1. Chinagro model structure and classifications W.C.M. van Veen Presentation available: www.sow.vu.nl/downloadables.htm www.ccap.org.cn Lecture 4

2. Current status of the welfare model Chinagro model presented in 4 lectures Lecture 4Structure and classifications Lecture 5Consumer demand Lecture 6Farm supply Lecture 7Feed accounting methodology

3. Contents of lecture 4 Recapitulation of yesterday's lectures aggregation messages structure Chinagro welfare model Classifications Chinagro consumers producers markets: sites, commodities

4. Recapitulation aggregation (1) Two types of aggregation from individual 'nano' (spatial or social continuum) to operational 'micro' level: exact optimal (best approximation)

5. Recapitulation aggregation (2) Is exact aggregation feasible? for profit maximizing farmers: yes for consumers maximizing utility subject to a budget constraint (demand system): yes, provided marginal utility of income is fixed (true in welfare programme since transfers adjust) for markets and commodities: no (compromise unavoidable in applications)

6. Recapitulation aggregation (3) Is optimal aggregation feasible? for profit maximizing farmers: yes for consumers maximizing utility subject to a budget constraint (demand system): yes for markets and commodities: no (compromise unavoidable in applications)

7. Recapitulation aggregation (4) Importance of aggregation messages for Chinagro welfare model: provides underpinning of operational specification of representative farmers and consumers (in terms of both exact and optimal aggregation) possibility to use 'nano'-level information in estimation procedure

8. Structure of Chinagro welfare model (1) profit maximizing farmers at detailed spatial level utility maximizing consumers at detailed spatial level spatially aggregated markets for commodities traded outside the own site, possibly also from/to abroad local markets for sources at detailed spatial level detailed level: county aggregated level: region

9. Structure of Chinagro welfare model (2) Full static version:

10. Regions of Chinagro welfare model

11. Classification of consumers Consumers: rural population by county (2300) urban population by region (8) In fact, model has with the population size of class s Hence, -utility depends on per capita consumption -detailed scenarios of migration possible

12. Classification of producers In each county: two crop farmers: rainfed, irrigated number of livestock farmers: under discussion one fisherman (exogenous output) In each region: one non-agricultural producer (exogenous output) (each producer characterized by own transformation function and own optimal behaviour)

13. Relative importance livestock activities 1997 (in million of RSLU) CattleBuffalo Goat Sheep PigsPoultry Grazing 21.9 - 5.2 8.8 - - Trad. mixed 51.3 22.1 10.5 4.2 32.2 20.5 Specialized 2.0 0.1 2.0 1.6 3.1 10.5 Industrial 1.5 - 0.5 1.5 1.8 1.9 Source: CCAP/IIASA

14. Possible classification livestock farmers By system: meat/milk ruminants, grazing meat/milk ruminants, mixed draught animals pigs/poultry, mixed pigs, intensified poultry, intensified

15. Model specification intensified livestock production adjusts, within bounds, to demand spatial distribution of production adjustment specified exogenously In model formula, for instance: with instead of

16. Classification of markets For tradable commodities spatial aggregation into 8 regions commodity aggregation into 14 commodities: food (12) non-agriculture (1) marketed feed (1) Furthermore, 3 types of local sources (county markets) feeds operating capacity plant nutrients

17. Relative importance of food commodities (in % of total food expenditures, 1997) RuralUrban Rice 18.8 9.6 Wheat 12.8 5.1 Maize 2.9 0.5 Other staple 6.4 1.4 Veget.oil 6.2 4.6 Sugar 1.2 1.7 Fruit 4.1 8.7 Vegetables 16.5 14.8 Rumin.meat 3.0 7.4 Pork 16.8 14.6 Poultry 7.5 19.6 Fish 4.0 11.9 Source: CCAP/IIASA

18. Relative importance of feed types, 1997 Supply in million Gcal Local feedMarketed feed North 89124 Northeast 78 68 East 50 40 Central 71 35 South 55 23 Southwest 101 55 Northwest 147 49 Source: CCAP/IIASA/SOW-VU

19. Interregional and foreign trade flows NE NW N E C SW S

20. Net import flows by region, 1997, 1000 Mton Milled rice Pork North 3273 -115 Northeast 1362 330 East -360 760 Central -5181-1084 South 4969 1239 Southwest -5830-1214 Northwest 1218 -337 China -549 -421 Source: calculated from baseyear data set of the project

21. Trade flows inside the regions Market region r (centre of gravity) Rural consumer county 1 Rural consumer county S(r) Farmgate county 1 Farmgate county S(r) Urban consumer

22. Difference farmgate - rural consumer Price milled rice in Yuan/kg, 1997 FarmgateRural consumer North 2.40 2.69 Northeast 2.04 2.21 East 2.09 2.12 Central 1.79 1.94 South 2.09 2.43 Southwest 2.61 2.47 Northwest 2.22 2.35 --> can the model neglect the differences?

23. Solving the welfare model solution algorithm in GAMS dimensions large (2300 counties!) therefore, decomposition of welfare model: - regional variables and markets in main programme - county variables in feedback loop - iteration between main programme and feedback specification of farm supply and rural consumption should allow solution in closed form (at given regional prices)