La e-Universidad y la Universidad de la Sociedad de la Información y el

I use a spatial partial equilibrium trade model (Durand-Morat & Wailes 2010) to evaluate changes in the global rice market generated by shocks in the Bangladeshi rice supply as a result of the adoption of MV rice. In the trade model, the BBS national average of 2012 – 2015 hectares, production, and yield per hectare were used to develop a framework for analysing consumer and producer welfare, international trade, and food security impacts based on the adoption of MV rice. The theoretical underpinnings of a spatial equilibrium model (SEM) for trade between exporting Country A and importing Country B in the world market are represented by Figure (1). This is a conceptual presentation of the economic theory behind a SEM, and though specified differently than the two-dimensional linear example below, provides a platform for analyzing shifts in supply, demand, and prices. In this study, the analysis of interest is the impacts of a supply shift from the adoption of improved rice seed technology on the global rice economy with all other factors ceteris paribus.

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Figure 1. A Three Panel Graph of a Theoretical Spatial Equilibrium Model. The decrease in the importing country’s supply (Z) will cause a shift in the world equilibrium and subsequently elicit a response in exporting countries.

This three panel graph is in price (P) and quantity (Q) space. D and S represent within country demand and supply curves, respectively. Pw, Pa, and Pb represent the world, Country A, and Country B prices, respectively. ES is the excess supply in Country A, and ED is the excess demand in Country B. The global equilibrium exists where ES and ED intersect at Pw. In this conceptual model, the supply shift Z represents the shocks being modeled for an importing country. In this study, Bangladesh is the importing country, and India and Pakistan are the primary exporting counties, while another 76 countries influence the world market. Many factors influence supply, demand, and prices (e.g., trade, input, and output policies), and are accounted for in the modeling framework used even though they are not present in this theoretical figure. See Appendix A for the full mathematical specification for the spatial partial equilibrium trade model used in this study.

Specifically, the rice trade model provides a platform to answer the following

counterfactual question: If hybrid and HYV (MV) rice had not been adopted in Bangladesh from 2012–2015, what would the implications be for global trade, domestic prices, producer and consumer welfare, and per capita consumption of rice in Bangladesh and its trading partners? In the trade model, this scenario is implemented via a shock to the exogenous rice yield variable. In other words, the global and local rice supply is shocked by removing the additional production (derived via yield enhancements) contributed by hybrid and HYV rice adoption, respectively. Hence, the production shocks consisted of replacing the respective MV yields per hectare for hybrid and HYV (higher yield) planted hectares with TYV (lower yield) yield per hectare. The

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impacts of the supply shocks are modeled for the total annual hectares of MV rice production, as well as for the individual seasons (aman and boro) to demonstrate not only the overall

implications of this lower rice supply for rice producers and consumers, but also the effects of MV rice across different rice production systems (i.e., season-wise intensification versus double- cropping and all combinations of the two forms of intensification). For example, if the average hectare of HYV rice yielded 2 MT and the average TYV yielded 1.5 MT, the 1.5 MT yield would replace the 2 MT yield for all hectares planted to HYV rice in total and for the aus, aman, and boro seasons, respectively. Each of these scenarios is aggregated as a weighted (percent) shock to the average production year.

The rice trade model is calibrated to a database that depicts the average global rice market situation for the 2013 – 2015 period. It disaggregates the global rice market into 76 regional markets and nine rice commodities resulting from a combination of three rice types (long grain, medium/short grain, and fragrant rice) and three milling degrees (paddy, brown, and milled rice). The rice supply is calibrated in each region based on exogenous supply elasticities that do not allow for input substitution in paddy rice production (Leontief assumption, Leontief & Strout 1963). Overall, the trade model demonstrates short-run outcomes accounting for possible supply, demand, and trade effects in other rice trading countries resulting from the production shocks in Bangladesh. The BBS rice production averages from 2012 – 2015 are used as inputs into the spatial partial equilibrium trade model so as to modulate the effects of changes in rice areas planted or a high or low production year. The model assumes constant genetic properties, i.e., texture, aroma, palatability, etc. across varieties in order to analyse the impacts of increased yields ceteris paribus.

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Table (1) outlines the counterfactual production shocks used in the simulations. There are five supply shocks representing the total and season-wise reductions in rice supply that would result if MV rice were not adopted in Bangladesh. Accordingly, the following questions

demonstrate the five supply shocks: (1) How much would average national production in 2012 – 2015 decrease in the absence of HYV across all seasons?, (2) How much would average national production in 2012 – 2015 decrease in the absence of HYV in the aman season?, (3) How much would average national production in 2012 – 2015 decrease in the absence of HYV in the boro season?, (4) How much would average national production in 2012 – 2015 decrease in the absence of HYV in the aus season?, and (5) How much would average national production in 2012 – 2015 decrease in the absence of hybrids in the boro season? The shocks outlined in Table (1) are the input data for the trade model.

Table 1. Supply Shocks used to Simulate Market Impacts of MV Rice Adoption by Season.

Variables Thousand MT Thousand Hectares Yield Kg/Ha Shock Kg/Ha Shock Annual % Local 2862 1899 1507 - - Local Boro 119 61 1951 - - Local Aman 2417 1582 1528 - - Local Aus 326 256 1272 - - HYV Total 28268 8888 3181 1507 -44% HYV Boro 15757 4091 3852 1951 -23% HYV Aman 10550 3981 2650 1528 -13% HYV Aus 1960 816 2403 1272 -3% Hybrid 3058 648 4717 1507 -6% Total 34187 11435 2990 - -

Note: The first three columns “Thousand MT”, “Thousand Hectares”, and “Yield Kg/Ha” represent actual national production, planting, and yield on average for 2012–2015 where each

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row represents the total by variety and season. The “Shock Kg/Ha” and “Shock Annual %” represent the new (local) kg/ha associated with the hectares in a given row of MV rice and the percent reduction (red) to annual production, respectively.