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Short-Run Demand Relationships in the U.S. Fats and Oils Complex

Published online by Cambridge University Press:  28 April 2015

Barry K. Goodwin ,
Daniel Harper  and
Randy Schnepf
Barry K. Goodwin
Affiliation:
The Ohio State University, Columbus, OH
Daniel Harper
Affiliation:
North Carolina State University, Raleigh, NC
Randy Schnepf
Affiliation:
USDA Economic Research Service, Washington, DC
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Abstract

Fats and oils play a prominent role in U.S. dietary patterns. Recent concerns over the negative health consequences associated with fats and oils have led many to suspect structural change in demand conditions. Our analysis considers short run (monthly) demand relationships for edible fats and oils. In that monthly quantities of fats and oils are likely to be relatively fixed, an inverse almost ideal demand system specification is used. A smooth transition function is used to model a switching inverse almost ideal demand system that assesses short-run demand conditions for edible fats and oils in the United States. The results suggest that short-run demand conditions for fats and oils experienced a gradual structural shift that began in the late 1980s or early 1990s and persisted into the mid-1990s. Although this shift generally made price flexibilities more elastic, differences in scale flexibilities across regimes were modest in most cases. The results suggest that decreases in marginal valuations for most fats and oils in response to consumption increases are rather small. Scale flexibilities are relatively close to –1, suggesting near homothetic preferences for fats and oils.

Keywords

fats and oilsinverse demand systemstructural changeQOD1
Type
Articles
Information
Journal of Agricultural and Applied Economics , Volume 35 , Issue 1 , April 2003 , pp. 171 - 184
Copyright
Copyright © Southern Agricultural Economics Association 2003

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