6.1.5.2. Demand: Fiscal Policy
Demand for livestock is primarily a function of consumer taste and the amount of product on the market. Because it cannot be stored, livestock is a price taker, not a price maker. It must accept whatever price is needed to clear the market. The market will determine the price where supply and demand become equal.
This condition is complicated by the fact that different kinds of livestock can substitute for one another. When the price of poultry is cheap relative to cattle, demand for chicken will increase and demand for beef will decline.
But consumer tastes are not dictated by price alone. When domestic beef production fell due to health concerns about the consumption of red meat, the demand for chicken and fish largely picked up the slack, while hog production remained relatively stable. Internationally, beef exports have increased due to higher income levels in Mexico and Asia. Exports account for about 11% of the demand for beef in the U.S.
Seasonality of demand is another factor in the demand for beef and pork. The demand for both is at its highest during the spring-early summer barbecue season and at its lowest in the late summer months. Population growth, disposable income, and inflation are also factors in determining the size of demand.
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Fundamental Analysis |
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Supply Factors |
Demand Factors |
Government Policy |
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Current inventories |
Population size |
Fiscal policy |
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Cost of production |
Consumer tastes |
Public spending |
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Expected production |
Disposable income |
Taxation |
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Imports |
Exports |
M |