Decompositions of corn price effects

implications for feed grain demand and livestock supply

Dong Hee Suh, Charles B. Moss

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

This article examines how corn prices affect the demand for feed grains and the supply of livestock outputs. The differential approach to the theory of the multiproduct firm is employed to examine ex ante decisions about feed grain demand and livestock supply. The estimation results suggest that livestock producers have little flexibility in adjusting the demand for corn in response to an increase in corn prices. The substitutable relationship between corn and distillers’ grains contributes to alleviating pressures on feed costs in response to high corn prices. In addition, the estimation results highlight that the composition of livestock supply can be altered by changes in livestock prices. On the basis of the estimated elasticities, the decompositions of profit-maximizing input demand are conducted to examine the effects of changes in corn prices on feed grain demand and livestock supply. The decomposition results reveal that an increase in corn prices reduces corn demand but raises the demand for distillers’ grains mainly due to the substitution effects of corn price changes. The decomposition results also show that an increase in the price of corn reduces cattle supply but raises the supply of chicken and pork due to the output relationships in supply.

Original languageEnglish
Pages (from-to)491-500
Number of pages10
JournalAgricultural Economics (United Kingdom)
Volume48
Issue number4
DOIs
Publication statusPublished - 2017 Jul 1

Fingerprint

feed grains
livestock
corn
degradation
distillers grains
livestock prices
Corn
Livestock
Price effects
Decomposition
elasticity (mechanics)
profits and margins
pork
chickens

Keywords

  • Corn price
  • Decomposition
  • Differential approach
  • Distiller's grain
  • Feed grain
  • Livestock output

ASJC Scopus subject areas

  • Agronomy and Crop Science
  • Economics and Econometrics

Cite this

Decompositions of corn price effects : implications for feed grain demand and livestock supply. / Suh, Dong Hee; Moss, Charles B.

In: Agricultural Economics (United Kingdom), Vol. 48, No. 4, 01.07.2017, p. 491-500.

Research output: Contribution to journalArticle

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