Short-Run Supply of Services—The Case of Soybean Processing

Allen B. Paul and William T. Wesson

American Journal of Agricultural Economics, 1966, vol. 48, issue 4_Part_I, 935-951

Abstract: This article measures a short-run industry supply function for a processing service (US. soybean crushing) that has no explicit market. Three different crushing margins were used, reflecting different assumptions about the timing of commodity transactions and deliveries. The quantity variable is the percentage of crushing capacity utilized. Single equations were fitted by least squares to annual and seasonal data (covering the 1952–53 to 1963–64 period) using the different margins. The coefficients obtained have positive signs and low elasticities. But some are not statistically significant. The best results utilize the most plausible measure of the price of processing— i.e., one that allows for a production interval through use of forward commodity markets. But almost as good results were obtained with a proxy measure that is much easier to compute. Some implications of this study for analyzing other business services, industry structure, and farm prices are briefly discussed.

Date: 1966
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