Research Reports
A Study of Modelling a Supply and Demand Outlook System of Korean Chestnut
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AuthorLee, Sangmin
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Publication Date2006.11.01
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Original
This study is mainly designed to model a supply and demand outlook system of the chestnut market in Korea. The basic figures from simulation results of the system would help making efficient policy planning.
The contents include the current chestnut market conditions, the estimation of functional forms of the supply and demand system, and modelling the system. Two pending problems on the removal of a TRQ and the enforcement of environmentally-friendly cultivation are simulated in accordance with possible scenarios.
According to the estimation result of the acreage function, it is more efficient to conceive policy plans for costs than for prices to alter the acreage, since the cost is more highly elastic to the acreage than the price. Typhoons in August are the most effective factor in yield per unit area. The yield function does not depend on typhoons in September, however. The imports are divided into two functions by their uses. The price of domestic produced chestnuts has a larger impact on fresh chestnut imports than the import price. The import amount of processed chestnuts is highly elastic in the price of domestic produced chestnuts as well as its own price, however, the estimation result of the function is unstable due to sudden increases of recent imports.
Exports of processed chestnuts and fresh chestnuts are regressed with respect to the price of Japanese chestnuts in common. For the processed chestnut the export amount is elastic in its own price, and it has a substitution relationship with the domestic consumption. An export of fresh chestnuts has a substitution relationship with decreasing exports of process chestnuts, and the export will increase for a considerable time because of highly elastic parameter of substitution. For the demand function of fresh chestnuts we have a regression equation of the price with respect to the quantity and other independent variables. In addition the calculated prices from this function become values of the price variable in the acreage function.
The baseline system is modelled and run with the estimated functions over a span of 9 years, which ends by 2015. The results indicate that the total amount of production will decrease by 21%, and the share of total imports in supply would be 14.4%. The consumption of chestnuts per capita will drop to 0.99kg, and this is 24% decrease of the current consumption. The producers' price will increase by 62% while the profits per hectare by 122%.
The first scenario of the TRQ removal reduces the base line acreage by 3.6%, and increases the import amount by more than 9,000 metric tons. Consequently, the total amount of supply increases, and the producers' price decreases to reduce the profit per hectare by 11%.
The second scenario of environmentally-friendly cultivation incurs a profit loss of ￦2,195,000 per hectare.
Researchers: Lee, Sang-Min and Chang, Cheol-Su
E-mail address: smlee@krei.re.kr
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