Economic relationships within the Japanese feed and livestock sector

Abstract

In analysing New Zealand's problems of access to Japanese markets for livestock products, there has been considerable discussion about alternative import policies. Attempts to analyse alternative Japanese policies, which could improve welfare for Japanese producers and consumers, while at the same time increasing access for New Zealand products, have been dependent on understanding the interactions which exist within the Japanese livestock sectors. The aim of this study is to provide estimates of some of the quantitative information which is necessary to analyse these problems. The study develops a twenty-three equation econometric model which measures the interactions between the supply and demand for beef and dairy products, and the associated impacts on the feed grain sector in Japan. The production and consumption of livestock products is seen to be influenced to a marked extent by policy variables which are under control of the Japanese Government, or quasi governmental institutions. These variables influence both the price and level of imports of beef and dairy products, and are seen to play a major role in these markets. As might be expected, the short-run implications of changes in the policy variables are often relatively small, but longer responses appear to be more diverse and complex. The model clearly demonstrates the implications of following a policy which attempts to increase domestic prices. It is shown that for both beef and dairy products, a policy of increasing price support in an attempt to increase producer incomes, would cause production to expand and prices to fall. The long-run outcome of such changes is shown to be an increase in stocks and the termination of imports. Policies which liberalise the imports of products were shown to have beneficial impacts for New Zealand exports, but these effects appear to differ between the products. In general, the results showed that with liberalisation New Zealand's share of the import market would increase relative to Australia's, but it must be remembered that in some cases New Zealand's share of the market is substantially lower than that of Australia, the major competitor for New Zealand's livestock products. In the case of beef imports, and to a lesser extent dairy imports, the model has identified the trade-offs which exist in Japan between the imports of finished products and livestock feeds. These trade-offs are important in any analysis of food security for self-sufficiency in Japan.