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The economics of cattle supply

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  • David Aadland

Abstract

This paper builds a dynamic rational expectations model describing the supply of cattle. The theoretical model improves on existing models by allowing cow-calf operators to make period-by-period investment decisions on both the cow and calf margins, separates the markets for fed and unfed beef, and considers a rich set of exogenous shocks. The model is calibrated and used to simulate artificial data that replicates several empirical regularities associated with the cattle cycle.

Suggested Citation

  • David Aadland, "undated". "The economics of cattle supply," Working Papers 2000-11, Utah State University, Department of Economics.
  • Handle: RePEc:usu:wpaper:2000-11
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    File URL: ftp://repec.bus.usu.edu/RePEc/usu/pdf/ERI2000-11.pdf
    File Function: First version, 2000
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    References listed on IDEAS

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    1. Prescott, Edward C., 1986. "Theory ahead of business-cycle measurement," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 25(1), pages 11-44, January.
    2. Uhlig, H.F.H.V.S. & Ravn, M., 1997. "On Adjusting the H-P Filter for the Frequency of Observations," Discussion Paper 1997-50, Tilburg University, Center for Economic Research.
    3. Matthews, Kenneth H. Jr & Hahn, William F. & Nelson, Kenneth E. & Duewer, Lawrence A. & Gustafson, Ronald A., 1999. "U.S. Beef Industry: Cattle Cycles, Price Spreads, and Packer Concentration," Technical Bulletins 184374, United States Department of Agriculture, Economic Research Service.
    4. Randal R. Rucker & Oscar R. Burt & Jeffrey T. LaFrance, 1984. "An Econometric Model of Cattle Inventories," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 66(2), pages 131-144.
    5. Capps, Oral & Farris, Donald E. & Byrne, Patrick J. & Namken, Jerry C. & Lambert, Charles D., 1994. "Determinants of Wholesale Beef-Cut Prices," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 26(01), pages 183-199, July.
    6. Blanchard, Olivier Jean & Kahn, Charles M, 1980. "The Solution of Linear Difference Models under Rational Expectations," Econometrica, Econometric Society, vol. 48(5), pages 1305-1311, July.
    7. Cogley, Timothy & Nason, James M, 1995. "Output Dynamics in Real-Business-Cycle Models," American Economic Review, American Economic Association, vol. 85(3), pages 492-511, June.
    8. Capps, Oral & Farris, Donald E. & Byrne, Patrick J. & Namken, Jerry C. & Lambert, Charles D., 1994. "Determinants of Wholesale Beef-Cut Prices," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 26(01), pages 183-199, July.
    9. Marsh, John M., 1991. "Derived Demand Elasticities: Marketing Margin Methods Versus An Inverse Demand Model For Choice Beef," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 16(02), December.
    10. Harry J. Paarsch, 1985. "Micro-economic Models of Beef Supply," Canadian Journal of Economics, Canadian Economics Association, vol. 18(3), pages 636-651, August.
    11. Rosen, Sherwin & Murphy, Kevin M & Scheinkman, Jose A, 1994. "Cattle Cycles," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 468-492, June.
    12. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-1370, November.
    13. John M. Marsh, 1999. "The Effects of Breeding Stock Productivity on the U.S. Beef Cattle Cycle," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(2), pages 335-346.
    14. Long, John B, Jr & Plosser, Charles I, 1983. "Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 39-69, February.
    15. Nerlove, Marc & Fornari, Ilaria, 1998. "Quasi-rational expectations, an alternative to fully rational expectations: An application to US beef cattle supply," Journal of Econometrics, Elsevier, vol. 83(1-2), pages 129-161.
    16. King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : I. The basic neoclassical model," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 195-232.
    17. James N. Trapp, 1986. "Investment and Disinvestment Principles with Nonconstant Prices and Varying Firm Size Applied to Beef-Breeding Herds," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(3), pages 691-703.
    18. Eckstein, Zvi, 1984. "A Rational Expectations Model of Agricultural Supply," Journal of Political Economy, University of Chicago Press, vol. 92(1), pages 1-19, February.
    19. Yair Mundlak & He Huang, 1996. "International Comparisons of Cattle Cycles," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(4), pages 855-868.
    20. Sherwin Rosen, 1987. "Dynamic Animal Economics," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 69(3), pages 547-557.
    21. Cogley, Timothy & Nason, James M., 1995. "Effects of the Hodrick-Prescott filter on trend and difference stationary time series Implications for business cycle research," Journal of Economic Dynamics and Control, Elsevier, vol. 19(1-2), pages 253-278.
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    Cited by:

    1. Zhao, Huan & Hennessy, David A., 2009. "Rationalizing Time Series Differences Between Cow-Calf And Feeder Returns," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49486, Agricultural and Applied Economics Association.

    More about this item

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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