The Short‐Run Supply of Veal

Abstract

In the early 1970s, cattle herds were expanding rapidly due to favorable retail beef and grain prices. This rapid buildup tended to reduce the supply of beef in the short run and reinforce an upward trend in beef prices. During 1974, however, the higher price of feed grain coupled with an inward shift of the beef demand curve due to concurrent reductions in real spendable income created a condition of unprofitably low prices for live beef. As a result, raising calves for feedlot replacement became quite unprofitable. This incentive to reduce the supply of beef has already manifested itself to some extent through changes in the supply of veal. Slaughtering calves for veal is one of the more effective ways of reducing the supply of beef. The impact of slaughtering potential beef-producing animals, however, has a considerable lag before its effects will be felt on the retail market. An analysis of the factors influencing the supply of veal, therefore, is not only interesting in its own right but also is of considerable importance in bringing about a longer-run equilibrium in the supply of beef. Previous studies of the supply of beef have neglected veal production as a supply regulator. The number of animals slaughtered for veal as a percentage of total beef slaughter declined from 35% in 1950 to about 7% in 1973. In 1974, it rose for the first time since 1964.