Aug. 7 (Bloomberg) -- A second case of foot-and-mouth disease in cattle was discovered at a farm in Surrey, southern England, raising concerns of a repeat of the 2001 outbreak that devastated the U.K.'s agricultural industry.

``Vets noticed clinical signs of foot-and-mouth yesterday and a quick decision was taken to cull the animals and carry out tests overnight,'' Hilary Benn, secretary of state for the environment, food and rural affairs, told the British Broadcasting Corp. ``It confirms foot-and-mouth.''

The second farm is within the 3-kilometer (1.9 mile) protection zone set up around the first farm where the disease was identified on Aug. 3. The government culled 102 cattle on the second site, Benn said.

After the first case was discovered the government banned the export of all livestock, fresh meat and milk products. There's also a national ban on the movement of all cows, sheep and pigs except under license. The restrictions have already cost agricultural businesses millions of pounds, the National Farmers Union said. The halting of livestock auctions fueled concerns that the country may run out of meat within a week.

``We've got a week's worth of supply left in stock in the processing chain,'' Stuart Roberts, a spokesman for the British Meat Processors Association in London, said in an interview. The association represents the industry's biggest abattoirs and food- processing companies.

In England and Wales 134 livestock markets are closed, with a further 32 shut in Scotland.

Export Ban

The meat and livestock industry is losing about 10 million pounds ($20.3 million) a week because of the export ban, said Guy Attenborough, a spokesman for the Milton Keynes, England-based Meat and Livestock Commission.

The 2001 foot-and-mouth outbreak cost the U.K. economy as much as 10 billion pounds as meat demand plunged and tourists stayed away from rural areas. It pushed up meat prices by 5 percent and tacked on 0.1 of a percentage point to inflation in the U.K., according to BNP Paribas SA. Prices for milk and eggs also rose.

Benn said 300,000 doses of vaccine have been ordered as a precaution. He defended a decision to transport the carcasses of culled cattle 80 miles to a government incineration plant in the county of Somerset, saying the transportation was leak-proof and the carcasses were disinfected.

`Very Scared'

Laurence Matthews, a farmer on whose land the second outbreak was discovered, said the infected cattle belonged to another farmer using the area for grazing. Some footpaths within the protection zone hadn't yet been closed, which could allow the virus to spread, he said.

``Most farmers are very, very scared and all activity on farms is also coming to a standstill,'' Matthews told the BBC.

The U.K. government is investigating a vaccine laboratory southwest of London as the possible source of the outbreak.

The site at Pirbright near Guildford, Surrey, is shared by the government's Institute for Animal Health and a private research company, Merial Animal Health Ltd., a venture of Merck & Co., a Whitehouse Station, New Jersey-based drugmaker, and Paris- based Sanofi-Aventis SA. The Pirbright lab is within the 3- kilometer protection zone and an initial report on the investigation will be issued later today.

Roger Pride, the farmer at the center of the first case, said he first noticed his animals ``drooling and off color'' on Aug 2.

Sewer Theory

A ``theory that the sewer which overflows into part of the field where the 38 cattle were grazing could be the cause is an obvious possibility,'' Pride told a televised news conference in Surrey. ``Certainly, no one at the farm has had contact with the Pirbright facility.''

There was ``interest'' in a particular area of the farm which had experienced flooding, the U.K.'s chief veterinary officer Debby Reynolds said at a news conference in London yesterday.

Investigations had so far shown ``no breach in our procedures,'' David Biland, Merial managing director, said at a televised news conference.

Both Merial and the government institute use the specific virus strain found at the farm, which is similar to one from a 1967 foot-and-mouth outbreak, the U.K. Department for Environment, Food and Rural Affairs said.

Vaccine Production

The strain was the same as one used in vaccine production at Pirbright on July 16, Prime Minister Gordon Brown said.

The strain hasn't recently been found in animals and is similar to those used in international diagnostic laboratories and in vaccine production.

Merial suspended virus production at Pirbright, and Biland said it was working with the U.K.'s environment agency. Merial said in a later e-mailed statement that it will temporarily resume production of foot-and-mouth vaccine at the center to produce the 300,000 doses of strain-specific vaccines ordered by DEFRA. The company had 2006 sales of $2.2 billion.

Institute of Animal Health Director Martin Shirley said in a televised news conference that there hadn't been any breaches of procedures at its Pirbright facility and that the organization is cooperating with authorities.

The 2001 epidemic led to 2,030 cases of foot-and-mouth disease and the slaughter of as many as 10 million animals. Following the latest outbreak Benn commissioned a review of biosecurity arrangements at Pirbright led by Professor Brian Spratt of Imperial College, London University.

To contact the reporters on this story: Nick Allen in London at nallen14@bloomberg.net.

Last Updated: August 7, 2007 07:45 EDT