Abstract

The paper develops a methodology for modeling regional markets for field crops, taking grain markets as a case. It proposes and tests a new combination of model assumptions that solves the problem of reproducing the actually observed stability of product supply to the consumer in the context of predominantly market regulators. A basic model of the grain market functioning is developed, describing in continuous time the chain of commodity flows linking producers and consumers. Interregional transportation is taken into account. This is a prototype of a future model, which should be calibrated on actual data and include markets for grain processing products, as well as the possibility of simulating economic policy instruments. The model is based on the principle of market fundamentalism when modeling the volume of grain production, setting them in a sole dependence on prices. The same principle, yet with reservations, is applied in the modeling of exports and interregional transportation. Consumption modeling combines opposing principles of market fundamentalism, which guides consumers, and market skepticism of resellers – counterparties of consumers. Resellers, when deciding on the volume of supplies, neglect prices – they are guided by the size and dynamics of grain stock. As a result of computer simulations, it is shown that a set of assumptions underlying the model provides, with an appropriate selection of parameters, the necessary dynamic properties of the model: in all regions, the relative stability of consumption and prices during the season is secured, and short-term fluctuations in domestic prices effectively direct grain transportation to regions in need. Moreover, the volume of grain exports weakly correlates with domestic price of grain, which is typical for the real Russian grain market. The ultimate aim of the study, one of the stages of which is the algorithm presented in the paper, is to create tools for analyzing the interaction effects of the economic policy measures applied in different sections of the production and processing chains of various types of field crops for periods shorter than a year.

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