An Economic Analysis Of Import Demand For Canola Oil In The United States

Abstract

The study analyzes the impacts of economic and noneconomic factors on import demand for canola oil. The import demand pattern for canola oil in the United States is influenced by changes in the world's oilseeds market and government oilseeds programs and policies, including tariffs and subsidies. The U.S. import demand for canola oil was specified as a function of its own import price, prices of substitute edible vegetable oils (soybean oil and palm oil), disposable personal income, the Canadian-U.S. dollar exchange rate, lagged imports, trend factor, and seasonality. Generalized Least Squares (GLS) was employed to estimate equation parameters. Based on analysis of monthly data for January 1989 through October 1993, U.S. import demand for canola oil was influenced mostly by prices of substitute vegetable oils (soybean and palm oils), the U.S.-Canadian exchange rate, and the change in consumers' tastes and preferences. The elimination of tariffs and subsidies under the auspices of the U.S.-Canadian Free Trade Agreement and the passage of the 1990 U.S. Farm Bill should lead to the continued expansion of canola and canola oil production in the United States. Moreover, canola oil may continue to gain in market share in the United states due to consumer preference for its health benefits driving consumption upward with rising pressure on price.