Beef Supply Response Under Uncertainty: An Autoregressive Distributed Lag Model

Abstract

This is the first econometric study of dynamic beef supply response to incorporate risk aversion or, more specifically, price variance. Autoregressive distributed lag (ADL) models are estimated for cow-calf and feedlot operations using aggregate data for Alberta. In all cases, output price variance has a negative impact on output supply and investment. Moreover, the impacts of expected price on supply response are greater in magnitude and significance than in risk-neutral models.