Source: IOWA STATE UNIVERSITY submitted to
EVOLVING DEMAND FOR DAIRY PRODUCTS IN ASIA: POLICY AND TRADE IMPLICATIONS
Sponsoring Institution
National Institute of Food and Agriculture
Project Status
TERMINATED
Funding Source
Reporting Frequency
Annual
Accession No.
0188639
Grant No.
2002-35402-11690
Project No.
IOW06559
Proposal No.
2001-01780
Multistate No.
(N/A)
Program Code
61.0
Project Start Date
Nov 15, 2001
Project End Date
Nov 14, 2004
Grant Year
2002
Project Director
Beghin, J.
Recipient Organization
IOWA STATE UNIVERSITY
2229 Lincoln Way
AMES,IA 50011
Performing Department
CENTER FOR AGRIC & RURAL DEV
Non Technical Summary
This project assesses Asian dairy markets and trade prospects, with a focus on Japan, Korea, Indonesia, and China. Specific objectives include estimating demand equations for dairy products, undertaking policy analysis of the impact of domestic and border distortions, and assessing the trade prospects in these Asian markets. The research would focus on international competitiveness and market access issues in the dairy industry. Major trade impediments exist in Asian dairy markets and they compromise market access to these fast-growing markets. The US dairy industry would benefit from the trade liberalization of these markets through better world prices and increased exports of products (whey and other). Timing is critical for this research in the context of agricultural and trade policy reform considered in the coming WTO negotiations. We would provide advances in the empirical assessment and evaluation of the competitiveness of international dairy markets; and we would assess the impacts of public policy alternatives (agricultural and trade) on the dairy industry performance. Our research would contribute to the assessments of the comparative advantage of the major agricultural dairy producing and importing nations.
Animal Health Component
100%
Research Effort Categories
Basic
(N/A)
Applied
100%
Developmental
(N/A)
Classification

Knowledge Area (KA)Subject of Investigation (SOI)Field of Science (FOS)Percent
6063410301025%
6063420301025%
6063430301025%
6063450301025%
Goals / Objectives
To quantitatively assess Asian dairy markets and trade prospects, with a regional focus on Japan, Korea, Indonesia, and China. To achieve this objective, our specific objectives include: 1) Collect and compile market data (supply, disappearance, trade, and price) and policy information for each country. 2) Estimate demand equations for dairy products. 3) Undertake policy analysis of the impact of domestic and border distortions. 4) Assess the trade prospects in these Asian markets.
Project Methods
There are two important phases. First, dairy demand would be estimated in the considered countries. This first step will use conventional econometric methods and time-series data collected from existing sources and from country sources. For each country, visits are planned to collect supplemental data and policy information not available from existing sources. We will utilize several demand models to estimate dairy demand in Asia, depending on data availability and the aggregation of dairy products in the data. Next, displacement models would be built to assess the impact of agricultural and trade policies distorting dairy markets and trade, using the demand estimates and some synthetic/existing estimates of supply response. Impact on world markets would be obtained from the world agricultural model maintained by the Center for Agricultural and Rural Development at Iowa State University.

Progress 11/15/01 to 11/14/04

Outputs
This project assessed Asian dairy markets and trade prospects, with a focus on Japan, Korea, Indonesia, and China. Specific objectives include estimating demand equations for dairy products, undertaking policy analysis of the impact of domestic and border distortions, and assessing the trade prospects in these Asian markets. The research would focus on international competitiveness and market access issues in the dairy industry. Major trade impediments exist in Asian dairy markets and they compromise market access to these fast-growing markets. The US dairy industry would benefit from the trade liberalization of these markets through better world prices and increased exports of products (whey and other). Timing is critical for this research in the context of agricultural and trade policy reform considered in the coming WTO negotiations. We would provide advances in the empirical assessment and evaluation of the competitiveness of international dairy markets; and we would assess the impacts of public policy alternatives (agricultural and trade) on the dairy industry performance. Our research would contribute to the assessments of the comparative advantage of the major agricultural dairy producing and importing nations. The analysis of the Japanese market is completed and has been presented in several venues. A master research project was completed. The Chinese investigation has been completed. Several papers have been presented and submitted. The Korean project is also well advanced with data collection and sorting completed. The econometric estimation is completed. A special issue of Food Policy will present the project results.

Impacts
The research we have undertaken informs the agricultural and trade policy reform process considered in the Doha round of the World Trade Organization. The information generated on China is of particular interest to the United States. The information generated is being used by industry interests worldwide. For example, Swedish DeLaval, the world largest dairy equipment company, uses our Asian dairy research results intensively in its business planning.

Publications

  • J. Beghin. Ed. 2005. Evolving Dairy Markets in Asia: Demand Growth, Supply Adjustments and Policy. A special issue of Food Policy, in press.
  • Fuller, F., S. Rozelle, and J. Beghin. 2004. Urban Demand for Dairy Products in China. Evidence from New Survey Data. Selected Paper for the Annual Australian Agricultural and Resource Economic Society Annual Meetings, Melbourne, February 11-13, 2004.
  • Fuller, F.H., J.C. Beghin, D. Hu, and S. Rozelle. 2004. China's Dairy Market: Consumer Demand survey and Supply Characteristics. CARD Staff Report 04-SR 99.
  • Schluep Campo, I., and J. Beghin. 2002. Westernization of Japanese Postwar Food Consumption: Estimation of Elasticities of Demand for Dairy Products. Poster presented at the EAAE Xth Congress, Zaragoza, Spain, August 28-31, 2002.


Progress 01/01/03 to 12/31/03

Outputs
This project assesses Asian dairy markets and trade prospects, with a focus on Japan, Korea, Indonesia, and China. Specifically we documented the major trade impediments that exist in Asian dairy markets and found that they compromise market access to these fast-growing markets. The U.S. dairy industry would benefit from the trade liberalization of these markets through better world prices and increased exports of products (whey and other). We provide an empirical assessment and evaluation of the competitiveness of international dairy markets; and we assess the impacts of public policy alternatives on the dairy industry performance. The analysis of the Japanese market is completed and has been presented in several venues. Dairy consumption is mature but still taxed by closed borders. The income response of dairy consumption is limited. The Chinese data collection has been completed. The data have been cleaned and the econometric estimation has been completed as well. A first paper has been written. Chinese dairy consumption is evolving rapidly driven by urbanization and income. The Korean project is also well advanced with data collection and sorting completed. The econometric estimation of dairy demand is underway.

Impacts
The research we have undertaken informs the agricultural and trade policy reform process considered in the Doha round of the World Trade Organization. The information generated on China is of particular interest to the United States.

Publications

  • Fuller, F., S. Rozelle, and J. Beghin. 2003. China's Dairy Market: Survey Results for Consumer Demand and Supply Characteristics. CARD Staff Report, August, Ames Iowa.
  • Schluep Campo, I. 2002. Japanese Dietary Habits and Food Consumption: Estimation of Elasticities of Demand for Dairy Products. A Creative Component in Partial Fulfillment of the Requirements for the Degree of Master of Science, Iowa State University


Progress 01/01/02 to 12/31/02

Outputs
We initiated the sub-projects in China, Korea and Indonesia. Consumer surveys were designed, translated and pre-tested in China. The actual surveys were conducted in 3 cities in China and data were collected on dairy consumption habits and patterns in urban households. We also collected information on dairy supply chains in the same three Chinese cities. We are in the process of cleaning the collected data and will soon conduct statistical analysis on these data. We are also pursuing a study of dairy consumption in Japan. Early results were presented at the 2002 European Congress of Agricultural Economics in Spain last August. This is in collaboration with a researcher at the University of Zurich who is a former ISU graduate student. We find that demographic and cultural factors are important determinants. Using 1963-2000 data, we analyze changes in postwar Japanese dairy food consumption with a complete demand system (four dairy products, other food and non-food group), accounting for prices, income and socio-demographic changes. Preferences are modeled within a Semi flexible Almost Ideal Demand System to impose negativity of demand. The data come from the Japanese Family Income and Expenditure Survey. The results yield own-price elasticity estimates for cheese, butter, powdered milk, and fluid milk suitable for welfare analysis. Income elasticity estimates of the SAI model imply that non-food, cheese, and powdered milk are luxuries, milk and other food are normal goods, and butter is an inferior good. Marshallian elasticities for dairy products are relatively elastic. The elasticity of the dependency ratio indicates that the aging population has had an overall positive effect on the consumption of dairy products. The increasing number of working women in Japan has had a positive impact on dairy food consumption, cheese is the exception.

Impacts
This project will generate instrumental and missing information on these new markets for the US dairy industry and decision makers. This information will be useful in the current WTO negotiations on agricultural trade policy in the Doha Round. Asian dairy markets are very protected and distorted.

Publications

  • No publications reported this period