Demand Analysis of the Markets for Soybean Oil and Soybean Meal

Abstract

A 10-equation simultaneous model of the soybean economy was constructed. This involved relationships representing quantities demanded domestically as well as exported, for both soybean oil and soybean meal. Estimates of the structural parameters of the model were obtained by the two-stage least-squares procedure, using first differences of the data. The estimates indicate an annual necessary increase of more than 30 million bushels of beans to cover the needs of the United States, Western Europe, Japan, and Canada, if prices are to remain relatively constant. This amount is based on the assumption that human and animal populations increase and that shifts in tastes and preferences and in feeding technology in these regions are of the same magnitude as they were during the period 19491964. Also it was assumed that the production of competing oils and oilseeds at the same prices as in the last decade would not drastically change. The domestic demand for oil and meal is price-inelastic (-.45, -.28); this statement holds for exports also (-.90, -.58). However, the price elasticities of demand for meal are less reliable than those of demand for oil. POLICY MAKERS in the United States must decide how far soybean production should be encouraged. Decisions in matters of this kind are made on the basis of knowledge derived from the past and evaluations of what the future may bring. This report is mainly concerned with an analysis of the past in the soybean sector through an econometric study of prices and quantities demanded. A 10-equation model was constructed, involving relationships representing quantities demanded domestically as well as quantities exported. Estimates of the structural parameters of the model were obtained by the two-stage least-squares procedure. The Economic Model