Linkages Between Regulated and Unregulated Markets: The Case of Milk Supply in Kenya

Linkages between the regulated and unregulated dairy markets in Kenya were examined using an econometric model of the fluid milk intake for eight processing plants. Counter-intuitive results were obtained: an increase in the regulated price was significant in decreasing intake in the regulated market, indicating that a price increase in the regulated market also increased price and quantity supplied in the unregulated market. Lagged rainfall was a proxy for available feed and was highly significant in explaining milk intake in the regulated market

Supply and demand for commodity components: implications of free trade versus the AUSFTA for the US dairy industry *

During the negotiations on the Australia-US free trade agreement (AUSFTA), the US dairy industry vigorously opposed opening the US market to imports of Australian dairy products on the grounds that the US industry would be devastated. Subsequently, the agreement signed in February 2004 made an exception for dairy, providing for only limited quota expansion and no free trade, even at the end of the long implementation period. This paper presents a simulation model of world dairy markets, represented by supply and demand equations for fat and non-fat components of milk and manufactured dairy products. We use the model to analyse the effects on US milk markets of both a hypothetical agreement, allowing free bilateral trade in dairy products, and the actual AUSFTA. An important contribution to the literature is the derivation of explicit supply and demand relationships for milk components. The components model allows an analysis of long-term production, consumption, and trade patterns that is not tied to specific, fungible products. Simulations indicate that increased imports from Australia resulting from bilateral trade liberalisation would have resulted in small reductions in US milk prices and production. The much smaller increases in Australian access to the US market under the actual AUSFTA will have even smaller, almost negligible, impacts. Copyright Australian Agricultural and Resource Economics Society Inc. and Blackwell Publishing Ltd 2006.

Impacts of Declining U.S. Retail Beef Demand on Farm-Level Beef Prices and Production

A systems model was estimated to determine the effects of declining U.S. retail beef demand on farm-level beef prices and production. Retail beef demand declined by nearly 66% from 1976 to 1999. Results indicate autonomous shifts in retail demand significantly impacted farm-level demands and production. Based on equilibrium multipliers, the 1976–99 reduction in beef demand decreased real slaughter cattle prices and production by 32.1% and 11.2%, respectively. Real feeder cattle prices and production decreased by 8.0% and 22.6%, respectively. Combining the decreases in farm prices and production, slaughter and feeder cattle producers experienced a real revenue reduction of $13.3 billion (61%) due to the long-term decline in demand. Copyright 2003, Oxford University Press.