An Econometric Model of Cattle Inventories

Abstract

Dynamic regression equations are estimated for each beef cattle breeding herd and beef cattle inventories at two levels of aggregation, the U.S. and Montana. The analysis for Montana was utilized asa guide for specification of the national equation to reduce the inference problem associated with letting the sample data help specify the model. Rational lags on average price received by farmers for calves and the ratio offed beefto corn prices at Omaha constitute the primary explanatory variables. The equations perform exceedingly well over the sample period and in post-sample forecasts with the sample truncated back to 1970.

Risk Management in Agricultural Markets: A Review

“…Attempts to explain cycles have used variants of the cobweb theorem, and, in principle, prices should move in cycles corresponding to the dynamics in quantities. Yet as Rucker, Burt, and LaFrance (1984) noted, few empirical studies have found this correspondence (though annual prices appear to be autocorrelated). Rosen (1987) demonstrated that supply responses to changing market conditions vary both in sign and magnitude according to whether demand and supply shocks are transitory or permanent.…”

Cattle cycles, heterogeneous expectations and the age distribution of capital

“…Exacerbating the problem, the Nixon administration imposed a freeze on the retail price of beef in 1973. Feedlot operators reduced their demand for cattle, and when coupled with an economy-wide recession, this led to a sharp decrease in the demand for beef and the derived demand for cattle (Rucker et al, 1984). Consequently, cattle producers postponed sending animals to market and aggregate cattle stocks rose sharply, reaching their highest level of the 20th century in 1975 (Martin and Haack, 1977).…”

“…Cattle cycles are not simply a U.S. phenomenon either; similar cycles can be found in other countries such as Argentina and Uruguay (Mundlak and Huang, 1996). The unique nature of the cattle cycle has led to a great deal of research aimed at understanding cattle dynamics (e.g., Jarvis, 1974;Rucker et al, 1984;Foster and Burt, 1992;Rosen et al, 1994;Nerlove and Fornari, 1998). However, despite all this research, no study has successfully replicated one of the cattle industry's most notable features-the approximate 10-year cattle cycle-within a model that is consistent with microeconomic fundamentals.…”

Dairy supply response under stochastic trend and seasonality

“…Many researchers have analysed supply response in dairy and cattle (Martin and Haack, 1977;Rucker et al, 1984;Kaiser et al, 1994;Sun, 1994), crops (Gafar, 1987;Paudel and McIntosh, 2005) and vegetables (Shonkwiler, 1982). One serious limitation of these studies is that they assume deterministic trend and/or seasonality components in the supply model, which implies that a model with a constant intercept, a time trend, and a deterministic seasonal component is correctly specified.…”