Understanding Agricultural Value Chains with System Dynamics Modeling and an Application in an Olive Oil Value Chain


Atamer Balkan B., Meral F. S.

in: Understanding Value Chains, Sarah Faust, Editor, NOVA Science Publishers Inc. , New York, pp.267-301, 2020

  • Publication Type: Book Chapter / Chapter Research Book
  • Publication Date: 2020
  • Publisher: NOVA Science Publishers Inc.
  • City: New York
  • Page Numbers: pp.267-301
  • Editors: Sarah Faust, Editor

Abstract

Agricultural value chains refer to the set of actors and processes that transform the raw agricultural crop on the farm to the final agricultural product on the consumer’s table. Decision making for agricultural value chain development is a complex research problem since agricultural value chains include causal nonlinear relationships, multiple stakeholders with different points of view, and embedded feedback structures. Traditional approaches in the field primarily focus on quantitative and qualitative analysis of the historical or current data regarding the agricultural value chain under study, and they are usually limited in answering the questions about the economic impact of the value chain interventions in the future. Understanding agricultural value chain dynamics and making quantitative policy assessments for development require the use of appropriate complex system science methods. This chapter (i) presents the agricultural value chain framework with the existing literature, (ii) introduces the main ideas of the system dynamics methodology, (iii) illustrates the use of system dynamics modeling to understand the supply, demand, capacity, and price dynamics in agricultural value chains and (iv) demonstrates the application of the model to a real-world case. System dynamics is a mathematical modeling and simulation methodology that is mainly used to model dynamic and complex socio-economic problems. To illustrate the use of system dynamics in decision-making for agricultural value chain interventions, a simulation model representing the market dynamics of an agricultural commodity is introduced. The model captures both the agricultural supply chain (i.e., flow and physical transformation of the product from seed to fork) and the agricultural value chain (i.e., formation of added cost and price elements during flow and transformation)structures. To demonstrate the use of the model as a decision support tool in a real-world case, an application to the Turkish olive oil value chain is presented. Based on the results of the policy analysis for the specific case of the Turkish olive oil value chain, it is observed that empowering cooperative action in one stage of the chain improves the total wealth along the value chain as a whole. By providing an insight into the dynamic behavior of different price levels along the value chain associated with the policy decisions, the results of this study indicate that considering an agricultural value chain as a complex system rather than a linear series of processes is more than crucial.