Estimating Marketing Margin Cost Components: An Application of Simulation to Products of the Vegetable Oil Industry

Abstract

While many methods have been proposed for evaluating agricultural processing market efficiency, estimation of product marketing margins has received the most attention and direct research effort. Despite this fact, there are many technical and statistical problems associated with both the performance of marketing analyses and utilization of margin reports. Most early marketing margin studies either ignored or circumvented these problems, concentrating on estimating absolute magnitudes of marketing margins over time. Marketing margin studies performed in the last few years have continued, in varying degrees, to ignore these and other problems implicit in the analysis. Relative levels of marketing margins over time may provide some insight into marketing efficiency, but those of various cost components of the marketing margin over time appear to give even more suitable indications of changing market performance.

Demand and Supply of Vegetable Oil Products in the United States: A Short-Run Analysis

“…Taking all expected values as parameters, the neces-EMPIRICAL IMPLEMENTATION sary conditions for a maximum require that OF THE MODEL Evidence presented in [8,9,10] indicates that aL/asit =-Pi + X8f/asit the vegetable oil products industry is effectively competitive. This is a necessary condition for applica-+ E(pit+ 1 ) 0 i= 1...,n (7) tion of the simultaneous equation model developed in the preceding section.…”

“…This is a necessary condition for applica-+ E(pit+ 1 ) 0 i= 1...,n (7) tion of the simultaneous equation model developed in the preceding section. Three markets are considered L/8zi = Pi t + X8f/zit =0 i =1,...,n (8) in the empirical implementation of the system described by relations (16), (17) and (18). These are aL/xjt -vjt + Xaf/xjt = 0 i 1,...,m (9) the domestic cooking oil, shortening and margarine markets.…”