Page 1 of 5 Wicked Case: FRE 502 – Policy analysis Assignment 2 Due date: October 26th, 2020, 8pm The work that you will do in your second assignment will help you get started for your final paper. You will: 1. download and handle relevant data, 2. explore the data and identify the issue that you will investigate in the final paper, a. Read the section below about the final paper to familiarize yourself with the requirements (see page 3). b. Make sure you run your topics ideas by Dr. Barichello. 3. produce graphs/tables to help you understand the background of your chosen topic, and 4. describe the issue you will be investigating. Assignment 2 and the final paper will be done in teams of two or three (same teams for both). Members in a group must be assigned to the same sector (energy, cereals or forestry). Please have a plan to share the work equally. Deliverables: 1. Create a basic snapshot of the chosen commodity by answering the following questions. For each question, produce a visual summary of your choice (graph, table, map, etc.). You can use the software of your choice to produce those visuals. • Which countries are the top 5 producers? What is the production quantity? • Which countries are top exporters (include quantities)? • Which countries are top importers (include quantities)? 2. Write 500 words about the issue you will be exploring in your final paper. Include a table or graph to support your explanation. The details below will help you with the first point mentioned above: download and handle the data. Data Collection: Collect data for yearly production, export, import, prices of commodities within your sector from a few different webpages: The Food and Agriculture Organization STAT (FAOSTAT), The Organization for Economic Co-operation and Development (OECD), the World Bank (WB) and/or the U.S. Energy Information Administration (EIA). CEREALS: 1. FAO: http://www.fao.org/faostat/en/#data The data is organized by domains (Production, Trade, Population, etc.). From the following Domains and sub domains, download the bulk data: • Production > Crops: All Data Normalized • Trade > Crops and livestock products: All Data Normalized • Emissions > Agriculture Total: All Data Normalized Page 2 of 5 • Prices > Producer Prices: All Data Normalized 2. WB: https://www.worldbank.org/en/research/commodity-markets Download the “Pink Sheet” Data – Annual prices (September 2020 (xls)). FORESTRY: 1. FAO: http://www.fao.org/faostat/en/#data 2. The data is organized by domains (Production, Trade, Population, etc.). From the following Domains and sub domains, download the bulk data: • Forestry > Forestry Production and Trade: All Data Normalized • Emissions - Land Use > Forest Land: All Data Normalized 3. WB: https://www.worldbank.org/en/research/commodity-markets Download the “Pink Sheet” Data – Annual prices (September 2020 (xls)). ENERGY: 1. EIA: https://www.eia.gov/international/data/world Select one of the energy sectors (ie: Petroleum and other liquids), and choose one of the “annual” alternatives (ie: Annual refined petroleum products). This is just to enter the interface to select and download data. Once in the data interface, select Data Options, and follow the next steps: 1. Select all countries 2. Select all activities 3. Select annual frequency and the entire range of years available 4. Click view data Once back in the data interface, sort the data by energy source/activity (very important). Then go to Download Options and select export as CVS (table). Repeat the same steps for other data sectors that you want to use. 2. WB: https://www.worldbank.org/en/research/commodity-markets Download the “Pink Sheet” Data – Annual prices (September 2020 (xls)). All the data needs to be organized in a folder as in figure 1. Note: You would have only the data relevant to your sector. Figure 1. Folder with data after download. Data Handling and Management: Merge, collapse, and reshape the data into a usable dataset, what is sometimes referred to as “Data Wrangling”. Code provided on Canvas. The Stata do file Page 3 of 5 will help you select the countries and commodities, but you will have to adapt the code to your folder (directory), files (folder paths), and commodities and countries (modules). Follow these instructions to adapt the code: • Change the directory path replacing the “Set Environment” section: Replace your directory in: global data "YOUR_DIRECTORY". Check that the folder paths in your folder are the same to the ones in the do file. If they are different you can either rename your folder/files in your disk or in the do file. • The “module” for the Cereals and Forestry sector starts with a section that sets the commodities and countries to keep (note that there are 2 commodity names, one for FAO (commodity) and another for WB price data (commodity_wb)). You have to change this to the commodity of your choice. Make sure to explore the excel files and website to decide and take note of how the commodities are named. For example, if in the module cereals you want to keep the commodity wheat, and the countries Canada and Mexico, the code will be: local commodity "keep if item=="Wheat"" local countries "keep if area=="Canada" | area=="Mexico"" local commodity_wb "Wheat*" If you want to keep all countries (which you probably should!), just turn the command into a comment by adding // before the quotations: ie: local countries // "keep if area=="Canada" | area=="Mexico"" (But don’t erase the line of code). The final data should be organized by country, year, commodity and the production/trade/price and other variables. • The “module” for Energy, contains a section to define the commodities to keep from each group (ie: petroleum products). The code is self-explanatory, but Juan will show you how to change or add during the Friday, October 2nd lab. Final Paper Due date: 11:59 pm on December 20th as a Canvas Upload 1. Papers are to be written in groups of two or three. Members in a group must be assigned to the same sector (energy, cereals (cereals/oils complex) or forestry). Please have a plan to share the work equally. 2. The paper is to focus on some commodity market (within your assigned sector), global or local, foreign or domestic, related to agricultural commodities or resources. It should examine a specific issue or problem in that market. Each team can choose its topic, but you must meet with Dr. Barichello to discuss your proposed topic so that topics are not duplicated and so suggestions can be given. 3. You might have to collect more data than what you will have collected for Assignment 2. Time series data are especially valuable but obtain the data that you find to be appropriate to examine the question you wish to address. When picking a topic, first explore what data are available. This should also guide your choice of topic or question (i.e., one with data!). 4. When examining a commodity market, the notes below give you some idea of the issues you may wish to address. These notes raise many more issues and questions than you are encouraged to address in your paper. Read it as a possible shopping list for data, rather than Page 4 of 5 a set of requirements. It does not give much attention to where you might find the data, but the FAO, World Bank, and USDA websites are very good places to start. 5. The length of the paper is not long, about 4-5 pages per person (e.g., 8-10 pages for a 2- person paper, 12-15 pages for three persons). This would be double-spaced using a 12-point font, counting only the text. 6. The paper should be written carefully but cryptically, with attention to why you chose that commodity and issue, what you did, what is your data, and what are your results. More detail on the general outline of paper: It should introduce the topic by showing why it is important, show what your theoretical or conceptual model is (the economic concepts and theory used to select your explanatory variables), some discussion of what data are appropriate or desired, the actual data you can obtain, how you use the data (e.g., the econometric strategy), and the discussion of your results, including how they answer the question you raised at the start. As much as you can, use previous research reported in the literature to guide you and show existing baselines, or existing expectations. The various sections listed here are general, and not all parts will apply to all groups and topics, but they present a standard that is often and effectively used. 7. Keep your focus quite narrow. Pick a problem that is specific so you can do this within a month. Potentially Important Elements to include in analyzing a Commodity Market (examples only) 1. World price levels, and path since ~2000 or preferably back longer; world market vs local market a. For changing prices over time, can you distinguish between demand and supply growth? b. Is price volatility especially significant? 2. Output levels, worldwide vs local country a. Time series: is production growing or stable? Is there any likely explanation (e.g., from previous research)? 3. Information on technical change, yield growth, other productivity questions a. Where is research taking place? Which countries are leaders in technology changes, or is it in CGIAR (i.e., international research centers like the International Rice Research Institute) centers? b. Yield threats due to pests, diseases, climate change? c. Other production-related issues? d. Time-related: changing comparative advantages across countries? 4. Special Issues: Different qualities for sale, any quality distinctions in pricing, output a. Different varieties if differences in qualities are less important (e.g., in apples) 5. By-products of importance 6. Key producing countries, importing countries 7. Proportion of world output that is traded (thickness or thinness of market) 8. Policy measures in domestic market(s)? Alternatively, are there important market institutions? a. Any that have impact on world prices 9. Linkages between domestic market and world market? 10. Particular segmentation of world market? Price discrimination against certain markets? 11. Value added in processing? What share of wholesale price received by farmers? 12. Processing-related issues? Joint products? Concentration? Dynamics over time? Page 5 of 5 Examples to investigate: A. Wheat: There are relatively few major wheat exporters. They include the US, the EU, Kazakhstan, Russia, Canada, Argentina, and Australia. a. Do any of these countries have market power? b. Do differences in wheat quality across countries have a big role to play? c. How will a fall in the value of the US Dollar affect this market and possibly change the production shares? B. US Corn/Biofuel Market: The corn market has been heavily affected by biofuel production, with resulting impacts on food prices more generally. However, as petroleum prices have come down to the relatively low price of $40/bbl, biofuel production has become less profitable. Reportedly, biofuel production has declined, and with it the demand for corn. This topic might focus on the biofuel market in the US, where corn is purchased as the raw material for the production of ethanol, as green energy. [deGorter book can be useful] a. It grew rapidly in the 2000s, but appears to have peaked and come down. What are the production and price patterns since 2000? b. How much corn now is being allocated to biofuel production compared to feed and food consumption? c. What can explain the biofuel (ethanol) industry’s considerable dynamics? Is it only the oil price? At what oil prices does bio-ethanol production ‘break even’? i.e., what is something like the AVC of ethanol production, if it can be generalized? d. Are there changes in the technology? e. Is the demand for ethanol policy-induced and how has that changed since 2000? Is there a market for ethanol with no policy? f. Can the ethanol industry’s demand for corn be forecasted? Is a situation like 2005- 2010 likely to be repeated? g. Biodiesel. Is it the same as ethanol-based biofuel production and that industry? See https://doi/org/10.1016/j.enconman.2018.05.002 C. Key Issues from Vietnamese export/production patterns and growth (rice, rubber, cassava, coffee, white pepper, cashews). For cereals, focus on rice? a. incredibly rapid production growth; equally rapid export growth. What is causing this? b. shift from ‘small country’ to ‘large country’ in those 6-7 commodities? c. little government ‘support’; no subsidy, little input market provision (via policy) d. role of SOEs? e. Expectation of future export growth? Would you invest in VN’s export commodities? Examples of some more specific questions or topics: 1. Puzzles about Indonesia’s agricultural exports excluding oil palm (palm oil). Why are they so successful? Will this continue? Who are their competitors in the world market? Is soybean oil a close competitor? Issues related to palm oil generally vs issues related to Indonesia’s growing dominance in that market? The environmental sustainability of oil palm production is hotly debated; the EU has banned oil palm from Indonesia unless it is ‘certified’ to be sustainable. 2. Questions about effects on Canada’s agriculture sector arising from the new NAFTA agreement. (wheat, canola, soybeans, cattle, hogs, pulses (lentils etc), dairy and poultry) 3. Empirical measures of effects of recent tariff war between US and China. Now we have more months (years) of data, so were initial predictions accurate? Or if not, why were the predictions of the usual models in error?
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