Title: An Example of Consumer Demand Issues: Modeling BSE in the EU
1An Example of Consumer Demand IssuesModeling
BSE in the EU
- by Wyatt Thompson
- Directorate for Food, Agriculture, and Fisheries
Washington DC, 15-16 November 2001
2To start a discussion...
- Definition and implementation of a scenario in a
model - Review some available studies
- Problems and a reminder
3Brief 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
4UK beef consumption recovered
Note Eurostat data are used.
5Has UK beef demand recovered?
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.
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.
6Calibrating demand
Price
P0
Demand before shock
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).
P1
Demand after shock
Quantity
Q0
Q1
7Beef demand shocks
Demand change by year, starting early 1996 for UK
and late 2000 for EU
8Analysis
- Commission
- Assumed lower consumption
- Focus on supply-side effects
- Used to generate Prospects of July 2001
- ABARE
- Teagasc and FAPRI-Ireland
- FAO
9Problems 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