A Framework for Policy in the Feed‐Livestock Economy

Abstract

M /ANY farm policy discussions have ignored the fact that programs which affect prices or production of feed grains also have important direct and indirect effects on all segments of the livestock industry utilizing these grains. Several empirical studies in recent years have examined certain relationships between the feed economy and selected segments of the livestock economy.' In the present study, a framework and mechanism were developed for analyzing interrelationships between the aggregate feed and livestock economies.2 The entire feed-livestock economy is large, complex, and highly interrelated. An ideal model might be a complete Walrasian framework which would include all demand, supply, and spatial components of the feed-livestock industry. A willingness to settle for something slightly less grandiose led to a model designed to estimate only some of the most important demand and supply relationships. The relationships were then used to examine probable aggregate effects of a policy which would maintain a substantial reduction in the U. S. production and consumption of feed grains. Hildreth and Jarrett [5] provided one of the earliest attempts to bring together in one model the entire feed-livestock sector of the agricultural economy. Their work was also somewhat of a pioneering effort in the application of econometrics. The model developed in this study bears resemblance to the model developed by Hildreth and Jarrett. An integral part of this study, in fact, involved bringing the Hildreth-Jarrett model up to date. Time is not spent here on the Hildreth-Jarrett model, except occasionally to point out similarities or differences between that model and the one developed in this study.