Crom, Richard J.

Martin, Neil R., Jr.

Nelson, Kenneth E.

Sullivan, Gregory M.

English

Research Papers in Economics

SOUTHERN JOURNAL  OF AGRICULTURAL  ECONOMICS  DECEMBER,  1982
IMPACT OF MEAT IMPORTS ON LEAST-COST UNITED  STATES  BEEF
PRODUCTION
K. E. Nelson,  N. R.  Martin,  G.  M.  Sullivan,  and R.  J. Crom
Meat  imports  have  been  a  source  of  con-  such  encompass  slightly  different  geographic
troversy  in  United  States  agriculture  for  more  areas  than  the  five  supply  regions.  The  central
than  20  years.  Beef producers  early  contended  receiving point  in each consumption region  also
that imports unduly restricted their incomes  and  differs  from  the  supply  points.  The  Northeast
placed  the  domestic  livestock industry  at a dis-  Region, omitted as a supply region, is included as
advantage.  In  1964,  the  Congress  enacted  the  a consumption region (Figure  lb.).
Meat Import Bill (P.L. 88-482),  limiting  imports  The  LP  model  is  a multistage,  multiproduct,
of meat to  approximately  7  percent  of domestic  interregional  competition  model of beef produc-
red  meat  production.  Consumers  consequently  tion, processing,  and distribution in the  contigu-
complained that limitations on imports have con-  ous United States.  The following description  in-
tributed to higher retail beef prices. Periodic de-  cludes  a summary  of  major components  of the
cisions  to adjust  quota levels  occurred  in  1968  model. Detail description of the model is given in
and  1977.  New  legislation, the  Meat Import Act  Kennedy.
of 1979 (P.L. 96-177),  includes  a countercyclical
adjustment  factor based on moving  averages  of  a.  Beef Supply  Regions
domestic cow beef production.
Previous  studies have examined the effects  of
imports  on  American  aggregate  livestock  and
meat  prices  and  supplies  (Crom;  Houck;
Freebairn  and Rausser).  However,  previous  re-  REAT 
search  has  not  accounted  for beef industry  ad-  PLAINS
justments  that  could  occur  in  response  to  the  SA  NTO  STERLING+  TRAL
presence  versus  the  absence  of  beef  imports.
This  paper  examines  the  configuration  of beef  IT
production  in the U.S. with and without imports  WES  SOTH\
under  specified assumptions. 
METHODS
b.  Beef  Demand  Regions
The analysis  is based on results from an inter-
regional  linear  programming  (LP)  model  of  the
U.S.  beef  industry.  The  model  minimizes  the
total variable plus fixed costs for new facilities at
each  stage  of the  production  and  marketing 
channels  for  beef.  Comparisons  between  total  C  OAST
production costs and regional production organi-  \  I  —  ,
zations  of  the  beef  economy  can  be  analyzed  f\ER
with and without imports.  A  AT  I
Five  production regions  correspond  to  those  T
used  in U.S.  Department  of Agriculture  cost of  I'll  S
production publications,  which are based on sig-
nificant  geographical,  climatic,  and  agricultural
patterns.  Supply  points  were  selected to  repre-
sent spatial concentration  within each  supply re-
~gion (Figure  la).  FIGURE  1.  The  Supply  and  Demand  Regions
Six consumption  regions  are groupings  of pri-  for a Model of U.S. Beef Industry
mary markets  defined by Raunikar et al, and, as
K.  E.  Nelson  is  Agricultural  Economist,  NED/ESCS/USDA,  University  of  Illinois.  N.  R.  Martin  is  Associate  Professor,  and  G.  M.  Sullivan  is  Assistant  Professor,
Department of Agricultural  Economics  and Rural  Sociology,  Auburn University.  R.  J.  Crom is Branch  Chief,  Animal Products Branch,  NED/ESCS/USDA,  Washington,
D.C.
101Beef Production and Processing  Stages  The Cow-Calf Stage.  One  hundred  and  seven
cow-calf  enterprises,  typical  of those in  36  sub-
The  general  construction  of the  model  is  the  regions  of the  5 supply  regions,  represent  herd
same  across  regions.  Production  alternatives,  sizes  of 50-1,500  cows.  Production  and  cost
technical  coefficients,  and  related  costs,  which  coefficients  are adapted from the Federal Enter-
vary  by  region,  were  derived  from  secondary  prise  Data  System  developed  by  ERS  regional
sources  (see below).  Each region has  subsets  of  analysts  (Gustafson  et al).
production  activities for vertical  linkages  in the  Feeders,  stockers,  and  cull  cows  are  inter-
model. A flow chart of the LP model is illustrated  mediate  outputs of the  cow-calf stage.  Cull beef
in Figure  2.  animals and an exogeneous quantity of cull dairy
cows go directly to the packer stage of the model.
Dairy  calves  not  held  for  replacement  are  in-
cluded in feeder cattle supplies.  Feeder calves of
)  I  BEEF  cOWS  IA  two sexes and weight-range categories  can be re-
tained  in  cow-stocker  activities  or  shipped  to
Icow I  CALF  PROD.  I  __  -other  stocker  operations  or  feedlots  along  de-
I——[  . . —sIJ  ,  II_  I  fined transportation  routes.  Feeder  cattle,  1-1.5
|CULLS  |  |1  1/2 YR  S  I  1  C"ALVE  I  years  of age,  can also  go  directly  to the  packer
W PK  CO/FEE  C/STOCKER  stage.
—\  I  CATTLEj  I  _  I  —  KThe  Stocker Stage.  Stocker programs  involve
P  STAGE  De  I  SToAG  placement of calves on pasture for 6,  12,  18, or 24
~  . i/  -AL-/  I  _  months.  Regional  differences  in  pasture  and
900/830LBss  range qualities are reflected in production coeffi-
FE~iTR  I  —ISTOCKERJFEDER—  YEARLING  cients.  All stockers  up to 2  years of age  can be
PACKER  1000/920 LB  1 1/2 Y  transferred either to the feedlot stage or directly
11o001010LBs  .—  (  2 YR  to  the  packer  stage  as  nonfed  slaughter.  Cattle
STOCKER/PACKER  that are  2.5 years  old must be  shipped direct to 120011100LBS  2  112  YRS the packer  stage.
1300/1190 LBS  The  Cattle Feeding Stage.  The feedlot  stage
i1400/1280LBS  includes  cattle taken from cow-calf  and  stocker
—  T,'—1 ____L  programs.  A range  of 200 to  600 pounds  of gain
P  KLL  & CHILL  pRUCS  will be  added,  based  on sex,  age,  weight class,
. ACTIVITIES  l  and  feeding  regime.  Long  (120-260  days)  and
NON-FEDFED IDCULL  —short  (40-95  days) feeding  operations  are  avail-
^CENTRAL  REATAIL  able.  Sixteen  different  finished weights  are pos-
sible, ranging from 600 to 1,400 lbs. for steers and
.__  ____  ,^~  4580  to  1,280 lbs. for heifers.  Average  daily gains
BREAK/FABRICATE  BREAK/FABRICATE  BREAK/FABRICATE  in feedlots  are  assumed  to be  identical for each
CENTRAL  FACILITY  PACKER  RETAIL  region.  Nonfeed  costs vary by region,  reflecting
_IMPORT  (  - "  iZ  NK  i  differences  in  average  size  of  lots  by  region
|LEAN  TRIM  LEEANTRIMM  LEAR  TRIM  |  (Gee).  Feed  costs  also  reflect  regional  differ-
MED.  TRIM  MED. TRIM  MED.  TRIM  ences in corn prices.  Costs escalate as  cattle are
LTAL  CUT.S  >  TAR.  C  —  TALE  CUTS—  fed  to higher  weights,  reflecting  the decrease  in
feed  conversion  efficiency  by older and  heavier
M  A  K  E  M  A  K  E  I  MAKEcattle.
IcLH  "  1"HAMBURGER  \  I  HAMBURGER  The Packer Stage.  At this  stage,  the dressing
percentages  and  cutability  coefficients  for  each
HAMBURGER  IHMURGER  HAMBRGER  -carcass  type  produced  vary  according  to  live-
stock  class,  weight,  and  sex.  Cost  coefficients
ENTRAL  PAE  reflect typical  plant  size  and hourly  earnings  in
each  region  (Cothern  et  al.  1977b;  Baker;
U.S.D.L.).  By-products at the packing  stage  are
|_AG_  ]\—  E—  lsold  at an average value of $39 (1976 dollars) per
i— i  I  '—•—  ,  1.,i  1,000 lbs.  liveweight.
FE  C  U  LL  NONFED  HAMBURGER  The Fabrication  Stage.  Fabrication  activities
are  formulated  to  reduce  carcasses  to  subpri-
mals.  Technical  coefficients  are  consistent with
—  '^  ^f^"~  —  F~--------'the  carcass type, whether it is a cull cow, nonfed,
or short- or long-fed steer, and heifer.  Six classes
FIGURE 2.  Flow Chart of U.S. Livestock-meat  of fabricated  beef,  including  table  cuts  and
Linear Program Model  medium trim (50%  lean),  are  output.  Lean  trim
(85%  lean)  and  medium  trim  can  go  into  ham-
102burger production.  Fat (100%)  is  sold  as a  sepa-  million lb.  carcass  weight of domestic beef out-
rate product.  Beef imports  enter a region  as  85-  put, with net imports  of 1,800  million  lbs.  Total
percent lean trim.  Carcass fabrication  occurs in  beef supply  amounts to  124 lbs. per capita (U.S.
conjunction  with the packer  stage either at cen-  population  of 220 million).
tral processing  facilities  or  at retail levels.  Cost  With  imports,  the  least-cost  U.S.  beef  cow
by regions  reflect  typical  plant sizes  and hourly  herd is estimated at 53.308 million head (Table 1),
earnings  (Baker;  Cothern  et  al.,  1977a;  U.S.  a  long-term  least-cost  herd  size.  Without  im-
Dept. Labor).  ported  beef,  the least-cost  herd increases  8 per-
The  Hamburger Stage.  Hamburger  activities  cent,  to  57.580  million  head.  The  restriction  in
represent  all  processing  uses  of trimmings  of  imports is  offset by a slightly greater-than-equal
beef.  The  model  uses  85-  and  50-percent  lean  increase  in cow numbers to replace the imported
trimmings  and  table cuts  to  produce  hamburger  meat.
which  contains  no  less  than  20 percent,  but no  With  available  imports,  corn  (equivalents)
more than 30 percent fat.  Hamburger production  used  in cattle  feeding  in the U.S.  is  1,389.0  mil-
can  occur  at  the  packer,  fabricator,  and  retail  lion  bu.  (Table  1).  Model  alternatives  included
demand  stages. Production capacity  is unlimited  both the possibility  to replace restricted imports
at any stage.  with more domestic  cattle feeding,  or with more
The Retail Stage.  This  stage  reflects  average  domestic  beef production  from increased forage
final  distribution  costs  aggregates  for  hotel-  input.  Results  indicated  that  the  cattle  feeding
restaurant-institutional  (HRI)  and  food  store  alternative  was  lower  in  cost  for  the  total
components  (Trieb;  U.S.  Dept.  of  Agriculture  amounts of beef required.  This is consistent with
1980b).  Products  sold  are fed, nonfed,  cull table  results  reported  by Brokken.  The  impact  of re-
cuts,  and hamburger.  stricting imports requires an increase  in corn uti-
lization to  1,547.2  million  bu., an increase  of 11
THE  TRANSPORTATION  ACTIVITIES  AND  percent.l  The  additional  corn  is  used  to  carry
DEMAND  FOR BEEF  cattle  on  feed  to  heavier  weights  to  meet  the
shortfall in meat imports.  With likely future def-
Transportation  activities make up a significant  icits  in  world demand for food grains  (Quance),
proportion  of the model (1,845  activities).  These  restricting  U.S.  meat  imports  would  affect
include transportation  of feeder cattle,  slaughter  America's position in international trade in corn.
cattle,  carcass,  and  boxed beef among  5 supply  Meat imports  with the  least-cost cow herd af-
regions  and 6 demand regions.  Of the 25 possible  fects  the  types  of cattle  processed  into  retail
transfer  routes  among supply regions,  20 routes  meats.  More  nonfed  and  cull  cows  are  used  as
are selected for the model (15  interregional and 5  table  cuts  in total  consumption,  replacing  table
intraregional).  Some transfer routes (a total of 5),  cuts  from  fed  cattle.  Imported  meat,  as  85-
such as  shipping  live animals  from a deficit  re-  percent  lean trim,  is used as  hamburger and pro-
gion  (West)  to  a  surplus  region  (Great  Plains),  cessed  meat.  The  impact  of no  imports  causes
were  excluded.  Freight  costs,  death  loss,  and
shrinkage  are  included  in  the  shipment  coeffi-
cients.  All interregional  shipments  are  between  TABLE  1.  The  Effect  of  Import  Policies  on
supply points (Figure  la) and consumption desti-  Least-Cost U.S. Beef Cow Herd and Corn Utili-
nations  (Figure  lb).  All transportation  activities  zation
terminate  at  each  of  the  6  designated  regional
cities.  Beef  Cow  Production  Corn Utilization
Supply
National  beef  consumption  is  set  at  an  Supply
Lower  With  Without  With  Without
exogeneous  level  and  regionalized  among  the  Regions  Limita/  imports  imports  Change  imports  imports  Change
........  (million  hd)  -----------  (%)  . .... (milinon  bu)  -----  (%)
demand  regions  from  previous  research  by  Western  3.033  5.349  6.038  +13  149.60  151.10  +1
Raunikar  et  al.  National  beef  consumption  (all  Great  Plains  6.687  12.730  14.646  +15  346.04  347.50  +.4
forms)  was  set  at  27,200  million  lbs.  carcass  Southwest  2.724  6.043  6.043  --- b/  212.98  252.20  18
weight, which is 124 lbs. per capita, respectively.  NorthCentral  7.239  15.979  17.472  +9  530.56  644.60  +21
Although  above  current  levels,  the  per  capita  Southeast  13.207  13.207  13.379  +1  149.00  151.80  +2
consumption  level  reflects  estimates  based  on  Nation  32.890  53.308  57.580  +8  1389.00  1547.20  +1
past beef industry statistics  (Quance).
aLower limits were placed  on number of beef cows in each
RESULTS  region  to  reflect  the  long-term  nature  of the beef  cow-calf
enterprise.
bFor the Southwest Region,  cattle raising reached an upper
Least Cost Production  constraint with and without imports  because  of physical lim-
its on expansion  of herd  based on historical  trends from  the
Baseline  results  are  obtained  by  constraining  previous cattle cycles.
the  model  to the domestic  production  of 25,400
' The model did not include  an endogenous  supply or price response for corn; however,  sensitivity analysis did not indicate  significant  changes  over a 10-percent  range in
corn prices.
103nonfed  and  cull  cows to  go  for processing  into  Restricting meat imports requires a larger U.S.
hamburger to replace imported lean trim. In addi-  cow  herd  (8  percent)  and  greater  utilization  of
tion,  cattle are fed  a longer period in feedlots to  corn  (11%)  in  cattle  feeding  than  under  import
produce more beef. The increased number of fed  levels experienced  in 1979.  More resources have
cattle go for table cuts and for trim to make ham-  to be  put into livestock  production,  resulting  in
burger.  higher  average cost of production.  Meat imports
thus play a role in moving the cattle industry to-
ward  the  least-cost  optimum  herd  size  under
IMPLICATIONS  AND CONCLUSIONS  conditions  modeled.
Results  should be interpreted to indicate direc-
Imports affect  sectors  differently.  The results  tion,  order  of  magnitude,  and  general  areas  of
indicate  that  significant  trade-offs  between  im-  economic impacts-not predictions of precise fu-
ports  of lean beef and U.S.  grain production  oc-  ture outcomes.  Future research is needed on beef
curs.  With  the  importation  of  1,800  million  demand  at the retail level.  Inclusion  of own and
pounds  of  beef  annually,  the  American  cattle  cross  price  elasticities  for  processed  beef  and
feeding  sector  would  utilize  158  million  fewer  table  cuts  would  allow  for  the  effects  of  con-
bushels  (8,848  million  pounds)  of  feed  grains.  sumer  response  on the  model. The resulting im-
United  States grain  export capacity  is  increased  pacts on production, processing, and distribution
with the imports of lean beef.  stages  could be examined.
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Spatial and Temporal Aspects on the Demandfor Food in the United States,

The Effects of Changes in the Level of U.S. Beef Imports.&quot;

The Short Run Impact of Beef Imports on U.S. Meat Prices.&quot;

IMPACT OF MEAT IMPORTS ON LEAST-COST UNITED STATES BEEF PRODUCTION

IMPACT OF MEAT IMPORTS ON LEAST-COST UNITED STATES BEEF PRODUCTION

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