Blend Bans and Butter Demand

Hui-Shung Chang and Henry Kinnucan

Review of Agricultural Economics, 1993, vol. 15, issue 2, 269-278

Abstract: A number of countries have instituted bans on the sale of butter blends to protect butter sales. A related strategy is to prohibit the coloration of margarine. This study examines the efficacy of the bans by estimating a pooled time series/cross section model of margarine and butter demand in Canada. Results suggest that such bans are effective. In particular, sales of butter in regions where the bans are in place are estimated to be 29 percent higher than in regions without bans, after adjusting for differences in prices, income, and other factors influencing interregional demands for fats and oils. The blend ban, moreover, is estimated to be about three times more effective at protecting butter sales than the coloration ban. Although removal of the bans is estimated to have a greater effect on margarine sales than on butter sales, it is not possible to determine which product would be the net loser without more information about blend compositions and supply responses in the respective markets.

Date: 1993
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