Price Elasticity of Demand for Beef and Range Improvement Decisions

Abstract

In recent years many leaders in the cattle industry have advocated restraint in cattle numbers in order to improve the cattleman's market position. During the same period, numerous articles have appeared in the Journal of Range Management recommending various range improvements as means of increasing beef output. There has been some question as to whether these two recommendations are contradictory. Since the rationality of the two recommendations depends upon the price elasticity of demand for beef, regression analysis was used to estimate a demand function for beef. An elasticity coefficient of -0.67 was derived from this function and then employed in the construction of a payoff matrix in order to determine the correct action for the individual rancher to take with regard to cattle numbers. The analysis indicates that increases in cattle numbers by individual ranchers (through range improvements or other management tools) are economically sound goals. The study also suggests that cattle numbers at the industry level will likely continue to increase despite the recommendations of cattle industry leaders.