U.S. agricultural policy and the demand for imported beef

An econometric model of the U.S. livestock-feed grain subsector was constructed to investigate the impact of agricultural policies and other exogenous variables upon the U.S. livestock-feed subsector and on the demand for imported beef. The model was estimated with quarterly data to allow the assumption of predetermined beef import levels and total beef consumption was disaggregated into table and processing quality classes to avoid the possibility of bias from mis-classification of some low quality beef under the fed/nonfed classification procedure. The basic specifications for the model equations were derived from economic theory with modification for the capital-good nature of livestock inventories and policy intervention in the feed grain market. The model was stable, with cyclical patterns corresponding to both the cattle and the hog cycle;The estimated impacts of changes in the level of beef imports were generally in line with the estimates obtained from earlier studies. Comparison of the factors influencing the excess demand for imports, and the beef import quota, revealed some divergent trends. An increase in corn prices, for instance, increased the long-run excess demand but reduced the import quota, while an increase in consumer incomes increased the quota but had virtually no effect on the level of excess demand for beef;Comparison of estimates obtained using the fed/nonfed and table/processing approaches to disaggregation suggested that the bias resulting from use of the fed/nonfed approach may tend to underestimate the effect of imports on U.S. beef prices, rather than to overestimate it as has previously been suggested.