The chlorfluzuron incident is just one of a number of chemical residue incidents that have plagued the Australian beef industry since the late 1980s. The frequency and diversity of residue episodes in Australia have served to illustrate the potential of agricultural and veterinary chemicals to cause considerable disruption to Australia's meat trade, even when the chemicals do not pose a health risk to consumers. For example, the discovery of chlorfluazuron residues in Australian beef in 1994 resulted in an export ban being placed on beef containing chlorofluazuron residues. While it is believed that residues in Australian beef can result in significant losses to the Australian cattle industry, a detailed economic evaluation of the cost of a residue incident has not been undertaken. A major aim of this study is to develop an economic model that can be used to assess the economic impact of any chemical residue incident on any agricultural industry, with an emphasis on producer returns, and to illustrate the general applicability of the model by using it to assess the economic impact of the chlorfluazuron incident on returns to australian beef cattle producers. This is done within a multiple-product, multiple-market framework, where the presence of chlorfluazuron residues in cattle is modelled as a shift in supply from one market segment to another.