ARGOS - Modelling the Economic, Environmental, and Social Implications for New Zealand from Different Scenarios Relating to the Demand and Supply of Organic Products

This paper reports on some of the initial findings of the ARGOS (Agricultural Research Group on (Sustainability) programme, a 6 year quasi-experimental research project with the aim to model the economic, environmental, and social differences between organic, environmentally friendly and conventional systems of production. In the first section the paper reviews the development of organic markets, details the production costs and reports some preliminary results from ARGOS. The information is then used to develop potential future scenarios relating to the organic sector, which are assessed using the Lincoln Trade and Environment Model (LTEM), a partial equilibrium trade model that differentiates between organic and conventional production methods. This paper concentrates upon the difference between organic and conventional production, consumption and trade.sustainability, New Zealand, organic markets, ARGOS, Demand and Price Analysis, F18, Q17,

Book reviews

Teaching/Communication/Extension/Profession,

Estimated Contribution of Four Biotechnologies to New Zealand Agriculture

The impact of biotechnology is an important consideration for New Zealand. The country depends significantly on agricultural production and exports (Ministry of Agriculture and Forestry, 2004), and has relied in part on modern biotechnology for productivity increases over the last 20 years (Evenson & Gollin, 2003; Jacobsen & Scobie, 1999; Ovenden, Anderson, Armstrong, & Mitchel, 1985). A recent survey of individuals in agriculture and biotechnology generated a comprehensive list of products and processes that are derived from four specific biotechnologies and are commercially significant in agriculture (Kaye-Blake, Saunders, Emanuelsson, Dalziel, & Wreford, 2005). This innovative research generated primary data on the actual impacts that biotechnology is currently having on agricultural production and produced a unique dataset of biotechnology products and processes and their value to New Zealand agriculture. Analysis found that these four biotechnologies are contributing approximately 206 million per year to agriculture. This analysis, however, assumed perfectly elastic international prices, and thus that New Zealand agricultural producers would capture the benefits of increased productivity. Literature on the impacts of productivity increases suggests that the distribution of benefits from increased productivity depends on how widely a technology is adopted. For example, genetic improvements in the crops of one country can allow domestic producers to increase producer surplus at the expense of producers in the rest of the world (Frisvold, Sullivan, & Raneses, 2003). By contrast, domestic farmers may be worse off if innovations are adopted in both the home country and the rest of the world (Moschini, Lapan, & Sobolevsky, 2000). The literature also suggests that specific impact of a novel technology is important to its impacts on agricultural producers. For example, technology that increases yields may be less beneficial for farmers than technology that reduces costs (Moschini et al., 2000). In addition, innovations that increase productivity of commodity products with low price elasticities of demand may not benefit farmers as much as innovations that increase consumer demand for agricultural products (Saunders & Cagatay, 2003). These findings are relevant because some features of New Zealand's primary sector suggest that international price impacts may be important. New Zealand is an open economy (Ministry of Agriculture and Forestry (MAF), 2004) and a significant exporter on world markets, particularly in pastoral products (Ministry of Agriculture and Forestry (MAF), 2004; Saunders & Cagatay, 2003). Modelling the movement of international prices may be done in several ways. The general equilibrium GTAP model (Hertel, 1997), for example, has been used to examine the potential impacts of biotechnology on producer and consumer welfare assuming different levels of adoption and consumer acceptance (e.g., Anderson & Jackson, 2005; Stone, Matysek, & Dolling, 2002). These impacts have also been analysed with partial equilibrium models, in particular models derived originally from the Uruguay Round of trade negotiations (Roningen, 1997), such as SWOPSIM (Frisvold et al., 2003; Roningen, Dixit, Sullivan, & Hart, 1991) and LTEM (Saunders & Cagatay, 2003). Partial equilibrium models are particularly appropriate for analysing impacts on a single sector of the economy: they allow substantial disaggregation by commodity and examination of the linkages that lead to model results (Gaisford & Kerr, 2001). In order to investigate the possible impact of biotechnological innovations on commodity prices and agricultural producers, the results of the original findings based on elastic prices were incorporated into a partial equilibrium model of world agricultural commodity trade (Cagatay & Saunders, 2003; Saunders & Cagatay, 2003). The model contained 19 commodities, including the major trade commodities for New Zealand (dairy products and meat). World trade was divided into 17 countries and the rest of the world, including New Zealand as a separate entity as well as the US, EU, Australia, Japan and others. As a partial equilibrium model, it examined the agricultural sector in isolation from other sectors of the economy. The base year was 2000, and impacts were modelled to 2005. The base solution modelled current production, which included biotechnological innovations. Alternative scenarios modelled the impact of the absence or loss of biotechnological innovations. The first scenario modelled the absence of innovations in all countries, while the second scenario examined the impact of innovations specific to New Zealand. The contribution of biotechnology to productivity was assessed separately for each commodity, using the original dataset (Kaye-Blake et al., 2005). For each commodity in the model, the analysis calculated the change in producer prices and total producer returns (price x quantity). The modelling results conformed to expectations. In the first scenario, a worldwide reduction in productivity in the primary sector led market prices to adjust upward in response to the lower production. For the second scenario, the price impacts were smaller for sectors with innovations specific to New Zealand. These changes were then combined with the original, constant-price estimate to calculate price-adjusted figures. The constant price analysis found that the contribution of the biotechnologies was 206 million. The first modelling scenario found that the economic benefit of the biotechnologies was only $19 million because increased productivity reduced commodity prices. The second scenario yielded an economic benefit of$191 million, suggesting that adopting New Zealandspecific innovations might not have a large impact on aggregate trade and might have allowed domestic producers to capture much of the increased welfare from innovations. Economic impacts, however, were spread unevenly across the commodities. In both trade scenarios, dairy producers increased producer returns through biotechnology, regardless of how widely the innovations were adopted. Meat producers, on the other hand, improved their returns when the innovations were specific to New Zealand, but were somewhat worse off when the innovations were available worldwide. This research contributes to understanding of the impacts of biotechnology in several ways. First, the productivity impacts were based on empirical findings regarding estimated impacts of actual commercially released biotechnologies; these were estimates of impacts that have actually occurred. Secondly, the productivity effects varied by commodity in the model, so that the impacts on different commodities could be estimated. Finally, by using a disaggregated, multi-commodity model, the cross-effects from resources shifting into other agricultural uses could be captured.Research and Development/Tech Change/Emerging Technologies,

Exploratory Research into the Resilience of Farming Systems during Periods of Hardship

This paper investigates the management strategies and responses used by New Zealand sheep and beef farmers to ensure resilience during periods of hardship. Using two, farm level surveys conducted in 1986 and 2010, some aspects of resilient farming systems were identified. Despite apparent hardship current farmers seemed more willing to take risks, with many more borrowing to invest in on farm developments than those in 1986. The main similarity between time periods was the greatest response to economic changes being the adoption of a low input policy. This result was quite significant, as conventional farmers are generally believed to resort to other strategies or responses.Resilience, New Zealand, indicators, sustainable agriculture, strategies, Agribusiness, Environmental Economics and Policy, Land Economics/Use, Production Economics,

TRADE AND THE ENVIRONMENT. LINKING A PARTIAL EQUILIBRIUM TRADE MODEL WITH PRODUCTION SYSTEMS AND THEIR ENVIRONMENTAL CONSEQUENCES

This paper was presented at the INTERNATIONAL TRADE IN LIVESTOCK PRODUCTS SYMPOSIUM in Auckland, New Zealand, January 18-19, 2001. The Symposium was sponsored by: the International Agricultural Trade Research Consortium, the Venture Trust, Massey University, New Zealand, and the Centre for Applied Economics and Policy Studies, Massey University. Dietary changes, especially in developing countries, are driving a massive increase in demand for livestock products. The objective of this symposium was to examine the consequences of this phenomenon, which some have even called a "revolution." How are dietary patterns changing, and can increased demands for livestock products be satisfied from domestic resources? If so, at what cost? What will be the flow-on impacts, for example, in terms of increased demands for feedgrains and the pressures for change within marketing systems? A supply-side response has been the continued development of large-scale, urban-based industrial livestock production systems that in many cases give rise to environmental concerns. If additional imports seem required, where will they originate and what about food security in the importing regions? How might market access conditions be re-negotiated to make increased imports achievable? Other important issues discussed involved food safety, animal health and welfare and the adoption of biotechnology, and their interactions with the negotiation of reforms to domestic and trade policies. Individual papers from this conference are available on AgEcon Search. If you would like to see the complete agenda and set of papers from this conference, please visit the IATRC Symposium web page at: http://www1.umn.edu/iatrc.intro.htmInternational Relations/Trade, Environmental Economics and Policy, Production Economics,

Modelling Climate Change Impacts on Agriculture and Forestry with the Extended LTEM (Lincoln Trade and Environment Model)

In the land-based sectors, agricultural production generally is a source of carbon, while forestry may be thought to act as a sink. This paper focuses on new research examining the interaction of the two. The core of the research is the Lincoln Trade and Environment model (LTEM), a partial equilibrium model which links trade in NZ with the main trading countries overseas, through to production and associated environmental consequences . This paper reports on research expanding the model to include forestry from incorporating the capabilities of the Global Forest Products Model (GFPM) into the LTEM and hence producing an integrated model of agricultural and forestry land-uses for NZ and overseas. The paper extends the environmental modelling capabilities of the LTEM to include the impacts of climate change. The paper thereby reports on the development of a model of international trade that encompasses major agricultural commodities and forestry, complete with linkages and feedback with the environment and differentiated international markets. The paper then presents results of scenarios around changes in consumer behaviour and production using the new model.Environmental Economics and Policy,

Trade liberalisation and greenhouse gas emissions: the case of dairying in the European Union and New Zealand

International Relations/Trade,

Capital Based Sustainability Indicators as a Possible Way for Measuring Agricultural Sustainability

This paper takes the capital based approach to sustainability and applies this to examine the sustainability of different farming methods. The capital based approach argues that for future generations to be as well off as the present than the capital base should at least be maintained. The paper explores some of the issues around this approach such as the definition of capitals, their measurement and weakness in the approach which do not account for the resilience of system and/ or the substitutability of capitals. The paper outlines how this could be applied to agriculture and show sustainability across different farming methods. The data used is from the ARGOS (Agricultural Research Group on Sustainability) project which has collected data on social, economic and environmental factors from kiwifruit orchards green, green organic and gold, for five years. The results show little significant differences across orchard types. This may be due to the homogeneity of kiwifruit orchards and it is intended to expand this to the sheep sector to examine this further.Agricultural and Food Policy,