Value chain development

1. Jim Hansen, Syd Cochrane, Getachew Nigatu
Agricultural Economist
USDA, Economic Research Service
June 27, 28, 29 2016
Long-term Projections
of International Agricultural Trade,
ECOWAS Agriculture to 2025 and Model

2. Presentation Outline
• Description of USDA 10 Year Commodity Projections
• Macroeconomics, population, and energy
• ECOWAS Model
• US commodities and International trade
• ECOWAS agricultural projections
• Conclusion

3. USDA’s Agricultural Projections
• 10-year projection of major commodities
- Supply, demand, trade, and prices.
- Based on November 2015 market conditions. Released Feb 2016
• Assumptions:
- Continuation of current U.S. law
- Continuation of existing international trade agreements
- Population growth slows, strongest in developing countries
- Macroeconomic growth – strongest in emerging markets
• Composite of Model Results and Analysts Judgment
- Modeling system: dynamic partial equilibrium trade
- 40 countries/regions,
- 24 commodity markets
• Equilibrates: (Supply = Demand) & (Imports = Exports)
Solves for prices and trade, clear world and country markets

4. Demand Structure:
•Per Capita GDP growth
- Population growth
- GDP growth
•Own and Substitute Prices
•Rural and Urban for some countries
•Diet Diversification in developing countries
 GDP/Capita Growth
 Urbanization
 Income distribution equality
 Food away from home

5. Changes in Food Consumption:
• Greater consumption of:
- Fruits & Vegetables
- Vegetable Oils
- Processed Cereal Products
- Meats & Dairy Products
Feed Demand Increases
 Import demand for Feed grains
• Less consumption of:
- Staple grains - rice in Asia, corn in Indonesia and Mexico
- Low-quality grain varieties and switching to high-quality
(high-quality varieties may lower yields)
- Roots & tubers

6. ERS ECOWAS Model

7. Commodities in ERS ECOWAS Model
• Livestock: (3 sectors)
– Beef, Pork, and Poultry
• Crops: (9 sectors)
– Wheat, Rice
– Corn, Sorghum, Other-Coarse-Gr (mostly millet)
– Other seeds (mostly peanuts), meal and oil
– Cotton, sugar, cocoa
– Blank sections no data – barley, soybeans meal oil,

8. • Elasticity Partial Equilibrium model
• Model in Excel Spread sheet - 3 main sheets
Commodity models (Forecast)
Parameters,
Base-Scenario (table)
• Data Requirement for Model
– Macroeconomic variables
– Agriculture data (aggregate) –
• USDA Production, supply and Disappearance and FAO
– Prices and Policies

9. Modeling the Agriculture Economy:
• Production & consumption
– Crops: area, yield, consumption, stocks and trade
– Livestock: animals inventory, production, consumption,
trade, stocks
• Model as a System
– Accounting (0 = PROD+BSTK+IM-TCON-EX-ESTK)
– Number of different identities must hold
– Stock issue, government, farm household

10. Modeling Production:
• Production
Gross return = lagged prices x expected yield
Yield = f(gross return, technology time trend)
Area = f(gross return, alternative crops GR, tech)
Production = Yield x Area
Total Supply = Production + Imports + Beg Stocks

11. Modeling Consumption:
• Consumption
Per capita cons = f(own price, sub prices, income)
Food cons = per capita cons x population
Total cons = food cons + feed cons + waste + industry use
Total Disappearance = Total cons + exports + end stocks

12. Modeling Stocks & Trade:
• Ending and beginning stocks
Beginning stocks = lagged(Ending stocks)
Ending stocks = f(production or consumption, trend)
Exports = f(consumer price, export price, trend)
Imports = f(producer price, export price, trend)
Imports and exports are also identities for some commodities
Imports = Cons + endstocks – production – exports-begstocks

13. Closing the Model:
• Domestic prices solved in the model for some
commodities
Total Disappearance = Total cons + exports + end stocks
Total Supply = Production + Imports + Beg Stocks
Prices solved in the model until supply = demand
0 = Total Supply - Total Disappearance

14. ECOWAS Commodity Projections

15. 0
2
4
6
8
10
12
14
16
18
77 80 83 86 89 92 95 98 01 04 07 10 13 16 19 22 25
Oth-CoarseGrn Sorghum Corn Oth-Oilseed Rice
ECOWAS Area Harvested (million ha)
Million hectares
Corn
Oth-oil
seed
Rice
Sorghum
Other coarse grain

16. 0
10
20
30
40
50
60
77 80 83 86 89 92 95 98 01 04 07 10 13 16 19 22 25
Oth-CoarseGrn Sorghum Corn Oth-Oilseed Rice
ECOWAS Area Harvested (million ha)
Million hectares
Corn
Oth-oil seed
Rice
Sorghum
Other coarse grain
(Millet)

17. 0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
2.00
80 83 86 89 92 95 98 01 04 07 10 13 16 19 22 25
Corn Rice
ECOWAS Yields: (mt/ha)
Metric tons per hectares
Corn
Rice
Are the recent yield data correct?

18. 0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
77 80 83 86 89 92 95 98 01 04 07 10 13 16 19 22 25
Sorghum Other Coarse Grain Oth-Oilseed
ECOWAS Yields: (mt/ha)
Metric tons per hectares
Other oil seed
Sorghum
Other coarse grain

19. 0
2
4
6
8
10
12
14
16
18
20
80 83 86 89 92 95 98 01 04 07 10 13 16 19 22 25
Production Consumption Feed Food seed waste
ECOWAS Corn Production,
and Consumption (million mt)
Million metric tons
Feed
Food
Total Consumption
Production

20. 0
100
200
300
400
500
600
700
800
900
80 83 86 89 92 95 98 01 04 07 10 13 16 19 22 25
Imports Exports
ECOWAS Corn
Imports and Exports (1,000 mt)
Thousand metric tons
Exports
Imports

21. 0
2
4
6
8
10
12
14
16
18
83 86 89 92 95 98 01 04 07 10 13 16 19 22 25
Production Feed Food seed waste
ECOWAS Sorghum Production,
Food, and Feed Consumption (million mt)
Million metric tons
Feed
Food
Production

22. 0
50
100
150
200
250
300
83 86 89 92 95 98 01 04 07 10 13 16 19 22 25
Imports Exports
ECOWAS Sorghum
Imports and Exports (1,000 mt)
Thousand metric tons
Imports
Exports

23. 0
2
4
6
8
10
12
14
16
71 74 77 80 83 86 89 92 95 98 01 04 07 10 13 16 19 22 25
P ro ductio n C o nsumptio n
ECOWAS Other Coarse Grain (Millet)
Production and Consumption (million mt)
Million metric tons

24. 0
2
4
6
8
10
12
80 83 86 89 92 95 98 01 04 07 10 13 16 19 22 25
Production Imports Exports Consumption
ECOWAS Wheat Imports, Consumption,
Exports and Production (million mt)
Million metric tons
Exports
Consumption
Imports

25. 0
5
10
15
20
25
83 86 89 92 95 98 01 04 07 10 13 16 19 22 25
Production Imports Consumption
ECOWAS Rice Total Consumption,
Production and Imports (million mt)
Million metric tons
Production
Total
Consumption
Imports

26. 0
2
4
6
8
10
12
80 83 86 89 92 95 98 01 04 07 10 13 16 19 22 25
Production T otal Consumption Feed seed waste Food Crush
ECOWAS Other Oilseeds (Peanuts)
Production, Exports, and Consumption (million mt)
Million metric tons
Crush
Total Consumption
Production
Food
Feed, seed & waste

27. 0
2
4
6
8
10
12
80 83 86 89 92 95 98 01 04 07 10 13 16 19 22 25
Feed seed waste Food Crush
ECOWAS Other Oilseeds (Peanuts) : Crush, Food,
and Feed, seed & waste (million mt)
Million metric tons
Crush
Total Consumption
Food
Feed, seed & waste

28. Consumption

29. 0
5
10
15
20
25
30
35
40
45
50
80 83 86 89 92 95 98 01 04 07 10 13 16 19 22 25
Corn W heat Rice
ECOWAS Food
Per Capita Consumption (kg/capita)
Kilograms/person per year
Corn
Rice
Wheat

30. 0
10
20
30
40
50
60
80 83 86 89 92 95 98 01 04 07 10 13 16 19 22 25
Sorghum Other Coarse Grain
ECOWAS Food
Per Capita Consumption (kg/capita)
Kilograms/person per year
Sorghum
Other Coarse Grain
Millet

31. 0
2
4
6
8
10
12
14
16
80 83 86 89 92 95 98 01 04 07 10 13 16 19 22 25
Seeds Other-Oilseed Peanuts Oil - Other Oil Peanuts
ECOWAS Food
Per Capita Consumption (kg/capita)
Kilograms/person per year
Peanuts
Other Oilseeds
Peanut Oil

32. Pork, Poultry, and Beef Production
and Feed Demand

33. 0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
89 92 95 98 01 04 07 10 13 16 19 22 25
Production Imports T otal Consumption
ECOWAS Beef
Production, Consumption and Imports (million mt)
Million metric tons
Consumption
Production
Imports

34. 0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
86 89 92 95 98 01 04 07 10 13 16 19 22 25
Production Imports T otal Consumption
ECOWAS Pork
Production, Consumption and Imports (million mt)
Million metric tons
Consumption
Production
Imports

35. 0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
86 89 92 95 98 01 04 07 10 13 16 19 22 25
Production Imports T otal Consumption
ECOWAS Poultry
Production, Consumption and Imports (million mt)
Million metric tons
Consumption
Production
Imports

36. 0.0
0.5
1.0
1.5
2.0
2.5
3.0
80 83 86 89 92 95 98 01 04 07 10 13 16 19 22 25
Pork Poultry Beef
ECOWAS Meat Production:
Beef, Poultry and Pork (million mt)
Million metric tons
Beef
Pork
Poultry

37. Feed Demand

38. 0
1
2
3
4
5
6
7
8
80 83 86 89 92 95 98 01 04 07 10 13 16 19 22 25
Sorghum Other-Oilseed-Peanuts Other-Meal-Peanuts Corn
ECOWAS Feed Demand:
Corn, Peanut-Meal, Peanuts, and Sorghum (million mt)
Million metric tons
Corn
Other-Oilseeds Peanut
Other-Meal
Peanut
Sorghum
Corn Increase
1980-2003 flat
2003-2016 + 2.4 mmt, Projection little growth

39. 0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
70 73 76 79 82 85 88 91 94 97 00 03 06 09 12 15 18 21 24
Production Exports Consumption
ECOWAS Cotton
Production, Exports, and Consumption (million mt)
Million metric tons
Exports
Total Consumption
Production

40. 80
100
120
140
160
180
200
220
240
260
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
80
100
120
140
160
180
200
220
240
260
Total world grain & oilseeds1
Production, yield, area harvested, population & per cap production
Index: 1970 = 100
1/Oilseeds = soybeans + rapeseed + sunflowers.
Source: Compiled from USDA’s PS&D Database & Baseline Projections
Growth rates: Exponential Trend (%/year)
1970-1990 1990- 2009 2010- 2019
Production 2.4 % 1.54 1.27
Yields 1.9 1.21 0.70
Area 0.50 0.33 0.57

41. 80
100
120
140
160
180
200
220
240
260
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
80
100
120
140
160
180
200
220
240
260
Total world grain & oilseeds1
Production, yield, area harvested, population & per cap production
Index: 1970 = 100
1/Oilseeds = soybeans + rapeseed + sunflowers.
Source: Compiled from USDA’s PS&D Database & Baseline Projections
Per Capita/Production
Growth rates: Exponential Trend
1970 - 90 1990 - 09 2010 - 19
Production 2.4 1.54 1.27
Yields 1.9 1.21 0.70
Population 1.7 1.30 1.06
Area 0.50 0.33 0.57
Capita/Pro 0.61 0.28 0.20

42. Conclusions and Summary:
• Strong global trade growth in most agriculture commodities,
without significant increases in real world commodity prices.
• Strong income growth in developing countries and urbanization
lead to increased import demand for grains, High Value Products
• Trade to remain very competitive
Expanding production potential in Brazil & Argentina, FSU, EU
Indonesia expands palm oil production.
• Uncertainties, Ethanol and trade, Bio-energy policies,
BSE, Avian influenza, food safety, China and Brazil,
natural resource constraints – water, changing demographics and
effect on food demand

43. Thank you
USDA-ERS Long-Term Projections
briefing room
http://www.ers.usda.gov/briefing/baseline