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An Equilibrium Displacement Model of the Australian Beef Industry

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  • Zhao, Xueyan
  • Mullen, John D.
  • Griffith, Garry R.
  • Griffiths, William E.
  • Piggott, Roley R.

Abstract

Around $100 million has been spent annually on R&D and promotion in the Australian red meat industries in recent years. The R&D investments are made throughout the production, processing and marketing chain in both the grass and grain finished sectors. Promotion investments are made in both export and domestic markets. Despite this large investment of industry and government funds there is great uncertainty about the returns from these investments. Not only is it unclear what the total industry returns are but it is even less clear how producers and the community benefit from the many alternative investment options. Hence, it is unclear how funds should be allocated between these alternatives. Zhao (1999) addressed these issues in research for her PhD degree from the University of New England. An important component of this research was the development of an equilibrium displacement model of the Australian beef industry. The objective of this Report is to thoroughly document the model and the procedures followed in defining the price, quantity and market parameters (supply, demand and substitution elasticities) used in the model. The results of the base run are also reported. Twelve investment scenarios were considered relating to 1% shifts in the relevant supply or demand curves due to new technologies in individual sectors and promotion in export or domestic markets. For each scenario, total returns in terms of economic surplus gains and the distribution of total returns among individual groups, namely, among cattle producers, feedlotters, processors, exporters, retailers and domestic and overseas consumers, were estimated. Producers and domestic consumers were shown to be the main beneficiaries in all scenarios. The results indicated that, in general, producers receive larger benefit shares from on-farm research than from off-farm research. They also receive significantly larger shares from export marketing research and promotion than from domestic marketing research and promotion. In general, while they should prefer research investments over domestic promotion, they gain as large or even larger shares from export promotion than from various research scenarios.

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Bibliographic Info

Paper provided by New South Wales Department of Primary Industries Research Economists in its series Research Reports with number 28007.

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Date of creation: 2000
Date of revision:
Handle: RePEc:ags:nswprr:28007

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Fax: 02-6391 3650
Web page: http://www.agric.nsw.gov.au/reader/10550
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Keywords: Industrial Organization; Research and Development/Tech Change/Emerging Technologies;

References

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Cited by:
  1. Liu, Esther & Tarrant, Katherine A. & Ho, Christie K.M. & Malcolm, Bill & Griffith, Garry R., 2012. "Size and Distribution of Research Benefits in the Australian Dairy Industry," 2012 Conference (56th), February 7-10, 2012, Freemantle, Australia 124326, Australian Agricultural and Resource Economics Society.
  2. Mounter, Stuart W. & Griffith, Garry R. & Piggott, Roley R. & Mullen, John D., 2005. "The Relative Payoffs From R&D and Generic Advertising Expenditure by the Australian Pig Industry," Working Papers 12943, University of New England, School of Economics.
  3. Vere, David T. & Griffith, Garry R. & Silvester, Luke T., 2005. "Australian Sheep Industry CRC: Economic Evaluations of Scientific Research Programs," Research Reports 42651, New South Wales Department of Primary Industries Research Economists.
  4. Zhao, Xueyan & Anderson, Kym & Wittwer, Glyn, 2003. "Who gains from Australian generic wine promotion and R&D?," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 47(2), June.
  5. Griffith, Garry R. & Coddington, Anna & Murdoch, Scott, 2004. "Beef Feedlot Supply Response in Australia," Australasian Agribusiness Review, University of Melbourne, Melbourne School of Land and Environment, vol. 12.
  6. Mullen, John D., 2001. "An Economic Persective On Land Degradation Issues," Research Reports 27999, New South Wales Department of Primary Industries Research Economists.
  7. Gunter, Allison & Goemans, Chris & Pritchett, James G. & Thilmany, Dawn D., 2012. "Linking an Equilibrium Displacement Mathematical Programming Model and an Input-Output Model to Estimate the Impacts of Drought: An Application to Southeast Colorado," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124930, Agricultural and Applied Economics Association.
  8. Henderson, Benjamin B. & Henry, Lynn A. & MacAulay, T. Gordon, 2006. "Investment and Change in the Coconut Industry of North Sulawesi: An Equilibrium Displacement Analysis," 2006 Conference (50th), February 8-10, 2006, Sydney, Australia 139789, Australian Agricultural and Resource Economics Society.
  9. Xueyan Zhao, 2002. "Who Bears the Burden and Who Receives the Gain? - The Case of GWRDC R&D Investments in the Australian Grape and Wine Industry," Monash Econometrics and Business Statistics Working Papers 15/02, Monash University, Department of Econometrics and Business Statistics.
  10. Mounter, Stuart W. & Griffith, Garry R. & Piggott, Roley R. & Fleming, Euan M. & Zhao, Xueyan, 2007. "Composition of the National Sheep Flock and Specification of Equilibrium Prices and Quantities for the Australian Sheep and Wool Industries, 2002-03 to 2004-05," Research Reports 37664, New South Wales Department of Primary Industries Research Economists.
  11. Griffith, Garry R. & Farquharson, Robert J. & Barwick, Steve & Banks, Rob & Holmes, Bill, 2002. "Estimating Returns From Past Investments Into Beef Cattle Genetics Rd&E In Australia," 2003 Annual Meeting, August 16-22, 2003, Durban, South Africa 25864, International Association of Agricultural Economists.
  12. Ambarawati, I Gusti Agung Ayu & Zhao, Xueyan & Griffith, Garry R. & Piggott, Roley R., 2003. "Distribution of Gains from Cattle Development in a Multi-Stage Production System: The Case of the Bali Beef Industry," 2003 Conference (47th), February 12-14, 2003, Fremantle, Australia 57829, Australian Agricultural and Resource Economics Society.
  13. Griffith, Garry R., 2009. "Estimating the economic impact of a major beef industry research and development investment," Australasian Agribusiness Review, University of Melbourne, Melbourne School of Land and Environment, vol. 17.
  14. O'Donnell, Christopher J. & Griffith, Garry R. & Nightingale, John J. & Piggott, Roley R., 2004. "Testing for Market Power in Multiple-Input, Multiple-Output Industries: The Australian Grains and Oilseeds Industries," Research Reports 28008, New South Wales Department of Primary Industries Research Economists.
  15. Xayavong, Vilaphonh & Radhakrishnan, Manju & Kingwell, Ross, 2013. "Development Strategies for a Premium Wine Region of Australia: an application of value chain modelling," 2013 Conference (57th), February 5-8, 2013, Sydney, Australia 152186, Australian Agricultural and Resource Economics Society.
  16. Mounter, Stuart W. & Griffith, Garry R. & Piggott, Roley R., 2004. "The Payoff from Generic Advertising by the Australian Pig Industry in the Presence of Trade," Working Papers 12946, University of New England, School of Economics.
  17. Dent, Siobahn K. & Piggott, Roley R. & O'Donnell, Christopher J. & Griffith, Garry R., 2003. "Does Excluding Cross-commodity Interactions Matter? Beef and Lamb in Australia," 2003 Conference (47th), February 12-14, 2003, Fremantle, Australia 57859, Australian Agricultural and Resource Economics Society.
  18. Griffith, Garry R. & Parnell, Peter F. & McKiernan, William A., 2005. "The Economic, Environmental and Social Benefits to NSW from Investment in the CRC for Beef Genetics Technologies," Research Reports 42654, New South Wales Department of Primary Industries Research Economists.

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