Health (cholesterol) information and economic effects on the U.S. beef industry
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Date
2005
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Montana State University - Bozeman, College of Agriculture
Abstract
The objectives of this thesis were to econometrically estimate and test the impacts of health (cholesterol) information as an exogenous shifter of retail beef demand, and to translate these shifts to structural inverse demands and supplies of the boxed beef, slaughter cattle, and feeder cattle sectors. Given the theoretical model, the empirical work consisted of three stages. First, shifts in retail beef demand were estimated through a retail beef demand index equation by OLS. Second, the system of inverse demand and supply equations for all beef industry sectors was estimated using a full information systems estimator (3SLS) to identify relationships, which were used to calculate reduced form, equilibrium multipliers. The last stage was to calculate long term impacts of health information on the beef industry sectors via a combination of beef demand index elasticities and system equilibrium multipliers. The majority of the model estimates were statistically significant. The health (cholesterol) information elasticity of the retail beef demand index was estimated to be -0.322. Based on equilibrium multipliers, the 1970-2000 trend in the retail demand index decreased revenues in the boxed beef, fed slaughter cattle, non-fed slaughter cattle, and feeder cattle sectors by 2.6%, 1.1%, 1.3%, and 1.7% annually (as a percent of the sample mean). Cholesterol information, as a driver of the retail demand index, was responsible for 1.6%, 0.7%, 0.8%, and 1.1% decreases in total revenues of the boxed beef, fed slaughter cattle, non-fed slaughter cattle, and feeder cattle sectors annually. Combined, the beef industry sectors experienced a real total revenue reduction of $727 million annually due to the negative long run effects of cholesterol information. Impacts of shifts in retail demand are distributed across all sectors of the beef industry, albeit somewhat unevenly. Implications are that beef industry revenues can be increased by positive information concerning health effects of beef consumption.