This study developed an evaluation scheme of agricultural outlook and information program which has been active since 1999. As expected, it identified a significant amount of positive social welfare effects and positive price stabilization effects.
First, following the methodology used by Lee et. al (2001), we found that the social welfare benefit of agricultural outlook information of 14 agricultural products is estimated to be 128.8 billion Korean Won at 2006. This can be decomposed by consumer and producer surplus, which are 71.6 billion Korean Won and 57.2 billion Korean Won, respectively. It is noted that this measures the maximum amount of social welfare benefit in the sense that all producers utilize this information in his/her crop production decision. Since not all producers adopt outlook information in crop decision, we discount the social welfare benefit of agricultural outlook information by using an adoption rate recovered by producers' survey results (23.2%). After this discount, the social welfare benefit produced by agricultural outlook information of 14 agricultural products is estimated to be 52.8 billion Korean Won, of which 29.4 billion Korean Won is for consumer surplus and 23.5 billion Korean Won is for producer surplus.
Second, in order to identify price stabilization effects of agricultural outlook information program, we used "monthly" coefficients of variation (CV) which can be calculated by dividing the standard deviation of monthly price series by its mean. Price stabilization effects are said to be present when the CV from the time span after this program is introduced is smaller than the CV before the program. The monthly CV is used because it can capture seasonality effects which are usually present for the prices of agricultural products. However, it is noted that the monthly CV tends to ignore yearly effects from idiosyncratic events such as market liberalization, crop and livestock diseases, and natural disasters. The analysis considers total of 14 agricultural product prices selected among 29 products under agricultural outlook information program at 2007 by production size. The analysis identified significant price stabilization effects of this program for fruits (such as pear, citrus, apple), tomato, watermelon, and vegetables including pepper, cucumber, radish, and cabbage. However, in the case of livestock prices, we recognize limitations when using the monthly CV to identify price stabilization effects of agricultural product prices mainly due to idiosyncratic events such as Avian Influenza (AI) and Foot-and-Mouth Disease. In this regard, we used a dynamic econometric approach capturing autoregressive nature of price levels and heteroscedastistic nature of variance of prices. Estimation results suggest that in the case of pork prices, price stabilization effects of the program are found to be significantly positive. However, in the case of chicken prices, these effects are found to be insignificant.
This study also reports the program's long-term development packages. An AHP (Analytic Hierarchy Process) approach revealed that an increase of precision level of agricultural outlook information is mostly preferred by experts participated in the survey, followed by the timeliness and efficiency of agricultural outlook information.
Researchers: Kwansoo Kim (Ph.D.), Donghwan An (Ph.D.), Sung-il Han (Ph.D.), Jaehoon Sung and Jahae Min
Research period: 2008. 4. - 2008. 8.
E-mail address: kimk@snu.ac.kr