Beef Feedlot Supply Response in Australia

Abstract

Reliable estimates of demand and supply elasticities are required for industry-wide evaluations of new agricultural technologies, new primary product promotion campaigns or new policy initiatives impacting on agricultural industries. In developing an equilibrium displacement model of the Australian beef industry, recent supply elasticities for feedlot beef in Australia were not available. The issue of consistency of throughput of feedlot beef and utilisation of feedlot capacity is also an important industry concern. Feedlot survey data were used to estimate supply response functions for feedlot beef. The results indicated that price response was much more inelastic than shown in previous work, reflecting perhaps the industrialisation of the industry in recent years and the significant level of foreign investment. The price of fed cattle plays the largest role in influencing decisions to place cattle on feed. The price of feed is also a major input affecting utilisation of feedlot capacity, however the price of feeder steers plays a lesser role in feedlot decision making than previously thought.