ORGANISATION DE COOPÉRATION ET DE DEVELOPMENT ÉCONOMIQUES
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
An Example of Consumer Demand
Issues:
Modeling BSE in the EU
by Wyatt Thompson
Directorate for Food, Agriculture, and Fisheries
Washington DC, 15-16 November 2001
Directorate for Food, Agriculture, and Fisheries
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To start a discussion...
• Definition and implementation of a
scenario in a model
• Review some available studies
• Problems and a reminder
Directorate for Food, Agriculture, and Fisheries
2
Brief background
• BSE - not FMD
• BSE timeline (in EU)
– 1996: UK announcement
– 2000: Incidence of BSE and vCJD in
other EU countries
• Policy response
– Destruction schemes and compensation
– Public stocks and subsidised exports
Directorate for Food, Agriculture, and Fisheries
3
UK beef:
consumption recovered
Price
22
140
130
120
110
100
90
80
70
60
kg / person
20
18
16
14
12
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
10
ncu / 100kg
Consumption
Note: Eurostat data are used.
Directorate for Food, Agriculture, and Fisheries
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Has UK beef demand
recovered?
No demand shock
Price
22
140
130
120
110
100
90
80
70
60
16
14
12
2000
1999
1998
1997
1996
1995
1994
1993
10
1992
Comparing the levels of beef
consumption that were observed
against the levels that might have
occurred if there had not been a
demand shock but at the observed
beef prices.
18
1991
kg / person
20
Notes: (1) Eurostat data are used for the observed data.
(2) The expected consumption without the demand shock are calculated
using the AGLINK demand equation as applied to the UK data.
Directorate for Food, Agriculture, and Fisheries
ncu / 100kg
Consumption
5
Calibrating demand
Price
A simple shift in demand can
be justified if we do not think
that there is any fundamental
change in demand. However,
consumer tastes may affect
cross-price or income elasticities.
Also, the composition of the
aggregate quantity (‘beef’) may
change (e.g. elimination of MRM
products and changing ages of
slaughter for animals).
P0
P1
Demand before shock
Demand after shock
Q1
Directorate for Food, Agriculture, and Fisheries
Q0
Quantity
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Beef demand shocks
per cent change in demand
UK, starts in 1996
EU, starts in 2000
0
-5
-10
-15
-20
-25
-30
1
2
3
4
5
Demand change by year, starting early
1996 for UK and late 2000 for EU
Directorate for Food, Agriculture, and Fisheries
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Analysis
• Commission
– Assumed lower
consumption
– Focus on supplyside effects
– Used to generate
“Prospects” of
July 2001
Directorate for Food, Agriculture, and Fisheries
• ABARE
• Teagasc and
FAPRI-Ireland
• FAO
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Problems and a reminder
• Shift demand (beef, pork…)
– But how much does demand shift?
– Is there a structural change?
– Is the demand effect predictable?
• Exports?
• The broader context
– As always, our modeling decision
should depend on our goals
Directorate for Food, Agriculture, and Fisheries
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