Livestock Supply Response in South Africa: An Investigation of Producer Price and Technology Dynamics

Abstract

Livestock supply in South Africa is examined using an error correction model with a polynomial lag formulation applied to determine price and technology dynamics. Data from 1947 to 1995 were used for the analysis. Time series properties of the data were tested and short and long run elasticities were derived for variables influencing livestock supply. An average total lag effect on livestock output of 7 years was derived with respect to real livestock producer prices and 15 years with respect to livestock research and development expenditures. These results suggest that reductions in research expenditures will have a significant negative long run effect on output. Correcting for the decline in output, with a subsequent increase in research expenditures, will take several years to achieve due to the lagged effects, with a potential of 15 years of lost growth. An inelastic response to livestock prices was derived for both the short and the long run.