Integrating the Philippine corn and livestock markets: a derived demand model.
1990
Costales A.C.
The results showed contrasting growth patterns in the corn and livestock sectors starting on the second half of the last decade, when the livestock industry began exhibiting a consistent robust expansion compared to rather sluggish growth in corn output. The supply of corn was shown to be fairly responsive to output price changes, but it takes a lag of four quarters before complete adjustment takes place. Seasonal variations in output were also found to be significant. In both livestock activities, inventory movements were shown to exhibit partial adjustment behavior with a shorter lag structure for the poultry sector. Whether the undertaking was on a backyard or commercial scale, the sensitivity to charges in the corn input price was consistently stronger than responses to changes in the price of output. On the demand side, the estimation results showed the demand for chicken meat to be priced is inelastic but highly income elastic. The study also determined that within certain policy relevant price ranges for corn, input substitution possibilities exist between corn and other feed ingredients in the formulation of poultry feeds. Such, however, was not shown to be the case for the swine feeds considered. For all alternative estimates of the elasticity of derived demand for all corn feed, the demand was shown to be quite price inelastic. In the case of the demand for corn by the broiler chicken activity, both the output and substitution effects were significant. The parameter which showed the strongest influence on the demand for corn was the income elasticity of demand for chicken meat. Finally, in determining the potentials for growth in the broiler chicken industry, the most crucial parameter was revealed to be the supply elasticity of corn output.
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