Welfare effects of introducing herbicide tolerant sugar beets worldwide

Transcription

1 Welfare effects of introducing herbicide tolerant sugar beets worldwide Koen Dillen*, Matty Demont, Eric Tollens* Centre for agricultural and food economics, KULeuven Africa Rice Center (CGIAR) 12th ICABR Conference, Ravello June, 2008

2 Presentation yesterday Bivariate parametric modeling of heterogeneity to estimate t the ex ante value of monopolistically priced technologies. Input: heterogeneity (spatial and temporal) Calculating the restricted monopoly price Output: Technology fee Adoption rate Profit/ha for adopting farmer

3 Distribution of benefits Review of ex post impact studies indicates that t 1/3 of the global l benefits is extracted by the input suppliers and 2/3 is shared among domestic and foreign farmers and consumers (Demont et al,2007) In Europe studies are limited. Our study is a ex ante impact assessment for transgenic sugar beet.

4 Transgenic sugar beet HT is an attractive trait. Weed control is crucial for economic beet production and the end product sugar does not contain proteins or DNA Commercial production was introduced in the US this year. Sugar industry is slowly opening its doors towards transgenic crops

5 Model Three region model: EU, ROW sugar beet, ROW sugar cane Moschini, Lapan and Sobolevsky (2000)complete the conventional framework by including welfare measurement in the input market to adjust for IPR and monopolistic power Temporal dimension 20 years, including one evaluation year Spatial dimension changes through the accession of New Member States in 2004: 16 or 19 European sugar market reform in 2006

6 Former CMO sugar ( 68-05) Intervention prices for sugar and beets Quotas higher than internal consumption. Overproduction on world market, autofinanced with levies which consumers pay for. AFC is function of worldwide adoption through h price meaning that t internal prices are affected by the innovation.

7 Former CMO Opposite effect of technology induced cost reduction and depression of world prices Following MLS (2000) variation of producer surplus is measured in the land market. However, this depends to a large extent on the region s production efficiency Different groups (ϕ) different supply responses. Stock decisions and risk premiums are assumed not to be affected by the new technology

8 Responsive to world market prices? Frandsen (2003) Frandsen (2003) revisited a Poonyth (1998) Gohin (2006) Buy-out in first two year c Score Belgium WPR WPR No WPR (3/5) Denmark WPR No Germany WPR WPR WPR WPR No WPR (5/5) Greece Yes Spain Yes France WPR WPR WPR No WPR (4/5) Italy Yes Netherlands WPR No Austria WPR WPR No WPR (3/5) Portugal Yes Finland Yes Sweden WPR Yes UK WPR WPR wrong b WPR No WPR (4/5) Czech republic WPR Yes Hungary WPR Yes Poland WPR No

9 Region * ϕ i,j Incentive price Area elasticity Yield elasticity Former New Former New ROW cane 6 6 world price world price ROW beet 5 5 world price world price Belgium 4 8 world price (C) world price (industrial) Denmark 3 7 B sugar price instit. price Germany 4 8 world price (C) world price (industrial) Greece 0 7 A sugar price instit. price Spain 3 7 B sugar price instit. price France 4 8 world price (C) world price (industrial) Italy 1 7 A sugar price instit. price Netherlands 2 7 mixed price (A, B and a instit. price fixed quantity of C sugar) Austria 4 8 world price (C) world price (industrial) Portugal 0 7 A sugar price instit. price Finland 1 7 A sugar price instit. price Sweden 2 7 B sugar price instit. price United 4 8 world price (C) world price Kingdom (industrial) Czech Rep. 4 7 world price (C) instit. price Hungary 3 7 B sugar price instit. price Poland 3 7 B sugar price instit. price

10 New CMO for sugar Introduced on the first of July Key features: progressive cut of institutional prices Direct compensatory payments to farmers Single production quota Reduction in production, facilitated by a buy-out scheme.

11 Model A and B quota replaced by single quota arrangment AFC is gone, just fixed reference price Type of production (ϕ) changes: Producers not filling gquota will sell and just fill there quota afterwards Filling before remain filling but some selling may occur C-producers become producers of industrial sugar but much less volume traded

12 ROW ROW cane reacts to world prices ROW beet is small, not being able to influence the world prices significantly and stringent market regulations are common. No supply shift nor export demand shift. As a consequence freeing land up allocated to sugar production

13 Producer surplus ROW Cane: πi, j( p j( ρw, j), ρi, j) PSi, j( pj( ρw, j), i, j) = Li, j( ) d πi, j( p j(0),0) ρ π π, ρ = ROW Beet: yp ( j( ρw, j), i, j) Q ij ( ρ ) ( ) PS = (0)0 ij, ( p j( W, j), ρij, ) πij, p j( W, j), ρij, πij, p j(0),0 ρ EU: PS ( p ( ρ ), ρ ) = PS ( p ( ρ ), ρ ) EU, j j W, j EU, j i, j j W, j i, j i= 2 19

14 Consumer surplus EU: no effect due to fixed institutional i peu, j( pj(0),0) prices CSEU, j( pj ( ρw, j), ρeu, j) = DEU, j( p) dp = 0 i EU, j pj ρw, j ρeu, j p ( ( ), ) ROW: CS ( p ( ρ ), ρ ) = D ( p) dp ROW, j j W, j ROW, j ROW, j p ( ρ ) j p j (0) W, j

15 Revenue innovator 18 Π ( ( ρ ), ρ ) = ρ ( ( ρ ), ρ ) µδ p L p w j j W, j W, j i, j i, j j W, j i, j i i i=0 Land supply function is important, depending on regional and global adoption. Due to quota, the yield increasing effect of technology can decrease the demand for the innovation in Europe

16 Data and calibration 1996 up to The innovator decides on a new uniform monopoly price in 2004 upon accession of 10 New Member States to the EU Adoption following a loglogistic l pattern (Griliches 1957) calibrated on US HT soybeans with country specific adoption ceilings

17 Stochastic EDM Yield increases, elasticities, uncertain in ex ante perspective. Distributions on each parameter Monte Carlo simulation

18 Results The distribution of created welfare is following the rule of thumb with 39% going to input suppliers and 61% going to the downstream sector. With 32% going outside of EU Sugar beet growers gain 7.6 billion, almost equally shared between ROW and EU (46%- 54%) Input suppliers have a revenue of 5.9 billion

19 Results Depressing effect on world sugar prices (1.3% annually) makes ROW consumers gain 8.6 billion but means a loss to cane growers of 7.2billion European consumers gain 0 in the current policy settings Land supply responses: EU: -1.10% (differences for exporters and world price irresponsive ROW beet:-2.7% ROW cane: -0.35%

20 Descriptive statistics of the distribution of the aggregated impact of HT sugar beet on EU-15 agriculture, the seed industry and the ROW, 1996/ /15 Minimum 2.5% confidence limit Mean 97.5% confidence limit Maximum EU-15 producers 2, , , , ,221.5 EU-15 consumers Net ROW , , , , ,328.8 Input suppliers 2, , , , ,486.1 Total 7, , , , ,555.2

21 New CMO How does the new regime influence the incentive for farmers to innovate? Does this influence the rationale behind the reform: Increased competiveness of the European sugar sector Pair wise analysis to analyze hypothesis on transformed prior distributions (Zhao et al.,1998). Construction of probability bili intervals.

22 Belgium (-21.9; 88.5) (-20.2; 83.1) (-22.1; 88.8) (-23.1; 92.3) (-23.3; 93.2) Denmark (10.6; 137.8) (2.2; 111.9) (-7.2; 102.0) (-15.3; 93.8) (-15.4; 94.8) Germany (-23.7; 97.0) (-21.9; 91.7) (-24.0; 97.5) (-25.1; 101.2) (-25.4; 102.3) Greece (-44.6; 3.9) (-64.4; 1.4) (-76.7; 0.93) (-86.4; 0.31) (-86.4; 0.34) Spain (15.4; 94.1) (9.6; 59.3) (4.7; 41.4) (-0.19; 28.7) (-0.19; 29.0) France (-27.7; 110.0) (-25.6; 103.6) (-28.1; 110.2) (-29.3; 114.3) (-29.6; 115.5) Italy (-35.0; 2.5) (-48.5; 0.41) (-57.3; -0.24) (-64.4; -0.79) (-65.0; -0.77) Netherlands (-19.0; 94.5) (-40.4; 70.8) (-59.4; 65.4) (-75.1; 62.3) (-75.7; 62.9) Austria ( ; 87.0) ( ; 1; 81.9) ( ; 87.3) ( ; 90.8) ( ; 91.9) 9) Portugal (-119.4; -5.9) (-151.0; -10.8) (-171.0; -13.0) (-187.4; -14.5) (-189.0; -14.9) Finland (-41.6; -1.1) (-58.1; -3.7) (-69.1; -5.0) (-78.3; -6.0) (-79.3; -6.0) Sweden (13.5; 81.1) (10.5; 64.2) (7.8; 55.2) (5.4; 49.2) (5.5; 49.6) United Kingdom (-14.0; 54.6) (-12.8; 51.0) (-14.2; 54.8) (-14.9; 57.0) (-15.1; 57.7) Czech Republic (10.0; 71.2) (6.3; 46.7) (3.9; 32.7) (1.4; 22.7) (1.5; 22.9) Hungary (2.8; 35.2) (0.70; 22.7) (-1.4; ) 160) (-3.8; ) 109) (-3.8; ) 111) Poland (9.8; 61.6) (6.4; 41.9) (3.6; 31.6) (0.42; 24.2) (0.40; 24.5) Innovator s revenue (-4.3; -8.1) (-10.9; -17.6) (-10.6; -17.2) (-10.4; -16.9) (-10.6; -17.4) Belgium (-23.7; 94.7) (-24.3; 96.5) (-24.7; 97.9) (-25.3; 99.8) Denmark (-15.8; 96.1) (-16.3; 97.7) (-16.7; 99.0) (-17.2; 100.6) Germany (-25.8; 103.8) (-26.5; 105.8) (-26.9; 107.3) (-27.5; 109.3) Greece (-86.3; 0.40) (-86.2; 0.51) (-86.2; 0.59) (-86.1; 0.70) Spain (-0.24; 29.3) (-0.32; 29.8) (-0.42; 30.1) (-0.56; 30.6) France (-30.1; 117.1) 1) (-30.8; 119.2) (-31.3; ) (-32.0; 123.0) Italy (-65.7; -0.73) (-66.3; -0.65) (-67.0; -0.60) (-67.7; -0.49) Netherlands (-76.5; 63.8) (-77.4; 65.0) (-78.2; 66.0) (-79.4; 67.2) Austria (-22.6; 93.3) (-23.1; 95.1) (-23.5; 96.6) (-24.0; 98.5) Portugal (-190.2; -14.9) (-191.3; -15.0) (-192.6; -14.9) (-193.8; -14.9) Finland (-80.4; -6.1) (-81.4; -6.1) (-82.5; -6.1) (-83.5; -6.1) Sweden (5.5; 50.2) (5.5; 50.8) (5.5; 51.4) (5.4; 52.1) United Kingdom (-15.3; 58.7) (-15.7; 59.9) (-16.0; 60.8) (-16.4; 62.1) Czech Republic (1.5; 23.2) (1.5; 23.6) (1.5; 23.9) (1.5; 24.3) Hungary (-3.9; 11.2) (-4.0; 11.4) (-4.1; 11.5) (-4.2; 11.7) Poland (0.38; 24.8) (0.34; 25.2) (0.32; 25.6) (0.29; 26.0) Innovator s revenue (-10.2; -16.6) (-10.1; -16.4) (-10.1; -16.3) (-10.0; -16.2)

23 Results Negative effect on high cost producers Positive effect on the middle groups Indifferent for the world market responsive producers Disfavoring high cost producers, leading to increased competiveness

24 Conclusion Introduction of HT sugar beet worldwide would gain significant benefits for downstream and upstream sector. Way of ex ante modeling confirms the rule of thumb

25 Further research Looking at coexistence measurements Looking at irreversibilities and uncertainty (real option approach)

26 Thanks for the attention?questions?