Forecasting Meat Prices: An Inverse Demand Approach

In Agriculture, there is a lag between planting decision and supplying the produced commodity to the market. This makes the marketed commodities as predetermined variables and prices as market clearing factor. Under such a condition, the inverse demand function in which price is a function of quantity is an appropriate tool for forecasting price responses to the injected quantities to the market. In this study, a system of prices equations is estimated for three meat commodities namely; beef, lamb, and broiler, using time series data over period 1985-2006. Results of the estimated own-quantity elasticities (price flexibilities), indicate that a one percent increase in quantities of each of these meats, injected to the market, will cause, a decrease of 0.86, 0.76, and 1.03 percent, respectively, of the prices of beef, lamb, and broiler. The estimated cross-quantity elasticities revealed that beef and lambs are not good substitutes for the broiler. Thus, it is not expected to notice a considerable decline in the price of the latter commodity by injecting more beef and lambs to the market.