Download by Dr. Tae Ho, Lee

How to forecast rice production
and consumption in Korea?
2004. 7
Tae Ho, Lee
1. The Situation of Production &
Consumption
Production & Consumption in Korea
8000
production
7000
consumption
supply
6000
1000 ton
5000
4000
3000
2000
1000
0
1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002
year
Data: MAF of Korea
Production & Consumption in Japan
16000
14000
12000
1000 ton
10000
8000
6000
4000
production
consumption
2000
supply
0
1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002
year
Data: General Food Policy Bureau of Japan
2. Rice Accounting
production + import + beginning stock
= consumption + export + ending stock
consumption
= production + (import – export)
+ (beginning stock - ending stock)*
* The amount of (beginning stock – ending stock) would be close
to 0, if the government keeps “public stockholding” constant.
3. Forecasting production
Estimation of the production

Model: small open economy
3 products* (domestic rice, imported rice,
other crops),
3 inputs (farm supplies, farm labor,
farm land)
production = yield x (area harvested)
*assuming that domestic rice and imported rice
could be differentiated
Estimation of the yield: AR(1)
Estimation of the area

Area harvested
= f (domestic rice price*, other crops price
farm supplies price, farm labor price,
farm land price, tariff rate,
exchange rate)
*In a small open economy,
domestic rice price
= international price x exchange rate x (1+ tariff rate)
Q> international price = Heilongjiang price?
Yield
yields
6.00
5.00
ton/ha
4.00
3.00
2.00
Korea
1.00
Japan
0.00
1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002
Data: USDA
year
Area harvested
area harvested
3500
Korea
3000
Japan
1000 ha
2500
2000
1500
1000
500
0
1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002
year
Data: USDA
Variation of area harvested
8.00
6.00
4.00
2.00
0.00
%
1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001
-2.00
-4.00
-6.00
-8.00
Korea
Japan
-10.00
-12.00
year
Data: USDA
Explanatory variables for the area equation
180
160
140
120
%
100
80
60
area harvested
real rice price
real farm price index(excluding grains, base=1995)
40
real paddy fileld price
real farm wage(adult male, \/day)
20
real farm supplies price index
0
1981
1983
1985
1987
1989
1991
1993
year
1995
Data: MAF and National Statistical Office of Korea
1997
1999
2001
4. The model for consumption
Forecasting the consumption
consumption
= per capita consumption x population
= domestic rice consumption
+ imported rice consumption
 population →AR(1) or AR(2)
 per capita consumption→AR(1) or AR(2)
 We like to separate domestic rice
consumption from the whole consumption

Model :
per capita rice consumption
= price dependent part
+ time dependent part

example
qt = a + bpt + et
et = c + det-1 + ut
qt: per capita rice consumption at period t
pt: price at period t
et: time dependent consumption at period t
ut: error
Explanatory variables for the consumption
equation
510
160
460
140
410
120
tril. Won
100
310
80
260
60
210
40
real GDP(tril. Won, base=1995)
160
real price(\1000, base=1995)
110
60
1981
20
per capita consumption(kg/year)
0
1983
1985
1987
1989
1991
1993
1995
1997
year
Data: MAF and National Statistical Office of Korea
1999
2001
\1000, kg/year
360
Per capita consumption
per capita consumption
140.0
130.0
120.0
kg/year
110.0
100.0
90.0
80.0
Korea
70.0
Japan
60.0
1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002
Year
Data: MAF of Korea and General Food Policy Bureau of Japan
Per capita consumption variation
20.00
15.00
10.00
%
5.00
0.00
1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001
-5.00
Korea
Japan
-10.00
-15.00
year
Data: MAF of Korea and General Food Policy Bureau of Japan
Differences in food consumption
180
Korea
160
Japan
Taiwan
140
120
100
kg/year
80
60
40
20
0
ls
ea
r
e
c
y
ch
ar
t
s
rs
ne
e
et
s
ot
ro
e
sw
s
lse
u
p
bl
ta
ge
es
fru
its
m
ts
ea
gs
eg
ve
es
if sh
countries
Data: Korea Rural Economic Institute
es
sh
i
f
ll
&
e
sh
m
s
ilk
ls
oi
&
ts
fa
5. summary
We like to forecast:
 the area harvested
 the amount imported
 effects of government policies and international
negotiations
problems:
 Should we install a mechanism in the model through
which government policies (such as direct payment)
could have an effect on production?
 What is the international price?
 How to separate per capita consumption for
imported rice from the whole consumption?
 How to forecast the level at which the downward
trend of per capita consumption will be stabilized?