TURKSIM is a comparative static partial equilibrium model of Turkish agricultural production, consumption of agricultural products, and some first-
and second-stage processing activities. It is programmed in GAMS; the code is given in the Annex.34
TURKSIM is a static model, as adjustments in time are not explicitly covered.
There are, for example, no lagged price responses or price expectations modeled on the supply side. Therefore, all simulation results have to be interpreted as long term equilibrium states. Nonetheless, TURKSIM is a projection model as shifters on the supply as well as the demand side (e.g. productivity or income growth) are accounted for. TURKSIM is a partial model, as only a part of the economy, the agricultural sector, is modeled. The macroeconomic variables income and real exchange rate enter the model as exogenous parameters. It is also partial in the sense that the international environment is exogenous and consists of given import and export prices for each product, the distance between them being the cif-fob spread. Import and export prices are determined exogenously since Turkey can be considered a small country making no significant impact on world market prices.
Based on the respective world market prices, import- and export-based domestic wholesale prices are calculated.35 Wholesale prices are functions of international prices, domestic border policies, and observed price margins, and their generation is described in detail in Subchapter 5.2.
Table 5.1 gives an overview of equations included in the core model of TURKSIM. This overview contains definitional equations which are for the most part spelled out completely (e.g. equation 5.2), as well as behavioral equations like equation (5.1). The latter are constant elasticity functions throughout, and are presented in Table 5.1 only in their general form. These equations are given in detail in Subchapters 5.3 to 5.6. In the case of behavioral equations, some parameters (like prod for productivity growth in equation 5.7) are cited, whereas intercepts and elasticities are generally omitted for reasons of readability.
In addition, Table 5.1 presents a list of sets, variables, and parameters used in TURKSIM. Main sets are printed bold, all other sets are subsets to these main
34 Throughout this study TURKSIM refers to the complete GAMS code which includes a core model solved iteratively to find an equilibrium state, and some other parts where functions are calibrated and border prices are determined. A second GAMS file with [0]the calibration database, behavioral parameters, technical factors, and definitions of projection scenarios is, not included in the Annex, due to its less accessible format. Nevertheless, the relevant data is discussed and presented in Chapters 6 through 8.
35 This calculation is part of the attached GAMS code, but is conducted prior to the model solution.
sets. For example, the set of farm products is a subset of all products, and animal products are a subset of farm products. For some sets synonyms are presented (i, j; an, ans) which are used throughout Chapters 5 and 6.
Supply includes farm supply of plant and animal products, which is defined for nine agricultural regions.36 In the case of plant products, supply (5.4) is defined as area (5.1) multiplied by yield (5.3). Area is a function of own and cross prices, and, in one region, of two parameters (ad_ha, irr_w) determining production on newly irrigated area under the Southeastern Anatolia irrigation scheme. The model allows for restriction of area by a national quantity quota, which is distributed among regions according to the production shares in the base period. These quotas are translated into regional area restrictions (5.2), and regional shadow prices are determined endogenously for the products concerned (5.21). Yield (5.3) is dependent on own price and a productivity shifter.
Animal products supply (5.5) is a function of own and cross prices, a productivity shifter, and a feed cost index (5.20) based on feed composition and component prices. Processing supply of processing outputs (5.6) is a linear transformation of processing demand for the processing inputs (5.11, 5.12).
Total supply (5.7) is a purely technical equation which adds farm supply (of farm products) and processing supply (of processing outputs).
Demand includes feed demand, human demand, processing demand, and seed demand. Feed demand per animal output unit (5.8), defined for each of the animal products, is a function of feed prices. Regional feed demand (5.9) is defined as the sum over animals of feed demand per animal unit multiplied by regional animal production. Human demand is defined at a national level for household income quintiles (5.10) and is a function of own and cross prices, income, and population shifters. Two different kinds of processing activities are defined. In the case of nontradable raw materials (5.11), processing demand equals farm supply minus waste. Processing demand for tradable inputs (5.12), such as oilseeds, is a function of prices of the respective processing input and outputs. Seed demand for plant products (5.13) is a fixed quantity per area unit allocated to the product concerned, while seed demand for animal products (5.14, hedging for eggs only) is a fixed quantity per unit of animal supply concerned.37 Total demand (5.15) is the sum of feed demand, human demand, processing demand, and seed demand.
36 A map of agricultural regions in Turkey is presented in the Annex.
37 In the case of cottonseed, demand is for the processed product (cotton seed), but related to the area of the unprocessed product (cotton).
Table 5.1: Overview of Equations in the TURKSIM Core Model
Supply equations
(5.1) Area allocation AREApl,reg = ƒ (P_EFpl, P_SHpl_q, QU_Rpl_q,reg, ad_hareg, irr_wpl,reg)
(5.2) Area restrict. for quota prod. QU_Rpl_q,reg = qupl_q,reg / YIELDpl_q,reg
(5.3) Yield YIELDpl,reg = ƒ (P_EFpl, prodpl) (5.4) Farm supply plant products F_SUPpl,reg = AREApl,reg • YIELDpl,reg
(5.5) Farm supply animal prod. F_SUPan,reg = ƒ (P_EFan, FCIan, prodan) (5.6) Processing supply PR_SUPpr_out = ƒ (PR_DEMpr_in)
(5.7) Total supply T_SUPi = ∑reg F_SUPfarm,reg + PR_SUPpr_out
Demand Equations
(5.8) Feed demand per animal output unit
FE_DEMfe,an = ƒ (P_WSfe)
(5.9) Regional feed demand FE_DEM_REGfe,reg = ∑an FE_DEMfe,an • F_SUPan,reg
(5.10) Human demand per inc.
quintile
tradables PR_DEMpr_in2 = ƒ (P_WSpr_in2, P_WSpr_out2) (5.13) Seed demand, plant prod. S_DEMpl = ∑reg AREApl,reg • seedpl (5.17) Domestic wholesale price P_WSpr_in1 = ƒ (P_WSpr_out1)
(5.18) Farmgate price P_FGfarm = ƒ (P_WSfarm, pm_r, pm_a, waste_perc)
(5.19) Effective farmgate price P_EFfarm = P_FGfarm + premfarm
(5.20) Feed cost index FCIan = ƒ (P_WSfe, FE_DEMan,fe) (5.21) Shadow price P_SHpl_q = ƒ (P_pl_nq, QU_Rpl_q)
Other equations
(5.22) Waste WASTEi = waste_perci • T_SUPi
(5.23) Net exports NXi = T_SUPi – WASTEi – T_DEMi
Table 5.1 (continued) farm Farm products er exchange rate
an, ans Animal products F_SUP Regional farm supply pl_irr Products which take a
share in additional irr.
pl_q Plant products with supply restrictions pr_out Outputs of the
processing ind.
P_SH Shadow Price
prod Productivity (index)
pr_out1 Outputs of the processing ind., input non-tradable
PR_DEM Processing demand
qu_n National quota
pr_out2 Outputs of the processing ind., input tradable
PR_SUP Processing supply
qu_share Share of region in national quota fe, fes Feed products P_WS Wholesale
price
inc Income quintiles QU_R Regional area quota
seed Seed quantity per
area/product unit
reg Production regions S_DEM Seed demand
waste_perc Waste percentage reg_irr Regions covered by
the GAP project
Equation 5.16 is not included in the core model of TURKSIM, but presented here in order to indicate the mechanism of domestic wholesale price formation explained in Subchapter 5.2 below. In case of the product being a nontradable processing input (cotton in the current TURKSIM version), the standard price formation mechanism is not in force and the domestic wholesale price is a weighted average of the wholesale prices of the processing outputs (5.17).
Farmgate prices (5.18) are linked to wholesale prices by a margin which has a relative and an absolute component and, in addition, is dependent on postharvest losses.38
The model allows for the introduction of product specific direct payments to producers, which add to the farmgate price, resulting in a higher effective farmgate price (5.19). Post harvest losses (5.22) are defined as a fixed ratio of total supply. Trade is included as net trade only (5.23) which is defined as total domestic supply minus waste minus total domestic demand.
Table 5.2 shows the products included in the model and the supply and demand activities modeled for each product.
38 This inclusion of the effect of post harvest losses on the price margin between farmgate and wholesale price was necessary in order to determine welfare effects accurately (see Subchapter 5.7). Otherwise, welfare effects at the demand side would be underestimated compared to welfare effects at the supply side.
Table 5.2: Product Coverage and Activities in TURKSIM
For all twelve crops, seventeen vegetables and fruit, and five animal products, supply is defined at farm level. Olive oil and tomato paste, which of course are processed products, are classified as "vegetables and fruit” in TURKSIM as the processing activity is not modeled explicitly, i.e. as for other farm products, the area allocated to the production of tomato paste and olive oil is defined as well as the yield of those products per ha. The processing activity is implicitly covered by the high margin between the farmgate price (e.g. for tomatoes per ton of tomato paste, entering the processing industry) and the wholesale price (for tomato paste).39 Human demand is defined for each of the farm products except cottonseed and soybeans, which directly enter the processing industry for the separation of seed and lint (cotton) and oil and cake/meal (soybeans). Seed demand is defined for those products for which seed accounts for a significant share of production. In the case of eggs, seed demand is to be interpreted as demand for hedging eggs. Processing demand is defined for raw cotton (equation 5.17) as well as for oilseeds (equation 5.18). In the case of sunflower seed, processing demand adds to human demand at the unprocessed level. For the other processing inputs, processing demand is the only demand component except, in some cases, seed demand. Feed demand is defined for various farm products as well as for three processing outputs (oil cake). For oil cake, feed demand is the only demand component. For all other feed products, feed demand adds to human demand.
Table 5.3 shows, that TURKSIM covers a high share of Turkish agricultural production. For the year 1999, TURKSIM covers about 96 percent of Turkish crop production, 78 percent of vegetable production, and 67 percent of fruit production. Altogether 83 percent of plant production and 94 percent of animal production is accounted for.
39 This approach is chosen because, in contrast to the oilseed industry, processing inputs usually are not traded, and the quantity of the raw product produced is therefore identical with the quantity processed. In addition, and in contrast to raw cotton, processing modeled in equation (5.11), these processing activities transform a single product (tomatoes, olives) into a single output (tomato paste, olive oil).
Table 5.3: Value Shares of Products Covered by TURKSIM
Total vegetables 5,464 100.0% Total animal 9,317 100.0%
Total value of plant products covered by TURKSIM 18,986 Total value of plant products 22,872 Value share of TURKSIM products 83.0%
Total value of agr. products covered by TURKSIM 27,734 Total value of agricultural products 32,189 Value share of TURKSIM products 86.2%
Sources: SIS (2000), Agricultural Structure; own calculations.
Note: Throughout this study product classification into crops, vegetables, and fruit is done according to the classification used by the SIS.
5.3 Integration into the International Trade Environment