The Market for U.S. Livestock Feed Proteins

Kenneth Mathews and Michael J. McConnell

Applied Economic Perspectives and Policy, 2012, vol. 34, issue 4, 555-569

Abstract: Parameters that characterize markets for livestock feed ingredients and inform an increasing array of policies motivated by a range of environmental, market, and animal disease issues are largely absent from the literature, which necessitates the use of often misleading assumptions in analyses of proposed feed-market policies. Such parameters are derived here from a theoretically consistent, dual translog cost model of U.S. protein and energy feed markets. Own-price elasticities ranged from a relatively inelastic −0.139 for feedgrains to a relatively elastic −0.568 for meat and bone meal (MBM). The cross elasticity for ethanol co-products and oilseed meals (0.168) is larger than the elasticity with co-products and feedgrains (0.024). Higher prices for protein feeds likely result in some substitution of feed grains for some protein (e.g. corn by oilseed meals = 0.125), which may also partially account for the relatively small feedgrains cross elasticity. Policies implemented as a result of bovine splongiform encephalopathy adversely affected the share of total costs attributed to MBM, but had a positive effect on oilseed meal cost share. Copyright 2012, Oxford University Press.

Date: 2012
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