How to forecast rice production and consumption in Korea? Tae Ho, Lee

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

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

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.

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 3. Forecasting production

Estimation of the yield: AR(1) Estimation of the area  Area harvested = f (domestic rice 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?

Yield Data: USDA

Area harvested Data: USDA

Variation of area harvested Data: USDA

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

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

Model : per capita rice consumption = price dependent part + time dependent part  example q t = a + bp t + e t e t = c + de t-1 + u t q t : per capita rice consumption at period t p t : price at period t e t : time dependent consumption at period t u t : error

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

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

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

Differences in food consumption Data: Korea Rural Economic Institute

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?