05Previous Demand Elasticity Estimates for Australian Meat Products

Griffith, G.R., I'Anson, K., Hill, D.J., Lubett, R. and Vere, D.T. (2001), Previous Demand Elasticity Estimates for Australian Meat Products, Economic Research Report No.5, NSW Agriculture, Orange.

Executive Summary

Reliable estimates of the responsiveness of the supply of and demand for agricultural commodities to prices and other factors are fundamental to accurate economic forecasting, sound analyses of the impacts of new production technologies or promotion campaigns and effective policy decision making. This is true whether the estimates are used by academics, government departments such as NSW Agriculture, research institutions such as ABARE or the Beef CRC, or producer organisations such as MLA.

This paper reports a listing and review of previous demand elasticity estimates for major Australian meat products. This review considers analyses from the early 1960s, such as Taylor (1961), through the major surveys by Gruen et al. (1967) and by Richardson (1976) to more recent work such as by Piggott et al. (1996) and Vere et al. (2000). However, not all of the studies that have been conducted in the area have been able to be covered in the review.

The studies reviewed vary substantially in terms of geographic coverage, sample periods, estimation method, functional form, inclusion of other explanatory variables and reliance on the underlying utility theory. Data limitations have restricted the majority of demand studies to estimates of aggregate demand elasticities. Most studies have been oriented to retail demand and have used data for livestock types, rather than on the various choices of meat available to the consumer. Only a few studies have focussed on demand at the saleyard or wholesale levels or on the demand for meats of different quality. Export elasticities have also been largely overlooked in the literature.

One area for further analysis could be a formal meta-analysis of the domestic retail market estimates to better separate out the effects on previous own- and cross-price elasticity estimates of time period, functional form, model specification, and the like. Another could be an up-to-date study of Australian retail meat demand using modern functional forms and estimation methods. Also, in spite of the trade status of the Australian meat industries, there are significant gaps in knowledge about export demand elasticities. Analyses covering export demand by region and by product would seem to be an obvious area for further effort.