The econometric estimation of the domestic demand for broiler meat in South Africa(1971-2012)

Abstract

The aim of the study was to estimate the future demand for broiler meat in South Africa. The first objective of the study was to identify factors that affect the demand of broiler meat. The second objective of the study was to determine whether the variation in specific economic factors have a significant effect on the quantity of broiler meat demanded in South Africa. The third objective of the study was to determine whether the variation in joint economic factors have a significant effect on the quantity of broiler meat demanded in South Africa. The data used in the study were obtained from Department of Agriculture, Forestry and Fisheries under Directorate Agricultural Statistics and Economic Analysis. Log-log model was used on historical time series data starting from 1971 to 2012 to estimate the demand of broiler meat in South Africa. Data were further categorized into two periods; that is; 1971 to 1995 and 1996 to 2012, to check the effect of policy changes on the demand for broiler meat which is the deregulation of agricultural markets. The results of the study revealed that the main determinants of broiler meat demand include price of broiler meat, price of beef, price of pork, price of mutton and the level of income. The regression results for the period 1971 to 1995 reveals that broiler meat demand was inelastic with respect to price of broiler meat. The results of the study further revealed that beef, mutton and pork are the substitutes of broiler meat and they have significant effect on the demand for broiler meat. The regression results for the period 1996 to 2012 indicated that all the factors have significant effect on the demand for broiler meat with the exception of mutton price. The results further indicated that short-run price elasticity of demand ranged from 0.531 to 0.932 and long-run demand elasticities ranged from 0.695 to 1.73 for the period between 1971 and 1995. This implied that broiler consumers were more responsive to price changes in the long-run. In addition, price elasticity of demand ranged from 0.152 to 0.190 in the short-run for the period between 1996 and 2012, while in the long-run the elasticities ranged from 0.530 to 1.05 signifying that behavioral adaptation plays a significant role on the changes of price. Income elasticity in both short and long-run stood at 8.631 and 8.394 respectively for the period between 1971 and 1995. On the other hand, for the period between 1996 and 2012 it stood at 1.787 in the short run and 2.755 in the long-run. This signifies that income had a greater effect on the demand for broiler meat for both periods. However, the effect was even greater for the period between (1971 and 1995) implying that the effect of income on broiler meat demand is fading away today in South Africa. This may further imply that in the future broiler meat in South Africa will be considered as an inferior good. It is on the basis of these results that the study recommends that more research be undertaken in order to understand the nature of broiler meat industry in South Africa before any policy development is made. The study for the time being, also recommends that the Department of Agriculture provide a policy instrument such as subsidies on animal feeds, purposefully to encourage more farmers in broiler production. This recommendation will increase production in pursue to respond to the high demand for broiler meat in the country.