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A simulation analysis of alternative stabilization schemes for British Columbia beef producers

University of British Columbia

British Columbia Beef Producers' Income Assurance Program (FIAP) was implemented in 1974 to try to alleviate the income instability problem facing B.C. beef producers. The objective of this study was to estimate the costs and effects of FIAP and alternative stabilization schemes in meeting some likely provincial government goals for the B.C. beef industry. Due to a lack of knowledge of policy makers' objectives, simulation was chosen because it is a relatively convenient research technique for studying a non-optimizing problem. Simulation can trace out the likely impacts of alternative schemes, without putting them into practice. A mathematical model was built to incorporate the major features of the B.C. beef industry, in accord with relevant theory, experience and industry knowledge. A set of production assumptions and alternative schemes designed to stabilize beef producer income were also incorporated into the model. Later the mathematical model was translated for use on the computer. The model was validated with historical production data over the period 1959-1978, to ensure that it was a valid representation of the real world system. The model was initially run without government intervention. Then it was run for each of the alternative income stabilization schemes to estimate the likely impacts of each scheme. The cost and effects for different schemes were also compared to show the relative effectiveness of each scheme. The impacts of different schemes were shown by a set of summary measures that were thought to be of most interest to policy makers. Net welfare changes were also estimated and included in the summary measures. The estimated results show that FIAP and the other stabilization schemes considered would be capable of achieving a goal of income instability, when compared to the "no scheme" situation. From the government point of view, the guaranteed price scheme was shown to be most effective in both raising beef producer gross revenue and reducing income variability. FIAP, as it existed in 1977, offered the greatest net producer receipts to B.C. beef producers.

Text

2010-03-26

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http://hdl.handle.net/2429/22688

Agricultural Economics

University of British Columbia

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