Abstracts Economics

Interregional and interseasonal competition in the U.S. beef industry, 1967 : an integrated analysis

by Dilipsinha Chintamani Pendse

Production and marketing are two important activities of the U.S. beef industry. Spatial differences in these activities result due to the existing cost differences in production and marketing of beef. The overall objective of this study is to determine simultaneously interregional and interseasonal equilibrium, with respect to beef production and marketing in the U.S., with special emphasis on the Pacific Northwest region. Market equilibrium was defined as the stage at which demand was exactly equal to supply for each product in each season and in each region. The reactive programming algorithm was used as the computational means. The CDC 3300 computer was used to obtain the results. The continental U.S. was divided into 12 regions. Fed and nonfed beef were defined as two products available in two seasons in 1967. Supply estimates were made for each product for each region in each season. Demand equations were defined for each product in each season and in each region. Transfer costs were also estimated. The equilibrium shipment patterns, and market prices were obtained for each product in each region during each season. It was concluded that, subject to the restrictions imposed on the equilibrium solution, the shipment patterns obtained approximated the actual industry observations fairly well. Comparison of simple average seasonal market prices and computed equilibrium prices showed that computed prices were in reasonable proximity with actual market prices. Possible reasons behind discrepancies existing between the equilibrium solutions obtained from the model and actual observations were, discussed in detail. It was pointed out that the analytical model could be useful provided the supply and demand estimates, coefficients of demand functions, feed and nonfeed costs estimates, and transportation rates were reasonably accurate. Effects of changes in truck transportation rates, availability of backhauls, and increase in slaughter demand for fed beef in Washington on equilibrium flows of fed and nonfed beef and prices were analyzed. The study revealed that interregional flows and prices of fed and nonfed beef were very sensitive to truck transportation rates. The effects of backhauls analyzed in this study indicated that Idaho will lose some of its competitive advantage to Montana- Wyoming, and Arizona-New Mexico regions in supplying fed beef to either Oregon or Washington, and nonfed beef to Colorado. Idaho, Montana-Wyoming, and Colorado are expected to meet Washington's increased slaughter demand for fed beef.