A Stochastic Analysis of the Impact of Volatile World Agricultural Prices on European and UK Agriculture

Joan E. Moss, Julian C.R. Binfield, Lichun Zhang, Myles Patton and In Seck Kim

No 108771, 85th Annual Conference, April 18-20, 2011, Warwick University, Coventry, UK from Agricultural Economics Society

Abstract: Successive Common Agricultural Policy (CAP) reforms and trade liberalisation have led to a more market-orientated European agricultural sector, with EU commodity prices now more closely linked to world prices. As a consequence EU prices have become more volatile. Greater price volatility increases uncertainty and raises fresh challenges for projections of policy impacts in the EU. To take account of world price volatility stochastic modelling has been applied to the FAPRI-EU partial equilibrium model, which includes a UK modelling system. Stochastic modelling provides a means to capture some of the inherent uncertainty associated with agricultural production systems. By varying assumptions about certain exogenous variables, stochastic models can be used to examine the different ways markets may behave. Variable world prices are incorporated within the EU GOLD model. This process identifies the impact of a stochastic distribution of world prices on EU agriculture rather than the single point estimates in the conventional deterministic approach. The results outlined in this study demonstrate the impact of volatile world prices on EU and, in particular, UK prices and market control instruments

Keywords: Agricultural; and; Food; Policy (search for similar items in EconPapers)
Pages: 17
Date: 2011-04
New Economics Papers: this item is included in nep-agr and nep-eur
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:aesc11:108771

DOI: 10.22004/ag.econ.108771

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