How to forecast rice production and consumption in Korea?

1. How to forecast rice production and consumption in Korea? 2004. 7 Tae Ho, Lee

2. 1. The Situation of Production & Consumption • Production & Consumption in Korea Data: MAF of Korea

3. Production & Consumption in Japan Data: General Food Policy Bureau of Japan

4. 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.

5. 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

6. Estimation of the yield: AR(1) • Estimation of the area • Area harvested = f (domesticrice 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?

7. Yield Data: USDA

8. Area harvested Data: USDA

9. Variation of area harvested Data: USDA

10. Explanatory variables for the area equation Data: MAF and National Statistical Office of Korea

11. 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

12. 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

13. Explanatory variables for the consumption equation Data: MAF and National Statistical Office of Korea

14. Per capita consumption Data: MAF of Korea and General Food Policy Bureau of Japan

15. Per capita consumption variation Data: MAF of Korea and General Food Policy Bureau of Japan

16. Differences in food consumption Data: Korea Rural Economic Institute

17. 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?