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Question 1

Explanation of the general principles of the WTO (6)

Accepted Answer

1. Non Discrimination• Most-favoured-nation (MFN): treating other people equally• National treatment: Treating foreigners and locals equally2. More Open• Freer trade: gradually, through negotiation3. Predictable and Transparent• Predictability: through binding and transparency4. More Competitive• Promoting fair competition5. More beneficial for less developed countries6. Protect the environmentNONDISCRIMINATION-two major components: the most favored nation (MFN) rule and the national treatment policy.-MFN: WTO-member must apply the same conditions on all other members; WTO member has to grant the most favorable conditions under which it allows trade in a certain product type to all other WTO members.-National Treatment: imported goods should be treated no less favorably than domestically produced goods; was introduced to tackle non tariff barriers to trade e.g. technical standards, security standards, discriminating against imported goods.-Both are embedded in the main WTO rules on goods, services, and intellectual property, but their precise scope and nature differ across these areas. MORE OPENLowering trade barriers is one of the most obvious ways of encouraging trade; these barriers include customs duties (or tariffs) and measures such as import bans or quotas that restrict quantities selectively.PREDICTABLE AND TRANSPARENTForeign companies, investors and governments should be confident that tradebarriers should not be raised arbitrarily. With stability and predictability,investment is encouraged, jobs are created and consumers can fully enjoy thebenefits of competition — choice and lower prices.Provisions on notification requirements and the Trade Policy Review Mechanism are set out in the WTO Agreement and its Annexes, with the objective of guaranteeing the fullest transparency possible in the trade policies of its Members in goods, services and the protection of intellectual property rights. Predictable and growing access to markets for goods and services is an essential principle of the WTO. This principle is fulfilled through various provisions so as to guarantee security, predictability and continued liberalization of trade.MORE COMPETITIVE Discouraging unfair practices, such as export subsidies and dumping products at below cost to gain market share; the issues are complex, and the rules try to establish what is fair or unfair, and how governments can respond, in particular by charging additional import duties calculated to compensate for damage caused by unfair trade.MORE BENEFICIAL FOR LESS DEVELOPED COUNTRIESGiving them more time to adjust, greater flexibility and special privileges; over three-quarters of WTO members are developing countries and countries in transition to market economies. The WTO agreements give them transition periods to adjust to the more unfamiliar and, perhaps, difficult WTO provisions.PROTECT THE ENVIRONMENTIn specific circumstances, governments are able to restrict trade. The WTO’s agreements permit members to take measures to protect not only the environment but also public health, animal health and plant health.However, these measures must be applied in the same way to both national and foreign businesses. In other words, members must not use environmental protection measures as a means of disguising protectionist policies.

Question 2

Definition and explanation of coupled and decoupled subsidies

Accepted Answer

Agreement on Agriculture has three pillars: market access, domestic support and export subsidies.If we start from the secon pillar: domestic support, we will see that there exist three boxes: amber box, blue box and green box.The subsidies included in Amber Box we called coupled and they are considered distort in production and trade.For example, coupled subsidies include: market price support (EC intervention price), support directly linked to production quantities (U.S. deficiency payment).Decoupled subsidies are categorized as Green Box payments and they has not or has little impact on production and trade. But one can say, that decoupled subsidies has indirect impact on production, but WTO does not consider that aspect.In decoupled subsidies we can include: general services, domestic food aid, decoupled income support, public stock holding for food security, payment for relief from natural disasters etc. Some of decoupled subsidies are considered that they are actually not completely decoupled, such as, for example, payment for relief from natural disasters.I can say that the main difference between coupled and decoupled subsidies are, that first one have impact on trade, production and consider trade distorting while second one do not have impact on trade.

Question 3

The three boxes of subsidies

Accepted Answer

Agreement on Agriculture has three pillars: market access, domestic support and export subsidies. If we start from the second pillar: domestic support, we will see that there exist three boxes: amber box, blue box and green box. The Uruguay Round (1986-1994) includes the classification of subsidies into boxes depending on their effect on production and trade.AMBER BOXFor agriculture all domestic support considered to distort production and trade (with some exceptions) fall into the Amber box. The Amber box consider aid to be avoided and reduced. These could take form of support for market prices via setting minimum intervention price. For example when EU buys cereals and diary product at guaranteed prices, it is amber box aid.BLUE BOXthe blue box contains tolerated aid. It is include subsidies tat are linked to the product, but do not increase according to production levels. This include aid that is linked to production limitation programs and calculated according to fixed production data from an earlier period. For example, the blue box contains aid to livestock or land not linked to prices but but to fixed figures for surface and yield. Production limitation program still distort trade but less then Amber Box measures.GREEN BOXIt takes subsidies that do not distort trade or minimally. Research and training services provided to farmers by the state are one example of such subsidies. Aid designed to help protect environment or resist natural disasters is another. The green box contains aid that has been transferred from blue box through decoupling in the form of the single payment per farm but does not really meet the criteria to be classed ad a green box aid.

Question 4

Classification of subsidies according to the SCM agreement

Accepted Answer

The Agreement on Subsidies and Countervailing Measures addresses two separate but closely related topics: multilateral disciplines regulating the provision of subsidies, the use of countervailing measures to offset injury caused by subsidized imports.CATEGORIES OF SUBSIDIESHere are two basic categories of subsidies:1. prohibited2. actionable (non-actionable)All specific subsidies fall into one of these categories.PROHIBITED SUBSIDIES CONTAIN export subsidies ⇒ a detailed list of export subsidies is annexed to the SCM agreement. local content subsidies ⇒ the use of domestic over imported goods.These two categories of subsidies are prohibited because they are designed to directly affect trade and thus are most likely to have adverse effects on the interests of other Members. subsidies contingent on export performance subsidies contingent on the use of domestic rather than imported goods countervailing measures can be applied without the proof of an adverse effect on other WTO membersproblem: subsidies for agricultural exports not prohibited if subject to reduction commitmentsACTIONABLE SUBSIDIESMost subsidies, such as production subsidies, fall in the actionable category. Actionable subsidies are not prohibited. However, they are subject to challenge, either through multilateral dispute settlement or through countervailing action, in the event that they cause adverse effects to the interests of another Member.There are three types of adverse effects:1. Injury to a domestic industry caused by subsidized imports in the territory of the complainingMember. This is the sole basis for countervailing action.2. Serious prejudice. Serious prejudice usually arises as a result of adverse effects (e.g.,export displacement) in the market of the subsidizing Member or in a third country market.Thus, unlike injury, it can serve as the basis for a complaint related to harm to a Member’s export interests.3. Nullification or impairment of benefits accruing under the GATT 1994. Nullification orimpairment arises most typically where the improved market access presumed to flow from a bound tariff reduction is undercut by subsidization. subsidies with adverse effects on other WTO members specific subsidies (for certain enterprises or groups of enterprises) unspecific subsidies if not classified as green (non actionable) countervailing measures can be applied if an adverse effect is proved.problem: AoA blue box measuresNON-ACTIONABLEA subsidy that is not subject to countervailing duties under the rules of the WTO. These include non-specific subsidies, subsidies for industrial research, regional aids, and some environmental subsidies. subsidies assumed to have no adverse effects on other WTO members non-specific and meeting the preconditions defined in article 8 promoting the adoption of existing facilities to new, more expensive, environmental requirements; assistance to disadvantaged regions research having adverse effects on other WTO members the affected member can seek a determinationor recommendation on that mattersproblem:sector specific subsidies but classified as green box measures

Question 5

The Special Safeguard Clause (Trigger price, calculation of additional duty, requirement for imposing)

Accepted Answer

The special agricultural safeguard (SSG) is a provision of Uruguay Round agreement on agriculture that may be invoked by WTO member for a product subject to tariffication and for which application of the special safeguard is designed in the member schedule. It allows WTO member to impose additional tariffs on agricultural products if their import volume exceeds defined trigger levels or if price fall below specified trigger level. It is designed to prevent disruption on domestic market due to import surges or abnormally low import prices. Can apply only to imports that exceed tariff-quota volumes. Valid only fore some WTO members and some products. This mechanism is available under AoA members who have converter non-tariffs measures to tariff protection. It is only valid for products marked with SSG symbol and applicable only over-tariffquota imports.Additional Tariff in case of: low world market price surge in importsAdditional duty = percentage of amount by which difference exceeds a certain %If difference ≤ 10% of trigger price ⇒ no duty10% < difference ≤ 40% of trigger price ⇒ additional duty = 30% of amount by which differenceexceeds 10%40% < difference ≤ 60% of trigger price ⇒ additional duty = 50% of amount by which differenceexceeds 40%+ duty before

Question 6

Impact of tariff reduction on domestic markets depending on the gap between domestic price and world market price and the level of tariff reduction

Accepted Answer

graph

Question 7

Synopsis of commitments in the AoA)

Accepted Answer

Key elements of AoA and related commitments. The AoA contains three mail categories of commitments.FIRST PILLAR: MARKET ACCESSAll member countries have to abolish quantitative restrictions and non-tariff barriers and replace with tariffs.developed countries(1995-200) developin countries (1995-2000)truff (for all ag.products) -36% -24%minimun cut per product -15% -10%minimum market access +5% +5%Least developed countries do not have to reduce their tariffs but also commit not rise their boundrates.SECOND PILLAR: DOMESTIC SUPPORTCategorized under three types: Amber Box, Blue Box, Green Box.Subsidies under Amber Box are calculated under Aggregate Measure of Support (AMS) and are subject to reduction discipline.Developed countries Developing countriesTotal AMS cut per sector(86-88) -20% -13%Least developed countries are exempted but committed nit ti rise the level of support beyond deminimis level.THIRD PILLAR: EXPORT SUBSIDIESDirect export subsidies are subject to reductions from the 1986-1990Developed countries Developing countriesoutlays for subsidies -36% -24%subsidized quantities -21% -14%

Question 8

Two fold objective of the SPS Agreement)

Accepted Answer

The SPS Agreement has a two-fold objective. It aims to both:1. Recognise the sovereign right of Members to provide the level of health protection they deem appropriate; and2. Ensure that SPS measures do not represent unnecessary, arbitrary, scientifically unjustifiable, or disguised restrictions on international trade.Indeed, the SPS Agreement allows countries to set their own food safety and animal and plant health standards. At the same time, however, the SPS Agreement requires that such regulations be based on science, that they be applied only to the extent necessary to protect health, and that they not arbitrarily or unjustifiably discriminate between countries where identical or similar conditions prevail. In order to achieve its objective, the SPS Agreement encourages Members to use international standards, guidelines and recommendations where they exist. Members may adopt SPS measures which result in higher levels of health protection or measures for health concerns for which international standards do not exist provided that they are scientifically justified.

Question 9

Basic rights and obligations of the SPS Agreement)

Accepted Answer

1. Members have the right to take sanitary and phytosanitary measures necessary for the protection of human, animal or plant life or health, provided that such measures are not inconsistent with the provisions of this Agreement.2. Members shall ensure that any sanitary or phytosanitary measure is applied only to the extent necessary to protect human, animal or plant life or health, is based on scientific principles and is not maintained without sufficient scientific evidence, except as provided for in paragraph 7 of Article 5.3. Members shall ensure that their sanitary and phytosanitary measures do not arbitrarily or unjustifiably discriminate between Members where identical or similar conditions prevail, including between their own territory and that of other Members. Sanitary and phytosanitary measures shall not be applied in a manner which would constitute a disguised restriction on international trade.4. Sanitary or phytosanitary measures which conform to the relevant provisions of this Agreement shall be presumed to be in accordance with the obligations of the Members under the provisions of GATT 1994 which relate to the use of sanitary or phytosanitary measures, in particular the provisions of Article XX(b).

Question 10

Requirements SPS measures have to fulfill to be deemed as appropriate?)

Accepted Answer

Appropriate measures SPS measures are deemed to be appropriate If they are based on international standards Food safety: Codex Alimentarius Commission (CAC) Animal health: International Office for Epizootics (O.I.E) Plant health: Secretariat of International Plant Protection (IPPC) If they are Based on scientific risk assessment Consistently applied not more trade-restrictive than required l

Question 11

Harmonized Commodity Description and Coding System (HS))

Accepted Answer

The Harmonized System is an international nomenclature for the classification of products developed by the World Customs Organization (WCO). It allows participating countries to classify traded goods on a common basis for customs purposes.At the international level, the Harmonized System (HS) for classifying goods is a six-digit code system. The Harmonized System was introduced in 1988 and has been adopted by most of the countries worldwide.Under the HS Convention, the contracting parties are obliged to base their tariff schedules on the HS nomenclature, although parties set their own rates of duty. The HS is organized into 21 sections and 96 chapters, accompanied with general rules of interpretation and explanatory notes.The system begins by assigning goods to categories of crude and natural products, and from there proceeds to categories with increasing complexity. The codes with the broadest coverage are thefirst four digits, and are referred to as the heading. The HS therefore sets forth all the international nomenclature through the 6-digit level and, where needed, contains added subdivisions assigned 2 more digits, for a total of 8 at the tariff-rate line (legal) level. Two final (non-legal) digits are assigned as statistical reporting numbers if warranted, for a total of 10 digits to be listed on entries. It has undergone several changes in the classification of products. These changes are called revisions and happened in 1996, 2002 and 2007. Information on Harmonized Commodity Description and Coding Systems (HS) can be found at the World Customs Organization. All existing products can be classified into the existing HS utilizing the General Rules of Interpretation.This structure allows for placement through research of the products form and function.An example of the former would be whole potatoes, while an example of the latter would be a resistance heated electric oven. The classification will change depending on whether the potatoes are fresh or frozen. Fresh potatoes are classified in position 0701.90, under the Header Potatoes, fresh or chilled, Subheader Other, while frozen potatoes are classified in position 0710.10 under the Header Vegetables (uncooked or cooked by steaming or boiling in water), frozen, Subheader Potatoes The classification for an electric oven depends on whether the oven is for domestic orindustrial use.

Question 12

Application of the HS System))

Accepted Answer

Application of the HS System:  Customs tariffs  Collection of international trade statistics Rules of origin  Collection of internal taxes  Trade negotiations (e.g., the World Trade Organization schedules of tariff concessions)  Transport tariffs and statistics  Monitoring of controlled goods (e.g., wastes, narcotics,chemical weapons, ozone layer depleting substances, endangered species)  Areas of Customs controls and procedures, including risk assessment, information technology and compliance. Codes have been revised through the years. If it is necessary to reference a code related to a trade issue from the past, one must make sure the definition set being used matches the code

Question 13

Possible impacts of production quotas on supply curve (graphs and explanation of the curves)))

Accepted Answer

graph

Question 14

Price support and deficiency payments (graphs and explanation)

Accepted Answer

graph

Question 15

Allocation of TRQs: Explanation and comment)

Accepted Answer

Methods of allocating TRQS First come first serve Historical precedent Auctioning State enterprisesThe advantages of the first come, first-served or fcfs method include its simplicity and potentially non-discriminatory nature. The latter is particularly important as this allows new exporters (and countries) to compete on equal terms with past suppliers. As a result, quota rents would be distributed more evenly than in the case of the allocations based on historical precedent. The disadvantages are mainly in practical difficulties to operate the system. Thus, for example, where the amount of the trq is small and demand is strong, there could be a frantic rush to import as soon as the trqs are opened, contributing to import surges, market disruptions and probably increased storage costs. The successful operation of this method also requires a timely flow ofinformation to all potential exporters on the quotas, i.e. When opened, what amount and so on. From the standpoint of an importing country with several customs posts, it would also require a good information system so that the customs authorities would know when exactly the quotas have been filled .The method of allocating quotas based on historical precedent has the advantage that itreinforces the maintenance and strengthening of trading relationships previously established - a relevant consideration for products where marketing and advertising are important. This mechanism may also be necessary to maintain current access arrangements, which is also an advantage if this is an objective of the Agriculture Agreement. For many developing countries, country-specific allocations based on historical precedent may be critical for the continuation of the access to developed country markets, as is the case with preferential access schemes. The main disadvantage of this method is its discriminatory nature: allocating quotas according to historical shares or on grounds of past precedent prevent other potential exporters from competing and accessing the quotas on an equal footing. Over time, the resulting trade pattern becomes inefficient and distorted, and thus goes against the principle of Article XIIIThe strengths and weaknesses of auctioning tariff quotas are similar to those of the lottery mechanism, except that the economic rents earned are transparent and accrue to the government as the price paid for the license to import. Where the process is truly transparent, it avoids the opportunity for vested interests to capture any rents as well as associated rent-seeking activities. In addition, given that there is a cost associated with obtaining the license, auctions are likely to attract traders who are keen to fulfil the opportunity to import (or export) and create a context where quotas are more likely to be filled. The drawback of auctions, as with FCFS and lotteries, includes the potential loss of historical trading relationships. They may also be open to manipulation by producer groups and other vested interests. Although auctioning has never been challenged in the WTO, a fundamental problem with the method is its questionable legality within the WTO rules. Where an importer includes in the price of the imported product the cost of the auction fee, as would normally be expected, and the resulting domestic price exceedsa level that would result from applying the maximum bound tariff, this would be a breach of GATT Article II - i.e. a case where the de facto duty exceeds the bound rate.Allocation to state trading enterprises (STEs) - where the decision to import is administrative and not based on commercial consideration - may lead to the under-utilization of the quotas. Although this practice has been criticised, it is difficult to establish whether the under-utilization, where it occurs, was merely due to the fact that the quotas were given to the STEs, or other factors were also at play. Other mechanisms of a related nature that may lead to low quota- fill include the allocation of licenses to producer organizations. These organizations by their very nature would have little incentive to import the product. Finally, in some cases, licenses have alsobeen given to processors, or required that the product imported under the TRQ be destined for further processing - in both cases it is very likely that there would be little incentive to import value-added products.

Question 16

Schedules of commitments WTO

Accepted Answer

During the Uruguay Round of negotiations (1986-1994), participating countries made market-access commitments and exemptions on a number of services sectors at the same time. These commitments and exemptions are contained in their original services schedules. After the Uruguay Round, sectoral negotiations took place in the WTO: on the movement of natural persons (1995), on telecommunications (1997) and on financial services (1997). During the sectoral negotiations, participating countries took new commitments specifically in those sectors. These new schedules replaced the corresponding section in the original schedules.Not all WTO members participated in the sectoral negotiations.All new members submit a list commitments and exemptions.Commitments and exemptions of European Union (more info) members are found under “European Communities”, except for: the 1993-1995 commitments of Austria, Finland and Sweden, who joined the EU in 9995, the ten countries which joined the EU on May 1, 2004.The General Agreement on Trade in Services consists of the framework agreement — the Articles of the Agreement — and its Annexes, and the schedules of specific commitments and the lists of exemptions from MFN treatment submitted by member governments. The schedules and the exemption lists are integral parts of the Agreement.

Question 17

DEFINITION OF TERM COARSE GRAINS

Accepted Answer

Coarse grains generally refer to cereal grains other than wheat and rice — in the OECD countries, coarse grains are primarily used for animal feed or brewing (digestion). In most instances the definition is derived from statistical standards developed by international organisations such as the IMF, OECD, Eurostat, ILO. Where possible, the definition has been quoted word for word from the source.The coarse grains include: corn, grain sorghum, barley, oats and rye.Considering the total world production of coarse grain from 2008 – 2010:America was the leading continent in prodution of coarse grain, producing roughly 44%.The second largest continent produces was Asia with around 25% and then Europe with 20%. Europe decreased the production of coarse grains in the last two decades, while America increased it by almost 200 million tones

Question 18

WORLD PRODUCTION VOLUMES (rounded numbers) WHEAT

Accepted Answer

Considering wheat production by continent (2008 – 2010) Asia is the largest continent for wheat production taking roughly 43% of the production. The second largest continent of wheat production is Europe with 34% and then America with 17%.Wheat production volumes:Total: 720 million tonnes (2013/14)By continent: Asia, Europe, America

Question 19

WORLD PRODUCTION VOLUMES (rounded numbers) COARSE GRAIN

Accepted Answer

Considering coarse grain production by continent (2008 – 2010) America was the largest continent for wheat production taking roughly 44% of the production. The second largest continent of coarse grain production is Asia with 34% and then Europe with 17%.Coarse grains production volumesTotal: 1300 million tonnes (2013/14)By continent: America, Asia, Europe

Question 20

WORLD PRODUCTION VOLUMES (rounded numbers) RICE

Accepted Answer

Considering rice production by continent (2008 – 2010) Asia was the largest continent taking roughly 91% of the production. The second largest continent of was America with 5%Total: 500 million tonnes (2013/14)By continent: America, Asia, Europe

Question 21

PROCESSING OF CORN

Accepted Answer

Corn wet-milling process and resulting productsThe corn wet milling process separates corn into its four basic components: starch, germ, fiber,and protein.1. Step – First the incoming corn is inspected and cleaned. When it is inspected and cleane.2. The corn is soaked by water (the process called steeping).3. Step – The next step in the process involves a separation of germ from the rest of the kernel. Corn oil is oil extracted from the germ of the corn.4. Step – After grinding and screening we get fiber which is used in animal feed.5. Step – The next step is separation of fiber from the starch and protein (gluten). The starch then can be converted to syrup or it can be made into several other products through a fermentation process.Germ, Fiber and Gluten are used in animal feed.Starch can be converted to syrup which is actually sweetener.By fermentation we can produce ethanol which can be used as bio fuel.Corn sweeteners are the most important refined corn products. The second major refined corn product category is feed. Refined corn feed products provide protein, fiber, minerals, and vitamins to feed the cattle, fish, hogs, and poultry that enrich our diets. The third major corn product is starch. Corn oil is also one of the products that we get from corn processing.Ethanol, which is gaining increasing acceptance as a cleaner burning option for motor fuels, is another important product.Corn dry milling process and resulting productsThe corn dry milling process is a less versatile, less capital intensive process that focuses primarily on the production of grain ethanol. In this process the corn kernels are hammer milled into a medium-tofine grind meal for introduction to the ethanol production process. The products of a traditional dry grind ethanol are fuel ethanol and Dried Distillers Grains (DDG), a low-value animal feed product.56 lbs of corn can provide 18 lbs. DDGS (animal feed) 2.8 gal. fuel ethanol

Question 22

IMPACT OF BIOFUEL PRODUCTION ON AGRICULTURAL AND FOOD MARKETS

Accepted Answer

In order to analyse the market of corn you have to consider all end products of corn, since all will be affected by biofuel production. This means also other markets might be affected. For example is the market of the animal feed DDGS affected and the protein market, since 19 % of corn is protein.Other more specified effects are listed below:Overall land use:1. Deforestation (the process where natural forests are cleared through logging (cutting the trees) and burning, either to use the timber or to replace the area for alternative uses.)2. Reduction of set aside programs3. Cultivation of non-used land. Supply:- Reallocation of land to different crops- Additional supply of by products.Prices:1. Overall increase of agricultural and food prices2. Increase of land prices3. Increase of price volatilityOther effects:1. Food security (There is concern that the expansion of biofuel crop production will threaten the food security of poor sectors of communities across the world by affecting food supply and price)2. Migration3. Use of waterCosts:1. Production costs2. Processing costs3. Disposal costs4. Transportation costsPerformance:1. Amount of ethanol2. Ethanol price; amount of by products3. Price of by products.Corn price development: increase from 150 $/t to 300 (1983-2012)Stock to use ratio declined in the same time from 35% to 15% (driver of price+ expectations)Corn production increased much stronger than wheatPrice of corn was always lower than wheat - but now it’s the sameUS is the biggest exporter of corn (corn yield 10t/ha)More corn is produced in the US, but the extra share of production goes into the ethanol production. US cord use for ethanol increased by 30% over the last decade (now: 150 million tons)Area payment:Effects of area payment with a limited area on farm level- Farm has established quota/contingent of subsidies for ha or t. In case of exceedingproduction in terms of ha or tonnes, farmers obtains market price for exceeded ha or tonne – production depends on MR and MC adjust to market max.- E.g. Guaranteed 100 ha with a payment to a farm. What happens on farm level if you exceed100 ha? Before MR/ha was increasing by subsidy (higher price). Exceeding to 101 hareduces MR for each ha above the 100 ha to market price as payment based on 100 ha and thus MR per ha decrease (relatively).Effects of area payment with a limited area on sector level (A cut in per ha payment in case of exceeding area (constant maximum spending)- Limited total subsidy amount allocated to total sector- if exceeding then premium per unit decreases (total payment divided by ha); one farmer can hardly influence (price taker = MR not influenced) – different production effect (more production)- Farmer apply for and thereby compete for payment – relative subsidies are lower per ha as each farmer attempts profit maximization, which is not in line with sector maximization (NE as BR but not optimal, Tragedy of the Commons)Cut in per ha payment in case of exceeding area- (Constant maximum spending) proportional/relative cut of subsidy per ha or tonne ifexceeding – MR per unit of subsidy decreases. Similar effects as in 1 and 2, just otherspecifications.General statements:- Depend on coupled or decoupled subsidy (latter has no impact on production volume)- Unit of subsidy may be ha (but also tonne)- Two effects on production volume:(1) Similar to price effect – production increases since payment is similar to higher prices.(2) Shift in competitiveness: Market entry or non-exit due to additional payment.- What is total supply curve? Sum all on farm maximising quantities (MR=MC)General effect of area payments:- Rising lease prices- Management of disused areas- Potential competition impact on farming decisions- Rising offers- Declining product travelling

Question 23

. World Production Volumes OIL SEEDS

Accepted Answer

Oilseeds are a key component of the world food supply. Soybeans are the leading oilseed, accounting for 56 percent of all oilseed produced in 2011. Soybeans are by far the most popular oilseed crop produced in the world today. Soybean represents 55% of the total global production of oilseeds followed by rapeseed 14%, cottonseed 10%, peanut 8% sunflower 9%, palm kernel 3% and copra 1%. The United States leads the world in soybean production. The US produces approximately 34% of the world’s soybean, followed by Brazil 29%, Argentina 19% and China 6%. Production of Oilseeds increased from 1990.Processed soybeans are the largest source of protein feed (soybean meal) and second-leading source of vegetable oil (soybean oil) in the world, surpassed only by palm oil.

Question 24

Top two countries regarding production volume of: palm oil, soybeans, rapeseed

Accepted Answer

Palm Oil: Indonesia, MalaysiaSoybeans: United States, BrazilRapeseed: European Union, China

Question 25

Extraction Rates (Oil and Meal)

Accepted Answer

The main product of oilseeds is the vegetable oil and oilseed meal. Usually 20 to 40% of the oilseeds are used for the production of vegetable oil and the rest is used for oilseed meal. For producing oilseed meal, 79% of the soybean year yield is used for meal. Rapeseed yield reserved to meal is 59%, palmkermel 53%, cottonseed 46% and sunflowerseed 43%. On the other hand, for the yield for the production of vegetable oil is of 45 % for palmkermel, 41% for sunflower seed, 40% for rapeseed, 19% for soybeans and 15% for cottonseeds.

Question 26

Difference between palm oil and palm kernel oil

Accepted Answer

The major difference between palm oil and palm kernel oil is where they are extracted.Palm oil is extracted from the palm fruit.Palm kernel oil is extracted from the seed (kernel) of the palm tree.The availability of both oils is mostly widespread across Southeast Asia and Africa.Its use in the commercial food industry in other parts of the world is widespread because of its lower cost and the high stability of the product when used for frying.Extracting palm oil from the fruit requires careful collection and pressing of the palm fruit. The result of this process is dark red oil that is rich in carotene. This nutrient is however eradicated easily once the oil is exposed to heat especially during cooking. The result is a liquid that is much pale in color and a lot creamy in texture.Production: in the case of palm kernel oil, the seeds are roasted, cracked then grounded although there are already many more modern processes on how to effectively extract the oil from the palm seeds. With regard to fat content, it is said that palm oil has 50% of its fat is saturated fat. This is significantly less compared to palm kernel oil’s 80%. At room temperature, the fat in these oils (especially for palm kernel) almost appears to be solid. Both oils are very popular in cooking because the saturated fat prevents it from breaking down easily even in high heat. On the other side this same saturated fat makes both oils not so healthy. Aside from cooking, palm and palm kernel oil can also be used in other industrial functions such as in the realm of cosmetics. Generally, palm oil is a more known and more widely consumed type of oil compared to the palm kernel oil.The use of palm oil in food products has attracted the concern of environmental activist groups; the high oil yield of the trees has encouraged wider cultivation, leading to the clearing of forests in parts of Indonesia in order to make space for oil-palm monoculture. This has resulted in significant acreage losses of the natural habitat of the orangutan, of which both species are endangered.

Question 27

Differences in the production system of GMO soybeans and GMO-free soybeans

Accepted Answer

For soybeans is said that culture is the future primarily due its composition of the seed and the general application: Oil production, consumption of goods and use in the food industry. Seed’s composition is: proteins, oil, carbohydrates, vitamins C, B, A, D, E, K, and other minerals. They are high in protein and oil, making it a very useful crop for feed for livestock and food for humans.Genetically modified soybean is a soybean that has had DNA introduced into it using genetic engineering techniques. Soy is a widely planted genetically modified crop that is used to produce genetically modified food. According to GMO producers, it is much easier and more efficient to produce GMO soybeans.With the use of products for production of GMO soybeans, nothing else in the ground survives except the GMO soybean seeds, with what the land get easily rid of the weeds by using the herbicides. GMO is considered as convenient because there is no need for farm management, the land can be easily sprayed by an airplane and there is no need for direct human physical work on the field, there are economies ofscale achieved, production is cheaper and the food supply is increased. The growth is faster and thepesticide resistance is increased.However, besides these positive facts, there are lots of problems associated to the production of GMO soybean seeds:- Negative impact of GMO to human’s health- GMO soybean seeds destroy biodiversity and land (after few years the land can be useless for cultivation of any plants).- Negative indirect social effect – if the land was rented, then after few years of use is returned, theowner will have useless land because of the GMO.- The GMO seeds are more expensive and farmers have to pay the big companies for the seeds.

Question 28

Segregation and book and claim GMO

Accepted Answer

Genetically modified crops (also called GMOs) are ones that have been developed using genetic engineering techniques to have special characteristics that haven't normally occurred in nature.Some grain and oilseed buyers are asking for segregation of GMOs and non-GMOs so that they can respond to their customers who would prefer not to buy products made from certain types of GMOs, or at least would like to have products labeled so that they have a choice about buying such products. Somebuyers will not be accepting any GMOs and some might actually offer premiums for non-GMOs. The process of segregating crops involves separate storage and handling and documentation of separation and is called "identity preservation."The idea behind identity preservation is to make sure that a crop that has a special characteristic does not have any connection with crops that don't have that characteristic. Once mixing occurs, it is often nearly impossible to re-separate the higher-value and lower-value crops and the marketing opportunity forthe higher value crop is lost. Along with maintaining purity of the crop through careful physical separation, farmers and grain handlers should also develop a good record keeping system so that they can document the identity of the crop or prove that they have maintained the separation. Identity preservation of nonGMOsis particularly tricky because in most cases, they are not visibly distinguishable from GMOs.Much controversy surrounds the production and marketing of agricultural genetically modified organisms. If we look on the market today, we conclude that there is very low market transparency and people are not familiar with all the products that exist.Many companies want to certify for selling sustainable products, which certification creates them a competitive advantage and good image for the consumers that prefer sustainable organic products. The intermediate products used for production of organic products are always organic, which is not always the case for the regular market products with no label – in this case you can’t know if the intermediate products used for the production are GMO or not.

Question 29

Context of oilseed and meat, egg, milk production

Accepted Answer

- vegetable oil production is very concentrated and not subjected to change that much-demand for palmoil strongly based on income and population growth, fuel use-complex nature of oilseed market: joint production of protein meal and oil-protein meal demand is fueled by increasing milk, pork, poultry and egg production in developing and certain developed countries.-expected growth in the oil market carries over into meal leading to a very strong supply and flat prices. -expansion and industrialization of grain oilseed and livestock production are reinforcing each other-raising crop productivity enabled livestock populations to grow-raising livestock population enabled crop production to grow to an extent that would have otherwise deflated prices and undercut initiatives.-maize (corn) production requires higher inputs than oilseed -> higher costs -> better profitability in oilseeds -> distribution of land towards oilseeds In other words, increasing livestock population transformed structural grain and oilseed surpluses from a deflationary issue into a growing source of low margin earning for large-scale farmers, processors and traders.Industrial livestock production is disciplined by two basic pressures: enhance conversion ratios and increase the scale of production. (Reasons also for the major shift in global meat production towards pigs and poultry). In the past nnovation have enabled animal bodies to grow much faster to produce more milk and egg and yield more with less feed.

Question 30

Relevance of soybean meal especially for feeding pigs and poultry

Accepted Answer

Soybean meal is a significant and cheap source of protein for animal feeds and is an essential element of the production method of growing farm animals, such as poultry and pigs. Most of the soybeans are used for production of soybean meal as the production of the animal products rises. China is huge producer of soybean meal and pig meat production. They import the soybeans and process nearly all of it in their owncountry. This shows that the big production results from the import. For poultry, the highest production is done by Brazil. The efficiency in meat production can be measured by feed conversion rate (feed / live weight of animals). Feed conversion rate often refers to live weight and not to slaughter weight or consumed meat. If we try to substitute protein meals, we might have additional costs. For example, rapeseed meal is notperfect substitute for soybean meal, but it can be used as animal feed. It means that in order to get the protein quantity set in soybean meal; we need to use much higher quantity of rapeseed meal. Specifically for pigs and poultry, the soybean meal is better because of the higher protein concentration and quality.

Question 31

Definition of “soybean meal equivalent” and reason for using that standard

Accepted Answer

Soybean meal equivalent is a measure used to standardize the protein content of different oilseed meals. For example, the protein content in soybean meal is 36/100 gr. and for rapes is 25%. Therefore, in one ton of soybean protein meal there are 1.3 + rapeseeds protein. The Soybean meal equivalent relates to protein content and not to protein composition or quality. Protein is an essential nutrient for animal feed. The reason why the soybean meal equivalent is used is because the largest operating cost in a livestock production enterprise is the feed of the animals. To keep this cost low, one must supply the right amount of feed to the animals. Overfeeding is wasteful. Underfeeding will decrease animal performance and profitability. Therefore, proper animal feeding andnutrition are crucial to the profitability of the livestock enterprise.

Question 32

Effects of higher tariffs for processed products compared to raw products for the Processing companies

Accepted Answer

If there are very high tariffs for the raw products, the company that is interested in buying those products has to make very good estimates about the effects of these high tariffs. Usually these high tariffs result in very high costs and high uncompetitive price for the final product of the processing companies. Talking about this, we have to take into consideration the tariff rapid increase – the higher the processing of theproduct, the higher is the tariff of the final product. This can be very important in determining the competitive advantage of the processing company. In other words, if the company for production of the final product, uses raw products that are exposed to high tariffication, then the final product will be more expensive and less competitive and vice versa. Another possible better strategy for a processing company might be that the company produces its raw materials. In this way, the company won’t need topay for the additional tariffs and will have much lower production costs.CALCULATION (for any case- it’s not mentioned in this question precisely, but better have this example)Protection of the margin: An exampleCountry A prices forRapeseed 400 €/tRapeseed Oil 1100 €/tRapeseed Meal: 330 €/tConversion: 40% Oil, 60% MealCountry A charges tariffs for import from country BRapeseed 0%Rapeseed Oil 10%Rapeseed Meal: 10%Calculate the margins for a country A and country B processor offering their products on country Amarket. Do not take into account differences in transport costs.Margin for processing plant at A country = -400 € + 1.100 € * 0.4 + 330€ * 0.6=-400+440+198=238€.Margin for processing plant at B country = -400 € + 1.100 € * 0.4/1.1 + 330€ * 0.6/1.1= ----400+400+180=180€.The margin of the domestic processor is protected by far more than 10% (238/180=32%). Thereforehigher input costs might not cause competitive disadvantage.

Question 33

Reducing the gap between EU protein supply and demand: relevant aspects to be considered

Accepted Answer

Soybean is little grown in the EU relative to European demand. EU demand far exceeds its production (0.9 million tons/year) and imports reach around 30-35 million tons per year. Because of the protein deficit, EU tries to promote and increase soybeans production. EU has a sustainable way of production of proteins in EU, with high protection of environment, plants, animals and human, trying to avoid the necessity for producing of GM crops. The EU markets have special conditions on the protein meal trade (they have high tariffs for cereals, but cereals don’t have the high protein required for animal feed). For filling the gap of the protein supply and demand, these aspects need to be taken into consideration: Climate requirements – For the production of the specific protein crop, there are defined climaterequirements that need to be met by the producing area. On the other side, some studies showedthat combining sustainable production of protein and energy in one crop would reduce agriculturalresource depletion, agricultural pollution, and climate change. Competitiveness of soybean production• Costs• Producer prices• Gross margins of other crops• Know how - Technical innovations on breeding and agronomy are needed to increase thecompetitiveness of the protein crops.• Efficiency of marketing chain• Preferences of consumers / retailers

Question 34

Milk Products Definitions ...

Accepted Answer

A dairy product or milk product - food produced from the milk of mammals. Dairy products are usually high energy-yielding food products.Butter - a dairy product made by churning fresh or fermented cream or milk, to separate butterfat from the buttermilk. Most frequently made from cow’s milk, butter can also be manufactured from the milk of other mammals, including sheep, goats, buffalo, and yaks.Powder(ed) milk or dried milk - evaporating milk to dryness (so milk evaporates and only powder left – that’s powder milk).Skimmed milk – is made when all the cream (that’s actually milkfat) is removed from a whole milk. So this is milk without fat, but it is still milk, not powder.Skimmed milk powder - this is the combination of previous two. We get it by evaporating skimmed milk.The difference between skimmed milk powder and powder milk is in milkfat.Fluid milk – is an industry term for milk processed for beverage use.

Question 35

WORLD PRODUCTION VOLUMES COW MILK

Accepted Answer

Final FAO data shows that (2012): World cow's milk production in 2012 was: 620 million tones with the top 10 producing countries produced around 57% of world production. The USA was the largest cow's milk producer in the world in 2012 accounting for 14.6% of world production, producing nearly 91 million tones in 2012. India was the second largest cow's milk producer, accounting for 9% of world production and producing 54 million tones in 2012. Of the top ten largest milk producing countries, New Zealand and Turkey have shown the largest percentage growth from 2011 to 2012 at 12.1% and 15.8%, respectively.World's Top 10 Cow's Milk Producing Countries in 2012: USA, India, China, Brazil, Russia, Germany, France, New Zealand, Turkey, UKWorld cow milk production by continent (2009) – round numbers:Europe: 220 million tonesAmerica: 180 million tonesAsia: 160 million tonesAfrica: 25 million tonesOceania: 25 million tones

Question 36

TOP THREE COUNTRIES REGARDING PRODUCTION VOLUME (MILK)

Accepted Answer

USDA: This is the list of Top 3 Countries by Milk Production by US Department of Agriculture, 2011:1. EU-27: 140 million tones2. India: 121 million tones3. USA: 88 million tonesFAO: In the last three decades, world milk production has increased by more than 50%, from 482 million tones in 1982 to 754 million tonnes in 2012.India is the world’s largest milk producer, with 16% of global production, followed by the United States of America, China, Pakistan and Brazil (consider here that FAO looks at Europe as 28 countries and USDA as one, so mention that also).

Question 37

VALUABLE INGREDIENTS IN MILK

Accepted Answer

The gross composition of cow's milk in the U.S.A is:Water 87.7%Carbohydrate 5%Fat 3.4%Protein 3.3%Minerals 0.7%Lactose: The source of carbohydrates in milk is lactose which gives energy to the body.Minerals and vitamins: Milk is rich in many nutrients that are essential for good health, for stronger bones (Calcium, Vitamin D, Phosphorous), for more energy (B vitamins), for a stronger immune system and for healthier skin (Vitamin A).The USDA’s recommendations are based on the fact that milk is a prime source for three important nutrients: calcium, potassium, and vitamin D. Milk contains a big package of nutrients that are especially important to bone health.Vitamins in MilkVitamins have many roles in the body, including metabolism, oxygen transport and antioxidants. They help the body to use carbohydrates, protein, and fat. Milk contains vitamin A, B1, B2, B3, B5, B6, B12, vitamin C.Minerals in MilkMinerals have many roles in the body including enzyme functions (enzyme functions increase a rate of reactions in our body. Most cellular reactions occur a million times faster with enzymes), bone formation, maintenance of water balance, and oxygen transport. Milk is a good source of calcium, magnesium, phosphorus, potassium, selenium, and zinc. Many minerals in milk are associated together in the form ofsalts. Milk contains small amounts of Magnesium, Copper, and Iron.

Question 38

NORMAL FAT AND PROTEIN CONTENT IN FLUID MILK

Accepted Answer

Fluid milk is an industry term for milk processed for beverage use. The fat content of milk depends on species (cow, sheep, goat, buffalo), animal breed, feed, and other factors.Milk is approximately 87% water and 13% solids.The water content of milk has a range from 83% to 91% and depends which animal is the milk from (cattle, buffaloes, yaks, sheep, goats, horses and donkeys (91%)).The fat content of milk can be from 3.7% to 5.5 %.Protein content (in grams) in 100g portion of milk:Cow milk has approximately 3.2gGoat milk has: 3.1gSheep milk has: 5.4gUSDA data: Nutrient content of milk (3.25% fat Milk) for 100 g reference amount is:Water: 88.32 g (%)Energy: 60 kcalFat: 3.25 g (%)Protein: 3.22 g (%)

Question 39

Relevant dairy products for international trade (4)

Accepted Answer

The most important dairy products for international trade are: butter, cheese, dry whole powder milk and skimmed milk powder.ButterThe Demand for butter comes mainly from Southeast Asia, the Middle East and the Russian Federation, although, China has substantially increased purchases in recent years.EU is both an important importer (4th in the world) and exporter (2nd in the world) of butter. In overall, Russian Federation, China, Saudi Arabia, the EU and Iran, increased imports in 2014.Butter import:Southeast Asia, the Middle East, Russia, China, EU, Saudi Arabia and IranButter Export (2010 – 2012):New Zealand – 61%EU-27 – 18%USA, Australia: 8%CheeseThe Demand for cheese: Four countries, the Russian Federation, Japan, the United States and SaudiArabia, account for just over 40 percent of purchases. The EU remains the major cheese exporter,supplying 33% (FAO database, 2014) of world trade.Cheese import: the Russian Federation, Japan, USA and Saudi ArabiaCheese export (2010 – 2012):EU-27 – 43%New Zealand: 18%USA: 16%Whole Milk PowderChina is the biggest importer of Whole Milk Powder. In Brazil, rising domestic production is expected to displace imports. In 2014 New Zealand increased level of export.Dry whole Milk Powder export (2010 – 2012):New Zealand – 58%EU-27 – 22%Argentina – 10%Skimmed Milk PowderOver 70% of world Skimmed Milk Powder exports are supplied by the United States, EU and New Zealand. In 2014, each increased sales, with the EU recording the strongest growth.Imports: China is the second largest importer of skimmed milk powder.Skimmed Milk Powder export (2010 – 2012):EU-27 – 31%USA: 28%New Zealand: 24%The dairy market is often among the most heavily regulated agricultural markets. In developing countries, policies are generally designed to reduce dairy imports and promote domestic production, to improve the livelihoods of farming households and reduce import expenditures. Nonetheless, it is likely that in the future many developing countries will not be self-sufficient in dairy production and will thus be dependent on imports of dairy products from other countries.

Question 40

CALCULATION RAW MATERIAL PRICE BASED ON PRODUCT PRICES (e.g. rapeseed, milk)

Accepted Answer

The price of milk is based on:- Hygienic and safety standards- Fat content- Protein content-The milk value is mainly determined by milk fat and milk protein. The milk price refers to a certain proportion of ingredients. By EU regulations, it is standardized the fat content of 3.7%.The composition of milk differs widely among species. Cow milk contains, on average, 87% of water,3.4% protein, 3.6% fat, and 4.6% lactose, 0.7% minerals and supplies 66 kcal of energy per 100 grams.Calculation: (a * b - c) / d = e; e + f = gReference price (€ / 100kg) = aMoney purchase / intervention price = bProcessing costs (€ / 100kg) = cYield butter / milk = dValue of the fat component (€ / 100kg) = eValue of the protein component (€ / 100kg) = fDerived milk price = g

Question 41

CONTEXT MILK AND BEEF PRODUCTION

Accepted Answer

Beef production is influenced by milk production (milk price, milk quota, breeding progress premiums). Like all mammals, dairy cows must be impregnated in order to produce milk. Cows in the dairy industry spend their lives in a constant cycle of impregnation, birth, and milking with just a few short months of restbetween pregnancies. Nearly all cows used for dairy in the U.S. are eventually slaughtered for human consumption. At an average of less than 5 years of age, exhausted cows are considered “spent” and sent to slaughter, and millions of them are eaten by Americans as hamburgers. In a natural setting, a cow can live more than 20years. Male calves will not grow up to produce milk, and because of that they are considered of little value to the dairy farmer and are sold for meat. Millions of these calves are taken away to be raised for beef. Hundreds of thousands of other male calves born into the dairy industry are raised for veal (beef). Many people consider veal to be cruel, but they don’t realize that veal production is a product of the dairy industry.Beef and milk production are opposite between each other. As milk production increases, more energy, protein, and other nutrients are leaving the beef female and being transferred to the calf through the milk.This benefits the calf but also increases the nutrient requirements for cow. If these increased nutritional needs are not met, then the lactating cow (cow that has a calf) may lose body condition.

Question 42

Fundamentals of EU milk market policys (6)

Accepted Answer

The EU's dairy policy dates from the 1960s. It helps to create stable market conditions for EU milk producers and processors. Since 2008, the milk sector is integrated into the single Common Organization of Agricultural Markets, where the main market tools are set:1. Market intervention2. Rules concerning marketing and production3. Trade with third countries1. Production limitation-1984 EU introduced milk quotas to solve problem of surplus production-Each Member State had two quotas, one for deliveries to dairies and the other for direct sales at farm level. -quantities were distrbuted among producers in each Member State. - overrun of the national quota -> surplus levy – or "super levy" -super levy had to be paid by the producers in proportion to their contribution to the overrun during the quota year.- CAP (Common Agricultural Policy) agreement in September 2003 provided the extension of the quota system until 2015 How the quota system works-Each Member State is allocated a national quota - each producer has an individual quota for use from the member state.- producer’s quota specifies how much milk they can sell on market in a quota year - Quota years run from 1 April to 31 March. - Quota can be transferred between producers and new producers must make their own arrangements to obtain quota because there is no reserve from which new allocations of quota can be made.-If a producer sells on market more than their allocated quota (it is allowed), they may have to pay a levy (called a 'milk supplementary levy') on the excess marketed quantity. What the quota system covers- quota system covers all milk and milk products which a producer sells at the market. - includes liquid milk, butter, cheese yoghurt and ice cream. Types of quotaThere are two types of quota:- Wholesale quota – this is quota for the delivery of milk to a milk purchaser. This is the amount of dairy products that can be sold to a wholesaler from an agricultural holding without liability for the levy.- Direct sales quota – for the marketing of milk or milk products directly to the public.Producers who supply milk both wholesales and direct to the public will need a separate quota for each type of transaction.2. Public intervention and private storageSome market tools are available in the dairy sector- work as a safety net in case of serious distortion in the market:-"public intervention" the buying-in of butter and skimmed milk powder into public stocks -"public intervention" granting a financial support (aid) for private storage costs for butter. Due to seasonal variations in raw milk deliveries the production is high for a short period, which can destabilize markets. This aid helps producers to take product temporarily off the market, as an alternative to 3. Special intervention measuresSpecific ad-hoc measures are also available to be mobilized in case of emergency or significant disturbances.4. Marketing rules-milk and milk products intended for human consumption must comply with marketing standards in order to be sold on EU market. - refers to definition of marketing, use of term “milk and the definition of “milk products.5. Trade with third countries-control of entry of dairy products. - Imports are subject to the issuing of a standardized import license and, in general, payment of an import duty (tariff). - EU is the main exporter of dairy products worldwide.- Under certain conditions, export refunds might be granted to enable exports to countries outside the EU on the basis of world market quotations. Such exports of dairy products are subject to the issuing of an export license.6. Environmental policiesEnvironmental policies focus on reducing water pollution from dairy production.

Question 43

POSSIBLE IMPACTS OF PRODUCTION QUOTAS ON SUPPLY CURVE (GRAPHS AND EXPLANATION OF THE CURVES)

Accepted Answer

Look at the question 13. (WTO). If some of you don’t have it, let me know and I’ll send the pdf file.

Question 44

DIFFICULTIES IN COMPILING A MILK BALANCE

Accepted Answer

International dairy trade absorbs only about 5% of globally produced cow milk. The trade is primarily in major manufactured dairy products – butter, cheese, and dry milk powders, with some trade in fluid milk products, ice cream, yogurt, and dry whey products.In developing countries, the largest share of milk is sold on markets through informal channels i.e. without licensing or regulation (illegally). This is mainly because most consumers do not want to pay for formal processing and packaging, preferring to process the milk themselves through simple practicessuch as boiling.The dairy market is often among the most heavily regulated agricultural markets. In developing countries, policies are generally designed to reduce dairy imports and promote domestic production and to improve the life of farming households and reduce import expenditures. Nonetheless, it is likely that in the futuremany developing countries will not be self-sufficient in dairy production and will thus be increasingly dependent on imports of dairy products.In recent decades, developing countries have increased their share in global dairy production. This growth is mostly the result of an increase in numbers of producing animals rather than a rise in productivity per head. In many developing countries, dairy productivity is constrained by poor-quality feed resources, diseases, limited access to markets and services (e.g. health, credit and training).Markets and trade facts- It is estimated that more than 80% of the milk marketed in developing countries is handled by informal market traders.- The sale of milk from rural areas to urban centers allows money transfer from wealthier urban centers to poorer agricultural communities.- The marketing of dairy products in many developing countries is constrained by the seasonality of the milk supply.- The dairy products that are most traded on the world market are butter, cheese and milk powders.Share of milk production tradedBased on the analysis 2004 about 7.1% of world milk production is traded internationally (Intra-EU trade excluded). With respect to milk delivered to milk processors, we estimate the share traded internationally to be in the order of 24%.

Question 45

The dairy chain

Accepted Answer

Dairy chains link the actors and activities involved in delivering milk and milk products to the final consumer; with each activity the product increases in value. A dairy chain can involve production, transport, processing, packaging and storage. Activities require inputs – such as financing and raw materials – which are employed to add value and to transport dairy products to consumers. Every actor of the chain should give the product the maximum added value at the minimum possible cost.

Question 46

BSCI Standard

Accepted Answer

The BSCI Code of conductThe BSCI (Business Social Compliance Initiative) Code of Conduct (code of behavior) aims to determine the values and principles that BSCI participants aspire to implement in their supply chains. Each BSCI participant approves the Code of Conduct as well as the Terms of Implementation, the Glossary and the Reference when joining the initiative.11 Principles aiming at the Highest Labour ProtectionThe BSCI Code draws on important international labour standards protecting workers’ rights such as International Labour Organization (ILO) conventions, declarations of the United Nations (UN) as well as guidelines of the OECD (Organization for Economic Cooperation and Development).It sets out 11 core labour rights, which our participants and their business partners commit to monitor within their supply chains in a step-by-step development approach.To implement the BSCI Code of Conduct along the supply chain, BSCI offers a combination of auditing, capacity building, stakeholder engagement and as well as strategic and risk assessment tools.Monitoring provides a picture of the producer’s compliance level (level of agreement) against the principles of the BSCI Code of Conduct.Audits are conducted in order to implement the BSCI Code and to measure improvements.We aim to empower our participants through workshops and training programmes. We increasingly focus on capacity building to raise awareness of business partners, provide issue-specific knowledge, and ensure sustainable change in factories and farms.BSCI engages with a wide range of stakeholders in order to find sustainable solutions to often complex challenges. Non-compliance with labour rights is often linked to political, economic or cultural issues that affect not only individual workplaces but also entire sectors and countries. BSCI develops active dialogue and cooperation with governments, trade unions, NGOs, business associations, buyers and theirbusiness partners. Social Responsibility at the Core of BusinessThe Code of Conduct sets the approach undertaken by BSCI participants to incorporate social responsibility at the core of their business. It underlines the importance for businesses to develop the necessary systems to address any risk that may be detected in their supply chains as well as to successfully pass important information of social responsibility to their business partners.Risk assessment places an obligation on participants to address and mitigate adverse effects in their supply chain.The cascade effect empowers them to demonstrate to the different actors in the supply chain the opportunities that lie in responsible behaviour to generate positive impact.The BSCI Code also places greater emphasis on the engagement of workers and their representatives, as well as establishing grievance mechanisms as key means to promote improvements in working conditions. BSCI will continue to support companies through a variety of training sessions to build on business partners’ and workers’ knowledge.BSCI Standard is of special relevance for processing companies.In the context of globalisation and international competition, many companies obtain labour-intensive goods from developing and newly industrialised countries. However, working conditions in these countries often do not obey with labour standards such as those established by the International Labour Organization (ILO). To address this issue, many companies and associations have created individualcodes of conduct and monitoring systems.The rapid increase of these individual codes, has resulted in audit duplications within the same factories.This leads to unnecessary efforts, confusion about requirements, lack of transparency and accountability, and higher costs for companies and their producers in risk countries.BSCI works to tackle these challenges by offering a broad platform for cooperation.In 2003, BSCI was established by the Foreign Trade Association (FTA) in order to create consistency and harmonisation for companies wanting to improve their social compliance (agreement) in the global supply chain. BSCI aims to establish a common platform for the various European companies Codes of Conducts and monitoring systems, it also lays the groundwork for a common monitoring system for socialcompliance. The experience and the know-how gained by companies and associations from their monitoring systems were the foundations of the BSCI approach and management instruments. In 2004 the development phase was achieved and the system has since been implemented worldwide.Following dramatic growth of BSCI over the years, in 2011 FTA made the decision to clearly include sustainability as one of its pillars and therefore adopted a stronger organisational structure to further develop the growth of the association and maintain an excellent service to its members. The BSCI approach to good working conditionsThe ultimate goal of BSCI is to provide companies with the best system to improve working conditions inthe global supply chain. This goal can only be achieved through a strong commitment from participants to implement the system.BSCI bases its approach towards good working conditions on the following cornerstones:Committed: The participants commit to implement the BSCI Code of Conduct with their business partners.Consistent: They offer a holistic framework for producers worldwide consisting of one Code of Conduct and one implementation process.Comprehensive: The BSCI system is applicable to both large and small companies and covers all products sourced from any country.Development – Oriented: BSCI offer a step-by-step development approach that helps BSCI participants put social responsibility at the core of their businessCredible: They only use external, experienced and independent auditing companies to perform audits.Focused on Risk Countries: They focus on risk countries* based on governance indicators set by the World Bank.Knowledge-Based: Their system integrates learning at the producer level to develop their knowledge and skills to improve working conditions in factories and agriculture.BSCI participants Business enterprises that endorse the BSCI Code of Conduct are committed to the values and principles set out in the Code and to meeting, within their sphere of influence, their responsibility to respect humanrights.To participate in BSCI, companies and associations are required to first become members of the Foreign Trade Association (FTA).Country networkBSCI is represented by more than 1,400 participants across the world.China, Bangladesh and India are top sourcing countries for BSCI participants.

Question 47

Global GAP

Accepted Answer

GLOBAL GAP’s roots began in 1997 as EUREPGAP, an initiative by retailers belonging to the EuroRetailer Produce Working Group. British retailers working together with supermarkets in continental Europe become aware of consumers’ growing concerns regarding product safety, environmental impact and the health, safety and welfare of workers and animals.Their solution was to harmonize their own standards and procedures and develop an independent certification system for Good Agricultural Practice (GAP).The EUREPGAP standards helped producers comply with Europe-wide accepted criteria for food safety, sustainable production methods, worker and animal welfare, and responsible use of water. Harmonized certification also meant savings for producers, as they would no longer need to undergo several audits against different criteria every year.Over the next ten years the process spread throughout the continent and beyond. Driven by the impacts of globalization, a growing number of producers and retailers around the globe joined in, gaining the European organization global world wide significance.To reflect both its global reach and its goal of becoming the leading international GAP standard, EurepGAP changed its name to GLOBAL GAP in 2007.GLOBAL GAP today is the world's leading farm assurance program, translating consumer requirements into Good Agricultural Practice in a rapidly growing list of countries – currently more than 100. It is a Nonprofit private sector body. Global GAP reassures consumers about how the product was produced and covers the whole production process of non-processed product. It is a company that works for assuringfood safety, traceability, environment, animal welfare and workers health and safety.GLOBALGAP is governed by a Board of equal number of elected producers and retailers and headed by an independent chairman.GLOBAL GAP certification is developed and defined by various Stakeholder Committees (for water, animal welfare, crop protection etc, which give their report to the Technical Committees), three Technical Committees and the Certification Body Committee.The GLOBAL GAP Technical Committees are the backbone of GLOBAL GAP Certification and are responsible for developing and defining the standard criteria, called Control Points and Compliance Criteria. They also define the cornerstone of the rules, called GLOBAL GAP General Regulations, which establish clear criteria for the successful implementation and verification of the standards.GLOBAL GAP has three main Technical Committees: Crops, Aquaculture and Livestock.The operational GLOBAL GAP Secretariat in Cologne supports the work of the Board and all the committees. GLOBAL GAP’s membership is formed by 48% suppliers, 13% retail members and 39% associate members.

Question 48

GlobalGAP GRASP

Accepted Answer

In response to growing concerns regarding specific aspects of the agricultural production process and supply chain, GLOBAL GAP has developed add-on modules that enhance the GLOBAL GAP Certification. These made-to-measure add-ons upgrade the status of the producer and offer buyers specific assurances tailored to their interests and preferences. One of those current ready-to-use modules is the GLOBAL GAP Risk Assessment on Social Practice (GRASP), committed to worker's health, safety and selfare.The basis for creation of GRASP is the fact that Good Agricultural Practice is not just about products but also about people. GRASP stands for GLOBAL GAP Risk Assessment on Social Practice, and is a voluntary module developed to assess social practices on the farm, addressing specific aspects of workers’ health, safety and welfare.Designed to complement GLOBAL GAP Certification towards social aspects, GRASP measures can be assessed together with the GLOBAL GAP audit. A GLOBAL GAP Certification Body (CB) approved for GRASP conducts the GRASP assessment of the production facilities. The assessment results are then uploaded to the GLOBAL GAP database, showing producers level of compliance, and then are visible toindustry supply chain partners and buyers who have been granted. The GRASP assessment is valid for one year and assessments are conducted annually.GRASP helps producers establish a good social management system on their farms. It offers buyers added assurance. And it helps protect one of the farm’s most important resources: its people.The coverage of GRASP• A signed self-declaration for maintaining human rights and good social practice• Worker and employee representation• Written employment contracts for all workers on the farm• Workers’ access to National Labour Regulations• A complaints handling procedure set up within the production facilities• A proper time recording system that shows working hours and overtime• Transparent and accurate records for regular wage payments• Access to schooling for all the children living on the farmGlobal GAP GRASP is easy to implement as it is based on an established system.GlobalGAP GRASP is• build on a wide spread certification system• easy to implement• a first possible step to fulfil the requirement of responsible behaviorGRASP control points – for this see table in Global GAP slides (slide 31)

Question 49

Context between GlobalGAP and CSR

Accepted Answer

Global GAP’s principles on Corporate Social Responsibility include safe and sustainable food for everyone, safe and sustainable production methods and environmental impact. The stands of Global GAP for responsible use of resources, protection of scarce resources and responsible use of water, compound feed and plant propagation materials imply the sustainability principles. The social part is determined by the advocacy of Global GAP for health, safety and welfare of workers and animals.

Question 50

Strategy of NGOs in enforce CSR behavior of retailers

Accepted Answer

- NGOs – Non-governmental organizations- CSR - Corporate social responsibility -concerns actions by companies over and above their legal obligations towards society and the environment.- CSR is important for consumers - consumers have little knowledge and can hardly recognise responsible behaviour- products show little information about CSR to customers- NGOs and media are regarded as the driving force for CSR in Germany. - NGOs have the power to blame retailers and they act on behalf of consumers- NGOs’ force a dialogue for accepting more sustainable CSR practices, they act as advocacy, do CSR lobbing, they influence the retailers trough campaigning, they provide the public with proving documentation of unsustainable practices ofretailers, etc.- NGOs’ can only blame retailers not the wholesalers or producers, since their brands are not familiar to the public. As a reaction to all this retailers try to demonstrate responsible behaviour by increasing pressure on the wholesalers

Global Food Markets (Fach) / Everything... (Lektion)