Analyzing the Impact of Changes in Trade and Domestic Policies: The Case of the Soybean Complex

Abstract

This study analyzes the impacts of domestic and trade policy changes on the soybean complex using a Stochastic Equilibrium Displacement Model (SEDM). Three different policies, Loan Deficiency Payments (LDP), transportation costs and export taxes are considered in the analysis. The results indicate that Brazil benefits from a reduction in transportation costs and becomes more competitive in the global soybean market. Brazilian exports of soybeans increase due to relatively lower export prices. However, Brazil gains little improvement in the export competitiveness of the soybean joint products, soybean meal and oil. A lower U.S. LDP rate results in the loss of competitiveness for the United States in the world soybean market. Furthermore, the results show that an Argentine export tax reduction increases soybean exports from Argentina, but it reduces the global supply of soybean meal and soybean oil.