Method for forecasting the effects of trade policies and supply and demand conditions on the world dairy sector

Abstract

The present invention comprises a methodology for forecasting the effects of domestic and international trade policies on future trends in world dairy trade on an annualized as well as longer-term basis. The spatial hedonic equilibrium model employed in the present invention is used to analyze world dairy sector data and to forecast future trends by simulating the regional market equilibrium impacts of trade policies in the world dairy sector. The model reflects both vertical (e.g. the processing of farm milk into many different dairy products processing that reflects the allocation of milk components (e.g., milkfats, caseins, whey proteins and lactose) to various dairy commodities including primary, intermediate and processed commodities) and spatial characteristics (e.g. the distribution of milk production, demand and trade for dairy products in different regions of the world). Both domestic and trade policies, and their variations among countries, are incorporated in the model. The analysis forecasts the effects of trade liberalization on attributes of the world dairy sector (including prices, production, consumption, trade flows and the welfare of producers, consumers and taxpayers in various countries).

We claim:  
     
         1 . A method of forecasting the effects of a plurality of trade policy and supply and demand scenarios on a plurality of attributes of the world dairy sector across a plurality of regions, the method comprising: 
 creating a database of world dairy sector data, the data comprising a plurality of factors pertaining to dairy primary, intermediate and processed commodities including components thereof;    refining an hedonic spatial equilibrium model of the world dairy sector using the world dairy sector data; and,    running the refined model under the plurality of scenarios to forecast the effects of each of said scenarios on the world dairy sector attributes on at least an annualized basis.    
     
     
         2 . The method of  claim 1 , wherein said plurality of attributes of the dairy sector comprise prices, production, consumption, trade flows and welfare of producers, consumers and taxpayers.  
     
     
         3 . The method of  claim 1 , wherein said plurality of regions comprise the United States, Mexico, China (including Hong Kong, Taiwan, Macao and Mongolia), India, Japan, Australia, New Zealand, western Europe (all western European countries including Malta), eastern Europe, the former Soviet Union countries, Korea (north and south), Southeast Asia (countries to the east of and including Myanmar), Other South Asian countries, Middle East (including Cyprus), North Africa, Republic of South Africa, Canada, South America (excluding Argentina, Chile, Uruguay), South America (Argentina, Chile, Uruguay), Central America and Caribbean countries (excluding Mexico) and a remainder category of mostly Sub-Saharan Africa countries.  
     
     
         4 . The method of  claim 1 , wherein said primary commodities comprise cow, buffalo, camel, sheep and goat milk and said components comprise fats, casein proteins, whey proteins, other nonfat solids and further fractionations thereof.  
     
     
         5 . The method of  claim 1 , wherein said processed commodities comprise cheeses, butters, whole milk powders, skim milk powders, dry wheys, caseins, condensed milks, evaporated milks and other dairy products.  
     
     
         6 . The method of  claim 1 , wherein said intermediate commodities comprise butters, skim milk powders, whole milk powders, condensed milks, evaporated milks, caseins, dry wheys, milk protein concentrates and other products embodying fractionated milk components.  
     
     
         7 . The method of  claim 1 , wherein one of said plurality of scenarios comprises a base scenario to reflect recent world economic conditions.  
     
     
         8 . A method of forecasting the effects of a plurality of trade policy and supply and demand scenarios on a plurality of attributes of the world dairy sector across a plurality of regions, the method comprising: 
 creating a database of world dairy sector data, the data comprising a plurality of factors pertaining to dairy primary, intermediate and processed commodities including components thereof, creating the database comprising: 
 compiling the data;  
 transforming the data to be usable by an hedonic spatial equilibrium model of the world dairy sector; and,  
 updating the data;  
   refining the model using the world dairy sector data, refining the model comprising: 
 running the model under a base scenario to forecast the plurality of world dairy sector attributes under a set of recent world economic conditions;  
 calibrating a portion of the data, said portion comprising at least price data;  
 re-running the model using the calibrated data; and,  
 validating the model; and,  
   running the refined model under the plurality of scenarios, comprising the base scenario and a plurality of non-base scenarios, to forecast the effects of each of said non-base scenarios on the world dairy sector attributes on an annualized basis as a difference between a scenario's forecast and the base forecast.    
     
     
         9 . The method of  claim 8 , wherein said plurality of attributes of the dairy sector comprise prices, production, consumption, trade flows and welfare of producers, consumers and taxpayers.  
     
     
         10 . The method of  claim 8 , wherein said plurality of regions comprise the United States, Mexico, China (including Hong Kong, Taiwan, Macao and Mongolia), India, Japan, Australia, New Zealand, western Europe (all western European countries including Malta), eastern Europe, the former Soviet Union countries, Korea (north and south), Southeast Asia (countries to the east of and including Myanmar), Other South Asian countries, Middle East (including Cyprus), North Africa, Republic of South Africa, Canada, South America (excluding Argentina, Chile, Uruguay), South America (Argentina, Chile, Uruguay), Central America and Caribbean countries (excluding Mexico) and a remainder category of mostly Sub-Saharan Africa countries.  
     
     
         11 . The method of  claim 8 , wherein said primary commodities comprise cow, buffalo, camel, sheep and goat milk and said components thereof comprise fats, casein proteins, whey proteins, other nonfat solids and further fractionations thereof.  
     
     
         12 . The method of  claim 8 , wherein said processed commodities comprise cheeses, butters, whole milk powders, skim milk powders, dry wheys, caseins, condensed milks, evaporated milks and other dairy products.  
     
     
         13 . The method of  claim 8 , wherein said intermediate commodities comprise butters, skim milk powders, whole milk powders, condensed milks, evaporated milks, caseins, dry wheys, milk protein concentrates and other products embodying fractionated milk components.  
     
     
         14 . The method of  claim 8 , wherein one of said plurality of scenarios comprises a base scenario to reflect recent world economic conditions.  
     
     
         15 . A method of forecasting the effects of a plurality of trade policy and supply and demand scenarios on a plurality of attributes of the world dairy sector, the method comprising: 
 running an hedonic spatial equilibrium model of the world dairy sector, the model inputting data from a database of world dairy sector data, the data comprising a plurality of factors pertaining to a plurality of d airy commodities, said commodities including primary, intermediate and processed dairy commodities and components thereof;    refining the model using the world dairy sector data, refining the model comprising: 
 running the model under a base scenario to forecast the plurality of world dairy sector attributes under a set of recent world economic conditions;  
 calibrating a portion of the data, said portion comprising at least price data;  
 re-running the model using the calibrated data; and,  
 validating the model; and,  
   running the refined model under the plurality of scenarios, comprising the base scenario and at least one of a plurality of non-base scenarios, to forecast the effects of the at least one non-base scenarios on the world dairy sector attributes on an annualized basis as a difference between said at least one non-base scenario's forecast and the base forecast.    
     
     
         16 . The method of  claim 15 , wherein running the spatial hedonic model comprises: 
 calculating an amount of surplus across the plurality of dairy commodities and a plurality of geographic regions by adding producer and consumer surplus;    subtracting a cost of transporting and processing said plurality of dairy commodities across the regions;    subtracting a value reflecting the net effects of a plurality of classical trade distortions;    modifying the foregoing analysis by a set of values reflecting price distortions and quantity restrictions generated by the at least one non-base scenario; and,    subjecting the preceding calculations to at least one of a plurality of constraints dependent on the at least one policy scenario.    
     
     
         17 . In a method of forecasting the effects of a plurality of trade policy and supply and demand scenarios on a plurality of attributes of the world dairy sector by running an hedonic spatial equilibrium model of the world dairy sector, an improvement to further optimize the model results comprising: 
 incorporating into the model a plurality of factors pertaining to a plurality of intermediate dairy commodities that may be reconstituted for use in the production of a plurality of final dairy commodities, the plurality of factors comprising: 
 cost of processing the intermediate commodities into the final commodities;  
 shipments of the intermediate commodities under within and over quota tariffs and export subsidies;  
 expanded component balance incorporating the conversion of the intermediate commodities into final commodities; and, expanded trade balance, import quota, export subsidy and non-negativity constraints of the model that include the intermediate and reconstituted final commodities and trade flows;  
   whereby milk reconstitution technology is reflected in the model.    
     
     
         18 . A method of modeling the regional effects of a plurality of trade policy and supply and demand scenarios on a plurality of attributes of the world dairy sector by solving for a market equilibrium value over a plurality of regions under at least one of said policy scenarios, the method comprising: 
 calculating an amount of surplus across a plurality of dairy commodities and the plurality of regions by adding producer and consumer surplus, the plurality of dairy commodities comprising primary, intermediate and processed commodities;    subtracting a cost of transporting and processing said plurality of commodities across the regions;    subtracting a value reflecting the net effects of a plurality of classical trade distortions;    modifying the foregoing analysis by a set of values reflecting price distortions and quantity restrictions generated by the at least one of said policy scenarios; and,    subjecting the preceding calculations to at least one of a plurality of constraints dependent on the at least one policy scenario.    
     
     
         19 . The method of  claim 18 , wherein said plurality of regions comprise the United States, Mexico, China (including Hong Kong, Taiwan, Macao and Mongolia), India, Japan, Australia, New Zealand, western Europe (all western European countries including Malta), eastern Europe, the former Soviet Union countries, Korea (north and south), Southeast Asia (countries to the east of and including Myanmar), Other South Asian countries, Middle East (including Cyprus), North Africa, Republic of South Africa, Canada, South America (excluding Argentina, Chile, Uruguay), South America (Argentina, Chile, Uruguay), Central America and Caribbean countries (excluding Mexico) and a remainder category of mostly Sub-Saharan Africa countries.  
     
     
         20 . The method of  claim 18 , wherein said primary commodities comprise cow, buffalo, camel, sheep and goat milk and said components thereof comprise fats, casein proteins, whey proteins, other nonfat solids and further fractionations thereof.  
     
     
         21 . The method of  claim 18 , wherein said processed commodities comprise cheeses, butters, whole milk powders, skin milk powders, dry wheys, caseins, condensed milks, evaporated milks and other dairy products.  
     
     
         22 . The method of  claim 18 , wherein said intermediate commodities comprise butters, skim milk powders, whole milk powders, condensed milks, evaporated milks, caseins, dry wheys, milk protein concentrates and other products embodying fractionated milk components.  
     
     
         23 . The method of  claim 18 , wherein said cost of transporting and processing is calculated by adding a cost of transforming said primary commodities into said intermediate commodities, a cost of processing said intermediate commodities into said processed commodities, a cost of transporting and marketing said primary commodities between regions, and a cost of transporting and marketing said intermediate and said processed commodities between regions.  
     
     
         24 . The method of  claim 18 , wherein said plurality of classical trade distortions comprise within and over quota tariffs, export subsidies and production and import quotas.  
     
     
         25 . The method of  claim 18 , wherein said plurality of constraints dependent on the at least one policy scenario comprise component balance, trade balance, import quotas, export subsidies, trade flows and non-negativity constraints.