Estimation of Beef Supply and Demand in Peninsular Malaysia: An Application of Cointegration and Error Correction Model Techniques

Abstract

This study estimates a complete system of supply-demand equations and analyzes the effects of income and price changes on demand, age of animal, technology, and quantity of imported beef on local beef production. The cointegration and error correction model techniques were applied to the analysis of beef supply and demand in Peninsular Malaysia. Results indicated positive and significant supply response of price for each category of female cattle and buffalo age cohort. However, female cattle over 3 years of age were significant decision variables on the number of cattle (buffalo) to be slaughtered for beef production. On the demand side, expenditure and price of competing meats were the main factors that affected the quantity of beef consumed. The number of breeding cattle/buffalo should be increased through imports to retain a higher number of female calves and to improve the local beef cattle population.

KEYWORDS:

• beef
• meat
• supply and demand
• LAIDS
• VECM
• elasticity
• Peninsular Malaysia

Notes

Source. Ministry of Agriculture and Agro-Based Industry (2008).

Source. Ministry of Agriculture and Agro-Based Industry (2004).

Note. ADF = Augmented Dickey-Fuller; PP = Phillip-Perron; KPSS = Kwiatkowski, Phillips, Schmidt, & Shin; TMCM3 = total male beef animal (cattle and buffalo) more than 3 years; TMCL3 = total male beef animal (cattle and buffalo) less than 3 years, TFCM3 = total female beef animal (cattle and buffalo) more than 3 years; TFCL3 = total female beef animal (cattle and buffalo) less than 3 years; TNCI = total number of cattle and buffalo imported; TNCSL = total number of cattle and buffalo slaughtered; IMB = total beef imported.

*5% of significance level of ADF, PP, and KPSS are −2.945842, −2.933158, and 0.463000, respectively.

**10% significance.

Note. ADF = Augmented Dickey-Fuller; PP = Phillip-Perron; KPSS = Kwiatkowski, Phillips, Schmidt, & Shin; P₁, P₂, P₃, P₄, and P₅ = retail prices of beef, mutton, pork, chicken, and fish, respectively; S₁, S₂, S₃, S₄, and S₅ = are share of expenditure of beef, mutton, pork, chicken, and fish, respectively.

*5% of significance level of ADF, PP, and KPSS are −2.945842, −2.93315, and 0.463000, respectively.

*Denotes rejection of the hypothesis at the .05 level. **MacKinnon, Haug, and Michelis (1999) p values.

*Denotes rejection of the hypothesis at the .05 level. **MacKinnon, Haug, and Michelis (1999) p values.

Note. p value in parentheses.

*are 1% and 5% significance levels.

Note. Estimated standard errors are reported in parentheses. ECM = Error Correction Model.

*Significant at 5%.

*Significant at 5%. **Significant at 10%.

Additional information

Notes on contributors

Ismail Abd. Latif

Ismail Abd. Latif is a senior lecturer in the Department of Agribusiness and Information Systems, Faculty of Agriculture, Universiti Putra Malaysia.

Zainalabidin Mohamed

Zainalabidin Mohamed is a professor in the Department of Agribusiness and Information Systems, Faculty of Agriculture, Universiti Putra Malaysia.

Abdullahi Farah Ahmed

Abdullahi Farah Ahmed is a lecturer in the Department of Agribusiness and Information Systems, Faculty of Agriculture, Universiti Putra Malaysia.

Mad Nasir Shamsudin

Mad Nasir Shamsudin is a professor of Agricultural and Resource Economics at Universiti Putra Malaysia.