TROPICULTURA, 1986, 6,4,163-166

Application of the Gini index to measure the concentration on seve-rai agricultural international markets.Ph. Burny and Ph. Lebailly*

SummaryThis paper studies the level of concentration ofseveral agricultural products exports whose rolesare important in developing countries. The Giniindex was determined as it measures the level ofcompetition within the different markets. After adescription of the index, eight products were stu-died: bovine meat, poultry meat, eggs in the shell,rice, sugar, tea, rubber and palm oil. For each ofthem, the Gini index was calculated according to thedata of the Food and Agriculture Organization in1965, 1970, 1975, 1980 and 1985. A comparisonwas made between the years 1965 and 1985 inorder to show the evolution of the relative impor-tance of the different exporting countries. ln conclu-sion, the successes, failures or changing goals ofthe agricultural policy of these countries could beevaluated.

RésuméCe travail étudie le niveau de concentration sur plu-sieurs marchés à l'exportation de produits agricoles,où les pays en voie de développement jouent un rôleimportant. L'indice de Gini permet de mesurer leniveau de compétition à l'intérieur de chaque mar-ché. Après une description de cet indice, huit pro-duits sont passés en revue,' la viande bovine, laviande de volaille, les œufs en coquille, le riz, lesucre, le thé, le caoutchouc et l'huile de palme. Pourchacun de ces produits, l'indice de Gini a été cal-culé, selon les données de la FA 0, en 1965, 1970,1975, 1980 et 1985. Une comparaison est faite entreles années 1965 et 1985 en vue de montrer l'évolu-tion de l'importance relative des différents paysexportateurs. En conclusion, les succès, les échecset les buts variables de la politique agricole de cespays peuvent être évalués.

1. Introduction

The international trade of agricultural products hasknown a notable extension in the last decades. TheUnited States, for example, has increased its pro-duction sa considerably that the survival of manyAmerican farmers depends on the quantities thatcan be sold on the world market and on the prieeobtained. The EC is also playing an important raie inthe field now. Developed countries, however, are notthe only partners: several developing countrieshave succeeded in promoting local productions, sathat they can not only satisfy the needs of an increa-sing population but also ensure large exports. Someof them are also urged ta get foreign currencies tapay their international debts.

Agricultural exports can th us be important for acce-lerating the development of several parts of theworld which have a real agricultural potential. That iswhy it seemed interesting ta measure the degree ofcompetition existing on several markets wherethese countries can have a place. The markets cho-sen are ail important in volume and in value. Theycover several situations as different as possible:animal and vegetal products, originating from LatinAmerica, Africa or Asia and containing rather pro-

tein, polysaccharides, fats or alcaloïds. These out-puts have been traditionally produced for decadesor centuries, or are produced only since a few years,by modern methods. Sa it is possible ta have a broadoverview of the situation by describing relatively fewmarkets. The products studied are: bovine meat,poultry meat, eggs in the shell, rice, sugar, tea, rub-ber and palm ail. The Gini index has been calculatedfrom the data of the Food and Agriculture Organiza-tion. The unit chosen is the US dollar and not themetric ton. It is sa easier ta appreciate the realimportance of each product.

ln order ta be able ta determine what has been theevolution in the last twenty years, the index hasbeen calculated for each product in 1965, 1970,1975, 1980 and 1985, respectively. The Gini indexgives an idea of the concentration of exports but itcan hide several situations: it is possible that big(small) exporters in 1965 became small (big) expor-ters in 1985, although the index remained the same.It is therefore mandatory ta carry out an in depthanalysis.

The following paragraphs give the definition of theGini index, its calculated values and a discussion foreach product.

• Department of Agricultural Economies. Faculty of Agronomical Sciences. B - 5800 Gembloux (Belgium)

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2. Description of the Gini index

More often, it is calculated from a class distributionor, more rigorously (exact index) by the followingformula (6) :

n-1L i (n - i) (Xi+l - Xi)i=1

G=

where:G is the Gini index;n is the number of observations;x is the arithmetic mean of the variable x;Xi and Xi + 1 are two successive observations sothat

Xi :::; X2 :::; ... < Xi < Xi + 1 :::; ... :::; x-;

The error made in the calculation of the Gini indexfram a class distribution is a function of the numberof classes and exponentially decreases when thenumber of classes increases (3).

3. Calculated values of the Gini index

The values of the index, calculated for the differentpraducts and for different years, are shown in thetable below (table 1) :

TABLE 1

The calculated Gini index values

ProductsYears

1965 1970 1975 1980 1985

Bovine meat 0.821 0.810 0.841 0.787 0.778Poultry meat 0.887 0.888 0.876 0.800 0.800Eggs in the shell 0.811 0.800 0.834 0.812 0.811Rice 0.878 0.884 0.884 0.845 0.849Sugar 0.789 0.815 0.798 0.791 0.849Tea 0.879 0.871 0.861 0.834 0.853Rubber 0.890 0.916 0.902 0.913 0.902Palm oil 0.803 0.858 0.887 0.904 0.913

4. Discussion

The products studied in this paper followed differentevolution between 1965 and 1985. Four vegetableproducts knew a moderate expansion in volume(riee, sugar, tea, rubber), their total world exportsbeing increased from 30 to 70 %. The animal pro-ducts knew a larger expansion, and especially eggsin the shell (x 3.9) and poultry meat (x 4.4). Themost important increase occurred for palm oil : x 8.5in twenty years. The value of an exported ton gene-rally dubbled or tripled, except for poultry meat(x 1.6) and for eggs in the shell (x 0.5). This reflectsthe difficulties for countries which want to exportlarge quantities of agricultural products to get a sta-ble income to ensure their economic grawth. It is

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less crucial for developed countries th an for develo-ping cnes which produce much less manufacturedgoods, though this is a question of great importancefor rich countries too (see the huge sums spent bythe United States and the EC to maintain the agrieul-tural income, the problem of rural depopulation, thevery important indebtedness of the developed coun-tries farmers, ...). So, world agricutlural trade is now atopic of conflict for ail countries in the world. Lessdeveloped countries often export few kinds of pro-ducts and so heavily depend on each of them. Thesituation of these countries can be very different.Some have succeeded in getting a very large shareof the market (Cuba with sugar, Malaysia with palmoil) by increasing their production (exceeding thelocal demand) or by focusing on export sales toobtain resources to invest in industrial development,or simply to reimburse their international debts.Other countries, on the contrary, completely disap-peared because of several problems such as warsor political troubles, though some of them have par-ticularly good soils and climates. So it seemed inter-esting to show the evolution of some important agri-cultural markets during the two last decades (1965-1985). For this purpose, the Gini index was used. Itgives an idea of the competition on the markets, butsimilar values can be the results of variable struc-tures. So one has to go further in the description.

For the eight products studied, the frame was asfcillows:

Bovine meat

The index was weaker in 1985 than in 1965 (0.778compared with 0.821 ). Some West European coun-tries became larger producers and exporters, theproductivity of the bovine meat sector having madeimportant progresses, notably by using much moreconcentrated feed (large imports of soybean meal,corn gluten feed, sweet potatoes, ...). Considering thequantities produced, it was certainly one of the CAPsuccesses. The EC exported large quantities to theother parts of the world but the intra-Communitytrade was also much more active than before the ECcreation. The EC exports increase was also due tothe high productivity of the milk production systemand to the milk quotas application (Iivestock reduc-tion). Many other regions of the world did notachieve such progresses and also had to satisfy theneeds of a rapidly increasing population, which wasnot the case in Europe.

The quantifies exported also depended on theprices offered on the national market and on theworld market. Sometimes, a country can suffer froma local shortage because world prices are moreattractive and farmers prefer to sell their produetsabroad. The currencies exchange rate plays here anon negligible role.

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ln fact, the bovine meat world market was ratherdominated by the developed countries, and more sain 1985 than in 1965. Some less developed coun-tries got a share mainly because of their large grass-land areas. Productivity however was rather poor.The situation can change because these countriesare able ta sell meat as much lower priees thandeveloped countries can do.

Poultry meat

The Gini index fell here from 0.887 ta 0.800. Theleadership of the Netherlands and the United Statesconsiderably weakened in twenty years. Some deve-loping countries (the most advanced among them)succeeded in exporting large quantities, industriallyproduced. This was especially true for Brazil andThailand and explained that the market was morecompetitive. Sa, the poultry industry is in progress inseveral developing countries. Therefore, they canimprove the standard of living of their population andeven become serious competitors for the traditionalexporters.

Eggs in the shell

The Gini index characterizing this sector was thesame in 1965 and in 1985: 0.811. Nevertheless, thesituation was different : the Netherlands, thanks ta aweil known commercial dynamism, got a much lar-ger share, while China and Belgium-Luxemburg hada smaller one. Turkey appeared as an importantexporter. Arabie countries also began ta exporteggs. This can seem ta be curious but they are ailexporters and sa have a high per capita income. Sathey can efford big investments and produce goods,such as barley in Soudi Arabia, at very high costs.But the eggs in the shell world market is rather satu-rated and sa it is doubtful that these countries willcontinue ta increase their share.

Rice

The main exporters here were essentially Asiancountries. Their evolution was somewhat different.Thailand was the most successful, exporting in 1985a larger share than twenty years before. China main-tained its share, but Burma and Cambodia disap-peared, showing once again that political stability isone of the main conditions for economic growth.Though they were not traditional praducers, the Uni-ted States and Italy exported large quantities, inspite of the "green revolution" in several less deve-loped countries.

Sugar

This sector was much more concentrated in 1985than in 1965 (0.849 against 0.789). Indeed, Cuba'sshare reached 53.1 % in 1985 against 28.4 % in1965. Brazil and Mauritius also had a little share.

It is interesting ta note that sa me developing coun-tries focus on the production of only one agriculturalgood (Cuba, Mauritius). Sa, they can get a leadingposition on the market, but this is dangerousbecause priees are often very volatile and largerexports don't necessarily mean bigger returns. Ame-rican and EC markets are highly pratected, and theEC only sells on the world market quantities excee-ding defined quotas, whatever the priee is. There isalso an agreement between the EC and the ACPcountries for the sale of sugar at special conditions(Lame III).

Tea

Here the developing countries played the major raie.This is of course due ta the fact that tea is cultivatedin environ mental conditions that only exist in lessdeveloped regions of the world. However, the UnitedKingdom had a non negligible place because thecountry was a large importer (this is due ta the parti-cular links it has kept with its former colonies) andreexported a part of its pure hases.

The concentration was high, the index being equalta 0.879 in 1965 and ta 0.853 in 1985. The marketwas dominated by Asian countries (India, Sri Lanka)while only Kenya had a significant share amongAfrican ones.

Rubber

This sector has always been highly concentrated(G = ± 0.9). South Asian countries were the majorproducers and exporters, and especially Malaysia(half of the total exports). Some African countriesplayed a minor raie. On this market, developingcountries were of course the most importantbecause they dispose of the climatic conditions thatmake rubber production possible. Asian countriesare once again much more present than Africanones.

Palm oil

The palm ail market was more and more concentra-ted from 1965 ta 1985. This was essentially due tathe very important effort made by Malaysia taincrease its production. Genetic improvement oftrees and favourable economic enviranment made iteasier for the government ta extend the plantationarea and ta promote the refining industry. This was asignificant success for Malaysia. However, "the gol-den crop loses its luster" (7), because priees conti-nuously decreased ta a very low level in 1984 and1985, as tao much ail had been praduced as com-pared with the demand. Priees were stabilized afterthis period but hardly covered the production costs.Consequently, government planting projects had tabe reviewed.

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5. Conclusions

Some important agricultural export markets forLDCs have been studied by the utilization of the Giniindex to measure their concentration. Tea, rubber,sugar and especially palm ail are exported in largerquantities now than twenty years ago. To be produ-ced, these goods need specific climatic conditionsthat exist in less developed countries only (exceptfor sugarbeet). The world demand has increased butwill it continue in that way? Developed countries,which were net importers of several products someyears ago, are now net exporters. Sometimes, theyproduce so much that they are obliged to stock hugequantities. So, they try now to promote new utiliza-tions of their traditional productions or to increasethose for which their domestic demand largelyexceeds their output (ex: rapeseed and sunflower-seed in the EC).

Some developing countries have also succeeded inexporting products by using advanced technology,but developed countries are still more performantand can afford, to some extent, to sell products atvery low priees (export subsidies), which is not the

case for developing countries. The rich countries'markets are stagnant, so it would be difficult fordeveloping countries to increase their exports in thatdirection. They would probably have more opportu-nities by exporting to other less developed countrieswhich sometimes enjoy a rapid economic growth.This is especially the case for South Asian coun-tries, while African ones did not find yet their politicalequilibrium in their majority, are often disorganizedand have sometimes known important decreases inseveral productions.

Another solution consists in agreements with deve-loped countries concerning exports of defined quan-tities at predetermined prices, though these agree-ments sometimes meet the opposition of developedcountries farmers (ex: sugar imports in the EC). Thisis a worldwide problem. This paper enlights only oneaspect, by measuring the competition on selectedmarkets with the help of the Gini index. It is of simpleconception and permits to characterize marketssynthetically. It is necessary to go in further detailshowever when more information is needed. The Giniindex is relatively easy to calculate and can be use-fui to get a global view of a market.

Literature1. Beghuin H., 1979, Méthodes d'analyse géographique quanti-

tatives. Paris. Librairie technique, 252 p.

2. Blaylock J., and Smallwood D., 1982, Engel Analysis withLorenz and Concentration Curves. American Journal of Agri-cultural Economies 64 (1): 134-139.

3. Breuer J.F., and Lange B, 1977, L'indice de Gini, sa théorie,son utilisation. Annales de Gembloux 83 (3) : 283-294.

4. Gini C., 1912, Variabilita e Mutabilita. Contributo alto Studiodelle Distribuziani e Relaziani Statistiche. StudioEcono. Giuri-dici della R. Univ. di Cagliari.

5. Lange B., 1982, Contribution à l'étude de la localisation desactivités agricoles en Belgique. Gembloux. Faculté desSciences Agronomiques de l'Etat, 316 p.

6. Tarrant F.J., 1987, Malaysian Palm Oil: The Golden CropLoses its Luster. Foreign Agriculture XXV (3) : 13-14.

Ph. Lebailly. Belge. Ingénieur Agronome, Candidat en sciences économiques. Assislant à l'Unité d'Economie et Sociologie rurales de la Faculté des Sciences Agronomiques det'Etat à Gembloux.

Ph. Burny. Belge. Ingénieur Agronome, Assistant d'Economie et Sociologie rurales de la Faculté des Sciences agronomiques de l'Etat à Gembloux.

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