The Taiwanese livestock and feedgrain markets and policies

Government intervention in livestock markets has become a controversial issue in Taiwan. Opponents charge that the policy of restricting pork export whenever the government deems the action necessary has led to a drop in pork prices on Taiwan over time, benefitting pork consumers but cutting deeply into the profitability of hog production. Consequently, there is growing pressure to liberalize pork exports. Similarly, opponents contend that the large imports of frozen beef, subsidized by the Australian government, that have been dumped in Taiwan since 1975, have led to a sharp decline in the domestic price of beef and in cattle inventories. Taiwanese cattle producers have requested that the government impose restrictions on beef imports such as a quota or an import surcharge;The main objective of this study is a qualitative and quantitative analysis of Taiwanese livestock and feedgrain markets and an evaluation of the likely effects of current and alternative policies on the Taiwanese livestock and feedgrain markets. A description of the structure and characteristics of the Taiwanese livestock industry and related government policies is first presented. Then a general model of the industry which integrates the cattle and beef, hog and pork, chicken and chicken meat, corn, and soybean sectors is developed and estimated using the Wallis-like two step estimator;Dynamic policy simulation analysis provides strong evidence of a significant impact of pork export restrictions on the Taiwanese livestock and feedgrain markets over the long run. The study suggests that a pork export embargo would force a drop in the domestic retail price of pork and, consequently, a decline in domestic pork production. The simulation results also indicate that an increase in the import prices of corn or soybeans as a result of a drought in the U.S., for example, would widely affect the Taiwanese livestock and feedgrain markets. The higher prices of corn or soybeans would push up feeding costs in the livestock industries in Taiwan and, consequently, decrease the production of meat. Alternative policies intended to support the domestic beef industry such as a restrictive beef import quota and the import tariff currently provided to U.S. beef have limited effects on the Taiwanese livestock and feedgrain markets.