System dynamics modeling of agricultural value chains: the case of olive oil in Turkey

Atamer Balkan, Büşr
In recent decades, agricultural commodity and food price fluctuations reveal the importance of understanding the agricultural value chain dynamics and making policy recommendations for sustainable development. The modeling purpose in this study is twofold: (1) to understand the price, supply and demand dynamics along the agricultural commodity value chains (2) for the specific case of olive oil value chain in Turkey, to make policy and scenario analysis with the focus of economical sustainability. In line with these purposes, the Agricultural Commodity Value Chain Model is constructed with system dynamics modeling methodology. The model is unique in terms of simultaneously (i) including both the agricultural supply chain and the agricultural value chain structures, (ii) considering the four major market elements, price, demand, supply, and capacity, endogenously, and (iii) considering complex nonlinear relationships among the price levels in different stages of the agricultural value chain. Using this modeling framework and a stylized parameter setting, we first conduct a numerical study and analyze the performance of two sets of value chain interventions, namely, technology investments and financial aid improvements, in mitigating the price fluctuations. Then, the model is adapted to the case of olive oil value chain in Turkey. By utilizing the historical data between years 2007-2018, the model is shown to be valid to represent the behavior of the olive oil value chain in Turkey. Using the validated model, a set of simultaneous policy and scenario analyses are conducted for years 2019-2023 and the impacts of policies on economic indicators are presented.