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Negative Supply Response And The Role Of Price Expectations In A Two‐Period Model Of Cattle Production

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  • D. V. Gordon

Abstract

This paper incorporates a representation of producers' price expectations (ARIMA) in a two‐period production process to characterise short‐run cattle supply. The model provides a framework for examining the role of biological factors and changing expectations of future cattle prices in generating a negative short‐run supply response. The biological link between cattle generations requires the farmer to make a decision between production today and production tomorrow. This decision is based on a trade‐off between the possibilities of increasing current profit levels by increasing current output weighted against the possibilities of increased future profit by maintaining animals in inventory under the expectation of future price increases. Application of the model to Canadian data for the period 1978‐81 shows that the necessary condition for a negative supply response exists, but that the total supply elasticity remains positive.

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  • D. V. Gordon, 1990. "Negative Supply Response And The Role Of Price Expectations In A Two‐Period Model Of Cattle Production," Journal of Agricultural Economics, Wiley Blackwell, vol. 41(2), pages 184-195, May.
    • Handle: RePEc:bla:jageco:v:41:y:1990:i:2:p:184-195
    DOI: 10.1111/j.1477-9552.1990.tb00634.x
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    1. Jarvis, Lovell S, 1974. "Cattle as Capital Goods and Ranchers as Portfolio Managers: An Application to the Argentine Cattle Sector," Journal of Political Economy, University of Chicago Press, vol. 82(3), pages 489-520, May/June.
    2. Randal R. Rucker & Oscar R. Burt & Jeffrey T. LaFrance, 1984. "An Econometric Model of Cattle Inventories," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 66(2), pages 131-144.
    3. Peter Tryfos, 1974. "Canadian Supply Functions for Livestock and Meat," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 56(1), pages 107-113.
    4. Glenn Nelson & Thomas Spreen, 1978. "Monthly Steer and Heifer Supply," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 60(1), pages 117-125.
    5. C. Robert Taylor, 1984. "Stochastic Dynamic Duality: Theory and Empirical Applicability," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 66(3), pages 351-357.
    6. Marvin L. Hayenga & Duane Hacklander, 1970. "Monthly Supply-Demand Relationships for Fed Cattle and Hogs," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 52(4), pages 535-544.
    7. Shlomo Reutlinger, 1966. "Short-Run Beef Supply Response," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 48(4_Part_I), pages 909-919.
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    1. A. Ozanne, 1993. "The Importance Of Produced Means Of Production In Uk Agriculture," Journal of Agricultural Economics, Wiley Blackwell, vol. 44(2), pages 205-217, May.
    2. Kivanda, Lena & Fox, Glenn, 1993. "Falsification and the Practice of Agricultural Production Economists: A Methodological Assessment," Department of Agricultural Economics and Business 258724, University of Guelph.

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