Industry vs. Commodity Output

maria_lucas

February 25, 2020 16:34

INTRODUCTION

Whether you are analyzing a capital investment, an Industry's bill of goods, results of a visitor survey, or some other collection of spending data the question often arises, should I analyze this purchase as an Industry Output Event or a Commodity Output Event? Should the analysis be framed from the perspective of the product or the producer?

Because there are several considerations when making this selection appropriately, this article is designed to assist you in making a well informed choice.

Industries can produce more than one Commodity. The portion of an Industry's Output coming from production of each Commodity it produces is called a Byproduct Coefficient.

Commodities are goods and services that can be produced by more than one Industry or Institution. The portion of Commodity Supply coming from each source for a given Commodity is called a Market Share.

While most Commodities are numbered according to the Industry for which the Commodity is the primary product (e.g. Commodity 3001 is the primary product of Industry 1 and Commodity 3002 is the primary product of Industry 2), there are some Industries that do not produce a unique primary Commodity. For example, all of the electricity producing Industries produce the same single Commodity “electricity” even though they do so via different methods (fossil fuels, wind, etc.). Thus, there are not multiple “electricity” Commodities in IMPLAN, each with its own distinct Commodity code; rather, there is only one single Electricity Commodity that is arbitrarily given the Commodity code that corresponds to the first electricity producing Industry. Commodity codes that correspond to the other Industries and Institutions that produce electricity are labeled in IMPLAN as “Not a unique Commodity.”

3040 * Not a unique commodity (electricity from fossil fuels)
3041 * Not a unique commodity (electricity from nuclear)
3042 * Not a unique commodity (electricity from solar)
3043 * Not a unique commodity (electricity from wind)
3044 * Not a unique commodity (electricity from geothermal)
3045 * Not a unique commodity (electricity from biomass)
3046 * Not a unique commodity (electricity from all other sources)
3169 * Not a unique commodity (fertilizer mixing)
3216 * Not a unique commodity (iron, steel pipes and tubes from purchased steel)
3217 * Not a unique commodity (rolled steel shapes)
3220 * Not a unique commodity (secondary smelting and alloying of aluminum)
3527 * Not a unique commodity (electricity from fed govt utilities)
3529 * Not a unique commodity (passenger transit by state govt)
3530 * Not a unique commodity (electricity from state govt utilities)
3532 * Not a unique commodity (passenger transit by local govt)
3533 * Not a unique commodity (electricity from local govt utilities)

Therefore, there are only 530 Commodities in the 546 Industry Scheme. Electricity types are not unique because each of the corresponding Industries (40-46) all make the same Commodity, Electricity (3039). Industry 169 - Fertilizer mixing primarily produces phosphatic fertilizer (3168). Industry 216 and 217, primarily produce Iron and steel and ferroalloy products (3215). Industry 220 primarily produces Aluminum products (3219). Industry 527, 530, and 533 primarily produce Electricity transmission and distribution (3047). Industry 529 and 532 primarily produce Transit and ground passenger transportation services (3418).

IDENTIFYING THE PURCHASE SCENARIO

The questionnaire and table below outlines all of the potential possibilities when analyzing a purchase. For example, if you know there is a purchase from a local manufacturer, you can simply use an Industry Output Event and specify the appropriate manufacturing Industry. We start with where the item was purchased. By following the outline below, you can find the correct corresponding Event Type & Event settings numbered in the table.

If you do not have enough information to categorize your purchase into one of the scenarios below, the purchase should be omitted from your analysis. Without the necessary information to define the purchase as an Event, IMPLAN has no way of estimating how the purchase affects the Region you’ve selected. In the case of capital purchases, there are a couple other options to consider here.

From whom was the purchase made:

A. Manufacturer

B. Local retailer or wholesaler

C. Non-local retailer or wholesaler

A: Purchase made through manufacturer

Was the product produced locally?

Yes: move on to question A2
No: Purchase Scenario #7
Not sure: Purchase Scenario #5

Do you know what they bought or who they bought it from?

What they bought: Purchase Scenario #3
Who they bought it from: Purchase Scenario #1

Note: Making this choice is most relevant for consideration when the supply of the good or service may be distributed across multiple Industries or Institutions such as government and inventory, which differ by Region. Check the Market Share of a good or service in your Region.

B: Purchase made through local retailer or wholesaler

Do you know what they bought?

No: Purchase Scenario #2
Yes: move on to question B2

Was the product produced locally?

No: Purchase Scenario #2
Yes: Purchase Scenario #4
Not sure: Purchase Scenario #6

C: Purchase made through non-local retailer or wholesaler

Do you know what they bought:

No: Purchase Scenario #7
Yes: move on to question C2

Was the product produced locally:

No: Purchase Scenario #7
Not sure: Remove margins, calculate Producer Marginal Revenue then proceed to Purchase Scenario #5
Yes: Remove margins, calculate Producer Marginal Revenue then proceed to Purchase Scenario #3

Purchase Scenarios

#	Event Type	Event Specification	Event Value	Margins Selection	LPP Setting
1	Industry Output	Manufacturer	Price paid at place of purchase	N/A	N/A
2	Industry Output	Retailer or Wholesaler	Price paid at place of purchase	Purchaser Price	N/A
3	Commodity Output	Product	Price paid for product	Producer Price	LPP = 100%
4	Commodity Output	Product	Price paid at place of purchase	Purchaser Price	LPP = 100%
5	Commodity Output	Product	Price paid for product	Producer Price	LPP = “SAM” (Region’s Commodity RPC)
6	Commodity Output	Product	Price paid at place of purchase	Purchaser Price	LPP = “SAM” (Region’s Commodity RPC)
7	The purchase cannot be analyzed as an Event in the Region

Learn more in the following articles where these purchase scenarios are further explained:

Explaining Event Types

Margins and Local Purchase Percentages (LPP)

Written February 21, 2020

Updated September 21, 2023