A Quarterly Econometric Model of United States Livestock and Feed Grain Markets and Some of Its Policy Implications

Abstract

This paper discusses the structural equations, forecasting properties, dynamic characteristics, and economic policy implications of a quarterly econometric model of V.S. livestock and feedgrain markets. Quarterly, semi-annual, and annual endogenous variables are incorporated by allowing individual structural equations to be estimated and to enter into the solution of the model with different periodicities. Commodity prices are determined by market equilibrium conditions rather than by autoregressive and other time-series techniques. Dynamic multipliers give the effect of changes in corn exports, beef imports, government grain stocks, com yield, consumer income, and the support price for com on producer and retail prices and acreage planted.

Consumer demand for meat and the evaluation of agricultural policy

“…All other supply equations are estimated by Two-Stage Least Squares. A more detailed discussion of the estimators of equations (1) - (38) in Table 2 can be found in Arzac/ Wilkinson [ 1979b ].…”

“…Their forecasting accuracy (both static and dynamic) has been compared with autoregressive models both within and beyond the sample. The policy implications of the dynamic multipliers have been analyzed and the model has been used to study optimal stabilization policy [Arzac/ Wilkinson, 1979b]. All of these experiments suggest that the supply equations provide a reasonable representation of the livestock and feed-gain markets.…”

Dynamic elasticities and flexibilities in a quarterly model of the US pork sector

“…Although economists have continued to evaluate structural econometric models by deriving reduced forms and by examining the resulting mean paths of endogenous variables (Freebairn and Rausser 1975;Arzac and Wilkinson 1979), there has been no known attempt to obtain the total response relationships implied by an estimated linear econometric model. However, Chavas, Hassan, and Johnson (1981) have illustrated that partial reduced forms obtained for simultaneous dynamic systems can be used to derive analytical expressions for total price and quantity effects.…”

“…The result is that total elasticities and flexibilities can be obtained even when the lag structure on endogenous variables is not arbitrarily constrained. The application is with a quarterly model of the U.S. pork sector similar in design to the models reported by Harlow (1962), Arzac and Wilkinson (1979), and others. The hog sector seems especially suited for examining the implications of total price and quantity effects, in that production occurs sequentially and well-defined biological time lags govern supply response.…”

Agricultural and trade policy reform in Mexico: PROCAMPO, NAFTA, and pre-GATT

“…These models are not based on rigorous microeconomic theory, since the properties of supply and demand are not satisfied, but the specifications satisfy the behavior of producers and their intuitive understanding of the market. A few examples of multimarket models of the U.S. agricultural and livestock industries include Arzac and Wilkinson (1979), Gadson, Price, and Salathe (1982), and Westcott and Hull (1985).…”