How to forecast rice production and consumption in Korea?
2004. 7
Tae Ho, Lee
1. The Situation of Production & Consumption
0
1000
2000
3000
4000
5000
6000
7000
8000
1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002
year
1000 ton
production
consumption
supply
Production & Consumption in Korea
Data: MAF of Korea
Production & Consumption in Japan
0
2000
4000
6000
8000
10000
12000
14000
16000
1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002
year
1000 ton
production
consumption
supply
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.
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
3. Forecasting production
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?
yields
0.00
1.00
2.00
3.00
4.00
5.00
6.00
1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002
year
ton/
ha
Korea
Japan
Yield
Data: USDA
area harvested
0
500
1000
1500
2000
2500
3000
3500
1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002
year
1000 h
a
Korea
Japan
Area harvested
Data: USDA
Variation of area harvested
-12.00
-10.00
-8.00
-6.00
-4.00
-2.00
0.00
2.00
4.00
6.00
8.00
1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001
year
%
Korea
Japan
Data: USDA
Explanatory variables for the area equation
0
20
40
60
80
100
120
140
160
180
1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001
year
%
area harvested
real rice price
real farm price index(excluding grains, base=1995)
real paddy fileld price
real farm wage(adult male, \ /day)
real farm supplies price index
Data: MAF and National Statistical Office of Korea
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
60
110
160
210
260
310
360
410
460
510
1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001
year
tril.
Won
0
20
40
60
80
100
120
140
160
\10
00,
kg/
year
real GDP(tril. Won, base=1995)
real price(\ 1000, base=1995)
per capita consumption(kg/year)
Explanatory variables for the consumption equation
Data: MAF and National Statistical Office of Korea
per capita consumption
60.0
70.0
80.0
90.0
100.0
110.0
120.0
130.0
140.0
1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002
Year
kg/y
ear
Korea
Japan
Per capita consumption
Data: MAF of Korea and General Food Policy Bureau of Japan
-15.00
-10.00
-5.00
0.00
5.00
10.00
15.00
20.00
1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001
year
%
Korea
Japan
Per capita consumption variation
Data: MAF of Korea and General Food Policy Bureau of Japan
0
20
40
60
80
100
120
140
160
180
kg/year
countries
Korea
Japan
Taiwan
Differences in food consumption
Data: Korea Rural Economic Institute
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?