Fed and Non-fed Cattle Production Returns in Relation to Trade Flow

Abstract

Percentage returns to operating capital in fed and non-fed cattle budgets for the production countries of the United States, Canada, Mexico, New Zealand, Australia, and Argentina are compiled in an effort to compare (on a percentage basis) the competitive advantage that may exist in specific production countries. The primary interest is in the production of non-fed beef, theorizing that there is need for the United States to import non-fed, lower value, beef products due to the returns available for the United States' fed beef production. A linear programming model is developed using percentage returns, and transportation costs, in the maximization of the objective function, maximizing the returns to all production countries, satisfying consumption with in production capabilities. Constraints considered are the production and consumption parameters for each production country respectively, assumptions included for the analysis of fed and non-fed beef independently. Model results indicate the most advantageous production regions and trade flows given a competitive comparison based on returns to capital. It is evident that the United States is most efficient at producing fed beef, and importing non-fed beef to satisfy demand. New Zealand is dominantly efficient at producing non-fed beef. The greater the increase in production capacity, the more efficient trade flow becomes. Government intervention is theorized to affect trade flow efficiency. Further research is needed to separate governmental impacts.