Research

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RESEARCH

Research Areas:
This research center analyzes a wide range of agricultural trade and policy issues for decision makers in private and public sectors. Some of the areas are:
 

Agricultural policies and programs

Agricultural trade policies - multilateral and bilateral trade

Global competitiveness for Northern Plains crops and products

Foreign market development and export strategies for Northern Plains crops and products

U.S./Canada trade under NAFTA

Economics of Bio-Energy and climate change
 
Research Tools:

Global Wheat Policy Simulation Model (GWPSM)

Global Sugar Policy Simulation Model (GSPSM)

ND Representative Farm Model

 

Global Agricultural Commodity Model (GACM)
 
Global Wheat Policy Simulation Model

This model was developed to evaluate the U.S. and world wheat industries. Wheat is divided into common and durum wheat. The Global Wheat Policy Simulation Model is a partial equilibrium model that distinguishes two classes of wheat. U.S. common wheat is further divided into four classes: hard red winter, hard red spring, soft red winter, and white wheat.
The model contains 5 exporting countries and regions (Argentina, Australia, Canada, the United States, and the European Union) and 13 importing countries and regions (Algeria, Brazil, China, Egypt, the Former Soviet Union, Japan, Mexico, Morocco, South Korea, Taiwan, Tunisia, Venezuela, and a Rest of the World Region). Wheat production, consumption, and carry-over stock equations in major producing and consuming countries are estimated with time series data by using econometric techniques. The estimated equations are linked under a partial equilibrium condition in the world wheat industry. The model is solved for a set of equilibrium wheat prices in which demand for each wheat class equals supply for every year.
The model is based on an assumption that current farm and trade policies adopted by wheat exporting and importing countries are unchanged. Assumptions associated with macroeconomic variables, such as GDP growth rates, interest rates, inflation rates, exchange rates, and consumer price indices in the United States and other countries are based on forecasts prepared by the WEFA Group and Project LINK. Average weather conditions and historical rates of technological change are also assumed to prevail during the projection period. It is generally assumed that current agricultural policy will be continued in the countries. The price of wheat in individual countries and the world market is endogenous, while the prices of other crops are exogenous. Thus, the baseline projection of the model is based on the forecasted world prices of other crops which have substitute and complementary relationships with wheat. The forecasted prices were obtained from the FAPRI baseline solution.
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Global Sugar Policy Simulation Model

The Global Sugar Policy Simulation Model was developed by dividing sugar into beet and cane sugar. This model includes 17 sugar producing and consuming countries. Some of these countries are beet sugar producing countries (Algeria, Canada, the EU, and the FSU) and some are cane sugar producing countries (Australia, Brazil, Cuba, India, Indonesia, Mexico, South Africa, and Thailand). The remaining countries (China, Japan, and the United States) produce both beet and cane sugar. These two sugars are perfectly substitutable in consumption, but are differentiated in the production process. Sugarcane is produced in tropical and subtropical climate zones. Once the cane is harvested, the sucrose starts breaking down. Thus, to minimize transport costs and sucrose losses, sugarcane mills are located close to cane fields. Mills convert sugarcane into raw sugar that is shipped to refineries for further processing for refined sugar. On the other hand, sugarbeets are produced in temperate climate zones. Since sugarbeets are bulky and costly to transport, beet processing facilities are located near the fields and process beets into refined sugar.

Sugar production, consumption, and carry-over stock equations in major producing and consuming countries are estimated with time series data by using econometric techniques. The estimated equations are linked under a partial equilibrium condition in the world sugar industry. In the market clearing condition, the sum of each country’s excess demand equation for sugar, which is a function of the world price of sugar, is zero. This aggregate excess demand equation is solved for the equilibrium price of sugar.

The model is grounded on a series of assumptions associated with the general economy, agricultural policies, and technological changes in exporting and importing countries. Macro assumptions are based on forecasts prepared by the WEFA group and Project LINK. Some of the macro variables are GDP growth rates, interest rates, exchange rates, and inflation rates in the countries. It is generally assumed that current agricultural policy will be continued in the countries. Average weather conditions and historical rates of technological change are assumed to prevail during the projection period. The price of sugar in individual countries and the world market is endogenous, while the prices of other crops are exogenous. Thus, the baseline projection of the model is based on the forecasted world prices of other crops which have substitute and complementary relationships with sugarbeets and sugarcane. The forecasted prices were obtained from the FAPRI baseline solution.
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North Dakota Representative Farm Model
The North Dakota Representative Farm Model is a stochastic simulation model that analyzes the impacts of policy changes on farm income. The model projects average net farm incomes, debt-to-asset ratios, cash rents, and cropland prices for representative farms producing five major crops: wheat, barley, corn, soybeans, and sunflowers. The model is linked to the FAPRI and North Dakota Global Wheat Policy Simulation Models and uses the prices of the crops generated from the models. In addition, macro policies and assumptions, trade policies, and agricultural policies are incorporated into the model directly or indirectly.
Farm policies affect net farm income for the representative farms. Changes in return to cropland, given the market-determined capitalization rate, result in changes in land prices. Changes in land prices affect cash rental rates farmers are willing to pay on land used to produce crops. Changes in land price and cash rental in turn affect net farm income through adjustments in farm expenses. These changes affect the debt-to-asset ratios of the representative farms.
The model has 12 representative farms, three farms in each of four regions of North Dakota. These regions are the Red River Valley (RRV), North Central (NC), South Central (SC), and Western (West). Farms in each region are representative of small, medium, and large size farms enrolled in the North Dakota Farm and Ranch Business Management Association. The large farm is the average of the largest 25 percent of farms in cropland acres for each producing region. The small representative farm is the average of the smallest 25 percent of farms for each producing region. The medium size farm is the average of the remaining 50 percent of farms. The average farm sizes are 2,358 cropland acres for the large size farm, 1,182 cropland acres for the medium size farm, and 475 cropland acres for the small size farm.
The model has 12 representative farms based on management efficiency, three farms (high profit, average profit, and low profit farms) in each region. The average profit representative farm is an average of all farms in the Farm and Ranch Business Management Records System in each region. The high profit representative farm is an average of farms in the top 20 percent of farm profitability for each region. The low profit representative farm is an average of farms in the low 20 percent of farm profitability for each region.
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Global Agricultural Commodity Model (GACM)

The Global Agricultural Commodity Model was developed to analyze the optimal trade flows of agricultural commodities, mainly wheat, rice, corn, and soybeans from exporting countries to importing countries. The model is based on a mathematical program algorithm, which optimizes the objective function of the model subject to several linear or nonlinear constraints.

The model includes major agricultural exporting and importing countries and some of these countries are sub-divided into several producing and consuming regions. This model is capable of evaluating optional trade flows under alternative domestic and trade policies in exporting and importing countries, and the impacts of the changes in transportation costs and handling capacities on the optimal trade flows of agricultural commodities.


Current Research:

Issues related to regional/bilateral negotiations for Northern Plains agriculture
Analysis of Northern Plains agriculture under the current macro economic conditions
Impacts of continuous dollar depreciation on U.S. agricultural exports
Analysis of Asian markets for Northern Plains agricultural commodities and products
U.S. cane and beet sugar industries under alternative sugar trade liberalization policies
Outlooks for the U.S. wheat and sugar industries
Outlooks for the North Dakota farm economy
Economics of corn and cellulose ethanol production in the Northern Plains
diamond Impacts of climate change policy on Northern Plains agriculture

 


Created by: Joe Hoffman
Produced by: The Department of Agribusiness and Applied Economics
Phone: (701) 231-7334  --  Fax: (701) 231-7400
Address: 209 Morrill Hall