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Short-Run Demand Relationships in the U.S. Fats and Oils Complex

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  • Goodwin, Barry K.
  • Harper, Daniel C.
  • Schnepf, Randall D.

Abstract

Fats and oils play a prominent role in U.S. dietary patterns. Recent concerns over the negative health consequences associated with fats and oils have led many to suspect structural change in demand conditions. Our analysis considers short run (monthly) demand relationships for edible fats and oils. In that monthly quantities of fats and oils are likely to be relatively fixed, an inverse almost ideal demand system specification is used. A smooth transition function is used to model a switching inverse almost ideal demand system that assesses short-run demand conditions for edible fats and oils in the United States. The results suggest that short-run demand conditions for fats and oils experienced a gradual structural shift that began in the late 1980s or early 1990s and persisted into the mid-1990s. Although this shift generally made price flexibilities more elastic, differences in scale flexibilities across regimes were modest in most cases. The results suggest that decreases in marginal valuations for most fats and oils in response to consumption increases are rather small. Scale flexibilities are relatively close to -1, suggesting near homothetic preferences for fats and oils.

Suggested Citation

  • Goodwin, Barry K. & Harper, Daniel C. & Schnepf, Randall D., 2003. "Short-Run Demand Relationships in the U.S. Fats and Oils Complex," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 35(1), pages 1-14, April.
    • Handle: RePEc:ags:joaaec:37858
    DOI: 10.22004/ag.econ.37858
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    2. Matthew T. Holt & Joseph V. Balagtas, 2009. "Estimating Structural Change with Smooth Transition Regressions: An Application to Meat Demand," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(5), pages 1424-1431.
    3. Asche, Frank & Zhang, Dengjun, 2013. "Testing Structural Changes in the U.S. Whitefish Import Market: An Inverse Demand System Approach," Agricultural and Resource Economics Review, Cambridge University Press, vol. 42(3), pages 453-470, December.
    4. Rodriguez, Nestor & Eales, James S., 2015. "Structural Change via Threshold Effects: Estimating U.S. Meat Demand Using Smooth Transition Functions and the Effects of More Women in the Labor Force," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 206522, Agricultural and Applied Economics Association.
    5. Roheim, Cathy A. & Zhang, Dengjun, 2018. "Sustainability certification and product substitutability: Evidence from the seafood market," Food Policy, Elsevier, vol. 79(C), pages 92-100.

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    JEL classification:

    • Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General
    • D1 - Microeconomics - - Household Behavior

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