The name is absent



preferences or a reaction to lower ground beef
prices (in relation to other beef and meat
prices). It should be noted, however, that there
is some evidence to support the contention
that the trend is due, at least in part, to the rel-
atively low prices of ground beef during the
last three to four years [see 9]. Also ignored is
the obvious alternative of increasing the levels
of imported beef to offset, at least partially, ~
the expected decrease in availability of domes-
tic nonfed beef. Though the quantity of beef
imported by the U.S. will likely increase, the
increases are not expected to be sufficient to
replace a significant portion of the decreased
supply of domestic nonfed beef [3].

The authors first describe the interdepen-
dence in the demand and supply of the various
beef submarkets. Then, through an adaptation
of a linear programming model to these mar-
kets, an estimate is made of the price relation-
ships that must exist in the various beef sub-
markets for each of the proposed alternatives
to become economically feasible. This analysis
also provides an indication of the probability of
these price relationships developing during the
next three to five years.

THE BEEF MARKET

The term “market” is used here in the theo-
retical sense to mean the equilibrium price and
corresponding quantity exchanged—implying
the existence of known supply and demand
functions. Submarkets, in the same sense, are
subsets of markets, i.e., the sum of the quanti-
ties exchanged in all of the submarkets equals
the quantity exchanged in the market, and the
sum of the products of the quantities ex-
changed and the respective equilibrium price in
each submarket divided by the sum of the
quantities exchanged in all submarkets yields
the equilibrium market price.

On the basis of this theoretical construct,
one can represent the structure of the beef mar-
ket and submarkets with the following func-
tional relationships.

(1) QDB = QSB

(2) QDB = QDgb + QDbln + QDbrb + QDbrn +
QObck ÷ QDθb

(3) QSB = QSgb+ QSbln +QSbrb + QSbrn +
QSbck + Qsθb

where

QDB = the quantity demanded for all
beef during a specific time period,
QSB = the quantity of all beef supplied
during a given time period,

QD, QS = the quantities demanded and sup-
plied, respectively, in each beef
submarket, and

subscripts gb, bln, brb, bm, bck, and ob =
ground beef, beef loins, beef ribs,
beef rounds, beef chucks, and
other beef (oxtails, briskets, edi-
ble offal, etc.), respectively.

The structure of the demand functions for
each beef submarket can be represented in
somewhat simplified form as:

(4) QDgb = f(Pgb, Pprk, Pplt, Pbln, Pbrb, Pbrn, Pbcb
Pob-I-TP)

(5) QDbn — f(Pbjn,Pprk-PpIt- Pgb- Pbrb- Pbrn- Pfack-
Pob-I-TP)

and

QDbrb, QDbrn, QDbck, QD0b, = f(similar to
equations 4 and 5)

where

P = price of the various meat prod-
ucts, subscripts prk and pit =
pork and poultry, respectively,

I = consumer income, and indirectly
the relative prices of all other
goods and services,

TP = consumer tastes and preferences,
and all other variables and sub-
scripts are as defined above.

Further, the structure of the supply func-
tions for each submarket can be represented in
simplified form as:

(6) QSgb = f(Pgfa, P bln’ Pbrb> Pbrn- Pbck-P ob- P Ib-
Pmfb- Pbt- OPCgb)

(7) QSbbl = f(Pbln,
Pgb- Pbrb- Pbm- Pbck- P©b’ Pfbc-

OPCbln)

QSbrd- QSbrn, QSbck, QSob = f(similar to
equations 6 and 7)

where

OPC = otherproductioncosts,
subscripts ib, mfb, bt, and fbc = imported
deboned beef, domestic manufac-
turing deboned beef, beef trim,
and fed beef carcasses, respective-
ly, and

all other variables and subscripts are as de-
fined above.

Though the structure of the functional rela-
tionships for the demand and supply of the
various beef products illustrated in equations 1
through 7 may be regarded as somewhat hy-
pothetical,’ they are very similar to those em-

’Equations 1 through 7 represent the beef market and submarkets only in the “pure free market’' sense. In actuality no market is completely “free.” Of particular
significance in the beef market and submarkets are the institutional restrictions on the quantity of beef imports and the natural (technical production) restrictions on
the timeliness of producer responses to price changes and the resulting inability to change quickly the quantities supplied to the various beef submarkets.

22



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