Dynamic PEATSim Model Documenting Its Use in Analyzing Global Commodity Markets
by Agapi Somwaru and Steve Dirkse
Technical Bulletin No. (TB-1933) 48 pp, July 2012
PEATSim (Partial Equilibrium Agricultural Trade Simulation) is a
dynamic, partial equilibrium, mathematical-based model that enables
users to reach analytical solutions to problems, given a set of
parameters, data, and initial conditions. This theoretical tool
developed by ERS incorporates a wide range of domestic and border
policies that enables it to estimate the market and trade effects
of policy changes on agricultural markets. PEATSim captures the
economic behavior of agricultural producers, consumers, and markets
in a global framework. It includes variables for production of
crops and livestock activities, consumption, exports, imports,
stocks, world prices, and domestic producer and consumer
In 2010, ERS updated and modified the model extensively. The
original model, static in its specification, was developed through
a collaborative effort between ERS and Pennsylvania State
University. This report supports requirements for documentation and
information quality as specified by the U.S. Office of Management
What Is the Contribution?
PEATSim's innovative and flexible design enables users to
analyze a variety of domestic and trade policy issues. The model is
written in GAMS (General Algebraic Modeling System) using PATH, a
Mixed Complementarity Problem (MCP) solver. MCP enables PEATSim to
account for a discon- tinuous policy regime, such as a tariff rate
quota or a trade ban. This report makes the model trans- parent and
available to a larger audience.
In 2010, PEATSim was modified to include new features and enhanced
• PEATSim was augmented to incorporate different sets of
production activities; links between upstream and downstream
sectors; and interactions of producers, processors, and consumers
at a global level.
• Unlike previous versions, the updated model's dynamic
specification and enhanced flexibility enable researchers to
analyze short-term and long-term effects of domestic and border
• The model accounts for simultaneous interactions between
livestock and crop activities and has the ability to capture and
solve different sets of production activities worldwide.
• PEATSim now includes 27 countries/regions, up from 12 in the
previous version. The updated version also allows flexible
aggregation of the countries in the model to accommodate various
• The updated model includes 31 agricultural commodities in
addition to 3 biofuel-related commodities (ethanol, biodiesel, and
distillers' dried grains with solubles).
• The data in PEATSim calibrate to USDA Agricultural Projections
to 2019 and OECD-FAO Agricultural Outlook 2010-2019, while an
innovative econometric method (i.e., cross entropy) equilibrates
supply and use.
• PEATSim uses transparent, clearly listed programming codes,
data inputs, equations, data rules, policies, and parameters.
How Was the Study Conducted?
This report documents the latest version of PEATSim. To
illustrate the model's capabilities, we evaluate the effects on the
biofuels sector of alternative macroeconomic conditions and crude
oil prices, taking into account biofuel production on a global
scale from different feedstocks across countries.