I. INTRODUCTION
II. RESULTS OF THE 1997-98 RESEARCH PERIOD
         II. 1. CORE RESEARCH PROGRAM
                (a) Situation and Outlook Reports
                (b) Other Projects
         II.2.  COOPERATIVE RESEARCH PROGRAM
         II. 3. COMPETITIVE RESEARCH PROGRAM
         II. 4. UNSOLICITED PROPOSALS FUNDED BY THE AERI
III. RESEARCH PROGRAM OF THE AERI FOR THE 1998-1998 PERIOD
         III.1. SITUATION AND OUTLOOK REPORTS
         III.2.    OTHER PROJECTS

AERI’s Research Program designed to reflect the Institute’s mission.  AERI has a two pronged mission:

(i)  to provide agricultural economics research that is relevant to the policy makers and essential for the development of a market oriented agri-food industry in Turkiye; and

(ii)  to create indigenous capacity to carry out such research.

Our mission defines our priorities as follows:

(i)  setting up a system/structure to discuss and to set up research priorities;

(ii)  institution/capacity building: to raise the average skill capacity of analysts and to improve policy analytical capacity within the government.

Therefore, our research program has been designed to accommodate, or at least be complementary to, the training needs of the Institute’s staff.  In order to fulfil this objective the staff of the Institute has been organized in project teams which also function as the units where on-the-job training and mentorship are provided to junior researchers.

The Institute’s research program has three basic components:

(i)  work to be completed within AERI (core research program);

(ii)  work to be completed within AERI with some components which will be done in co-operation with other organizations (co-operative research program); and

(iii)  work to be completed outside the institute in accordance with the specifications of AERI, and funded by AERI under competitive bids (competitive research program).

A summary of projects that were completed or in progress is provided in the second section of this report.  The third section provides a list of projects the Institute plans to undertake in the 1998-99 research period, which incorporates the recommendations of the Research Council.

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(a)   Situation and Outlook Reports

The objective of the Situation and Outlook Program is to follow developments in world commodity markets and the Turkish agricultural sector and analyze the short-run impacts of these developments on production, consumption and trade of agricultural products.  Another objective of the work is to provide a knowledge base for other work of the Institute as well as informing individuals, interest groups and organizations of the developments in the agricultural sector.  In principal, these studies will provide a systematic analysis of the situation (production, consumption, use, and trade) in the current year and outlook (possible developments) for the coming year.

Wheat Situation and Outlook:
Publication date of the first report: December 1997
Project Team: Osman Aydoğuş, Hüsnü Ege, Erdal Ertürk.

Feed Grains Situation and Outlook:
Publication date of the first report: August 1998
Project Team: Hüsnü Ege, Erdal Ertürk. (Supervisor: Osman Aydoğuş)

Cotton Situation and Outlook:
Publication date of the first report: Ocak 1998
Project Team: Musa Pınar, Nermin Akyıl.

Livestock Situation and Outlook:
Publication date of the first report: December 1998
Project Team: Erdal Ertürk  (Supervisor: Osman Aydoğuş)

Oilseeds Situation and Outlook:
Publication date of the first report: August 1998
Project Team: Şafak Aksoy, Aykut  Şener
 
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(b)    Other Projects

The Distributional Impacts of Farm Policy in Semi-Subsistence Agriculture
Project Team: Garth Holloway, Ahmet Bayaner, Nermin Akyil
Publication date: November 1998

This project evaluates the distributional impacts of relevant policies (output subsidies, input subsidies, export subsidies and research and development) in the Turkish wheat sector.  The objective is to assess the degree to which enacted and proposed policies may have alleviated or exacerbated inequities between small, semi-subsistence producers and large, commercial farms.

One point of contention in the enactment of policy is its differential impacts on rich and poor. The issue is conspicuous in developing agriculture where a common organization consists of a large number of semi-subsistence farmers competing with large commercial enterprises who grow the crop product exclusively for sale. Government intervention in the market and the provision of new technologies generate two concerns. The first is the direct impacts of policy on subsistence-farm welfare. The second is the differential impact of policy across the small- and large-farm sectors.

An Analysis of Domestic Support Programs and the Potential Impacts of Direct Income Support Programs on Turkish Agriculture.
Project Team: Jonathan Brooks and Aysen Tanyeri-Abur
Publication date:  November 1998

There is a pressing need for agricultural policy reform in Turkey.  A number of recent studies have suggested that a move towards more market-oriented government policies would reduce the burden on consumers and taxpayers, and enable assistance to be targeted more effectively to the specific problems confronting Turkish agriculture.  The central purpose of this study is to estimate the potential gains from such a reorientation of policy.

This study will provide a detailed assessment of current policy provisions and examine the likely consequences, in principle and in practice, of a range of reform scenarios.  The policy alternatives to be considered range from partial reform (where income payments are made to compensate for reduced support prices) to a fresh system of direct income supports, under which payments are not linked to output.  The study will contrast these policy alternatives at both the macro (sector) and micro (farm household) level, and will propose a methodology for examining the impacts of reform.  It will conclude with specific recommendations in terms of the design and implementation of policy.

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II.2.  COOPERATIVE RESEARCH PROGRAM

Joint program with SIS on Agricultural Databases
Project Supervisor:  Osman Aydogus
Project completion date:  June 1999.

This project is designed to develop an electronic database of agricultural statistics which will include monthly, quarterly, and annual data, based on availability, on primary agriculture and agri-food industry.  This database will include data collected since 1950s and cover some 113 commodities. On-line access will be provided to AERI and MARA, and there will be an accompanying user mannual.  The database will be updated regularly.

The Rate of Return to Agricultural Research in Turkey
Project Team: W. H. Furtan,  A. Güzel, A. Bayaner
Publication date: November 1998.

The purpose of this project is three fold.  First, aggregate rate of return to Turkish agriculture from the investment (domestic and international) in agricultural research will be measured.  Second, the economic benefit of variety development in wheat and cotton for the Turkish agriculture sector will be measured.  In both cases we will include the economic spill in effect from the international research system(other countries).  The final purpose is to aid in the building of the agricultural economics research capacity in Turkey to further carry out economic analysis of the sector.  All three components of the research are carried out co-operatively between METU, AERI and the Centre for Studies in Agriculture, Law and the Environment(CSALE) at the University of Saskatchewan, Canada.  CSALE is in the College of Agriculture and College of Law at the University of Saskatchewan.  The College of Agriculture has an international reputation in the area of new crop development and economic analysis.
 
The Impacts of a Deficiency Payment Scheme on Turkish Agriculture.
Project Team:  Erol Cakmak, Haluk Kasnakoglu, Tulay Yildirim.
Publication Date:  April 1998.

The objective of this study is to analyze these impacts for wheat, cotton and sunflower seeds in Turkey within a partial equilibrium framework.

This study sets the target prices at the 1996 support price levels and compares the welfare effects of two policies in delivering the same level of support to farmers.   The current support program guarantees a price higher than world market prices to producers by setting a floor price for supported commodities and introducing border measures.  In the deficiency payment scenario we developed producers will keep receiving the same price, but transfers will occur from government to producers as opposed to the current situation where transfers occur from consumers to.  Production does not change, but consumers and processors, who are facing a lower price now, increase the consumption/use of the commodities in question.  As a result, the imports of wheat, cotton and sunflower seeds are expected to increase, but with the distortions on production kept at the previous level they remain below the free trade levels.  In terms of resource use, deficiency payment scheme does not represent an improvement over the current support price programs.

While these changes have no impact on producers’ welfare, it represents certain improvement on consumers’ welfare, which exceeds the additional burden on the Treasury, and results in an increase in total social welfare in each one of three subsectors examined.

The wheat sector in Turkey shows the characteristics of a semi-subsistence production system and in any given year 40 to 50 percent of wheat output is consumed where it is produced.  The deficiency payment scheme discussed in this paper is expected to increase the quantity of wheat marketed in Turkey.  This may result in substantial structural changes in wheat processing sector.  The second round effects of the policy change, including additional tax revenue,  may be large enough to justify the additional burden the policy change will impose on the Treasury.

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II. 3. COMPETITIVE RESEARCH PROGRAM

Marketing Orders and State Trading in Turkish Agriculture.
Contractor:  Andy Schmitz, University of Florida and Erol Cakmak, METU.
Project Supervisors:  Osman Aydogus, Tulay Yildirim.
Publication Date:  November 1998.
 
Support purchases are the dominant method of income transfer in Turkish agriculture.  They are enacted through a number of state owned enterprises (SEEs) and state-controlled sales cooperatives (ASCUs). Concerns about degrees of transfer efficiency, the magnitudes of budgetary outlays, and the distributional impacts of these purchases on the Turkish economy generate considerable scope for applied economic analysis.  These questions are becoming increasingly important in light of statutory obligations to the World Trade Organisation.  Specifically, and in its signatory capacity with WTO, Turkey has made commitments to curb the use of non-tariff trade barriers.  In addition, through GATT commitments, Turkey has agreed to reduce the magnitudes of particular export subsidies. These policies have implications for state-trading enterprises and agricultural sales cooperatives and AERI is interested in evaluating them.  Proposals are sought that evaluate the efficiency of existing marketing orders, especially the effects of state trading enterprises and sales cooperatives, on transfer efficiency, including distributional impacts on farmers, consumers, and the government; budgetary outlays;  production;  and the terms of trade.  Priority will be given to proposals that offer options to rationalise the existing systems, in particular the following SEEs and ASCUs: TMO (Turkish Grains Board), TEKEL (Turkish State Monopolies, tobacco), ÇAYKUR (Tea Industry Corporation);  FİSKOBİRLİK (hazelnuts), TARİŞ (olive oil, soybeans, raisins, cotton, cotton seed, dried figs), and TRAKYABİRLİK (sunflower, soybeans); CUKOBIRLIK (cotton).
 
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II. 4. UNSOLICITED PROPOSALS FUNDED BY THE AERI

Several unsolicited proposals were funded after careful evaluation of the relevance of the topic to AERI research agenda, content and budget.  Proposals that were funded are listed below:

A Study on the Estimation of Potential Demand for Organically Produced Agricultural Products in Istanbul, Ankara, and Izmir.
Contractor:  Sedef Akgüngör, Ege University.
Project Supervisor:  Ahmet Bayaner.
Publication date:  November 1998.
Organically produced agricultural products are almost non-existent in Turkish Agriculture.  These products are only produced under contract farming arrangements.  This study is aimed at determining the potential demand, analyze marketing channels, and facilitate the formation of a market for these products.  Under this objective, sensitivity of consumers to risks associated with chemicals, the change in the extent of health and environmental risks resulting from the adoption of policies requiring environmentally friendly production methods, and the associated change in consumers’ surplus will be analyzed.  Firms, marketing organizations and decision makers involved in production and marketing of organically produced products are expected to benefit from the results of this study.

Contract Farming within Market Integration of Agriculture in Turkey and its Impacts on Sustainable resource Use and Producer Income.
Consultants: Ahmet Özçelik, Ankara University, College of Agriculture
Project Supervisor:  Ahmet Bayaner.
Publication Date:  November 1998

Contract farming has been applied as an alternative model in increasing agricultural production and rural development.  Uncertainties in marketing are eliminated and producer incomes increase with contract farming.  The purpose of the study is the assess the current situation of contract farming, documentation of types of agreements, and determining necessary conditions for contract farming.   Within this objective, a comparison will be made between agricultural enterprises that produce wheat for pasta, tobacco, potatoes, tomatoes, and cut flowers under contract farming and others who do not practice contract farming.  Improvement of producer-firm relations and problems preventing market integration will be determined and suggestions will be made on how to improve.  Another objective is to evaluate the effects of contract farming on sustainable resource use.  Firms and other policy makers are expected to benefit from project findings.
 
Supply of Livestock Products and the Demand for Feed:  An Assessment of the Current Situation and Alternative Policy Scenarios.
Consultant:  Oğuz Yurdakul, Çukurova University,  College of Agriculture.
Project Supervisors:  Tulay Yildirim, Osman Aydogus.
Publication Date:  December 1998.

Demand for livestock products in Turkey is increasing rapidly.  Turkey is currently importing meat and feed since domestic supply is not enough to meet demand.  The purpose of this study is to analyze the current situation of the livestock and feed sectors in Turkey.  Feed use, livestock production, and productivity in the livestock sector and factors that affect productivity, and alternative policy scenarios impacting supply-demand balances will be analyzed.

III.1. SITUATION AND OUTLOOK REPORTS

Studies already initiated for wheat, feedgrains, cotton, oilseeds, and livestock sectors will be continued as annual and periodic situation and outlook reports.  These reports will be prepared within the Institute as in the past year.

III.2. OTHER PROJECTS

(A)  Domestic Policy Analyses

Analysis of Domestic Policies and the Potential Impacts of Direct Income Supports on Turkish Agriculture.   Considered as one of the priority research areas, this study is being conducted within the Institute.

(B)  Structure of Agriculture and Production

Econometric Analyses of parameters that will Improve the Forecasting Capabilities of Situation and Outlook Reports:  This study is expected to enable researchers at the Institute to refine methods and arrive at better results in forecasting.

Analysis of the Comparative Advantage of Oilseeds and Substitutes in Turkey and Factors  that Affect Comparative Advantage:  Reduction in production of oilseeds is a current issue of concern.  This study will provide input into policy design in this area.

Supply of Livestock Products and the Demand for Feed:  An Assessment of the Current Situation and Alternative Policy Scenarios.  This study is being carried out for the Institute by researchers from several universities.  The model will be used to provide answers to the concerns of the Research Council about the livestock sector.

 (C)   Analysis of International Trade Policies:

Use of Sanitary and Phyto-Sanitary Regulations on Food Production Conditions as Non-Tariff Barriers in International Trade and Economic Impacts of these Regulations:  International standards on health concerns of food production conditions are adversely affecting food exports of Turkey by imposing non-tariff barriers to trade.  Economic costs of conforming to these standards are substantial, and a study on this topic will create a knowledge base on development of similar food production standards in Turkey.  Our Institute has begun preliminary studies in this area.

International Competitiveness of Selected Agri-Food Industries:  This topic was also mentioned by some Research Council members as being important.  This study will analyze international competitiveness of food products (flour, pasta, cookies, and fresh fruits and vegetables) that are primary food exports of Turkey using economic theory and empirical analyses.

Evaluation of Current Concessionary Agreements with the EU:  This topic has become more important after the ban by the EU on the sale of agricultural exports of Turkey.

(D)   Environmental  Policies:

Economic Analysis of Alternative Pricing Schemes for Water and the Functioning of Irrigation Unions:
This study will provide important results on the rational allocation of water and an efficient pricing mechanism that will enable sustainable use of water in the GAP region.  The results of this study will be important for the planning of irrigation in the agricultural region within the GAP project.

Impacts of Domestic Agricultural Policies on Soil Organic Matter and Productivity:  Price support policies, along with input subsidies is affecting the methods and frequency of soil use and thus affecting organic matter composition of soils.  Soil organic matter is one of the most important factors affecting  productivity and profitability in  field crop production.  The purpose of this study is to analyze these relationships and contribute to environmentally friendly agricultural policy formation.

(E) Dissemination of Information:

The importance of  dissemination of research results and other studies of the Institute to a greater audience was discussed by the Research Council.  The distribution of study results through media channels was discussed.