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The Taiwanese Livestock and Feedgrain Markets and Policies Iowa State University Capstones, Theses and Retrospective Theses and Dissertations Dissertations 1988 The aiT wanese livestock and feedgrain markets and policies Shang-Chi Gong Iowa State University Follow this and additional works at: https://lib.dr.iastate.edu/rtd Part of the Agricultural and Resource Economics Commons, and the Agricultural Economics Commons Recommended Citation Gong, Shang-Chi, "The aiwT anese livestock and feedgrain markets and policies " (1988). Retrospective Theses and Dissertations. 8846. https://lib.dr.iastate.edu/rtd/8846 This Dissertation is brought to you for free and open access by the Iowa State University Capstones, Theses and Dissertations at Iowa State University Digital Repository. It has been accepted for inclusion in Retrospective Theses and Dissertations by an authorized administrator of Iowa State University Digital Repository. For more information, please contact [email protected]. INFORMATION TO USERS The most advanced technology has been used to photo­ graph and reproduce this manuscript from the microfilm master. UMI films the text directly from the original or copy submitted. Thus, some thesis and dissertation copies are in typewriter face, while others may be from any type of computer printer. The quality of this reproduction is dependent upon the quality of the copy submitted. Broken or indistinct print, colored or poor quality illustrations and photographs, print bleedthrough, substandard margins, and improper alignment can adversely affect reproduction. In the unlikely event that the author did not send UMI a complete manuscript and there are missing pages, these will be noted. Also, if unauthorized copyright material had to be removed, a note will indicate the deletion. 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University Microfilms International A Bell & Howell Information Company 300 North Zeeb Road, Ann Arbor, Ml 48106-1346 USA 313/761-4700 800/521-0600 Order Number 8909147 The Taiwanese livestock and feedgrain markets and policies Gong, Shang-Chi, Ph.D. Iowa State University, 1988 UMI aOON.ZeebRd. Ann Arbor, MI 48106 The Taiwanese livestock and feedgrain markets and policies by Shang-Chi Gong A Dissertation Submitted to the Graduate Faculty in Partial Fulfillment of the Requirements for the Degree of DOCTOR OF PHILOSOPHY Major; Economics Approved Signature was redacted for privacy. In uharge o/ Major Work Signature was redacted for privacy. -or the Major Departme Signature was redacted for privacy. F he Graduate College Iowa State University Ames, Iowa 1988 ii TABLE OF CONTENTS Page CHAPTER I. INTRODUCTION 1 Problem Statement S Literature Review 4 Objectives 11 CHAPTER II. THE TAIWANESE LIVESTOCK INDUSTRY: ECONOMIC STRUCTURE AND POLICY INTERVENTIONS 13 Introduction 13 Hog and Pork Industry 13 Hog Production 15 Hog Production Costs 15 Production Scale 16 Hog Marketing and Slaughter 16 Demand for Pork 21 Pork Exports 21 Hog and Pork Policies 24 Cattle and Beef Industry 26 Beef Cattle Supply 27 Dairy Cattle Supply 27 Dairy and Beef Cattle Production Costs 30 Beef Marketing and Slaughter 30 Beef Imports 32 Demand for Beef 35 Cattle and Beef Policies 35 Chicken and Chicken Meat Industry 37 Chicken Production 37 Chicken Marketing and Slaughter 38 Demand for Chicken Meat 42 Chicken Policies 43 CHPATER III. CONCEPTUAL FRAMEWORK 44 Graphical Presentation of the Conceptual Framework 44 iii Cattle and Beef Sector 45 Hog and Pork Sector 49 Chicken and Chicken Meat Sector 51 Feed Sector 53 Diagrammatic Presentation of the Model 54 Mathematical Presentation of the Conceptual Framework 62 Cattle and Beef Sector Block 63 Hog and Pork Sector Block 81 Chicken and Chicken Meat Sector Block 82 Corn Sector Block 84 Soybean Sector Block 85 Estimation Techniques 86 CHAPTER IV. EMPIRICAL ANALYSES MMD MODEL VALIDATION 91 Cattle and Beef Sector 91 Hog and Pork Sector 115 Chicken and Chicken Meat Sector 117 Corn Sector 119 Soybean Sector ISO Model Validation 125 CHAPTER V. SIMULATION ANALYSES OF ALTERNATIVE POLICIES 129 Dynamic Effects of An Increase in the Import Price of Beef 130 Short-Run and Long-Run Effects 135 Dynamic Effects of An Increase in Pork Exports 136 Effects on the Hog and Pork Sector 137 Effects on Cattle and Chicken Sectors 137 Effects on the Feed Sector 142 Alternative Beef Import Quota Policies 143 Baqp Ai Beef Import Quota at the 1971 Level 143 iv Case B: Revocation of the Special Lower Tariff on U.S. Beef Imports 170 Case C: A Zero Tariff on U.S. Beef Imports 170 Alternative Pork Export Policy 171 Case 0: An Embargo on Exports of Pork 171 Dynamic Effects of An Increase in Imported Feed Prices 173 Cas* E: A Ten-Percent Sustained Increase in the U.S. Export Price of Corn 174 Case F: A Ten-Percent Sustained Increase in the U.S. Export Price of Soybeans 176 Conclusions 177 CHAPTER VI. CONCLUSIONS AND SUGGESTIONS FOR FURTHER RESEARCH 179 Summary and Conclusions 179 Suggestions for Further Research 183 BIBLIOGRAPHY 186 ACKNOWLEDGEMENTS 190 1 CHAPTER I. INTRODUCTION Rapid economic growth and an increasing population since the 1960s have led to a significant structural change in food consumption and pro­ duction in Taiwan. As incomes have increased, Taiwanese food consumption has increasingly shifted toward animal protein and away from cereal prod­ ucts. Pork is the most important among meats consumed in Taiwan. Never­ theless, poultry meat consumption has been growing dramatically. Cul­ tural and religious prohibitions have slowed the growth of beef and dairy consumption. To meet the growing demand for meat, specialized, large- scale livestock farms have been introduced to reduce production costs and boost profits. To foster development of the cattle industry, the Taiwanese government has provided production subsidies to beef producers and has implemented a number of programs to improve the quantity and qual­ ity of live animals. This strategy, however, contrasts sharply with the extensive import supply controls and price stabilization scheme adopted by the Japanese to support their cattle producers. To balance domestic pork demand and supply and stabilize the domestic pork price, the govern­ ment frequently restricts pork exports. The poultry industry is rela­ tively free of government controls. Problem Statement Government intervention in livestock markets has become a contro­ versial issue in Taiwan. Opponents charge that the policy of restricting pork export whenever the government deems the action necessary has led to a drop in pork prices on Taiwan over time, benefiting pork consumers but 2 cutting deeply into the profitability of hog production. Consequently, there is growing pressure to liberalize pork exports. Similarly, opponents contend that the large imports of frozen beef, subsidized by the Australian government, that have been dumped into Taiwan since 1975, have led to a sharp decline in the domestic price of beef and in cattle inventories. Taiwanese cattle producers have requested that the government impose restrictions on beef imports such as a quota or an import surcharge. Recently, a large trade deficit has been an important economic and political issue in the United States. Taiwan enjoys an enormous trade surplus of about $17 billion (1987) with the United States. As one remedv to reduce this trade imbalance between the U.S. and Taiwan, the U.S. government has applied a great deal of pressure on Taiwan to reduce the import tariff rate for U.S. beef. Since 1900, the tariff of beef imoorts from U.S. has been subject to a special tariff (NT $23.B/kg) which is lower than that from other countries such as Australia and New Zealand (NT $30/kq). The Taiwanese government has proposed that a free trade area between the U.S. and Taiwan be created. If adapted, this prooosal \ could completely eliminate this tariff on U.S. beef and significantly increase the competitiveness of U.S. beef in Taiwan. Owing to the scarce domestic production and the large demand for corn and soybeans, Taiwan relies heavily on corn and soybean imports to meet the livestock feed requirements. Imports have accounted for about 85-95 percent of feedgrain use in Taiwan since 1980. Because more than 90 percent of all corn and soybeans are used as feed in the chicken. 3 hog, and dairy industries, those farmers are particularly concerned about the reliability of import supplies and the levels of import prices of corn and soybeans. These issues raise a number of important questions: 1) If the government imposed a beef import quota in response to growing pressure, how would the farm prices of cattle, the retail price of beef, and beef production and consumption be affected? What effect would such a policy have on the pork and poultry industries in Taiwan? 2) How much of an advantage does the special lower import tariff provided to U.S. beef imports? 3) If a free trade region between the U.S. and Taiwan was estab­ lished, how would the U.S., New Zealand, and Australia market shares and beef imports be affected? 4) To what extent has the pork export restriction policy affected the farm price of hogs, the retail price of pork, and pork production and consumption? 5) If the U.S. embargoed its exports of feedgrain leading to a significant rise in the Taiwanese prices of corn and soybeans, how would the corn, soybean, and livestock industries of Taiwan be affected? The focus of this study is on the evaluation of the answers to these and other questions related to the feed-livestock industry of Taiwan.
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