The Market for US Livestock Feed Proteins

Parameters that characterize markets for livestock feed ingredients and inform an increasing array of policies motivated by a range of environmental, market, and animal disease issues are largely absent from the literature, which necessitates the use of often misleading assumptions in analyses of proposed feed-market policies. Such parameters are derived here from a theoretically consistent, dual translog cost model of U.S. protein and energy feed markets. Own-price elasticities ranged from a relatively inelastic 0.139 for feedgrains to a relatively elastic 0.568 for meat and bone meal (MBM). The cross elasticity for ethanol co-products and oilseed meals (0.168) is larger than the elasticity with co-products and feedgrains (0.024). Higher prices for protein feeds likely result in some substitution of feed grains for some protein (e.g. corn by oilseed meals 0.125), which may also partially account for the relatively small feedgrains cross elasticity. Policies implemented as a result of bovine splongiform encephalopathy adversely affected the share of total costs attributed to MBM, but had a positive effect on oilseed meal cost share.