly different, indicating that the current value of dairy breeds would be determined by the prices paid at the last major dispersal sale of dairy cattle (i.e. a sale where the majority of a herd is sold) for the same class of livestock, multiplied by the current MLA Beef Benchmark, divided by the equivalent MLA Benchmark at the time of the dairy dispersion sale.
breeding cattle would only be considered breeding stock if registered with a breed society. In summary, the animal’s insured value would be used as a guideline to determine value. If uninsured, registered cattle would be valued above the value of non-breeding cattle by 25% for heifers, 50% for cows, 200% for bullocks, and 400% for bulls. Stallions may receive a larger “top-up” payment upon restocking.
Similar processes apply to sheep and goats.
The national documentation currently available on compensation for affected businesses demonstrates that the issue is complicated and situation dependent, but also underscores the need for more clarity before Australia suffers a major livestock disease outbreak.
Another point raised in the EADRA is that the owner or livestock that dies or is destroyed would have 90 days to file a claim for compensation.
Furthermore, the objective of animal disease emergency response is “to ensure the destruction of the minimum number of uninfected animals and the maintenance of acceptable standards of animal welfare for all species of livestock. , without compromising disease control and eradication efforts”.
It should also be noted that some states have their own biosecurity funding programs for cattle and sheep producers.
Victoria has livestock compensation funds financed by stamp duty on the sale of cattle, sheep and goats.
southern australia and Western Australia have voluntary livestock biosecurity funding schemes based on levies ($1.50 per NLIS cattle tag in SA and 20c/head on cattle sold in WA).
Producers in South Africa or West Africa may voluntarily refrain from paying levies, but those who do so waive entitlement to assistance from the Emergency Outbreak Fund of a animal disease.
The above programs are also used to fund projects to benefit the beef industry in each state each year (Victoria’s fund is used to subsidize the costs of NLIS tags in that state, for example).
As a result, substantial reserves are not accumulated from year to year, and the amount of money collected would not be large enough to be considered a “full insurance safety net” to ensure full compensation for all producers affected in the event of a major incursion of the disease. .
New South Wales does not have a dedicated fund, but regional land service network agencies can use local rates to raise funds to manage biosecurity issues as they arise.
Tasmania, the North territory and queensland do not have specific funds for livestock biosecurity that Beef Central is aware of.
Queensland toyed with the idea of setting up its own state-based biosecurity fund following the costly and painful outbreak of bovine Johne’s disease in 2012/13, which saw many animals destroyed and more than a hundred properties quarantined for an extended period.
Following this calamity, the then Newman government announced seed funding of $2 million along with a $3 million loan to launch a voluntary biosecurity fund in Queensland, which was to be matched. through voluntary contributions from producers.
However, no agreement was ever reached with industry on a levy rate or scheme structure, and the proposed biosecurity fund in Queensland has so far not been put in place.
Government won’t ‘go up the hill and save us all’
In the absence of assured assistance, experts warn that the industry must be prepared for the possibility of a significant financial impact in the event of an outbreak of foot-and-mouth disease or a similar high-impact disease such as dermatosis contagious lump.
Chairman of the SAFEMEAT advisory group Andrew Henderson gave a sobering message to a recent podcast from Ag Watcherswarning that while growers think the government will ‘ride over the hill and save us all’ if foot-and-mouth disease reaches Australia, it won’t happen.
The simple reality is that the capacity of governments has been significantly reduced in recent years, he told podcast hosts. Andrew Whitelaw and Matt Dalgleish.
“So if any of us are thinking ‘well that’s fine, the government is just going to pay for this’, or they’re going to come over the hill and save us all, or they’re going to have the resources to do this, that and the other, they’re just not in the same position that they once might have been,” he said.
“So that means we as an industry are going to have to be prepared and play a much bigger role in how we prepare for these kinds of things and that’s in many ways the focus of our reforms.”
The reforms he was referring to were five recommendations from a 2020 review by Safemeat Partners for the National Biosecurity Committee to improve the effectiveness of national livestock traceability systems, including the mandatory adoption of electronic identification for the Australian sheep industry.
When foot-and-mouth disease was confirmed in Indonesia, Beef Central asked the National Biosafety Committee if it had made progress on the 2020 reform recommendations and was told they were still under review.
A fact sheet for producers from Animal Health Australia also reinforces the importance of producers having their own plans in place.
“Compensation is not intended to maintain profitability or business continuity,” he says.
“Its primary intent is to promote early notification, which promotes rapid response and rapid return to trade.
“As such, owners should have their own business continuity plans in place.”