An economic model to assist with policy development in the citrus industry (CT02054)

This is a final research report from Hort Innovation’s historical archives. Please note that as these reports may date back as far as the 1990s, the content and recommendations within them may be superseded by more recent research.

What was it all about?

In 2002, Horticulture Australia Ltd (HAL) commissioned the Centre for International Economics (CIE) to develop an economic model of the Australian orange and mandarin industries. This followed the development of the citrus industry strategic investment plan by the Citrus Industry Advisory Committee (CIAC). Under the plan, which covers expenditure on both R&D and marketing, around $22m of grower levy funds (including matching commonwealth government contribution) will be spent to enhance the growth prospects for the citrus industry and the profitability of growers.

Economic models, which describe the interactions between supply and demand, and compute the outcomes for prices and quantities, are often used in the development of industry plans. Consequently, they are a useful tool for analysing key developments on the domestic and export markets and how these developments may impact on the industry, for example, on profits.

This report details the key features and structure of the model that we have developed. In addition, the report presents some key model simulations, which highlight key interactions within the model and illustrate the ways in which it could be used for industry planning. The key steps involved in developing the model are:

• Constructing a database
• Developing the models theoretical structure
• Implementing the model
• Model checking and testing
• Undertaking simulations of interest to the citrus industry to demonstrate the model.

We have completed these steps. The purpose of this report is to provide anoverview of the model as well as raise several issues for the citrus industry to consider.