Benefit-cost analysis of the long term containment strategy for exotic fruit flies in the Torres Strait
Benefit-cost analysis of the long term containment strategy for exotic fruit flies in the Torres Strait
Ahmed Hafi, Tony Arthur, Michael Symes and Nicola Millist
Research by the Australian Bureau of Agricultural
and Resource Economics and Sciences
Report to client to National Biosecurity Committee
October 2013
Benefit-cost analysis of the long term containment strategy for exotic fruit flies in the Torres Strait
© Commonwealth of Australia
Ownership of intellectual property rights
Unless otherwise noted, copyright (and any other intellectual property rights, if any) in this publication is owned by the Commonwealth of Australia (referred to as the Commonwealth).
Creative Commons licence
All material in this publication is licensed under a Creative Commons Attribution 3.0 Australia Licence, save for content supplied by third parties, logos and the Commonwealth Coat of Arms.
Creative Commons Attribution 3.0 Australia Licence is a standard form licence agreement that allows you to copy, distribute, transmit and adapt this publication provided you attribute the work. A summary of the licence terms is available from creativecommons.org/licenses/by/3.0/au/deed.en. The full licence terms are available from creativecommons.org/licenses/by/3.0/au/legalcode.
This publication (and any material sourced from it) should be attributed as: Hafi, A, Arthur, T, Symes, M and Millist, N, 2013, Benefit-cost analysis of the long term containment strategy for exotic fruit flies in the Torres Strait, ABARES Report to client prepared for the National Biosecurity Committee, Canberra, October. CC BY 3.0.
Cataloguing data
Hafi, A, Arthur, T, Symes, M and Millist, N, 2013, Benefit-cost analysis of the long term containment strategy for exotic fruit flies in the Torres Strait, ABARES Report to client prepared for the National Biosecurity Committee, Canberra, October.
ABARES project:43431
ISBN No: 978-1-74323-183-8
Internet
Benefit-cost analysis of the long term containment strategy for exotic fruit flies in the TorresStraitis available at: daff.gov.au/abares/publications.
Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES)
Postal address GPO Box 1563 Canberra ACT 2601
Switchboard +61 2 6272 2010|
Facsimile +61 2 6272 2001
Email
Web daff.gov.au/abares
Inquiries regarding the licence and any use of this document should be sent to: .
The Australian Government acting through the Department of Agriculture, ABARES,has exercised due care and skill in the preparation and compilation of the information and data in this publication. Notwithstanding, the Department of Agriculture, ABARES, its employees and advisers disclaim all liability, including liability for negligence, for any loss, damage, injury, expense or cost incurred by any person as a result of accessing, using or relying upon any of the information or data in this publication to the maximum extent permitted by law.
Acknowledgements
The authors acknowledge the contributions of Philippe Frost of the Australian Chief Plant Protection Office, and comments and advice provided by Darryl Barbour and Sarah Hilton of the Australian Chief Plant Protection Office, Barbara Waterhouse and James Walker of the Northern Australia Quarantine Strategy, Andrew Tomkins of the Torres Strait Fruit Fly Strategy review panel and Lisa Elliston of ABARES.
Foreword
In July 2010 the National Biosecurity Committee endorsed an initiative to apply the National Framework for Biosecurity Benefit Cost Analysis (BCA) to all BCAs that evaluate future biosecurity investments. This initiative aims to ensure national consistency and transparency in BCAs to improve the efficiency and timeliness of management decisions on biosecurity investments. Under this initiative a national core capacity for biosecurity BCAs has been created within ABARES.
The role of ABARES, under the core capacity, is to undertake BCAs on alternative options to manage selected potential or existing pest and disease incursions. ABARES consults with relevant experts and stakeholders and then communicates the results and policy implications to various decision-making entities. These entities include consultative committees, the National Management Group and the National Biosecurity Committee.
Benefit-cost analysis of the long term containment strategy for exotic fruit flies in the Torres Strait is the sixth in a series of BCAs prepared under the national core capacity.
The Long-term Containment Strategy for Exotic Fruit Flies in Torres Strait (the Strategy)is designed to prevent the entry of 6 exotic fruit fly species to the Australian mainland. It was established following theincursionof exotic papaya fruit fly in 1995 around Cairns that cost $34 million (equivalent to around $55 million in 2012-13 dollars) to eradicate and resulted in bans on imports of Australian horticultural products by overseas countries.
The absence of exotic fruit fly incursions into mainland far north Queensland since 1995 suggests that the Strategy has been successful andavoided the cost of expensive eradication programs and significant economic costs should eradication fail and the incursion spread to the rest of Australia.
A key component of the Strategy is a nationally cost shared response program to eradicate the seasonal exotic fruit fly populations from the Torres Strait islands. However, this border protection program is currently fully funded by the government, compared to industry sharing of some of the costs of eradicating post border fruit fly outbreaks.
This report presents a benefit-cost analysis of the response component of the Long-term Containment Strategy for Exotic Fruit Flies in Torres Strait, including a business case for the horticultural industries to invest in it. It provides information that would help convince the industry to participate in the cost sharing arrangements, which would result in the better alignment of the funding base of the response activities of the Strategy with that of other nationally cost shared detection and eradication initiatives.
Paul Morris
Executive Director
October 2013
Contents
Foreword
Summary
1Introduction
2The threat of exotic fruit flies
3Surveillance for exotic fruit flies
4Methodology
An illustrative economic framework
Specification of the scenarios
Modelling the spread of the incursion
Estimation of economic impacts
5Results
6Conclusions
Appendix A: Gross value of production by states
Appendix B: Estimating the benefits of the Torres Strait Fruit Fly Strategy
Incorporating uncertainty
Estimating producer and consumer losses
References
Tables
Table 1 Potential losses without and with eradication (present values over 100 years)
Table 2 Benefits of eradication without the Strategy (present values over 100 years)
Table 3 Benefits of the Torres Strait Fruit Fly Strategy (present values over 100 years)
Table 4 Benefits to industry of cost sharing (present values over 100 years)
Table 5 Bactrocera exotic fruit fly species targeted by the Torres Strait Fruit Fly Strategy
Table 6 Host crop - exotic fruit fly mapping
Table 7 Gross value of production of fruit crops that are potential hosts to exotic fruit flies
Table 8 Exotic fruit fly detections and eradication responses under the Torres Strait Fruit Fly Strategy 2002-03 to 2011-12.
Table 9 Cost of the response component of the Torres Strait Fruit Fly Strategy
Table 10 Jurisdictions' share of the total cost
Table 11 A 4 by 4 Markov probability transition matrix
Table 12 The number of additional sprays of insecticides per hectare by state and territory
Table 13 Cost of on-farm sprays and disinfestation of produce
Table 14 Production volumes affected by state of incursion
Table 15 Producer losses in the event of an incursion without the Strategy (present values over 100 years)
Table 16 Consumer losses in the event of an incursion without the Strategy (present values over 100 years)
Table 17 Economic losses in the event of an incursion without the Strategy (present values over 100 years)
Table 18 Benefits of eradication in the event of an incursion without the Strategy (present value over 100 years)
Table 19 Benefits of eradication in the event of an incursion with the Strategy (present value over 100 years)
Table 20 Benefit - cost analysis of the Torres Strait Fruit Fly Strategy (present values over 100 years)
Table 21 Benefits to industry of cost sharing (present values over 100 years)
Table 22 Sensitivity of the benefits to change in incursion probability and the budget (present values over 100 years)
Table 23 Gross value of production of fruit crops that are potential hosts to exotic fruit flies
Table 24 A 4 by 4 Markov probability transition matrix
Figures
Figure 1 Map of Torres Strait showing the Torres Strait Protected Zone, Special Quarantine Zone and movement restrictions for biosecurity risk material including fruit fly hosts
Figure 2 Transition probabilities used to model the spread without eradication
Figure 3 The impact of eradication on transition probabilities
Figure 4 Basic supply and demand model for exotic fruit fly susceptible crop product
Boxes
Box 1 Target species of the Torres Strait Fruit Fly Strategy
Box 2 Detection and response activities under the Torres Strait Fruit Fly Strategy
Box 3 Northern Australia Quarantine Strategy (NAQS)
Box 4 Queensland government activities targeting exotic fruit flies in Torres Strait
Box 5 An illustrative economic framework to estimate the benefits of the Torres Strait Fruit Fly Strategy
1
Benefit-cost analysis of the long term containment strategy for exotic fruit flies in the Torres Strait
Summary
The Long-term Containment Strategy for Exotic Fruit Flies in Torres Strait (the Strategy)is designed to prevent the entry of exotic fruit flies to the Australian mainland. It was established following the 1995 papaya fruit fly incursion around Cairns that cost $34 million (equivalent to around $55 million in 2012-13 dollars) to eradicate and reduced horticultural incomedue toa ban on imports of Australian horticultural products by overseas countries. According to Cantrell et al. (2002), the incursion lasting 5 years has cost the horticultural industries approximately $100 million. The absence ofexotic fruit fly incursions intomainland far north Queensland since then suggests that the Strategy has been successful andavoided the cost of expensive eradication programs, short term losses from reduced market access, and long term productivity losses to horticultural industries should eradication fail and the incursion spread to the rest of Australia. Theavoidedpotential economic cost represents the benefitto horticultural industries of the early detection and rapid response program implemented under the Strategy.The Bealereview of Australia’s quarantine and biosecurity arrangements lauded the Strategy as – an initiative with a small investment ($200,000) each year that has prevented expensive response actions ($35 million). However, unlike the arrangements for post-border fruit fly outbreaks, the current arrangements for this key border prevention measure only shares the cost between Australian governmentswith no contribution being made by the horticultural industry.
In recognition of the significant benefits to horticultural industries, the Primary Industries Standing Committee (PISC) in 2012announced a review of the Strategy,focussing particularly on thedevelopment of a business case for the participation of the horticultural industry in the long term cost sharing arrangements.
ABARES was asked by the secretariat of the National Biosecurity Committee to conduct a benefit-cost analysis with the focus on developing a business case for the horticultural industries to invest in maintaining the Strategy.
The overall benefit-cost analysis is positive with robust benefit-cost ratios. This report shows there are significant benefits for the horticultural industry in its participation in the cost sharing arrangements for the Strategy, resulting in better alignment of the funding base of the Strategy with that of other nationally cost shared detection and eradication initiatives.
The threat of exotic fruit flies
Given the presence of multiple species of exotic fruit flies in neighbouring countries immediately to the north, Australia faces a risk of these flies entering northern parts of the country. A potential incursion of exotic fruit flies is recognised by the National Fruit Fly Strategy as one of the six key risks facing current fruit fly management arrangements (Plant Health Australia, 2010).
Compared to the Queensland and Mediterranean fruit flies, other exotic fruit fly speciescan potentially cause more damage because some species attack fruits at an earlier stage of development (unripe fruits)and can survive in a wide range of climatic conditions.Given the wide range of species of fruit fly exotic to Australia, there are very few fruit crops that would not be susceptible to infestation by at least one exotic species.For example, despite its name, papaya fruit fly attacksmost edible fresh fruits, both tropical and temperate, with the exceptionof pineapples, and most vegetables other than root vegetables, leafy vegetables, peas and chokos (ABARE, 1995).
The gross value of Australian horticultural products that would be susceptible to infestation by exotic fruit fly species targeted by the Strategy is estimated at $2.1 billion in 2011-12 which is 54 percent of the total gross value of all horticultural products produced in that year. If an exotic fruit fly incursion in mainland far north Queensland spreads to the entire state, then approximately half of the gross value product of all Australian host horticultural products, around 90 percent of the value of bananas, papaws, papayas, limes and lychees and over half of the value of tomatoes, mandarins, avocados,mangoes, eggplants, passionfruits and chillies are expected to come under threat. In Queensland, the most threatened commoditiesin terms of gross value productare bananas ($283 million), tomatoes ($230 million), beans ($94 million), mandarins ($89 million), capsicums ($83 million), mangoes ($55 million) and avocados
($53 million).
Economic losses to affected industries can arise from lost profits due to additional costs being incurred frominsecticide sprays on-farm to avoid the potential reduction in marketable yields of fruits and vegetables. Potential lost sales to overseas markets and domestic markets outside the area of incursion due to export bans imposed on the affected areas and the cost of regulations implemented during an incursion could also be significant. To some extent these sales losses can be mitigated by appropriate disinfestation of products. However, development of effective treatments and subsequent negotiations to have them accepted for either domestic or international trade may be time consuming, resulting in ongoing loss of market access until the negotiations are successful. The cost of complying with these treatment protocols represents the ongoing additional cost of disinfestation of produce destined to export market,though this cost could be significantly less than the value of sales that could have been potentially lost if the export bans were maintained (ABARE 1995).
The Torres Strait Fruit Fly Strategy
The Torres Strait Fruit Fly Strategy targets sixexotic fruitfly species that have established populations in South East Asian countries and Papua New Guinea.Australia is most concerned with populations of 3 species in Papua New Guinea, namely Bactrocerapapayae (papaya fruit fly), B. cucurbitae (melon fly) and B. trivialis(New Guinea fruit fly) thatcould enter the Australian mainland viathe Torres Strait islands. Papaya and New Guinea fruit flies and to a lesser extent melon flies have been found in some Torres Strait islands in most years over the last decade. The flies disperse to theislands throughwind-assistednatural dispersal, especially during the annual monsoon season, when northerlywinds assistdispersalfrom Papua New Guinea. However, the surveillance and eradication activities implemented under the Strategy have prevented the flies from establishing permanent populations in the Torres Strait islands,which would otherwise have increased the likelihood of these species entering theAustralian mainland.
The Strategy has two components:
1)The Australian Government Department of Agriculture funded and implemented trap based monitoring programfor early detection of target flies, carried out under the Northern Australia Quarantine Strategy (NAQS); and
2)A nationally cost shared response program to eradicate the flies from the affected islands by supplementary trapping to delimit the incursion, application of bait sprays and lure-and-kill techniques. Response trapping and bait-spraying are undertaken by NAQS on behalf of the Queensland Department of Agriculture and Fisheries (QDAFF) on a cost-recovered basis, while the male annihilation blocking (lure and kill) is implemented directly by QDAFF.
The current arrangements for the second (response) component of the Strategy are to share the on-going cost between Australian governments,with no contribution from industry. As these arrangements came into being prior to the establishment of the Emergency Plant Pest Response Deed (EPPRD), they do not include industry contributions. While cost sharing arrangements with industry contributions are in place for the management of post-border exotic fruit fly outbreaks, efforts need to be made to convince the industry of the significant benefits it receivesfromthe response element (second component) of the Torres Strait Fruit Fly Strategy and the justification, therefore, in it contributing to the costs of the program. Currently, the importance of sharing the cost of a mainland eradication campaign is more easily understood by stakeholders than that of an eradication program to prevent the pest from entering the mainland, as is carried out in the response component of the Strategy. The government fully funding the response element of the Strategy, as happens now, is inconsistent with the principle of the EPPRD and this deed process would provide a mechanism for industry input.
For example, the 1995 papaya fruit fly incursionon mainland far north Queensland was eradicated with funds raised using similar cost sharing arrangementseven before the deed became operational (PHA 2011 and Abdalla et al. 2012).
The benefit cost- analysis
The business case developed in this study for the participation of horticultural industries in the cost sharing arrangements forthe response component of the Strategy is based on the estimatedlong term benefits of the Strategy to horticultural industries and their sensitivity to key parameters.A group of25 host crops are included in this study.