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GTAP Resource #1700

"A link between the International Farm Comparison Network (IFCN) and global equilibrium models"
by Isermeyer, Folkhard, Claus Deblitz, Torsten Hemme and Frank Plessmann


Abstract
The globalisation of the economy and the on-going liberalisation of agricultural trade policy may lead to a considerable re-allocation of agricultural production worldwide. Economists usually try to predict such changes by applying general or partial equilibrium models. The direction and extent of supply and demand changes is highly dependent on the demand and supply elasticities applied. The elasticities are either based on econometric analysis, theoretically sound assumptions, or expert judgement. A farm level view is usually not included in such a type of analysis.

The International Farm Comparison Network (IFCN) aims at improving the access and availability of farm level information for the future-oriented assessment of regional production and trade on a world-wide scope. The IFCN does not attempt to replace equilibrium models, since the world’s agriculture can never be reflected through the farm-level analysis of just a few typical farms per country. It is rather an attempt to add valuable information to higher-aggregated models in order to improve their ability to reflect the "true world of farming“.

The International Farm Comparison Network (IFCN) is a world-wide association of agricultural scientists, advisors and farmers. Within the framework of this co-operation, farms and agricultural production systems are defined that are typical for their region. Their economic situation is analysed, and the farms can be projected into the future. For the most important agricultural products and production regions in the world, the IFCN shall provide answers to the following questions:
– How is farming done (farming systems, production technology)?
– What is the level of variable and total production cost?
– What are the reasons for advantages and disadvantages in competitiveness?
– What is the future perspective of agricultural production at the locations considered?
For each location models of typical farms are established and analysed using internationally harmonised methods. The application of harmonised methods is essential because our experience has shown that existing data sets – if there are any – show significant differences from country to country, such as methodology applied, extent of data sets (physical and financial figures), and availability of up to date data. The IFCN data for the typical farms are compiled in co-operation with local farmers and advisors and are based on regional statistics, accounting data and expert assessments. Furthermore, the local experts crosscheck results and discuss farm level strategies to adopt their farms to a changing technological, economical and political environment. Status quo analysis, for example total cost of production, as well as analysis of economic consequences of policy changes and farm adjustments is carried out by using the simulation model TIPI-CAL (10 year projection cycle), and results are returned to the local experts for assessment.

The idea of the IFCN has been developed in the late 1990s (see Hemme, 2000). Since 2000, we are proceeding strictly branch-wise. In the first step, the Dairy Network was established. Those organisational and financial arrangements that proved to be successful in safeguarding a sustainable network development are transferred stepwise to other agricultural branches. The IFCN Beef branch was launched in 2001, the IFCN Cash Crop branch in 2004. In each of the networks, the participating researchers from abroad become a member of a consortium that works on an agreed annual schedule and meets once a year in a conference to discuss results, prepare common publications and decide on the future steps of the network. The overhead costs at the IFCN co-ordination centre are financed through consortium fees, research projects and sponsoring.

At present, the IFCN Dairy network includes partners from more than 30 countries that account for more than 80 percent of world milk production. The IFCN Beef network comprises 15 countries, and the Cash Crop network started in 2004 with researchers from 12 countries.

In order to illustrate the work of the IFCN and to identify possible areas of co-operation with GTAP, selected results from the latest Dairy, the Beef, and the Cash Crop Report (Hemme et al. 2004, Deblitz et al. 2004, Pleßmann et al. 2005) will be presented in the paper.

Presumably, the possible benefits for the equilibrium models can be identified in the following areas:
– Panel-based estimation of supply response (to policy changes) in typical farms
– Background information on the determinants of supply response
– “Exit thresholds” for typical farms in case of drastic price changes
On the other hand, the quality of farm-level projections of the IFCN is highly dependent on the projections of prices that can only be supplied by highly-aggregated equilibrium models such as GTAP. Hence, there is scope for a win-win situation if the development of these two global networks could be linked to each other.

References:
Deblitz C, Izquierdo-Lopez MD, Davier Z von (eds) (2004) IFCN beef report 2004 : for a better understanding of beef farming world-wide [online]. Potsdam: IFCN Beef and Sheep Management GbR, 107 p
Hemme T, Christoffers K, Deeken E (eds) (2004) IFCN dairy report 2004 : for a better understanding of milk production world-wide. Braunschweig : Global Farm GbR, 152 p
Hemme T (2000) Ein Konzept zur international vergleichenden Analyse von Politik- und Technikfolgen in der Landwirtschaft. Braunschweig : FAL, VIII, 284 p Landbauforsch. Völkenrode SH 215
Pleßmann F, Ebmeyer C, Görg, K (eds) (2005) IFCN cash crop report 2005 : for a better understanding of cash crop production world-wide. Braunschweig : FAL-BW, 76 p (in print)


Resource Details (Export Citation) GTAP Keywords
Category: 2005 Conference Paper
Status: Published
By/In: Presented at the 8th Annual Conference on Global Economic Analysis, Lübeck, Germany
Date: 2005
Version:
Created: Isermeyer, F. (4/27/2005)
Updated: Isermeyer, F. (4/27/2005)
Visits: 2,142
No keywords have been specified.


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