Has Price Responsiveness of U.S. Milk Supply Decreased?
This study has three main objectives: (i) to quantify the impacts of milk and feed price changes on the primary milk supply in the U.S.; (ii) to examine the impacts of technological changes on the price responsiveness of supply and specific herd characteristics; and (iii) to generate dynamic long-run forecasts of the milk supply response to price changes and possible future technological advancements. The econometric analysis contained in this study is an update of the model by Chavas and Klemme (1986). We used the residual-based bootstrap to test hypotheses regarding the long-run price-responsiveness of supply, and found that the 10-year elasticity of milk supply to milk price is lower in 2007 than it was in 1980. This result is most surprising. One might expect that with better genetics, improved heifer management and larger farms the industry would be likely to react to prices more quickly than almost thirty years ago, when small and medium-sized dairy operations played a major role. A detailed analysis of the predicted herd structure supports the conjecture that a decrease in price responsiveness is a consequence of decades-long excessive focus on yield improvement in genetic selection. The intensive production process could make cows susceptible to health problems, imposing biological constraints on the economic lifetime of a cow. Hence, herd expansion decisions will be harder to implement, as culling rates are not easily reduced, and more replacement heifers are needed just to keep the herd size stable.
|Date of creation:||Nov 2009|
|Date of revision:|
|Contact details of provider:|| Postal: Trg J.F.Kennedy 7, HR - 10000 Zagreb|
Phone: (**385 1) 23 35 700
Fax: (**385 1) 23 35 165
Web page: http://www.eizg.hr
More information through EDIRC
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.:
- J.-P. Chavas & A. F. Kraus, 1990. "Population Dynamics And Milk Supply Response In The Us Lake States," Journal of Agricultural Economics, Wiley Blackwell, vol. 41(1), pages 75-84.
- Jeffrey T. LaFrance & Harry de Gorter, 1985.
"Regulation in a Dynamic Market: The U.S. Dairy Industry,"
American Journal of Agricultural Economics,
Agricultural and Applied Economics Association, vol. 67(4), pages 821-832.
- Jeffrey T. LaFrance & Harry D. Gorter, 1985. "Regulation in a Dynamic Market: The U.S. Dairy Industry," Monash Economics Working Papers archive-34, Monash University, Department of Economics.
- John D. Schmitz, 1997. "Dynamics of Beef Cow Herd Size: An Inventory Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(2), pages 532-542.
- Thraen, Cameron S. & Hammond, Jerome W., 1987. "Price Enhancement, Returns Variability, And Supply Response In The U.S. Dairy Sector," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 19(02), December.
- Blayney, Donald P. & Gehlhar, Mark J. & Bolling, H. Christine & Jones, Keithly G. & Langley, Suchada V. & Normile, Mary Anne & Somwaru, Agapi, 2006. "U.S. Dairy at a Global Crossroads," Economic Research Report 7209, United States Department of Agriculture, Economic Research Service.
- Lee, David R. & Boisvert, Richard N., 1985. "Factors Affecting Participation In The Milk Diversion Program In The U.S. And New York," Northeastern Journal of Agricultural and Resource Economics, Northeastern Agricultural and Resource Economics Association, vol. 14(2), October.
When requesting a correction, please mention this item's handle: RePEc:iez:wpaper:0902. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Doris Banicevic)
If references are entirely missing, you can add them using this form.