1. ECOWAS Model Structure and Training Jim Hansen, Nancy Cochrane, and Getachew Nigatu USDA, Economic Research Service

2. Presentation Outline:
1. Model Structure and general framework
2. Macro, Crops and Livestock Structure
3. Data for model
4. Basic sheets - Model, elasticity, base/scenarious
Set up Equations and Identities
6. Set up Baseline
7. Run Scenarios
8. Develop model

3. Build Equations: 1. Save Save Save 2. Moving sections - cut and paste
3. Identities
4. Build price equation, check revenue
5. Additional area equation
6. New consumption urban and rural
7. How parameter sheet change

4. Commands: 1. Graphs ctrl-shift T, new gen graph
2. Equation writer; ctrl-Shift-N ctrl-shift-E
3. Add-Factor: Line up new right hand data ctrl-R
3. Moving areas of model - cut and paste
4. F9 solve model
5. Additional commands - side bar

5. Baseline: 1. New macro data, GDP, exchange rate, population
2. New prices
3. New Data for commodities
4. Check graphs
5. Work through one commodity

6. Scenarios: 1. Macroeconomic data, GDP, exchange rate, population
2. New Feed rations for corn
3. Drought for rice rainfed area
4. Change in consumption patterns, income elasticty
5. Additional scenarios - ideas

7. Build Model: Save Save Save 1. Data 2. Equation writer
3. Copying sections and building new
4. Identities vs equations
5. Prices linkages (Price Transmission)
6. Production, consumption, trade, stocks
7. Additional
Save Save Save

8. Build Model: 1. Data, 2. Equation writer 3. Identities
4. Change in consumption patterns, income elasticities, feed demand
5. Additional ???

9. Commodities in ERS ECOWAS Model
Livestock: (3 sectors)
Beef, Pork, and Poultry
Crops: (9 sectors)
Wheat, Rice
Corn, Sorghum, Other-Coarse-Gr (mostly millet, oats, rye)
Other seeds, meal and oil
Cotton, sugar, cocoa
Blank sections no data – barley, soybeans meal oil,

10. ECOWAS Model Elasticity Partial Equilibrium model
Model in Excel Spread sheet - 3 main sheets Commodity models (Forecast) Parameters, Base-Scenario (table)
Data Requirement for Model
Macroeconomic variables
Agriculture data (aggregate) – UNFAO and PS&D
Prices and Policies

11. Model: Spread Sheets
1. Graphs of commodities
2. Gengraph - created by (Ctrl-Shift-t) in forecast sheet
3. Parameter sheet - elasticities used in forecast sheet
4. Forecast sheet - model and data ( )
5. Tables - used to compare Scenarios and Base
6. Scenario graph for rice
7. Last 3 sheets are log, needed, load error

12. Forecast Sheet: Macro, Policies, and Prices
1. Macroeconomic section
2. Reference Prices
3. Policies
4. Transportation cost
5. Consumer/producer margin
6. Government price
7. Border prices FAO - CIF
8. User defined variables

13. Forecast Sheet: Agriculture Sector
Livestock Grains Oilseed & Other
1. Aggregate land
2. Livestock Sector Beef Pork Poultry
3. Feed Demand
4. Total Grain Wheat Rice
5. Total Coarse Grain Corn Sorghum Other (millet, rye, oat)
6. Total Oilseed, Meal, Oil Other (meal, oil)
7. Cotton (bale )
8. Sugar
9. Cocoa

14. Scenario vs Base Comparison Sheet

15. Macroeconomics in Model
Oil price and % change
Population and % change
Domestic GDP and growth rate
Per capita GDP, local currency and % change
Domestic GDP, dollars
Per capita GDP, dollars
Domestic GDP deflater Growth rate
Domestic CPI and Growth rate
Nominal Exchange Rate and Growth rate
Real Exchange Rate and change in RER

16. Food Demand Commodities Matrix (16x16)
Grains and Others
4. Wheat
5. Rice
6. Corn
8. Sorghum
9. Other Coarse Grain
10. Dry beans
11. Vegetables
12. Ground nuts
Oilseeds
13. Soybean oil
14. Rape seed oil
15. Sunflower oil
16. Other oil
Meats
1. Beef
2. Pork
3. Poultry

17. Area Supply Response Matrix
1. Wheat
2. Rice
3. Corn
4. Sorghum
5. Other Coarse Grain
6. Other seeds
7. Sugar
8. Cotton
9. Cocoa

18. Structure of Crop Models
1. Policy (tariffs and quotas)
2. Price (border, farm, consumer)
3. Expected yield & revenue
4. Yield
5. Area harvested
6. Production
7. Consumption (total, feed, other)
8. Per capita consumption for food
9. Imports
10. Exports
11. Ending Stocks

19. Modeling ECOWAS Agriculture Economy:
Production & consumption
Crops: area, yield, consumption, stocks and trade
Livestock: animals inventory, production, consumption, trade, stocks
Model as a System
Accounting (0 = PROD+BSTK+IM-TCON-EX-ESTK)
Number of different identities must hold
Stock issue, government, farm household

20. Prices in the Model International prices (references price)
Import and export prices
Farm prices
Gross revenue (prices x expected yield)
Consumer wholesale or retail prices

21. Modeling Production: Production
Gross return = lagged prices x expected yield
Yield = f(gross return, research investment, tech)
Area = f(gross return, alternative crops GR, tech)
Production = Yield x Area
Total Supply = Production + Imports + Beg Stocks

22. Modeling Consumption:
Per capita consumption = f(own price, sub prices, income)
Food consumption = Per capita cons x Population
Feed demand = f(feed prices, meat production, historical ration)
Total cons = Food cons + Feed cons + Indus use
Total Disappearance = Total cons + Exports + End stocks

23. Modeling Stocks & Trade:
Beginning stocks = lagged(Ending stocks)
Ending stocks = f(production or consumption, trend)
Exports = f(consumer price, export price, trend)
Imports = Production + Beginning Stocks - Total Cons
- Exports - Ending Stocks

24. Closing the Model: Open Economy for some commodities
Imports and prices close the model the model
World and domestic price will solve for equilibrium
Total Disappearance = Total cons + exports + end stocks
Total Supply = Production + Imports + Beg Stocks
World Prices solve until world trade balances and
supply = demand for each country
0 = Total Supply - Total Disappearance

25. Elasticities in the Model
Consumer price elasticities
Consumer income elasticities
Producers supply response elasticities

26. Model Structure for Beef and Pork
1. Production ( total slaughter x carcass weight)
2. Consumption
3. Per Cap Consumption
4. Ending Stocks
5. Beginning Stocks
6. Exports
7. Imports

27. Model Structure for Poultry
1. Import and Export Price
2. Producer and Consumer Price
3. Production ( lagged on itself and function of price)
4. Consumption
5. Per Cap Consumption
6. Exports
7. Imports
No inventory for poultry

28. Thank you USDA, Economic Research Service