Supply and Demand Interactions in the New South Wales Prime Lamb Market

Abstract

Prime lamb has not received the same level of economic research as Australia's other major livestock markets and knowledge of the lamb market's operations remains relatively limited. This market has experienced increasing problems including highly variable saleyard prices, strong retail competition and calls for market reform. To date, there has been no quantitative mechanism for assessing the potential impacts of these issues on the state or national lamb markets. This paper reports the development of a quarterly econometric model of the New South Wales prime lamb market. The model considers prime lamb as a separate market entity and places emphasis on the demographic influences on supply response. The estimated model is validated under historical dynamic simulation which generates simultaneous equilibrium solutions for twelve endogenous variables. The model's ability to respond to exogenous shocks is established under impact analysis and some proposed uses for the model are indicated.