An Agent-Based Simulation Model of Structural Change in Agriculture

Abstract

Like many North American agricultural regions, Saskatchewan has experienced significant fundamental structural changes in farming. Structural change encompasses evolution in distribution of farm sizes, land tenure and financial characteristics, as well as variations in demographic and production characteristics. These issues are often a source of discontent among farm populations as it implies these populations are forced to adapt in a number of potentially unpleasant ways. These changes have profound and sometimes poorly understood effects on the rural economy – for example, structural change affects rural population and therefore demand for rural infrastructure. Traditional agricultural farm level analysis is often conducted using a representative farm or group, but this framework cannot capture the growing heterogeneity of modern farm operators or the current operating environment in agricultural regions. Farm profiles vary by demographic characteristics, such as age and education, and resource endowments. Agent-based simulation captures this heterogeneity through a farm by farm analysis, where after initialization, the regional economy evolves over time.A synthetic population is created based on survey data and the land characteristics based on the actual land data in CAR 7B of Saskatchewan. A number of different price and yield time paths were created using a bootstrap procedure on historical data and the model evolved to potential agriculture structures that may occur in the model region, 30 years in the future.Structural change occurs endogenously as farms interact in land markets, and make decisions on land use. Agents compete for available land in a purchase and lease market with land selling to the highest bidder. The dynamic nature of agent-based models allows individual farms to adjust land use in response to changing economic conditions and individual preferences. How individuals organize their resources will be critical to farm survival and growth.The results indicate that many of the trends are the same under the different price and yield time paths, however the rate of change is significantly impacted by the price and yield time path that occurs. The model predicted the trend to fewer and larger farms will continue into the future. The forecasted distribution of smaller farms will decline and proportion of large farms will increase, while mid sized farms will remain relatively unchanged. The proportion of mixed farms, land use, and total livestock numbers depend significantly on the price and yield time path. The actual structure that will occur will be the result of the actual individual price and yield time path that occurs.

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