The Measurement of Direct Value of Forage Production

1. The Measurement of Direct Value of Forage Production Ken Belcher Department of Bioresource Policy, Business and Economics November 20, 2008

2. Direct Value Represents the value of production captured by output quantity and output prices. Secondary effects are the values from the economic activity, spending and re-spending stimulated by the direct effect (multiplier effects).

3. Production • To Quantify the economic value of an industry first need to calculate total production: • Data needs: • Total quantity of production - depending on the sector/product (tonnes). • Average productivity converted to total production by area of production. • Time series of data to capture variation in production, average production and time trends.

4. Value To convert total production to direct value of production need to determine output prices. For each category and quality of output will have a specific output price. The more detailed the price data the more accurate the value estimate. There will also be regional variation in prices with distribution of transportation costs.

5. Value In the absence of appropriate data may need to use average prices. Important to apply the appropriate price data for the year of production to capture the interdependence of production quantity and price. Therefore, will require a time series of output prices corresponding to the time series of production levels.

6. Source (SAF, 2007)

7. Source (SAF, 2007)

8. Direct Value of Forage Industry • For the various sectors of the forage industry there will be a wide range of data quality for production and prices – area of production, quantity of sales, farm and industry prices, quality, time series. • Calculation of the value of the forage industry through • Existing data sets • Transferable data sets from other regions – adjustment based on biophysical and socio-economic differences between data source and region to be applied. • Collection of primary data.

9. Secondary Effects • Secondary or multiplier effects of most industry is somewhat difficult as it represents the spending and re-spending stimulated by the forage industry. • Can include forage marketing services, equipment sales and service, input sales (e.g. Fertilizer, pesticides), processing facilities etc. • Can be based on primary data but may be estimated based on secondary effects of similar industries in different regions ($5 direct: $7.5 secondary; 2.5 multiplier).

10. Other Considerations Changing transportation costs – influence viable markets, particularly for bulk products. Alternative markets – biofuel production, fuel pellets. Carbon sequestration values - Trading at $1.10/tonne CO2

11. Carbon value trend

12. Thank You