Demand

7.1.3.1 Processing Demand, Seed Demand and Waste

Seed demand is fixed as a quantity per area unit for plant products, and per supply unit for eggs and waste is defined as a fixed percentage in TURKSIM.

All data, except processing demand for cotton, which equals farm supply of cotton, is taken from FAO commodity balances (2002a, b). Processing demand, seed demand, and waste are presented in Table A-7.2 of the Annex.

7.1.3.2 Feed Demand

The relevant input for the calibration of TURKSIM are the quantities of feed components per animal unit produced. This data is obtained in three steps:

1. The national total feed quantities per feed component are determined.

2. The shares of individual animal products in total feed component demand are determined.

3. The national quantities per animal product are divided by the animal product quantity produced in order to get the quantity per animal product unit.

National total feed component quantities are taken from FAO commodity balances. The shares of individual animal products in total component demand are based on OECD data used for PSE calculations and on several USDA GAIN reports on poultry and livestock production (USDA, various issues) reporting total feed use and feed ratios. Table 7.4 presents total feed demand, feed demand per animal product, and feed demand per animal product unit. Table 7.4 shows, that about 10.5 million tons of the products covered by TURKSIM are used for feed consumption with about 45 percent covered by barley. About 40 percent of total feed is used in milk production. When looking at feed demand per animal unit it is interesting to note that the use of grains in bovine meat production is relatively high compared to European averages. This is due to the low use of fodder in cattle feeding in Turkey and is confirmed by specific rations (Grethe and Uzmay, 2000, p.40). The use of feed components in poultry and egg production, on the other hand, is close to international averages.

Table 7.4: Base Period Feed Demand Total feed demand (1000 t)

967 4,534 1,633 150 100 1,321 689 671 531 10,596 Feed demand per animal product (1000 t)

Milk 222 1,949 229 30 20 1,189 186 94 255 4,174

Feed demand per product unit (kg/t)

Milk 22 194 23 3 2 119 19 9 25 416

Sources: FAO (2002b); OECD (unpublished); USDA (various issues); own calculations.

For the determination of cross-price elasticities, value shares of feed components are calculated (see Section 6.3.3). Based on USDA published ratios about 8 percent of the total value of feed for poultry and egg production are assumed to stem from other products than those covered by TURKSIM. For ruminants much of total feed requirements are covered by coarse feed, but no publications with respect to quantities and the value share of coarse feed in total animal feed were found. Therefore a simple three step approach is followed in order to roughly estimate the value share of coarse feed in ruminant production:

1. The total nutrient requirement per animal product unit is estimated based on a standard procedure, taking into account only the entergy component.

2. The nutrient content of the above calculated feed ratios is deducted from total feed requirements in order to obtain the nutrient input from coarse feed.

3. It is assumed that the production cost per nutrient unit of coarse feed is about 50 percent of the market price per nutrient unit of feed components covered

by TURKSIM. This is because a high share of the production factors used in coarse feed production has low opportunity cost (e.g. extensive pasture land and unpaid family labor).

In order to illustrate the calculation of nutrient requirement and the resulting value share of coarse feed in total feed, the example of milk is presented below.

For milk the daily nutrient requirement per cow is calculated according to NEL MJ/day = 0.293 • kg live weight^0.75 + 3.37 • liter milk. ⁵⁵

For Turkey milk production per animal is around 1620 liter per animal per year and live weight is about 400 kg. Therefore the nutrient requirement in NEL MJ is about 9300 per ton of milk. About 2100 NEL MJ are covered by the ration presented in Table 7.4 which is about 23 percent of total nutrient intake. Thus, 77 percent of nutrient intake are covered by coarse feed and as the value per nutrient unit is assumed to be 50 percent of the value of nutrient from other feeds the resulting value share is about 63 percent.

For bovine meat and for sheep meat production, the calculation of nutrient requirement is also based on KIRCHGESSNER (1992). Resulting nutrient shares and value shares are presented in Table 7.5.

Table 7.5: Nutrient and Value Shares of Coarse Feed in Total Feed for Ruminants

Milk Bovine meat Sheep meat

Nutrient share coarse feed 77% 37% 74%

Value share coarse feed 63% 23% 59%

Source: Own calculations.

7.1.3.3 Human Demand

Human demand is calculated as the residual of production minus waste, seed demand, feed demand, processing demand and net trade. Total human demand is allocated to income quintiles according to data observed for some products and assumptions made for others. Human demand per income quintile as well as the base principles for allocation to quintiles are presented in Table A-7.3 of the Annex.

For some products such as wheat and all animal products, allocation to quintiles is done according to the data from the 1994 expenditure survey. For other products the allocation to quintiles is assumed to be the same as for products

55 Kirchgessner (1992, pp. 281 and 284). NEL = Nettoenergie Laktation; MJ = Megajoule.

observed. For example in the case of basic food commodities like pulses, maize, and potatoes, the distribution is assumed to equal that observed for wheat, and a product with a higher income elasticity like cotton lint is assumed to be distributed like poultry meat. For some products, like fruit and vegetables, the distribution is assumed to equal that of an observed product with the total spread being lower, because the income elasticity used in TURKSIM is lower. For all oils except olive oil, the distribution among quintiles is assumed to be equal relative to the effective household members, as no significant income dependency of the quantity consumed was found from the observed data. The fact that the distribution among household quintiles for these products of "equal distribution" is not equal across quintiles (see Table A-7.3) is due to quintiles containing an equal number of households each, but the number of effective household members per quintile being different due to household size.

For the establishment of cross-price elasticities of demand, the respective value shares of consumption are used (see Section 6.3.2.2). Thus total expenditure per income quintile is required. Total expenditure per income quintile is taken from the 1994 expenditure survey, adjusted for GDP growth between 1994 and 1998, the average base year of the quantity framework, and expressed in 1997 TL, like all other monetary parameters and variables in TURKSIM. The results are shown in Table 7.6.

Table 7.6: Total Expenditure and Food Expenditure per Income Quintile

12,178 1,039 1,535 1,991 2,684 4,928 Share of food ex. in

Sources: SIS (1997); own calculations.

Table 7.6 shows that overall expenditure in the base period was about one billion TL in quintile 1 and five billion TL in quintile 5. The value shares of food expenditure in total expenditure, which result from multiplying base consumption quantities in TURKSIM by base wholesale prices, are between 57 percent in quintile 1 and 23 percent in quintile 5. These shares are surprisingly high compared to the shares of food expenditures published in the 1994 survey and shown in row three of Table 7.6. One would expect the shares resulting from TURKSIM base data to be much lower than those from the 1994

expenditure survey for two important reasons: i) some food products like fish and goat meat are not included, and ii) the processing share is only partially included as products are valued with their respective wholesale prices, while many products are sold to households as higher processed products (e.g.

cookies, sausages). On the other hand, consumption data in TURKSIM includes out-of-home consumption as consumption is determined as a residual, in contrast to food consumption in the expenditure survey which excluded out-of-home consumption. One other possible explanation of the low share of food expenditure reported in the 1994 survey could be a significant underestimation of subsistence production. Finally, the reason for the somewhat high shares of food expenditure in TURKSIM resulting from the combination of 1994 expenditure data and 1997 to 1999 consumption data is not clarified. Therefore data is used as presented in the first two rows of Table 7.6.