Technological Change and Markets in Sheep Systems Charles Nicholson Department of Applied Economics and Management, Cornell University

Market-level Analyses Often, agricultural researchers focus on outcome for an individual farm  Nutritional management Now, want to consider outcomes if a number of farmers adopt new technologies  What happens as a result of markets? Focus on producer net margin as outcome  Net margin = Revenues – Variable Costs

Simple Sheep Market Model Sheep numbers, feed, sheep meat market 2 regions  Yucatán and “Other” 2 types of producers  Commercial (adopters)  Tras patio (non-adopters) Sheep producers adopt a new technology  Over a period of time Also, growth in demand  Does it lead to increases in profitability?

Simple Sheep Market Model Stocks Total sheep numbers (region, farm type)

Simple Sheep Market Model Stocks Inventory of Sheep Meat (Mexico City)

Simple Sheep Market Model Stocks Local feed resources (region, farm type) Grazing, browsing (not purchased)

Simple Sheep Market Model Stocks Proportion of farmers adopting new technology S-shaped growth curve

Key Assumptions Producers must sell or retain young sheep  Regardless of the price Sheep price to producers depends on sheep meat price  “Markup pricing” Feed availability influences birth rate  Nonlinear function Consumers respond to price changes  Increase in price, decrease in sales

Combined Model Structure

Model has many feedback loops Key linkages between:  Sheep production and sheep meat inventories  Sheep production and feed resources

Combined Model Structure Sales and inventory linkage

Combined Model Structure Sheep and feed resources linkage

Combined Model Structure Economic factors

Model Scenarios Begin model in “dynamic equilibrium”  Population stable, no incentives for change Examine 2 interventions  Health intervention that decreases lambing interval  Subsidies for sheep producers (lower costs) Examine growth in demand

Model Outcomes of Interest Number of sheep Sheep sales Producer profits  Revenues less costs  Use this as an indicator of producer well-being

Baseline

Decreased Lambing Interval (Adopters)

Decreased Lambing Interval

Subsidies for Adopters

Demand Growth

Summary Interventions can:  Improve (or worsen) adopter profitability  Worsen non-adopter profitability Ultimate outcomes depend on biological and economic parameters  Inclusion of both makes for better analysis