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A Demand Model of the Wholesale Vegetable Oils Market in the U.S.A

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  • Kojima, Yasutomo
  • Parcell, Joseph L.
  • Cain, Jewelwayne S.

Abstract

This paper analyzed the quantity-price demand system of vegetable oils market in the United States, focusing on the wholesale market of eight vegetable oils. The global demand for vegetable oils has increased with the overall increase in global food demand. Due to health problems with trans fats (trans fatty acids: TFA) and biofuels issue with crude oil price surge, dramatic changes have been observed in vegetable oils market since the mid 2000’s. We took into account the two major events that might have caused structural changes in the system. We estimated the demand system with eight compensated demand equations, using seemingly unrelated regressions. In this estimation, we specified the first-differenced double-log demand model with homogeneity and symmetry constraints. For each of the vegetable oils, we reported own-price, cross-price, and expenditure elasticities. The results indicate that own-price elasticities are elastic for canola oil and for palm oil contrary to the other six vegetable oils. Palm oil, canola oil and sunflower oil are substitutes for soybean oil. The findings suggest that international prices of palm oil and canola oil affect significantly the U.S. soybean oil demand. Supply policies in export countries and importers’ behavior for palm oil and canola oil have important implications for the U.S. domestic vegetable oils market. The results also reveal that exogenous factors, such as issues of TFA and biofuels, have negatively affected the demand for soybean oil and peanut oil. These same factors, however, have positively affected the demand for palm oil and canola oil since 2004.

Suggested Citation

  • Kojima, Yasutomo & Parcell, Joseph L. & Cain, Jewelwayne S., 2014. "A Demand Model of the Wholesale Vegetable Oils Market in the U.S.A," 2014 Annual Meeting, February 1-4, 2014, Dallas, Texas 162472, Southern Agricultural Economics Association.
    • Handle: RePEc:ags:saea14:162472
    DOI: 10.22004/ag.econ.162472
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    References listed on IDEAS

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    1. Julian Alston & James Chalfant & Nicholas Piggott, 2002. "Estimating and testing the compensated double-log demand model," Applied Economics, Taylor & Francis Journals, vol. 34(9), pages 1177-1186.
    2. Jeffrey T. LaFrance, 1986. "The Structure of Constant Elasticity Demand Models," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(3), pages 543-552.
    3. Willig, Robert D., 1976. "Integrability implications for locally constant demand elasticities," Journal of Economic Theory, Elsevier, vol. 12(3), pages 391-401, June.
    4. Bekkerman, Anton & Piggott, Nicholas E. & Goodwin, Barry K. & Jefferson-Moore, Kenrett Y., 2012. "A Market-based Mitigation Program for Wind-borne Diseases," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 41(2), pages 1-14, August.
    5. Terry L. Kastens & Gary W. Brester, 1996. "Model Selection and Forecasting Ability of Theory-Constrained Food Demand Systems," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(2), pages 301-312.
    6. E. W. Goddard & S. Glance, 1989. "Demand for Fats and Oils in Canada, United States and Japan," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 37(3), pages 421-443, November.
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    Cited by:

    1. Donald A. P. Bundy & Nilanthi de Silva & Susan Horton & Dean T. Jamison & George C. Patton, 2017. "Disease Control Priorities, Third Edition," World Bank Publications - Books, The World Bank Group, number 28876.
    2. M. Shahe Emran & Dilip Mookherjee & Forhad Shilpi & M. Helal Uddin, 2021. "Credit Rationing and Pass-Through in Supply Chains: Theory and Evidence from Bangladesh," American Economic Journal: Applied Economics, American Economic Association, vol. 13(3), pages 202-236, July.
    3. M. Shahe Emran & Dilip Mookherjee & Forhad Shilpi & M. Helal Uddin, "undated". "Do Consumers Benefit from Supply Chain Intermediaries? Evidence from a Policy Experiment in Edible Oils Market in Bangladesh," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-273, Boston University - Department of Economics.

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    Keywords

    Agricultural and Food Policy; Demand and Price Analysis; Food Consumption/Nutrition/Food Safety;
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