The present invention comprises a methodology for forecasting the effects of domestic and international trade policies on future trends in world dairy trade on an annualized as well as longer-term basis. The spatial hedonic equilibrium model employed in the present invention is used to analyze world dairy sector data and to forecast future trends by simulating the regional market equilibrium impacts of trade policies in the world dairy sector. The model reflects both vertical (e.g. the processing of farm milk into many different dairy products processing that reflects the allocation of milk components (e.g., milkfats, caseins, whey proteins and lactose) to various dairy commodities including primary, intermediate and processed commodities) and spatial characteristics (e.g. the distribution of milk production, demand and trade for dairy products in different regions of the world). Both domestic and trade policies, and their variations among countries, are incorporated in the model. The analysis forecasts the effects of trade liberalization on attributes of the world dairy sector (including prices, production, consumption, trade flows and the welfare of producers, consumers and taxpayers in various countries).
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