The Demand for Red Meats and Related Foods in Canada

Abstract

This study focuses on the question of whether variations in total consumption of meat and the mix of different types of meats consumed in Canada over the past twenty-five years have been primarily due to changes in the levels of prices and consumers' income or whether structural changes in red meat demand, due to change in consumers' tastes, have occured. Since recent economic literature indicates that findings of structural change in demand may be senstive to functional form or other features of model specification, several model specifications were tested. In the initial phase of the study, issues of demand specification were analysed using two single-equation functional forms of the various meat demand models fitted to annual time-series data for beef, pork, poultry, and fish from 1960 through 1987. The models are the widely used but theoretically inconsistent double logarithmic model and the single-equation version of the almost ideal demand model. Various tests of the appropriate measure of the explanatory income variable support the use of expenditure on meat, rather than per capita disposable income, as the income variable. Exogeneity tests of the appropriateness of single equation demand specification are not conclusive but tend to support the use of non-simultaneous quantity- or price-dependent models. The analysis of structural change in the single equation models indicates a structural shift in the Canadian demand for meat during the mid-1970s. In the second and major phase of the study, two multiple-equation demand systems, the almost ideal demand system and the translogarithmic demand system, were fitted the quarterly data for beef, pork, chicken, and turkey from 1967 through 1987. One contribution of this study to applied demand analysis is to confirm the importance of habit persistence in analyzing demand. Inconclusion of lagged meat consumption variables materially improve the fit, performance, and consistency with theory-based restirctions of both demand systems. Results from the system analyses of demand also indicated a change in the structure of the demand functions for meat dating from the mid 1970s. Use of a variety of tests of structural change indicated a shift in the intercept terms, rather than in the slopes of the demand functions, implying a change in consumer preferences or tastes away from beef and toward chicken after accounting for the influence of changes in prices and income. A minor or nonsignificant structural change is evident for pork. The cause of the change in preferences is not clear. Perceptions of healthy diets, changes in the availability of and preferences for fast food items, and changes in the demographic structure of the population as the population has aged are possible explanations. The study provides updates estimates of the responsiveness of Canadian consumption of the various meats to changes in prices and consumers' expenditure or income. The estimates based on the system analyses are preffered, since theya re more strongly grounded in economic theory. As expected, all estimates of price elasticity of demand are less than unity. Both system model approaches indicate that chicken and pork consumption are slightly more responsive to changes in price than is beef consumption. Turkey consumption varies much less than other meats in response to price changes. As expected, the demand estimates based on quarterly data are slightly more responsive to price changes than the estiamates based on annual data. Overall, habit persistence is important in red meat consumption and consumption changes have occured in response to changes in prices and incomes. Nontheless, after accounting for these influences, there is evidence of a structural change in demand away from beef and towards chicken. This has accounted for a decrease of 6% in the expenditure share of beef and an increase of 33% in the budget share of chicken. In relative terms, about 20% of the increase per capita chicken consumption and about 25% of the decrease in per capita beef consumption seems to have been associated with the changes in consumer preferences. The results from this study suggest potential market strategies for livestock producers are to emphasize production of lean meat, encourage fast food products, and encourage cost competitiveness throughout the industry,