UBC Theses and Dissertations

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UBC Theses and Dissertations

A simulation analysis of alternative stabilization schemes for British Columbia beef producers Tang, Yan Sing 1981

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SIMULATION ANALYSIS OF A L T E R N A T I V E S T A B I L I Z A T I O N SCHEMES FOR B R I T I S H COLUMBIA BEEF PRODUCERS by YAN SING|TANG B. S c . , N a t i o n a l C h u n g H s i n g U n i v e r s i t y , 1977 A T H E S I S SUBMITTED IN P A R T I A L FUFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF THE FACULTY OF GRADUATE STUDIES DEPARTMENT OF AGRICULTURAL ECONOMICS We a c c e p t t h i s t h e s i s a s c o n f o r m i n g t o t h e r e q u i r e d s t a n d a r d THE U N I V E R S I T Y OF B R I T I S H COLUMBIA MASTER OF S C I E N C E i n A p r i l 1981 TANG, 1981 In p r e s e n t i n g t h i s t h e s i s i n p a r t i a l f u l f i l m e n t o f the requirements f o r an advanced degree a t the U n i v e r s i t y of B r i t i s h Columbia, I agree t h a t the L i b r a r y s h a l l make i t f r e e l y a v a i l a b l e f o r r e f e r e n c e and study. I f u r t h e r agree t h a t p e r m i s s i o n f o r e x t e n s i v e copying of t h i s t h e s i s f o r s c h o l a r l y purposes may be granted by the head o f my department o r by h i s o r her r e p r e s e n t a t i v e s . I t i s understood t h a t c o p y i n g or p u b l i c a t i o n o f t h i s t h e s i s f o r f i n a n c i a l g a i n s h a l l n ot be al l o w e d without my w r i t t e n p e r m i s s i o n . Department of The U n i v e r s i t y of B r i t i s h Columbia 2075 Wesbrook P l a c e Vancouver, Canada V6T 1W5 DF-fi (2/79) ABSTRACT B r i t i s h C o l u m b i a B e e f P r o d u c e r s ' Income A s s u r a n c e P r o g r a m ( F I A P ) was i m p l e m e n t e d i n 1974 t o t r y t o a l l e v i a t e t h e income i n s t a b i l i t y p r o b l e m f a c i n g B.C. b e e f p r o d u c e r s . The o b j e c t i v e o f t h i s s t u d y was t o e s t i m a t e t h e c o s t s a n d e f f e c t s o f F I A P and a l t e r n a t i v e s t a b i l i z a t i o n schemes i n m e e t i n g some l i k e l y p r o v i n c i a l g o v e r n m e n t g o a l s f o r t h e B.C. b e e f i n d u s t r y . Due t o a l a c k o f k n o w l e d g e o f p o l i c y m a k e r s ' o b j e c t i v e s , s i m u l a t i o n was c h o s e n b e c a u s e i t i s a r e l a t i v e l y c o n v e n i e n t r e s e a r c h t e c h n i q u e f o r s t u d y i n g a n o n - o p t i m i z i n g p r o b l e m . S i m u l a t i o n c a n t r a c e o u t t h e l i k e l y i m p a c t s o f a l t e r n a t i v e s c hemes, w i t h o u t p u t t i n g them i n t o p r a c t i s e . A m a t h e m a t i c a l m o del was b u i l t t o i n c o r p o r a t e t h e m a j o r f e a t u r e s o f t h e B.C. b e e f i n d u s t r y , i n a c c o r d w i t h r e l e v a n t t h e o r y , e x p e r i e n c e and i n d u s t r y k n o w l e d g e . A s e t o f p r o d u c t i o n a s s u m p t i o n s and a l t e r n a t i v e schemes d e s i g n e d t o s t a b i l i z e b e e f p r o d u c e r income were a l s o i n c o r p o r a t e d i n t o t h e m o d e l . L a t e r t h e m a t h e m a t i c a l model was t r a n s l a t e d f o r u s e on t h e c o m p u t e r . The model was v a l i d a t e d w i t h h i s t o r i c a l p r o d u c t i o n d a t a o v e r t h e p e r i o d 1 9 5 9 - 1 9 7 8 , t o e n s u r e t h a t i t was a v a l i d r e p r e s e n t a t i o n of t h e r e a l w o r l d s y s t e m . The m o del was i n i t i a l l y r u n w i t h o u t g o v e r n m e n t i n t e r v e n t i o n . Then i t was r u n f o r e a c h o f t h e a l t e r n a t i v e income s t a b i l i z a t i o n schemes t o e s t i m a t e t h e l i k e l y i m p a c t s o f e a c h scheme. The c o s t a n d e f f e c t s f o r d i f f e r e n t schemes were i i i a l s o compared t o show the r e l a t i v e e f f e c t i v e n e s s of each scheme. The impacts of d i f f e r e n t schemes were shown by a s e t of summary measures t h a t were thought t o be of most i n t e r e s t t o p o l i c y makers. Net w e l f a r e changes were a l s o e s t i m a t e d and i n c l u d e d i n the summary measures. The e s t i m a t e d r e s u l t s show t h a t FIAP and the o t h e r s t a b i l i z a t i o n schemes c o n s i d e r e d would be c a p a b l e of a c h i e v i n g a g o a l of income i n s t a b i l i t y , when compared t o the "no scheme" s i t u a t i o n . From the government p o i n t of view, the guaranteed p r i c e scheme was shown t o be most e f f e c t i v e i n both r a i s i n g beef producer g r o s s revenue and r e d u c i n g income v a r i a b i l i t y . FIAP, as i t e x i s t e d i n 1977, o f f e r r e d the g r e a t e s t net pr o d u c e r r e c e i p t s t o B.C. beef p r o d u c e r s . iv TABLE OF CONTENTS ABSTRACT i i TABLE OF CONTENTS i v LIST OF TABLES ix LIST OF FIGURES x ACKNOWLEDGEMENTS ; x i CHAPTER I INTRODUCTION 1 1.1' The Beef Industry i n B r i t i s h Columbia 1 1.2 I n s t a b i l i t y of Beef Producer Income 1 1.3 O b j e c t i v e s of the Study 3 1.4 Th e s i s Guide 4 CHAPTER II METHODOLOGY 5 2.1 Sim u l a t i o n 5 2.1.1 Programming Approach 5 2.1.2 System Approach 6 2.2 J u s t i f i c a t i o n f o r Using S i m u l a t i o n 6 2.3 Methodology of Si m u l a t i o n 7 2.3.1 Formulation of the Problem 7 2.3.2 Formulation of a Mathematical Model 7 2.3.3 Formulation of a Computer Program 9 2.3.4 Model V a l i d a t i o n 9 2.3.5 Model Experimentation 9 2.3.6 I n t e r p e r a t i o n of R e s u l t s 10 V CHAPTER III CURRENT AND ALTERNATIVE BEEF PRODUCER INCOME STABILIZATION PROGRAMS 11 3.1 A g r i c u l t u r a l S t a b i l i z a t i o n Act 12 3.2 B r i t i s h Columbia Beef Producers' Income Assurance Program, FIAP(1977) 13 3.3 A l t e r n a t i v e Schemes 15 3.3.1 New Farm Income Assurance Program, FIAP(1980) 15 3.3.2 Premium/Subsidy Scheme 16 3.3.3 H e i f e r Retention Subsidy Scheme 16 3.3.4 Guaranteed P r i c e Scheme 17 3.4 Data Used 18 3.4.1 Cost Data 18 3.4.1.1 Cow-Calf Cost 19 3.4.1.2 Y e a r l i n g Cost 24 3.4.2 Beef P r i c e Data 27 3.4.3 Beef Production Data 28 CHAPTER IV THE MATHEMATICAL MODEL 32 4.1 Beef Production Assumptions For B r i t i s h Columbia 32 4.1.1 D e c i s i o n s Not I n f l u e n c e d By Government S t a b i l i z a t i o n Programs 32 4.1.2 D e c i s i o n s I n f l u e n c e d By Government S t a b i l i z a t i o n Programs 36 4.1.2.1 C a l f L e v e l 36 4.1.2.2 Y e a r l i n g L e v e l 36 v i 4.2 The Model 38 4.2.1 E q u i l i b r i u m Module 39 4.2.2 Farmer Production D e c i s i o n Module 40 4.2.2.1 B e h a v i o r a l Equations 41 4.2.2.1.1 H e i f e r Retention 42 4.2.2.1.2 Holdover Response 46 4.2.2.1.2.1 C a l f Holdovers 46 4.2.2.1.2.2 Y e a r l i n g Holdovers 48 4.2.2.1.2.3 Slaughter Animal Holdovers 52 4.2.2.2 Flow R e l a t i o n s h i p s and Accounting I d e n t i t i e s 53 4.2.2.2.1 C o n s t r a i n t s on H e i f e r Retention 54 4.2.2.2.2 C o n s t r a i n t s on C a l f Holdovers 55 4.2.2.2.3 C o n s t r a i n t s on Y e a r l i n g Holdovers 55 4.2.2.2.4 C o n s t r a i n t on Slaughter Animal Holdovers ... 56 4.2.2.2.5 Output Change of Calves From A d d i t i o n a l H e i f e r s Retained 57 4.2.2.2.6 Market Supply of Beef Calves 58 4.2.2.2.7 Market Supply of Y e a r l i n g s And C a l f - y e a r l i n g s 59 4.2.2.2.8 Market Supply of Slaughters 60 4.2.2.3 Market I d e n t i t i e s 60 4.2.3 Government Program Module 61 4.2.3.1 B r i t i s h Columbia Beef Producers' Income Assurance Program 61 4.2.3.1.1 Premium C a l c u l a t i o n 63 4.2.3.2 Premium/Subsidy Scheme 64 4.2.3.3 Guaranteed P r i c e Scheme 66 v i i 4.2.4 Summary M e a s u r e M o d u l e 67 4.2.4.1 Summary M e a s u r e s C o m p u t a t i o n 70 4.2.4.2 T o t a l G o v e r n m e n t C o n t r i b u t i o n 70 4.2.4.3 T o t a l P r o d u c e r Premium 70 4.2.4.4 Net Government Payment 71 4.3 E s t i m a t i o n o f W e l f a r e Changes 72 4.3.1 D i r e c t D i s t o r t i o n 73 4.3.2 I n d i r e c t D i s t o r t i o n 76 4.3.3 Summary on W e l f a r e Change 77 4.4 M o d e l V a l i d a t i o n 79 4.4.1 V a l i d a t i o n P r o c e d u r e 81 4.4.1.1 C h o o s i n g P a r a m e t e r V a l u e s 81 4.4.1.1.1 B e h a v i o r a l P a r a m e t e r s 81 4.4.1.1.2 T e c h n i c a l P a r a m e t e r s 82 4.4.1.1.3 P o l i c y P a r a m e t e r s 83 4.4.1.2 V a l i d a t i n g The M o d e l 85 4.4.1.2.1 The 1974-1978 P e r i o d 85 4.4.1.2.2 The 1959-1978 P e r i o d 86 4.4.2 L i m i t a t i o n s o f t h e V a l i d a t i o n P r o c e d u r e ... 89 CHAPTER V THE RESULTS 91 5.1 C o m p a r i n g E f f e c t s o f A l t e r n a t i v e S t a b i l i z a t i o n Schemes 91 5.1.1 No S t a b i l i z a t i o n Scheme 92 5.1.3 E f f e c t s o f FIAP(.1980) 100 5.1.4 E f f e c t s o f P r e m i u m / S u b s i d y Schemes 106 5.1.5 E f f e c t s o f G u a r a n t e e d P r i c e Schemes I l l v i i i 5.2 Comparative E f f e c t i v e n e s s of the A l t e r n a t i v e Income S t a b i l i z a t i o n Schemes 115 CHAPTER VI CONCLUSIONS 125 6.1 M e t h o d o l o g i c a l Aspect 125 6.2 Model R e s u l t s 126 6.2.1 L i k e l y E f f e c t s of A l t e r n a t i v e S t a b i l i z a t i o n Schemes 126 6.2.2 Comparative E f f e c t s of A l t e r n a t i v e S t a b i l i z a t i o n Schemes 128 6.3 F u r t h e r R esearch 130 LIST OF REFERENCES 132 APPENDIX 134 ix LIST OF TABLES Table 4.1 Beef P r o d u c t i o n T i m e t a b l e 35 Ta b l e 4.2 Summary Measures Used i n T h i s Study 68 Table 4.3 L i s t of V a l u e s of Parameters 84 Ta b l e 5.1 E s t i m a t e d E f f e c t s of F I A P Q 9 7 7 ) , 1959-1978 ... 99 Table 5.2 E s t i m a t e d E f f e c t s of F I A P Q 9 8 0 ) , 1959-1978 ... 105 Ta b l e 5.3 E s t i m a t e d E f f e c t s of Premium/subsidy Scheme, 1959-1978 110 Table 5.4 E s t i m a t e d E f f e c t s of Guaranteed P r i c e Scheme, 1959-1978 114 Ta b l e 5.5 E f f e c t i v e n e s s of A l t e r n a t i v e Schemes Per $1,000 Government And Producer E x p e n d i t u r e Per Year, 1959-1978 ' 120 Ta b l e 5.6 Average Net Producer R e c e i p t s Under A l t e r n a t i v e S t a b i l i z a t i o n Schemes, 1959-1978 . 124 T a b l e ' A - l . l Market P r i c e s Of C a l v e s Without Government I n t e r v e n t i o n 135 Table A-1.2 Market P r i c e s Of Y e a r l i n g s Without Government I n t e r v e n t i o n 136 Table A-2.1 T o t a l Input C o s t s On C a l f P r o d u c t i o n In B r i t i s h Columbia 137 Table A-2.2 T o t a l Input C o s t s On Y e a r l i n g P r o d u c t i o n In B r i t i s h Columbia 138 Ta b l e A-3.1 Q u a n t i t i e s Of C a l v e s Produced Without Government I n t e r v e n t i o n 139 Table A-3.2 Q u a n t i t i e s Of Y e a r l i n g s Produced Without Government I n t e r v e n t i o n 140 Ta b l e A-3.1 Q u a n t i t i e s Of C a l f - y e a r l i n g s Produced Without Government I n t e r v e n t i o n 141 X LIST OF FIGURES Fi g u r e 4.1 Rate of D a i l y Weight Gain . In Beef Production 34 F i g u r e 4.2 Welfare Changes Due to D i r e c t D i s t o r t i o n 73 F i g u r e 4.3 Welfare Changes Due to I n d i r e c t D i s t o r t i o n , With Non-price E f f e c t .... 75 x i ACKNOWLEDGEMENTS I would l i k e to thank my a d v i s o r , Dr. George Kennedy f o r h i s encourgements and supports throughout my research work. I a l s o want to thank Dr. Rick B a r i c h e l l o , Dr. John Graham, and Dr. Malcom T a i t for being the members of my t h e s i s committee and provided with p r e c i o u s s u g g e s t i o n s . L a s t , but not the l e a s t , I would l i k e to send my a p p r e c i a t i o n to C a r o l , Frances, and Cheng fo r t h e i r h e l p on the t y p i n g . 1 CHAPTER I INTRODUCTION 1.1 The B e e f I n d u s t r y i n B r i t i s h C o l u m b i a B e e f p r o d u c t i o n i s one o f t h e most i m p o r t a n t a g r i c u l t u r a l a c t i v i t i e s i n B.C. I n 1978, i t r e p r e s e n t e d 15 p e r c e n t of t h e t o t a l f a r m c a s h r e c e i p t s i n B.C., a n d 25.4 p e r c e n t o f c a s h r e v e n u e s d e r i v e d f r o m t h e s a l e o f l i v e s t o c k and l i v e s t o c k p r o d u c t s , b e i n g s e c o n d o n l y t o t h a t f r o m d a i r y p r o d u c t s ( S t a t i c t i c s C a n a d a , Farm C a s h R e c e i p t s ) . B e e f c o n s u m p t i o n i n B.C. h a s i n c r e a s e d f r o m 75 pounds p e r c a p i t a i n t h e e a r l y 1 960's t o j u s t o v e r 100 p o u n ds i n 1977 (B.C. M i n i s t r y of A g r i c u l t u r e , B e e f C a t t l e I n d u s t r y i n B r i t i s h C o l u m b i a ) . H owever, o u t o f t h e t o t a l c o n s u m p t i o n of 266.2 m i l l i o n pounds i n 1 9 7 8 , o n l y 88.3 m i l l i o n p ounds were p r o d u c e d i n B.C. The low s u p p l y r a t e ( 3 3 . 2 % ) s u g g e s t s a p o t e n t i a l t o i n c r e a s e p r o v i n c i a l p r o d u c t i o n t o more c l o s e l y meet e x p a n d i n g demand. 1.2 I n s t a b i l i t y o f B e e f P r o d u c e r Income I n a d d i t i o n t o s t o c h a s t i c v a r i a t i o n i n s u p p l y , due t o w e a t h e r , d i s e a s e , and t a r i f f r e g u l a t i o n , t h e income l e v e l s o f b e e f p r o d u c e r s a r e h i g h l y a f f e c t e d by t h e i n s t a b i l i t y o f b o t h p r o d u c t p r i c e s and i n p u t p r i c e s . P r o d u c t p r i c e s f o r B.C. b e e f p r o d u c e r s have v a r i e d w i d e l y o v e r t h e l a s t d e c a d e . F e e d e r y e a r l i n g p r i c e s ( a v e r a g e f e e d e r h e i f e r s o f 700 l b s . a n d f e e d e r s t e e r s o f 700-800 l b s . , C a l g a r y ) h a v e f l u c t u a t e d f r o m $32.57 p e r c w t . i n O c t o b e r 1971 t o $50.66 i n O c t o b e r 1 9 7 3 , down t o $31.68 2 i n O c t o b e r 1976, and up a g a i n t o $70.56 i n O c t o b e r 1978. C a l f p r i c e s ( a v e r a g e s t e e r c a l v e s l e s s t h a n 400 l b s . , s t e e r c a l v e s o f 400-500 l b s . , h e i f e r c a l v e s o f 300-400 l b s . , and h e i f e r c a l v e s o f 400-500 l b s . , C a l g a r y ) have f l u c t u a t e d f r o m $33.09 p e r c w t . i n O c t o b e r 1970, up t o $56.46 i n O c t o b e r 1 9 7 3 , down t o $27.85 i n O c t o b e r 1975, and up a g a i n t o $83.54 i n O c t o b e r 1978 ( A g r i c u l t u r e C a n a d a , L i v e s t o c k And Meat T r a d e R e p o r t ) . I n p u t p r i c e s h ave a l s o v a r i e d i n an u p w a r d t r e n d . The f l u c t u a t i o n s i n p r o d u c t p r i c e s a n d i n p u t p r i c e s , t o g e t h e r w i t h t h e i n s t a b i l i t y i n p r o d u c t i o n ( m o s t l y due t o i t s b i o l o g i c a l c h a r a c t e r i s t i c s ) , have b r o u g h t f l u c t u a t i o n s i n t h e income l e v e l s o f B.C. b e e f p r o d u c e r s . T h i s income i n s t a b i l i t y c r e a t e s u n c e r t a i n t y f o r l o c a l b e e f p r o d u c e r s , c a u t i o n i n g any p l a n s t o e x p a n d t h e i r p r o d u c t i o n t o meet t h e c o n s u m p t i o n demand o f B r i t i s h C o l u m b i a n s . C o s t s of p r o d u c t i o n may i n c r e a s e as r e s o u r c e s a r e s h i f t e d i n a n d o u t o f p r o d u c t i o n i n r e s p o n s e t o f l u c t u a t i n g b e e f p r i c e s . " F a r m e r s may f o r e g o some o f t h e c o s t a d v a n t a g e s o f s p e c i a l i z a t i o n a s t h e y d i v e r s i f y t h e i r o p e r a t i o n s i n an a t t e m p t t o a c h i e v e a more s t a b l e income l e v e l " ( " B a c k g r o u n d t o t h e p r o p o s e d c h a n g e s i n t h e F e d e r a l S t a b i l i z a t i o n P r o g r a m " , A g r i c u l t u r e C a n a d a , F e b r u a r y 1979, p p . 1 ) . B e c a u s e of t h e u n c e r t a i n t y o f t h e b e e f m a r k e t , t h e d e v e l o p m e n t o f l o c a l b e e f i n d u s t r y may be hampered due t o s l o w n e s s i n a d o p t i o n of new t e c h n o l o g y . I n a d d i t i o n , i n s t a b i l i t y i n b e e f p r o d u c t i o n a l s o a d v e r s e l y a f f e c t s f a r m s u p p l i e r s a n d b e e f c o n s u m e r s . I n g e n e r a l , t h e b e e f i n d u s t r y i n B.C. i s i n t i m a t e l y a f f e c t e d by t h e income i n s t a b i l i t y o f b e e f 3 producers. Both f e d e r a l and p r o v i n c i a l governments have designed d i f f e r e n t income s t a b i l i z a t i o n programs to a l l e v i a t e the i n s t a b i l i t y . 1.3 O b j e c t i v e s of the Study The B r i t i s h Columbia Beef Producers' Income Assurance Program (FIAP) was implemented in 1974 as an income s t a b i l i z i n g measures. It provided s u b s i d i e s to beef producers whenever t h e i r p r o d u c t i o n c o s t s exceeded the market r e t u r n . P r i o r to implementing such an income s t a b i l i z a t i o n scheme, p o l i c y makers need a b e t t e r understanding of the c o s t s and e f f e c t s of these schemes, i n order to judge the e f f e c t i v e n e s s of a l t e r n a t i v e schemes. T h i s study attempts to provide estimates of these c o s t s and e f f e c t s . In a d d i t i o n to the FIAP, a l t e r n a t i v e and p o t e n t i a l schemes w i l l a l s o be examined. T h i s study i n v o l v e s b u i l d i n g a mathematical model for the B.C. beef i n d u s t r y , i n c l u d i n g important supply-demand r e l a t i o n s h i p s and the o p e r a t i n g c h a r a c t e r i s t i c s of a l t e r n a t i v e s t a b i l i z a t i o n schemes. In summary, the o b j e c t i v e of t h i s study i s to b u i l d and use a mathematical model to t r a c e the impacts of c u r r e n t and a l t e r n a t i v e government s t a b i l i z a t i o n schemes for B.C. beef producers i n terms of : (a) the l e v e l and v a r i a n c e of producer revenue; (b) the l e v e l and v a r i a n c e of producer income; (c) the q u a n t i t y of beef s u p p l i e d ; and (d) the c o s t s to the p r o v i n c i a l government and beef producers. 4 Gove r n m e n t i n v o l v e m e n t i n a g r i c u l t u r a l d e v e l o p m e n t h a s f r e q u e n t l y been t h e s u b j e c t o f d i s c u s s i o n a n d c r i t i c i s m . P r i c e s u p p o r t m e a s u r e s u s e d by g o v e r n m e n t s t o m a i n t a i n i n c o m e s o f p r o d u c e r s may r e d u c e t h e i r i n c e n t i v e s t o a d j u s t p r o d u c t i o n t o m a r k e t r e q u i r e m e n t s . T h i s may l e a d t o i n e f f e c t i v e n e s s by " h o l d i n g " r e s o u r c e s i n u s e s where t h e i r p r o d u c t i v i t y i s l e s s t h a n t h e i r p o t e n t i a l c a p a c i t y . T h i s p r o b l e m o f r e s o u r c e m i s a l l o c a t i o n t h a t c a n r e s u l t f r o m g o v e r n m e n t i n t e r f e r e n c e h a s been d i s c u s s e d (Drummand, A n d e r s o n and K e r r ) . I t i s o f i n t e r e s t t o know t h e w e l f a r e c h a n g e s t o t h e s o c i e t y r e s u l t i n g f r o m a l t e r n a t i v e g o v e r n m e n t schemes. E s t i m a t e s o f n e t w e l f a r e c h a n g e a r e i n c l u d e d i n t h i s s t u d y . 1.4 T h e s i s G u i d e T h i s t h e s i s i s d i v i d e d i n t o s i x c h a p t e r s . C h a p t e r I I d e s c r i b e s t h e m e t h o d o l o g i c a l a p p r o a c h a nd t h e r e a s o n s f o r c h o o s i n g s i m u l a t i o n . C h a p t e r I I I d e s c r i b e s c u r r e n t a n d a l t e r n a t i v e s t a b i l i z a t i o n schemes f o r B.C. b e e f p r o d u c e r s . C h a p t e r I V p r e s e n t s t h e m a t h e m a t i c a l model t h a t r e p r e s e n t s t h e B.C. b e e f i n d u s t r y , t o g e t h e r w i t h t h e p r o c e d u r e s t o v a l i d a t e t h e r e a l i s m o f t h e m o d e l . C h a p t e r V r e p o r t s t h e e s t i m a t e d r e s u l t s o f d i f f e r e n t schemes and t h e i r r e l e v a n c e t o income s t a b i l i z a t i o n . C h a p t e r VI p r e s e n t s t h e c o n c l u s i o n s t h a t drawn f r o m t h e s t u d y . 5 CHAPTER II METHODOLOGY The o b j e c t i v e of t h i s study i s to estimate the c o s t s and e f f e c t s of d i f f e r e n t income s t a b i l i z a t i o n schemes. This chapter w i l l d i s c u s s the reasons f o r choosing s i m u l a t i o n as the most a p p r o p r i a t e methodology. F o l l o w i n g t h a t , i t w i l l s t a t e the steps i n v o l v e d i n using s i m u l a t i o n . 2.1 S i m u l a t i o n A s i m u l a t i o n study e n t a i l s i n v e s t i g a t i n g the p r o p e r t i e s of a r e a l world system by c o n s t r u c t i n g and a n a l y z i n g an analogous but a b s t r a c t system (Manderschied). The term " s i m u l a t i o n " has a la r g e scope, but the essence of s i m u l a t i o n i s the use of a model to analyze a number of a l t e r n a t i v e s . The model used f o r s i m u l a t i o n c o u l d be based on a programming approach, or a systems approach ( S a b o u r i n ) . 2.1.1 Programming Approach L i n e a r programming and/or q u a d r a t i c programming i s widely accepted as an e f f i c i e n t way to solve an o p t i m i z a t i o n problem. Without knowing the o b j e c t i v e of p o l i c y makers, we cannot d e f i n e the o b j e c t i v e f u n c t i o n of the model. The unique and optimal s o l u t i o n given by a programming approach i s the main reason f o r i t s i n a p p r o p r i a t e n e s s f o r t h i s study, given our lack of knowledge of the o b j e c t i v e f u n c t i o n . 6 2.1.2 S y s t e m A p p r o a c h A s i m u l a t i o n m o d e l b a s e d on a s y s t e m a p p r o a c h d o e s n o t n e c e s s a r i l y s t a r t o f f w i t h any g i v e n s t r u c t u r e , b u t r a t h e r i t i s b a s e d on what e x p e r t s know a b o u t t h e s y s t e m . T h i s t y p e o f m o d e l i s more f l e x i b l e , a l l o w i n g a v a r i e t y o f income s t a b i l i z a t i o n schemes t o be e v a l u a t e d and a v a r i e t y o f r e l a t i o n s h i p s t o be i n c l u d e d . 2.2 J u s t i f i c a t i o n f o r U s i n g S i m u l a t i o n S i m u l a t i o n i s c h o s e n f o r use i n t h i s s t u d y f o r t h e f o l l o w i n g r e a s o n s : (1) Our a i m i s n o t t o d e t e r m i n e an o p t i m a l s t a b i l i z a t i o n scheme, b u t t o e s t i m a t e t h e c o s t s and e f f e c t s o f d i f f e r e n t s chemes. S i m u l a t i o n m o d e l s c a n e s t i m a t e what w o u l d happen i f a c e r t a i n scheme i s i m p l e m e n t e d w i t h o u t f i r s t p u t t i n g i t i n t o e f f e c t ( w h i c h may be e x p e n s i v e o r i m p o s s i b l e ) . (2) A s i m u l a t i o n s t u d y d e t e r m i n e s t h e c o n s e q u e n c e s o f d i f f e r e n t a s s u m p t i o n s , b u t d o e s n o t t r y t o e x p l a i n t h e c a u s e s . I t a l l o w s us t o make c o n d i t i o n a l " i f ... t h e n " s t a t e m e n t s , i . e . , i_f a g i v e n s e t o f c o n d i t i o n s h o l d s , t h e n t h e s e a r e t h e c o n s e q u e n c e s . (3 ) S i m u l a t i o n c a n show t h e p a t h o f g e t t i n g t o t h o s e c o n s e q u e n c e s w h i l e a l i n e a r p r o g r a m m i n g s o l u t i o n o n l y g i v e s an o p t i m a l s o l u t i o n w i t h o u t s h o w i n g t h e p a t h t o a c h i e v e t h i s optimum s t a t e . S i m u l a t i o n i s u s u a l l y d y n a m i c , m o v i n g t h r o u g h t i m e s t e p by s t e p , so t h a t t h e d e c i s i o n maker knows how t h e f i n a l s t a t e i s r e a c h e d by s i m p l y p r i n t i n g t h e 7 values of intermediate v a r i a b l e s . (4) S i m u l a t i o n i s f l e x i b l e , r e q u i r i n g only small adjustments to o b t a i n a d d i t i o n a l i n f o r m a t i o n without the r e f o r m u l a t i o n of the whole model. In summary, s i m u l a t i o n i s chosen because i t i s a r e l a t i v e l y convenient technique f o r studying a non-optimizing problem. 2.3 Methodology of S i m u l a t i o n Having chosen s i m u l a t i o n as an a p p r o p r i a t e technique f o r meeting the o b j e c t i v e s of t h i s study, we w i l l b r i e f l y d i s c u s s the steps i n v o l v e d . 2.3.1 Formulation of the Problem Sim u l a t i o n should begin with an e x p l i c i t statement of the o b j e c t i v e s of the s i m u l a t i o n experiment. As mentioned above, our o b j e c t i v e i s to determine the c o s t s and e f f e c t s of a l t e r n a t i v e income s t a b i l i z a t i o n schemes for B.C. beef producers. 2.3.2 Formulation of a Mathematical Model A mathematical model should be an a b s t r a c t (or s i m p l i f i e d ) v e r s i o n which r e l a t e s to the components and the v a r i b a l e s of the r e a l world. According to Naylor, a mathematical model of an economic system should c o n s i s t of three w e l l - d e f i n e d elements: components, v a r i a b l e s and f u n c t i o n a l r e l a t i o n s h i p s . 8 (1) Components are the d e c i s i o n making u n i t s . In t h i s study, they are beef producers and the p r o v i n c i a l government. (2) V a r i a b l e s are used to r e l a t e between components. The v a r i a b l e s can be c o n v e n i e n t l y c l a s s i f i e d as endogenous v a r i a b l e s , exogenous v a r i a b l e s , and p o l i c y v a r i a b l e s . Endogenous v a r i a b l e s are generated from the i n t e r a c t i o n of the system's exogenous and p o l i c y v a r i a b l e s a c c o r d i n g to the system's beha v i o u r a l equations and i d e n t i t i e s ( N a y l o r ) ; e.g. t o t a l beef producation and t o t a l net government payment. Sometimes they are termed as "output v a r i a b l e s " . Exogenous v a r i a b l e s and p o l i c y v a r i a b l e s are both independent and act as input v a r i a b l e s . Exogenous v a r i a b l e s are predetermined o u t s i d e the system, e.g. the supply e l a s t i c i t y of beef. P o l i c y v a r i b l e s are those that can be manipulated by the p o l i c y makers of the system, e.g. the support p r i c e of beef. (3) F u n c t i o n a l r e l a t i o n s h i p s a ct as li n k a g e s between components and v a r i a b l e s . They i n c l u d e i d e n t i t i e s and op e r a t i n g c h a r a c t e r i s t i c s , both d e s c r i b i n g the behaviour of the complete system. The c h o i c e of v a r i a b l e s to be i n c l u d e d i n the mathematical model i s a c r i t i c a l c o n s i d e r a t i o n . Endogenous v a r i a b l e s are u s u a l l y determined as the r e s u l t of experiments, t h e r e f o r e , not too many qu e s t i o n s w i l l a r i s e . Exogenous v a r i a b l e s and c o n t r o l l a b l e v a r i a b l e s should be c a r e f u l l y s e l e c t e d because they w i l l a f f e c t the output v a r i a b l e s . A model can u s u a l l y be made more r e a l i s t i c by i n c o r p o r a t i n g more 9 exogenous v a r i a b l e s and more u s e f u l by i n c o r p o r a t i n g more c o n t r o l l a b l e v a r i a b l e s . However, t h i s w i l l complicate the model and make i t more expensive to compute and more d i f f i c u l t to manipulate. The t r a d e o f f between s i m p l i c i t y and r e a l i s m e x i s t s . A u s e f u l model should be r e a l i s t i c , yet simple. 2.3.3 Formulation of a Computer Program T r a n s l a t i n g a mathematical model for use on the computer can e l i m i n a t e the computational burden and reduce the l i k e l i h o o d of e r r o r . The computer program used i n t h i s study was w r i t t e n i n FORTRAN IV, a general purpose language. 2.3.4 Model V a l i d a t i o n V a l i d a t i o n r e f e r s to the process of showing that the model i s a v a l i d r e p r e s e n t a t i o n of the r e a l world. Two c r u c i a l steps are i n v o l v e d : (1) a r a t i o n a l i s t step of ensuring the assumptions of the model are in accord with r e l e v a n t theory, a p r i o r i knowledge and exper i ence; (2) comparing the model performance with the r e a l system, with known h i s t o r i c a l data. 2.3.5 Model Experimentation Experimentation with the model i s employed to estimate the impacts of d i f f e r e n t -sets of exogenous v a r i a b l e s and p o l i c y v a r i a b l e s on the output v a r i a b l e s . 10 2.3.6 I n t e r p r e t a t i o n of R e s u l t s Once the r e s u l t s are obtained, they w i l l be analyzed and t h e i r u s e f u l n e s s i n t e r p r e t e d . F i n a l l y , c o n c l u s i o n s w i l l be drawn and some suggestions w i l l be made. 11 CHAPTER I I I CURRENT AND ALTERNATIVE BEEF PRODUCER INCOME STABILIZATION PROGRAMS T h i s c h a p t e r o u t l i n e s the c u r r e n t programs used t o s t a b i l i z e the incomes of B.C. beef p r o d u c e r s . I t a l s o d e s c r i b e s some a l t e r n a t i v e schemes t h a t c o u l d be used t o a c h i e v e income s t a b i l i t y . The l a t t e r p a r t of the c h a p t e r d e s c r i b e s the da t a used i n t h i s study and the pr o c e d u r e by which i t was c a l c u l a t e d . S e v e r a l mechanisms e x i t t h a t can be used to s t a b i l i z e p roducer income. Some of these measures f a l l under the j u r i s d i c t i o n of the government ( e . g . p r i c e c o n t r o l , s u p p l y management, government purchase, d e f i c i e n c y payment, e t c ' . ) , w h i l e o t h e r s ' c a n be employed by the farmers themselves (e.g. f o r w a r d c o n t r a c t i n g , c o - o p e r a t i v e m a r k e t i n g , e t c . ) . In t h e o r y , the market p r i c e of a commodity can be s t a b i l i z e d by a d j u s t i n g the q u a n t i t y s u p p l i e d . Quota systems are commonly p r a c t i s e d by a v a r i e t y of m a r k e t i n g boards i n Canadian a g r i c u l t u r a l p r o d u c t i o n . However, the B.C. beef market i s s m a l l compared t o the N o r t h American beef market i m p l y i n g B.C. p r o d u c e r s a re " p r i c e - t a k e r s " . C u r r e n t l y , no t r a d e r e s t r i c t i o n s on the f l o w of beef between the U n i t e d S t a t e s and Canada e x i s t t h a t would a l l o w e i t h e r p r i c e c o n t r o l or a quota system t o work e f f e c t i v e l y i n the B.C. beef market. D e f i c i e n c y payments have been adopted by the B.C. government t o a l l e v i a t e the problem of beef producer income i n s t a b i l i t y . By u s i n g d e f i c i e n c y payments, i t i s p o s s i b l e t o 12 m a i n t a i n a b o v e - e q u i l i b r i u m p r i c e s f o r p r o d u c e r s w h i l e p e r m i t t i n g m a r k e t p r i c e s t o be d e t e r m i n e d by t h e m a r k e t m e c h a n i s m . The g o v e r n m e n t makes up t h e d i f f e r e n c e b e t ween m a r k e t c l e a r i n g p r i c e s and t h e h i g h e r e f f e c i v e p r i c e s r e c e i v e d by f a r m e r s . A l t h o u g h t h e r e a r e s e v e r a l i n p u t s u b s i d y m e a s u r e s w h i c h B.C. b e e f p r o d u c e r s ca n b e n e f i t f r o m ( e . g . l a n d c l e a r i n g s u b s i d y , f a r m g a s o l i n e s u b s i d y , e t c . ) , t h e s e i n p u t s u b s i d i e s a r e a v a i l a b l e t o B.C. f a r m e r s i n g e n e r a l , n o t j u s t b e e f p r o d u c e r s . T h i s s t u d y w i l l p r o v i d e r e s u l t s f o r o n l y t h o s e g o v e r n m e n t schemes w h i c h i n v o l v e p r o d u c t p r i c e d e f i c i e n c y p a y m e n t s . C u r r e n t l y , two income s t a b i l i z a t i o n p r o g r a m s a r e i n o p e r a t i o n f o r B.C. b e e f p r o d u c e r s . One i s t h e F e d e r a l A g r i c u l t u r a l S t a b i l i z a t i o n A c t , a n d t h e o t h e r i s t h e B.C. B e e f P r o d u c e r s ' Income A s s u r a n c e P r o g r a m . B r i e f d e s c r i p t i o n s of b o t h p r o g r a m s a r e g i v e n b e l o w , w i t h some a l t e r n a t i v e schemes p r o p o s e d . The a l t e r n a t i v e schemes r e p r e s e n t some m o d i f i c a t i o n s o f t h e c u r r e n t p r o g r a m s . 3.1 A g r i c u l t u r a l S t a b i l i z a t i o n A c t The A g r i c u l t u r a l S t a b i l i z a t i o n A c t (A.S.A.) o f 1958 e s t a b l i s h e d a l i s t o f "named c o m m o d i t i e s " f o r w h i c h s u p p o r t was m a n d a t o r y a t a minimum of 80% o f t h e t e n y e a r m o v i n g a v e r a g e m a r k e t p r i c e . I n 1975, t h e A c t was amended and t h e f o r m u l a u s e d t o c a l c u l a t e t h e s u p p o r t p r i c e c h a n g e d t o a minimum o f 90% o f t h e n a t i o n a l m o v i n g a v e r a g e m a r k e t p r i c e o v e r t h e p r e v i o u s f i v e y e a r s , p l u s t h e d i f f e r e n c e b e t w e e n c u r r e n t n a t i o n a l a v e r a g e c o s t s o f p r o d u c t i o n and t h e n a t i o n a l m o v i n g a v e r a g e c o s t s i n t h e 13 p r e c e d i n g f i v e y e a r s . The s u p p o r t s p r i c e a r e c a l c u l a t e d e a c h y e a r and s u b s i d i e s a r e p a i d on an a n n u a l b a s i s . 3.2 B.C. B e e f P r o d u c e r s ' Income A s s u r a n c e P r o g r a m , F I A P ( 1 9 7 7 ) The B.C. Bee f P r o d u c e r s ' Income A s s u r a n c e P r o g r a m began i n J a n u a r y 1974 and e n d e d i n December 1978. The mai n f e a t u r e s of t h i s f i v e y e a r p r o g r a m c a n be s u m m a r i z e d a s f o l l o w s : A. E l i g i b i l i t y To be e l i g i b l e t h e p r o d u c e r must be a member of t h e B.C. C a t t l e m e n ' s A s s o c i a t i o n and have a minimum o f 20 b e e f b r e e d i n g cows, o r p r o d u c e a n d m a r k e t a t l e a s t 8,075 pounds o f c a l f a n d / o r y e a r l i n g a n n u a l l y . The maximum a n n u a l p a r t i c i p a t i o n i s l i m i t e d t o 121,125 pounds o f c a l f a n d / o r y e a r l i n g . S a l e s o f b e e f cows and b u l l s do n o t q u a l i f y as pounds f o r i n d e m n i t i e s . B. I n d e m n i t i e s The i n d e m n i t y r a t e i s e q u a l t o 75% o f t h e r e t u r n d e f i c i t ( i . e . t h e d i f f e r e n c e b e t ween b a s i c c o s t s o f p r o d u c t i o n and t h e a v e r a g e m a r k e t r e t u r n l e s s m a r k e t i n g c o s t s ) . I n d e m n i t i e s a r e p a i d a t t h r e e l e v e l s : (1) B e e f C a l f Pounds - f o r t h o s e b e e f a n i m a l s b o r n i n B.C. and r a i s e d f r o m b i r t h t o a l i v e w e i g h t o f 400 p o u n d s . D a i r y c a l v e s a r e n o t i n c l u d e d b e c a u s e t h e y a r e t h e p r o d u c t s o f d a i r y i n d u s t r y . (2) B e e f Y e a r l i n g Pounds - t h o s e pounds g a i n e d i n e x c e s s o f 400 pounds a nd up t o 850 p o u n d s f o r t h o s e a n i m a l s r a i s e d f r o m b i r t h by B.C. b e e f p r o d u c e r s . F o r t h o s e a n i m a l s p u r c h a s e d o u t s i d e t h e p r o v i n c e , i t i n c l u d e s t h o s e pounds g a i n e d b e t w e e n t h e g r e a t e r o f p u r c h a s e w e i g h t o r 400 14 p ounds a n d 850 pounds ( i . e . t h e y e a r l i n g p o u n d s g a i n e d i n B.C.) . (3) C a l f - Y e a r l i n g Pounds - f o r t h o s e a n i m a l s b o r n i n B.C. and r a i s e d t o s e l l a s y e a r l i n g s i n t h e f o l l o w i n g y e a r . The f i r s t 400 pounds a r e c l a s s i f i e d a s c a l f - y e a r l i n g p o u n d s . T h e i r i n d e m n i t i e s a r e e q u a l t o 75% o f t h e d i f f e r e n c e b e t w e e n t h e b a s i c c o s t s o f c a l f p r o d u c t i o n and t h e a v e r a g e y e a r l i n g m a r k e t r e t u r n l e s s m a r k e t i n g c o s t . The p r o g r a m r e g u l a t i o n s h ave s e t an u p p e r l i m i t on t h e i n d e m n i t y r a t e , c a l c u l a t e d a s : Maximum i n d e m n i t y = (0.75 x c o s t o f p r o d u c t i o n ) / 1.75 T h e r e i s no i n d e m n i t y p a i d f o r pounds g a i n e d e x c e e d i n g 850 p o u n d s ; i . e . t h e r e i s no i n d e m n i t y p a i d f o r f i n i s h i n g a n i m a l s . C. P ayments M a r k e t r e t u r n s u s e d t o d e t e r m i n e t h e i n d e m n i t y of b e e f c a l f p ounds a r e c a l c u l a t e d by summing t h e w e i g h t e d a v e r a g e p r i c e s r e c e i v e d i n C a l g a r y m a r k e t f o r s t e e r s u n d e r 400 l b s . , s t e e r s of 400-500 l b s . , h e i f e r s of 300-400 l b s . , and h e i f e r s of 400-500 l b s . The w e i g h t e d a v e r a g e p r i c e s o b t a i n e d i n O c t o b e r and November a r e summed and t h e t o t a l d i v i d e d by two. M a r k e t r e t u r n s f o r b e e f y e a r l i n g pounds a r e c a l c u l a t e d by summing t h e w e i g h t e d a v e r a g e p r i c e s r e c e i v e d i n C a l g a r y m a r k e t f o r s t e e r s o f 700-800 l b s . a n d h e i f e r s o v e r 700 l b s . , f o r t h e months o f S e p t e m b e r a n d O c t o b e r , t h e n d i v i d i n g t h e t o t a l by two. B a s i c c o s t s o f p r o d u c t i o n i n c l u d e c a s h c o s t s , d e p r e c i a t i o n , i n t e r e s t on i n v e s t m e n t , o p e r a t o r and f a m i l y l a b o u r , and 15 management f e e . The c o s t s a r e b a s e d on a h y p o t h e t i c a l f a r m p r o d u c t i o n m o d e l , n e g o t i a t e d by t h e B.C. F e d e r a t i o n of A g r i c u l t u r e and t h e B.C. M i n i s t r y of A g r i c u l t u r e . B a s i c c o s t s o f p r o d u c t i o n a n d m a r k e t r e t u r n s of b e e f a r e c a l c u l a t e d a n n u a l l y a n d i n d e m n i t i e s a r e p a i d on a y e a r l y bas i s. D. P r o g r a m Fund I f p a r t i c i p a t i n g i n t h e F I A P , b e e f p r o d u c e r s pay an a n n u a l p r emium i r r e s p e c t i v e of w h e t h e r a s u b s i d y i s r e c e i v e d . The amount o f p r o d u c e r premiums i s d e t e r m i n e d a n n u a l l y w i t h f a r m e r s p a y i n g 1/3 and t h e p r o v i n c i a l g o v e r n m e n t p a y i n g 2/3 t o t h e B.C. B e e f P r o d u c e r s ' Income P r o g r a m F u n d . 3.3 A l t e r n a t i v e Schemes Some a l t e r n a t i v e schemes p o t e n t i a l l y u s e f u l i n a c h i e v i n g p r o d u c e r income s t a b i l i t y a r e d e s c r i b e d b e l o w . 3.3.1 New Farm Income A s s u r a n c e P r o g r a m , F I A P ( 1 9 8 0 ) A new B e e f P r o d u c e r s ' Income A s s u r a n c e P r o g r a m was a n n o u n c e d a n d came i n t o o p e r a t i o n b e g i n n i n g J a n u a r y 1980. The new p r o g r a m a l s o i n c l u d e s f i n i s h e d a n i m a l s . The s u p p o r t l e v e l o f r e t u r n d e f i c i t has i n c r e a s e d f r o m 75% t o 100%, a n d t h e p r o d u c e r p r emium w h i c h c o n s i s t s o f two c o m p o n e n t s , an a d v a n c e d premium and an a d d i t i o n a l p r emium, i s t i e d t o t h e g r o s s i n d e m n i t y i n t h e c u r r e n t y e a r . The c o s t s and e f f e c t s o f t h i s new p r o g r a m w i l l be e x a m i n e d . 16 3.3.2 P r e m i u m / S u b s i d y Scheme An a l t e r n a t i v e scheme i s p r o p o s e d as b e i n g u s e f u l i n s t a b i l i z i n g b e e f p r o d u c e r i n c o m e . A p r e m i u m / s u b s i d y scheme i n v o l v e s an a t t e m p t t o e l i m i n a t e p r i c e " p e a k s " i n a d d i t i o n t o p r i c e " t o u g h s " by p a y i n g s u b s i d i e s t o p r o d u c e r s when m a r k e t p r i c e o f b e e f f a l l s b e l o w a g i v e n f l o o r , and c o l l e c t i n g premiums when m a r k e t p r i c e e x c e e d s a g i v e n c e i l i n g . 3.3.3 H e i f e r R e t e n t i o n S u b s i d y Scheme The most common f o r m o f b e e f p r o d u c t i o n i n B.C. i s t h e c o w - c a l f o p e r a t i o n . A b e e f p r o d u c e r ' s h e r d s i z e i s v a r i e d m a i n l y t h r o u g h v a r y i n g t h e number o f h e i f e r s r e t a i n e d . When t h e c o s t o f p r o d u c t i o n e x c e e d s t h e m a r k e t r e t u r n f o r c a l v e s , f a r m e r s may d e c r e a s e h e r d s i z e by d e c r e a s i n g t h e number o f h e i f e r s . The t o t a l amount o f b e e f p r o d u c e d i n c o m i n g y e a r s w i l l d e c l i n e a s a r e s u l t o f c u r r e n t l i q u i d a t i o n o f h e i f e r s . T h i s w i l l b r i n g a b o u t f l u c t u a t i o n s i n b e e f s u p p l y and r e s u l t i n g f l u c t u a t i o n s i n b e e f p r o d u c e r i n c o m e s . S i n c e h e i f e r r e t e n t i o n s p l a y s u c h an i m p o r t a n t p a r t i n t h e s t a b i l i t y o f b e e f p r o d u c t i o n , i t i s r e a s o n a b l e t o d e s i g n p r o g r a m s t o s t a b i l i z e t h e s e r e t e n t i o n s . A h e i f e r r e t e n t i o n s u b s i d y scheme c o u l d work a s f o l l o w s . I n p e r i o d s o f low c a l f p r i c e s , a s u b s i d y w o u l d be p a i d t o f a r m e r f o r e a c h h e i f e r r e t a i n e d , p r o v i d i n g an i n c e n t i v e n o t t o engage i n l a r g e s c a l e l i q u i d a t i o n o f h e i f e r s . I n p e r i o d s o f h i g h c a l f p r i c e s , no s u b s i d y w o u l d o c c u r a l l o w i n g f a r m e r s t o a d j u s t t h e i r h e r d s i z e s a c c o r d i n g t o t h e i r own e x p e c t a t i o n s . 1 7 3.3.4 Guaranteed P r i c e Scheme A scheme resembling the f e d e r a l A.S.A. could be adopted by the p r o v i n c i a l government in B.C. S i m i l i a r schemes have been adopted in other p r o v i n c e s (e.g. Manitoba Beef Producers' Income Assurance Program) to s u b s i d i z e beef outputs that are not covered under A.S.A., p a r t i c u l a r l y c a l v e s and y e a r l i n g s . Given the importance of cow-calf and backgrounding op e r a t i o n s i n the B.C. beef i n d u s t r y , t h i s approach would seem a p p l i c a b l e to B.C. The formula used to c a l c u l a t e guaranteed p r i c e c o u l d be determined as a percentage of the average market p r i c e over the p r e v i o u s f i v e years, p l u s the d i f f e r e n c e between c u r r e n t input cost and the average input cost i n the preceding f i v e years. The guaranteed p r i c e would become e f f e c t i v e only i f i t were higher than the c u r r e n t market p r i c e . T h i s way of c a l c u l a t i n g support l e v e l d i f f e r s from that of FIAP, i n that i t would use the average p r i c e s and c o s t s of the preceding f i v e years i n s t e a d of using c u r r e n t year f i g u r e s only. One of the advantages of using the moving average as the base to determine support p r i c e i s that the r e s u l t i n g support p r i c e w i l l l i k e l y be more s t a b l e , whereas the r e t u r n d e f i c i t of FIAP can f l u c t u a t e from year to year. 18 3.4 Data used T h i s s e c t i o n d i s c u s s e s the b a s i c data used in t h i s study and i t s d e r i v a t i o n . 3.4.1 Cost Data Costs of production f o r c a l v e s and y e a r l i n g s f o r FIAP(1977) were determined through n e g o t i a t i o n s between the B.C. M i n i s t r y of A g r i c u l t u r e and the B.C. F e d e r a t i o n of A g r i c u l t u r e . The cost f i g u r e s reported below represent the c o s t s of inputs needed to produce one cwt. of l i v e a n i m a l 1 . They were estimated based on a h y p o t h e t i c a l ranch production model assuming good management and good f a c i l i t i e s . Since the c o s t s were a r r i v e d at by agreement between government and the farmers a s s o c i a t i o n , we can o f f e r no guarantee as to the r e a l i s m of the cost data. However, t h e i r r e a l i s m i s not c r i t i c a l f o r the examination of the comparative r e s u l t s of a l t e r n a t i v e income s t a b i l i z a t i o n schemes. The c o s t data used in t h i s study for the p e r i o d 1974-1978 were p u b l i s h e d by B.C.M.A. in "Beef Income Assurance Model: Basic Cost of P r o d u c t i o n " , and they are used as the base to d e f l a t e the c o s t f i g u r e s for the p r e v i o u s years ( i . e . 1959-1973) by d i f f e r e n t index numbers. The c a l c u l a t i o n procedures to determine the production c o s t s f o r c a l v e s and y e a r l i n g s are d e s c r i b e d below. xThe same co s t data are used to determine the b a s i c c o s t s of p r o d u c t i o n f o r the a l t e r n a t i v e s t a b i l i z a t i o n schemes examined in t h i s study. 19 3.4.1.1 C o w - c a l f C o s t The h y p o t h e t i c a l f a r m c o n s i s t s o f 300 cows, 12 b u l l s , a c a l f w e a n i n g r a t e o f 90%, a m o r t a l i t y r a t e o f 2% among cows and b u l l s , a n d a w e a n i n g c a l f - w e i g h t o f 425 l b s . T o t a l c a l f p r o d u c t i o n a c c o r d i n g t o t h e s e a s s u m p t i o n s w o u l d be 128,250 l b s . The c o s t i t e m s a t e l i s t e d a s f o l l o w : 1. T o t a l V a r i a b l e C o s t was d i v i d e d i n t o t h r e e i t e m s : f e e d c o s t s , l a d o r c o s t s and o t h e r v a r i a b l e c o s t s . (a) F e e d C o s t s i n c l u d e d t h e c o s t s o f h a y , g r a i n , g r a z i n g , r a n g e and o t h e r m i n o r i t e m s s u c h a s s a l t s a n d m i n e r a l s . Hay c o s t was e s t i m a t e d by a s s u m i n g t h a t 486.37 t o n s o f hay were n e e d e d t o p r o d u c e 128,250 l b s . o f c a l f . T h i s f i g u r e was t a k e n f r o m F I A P m o del a nd c a n be b r o k e n down a s f o l l o w s : 450.00 t o n s f o r f e e d i n g cows (20 l b s . / d a y * 1 5 0 d a y s * 3 0 0 ) 27.75 t o n s f o r f e e d i n g b u l l s (25 l b s . / d a y * 1 8 5 d a y s * 1 2 ) 9.12 t o n s f o r f e e d i n g h o r s e s (25 l b s . / d a y * 3 6 5 d a y s * 2 ) 486.87 t o n s o f hay i n t o t a l . The above hay c o n s u m p t i o n r e p r e s e n t e d a r a t e o f c o n v e r s i o n of 0.38 t o n s o f hay t o p r o d u c e one c w t . o f c a l f ( l i v e w e i g h t ) . The b a s e p r i c e o f hay u s e d was t h e a v e r a g e hay p r i c e r e p o r t e d by F I A P f r o m O c t o b e r 1974 t o O c t o b e r 1978. L a t e r , by means of t h e hay p r i c e i n d e x t a k e n f r o m t h e A n n u a l  R e p o r t o f B.C. M i l k B o a r d , t h e hay c o s t s i n t h e r e s t o f t h e 20 t w e n t y y e a r p e r i o d b e i n g s i m u l a t e d were e s t i m a t e d 1 . The c o s t of hay f o r any month was c o m p u t e d , a s i n t h e m o d e l o f F I A P , by u s i n g t h e hay p r i c e o f t h e p r e v i o u s y e a r . G r a i n c o s t was e s t i m a t e d by a s s u m i n g t h a t 5.55 t o n s o f g r a i n were n e e d e d t o p r o d u c e 128,250 l b s . o f c a l f . T h i s c o n s u m p t i o n f i g u r e r e p r e s e n t e d t h e amount o f g r a i n n e e d e d t o f e e d t h e b u l l s was 0.004 t o n s of g r a i n p e r c w t . o f c a l f p r o d u c e d . The b a s e p r i c e o f g r a i n u s e d was t h e a v e r a g e p r i c e o f b e e f p e l l e t s ( 1 4 % p r o t e i n ) r e p o r t e d by F I A P f o r t h e p e r i o d O c t o b e r 1974 t o O c t o b e r 1978. L a t e r , by means of t h e d a i r y p e l l e t p r i c e s ( 1 6 % ) t a k e n f r o m t h e A n n u a l R e p o r t o f B.C. M i l k B o a r d , t h e g r a i n c o s t s f o r t h e r e s t o f t h e p e r i o d were e s t i m a t e d . The c o s t s o f g r a i n f o r any month was a l s o c a l c u l a t e d by u s i n g t h e g r a i n p r i c e o f p r e v i o u s y e a r . G r a z i n g c o s t was e s t i m a t e d by a s s u m i n g t h a t 183.75 t o n s o f g r a s s were n e e d e d t o p r o d u c e 128,250 l b s . o f c a l f . T h i s f i g u r e was o b t a i n e d a s f o l l o w s : 180.00 t o n s f o r cows g r a z i n g (20 l b s . / d a y * 60 d a y s * 3 0 0 ) 3.75 t o n s f o r b u l l s g r a z i n g (25 l b s . / d a y * 2 5 d a y s * 1 2 ) 183.75 t o n s o f g r a s s i n t o t a l . The a b o v e g r a s s c o n s u m p t i o n r e p r e s e n t e d a r a t e of c o n v e r s i o n of 0.143 t o n s o f g r a s s t o p r o d u c e one c w t . o f x T h e a p p r o p r i a t e n e s s o f t h e p r i c e i n d e x f o r hay f r o m t h e B.C. M i l k B o a r d as a p r o x y f o r t h e p r i c e o f hay u s e d by b e e f p r o d u c e r s w i l l be g r e a t e r f o r a r e a s c l o s e r t o t h e F r a s e r V a l l e y where t r a d e i n hay o c c u r s b e t w e e n b e e f and d a i r y p r o d u c e r s . 21 c a l f ( 1 i v e w e i g h t ) . The b a s e p r i c e o f g r a s s was e q u a l t o h a l f o f t h e hay p r i c e . Range c o s t was e s t i m a t e d by a s s u m i n g t h a t 1,612 A.U.M. ( a n i m a l u n i t months) were n e e d e d t o p r o d u c e 128,250 l b s . o f c a l f . T h i s f i g u r e was o b t a i n e d a s f o l l o w s : 1,550 A.U.M. f o r cows (300 A.U. * 5.16 months) 62 A.U.M. f o r cows ( 12 A.U. * 5.16 months) 1,612 A.U.M. i n t o t a l . The a b o v e r a n g e c o s t r e p r e s e n t e d a r a t e o f c o n v e r s i o n o f 1.257 A.U.M. t o p r o d u c e one c w t . of c a l f ( l i v e w e i g h t ) . The b a s e p r i c e o f r a n g e was p r o v i d e d by t h e B.C. M i n i s t r y o f F o r e s t r y , F o r e s t S e r v i c e , Range B r a n c h . O t h e r f e e d c o s t s s u c h as s a l t s a n d m i n e r a l s , were e s t i m a t e d b a s e d on t h e a v e r a g e F I A P f i g u r e s f o r 1976, 1977 a n d 1978. The a v e r a g e f i g u r e i n d i c a t e d t h a t t h e y r e p r e s e n t e d a p p r o x i m a t e l y 4.4% of a l l o t h e r f e e d c o m p o n e n t s ( i . e . h a y , g r a i n , g r a z i n g and r a n g e ) . L a b o u r C o s t s were e s t i m a t e d by a s s u m i n g 1.637 h o u r s o f l a b o u r were needed t o p r o d u c e one c w t . o f c a l f ( i . e . 2,100 h o u r s t o p r o d u c e 128,250 l b s . o f c a l f ) . The p r i c e o f l a b o u r was e s t i m a t e d by u s i n g t h e 1978 F I A P r a t e o f $7.05 p e r h o u r a s a b a s e l i n e . L a t e r , by means o f I n d e x o f Farm L a b o u r f o r W e s t e r n Canada ( h o u r l y r a t e d ) t a k e n f r o m S t a t i s t i c s C a n a d a , Farm I n p u t P r i c e I n d e x , t h e l a b o u r c o s t s o f t h e r e s t o f t h e p e r i o d were e s t i m a t e d . 22 ( c ) O t h e r V a r i a b l e C o s t s i n c l u d e d t h e f o l l o w i n g c o s t i t e m s : V e t e r i n a r y c o s t was e s t i m a t e d b a s e d on t h e a v e r a g e f i g u r e s r e p o r t e d by F I A P f o r 1976, 1977 a n d 1978. The a v e r a g e f i g u r e s i n d i c a t e d t h a t v e t e r i n a r y c o s t r e p r e s e n t e d a p p r o x i m a t e l y 5.04% o f f e e d p l u s l a b o u r c o s t s . " I n t e r e s t on cows and b u l l s was e s t i m a t e d a s 7.5% of t h e i n v e s t m e n t v a l u e o f t h e b r e e d i n g s t o c k . M o r t a l i t y o f cows and b u l l s was e s t i m a t e d a s 2% o f t h e i n v e s t m e n t v a l u e o f t h e b r e e d i n g s t o c k . R e p l a c e m e n t o f cows and b u l l s was e s t i m a t e d by a s s u m i n g an a n n u a l r a t e o f 1 2 % o f r e p l a c e m e n t f o r cows and a 3 3 % of r e p l a c e m e n t f o r b u l l s . The t o t a l r e p l a c e m e n t c o s t was c o m p u t e d a s t h e d i f f e r e n c e b e t w e e n t h e a c q u i s i t i o n v a l u e of t h e r e p l a c e d cows and b u l l s and t h e s e l l i n g v a l u e o f c u l l e d cows and b u l l s . C a s h o v e r h e a d was e s t i m a t e d a s 5% of a l l o t h e r v a r i a b l e c o s t s ( i . e . f e e d c o s t s , l a b o u r c o s t s , v e t e r i n a r y c o s t s , i n t e r e s t on cows a n d b u l l s , m o r t a l i t y o f cows and b u l l s , a n d r e p l a c e m e n t o f cows and b u l l s ) . T r a n s p o r t a t i o n c o s t was e s t i m a t e d by a s s u m i n g t h a t an a v e r a g e c o w - c a l f o p e r a t o r h a d t o pay 7,500 m i l e s o f t r a n s p o r t a t i o n c o s t s f o r t h e p r o d u c t i o n o f 128,250 l b s . o f c a l f ( i . e . 5.8 m i l e s p e r c w t . o f c a l f p r o d u c e d ) . T r a n s p o r t a t i o n c o s t s were e s t i m a t e d by u s i n g t h e 1978 F I A P r a t e o f $0.23 p e r m i l e a s a b a s e l i n e . L a t e r , by means o f t h e M a c h i n e r y a nd M o t o r V e h i c l e O p e r a t i o n I n d e x 23 f o r W e s t e r n Canada t a k e n f r o m S t a t i s t i c s C a n a d a , Farm  I n p u t P r i c e I n d e x , t h e t r a n s p o r t a t i o n c o s t s o f t h e r e s t o f t h e p e r i o d were e s t i m a t e d . T r a c t o r c o s t was e s t i m a t e d by a s s u m i n g t h a t an a v e r a g e c o w - c a l f o p e r a t o r h a d t o pay f o r 600 h o u r s o f t r a c t o r u s e f o r t h e p r o d u c t i o n o f 128,250 l b s . o f c a l f ( i . e . 0.47 h o u r s p e r c w t . o f c a l f p r o d u c e d ) . The c o s t f o r u s i n g t r a c t o r f o r an h o u r were e s t i m a t e d by u s i n g t h e 1978 F I A P r a t e o f $9.50 p e r h o u r a s a b a s e l i n e . L a t e r , by means o f t h e same i n d e x u s e d i n t h e c o m p u t a t i o n o f t r a n s p o r t a t i o n c o s t s , t h e t r a c t o r c o s t s f o r t h e r e s t o f t h e p e r i o d were e s t i m a t e d . I n t e r e s t on o p e r a t i n g c a p i t a l was c o m p u t e d a s 8% o f t h e q u a r t e r l y e x p e n d i t u r e o f a l l t h e v a r i a b l e i n p u t s e x c e p t l a b o u r , t r a n s p o r t a t i o n a n d t r a c t o r c o s t s . 2. F i x e d C o s t s were e s t i m a t e d by means o f t h e a v e r a g e f i g u r e r e p o r t e d by F I A P f o r 1978, and t h e M o r t g a g e C r e d i t I n d e x t a k e n f r o m S t a t i s t i c s C a n a d a , Farm I n p u t P r i c e I n d e x . The a v e r a g e f i x e d c o s t c a l c u l a t e d by F I A P f o r 1978 was $13.23 p e r c w t . of c a l f p r o d u c e d . F i x e d c o s t i n c l u d e d i n t e r e s t on c a p i t a l i n v e s t m e n t ( l a n d , b u i l d i n g s a n d e q u i p m e n t ) , d e p r e c i a t i o n , management f e e s a n d o t h e r m i n o r i t e m s ( e . g . b o o k k e e p i n g , i n s u r a n c e , t a x e s , e t c . ) . 24 3.4.1.2 Y e a r l i n g C o s t The F I A P p r o d u c t i o n m o d el was b a s e d on a h y p o t h e t i c a l r a n c h r a i s i n g 300 c a l v e s f r o m a l i v e w e i g h t of 420 l b s . t o a s e l l i n g w e i g h t o f 781 l b s . ( i . e . a n e t w e i g h t g a i n o f 361 l b s . p e r a n i m a l o v e r t h e p e r i o d ) , w i t h good management and good f a c i l i t i e s . The model assumed a 2% m o r t a l i t y r a t e among c a l v e s . The t o t a l y e a r l i n g p r o d u c t i o n a c c o r d i n g t o t h e a b o v e a s s u m p t i o n s w o u l d be 106,134 l b s . A l i s t o f c o s t i t e m s a r e shown as f o l l o w s : 1. T o t a l V a r i a b l e C o s t was d i v i d e d i n t o t h r e e i t e m s : f e e d c o s t s , l a b o u r c o s t s and o t h e r v a r i a b l e c o s t s , ( a ) F e e d C o s t s i n c l u d e d t h e c o s t s o f h a y , g r a i n , g r a z i n g , r a n g e and o t h e r m i n o r i t e m s s u c h a s s a l t s and m i n e r a l s . Hay c o s t was e s t i m a t e d by a s s u m i n g t h a t 329.90 t o n s o f hay were n e e d e d t o p r o d u c e 106,134 l b s . of y e a r l i n g . T h i s f i g u r e was t a k e n rom F I A P model and c a n be b r o k e n down as f o l l o w s : 360.76 t o n s f o r f e e d i n g c a t t l e (12 l b s . / d a y * 180 d a y s * 297 ) 9.13 t o n s f o r f e e d i n g h o r s e s (25 l b s . / d a y * 365 d a y s * 2 ) 329.90 t o n s o f hay i n t o t a l . The a b o v e hay c o n s u m p t i o n r e p r e s e n t e d a r a t e o f c o n v e r s i o n o f 0.311 t o n s o f hay t o p r o d u c e one c w t . o f y e a r l i n g ( l i v e -w e i g h t ) . The c o s t s o f hay u s e d were c o m p u t e d i n t h e same way a s r e p o r t e d e a r l i e r f o r t h e c o w - c a l f p r o d u c t i o n . G r a i n c o s t was e s t i m a t e d by a s s u m i n g t h a t 106.92 t o n s of g r a i n were n e e d e d t o p r o d u c e 106,134 l b s . o f y e a r l i n g . I t was 25 o b t a i n e d by a s s u m i n g 297 c a l v e s w o u l d use 4 l b s . o f g r a i n p e r day f o r 180 d a y s . T h i s c o n s u m p t i o n f i g u r e r e p r e s e n t e d t h e amount o f g r a i n n e e d e d t o f e e d t h e c a l v e s was 0.10 t o n s p e r c w t . o f y e a r l i n g p r o d u c e d . The c o s t s o f g r a i n were c o m p u t e d i n t h e same way a s r e p o r t e d e a r l i e r f o r t h e c o w - c a l f p r o d u c t i o n . G r a z i n g c o s t was e s t i m a t e d by a s s u m i n g t h a t 160.38 t o n s o f g r a s s were n e e d e d t o p r o d u c e 106,134 l b s . o f y e a r l i n g . T h i s f i g u r e was o b t a i n e d by a s s u m i n g 297 c a l v e s w o u l d u se 18 l b s . o f g r a s s p e r day f o r 60 d a y s . T h i s c o n s u m p t i o n f i g u r e r e p r e s e n t e d t h e amount o f g r a s s n e e d e d t o f e e d t h e c a l v e s was 0.51 t o n s p e r c w t . o f y e a r l i n g p r o d u c e d . The c o s t s o f g r a s s were c o m p u t e d i n t h e same way as r e p o r t e d e a r l i e r f o r t h e c o w - c a l f p r o d u c t i o n . Range c o s t was e s t i m a t e d by a s s u m i n g t h a t 940 A.U.M. ( a n i m a l u n i t m o n t h s ) were n e e d e d t o p r o d u c e 106,134 l b s . o f y e a r l i n g . The a b o v e r a n g e c o s t r e p r e s e n t e d a r a t e o f c o n v e r s i o n o f 0.886 A.U.M. t o p r o d u c e one c w t . o f y e a r l i n g ( 1 i v e w e i g h t ) . The base p r i c e o f r a n g e was p r o v i d e d by t h e B.C. M i n i s t r y o f F o r e s t r y , F o r e s t S e r v i c e , Range B r a n c h . O t h e r f e e d c o s t s s u c h a s s a l t s a n d m i n e r a l s , were e s t i m a t e d b a s e d on t h e a v e r a g e F I A P f i g u r e s f o r 1976, 1977 and 1978. The a v e r a g e f i g u r e i n d i c a t e d t h a t t h e y r e p r e s e n t e d a p p r o x i m a t e l y 0.7% o f a l l o t h e r f e e d c o m p o n e n t s ( i . e . h a y , g r a i n , g r a z i n g a n d r a n g e ) . (b) L a b o u r C o s t s were e s t i m a t e d by a s s u m i n g 1.10 h o u r s o f 26 l a b o u r were n e e d e d t o p r o d u c e one c w t . o f y e a r l i n g ( i . e . 1,170 h o u r s t o p r o d u c e 106,134 l b s . o f y e a r l i n g ) . The c o s t s of l a b o u r u s e d were c o m p u t e d a s r e p o r t e d e a r l i e r i n t h e c a l c u l a t i o n f o r c o w - c a l f p r o d u c t i o n c o s t . O t h e r V a r i a b l e C o s t s i n c l u d e d t h e f o l l o w i n g c o s t i t e m s : V e t e r i n a r y a n d f u e l c o s t was e s t i m a t e d b a s e d on t h e •average f i g u r e s r e p o r t e d by F I A P f o r 1976, 1977 and 1978. The a v e r a g e f i g u r e s i n d i c a t e d t h a t v e t e r i n a r y c o s t a nd f u e l c o s t r e p r e s e n t e d a p p r o x i m a t e l y 3.84% o f f e e d c o s t s p l u s l a b o u r c o s t s . I n t e r e s t on c a l v e s was e s t i m a t e d a s 7.5% of t h e i n v e s t m e n t v a l u e o f p u r c h a s e d c a l v e s . C a s h o v e r h e a d was e s t i m a t e d a s 5.0% o f a l l o t h e r v a r i a b l e c o s t s ( i . e . f e e d c o s t s , l a b o u r c o s t s , v e t e r i n a r y and f u e l c o s t s , and i n t e r e s t on c a l v e s ) . T r a n s p o r t a t i o n c o s t was e s t i m a t e d by a s s u m i n g t h a t an a v e r a g e c o w - c a l f o p e r a t o r h ad t o pay 5,000 m i l e s o f t r a n s p o r t a t i o n c o s t s f o r t h e p r o d u c t i o n o f 106,134 l b s . o f y e a r l i n g ( i . e . 4.7 m i l e s p e r c w t . o f y e a r l i n g p r o d u c e d ) . The t r a n s p o r t a t i o n c o s t s were e s t i m a t e d a s r e p o r t e d e a r l i e r i n t h e c a l c u l a t i o n f o r c o w - c a l f p r o d u c t i o n c o s t . I n t e r e s t on o p e r a t i n g c a p i t a l was c o m p u t e d a s 8% o f t h e q u a r t e r l y e x p e n d i t u r e o f a l l t h e v a r i a b l e i n p u t s e x c e p t l a b o u r a nd t r a n s p o r t a t i o n c o s t s . 27 2. F i x e d C o s t s were e s t i m a t e d by means o f t h e a v e r a g e f i g u r e r e p o r t e d by F I A P f o r 1978, and t h e M o r t g a g e C r e d i t I n d e x t a k e n f r o m S t a t i s t i c s C a nada, Farm I n p u t P r i c e I n d e x . The a v e r a g e f i x e d c o s t c a l c u l a t e d by F I A P f o r 1978 was $10.73 p e r c w t . o f y e a r l i n g p r o d u c e d . F i x e d c o s t i n c l u d e d i n t e r e s t on c a p i t a l i n v e s t m e n t ( l a n d , b u i l d i n g s and e q u i p m e n t ) , d e p r e c i a t i o n , management f e e s and o t h e r m i n o r i t e m s ( e . g . b o o k k e e p i n g , i n s u r a n c e , t a x e s , e t c . ) 3. M a r k e t i n g C o s t was a d d e d t o t o t a l c o s t i n t h e c a l c u l a t i o n o f y e a r l i n g c o s t . I t was b a s e d on t h e 1978 f i g u r e r e p o r t e d by F I A P . A c c o r d i n g t o t h e a v e r a g e f i g u r e , m a r k e t i n g c o s t r e p r e s e n t e d a p p r o x i m a t e l y 0.29% o f t h e t o t a l c o s t f o r y e a r l i n g p r o d u c t i o n . 3.4.2 B e e f P r i c e D a t a The m o n t h l y p r i c e s were t a k e n f r o m A g r i c u l t u r e C a n a d a , F o o d P r o d u c t i o n and M a r k e t i n g B r a n c h , L i v e s t o c k M a r k e t R e v i e w and L i v e s t o c k and Meat T r a d e P e p o r t a n d c o m p u t e d as f o l l o w s : 1. C a l f P r i c e s (a) From J a n u a r y 1973 t o December 19 7 8 , t h e y were t h e a r i t h m e t i c mean o f t h e C a l g a r y p r i c e s r e c e i v e d by f a r m e r s f o r s t e e r s l e s s t h a n 400 l b s . , s t e e r s of 400-500 l b s . , h e i f e r s o f 300-400 l b s . , and h e i f e r s o f 400-500 l b s . ( l e s s $3.00 p e r c w t . f o r m a r k e t i n g c o s t ) . 28 (b) From F e b r u a r y 1963 t o December 1972, t h e y c o r r e s p o n d e d t o t h e a r i t h m e t i c mean o f t h e C a l g a r y p r i c e s r e c e i v e d by f a r m e r s f o r s t e e r c a l v e s a n d h e i f e r c a l v e s . The a v e r a g e p r i c e s were c o m p u t e d f r o m o n l y t h e s e two f i g u r e s i n s t e a d o f f o u r , b e c a u s e p r i o r t o 1973 t h e c a l f p r i c e s r e p o r t e d w e r e n ' t d i s t i n g u i s h a b l e among d i f f e r e n t w e i g h t c a t e g o r i e s . ( c ) P r i o r t o F e b r u a r y 1963, t h e r e was o n l y one c a l f p r i c e r e p o r t e d u n d e r t h e c a t e g o r y o f s t o c k e r c a l v e s ( s t e e r s and h e i f e r s ) , w i t h o u t d i s t i n c t i o n o f sex o r w e i g h t . 2. Y e a r l i n g P r i c e s From J a n u a r y 1954 t o December 1 9 78, t h e y were t h e a r i t h m e t i c means o f t h e C a l g a r y p r i c e s r e c e i v e d by f a r m e r s f o r s t e e r s o f 700-800 l b s . , a n d h e i f e r s o v e r 700 l b s . 3.4.3 B e e f P r o d u c t i o n D a t a The p r o d u c t i o n d a t a u s e d t o s i m u l a t e t h e l i k e l y i m p a c t s of a l t e r n a t i v e income s t a b i l i z a t i o n schemes f o r B.C. b e e f p r o d u c e r s i n c l u d e d b e e f c a l v e s , y e a r l i n g s and c a l f - y e a r 1 i n g s . The s u b s i d i e s w h i c h t h e s e a n i m a l s c a n r e c e i v e u n d e r t h e a l t e r n a t i v e s t a b i l i z a t i o n schemes c o n s i d e r e d were d e f i n e d by t h e F I A P ( 1 9 7 7 ) r e g u l a t i o n s a s f o l l o w s : C a l f S u b s i d y : t h o s e a n i m a l s b o r n a n d m a r k e t e d w i t h i n t h e same y e a r o f b i r t h a r e e l i g i b l e t o r e c e i v e t h e c a l f s u b s i d i e s up t o a maximum o f 400 l b s . 29 Y e a r l i n g S u b s i d y : t h o s e a n i m a l s w h i c h were b o u g h t a s c a l v e s and r a i s e d by B.C. b e e f p r o d u c e r s t o m a r k e t a s y e a r l i n g s , a r e e l i g i b l e t o r e c e i v e t h e y e a r l i n g s u b s i d i e s . The w e i g h t g a i n e d f r o m 400 l b s . up t o a maximum o f 850 l b s . f a l l s i n t o t h e c a t e g o r y o f y e a r l i n g p o u n d s . C a l f - y e a r l i n g S u b s i d y : t h o s e a n i m a l s b o r n i n y e a r t and m a r k e t e d i n y e a r t+1 a r e c l a s s i f i e d as y e a r l i n g s by F I A P r e g u l a t i o n s , d e s p i t e t h e i r w e i g h t . T h e s e a n i m a l s w o u l d r e c e i v e t h e c a l f - y e a r l i n g s u b s i d i e s i n s t e a d o f t h e c a l f s u b s i d i e s f o r t h e i r f i r s t 400 l b s . , and t h e r e s i d u a l pounds ( t h o s e pounds above 400 l b s . ) a r e e l i g i b l e f o r t h e y e a r l i n g s u b s i d i e s . I t was t h e n n e c e s s a r y t o i d e n t i t y t h e d i f f e r e n t c a t e g o r i e s o f a n i m a l s e n t i t l e d t o r e c e i v e d t h e s e s u b s i d i e s . They a r e b e e f c a l f p o u n d s , b e e f y e a r l i n g p o u n d s and c a l f -y e a r l i n g p o u n d s . 1. B e e f C a l f Pounds The a n i m a l s e l i g i b l e t o r e c e i v e t h e b e e f c a l f s u b s i d i e s u n d e r F I A P i n c l u d e t h e f o l l o w i n g c a t e g o r i e s : (a) b e e f c a l v e s b o r n i n B.C. and s o l d t o b a c k g r o u n d i n g o p e r a t i o n s w i t h i n B.C. (b) b e e f c a l v e s b o r n i n B.C. and s l a u g h t e r e d i n i n s p e c t e d p l a n t s ( f e d e r a l a nd p r o v i n c i a l ) . ( c ) b e e f c a l v e s b o r n i n B.C. and e x p o r t e d t o t h e U n i t e d S t a t e s . (d) b e e f c a l v e s b o r n i n B.C. and s e n t t o o t h e r C a n a d i a n 30 p r o v i n c e s . (e) b e e f c a l v e s b o r n i n B.C. and s l a u g h t e r e d i n n o n - i n s p e c t e d p l a n t s . ( f ) b e e f c a l v e s b o r n i n B.C. a n d s l a u g h t e r e d f o r a n i m a l f o o d , ( f ) b e e f c a l v e s b o r n i n B.C. and s l a u g h t e r e d on f a r m s f o r c o m m e r c i a l u s e . 2. B e e f Y e a r l i n g Pounds The a n i m a l s e l i g i b l e t o r e c e i v e t h e b e e f y e a r l i n g s u b i s d i e s u n d e r F I A P i n c l u d e t h e f o l l o w i n g c a t e g o r i e s : ( a ) b e e f and d a i r y s t e e r s a nd h e i f e r s b o r n and r a i s e d i n B.C. t h a t were m a r k e t e d w i t h i n B.C. (b) b e e f and d a i r y s t e e r s a nd h e i f e r s e x p o r t e d t o t h e U n i t e d S t a t e s . ( c ) b e e f and d a i r y s t e e r s a n d h e i f e r s s e n t t o o t h e r C a n a d i a n p r o v i n c e s . (d) b e e f s t e e r s and h e i f e r s b r o u g h t f r o m A l b e r t a as c a l v e s i n any one y e a r and s o l d a s y e a r l i n g s w i t h i n B.C. i n t h e f o l l o w i n g y e a r . (e) b e e f and d a i r y s t e e r s a n d h e i f e r s s l a u g h t e r e d on f a r m s f o r c o m m e r c i a l u s e , p r o v i d e d t h e a n i m a l s were r a i s e d i n B.C. f r o m t h e i r 400 l b s . t o 850 l b s . 3. C a l f - y e a r l i n g Pounds W i t h i n t h e g r o u p s o f a n i m a l s e l i g i b l e f o r b e e f y e a r l i n g s u b s i d i e s i n d i c a t e d a b o v e , t h e p o s s i b i l i t y e x i s t s t h a t some o f them i n c a t e g o r i e s 2 - ( a ) , 2 - ( b ) , 2 - _ ( c ) , a n d / o r 2 - ( e ) a r e a l s o 31 e n t i t l e d to r e c e i v e s u b s i d i e s for the f i r s t 400 l b s . of l i v e w e i g h t . These would i n c l u d e y e a r l i n g s not being marketed as c a l v e s the year b e f o r e . According to FIAP r e g u l a t i o n s , these animals are e n t i t l e d to r e c e i v e not only the beef y e a r l i n g s u b s i d i e s , but a l s o what FIAP c a l l s c a l f - y e a r l i n g s u b s i d i e s . T h i s subsidy r e p l a c e the c a l f subsidy i n t h i s s p e c i f i c s i t u a t i o n . To compute the c a l f - y e a r 1ing subsidy payments, i t was assumed that a l l beef c a l v e s s o l d f o r backgrounding o p e r a t i o n s w i t h i n B.C. i n any year ( i . e . year t-1) appeared the f o l l o w i n g year ( i . e . year t) in c a t e g o r i e s 2-(a), 2-(b), 2 - ( c ) , and/or 2-(e). Thus, e l i g i b l e c a l f - y e a r l i n g pounds in year t were computed by s u b t r a c t i n g the number of c a l v e s s o l d f o r backgrounding o p e r a t i o n s w i t h i n B.C. in year t-1 from the sum of s t e e r s and h e i f e r s in 2-(a), 2-(b), 2 - ( c ) , and 2 - ( e ) . The p r o d u c t i o n data mentioned above are obtained from "Monthly Production F i g u r e s Relevant to the Beef Industry i n B.C., 1959-1978" ( P a l a c i o s and Kennedy), with some adjustments. 32 CHAPTER IV THE MATHEMATICAL MODEL The major c h a r a c t e r i s t i c s of the beef i n d u s t r y in B r i t i s h Columbia, the assumptions made about beef p r o d u c t i o n and the mathematical model of B.C. beef p r o d u c t i o n are presented i n t h i s c h a p ter. The resource a l l o c a t i o n e f f e c t s of the FIAP and a l t e r n a t i v e income s t a b i l i z a t i o n schemes are a l s o presented, with the computation of a s s o c i a t e d s o c i a l c o s t s / b e n e f i t s . The v a l i d a t i o n procedure of the model i s d i s c u s s e d i n the l a s t sect i o n . 4.1 Beef Production Assumptions f o r B r i t i s h Columbia A l i s t of p r o d u c t i o n assumptions r e p r e s e n t a t i v e of beef p r o d u c t i o n in B r i t i s h Columbia are presented below. 1 4.1.1 D e c i s i o n s Not I n f l u e n c e d By Government S t a b i l i z a t i o n Programs (1) Breeding of cows takes p l a c e three months a f t e r c a l v i n g . H e i f e r s are 15 months o l d at the time of breeding. The month of breeding does not vary with changes in beef pr i c e s . (2) Cows not r e t a i n e d f o r breeding are s o l d e i g h t months a f t e r c a l v i n g ( i . e . when c a l f i s weaned ). ^ h e s e estimates were a r r i v e d at i n c o n s u l t a t i o n with Dr. R.J. Richmond, beef c a t t l e s p e c i a l i s t , B.C. M i n i s t r y of A g r i c u l t u r a l , Kamloops D i s t r i c t O f f i c e and Dr. John Hodges, Department of Animal Science, U n i v e r s i t y of B t i t i s h Columbia. 33 (3) Number o f c a l v e s p e r cow a s s u m p t i o n s : (a) 20 p e r c e n t o f h e i f e r s r e t a i n e d f o r b r e e d i n g a r e c u l l e d p r i o r t o s e c o n d b r e e d i n g ; (b) a f t e r s e c o n d c a l f , an a d d i t i o n a l 10 p e r c e n t a r e c u l l e d ; ( c ) a f t e r t h i r d c a l f a n d t h e r e a f t e r , an a d d i t i o n a l 10 p e r c e n t a r e c u l l e d ; a n d (d) cow r e m a i n e d a r e s o l d a f t e r h a v i n g f i v e c a l v e s . T h e s e a s s u m p t i o n s i m p l y t h e f o l l o w i n g s c h e d u l e i f 100 h e i f e r s were r e t a i n e d f o r b r e e d i n g : Number o f c a l v e s P e r c e n t o f cows 1 20 2 10 3 10 4 10 5 50 (4) I t i s assumed t h a t t h e number of c a l v e s p e r cow d o e s n o t v a r y i n r e s p o n s e t o c h a n g e s i n m a r k e t p r i c e s . I n o t h e r w o r d s , r a n c h e r s do n o t k e e p cows a y e a r o r two l o n g e r when b e e f p r i c e s a r e r i s i n g . R a t h e r , i t i s assumed r a n c h e r s r e t a i n more h e i f e r s f o r b r e e d i n g i n t i m e s o f h i g h b e e f p r i c e s . (5) C a l v e s a r e weaned a t age 8 months a n d 400 l b s . l i v e w e i g h t . (6) C a l v e s weaned a t 400 l b s . r e a c h a v e r a g e y e a r l i n g w e i g h t o f 600 l b s . f o u r months l a t e r . (7) T h e r e i s a f i v e month p e r i o d f r o m a v e r a g e y e a r l i n g w e i g h t ( i . e . 600 l b s . ) u n t i l y e a r l i n g s h ave r e a c h e d what m i g h t be r e f e r r e d a s "minimum s l a u g h t e r w e i g h t " ( i . e . 925 34 l b s . ) , a s i x month p e r i o d t o " a v e r a g e s l a u g h t e r w e i g h t " ( i . e . 1,000 l b s . ) , a nd a s e v e n month p e r i o d t o "maximum s l a u g h t e r w e i g h t " ( i . e . 1,075 l b s . ) . (8) A s s u m p t i o n s (6) a n d (7) i m p l y t h e f o l l o w i n g s c h e d u l e and r a t e s o f d a i l y w e i g h t g a i n a s shown i n F i g u r e 4.1. F i g u r e 4.1 R a t e Of D a i l y W e i g h t G a i n I n B e e f P r o d u c t i o n C a l f born Minimum slaug h t e r 925 l b s . 8 months 5 months 1.67 l b . / d a y — >\< 2.17 lb./day >| ^ 2.5 lb./day—>|< 2.5 lb./day >| (9) I n t h e a b s e n c e o f g o v e r n m e n t p r o g r a m s , c a l v e s a r e s o l d a t 400 l b s . , y e a r i n g s a t 600 l b s . , a n d s l a u g h t e r c a t t l e a r e s o l d on r e a c h i n g a v e r a g e s l a u g h t e r w e i g h t ( i . e . 1,000 l b s . ) . The a b o v e p r o d u c t i o n a s s u m p t i o n s c a n be s u m m a r i z e d i n a b e e f p r o d u c t i o n t i m e t a b l e and shown i n T a b l e 4.1. 35 Table 4.1 Beef P r o d u c t i o n T i m e t a b l e Month t h e i f e r s r e a c h average y e a r l i n g weight and the d e c i s i o n i s made t o r e t a i n them f o r b r e e d i n g purposes t+ 3 breed h e i f e r s t+12 c a l v e s born t+15 r e b r e e d cows t+20 c a l v e s weaned and c u l l cows s o l d ( f i r s t b r e e d i n g ) t+24 c a l v e s reach average y e a r l i n g weight t+30 y e a r l i n g s reach average s l a u g h t e r weight For cows bred i n t+15, t h e n : t+24 c a l v e s born t+27 r e b r e e d cows t+32 c a l v e s weaned and c u l l cows s o l d (second b r e e d i n g ) t+36 c a l v e s reach average y e a r l i n g weight t+42 y e a r l i n g s reach average s l a u g h t e r weight For cows bred i n t+27, t h e n : t+36 c a l v e s born t+39 r e b r e e d cows t+44 c a l v e s weaned and c u l l cows s o l d ( t h i r d b r e e d i n g ) t+48 c a l v e s reach average y e a r l i n g weight t+54 y e a r l i n g s reach average s l a u g h t e r weight 36 4.1.2 D e c i s i o n s I n f l u e n c e d By Government S t a b i l i z a t i o n Programs I t i s assumed t h a t farmer b e h a v i o r a l d e c i s i o n s occur a t t h r e e l e v e l s : c a l f l e v e l ( i . e . 400 l b s . ) , y e a r l i n g l e v e l ( i . e . 600 l b s . ) and s l a u g h t e r l e v e l ( i . e . 1,000 l b s . ) . 4.1.2.1 The C a l f L e v e l When c a l v e s have reached 400 l b s . , c o w - c a l f o p e r a t o r s have two o p t i o n s : (a) s e l l i n g c a l v e s f o r s l a u g h t e r or f e e d i n g o u t s i d e B.C.; or (b) b a c k g r o u n d i n g them over the w i n t e r . The d e c i s i o n of backgr o u n d i n g i s assumed t o be i n f l u e n c e d by the amount of s u b s i d i e s or premiums a t t a c h e d t o the y e a r l i n g p r i c e s . 4.1.2.2 The Y e a r l i n g L e v e l At the y e a r l i n g l e v e l , the model h y p o t h e s i z e s t h r e e k i n d s of re s p o n s e s : (a) H e i f e r r e t e n t i o n p r i c e response -- the d e c i s i o n r e g a r d i n g the number of h e i f e r s t o r e t a i n f o r b r e e d i n g i s made when h e i f e r s are y e a r l i n g s . T h i s d e c i s i o n i s assumed t o be a f f e c t e d by the amount of s u b s i d i e s or premiums e s t a b l i s h e d by a government program on c a l f and/or y e a r l i n g p r o d u c t i o n . In o t h e r words, the model a l l o w s beef p r o d u c e r s t o r e t a i n more h e i f e r s f o r b r e e d i n g i f the e f f e c t i v e p r i c e s of c a l v e s and/or y e a r l i n g s a re 37 i n c r e a s e d . (b) H e i f e r r e t e n t i o n n o n - p r i c e response -- t h i s " n o n - p r i c e e f f e c t " i s i n c l u d e d because i t i s thought t h a t any program t h a t p r o v i d e s a more s t a b l e p r o d u c t i o n environment may induce farmers t o i n c r e a s e s u p p l i e s over and above any i n c r e a s e caused d i r e c t l y by p r i c e changes. (c) Y e a r l i n g h o l d o v e r p r i c e response -- assuming i n the absence of government program, y e a r l i n g s are s o l d at t h e i r 600 l b s . In response t o y e a r l i n g p r i c e i n c r e a s e s caused by government i n t e r v e n t i o n , y e a r l i n g s t e e r s and h e i f e r s may be h e l d over up t o s i x months ( i . e . t o 850 l b s . ) t o take advantage of the i n c r e a s e d e f f e c t i v e y e a r l i n g p r i c e . In o t h e r words, y e a r l i n g s t e e r s and h e i f e r s may be r e t a i n e d an e x t r a s i x months t o be e l i g i b l e f o r the s u b s i d y on the e x t r a 250 l b s . weight g a i n (600 l b s . t o 850 l b s . ) . 38 4.2 The Model The model used t o s i m u l a t e d i f f e r e n t income s t a b i l i z a t i o n schemes f o r B.C. b e e f p r o d u c e r s can be d e s c r i b e d as dynamic i n t h e sen s e of t r a c i n g t h e b e h a v i o r o f t h e B.C. b e e f s y s t e m from J a n u a r y 1959 t o December 1978 w i t h 240 o b s e r v a t i o n s of beef p r i c e s and q u a n t i t i e s . Twenty y e a r s of d a t a e n s u r e s t h a t t h e model a v o i d s t h e p o s s i b i l i t y of o n l y d e s c r i b i n g a segment of t h e b e e f c y c l e , w h i c h i s e s t i m a t e d t o be 15 y e a r s (Meadows). The model i s n o n - o p t i m i z i n g , d e t e r m i n i n g t h e c o s t s and e f f e c t s of a l t e r n a t i v e s t a b i l i z a t i o n programs i n s t e a d of c h o o s i n g t h e b e s t a l t e r n a t i v e . I t i s not i n t e n d e d t o make d e c i s i o n s f o r p l a n n e r s or t o p r o v i d e an u n i q u e s o l u t i o n t o t h e s t a t e d p r o b l e m , but r a t h e r t o p r o v i d e a s t r u c t u r e d means t o i n v e s t i g a t e t h e v a r i o u s p l a n s ( S a b o u r i n ) . A l t h o u g h s t o c h a s t i c models c a n o f t e n b e t t e r r e p r e s e n t a g r i c u l t u r a l p r o d u c t i o n s y s t e m s , t h e model i s d e t e r m i n i s t i c . The r e p e a t a b i l i t y of e l e m e n t s ( f o r e a c h run of t h e model t h r o u g h t i m e ) not being, m a n i p u l a t e d makes c o m p a r i s o n s a p p e a r more d i r e c t ( L a d u e ) . As t h i s s t u d y compares t h e c o s t s and e f f e c t s of d i f f e r e n t income s t a b i l i z a t i o n schemes, a d e t e r m i n i s t i c model i s a p p r o p r i a t e . The model' r e p r e s e n t s t h e b e e f p r o d u c t i o n s y s t e m i n B.C. t h r o u g h a s e t of e q u a t i o n s w h i c h can be g r o u p e d i n t o f o u r m o d u l e s : 1 J T h e g e n e r a l form of t h e model i n t h i s s t u d y i s s i m i l i a r t o t h e B.C. hog i n d u s t r y model of P a l a c i o s . 39 (1) E q u i l i b r i u m Mo'dule r e f e r s t o the p r i c e and q u a n t i t y p r e v a i l i n g i n the market when no income s t a b i l i z a t i o n program i s i n o p e r a t i o n ; (2) Farmer P r o d u c t i o n D e c i s i o n Module p r o v i d e s i n f o r m a t i o n as to how beef p r o d u c e r s can be expected t o respond t o government income s t a b i l i z a t i o n e f f o r t s ; (3) Government Program Module d e s c r i b e s the a l t e r n a t i v e government income s t a b i l i z a t i o n programs f o r B.C. beef p r o d u c e r s , r e f l e c t e d i n the v a l u e of p o l i c y parameters and f o r m u l a f o r the c a l c u l a t i o n of the s u p p o r t i n g l e v e l ; and (4) Summary Measure Module computes s t a t i s t i c a l parameters c a l c u l a t e d t o i n d i c a t e the degree of s t a b i l i t y and the l e v e l of v a r i a b l e s t h a t a r e regard e d as imp o r t a n t t o p o l i c y makers. These f o u r modules w i l l be d e s c r i b e d i n d e t a i l below. 4.2.1 E q u i l i b r i u m Module In s e c t i o n 3.4, the da t a used i n t h i s study were d e s c r i b e d i n d e t a i l . The p r o d u c t i o n c o s t s of beef are j o i n t l y d e t e r m i n e d by the B.C. M i n i s t r y of A g r i c u l t u r e and the B.C. F e d e r a t i o n of A g r i c u l t u r e , and assumed t o be a " f a i r " f i g u r e f o r l o c a l beef p r o d u c t i o n . The market p r i c e s of beef are c o l l e c t e d from L i v e s t o c k Market Review, A g r i c u l t u r e Canada. The p r o d u c t i o n q u a n t i t y f i g u r e s a r e r e p o r t e d by P a l a c i o s and Kennedy. A l l the data r e g a r d i n g the c o s t s , p r i c e s and o u t p u t s 40 a r e the e q u i l i b r i u m f i g u r e s d e t e r m i n e d by the market mechanism, w i t h o u t any government i n t e r f e r e n c e (except the p r o d u c t i o n q u a n t i t y i n the p e r i o d 1974-1978 when F I A P Q 9 7 7 ) was i n o p e r a t i o n 1 . I f t h e r e i s no government income s t a b i l i z a t i o n program i n o p e r a t i o n , t h e s e e q u i l i b r i u m q u a n t i t i e s of beef would be produced w i t h these e q u i l i b r i u m p r o d u c t i o n c o s t s and would s e l l i n the market at the e q u i l i b r i u m p r i c e s . The e q u i l i b r i u m beef p r i c e s , i n p u t c o s t s and output q u a n t i t i e s a r e r e p o r t e d i n Appendix A, T a b l e s A - l , A-2 and A-3, r e s p e c t i v e l y . 4.2.2 Farmer P r o d u c t i o n D e c i s i o n Module Of the f o u r modules, the farmer p r o d u c t i o n d e c i s i o n module i s the most c r i t i c a l . The e q u a t i o n s of t h i s model can be grouped i n t o t h r e e main c a t e g o r i e s : (1) B e h a v i o r a l e q u a t i o n s which r e p r e s e n t farmer responses t o changes i n p r o d u c t p r i c e s and/or i n p u t c o s t s t h a t induced by income s t a b i l i z a t i o n programs; (2) Flow r e l a t i o n s h i p and a c c o u n t i n g i d e n t i t i e s which i n c o r p o r a t e the beef p r o d u c t i o n assumptions and the l i m i t a t i o n of r e s o u r c e s a v a i l a b l e ; and (3) Market i d e n t i t i e s which ensure a l l of the beef produced i n B.C. f i n d s i t s way t o market. The model has the a b i l i t y t o c a p t u r e any o utput changes JThe 1974-1978 p r o d u c t i o n f i g u r e s a r e d e f l a t e d t o t h e i r e q u i l i b r i u m q u a n t i t y by u s i n g the p r o c e d u r e d e s c r i b e d l a t e r i n the v a l i d a t i o n procedure i n s e c t i o n 4.4. 41 which r e s u l t from changes i n e i t h e r product p r i c e s or i n p u t c o s t s . The above t h r e e c a t e g o r i e s of the farmer p r o d u c t i o n d e c i s i o n module a r e d i s c u s s e d i n d e t a i l below. 4.2.2.1 B e h a v i o r a l E q u a t i o n s The b e h a v i o r a l e q u a t i o n s a l l o w two t y p e s of farmer responses t o income s t a b i l i z a t i o n schemes. They a r e : (1) H e i f e r r e t e n t i o n , a l l o w i n g farmers t o r e t a i n more h e i f e r s i n response t o changes i n c a l f p r i c e and/or y e a r l i n g p r i c e ; b o th p r i c e e f f e c t s and n o n - p r i c e e f f e c t s may be i n c l u d e d . (2) Holdover response, a l l o w i n g farmers t o f e e d a n i m a l s f o r a l o n g e r or s h o r t e r time i n response t o p r i c e changes. I t s h o u l d be noted t h a t the model does not p r o v i d e a farmer response i n terms of changes i n c u l l e d cows. T h i s i s c o n s i s t e n c e w i t h our e a r l i e r p r o d u c t i o n a s s u m p t i o n , i . e . the number of c a l v e s per cow does not v a r y i n response t o p r i c e c h a n g e s 1 . Below i s a d e t a i l e d d i s c u s s i o n on how the beef q u a n t i t i e s are a f f e c t e d by the changes i n p r o d u c t p r i c e s as c a p t u r e d by h e i f e r r e t e n t i o n response and/or h o l d o v e r response. xWere d a t a on cow numbers a v a i l a b l e , a c u l l i n g response c o u l d be e a s i l y i n c o r p o r a t e d i n t o the model. 42 4.2.2.1.1 H e i f e r R e t e n t i o n The most im p o r t a n t type of c a t t l e p r o d u c t i o n i n B.C. i s the c o w - c a l f o p e r a t i o n . The number of c a l v e s a farmer can produce each year i s h i g h l y dependent on the s i z e of h i s b r e e d i n g h e r d . In g e n e r a l , a c e r t a i n p e r c e n t of c a l v e s a re r e t a i n e d as h e i f e r s and are added t o the b r e e d i n g h erd t o r e p l a c e the number of cows c u l l e d . T h e r e f o r e , the number of h e i f e r s r e t a i n e d w i l l d e termine the q u a n t i t y of c a l v e s a farmer can s u p p l y i n f o l l o w i n g y e a r ( s ) . A c a l f s u b s i d y p r o v i d e d by any income s t a b i l i z a t i o n measures may induce farmers t o r e t a i n more beef h e i f e r s i n o r d e r t o i n c r e a s e the number of beef c a l v e s b e i n g produced and marketed a c e r t a i n p e r i o d of time l a t e r . Here we assume t h a t the a d d i t i o n a l q u a n t i t y of beef h e i f e r s r e t a i n e d (IQHRb) i n a g i v e n time p e r i o d i s p r o p o r t i o n a l t o the e q u i l i b r i u m q u a n t i t y of beef h e i f e r s r e t a i n e d f o r b r e e d i n g purposes i n the same p e r i o d (QHRb), and i s a f f e c t e d by the change i n c a l f p r i c e s and i n p u t c o s t s of the same p e r i o d as shown i n e q u a t i o n [ 1 ]. [ 1 ] IQHRb/QHRb = B30 [ B3 (PCs - PCe) + B4 ( i C e - ICs) + B5 ] where IQHRb the change of q u a n t i t y of beef h e i f e r s r e t a i n e d due t o a c a l f s u b s i d y i n a g i v e n time p e r i o d . QHRb the e q u i l i b r i u m q u a n t i t y of beef h e i f e r s r e t a i n e d f o r b r e e d i n g purposes i n a g i v e n time p e r i o d . 43 PCs the simulated or e f f e c t i v e p r i c e of c a l v e s in a given time p e r i o d . PCe the e q u i l i b r i u m B.C. market p r i c e of c a l v e s i n a given time p e r i o d . ICs the simulated or e f f e c t i v e cost of a l l inputs for c a l f p r o d u c t i o n i n a given time p e r i o d . ICe the e q u i l i b r i u m cost of a l l inputs f o r c a l f production in a given time p e r i o d . B3 e f f e c t of changes i n the c a l f p r i c e on a d d i t i o n a l q u a n t i t y of beef h e i f e r s r e t a i n e d f o r breeding. B4 e f f e c t of changes i n the c a l f c o s t on a d d i t i o n a l q u a n t i t y of beef h e i f e r s r e t a i n e d for breeding. B5 non-price e f f e c t on a d d i t i o n a l q u a n t i t y of beef h e i f e r s r e t a i n e d due to government s t a b i l i z a t i o n e f f o r t s . B30 adjustment for death rate of keeping a c a l f to y e a r 1 i n g . A higher y e a r l i n g p r i c e , due to the y e a r l i n g subsidy, w i l l induce farmers to keep more h e i f e r s f o r breeding and hence produce more c a l v e s a c e r t a i n p e r i o d of time l a t e r . Since the y e a r l i n g subsidy a p p l i e s to both beef and d a i r y animals, equation [ 2 ] captures the changes of t o t a l h e i f e r s r e t a i n e d ( i . e . IQHRa, i n c l u d i n g both d a i r y and beef h e i f e r s ) i n s t e a d of only beef h e i f e r s (IQHRb) as in equation [ 1 ]. [ 2 ] IQHRa/QHRa = B30 [ *B1 (PYs - PYe) + B2 (iYe - IYs) + B5 ] 44 where IQHRa the change of q u a n t i t y of t o t a l h e i f e r s r e t a i n e d (both beef and d a i r y ) due t o a y e a r l i n g s u b s i d y i n a g i v e n time p e r i o d . QHRa the e q u i l i b r i u m q u a n t i t y of t o t a l h e i f e r s r e t a i n e d (both beef and d a i r y ) f o r b r e e d i n g purposes i n a g i v e n time p e r i o d . PYs the s i m u l a t e d or e f f e c t i v e p r i c e of y e a r l i n g s i n a g i v e n time p e r i o d . PYe the e q u i l i b r i u m B.C. market p r i c e of y e a r l i n g s i n a g i v e n time p e r i o d . IYs the s i m u l a t e d or e f f e c t i v e c o s t of a l l i n p u t s f o r y e a r l i n g p r o d u c t i o n i n a g i v e n time p e r i o d . IYe the e q u i l i b r i u m c o s t of a l l i n p u t s f o r y e a r l i n g p r o d u c t i o n i n a g i v e n time p e r i o d . BI e f f e c t of changes i n the y e a r l i n g p r i c e on a d d i t i o n a l q u a n t i t y of a l l h e i f e r s r e t a i n e d f o r b r e e d i n g . B2 e f f e c t of changes i n the y e a r l i n g c o s t on a d d i t i o n a l q u a n t i t y of a l l h e i f e r s r e t a i n e d f o r b r e e d i n g . G i v e n t h a t the monthly f i g u r e s of the q u a n t i t y of h e i f e r s r e t a i n e d i n B.C. were not o b t a i n a b l e , QHRb and QHRa were r e p l a c e d by the e q u i l i b r i u m q u a n t i t y of beef c a l v e s (QCWeb t+24) and t o t a l c a l v e s (QCWea t+24) s o l d i n the market twenty f o u r months l a t e r , both a d j u s t e d w i t h the d e a t h r a t e of c a l v e s a c c o r d i n g l y . The reason f o r c h o o s i n g a t w e n t y - f o u r month l a g i s based on the time d i f f e r e n c e between when the h e i f e r r e t e n t i o n 45 d e c i s i o n i s made and c a l v e s a c t u a l l y go t o market, a d j u s t e d f o r s e a s o n a l f a c t o r s . The n o n - p r i c e e f f e c t was i n c l u d e d i n the e q u a t i o n s and was c a p t u r e d by the parameter B5. R e c o g n i z i n g t h a t the y e a r l i n g s u b s i d y a p p l i e s t o both d a i r y a n i m a l s and beef a n i m a l s w h i l e the c a l f s u b s i d y a p p l i e s o n l y t o beef a n i m a l s , i t i s n e c e s s a r y to d i s t i n g u i s h the change i n beef h e i f e r s r e t a i n e d from the change i n d a i r y h e i f e r s r e t a i n e d . The changes i n the q u a n t i t y of beef h e i f e r s r e t a i n e d (IQHRbb) i n c l u d e a l l the changes induced by the c a l f s u b s i d y (IQHRb) and p a r t of the changes induced by the y e a r l i n g s u b s i d y (IQHRa). The p o r t i o n of a d d i t i o n a l beef h e i f e r s r e t a i n e d i nduced by y e a r l i n g s u b s i d y i s e q u a l to the change i n t o t a l h e i f e r s r e t a i n e d (IQHRa) m u l t i p l e d by the p r o p o r t i o n of q u a n t i t y of beef h e i f e r s (QHRb) d i v i d e d by the t o t a l q u a n t i t y of beef and d a i r y h e i f e r s (QHRa), as i n e q u a t i o n [ 3 ]. [ 3 ] IQHRbb = IQHRb + IQHRa * (QHRb / QHRa) where IQHRbb the t o t a l change i n beef h e i f e r s r e t a i n e d due to both c a l f s u b s i d y and y e a r l i n g s u b s i d y . The changes i n d a i r y h e i f e r s r e t a i n e d (IQHRd), on the o t h e r hand, i n c l u d e o n l y p a r t of the change i n d u c e d by the y e a r l i n g s u b s i d y . They are the p o r t i o n of the changes i n t o t a l h e i f e r s r e t a i n e d (IQHRd) m u l t i p l e d by the p r o p o r t i o n of 46 e q u i l i b r i u m q u a n t i t y of d a i r y h e i f e r s (QHRa - QHRb) over t o t a l q u a n t i t y of beef and d a i r y h e i f e r s (QHRa), as i n e q u a t i o n [ 4 ]. [ 4 ] IQHRd = IQHRa * [ (QHRa - QHRb) / QHRa) ] where IQHRd the change i n d a i r y h e i f e r s r e t a i n e d due t o y e a r l i n g s u b s i d y . In the case of no s t a b i l i z a t i o n program, t h a t i s when the e q u i l i b r i u m p r i c e i s e q u a l t o or g r e a t e r than the s i m u l a t e d p r i c e , t h e r e i s no change i n the q u a n t i t y of h e i f e r s r e t a i n e d , ( i . e . IQHRbb=0 and IQHRd=0) 4.2.2.1.2 Holdover Response Holdover response a l l o w s farmers t o feed a n i m a l s f o r a l o n g e r or s h o r t e r time i n response t o p r i c e changes. A d e t a i l e d d e s c r i p t i o n of the farmer h o l d o v e r response i s g i v e n below f o r c a l v e s , y e a r l i n g s , and s l a u g h t e r a n i m a l s . 4.2.2.1.2.1 C a l f H o l d o v e r s In e q u i l i b r i u m , i t i s assumed farmers s e l l weaned c a l v e s a t 400 l b s . ( i . e . 8 months a f t e r b i r t h ) . In response t o a p r i c e change i n y e a r l i n g s , they may h o l d over market c a l v e s f o u r a d d i t i o n a l months ( p o s i t i v e h o l d o v e r ) t o take advantage of the e x t r a payment when the c a l v e s r e a c h average y e a r l i n g weight ( i . e . 600 l b s . ) . More c a l v e s can be expected t o be kept f o r back g r o u n d i n g i f t h e r e i s a y e a r l i n g s u b s i d y . On the o t h e r 47 hand, no n e g a t i v e h o l d o v e r w i l l o c cur s i n c e i t i s assumed t h a t when s i m u l a t e d y e a r l i n g p r i c e i s below the e q u i l i b r i u m p r i c e , f a r m ers w i l l not s e l l t h e i r c a l v e s e a r l i e r due t o the c h a r a c t e r i s t i c s of the beef market. The q u a n t i t y of c a l f h o l d o v e r s (IQCWh) i s assumed t o be p r o p o r t i o n a l t o the q u a n t i t y of c a l v e s a v a i l a b l e f o r h o l d i n g over (QCWh); i . e . the e q u i l i b r i u m c a l v e s i n month t (QCWe) p l u s a d d i t i o n a l o f f s p r i n g (IQAC) from a d d i t i o n a l h e i f e r s r e t a i n e d i n the e a r l i e r p e r i o d s ; and i s a f f e c t e d by the change i n y e a r l i n g p r i c e and change i n y e a r l i n g i n p u t c o s t . The q u a n t i t y of beef c a l v e s a v a i l a b l e f o r h o l d i n g over (QCWHb) and the q u a n t i t y of beef c a l f h o l d o v e r s (IQCWhb) are e s t i m a t e d by e q u a t i o n s [ 5 ] and [ 6 ], w h i l e the q u a n t i t y of d a i r y c a l v e s a v a i l a b l e f o r h o l d i n g over (QCWHd) and the q u a n t i t y of d a i r y c a l f h o l d o v e r s (IQCWhb) are e s t i m a t e d by e q u a t i o n s [ 7 ] and [ 8 ]. [ 5 ] QCWhb = QCWeb + IQACb [ 6 ] IQCWhb/QCWhb = B6 (PYs - PYe) + B7 (IYe - IYs) [ 7 ] QCWhd = (QCWea - QCWeb) + IQACd [ 8 ] IQCWhd/QCWhd = B6 (PYs - PYe) + B7 (IYe - IYs) i f PYe > PYs then B6 = 0.0 IYs > IYe B7 = 0.0 48 where QCWhb q u a n t i t y of weaned beef c a l v e s t h a t are a v a i l a b l e f o r h o l d i n g over i n a g i v e n time p e r i o d . QCWhd q u a n t i t y of weaned d a i r y c a l v e s t h a t a r e a v a i l a b l e f o r h o l d i n g over i n a g i v e n time p e r i o d . IQCWhb q u a n t i t y of weaned beef c a l f h o l d o v e r s i n a g i v e n time p e r i o d . IQCWhd q u a n t i t y of weaned d a i r y c a l f h o l d o v e r s i n a g i v e n time p e r i o d . QCWeb q u a n t i t y of weaned beef c a l v e s i n e q u i l i b r i u m i n a g i v e n time p e r i o d . QCWea q u a n t i t y of t o t a l weaned c a l v e s i n e q u i l i b r i u m i n a g i v e n time p e r i o d . IQACb change of a d d i t i o n a l beef c a l v e s t h a t come from e x t r a h e i f e r s r e t a i n e d i n the e a r l i e r p e r i o d s . IQACd change of a d d i t i o n a l d a i r y c a l v e s t h a t come from e x t r a h e i f e r s r e t a i n e d i n the e a r l i e r p e r i o d s . B6 e f f e c t of y e a r l i n g p r i c e changes on the q u a n t i t y of c a l f h o l d o v e r s . B7 e f f e c t of y e a r l i n g c o s t changes on the q u a n t i t y of c a l f h o l d o v e r s . 4.2.2.1.2.2 Y e a r l i n g H o l d o v e r s In e q u i l i b r i u m , i t i s assumed farmers s e l l y e a r l i n g s when they r e a c h the average market weight ( i . e . 600 l b s . ) . In response t o y e a r l i n g and/or s l a u g h t e r p r i c e i n c r e a s e s , farmers may h o l d o v e r y e a r l i n g s s i x more months u n t i l l they r e a c h average 49 s l a u g h t e r weight ( i . e . 1,000 l b s . ) . In o t h e r words, they may r e t a i n y e a r l i n g s f o r an e x t r a s i x months t o c o l l e c t the s u b s i d y on the e x t r a 250 l b s . weight g a i n (600 l b s t o 850 l b s ) when the y e a r l i n g s u b s i d y a p p l i e s , and on the e x t r a 150 l b s . weight g a i n (850 l b s t o 1,000 l b s ) when the s l a u g h t e r s u b s i d y a p p l i e s . The q u a n t i t y of y e a r l i n g s t h a t can be h e l d o v e r and s o l d s i x months l a t e r i s r e l a t e d to the t o t a l y e a r l i n g s a v a i l a b l e f o r h o l d i n g o v e r . Y e a r l i n g s a v a i l a b l e f o r h o l d i n g over (QYha) ar e e q u a l t o t o t a l y e a r l i n g s a t e q u i l i b r i u m (QYea) p l u s the a d d i t i o n a l c a l v e s r e t a i n e d f o r h o l d o v e r f o u r months e a r l i e r (IQCWhb t-4 and IQCWhd t - 4 ) minus the number of h e i f e r s (both beef and d a i r y ) b e i n g r e t a i n e d f o r b r e e d i n g purposes (IQHRbb and IQHRd) due t o h i g h e r c a l f and y e a r l i n g p r i c e s . These h e i f e r s would have been marketed as y e a r l i n g s i f t h e r e were no s u b s i d y p r o v i d e d . The e s t i m a t i o n of the q u a n t i t y of y e a r l i n g s a v a i l a b l e f o r h o l d i n g over (QYha) i s shown i n e q u a t i o n [ 9 ] . The q u a n t i t y of y e a r l i n g h o l d o v e r s (IQYha) i s assumed t o be p r o p o r t i o n a l t o the q u a n t i t y of y e a r l i n g s a v a i l a b l e f o r h o l d i n g over (QYea) and i s a f f e c t e d by the change i n s l a u g h t e r a n i m a l p r i c e s and/or y e a r l i n g p r i c e s , and the change i n i n p u t c o s t s of s l a u g h t e r a n i m a l s and/or y e a r l i n g p r o d u c t i o n , as i n e q u a t i o n [ 10 ] . The q u a n t i t y of c a l f - y e a r l i n g h o l d o v e r s (IQYhcy) i s assumed t o be p r o p o r t i o n a l t o the q u a n t i t y of c a l f - y e a r l i n g s a v a i l a b l e f o r h o l d i n g over (QYhcy) and i s a f f e c t e d by the change i n s l a u g h t e r a n i m a l p r i c e s and/or y e a r l i n g p r i c e s , and the change i n i n p u t c o s t s of s l a u g h t e r a n i m a l s and/or c a l f p r o d u c t i o n , as shown i n e q u a t i o n [ 11 ]. Q u a n t i t y of c a l f -y e a r l i n g s a v a i l a b l e f o r h o l d i n g over (QYhcy) i s assumed t o be a p r o p o r t i o n of QYha. The p r o p o r t i o n s a re e q u a l t o the e q u i l i b r i u m q u a n t i t y of c a l f - y e a r l i n g s d i v i d e d by the e q u i l i b r i u m q u a n t i t y of y e a r l i n g s i n a c t u a l p r o d u c t i o n d a t a . [ 9 ] QYha = QYea + B12 (IQCWhb t-4 + IQCWhd t-4) - IQHRbb - IQHRd [ 10 ] IQYha/QYha = BIO (PSs - PSe) + B l l (ISe - ISs) + B8 (PYs - PYe) + B9 (IYe - IYs) [ 11 ] IQYhcy/QYhcy= BIO (PSs - PSe) + B l l (ISe - ISs) + B8 (PYs - PYe) + B21 ( i C e - ICs) I f PSs < PSe ISs > ISe PYs < PYe IYs > IYe ICs > ICe then BIO = 0.0 B l l = 0.0 B8 = 0.0 B9 = 0.0 B21 = 0.0 where QYha q u a n t i t y of y e a r l i n g s a v a i l a b l e f o r h o l d i n g over i n a g i v e n time p e r i o d . QYea q u a n t i t y of y e a r l i n g s i n e q u i l i b r i u m i n a g i v e n time p e r i o d . QYhcy q u a n t i t y of c a l f - y e a r l i n g s a v a i l a b l e f o r h o l d i n g over 51 i n a g i v e n time p e r i o d . QYecy q u a n t i t y of c a l f - y e a r l i n g s i n e q u i l i b r i u m i n a g i v e n time p e r i o d . IQYha q u a n t i t y of y e a r l i n g h o l d o v e r s i n a g i v e n time p e r i o d . IQYcy q u a n t i t y of c a l f - y e a r l i n g h o l d o v e r s i n a g i v e n time p e r i o d . PSs s i m u l a t e d or e f f e c t i v e p r i c e of s l a u g h t e r a n i m a l s i n a g i v e n time p e r i o d . PSe e q u i l i b r i u m market p r i c e of s l a u g h t e r a n i m a l s i n a g i v e n time p e r i o d . I S s s i m u l a t e d c o s t of a l l i n p u t s f o r s l a u g h t e r a n i m a l p r o d u c t i o n i n a g i v e n time p e r i o d . ISe e q u i l i b r i u m c o s t of a l l i n p u t s f o r s l a u g h t e r a n i m a l p r o d u c t i o n i n a g i v e n time p e r i o d . B8 e f f e c t of y e a r l i n g p r i c e changes on the q u a n t i t y of y e a r l i n g h o l d o v e r s and c a l f - y e a r l i n g h o l d o v e r s . B9 e f f e c t of y e a r l i n g c o s t changes on the q u a n t i t y of y e a r l i n g h o l d o v e r s and c a l f - y e a r l i n g h o l d o v e r s . BIO e f f e c t of s l a u g h t e r a n i m a l p r i c e changes on the q u a n t i t y of y e a r l i n g h o l d o v e r s and c a l f - y e a r l i n g h o l d o v e r s . B l l e f f e c t of s l a u g h t e r a n i m a l c o s t changes on the q u a n t i t y of y e a r l i n g h o l d o v e r s and c a l f - y e a r l i n g h o l d o v e r s . B21 e f f e c t of c a l f c o s t changes on the q u a n t i t y of c a l f -y e a r l i n g h o l d o v e r s . B12 adjustment f o r death l o s s from k e e p i n g a c a l f an e x t r a f o u r months. 52 4.2.2.1.2.3 S l a u g h t e r Animal H o l d o v e r s In e q u i l i b r i u m , i t i s assumed farmers s e l l s l a u g h t e r c a t t l e when they reach 1,000 l b s . (18 months). In response t o s l a u g h t e r c a t t l e p r i c e i n c r e a s e s , they may h o l d the s l a u g h t e r a n i m a l s t h r e e e x t r a months t o t a k e advantage of the 200 l b s . weight g a i n (1,000 l b s t o 1,200 l b s ) , and r e c e i v e the s u b s i d y on the s l a u g h t e r a n i m a l s . The q u a n t i t y of s l a u g h t e r a n i m a l s a v a i l a b l e f o r h o l d i n g over (QSh) i s e q u a l t o the e q u i l i b r i u m q u a n t i t y of s l a u g h t e r a n i m a l s (QSe) p l u s the change i n y e a r l i n g h o l d o v e r s s i x months e a r l i e r (IQYha t~6) a d j u s t e d w i t h death r a t e (B24), as i n e q u a t i o n [ 12 ]. The q u a n t i t y of s l a u g h t e r a n i m a l h o l d o v e r s (I.QSh) i s assumed t o be p r o p o r t i o n a l t o the q u a n t i t y of s l a u g h t e r a n i m a l s a v a i l a b l e f o r h o l d i n g over (QSh) and i s a f u n c t i o n of the change i n s l a u g h t e r a n i m a l p r i c e s and t h e i r i n p u t c o s t s , as shown i n e q u a t i o n [ 13 ]. [ 12 ] QSh = QSe + ( B24 * IQYha t-6 ) [ 13 ] IQSh / QSh = B13 (PSs - PSe) + B14 (ISe - ISs) I f PSe > PSs then B13 = 0.0 ISs > ISe B14 = 0.0 where QSh q u a n t i t y of s l a u g h t e r a n i m a l s a v a i l a b l e f o r h o l d i n g over i n a g i v e n time p e r i o d . IQSh q u a n t i t y of s l a u g h t e r a n i m a l h o l d o v e r s i n a g i v e n time 53 p e r i o d . B13 e f f e c t of s l a u g h t e r a n i m a l p r i c e change on the q u a n t i t y of s l a u g h t e r a n i m a l h o l d o v e r s . B14 e f f e c t of s l a u g h t e r a n i m a l c o s t change on the q u a n t i t y of s l a u g h t e r a n i m a l h o l d o v e r s . B24 adjustment f o r death l o s s from keeping a y e a r l i n g an e x t r a s i x months. T h i s completes the d i s c u s s i o n of b e h a v i o r a l e q u a t i o n s of the model. E q u a t i o n s i n the second c a t e g o r y , f l o w r e l a t i o n s h i p and a c c o u n t i n g i d e n t i t i e s , are d e s c r i b e d as f o l l o w s . 4.2.2.2 Flow R e l a t i o n s h i p s and A c c o u n t i n g I d e n t i t i e s The e q u a t i o n s r e p r e s e n t i n g f l o w r e l a t i o n s h i p s and a c c o u n t i n g i d e n t i t i e s i n c o r p o r a t e the beef p r o d u c t i o n a ssumptions r e l e v a n t t o B.C. and account f o r changes- i n p r o d u c t i o n r e s u l t i n g from e a r l i e r farmer r e s p o n s e s . I t seems r e a s o n a b l e t o assume t h a t changes i n farmer p r o d u c t i o n d e c i s i o n s induced by p r i c e changes would be bound w i t h c e r t a i n c o n s t r a i n t s (e.g. p r o d u c t i o n f a c i l i t i e s , s u p p l y of f e e d , e t c . ) . I t i s assumed t h a t upper l i m i t s e x i s t t o r e s t r i c t the maximum changes i n h e i f e r r e t e n t i o n and h o l d o v e r r e s p o n s e 1 . 1These l i m i t s are p a r t i c u l a r l y i m p o r t a n t i n the model, g i v e n t h a t cow c u l l i n g d e c i s i o n s a r e assumed t o be u n a f f e c t e d by the s t a b i l i z a t i o n schemes. 54 4.2.2.2.1 C o n s t r a i n t s on H e i f e r R e t e n t i o n Due t o r e s o u r c e c o n s t r a i n t s , i t i s r e a s o n a b l e t o assume an upper l i m i t t o the q u a n t i t y of a d d i t i o n a l h e i f e r s r e t a i n e d . Parameter B24 i s used as the maximum p r o p o r t i o n of a d d i t i o n a l h e i f e r s t h a t can be added t o the b r e e d i n g herd (QUPHF) i n a g i v e n time p e r i o d . The change i n a d d i t i o n a l h e i f e r s r e t a i n e d (IQHR) cannot exceed the upper l i m i t (QUPHF) of the b r e e d i n g h e r d , t h a t i s the e q u i l i b r i u m q u a n t i t y of h e i f e r s r e t a i n e d (QHR) m u l t i p l e d by B24. E q u a t i o n [ 14 ] shows the upper l i m i t on beef h e i f e r s (QUPHFb), and e q u a t i o n [ 15 ] shows the upper l i m i t on a l l h e i f e r s (QUPHFa, both beef and d a i r y ) . [ 14 ] QUPHFb = B24 * QHRb I f IQHRb > QUPHFb then IQHRb = QUPHFb [ 15 ] QUPHFa = B24 * QHRa I f IQHRa > QUPHFa then IQHRa = QUPHFa where QUPHFb maximum q u a n t i t y of beef h e i f e r s t h a t can be added t o the b r e e d i n g herd i n a g i v e n time p e r i o d . QUPHFa maximum q u a n t i t y of t o t a l h e i f e r s t h a t can be added t o the b r e e d i n g herd i n a g i v e n time p e r i o d . B24 maximum p r o p o r t i o n of h e i f e r s t h a t can be added t o the b r e e d i n g herd i n a g i v e n time p e r i o d . 55 4.2.2.2.2 C o n s t r a i n t s on C a l f H o l d o v e r s S i m i l i a r l y , g i v e n the r e s o u r c e c o n s t r a i n t s , t h e r e i s l i k e l y some l i m i t t o the c a l v e s t h a t can be h e l d o v e r . The l i m i t on beef c a l f h o l d o v e r s (QUPCHb) i s shown i n e q u a t i o n [ 16 3, and the l i m i t on d a i r y c a l f h o l d o v e r s (QUPCHd) i s shown i n e q u a t i o n [ 17 ]. [ 16 ] QUPCHb = B2 5 * QCWhb i f IQCWhb > QUPCHb then IQCWHb = QUPCHb [ 17 ] QUPCHd = B2 5 * QCWhd i f IQCWhd > QUPCHd then IQCWHd = QUPCHd where QUPCHb maximum q u a n t i t y of beef c a l v e s t h a t can be h e l d o v e r i n a g i v e n time p e r i o d . QUPCHd maximum q u a n t i t y of d a i r y c a l v e s t h a t can be h e l d o v e r i n a g i v e n time p e r i o d . B25 the maximum p r o p o r t i o n of c a l v e s t h a t can be withdrawn from market i n a g i v e n time p e r i o d . 4.2.2.2.3 C o n s t r a i n t s on Y e a r l i n g H o l d o v e r s S i m i l i a r l y , i t i s r e a s o n a b l e t o assume some l i m i t s t o the y e a r l i n g s and c a l f - y e a r l i n g s t h a t can be h e l d o v e r i n a g i v e n time p e r i o d . E q u a t i o n [ 18 3 shows the maximum q u a n t i t y of y e a r l i n g s t h a t can be h e l d o v e r (QUPYLH) , and e q u a t i o n [ 19 ] shows the maximum q u a n t i t y of c a l f - y e a r l i n g s t h a t can be 56 h e l d o v e r (QUPCYH) i n a g i v e n time p e r i o d . [ 18 ] QUPYLH = B26 * QYha I f IQYHa > QUPYLH' then IQYha = QUPYLH [ 19 ] QUPCYH = B25 * QYhcy I f IQYhcy > QUPCYLH then IQYhcy = QUPCYH where QUPYLH maximum q u a n t i t y of y e a r l i n g s t h a t can be h e l d o v e r i n a g i v e n time p e r i o d . QUPCYH maximum q u a n t i t y of c a l f - y e a r 1 i n g s t h a t can be h e l d o v e r i n a g i v e n time p e r i o d . B26 the maximum p r o p o r t i o n of y e a r l i n g s and c a l f - y e a r l i n g s t h a t can be withdrawn from market i n a g i v e n time p e r i o d and s o l d s i x months l a t e r . 4.2.2.2.4 C o n s t r a i n t on S l a u g h t e r A n i m a l H o l d o v e r s S i m i l i a r l y , i t i s r e a s o n a b l e t o assume a l i m i t t o the s l a u g h t e r a n i m a l s t h a t can be h e l d o v e r i n a g i v e n time p e r i o d , and i s shown as QUPSH i n e q u a t i o n f 20 ]. [ 20 ] QUPSH = B27 * QSh I f IQSH > QUPSH then IQSH = QUPSH 57 where QUPSH maximum q u a n t i t y of s l a u g h t e r a n i m a l s t h a t can be h e l d o v e r i n a g i v e n time p e r i o d and s o l d two months l a t e r . B27 the maximum p r o p o r t i o n of s l a u g h t e r a n i m a l s t h a t can be withdrawn from market i n a g i v e n time p e r i o d . 4.2.2.2.5 Output Changes of C a l v e s From A d d i t i o n a l H e i f e r s R e t a i n e d Where t h e r e i s a change i n the number of h e i f e r s r e t a i n e d , o f f s p r i n g from these e x t r a h e i f e r s w i l l come t o market 24 months l a t e r as weaning c a l v e s . A d d i t i o n a l h e i f e r s r e t a i n e d i n month t w i l l produce o f f s p r i n g of average market weight ( i . e . 400 l b s . ) i n month t+24 and every 12 months t h e r e a f t e r f o r f o u r y e a r s . Two e q u a t i o n s are r e q u i r e d h e r e . E q u a t i o n [ 21 ] c a p t u r e s the a d d i t i o n a l beef c a l v e s i n a g i v e n time p e r i o d (IQACb) t h a t come from e x t r a beef h e i f e r s r e t a i n e d i n the e a r l i e r p e r i o d s (iQHRbb), and e q u a t i o n [ 22 ] c a p t u r e s the a d d i t i o n a l d a i r y c a l v e s i n a g i v e n time p e r i o d (IQACd) f o r e s t i m a t i n g the e q u i l i b r i u m q u a n t i t y of d a i r y c a l v e s a v a i l a b l e f o r h o l d i n g over i n e q u a t i o n [ 7 ]. [ 21 ] IQACb = B22 [ IQHRbb t-24 + (1-B17) IQHRbb t-36 + ( 1 -B17-B18) IQHRbb t-48 + (1-B17-B18-B19) IQHRbb t -60 + (1-B17-B18-B19-B20) IQHRbb t-72 ] 58 [ 22 ] IQACd = B22 [ IQHRd t-24 + (1-B17) IQHRd t-36 + ( 1 -B17-B18) IQHRd t-48 + (1-B17-B18-B19) IQHRd t-60 + (1-B17-B18-B19-B20) IQHRd t-72 ] where IQACb change of a d d i t i o n a l beef c a l v e s i n p e r i o d t t h a t come from e x t r a beef h e i f e r s r e t a i n e d i n the e a r l i e r per i o d s . IQACd change of a d d i t i o n a l d a i r y c a l v e s i n p e r i o d t t h a t come from e x t r a d a i r y h e i f e r s r e t a i n e d i n the e a r l i e r per i o d s . B22 average number of c a l v e s weaned per cow bred a n n u a l l y . B17 to B20 p r o p o r t i o n of cow c u l l i n g s per b r e e d i n g ( f i r s t , second, t h i r d and f o u r t h r e s p e c t i v e l y ) . 4.2.2.2.6 Market Supply of Beef C a l v e s The s i m u l a t e d q u a n t i t y of beef c a l v e s i n a g i v e n time p e r i o d (QCsb) i s equal t o the e q u i l i b r i u m q u a n t i t y of beef c a l v e s i n the same p e r i o d (QCWeb) p l u s the i n c r e a s e d o f f s p r i n g from a d d i t i o n a l beef h e i f e r s r e t a i n e d e a r l i e r (IQACb) minus the beef c a l f h o l d o v e r s (IQCWhb) which w i l l e n t e r the y e a r l i n g s e c t o r f o u r months l a t e r i n s t e a d of b e i n g marketed as c a l v e s , as i n e q u a t i o n [ 23 ]. [ 23 ] QCsb = QCWeb + IQACb - IQCWhb 59 where QCsb s i m u l a t e d q u a n t i t y of beef c a l v e s i n a g i v e n time p e r i o d . 4.2.2.2.7 Market Supply of Y e a r l i n g s and C a l f - Y e a r 1 i n g s The market s u p p l y of y e a r l i n g s (QYsa) i n a g i v e n time p e r i o d i s e q u a l t o the q u a n t i t y of y e a r l i n g s a v a i l a b l e f o r h o l d i n g over (QYha) i n the same p e r i o d minus the q u a n t i t y of y e a r l i n g h o l d o v e r s i n t h a t p e r i o d (IQYha). The q u a n t i t y of e l i g i b l e y e a r l i n g pounds t h a t c o u l d r e c e i v e s u b s i d i e s s h o u l d a l s o i n c l u d e the y e a r l i n g pounds t h a t come from those y e a r l i n g s b e i n g h e l d o v e r s i x months e a r l i e r and now marketed as s l a u g h t e r a n i m a l s , as i n e q u a t i o n [ 24 ]. S i m i l i a r l y , the market su p p l y of c a l f - y e a r 1 i n g s (QCYsa) i n a g i v e n time p e r i o d i s eq u a l t o the q u a n t i t y of c a l f - y e a r l i n g s a v a i l a b l e f o r h o l d i n g over (QYhcy) i n the same p e r i o d minus the q u a n t i t y of c a l f - y e a r 1 i n g h o l d o v e r s i n t h a t p e r i o d (IQYhcy), p l u s the c a l f - y e a r l i n g pounds t h a t come from y e a r l i n g h o l d o v e r s s i x months e a r l i e r , as i n e q u a t i o n [ 25 ]. [ 24 ] QYsa = QYha + (IQYha t-6) - IQYha [ 25 ] QCYsa = QYhcy + (IQYhcy t-6) - IQYhcy where QYsa s i m u l a t e d q u a n t i t y of y e a r l i n g s i n a g i v e n time p e r i o d . QCYs s i m u l a t e d q u a n t i t y of c a l f - y e a r l i n g s i n a g i v e n time 60 p e r i o d . 4.2.2.2.8 M a r k e t S u p p l y o f S l a u g h t e r A n i m a l s T h e m a r k e t s u p p l y o f s l a u g h t e r a n i m a l s i n a g i v e n t i m e p e r i o d ( Q S s ) i s e q u a l t o t h e q u a n t i t y o f s l a u g h t e r a n i m a l s a v a i l a b l e f o r h o l d i n g o v e r i n t h e same p e r i o d (QSh) m i n u s t h e q u a n t i t y o f s l a u g h t e r a n i m a l h o l d o v e r s i n t h a t p e r i o d ( I Q S h ) , p l u s t h e a d d i t i o n a l h e l d o v e r q u a n t i t y two m o n t h s e a r l i e r a d j u s t e d w i t h d e a t h l o s s f o r k e e p i n g two e x t r a m o n t h s . [ 26 ] QSs = QSh - IQSh + B15 * ( I Q S h t - 2 ) w h e r e QSs s i m u l a t e d q u a n t i t y o f s l a u g h t e r a n i m a l s i n a g i v e n t i m e p e r i o d . B15 a d j u s t m e n t f o r d e a t h l o s s f r o m k e e p i n g a s l a u g h t e r a n i m a l two e x t r a m o n t h s . 4.2.2.3 M a r k e t I d e n t i t i e s • B a c k g r o u n d i n g , f e e d l o t a n d p a c k e r demand f u n c t i o n s a r e a s s u m e d t o be p e r f e c t l y e l a s t i c b e c a u s e t h e m a r k e t p r i c e o f b e e f i n B.C. i s d e t e r m i n e d l a r g e l y o u t s i d e t h e p r o v i n c e . The a s s u m p t i o n o f p e r f e c t l y e l a s t i c demand f u n c t i o n s i m p l i e s a l l a n i m a l s s u p p l i e d a r e p u r c h a s e d i n t h e m a r k e t . [ 27 ] QCd = QCsb 61 [ 28 ] QYd = QYsa [ 29 ] QSd = QSs where QCd q u a n t i t y of beef c a l v e s demanded i n a g i v e n time per i o d . QYd q u a n t i t y of y e a r l i n g s demanded i n a g i v e n time p e r i o d . QSd q u a n t i t y of s l a u g h t e r a n i m a l s demanded i n a g i v e n time p e r i o d . A l l the e q u a t i o n s w i t h r e f e r e n c e t o farmer p r o d u c t i o n d e c i s i o n module have been d e s c r i b e d above. E q u a t i o n s r e g a r d i n g government program module w i l l be d i s c u s s e d as f o l l o w s . 4.2.3 Government Program Module The income s t a b i l i z a t i o n schemes f o r B.C. beef p r o d u c e r s t h a t were d i s c u s s e d i n Chapter I I I , a r e now p r e s e n t e d i n m a t h e m a t i c a l form, b e g i n n i n g w i t h B.C. Beef P r o d u c e r s ' Income Assurance Program. 4.2.3.1 B r i t i s h Columbia Beef P r o d u c e r s ' Income Assurance Program Under the B.C. Beef P r o d u c e r s ' Income Assurance Program, farmers a r e e l i g i b l e t o r e c e i v e an i n d e m n i t y from the p r o v i n c i a l government i f the c a l c u l a t e d t o t a l c o s t of p r o d u c t i o n (IC) p l u s i t s m a r k e t i n g c o s t (MC) exceeds the market p r i c e (Pe) i n t h a t 62 p e r i o d . I t a p p l i e s t o both c a l f and y e a r l i n g p r o d u c t i o n . The amount of the i n d e m n i t y p a i d (IND) i s e q u a l t o 75% of the r e t u r n d e f i c i t (RD), i . e . the d i f f e r e n c e between c o s t and p r i c e . The p r i c e r e c e i v e d by the farmers under FIAP ( P f ) i s e q u a l t o the market p r i c e (Pe) p l u s the c a l c u l a t e d i n d e m n i t y . For p a r t i c i p a t i n g p r o d u c e r s , a p r o d u c e r premium (PP) i s c h a r g e d . Thus, the a c t u a l p r i c e they r e c e i v e d (Pa) s h o u l d deducted the producer premiums (PP) from P f . S i n c e not a l l B.C. beef p r o d u c e r s have j o i n e d FIAP, the e f f e c t i v e p r i c e r e c e i v e d by the average farmer (Ps) i s e q u a l l e d t o a weighted average of the e f f e c t p r i c e r e c e i v e d by p a r t i c i p a t i n g farmers (Pa) i n each p e r i o d and the e q u i l i b r i u m p r i c e (Pe) of the same p e r i o d . E q u a t i o n [ 30 ] to [ 34 ] are l i s t e d below t o i l l u s t r a t e the p rocedure t o determine the e f f e c t i v e p r i c e r e c e i v e d by the averge farmer i n each p e r i o d i f FIAP has been i n o p e r a t i o n . [ 30 ] RD = IC + MC - Pe [ 31 ] IND = A18 * RD [ 32 ] Pf = Pe + IND [ 33 ] Pa = Pf - PP [ 34 ] Ps = [ (A89 * Pa) + (1 - A89) * Pe ] where IND i n d e m n i t y p a i d by the FIAP i n a g i v e n time p e r i o d , RD r e t u r n d e f i c i t i n a g i v e n time p e r i o d . IC c o s t of p r o d u c t i o n i n a g i v e n time p e r i o d . MC m a r k e t i n g c o s t i n a g i v e n time p e r i o d . 63 Pe m a r k e t i n g p r i c e a t e q u i l i b r i u m i n a g i v e n t i m e p e r i o d . P f n o m i n a l p r i c e r e c e i v e d by f a r m e r s t h a t h a v e j o i n e d F I A P i n a g i v e n t i m e p e r i o d . Pa a c t u a l p r i c e r e c e i v e d by f a r m e r s t h a t have j o i n e d F I A P i n a g i v e n t i m e p e r i o d . Ps w e i g h t e d a v e r a g e p r i c e r e c e i v e d by a l l f a r m e r s ( t h e e f f e c t i v e p r i c e ) i n a g i v e n t i m e p e r i o d . PP p r o d u c e r premium p a i d by p a r t i c i p a t i n g f a r m e r s i n a g i v e n t i m e p e r i o d . A18 t h e p r o p o r t i o n o f r e t u r n d e f i c i t g u a r a n t e e d by F I A P ( i . e . t h e s u p p o r l e v e l ) A89 t h e p r o p o r t i o n o f p a r t i c i p a t i n g b e e f o u t p u t . The above e q u a t i o n s h o l d f o r b o t h c a l v e s a n d y e a r l i n g s . F o r c a l f - y e a r l i n g s , t h e r e t u r n d e f i c i t i s e q u a l t o t h e p r o d u c t i o n c o s t o f c a l v e s m i n u s t h e m a r k e t i n g p r i c e o f y e a r l i n g s . 4.2.3.1.1 Premium C a l c u l a t i o n The t o t a l premium i n a g i v e n p e r i o d t ( T P t ) i s d e t e r m i n e d by d i v i d e d t h e t o t a l amount of i n d e m n i t y i n t h e p r e v i o u s f i v e y e a r s w i t h t h e t o t a l q u a n t i t y o f b e e f p r o d u c t i o n i n t h e p r e v i o u s f i v e y e a r s a s shown i n e q u a t i o n [ 35 ] . P r o d u c e r premium ( P P t ) i n a g i v e n t i m e p e r i o d i s an a s s i g n e d p r o p o r t i o n (A20) o f t h e t o t a l p remium of t h e same p e r i o d ( T P t ) , a s shown i n e q u a t i o n [ 36 ] . The way of premium c a l c u l a t i o n a i m s t o make t h e scheme s e l f - f i n a n e i n g . A c u r r e n t y e a r premium w i l l be c h a r g e d a t a h i g h e r r a t e t o t h e e x t e n t t h a t t h e p a y m e n t s 64 i n t h e p r e v i o u s f i v e y e a r s have a c c u m u l a t e d . S i m i l i a r l y , f a r m e r p remium w i l l f a l l f o l l o w i n g p e r i o d s o f low i n d e m n i t y p a y m e n t s , t h e n t h e c u r r e n t premium w i l l c h a r g e a t a l o w e r l e v e l . [ 35 ] T P t = t-1 S l N D t t-6 t-1 QSt .t-6 [ 36 ] where QSt INDt T P t P P t A20 P P t = A20 * T P t b e e f o u t p u t i n a g i v e n t i m e p e r i o d t . i n d e m n i t y p a i d i n a g i v e n t i m e p e r i o d . t o t a l premium i n a g i v e n t i m e p e r i o d t . p r o d u c e r premium i n a g i v e n t i m e p e r i o d t . t h e p r o p o r t i o n o f p r o d u c e r premium as a p e r c e n t a g e o f t h e t o t a l premium i n a g i v e n t i m e p e r i o d . 4.2.3.2 P r e m i u m / S u b s i d y Scheme The b a s i c i d e a o f t h i s scheme i s t o r e q u i r e b e e f p r o d u c e r s t o pay a premium when t h e m a r k e t r e t u r n e x c e e d s a p r e d e t e r m i n e d c e i l i n g p r i c e , a n d .have t h e g o v e r n m e n t pay them a s u b s i d y ( o r l o w e r t h e premium r a t e ) when t h e m a r k e t r e t u r n f a l l s b e l o w t h e i r p r o d u c t i o n c o s t s . T h i s scheme i s d e s i g n e d t o a l l o w f o r t h e e l i m i n a t i o n o f t h e " p e a k s " a s w e l l a s " t o u g h s " o f t h e f l u c t u a t i n g l e v e l o f p r o d u c t p r i c e s . When t h e i n p u t c o s t e x c e e d s t h e m a r k e t p r i c e i n a g i v e n t i m e p e r i o d , t h e i n d e m n i t y c a n be d e t e r m i n e d i n t h e same way as 65 in the FIAP. No producer premium should be c o l l e c t e d in t h i s case. The c a l c u l a t i o n of the e f f e c t i v e p r i c e i s shown as in equation [ 37 ]. When the marketing p r i c e exceeds the input c o s t s in a given time p e r i o d , the f l o o r p r i c e ( P f f ) can be determined by s u b s t r a c t i n g the indemnity c a l c u l a t e d as mentioned e a r l i e r (IND) from the market p r i c e (Pe). Then the c e i l i n g p r i c e (Pee) can be set at a c e r t a i n percentage above the f l o o r p r i c e . If, the market p r i c e exceeds the c e i l i n g p r i c e , farmers w i l l pay a premium (equal to the market p r i c e l e s s the c e i l i n g p r i c e ) so that the e f f e c t i v e p r i c e they r e c e i v e d i s j u s t equal to the c e i l i n g p r i c e . The c a l c u l a t i o n s of the e f f e c t i v e p r i c e are shown as in equations [ 40 ] to [ 43 ]. For the case where input cost exceeds market p r i c e , equation [ 37 ] apply: [ 37 ] Ps = Pe, + IND For the case where market p r i c e exceeds input c o s t , equations [ 38 ] to [ 41 ] apply: [ 38 ] P f f = Pe - IND [ 39 ] Pee = A23 * Pff t 40 ] PP = Pee - Pe [ 41 ] Ps = Pe - PP where Pf f f l o o r p r i c e i n a given time p e r i o d . 66 Pee c e i l i n g p r i c e i n a g i v e n time p e r i o d . A23 per c e n t a g e of c e i l i n g p r i c e s et over the f l o o r p r i c e . 4.2.3.3 Guaranteed P r i c e Scheme The model a l l o w s f o r a guaranteed p r i c e (GPt) to be d e t e r m i n e d by a s s i g n i n g a support l e v e l (B35) t o the. sum of the average market p r i c e of the p r e v i o u s f i v e y e a r s (Pea) and the c u r r e n t c o s t of p r o d u c t i o n ( I C t ) l e s s the average c o s t i n the p r e c e d i n g f i v e y e a r s ( I C a ) . I f the market p r i c e ( Pet) exceeds the g u a r a n t e e d p r i c e (GPt) i n any month t , then the guaranteed p r i c e j u s t e q u a l s P e t . The c a l c u l a t i o n of the guaranteed p r i c e i s shown i n e q u a t i o n [ 42 ]. [ 42 ] GPt = B35 * [ Pea + ( I C t - ICa) ] I f GPt < Pet then GPt = Pet where GPt guaranteed p r i c e i n a g i v e n month t . Pea average market p r i c e of the p r e v i o u s f i v e y e a r s ( i n the same month as t ) . ICt c o s t of p r o d u c t i o n i n a g i v e n month t . ICa average p r o d u c t i o n c o s t of the p r e v i o u s f i v e y e a r s ( i n the same month as t ) . B35 per c e n t a g e of support l e v e l . module. The f i n a l module t o be d i s c u s s e d i s the summary measure 67 4.2.4 Summary Measure Module The computer s i m u l a t i o n experiments are designed to generate i n f o r m a t i o n that i s v a l u a b l e to government d e c i s i o n makers. The r e s u l t s are summarized as "summary measures". They are s t a t i s t i c a l parameters ( e.g. mean, standard d e v i a t i o n , c o e f f i c i e n t of v a r i a t i o n , e t c . ) used to i n d i c a t e the degree of s t a b i l i t y and the l e v e l of v a r i a b l e s regarded as important to p o l i c y makers. Other v a r i a b l e s ( e.g. producer income, q u a n t i t y of beef produced, government expenses, e t c . ) are presented in t h i s module, too. By comparing the values of summary measures obtained from d i f f e r e n t runs of the a l t e r n a t i v e schemes, i t i s p o s s i b l e to p r e d i c t the l i k e l y impacts of these schemes. A l i s t of the summary measures used in t h i s study i s given below i n Table 4.2. 68 T a b l e 4.2 Summary M e a s u r e s Used In T h i s S t u d y MQc mean of s i m u l a t e d a n n u a l c a l f p r o d u c t i o n . MQy mean of s i m u l a t e d a n n u a l y e a r l i n g p r o d u c t i o n . MQcy mean of s i m u l a t e d a n n u a l c a l f - y e a r 1 i n g p r o d u c t i o n . MQt summation of means of a n n u a l c a l f , y e a r l i n g , and c a l f -y e a r l i n g p r o d u c t i o n . PSe mean of e f f e c t i v e c a l f p r i c e r e c e i v e d by a v e r a g e f a r m e r . PSy mean of e f f e c t i v e y e a r l i n g p r i c e r e c e i v e d by a v e r a g e f a r m e r . PScy mean of e f f e c t i v e c a l f - y e a r l i n g p r i c e r e c e i v e d by a v e r a g e f a r m e r . PSt summation of means of c a l f , y e a r l i n g , and c a l f - y e a r l i n g e f f e c t i v e p r i c e s . MRc mean of c a l f p r o d u c e r s a n n u a l r e v e n u e . MRy mean of y e a r l i n g p r o d u c e r s a n n u a l r e v e n u e . MRcy mean of c a l f - y e a r l i n g p r o d u c e r s annual- r e v e n u e . MRt summation of means of c a l f , y e a r l i n g , and c a l f - y e a r l i n g p r o d u c e r s a n n u a l r e v e n u e . SDRc s t a n d a r d d e v i a t i o n of c a l f p r o d u c e r s a n n u a l r e v e n u e . SDRy s t a n d a r d d e v i a t i o n of y e a r l i n g p r o d u c e r s a n n u a l r e v e n u e . SDRcy s t a n d a r d d e v i a t i o n of c a l f - y e a r 1 i n g p r o d u c e r s a n n u a l r e v e n u e . SDRt summation of s t a n d a r d d e v i a t i o n s of c a l f , y e a r l i n g , and c a l f - y e a r l i n g p r o d u c e r s a n n u a l r e v e n u e . CVRc c o e f f i c i e n t of v a r i a t i o n of c a l f p r o d u c e r s a n n u a l r e v e n u e . CVRy c o e f f i c i e n t of v a r i a t i o n o f y e a r l i n g p r o d u c e r s a n n u a l r e v e n u e . CVRcy c o e f f i c i e n t of v a r i a t i o n of c a l f - y e a r 1 i n g p r o d u c e r s a n n u a l r e v e n u e . CVRt summation of c o e f f i c i e n t of v a r i a t i o n s o f c a l f , y e a r l i n g , and c a l f - y e a r l i n g p r o d u c e r s a n n u a l r e v e n u e . MIc mean of c a l f p r o d u c e r s a n n u a l g r o s s income. MIy mean of y e a r l i n g p r o d u c e r s a n n u a l g r o s s income. MIcy mean of c a l f - y e a r l i n g p r o d u c e r s a n n u a l g r o s s income. MIt summation of means of c a l f , y e a r l i n g , and c a l f - y e a r l i n g p r o d u c e r s a n n u a l g r o s s income. SDIc s t a n d a r d d e v i a t i o n of c a l f p r o d u c e r s a n n u a l g r o s s income. SDIy s t a n d a r d d e v i a t i o n of y e a r l i n g p r o d u c e r s a n n u a l g r o s s income. SDIcy s t a n d a r d d e v i a t i o n of c a l f - y e a r l i n g p r o d u c e r s a n n u a l g r o s s income. SDIt summation of s t a n d a r d d e v i a t i o n s of c a l f , y e a r l i n g , and c a l f - y e a r 1 i n g p r o d u c e r s a n n u a l g r o s s income. 69 TGPc t o t a l p r o v i n c i a l government c o n t r i b u t i o n f o r c a l f p r o d u c t i o n . TGPy t o t a l p r o v i n c i a l government c o n t r i b u t i o n f o r y e a r l i n g p r o d u c t i o n . TGPcy t o t a l p r o v i n c i a l government c o n t r i b u t i o n f o r c a l f -y e a r l i n g p r o d u c t i o n . TGPt summation of t o t a l p r o v i n c i a l government c o n t r i b u t i o n s f o r c a l f , y e a r l i n g , and c a l f - y e a r l i n g p r o d u c t i o n . TPPc t o t a l p r oducer premium f o r c a l f p r o d u c t i o n . TPPy t o t a l p r oducer premium f o r y e a r l i n g p r o d u c t i o n . TPPcy t o t a l producer premium f o r c a l f - y e a r l i n g p r o d u c t i o n . TPPt summation of t o t a l p r oducer premiums f o r c a l f , y e a r l i n g , and c a l f - y e a r l i n g p r o d u c t i o n . NGPc net government payment p a i d t o c a l f p r o d u c e r s . NGPy net government payment p a i d t o y e a r l i n g p r o d u c e r s . NGPcy net government payment p a i d t o c a l f - y e a r 1 i n g p r o d u c e r s . NGPt summation of net government payments p a i d t o c a l f , y e a r l i n g , and c a l f - y e a r l i n g p r o d u c e r s . TWC net w e l f a r e change due t o government income s t a b i l i z a t i o n e f f o r t s . 4 70 4.2.4.1 Summary M e a s u r e s C o m p u t a t i o n The a n n u a l mean, s t a n d a r d d e v i a t i o n a n d c o e f f i c i e n t o f v a r i a t i o n o f t h e p r o d u c e r r e v e n u e , p r o d u c e r income and b e e f p r o d u c t i o n a r e c o m p u t e d u s i n g t h e s t a n d a r d s t a t i s t i c a l p r o c e d u r e s . 4.2.4.2 T o t a l G o v e r n m e n t C o n t r i b u t i o n month ( T G P t ) i s e q u a l t o t h e p r o d u c t o f c a l c u l a t e d i n d e m n i t y payment (IND) and t h e s i m u l a t e d q u a n t i t y o f p a r t i c i p a t i n g b e e f (QHSt*A89) i n t h e same month. The t o t a l amount o f g o v e r n m e n t c o n t r i b u t i o n (TGP) o v e r t h e s i m u l a t i o n p e r i o d i s t h e sum o f a l l t h e m o n t h l y c o n t r i b u t i o n ( T G P t ) , a s shown i n e q u a t i o n [ 43 ] . [ 43 ] TGPt = INDt * ( QHSt * A89 ) The amount p a i d t o f a r m e r s by t h e g o v e r n m e n t i n any T TGP TGPt t=l where QHSt s i m u l a t e d b e e f p r o d u c t i o n i n any g i v e n month. TGPt g o v e r n m e n t c o n t r i b u t i o n i n a g i v e n month. TGP t o t a l g o v e r n m e n t c o n t r i b u t i o n o v e r t h e s i m u l a t i o n p e r i o d . T t o t a l number o f months i n t h e s i m u l a t i o n p e r i o d . 4.2.4.3 T o t a l P r o d u c e r Premium I f any of t h e p r o g r a m s i n c l u d e s p r o d u c e r premium, t h e 71 monthly producer premium (TPPt) i s equal to the premium paid per month (PPt) times the q u a n t i t y of simulated q u a n t i t y of p a r t i c i p a t i n g beef per month (QHSt*A89). The t o t a l amount of producer premium over the s i m u l a t i o n p e r i o d (TPP) i s equal to the sum of a l l monthly producer premiums (TPPt) over the s i m u l a t i o n p e r i o d , shown as in equation [ 44 ]. [ 44 ] TPPt = PPt * ( QHSt * A89 ) T TPP = 2 TPPt t=l where TPPt monthly producer premium. TPP t o t a l producer premium over the s i m u l a t i o n p e r i o d . 4.2.4.4 Net Government Payment The net government payment (NPP) i s equal to the t o t a l government c o n t r i b u t i o n (TGP) minus t o t a l producer premium (TPP), that i s the a c t u a l f i n a n c i a l c ost of the income s t a b i l i z a t i o n programs shown i n equation [ 45 ]. [ 45 ] NGP = TGP - TPP where NGP net government payment over the s i m u l a t i o n p e r i o d . T h i s completes the d e s c r i p t i o n of the mathematical model of the B.C. beef i n d u s t r y used i n t h i s study. In the next s e c t i o n , welfare change due to the implementation of a l t e r n a t i v e government programs w i l l be d i s c u s s e d i n d e t a i l . 72 4.3 E s t i m a t i o n Of Welfare Changes Because the Farm Income Assurance program (FIAP) pays a subsidy f o r e l i g i b l e beef pounds produced, B.C. beef producers would have r e c e i v e d a higher r e t u r n on beef p r o d u c t i o n in recent years. P r i c e support for income maintance purposes may c o n t r i b u t e to higher cost by h o l d i n g resources in uses where t h e i r p r o d u c t i v i t i e s are l e s s than t h e i r p o t e n t i a l c a p a c i t i e s (Drummand, Anderson and K e r r ) . From the s o c i a l p o i n t of view, <? government i n t e r f e r e n c e through any income s t a b i l i z a t i o n programs may l e a d to problems of resource m i s a l l o c a t i o n . It i s i n t e r e s t i n g to estimate the resource a l l o c a t i o n . c o s t s generated by the a l t e r n a t i v e income s t a b i l i z a t i o n schemes. T h i s i n v o l v e s e s t i m a t i o n of s o c i a l c o s t s of resources used and the s o c i a l value of beef produced. As p o i n t e d out e a r l i e r , the amount of beef produced in B.C. i s q u i t e small compared to the North American beef market. Th i s i m p l i e s that B.C. beef producers are " p r i c e - t a k e r s " . Thus, income s t a b i l i z a t i o n programs cannot be expected to a f f e c t the demand side so no consumer s u r p l u s w i l l be i n v o l v e d . The e s t i m a t i o n s below r e l a t e only to the supply s i d e of the beef market. By making use of the model, i t i s found that the simulated supply q u a n t i t y of c a l v e s has i n c r e a s e d whereas the simulated supply q u a n t i t y of y e a r l i n g s has decreased, assuming implementation of the a l t e r n a t i v e income s t a b i l i z a t i o n schemes mentioned e a r l i e r . The reason fo r the decrease of y e a r l i n g s i s that more h e i f e r s were r e t a i n e d and some y e a r l i n g s were heldover 73 to feed as slaughter animals. In the aggregate sense of beef p r o d u c t i o n , those y e a r l i n g s being heldover to become s l a u g h t e r animals are j u s t a t r a n s f e r from one type of p r o d u c t i o n to another type and thus i t i s u n l i k e l y that they w i l l exert any e f f e c t on the welfare changes. The i n c r e a s e i n the q u a n t i t y of c a l v e s w i l l a c t u a l l y ncrease the aggregate beef p r o d u c t i o n and the emphasis w i l l be put on the welfare changes on c a l f product i o n . 4.3.1 D i r e c t D i s t o r t i o n Without any government i n t e r f e r e n c e , the market c l e a r i n g p r i c e of beef (Pe) i s at the e q u i l i b r i u m p o i n t A ( F i g . 4.2) where the marginal cost of p r o d u c t i v e r e s o u r c e s i s equal to the marginal b e n e f i t r e c e i v e d by consumers. Since the demand for beef i s assumed to be p e r f e c t l y e l a s t i c , the demand curve can be represented by a h o r i z o n t a l l i n e equal to the market p r i c e , as in F i g u r e 4.2. • F i g u r e 4.2 Welfare Change Due To D i r e c t D i s t o r t i o n Price Quantity 74 At e q u i l i b r i u m (point A), beef producers produce Qe q u a n t i t y of beef at a supply p r i c e equal to the market c l e a r i n g p r i c e , Pe. If an income s t a b i l i z a t i o n scheme pays a subsidy to the beef producers that i n c r e a s e the e f f e c t i v e p r i c e they r e c e i v e d to Ps. Induced by t h i s higher p r i c e , farmers are l i k e l y to i n c r e a s e t h e i r p r o d u c t i o n and w i l l produce Qs q u a n t i t y of beef at the p r i c e Ps. At point B, the marginal cost of resources i s higher than the marginal b e n e f i t because the demand curve i s s t i l l the same h o r i z o n t a l l i n e (DD). T h i s e x e r t s a co s t to s o c i e t y for the m i s a l l o c a t i o n of resources which c o u l d otherwise be used more e f f e c t i v e l y i n the pr o d u c t i o n of other c o m p e t i t i v e a c t i v i t i e s . The s o c i a l c o s t i s represented by the shaded t r i a n g l e ABC shown i n F i g u r e 4.2. The s o c i a l c ost can be c a l c u l a t e d as in equation [ 46 ] below. T [ 46 ] TSC = 2 1/2 * ( Qst - Qet ) * ( Pst - Pet) t=l where TSC t o t a l s o c i a l c ost over the s i m u l a t i o n p e r i o d . Pet e q u i l i b r i u m market p r i c e i n a given time p e r i o d t . Pst simulated p r i c e (Pe+subsidy) i n a given time p e r i o d t . Qet e q u i l i b r i u m q u a n t i t y in a given time p e r i o d t . Qst simulated q u a n t i t y i n a given time p e r i o d t . T t o t a l number of time p e r i o d i n the s i m u l a t i o n p e r i o d . As mentioned e a r l i e r , i t i s reasonable to expect some "non-price" supply response to the advent of any income s t a b i l i z a t i o n scheme. I f farmers expect a more s t a b l e 75 p r o d u c t i o n environment, they may be i n c l i n e d to i n c r e a s e t h e i r supply. If they do, the beef supply curve w i l l s h i f t to the r i g h t , as in F i g u r e 4.3. Beef w i l l be produced with lower resource c o s t and a c t u a l l y b e n e f i t s o c i e t y . The b e n e f i t s obtained are represented i n F i g u r e 4.3 by the area ABCD. F i g u r e 4.3 Welfare Change Due To D i r e c t D i s t o r t i o n ,  with non-price response Price Quantity Q e " Qs As in the case above, when any income s t a b i l i z a t i o n scheme comes i n t o e f f e c t , beef w i l l be produced at a higher than e q u i l i b r i u m p r i c e , thus implying a welfare l o s s . The welfare cost i s represented by t r i a n g l e EDF in F i g u r e 4.3. The t o t a l welfare change induced by any income s t a b i l i z a t i o n scheme assuming a "non-price e f f e c t " i s equal to the d i f f e r e n c e between the s o c i a l b e n e f i t s generated by the more e f f i c i e n t p r o duction and the s o c i a l c ost of excess p r o d u c t i o n ; i . e . the d i f f e r e n c e between the areas ABCD and EDF i n F i g u r e 4.3. 76 4.3.2 I n d i r e c t D i s t o r t i o n I n C a n a d a , b e e f i s b o t h i m p o r t e d a n d e x p o r t e d . T h u s , an i n c r e a s e i n b e e f p r o d u c t i o n r e s u l t i n g f r o m any income s t a b i l i z a t i o n scheme s u g g e s t s an i n c r e a s e i n e x p o r t s a n d / o r a r e d u c t i o n i n i m p o r t s . I n c r e a s e s i n B.C. b e e f p r o d u c t i o n due t o g o v e r n m e n t i n t e r v e n t i o n c a n be e x p e c t e d t o i m p r o v e C a n a d a i a n f o r e i g n e x c h a n g e e a r n i n g s ; h e n c e , a s o c i a l b e n e f i t . The b e n e f i t a r i s e s b e c a u s e t h e s o c i a l o p p o r t u n i t y c o s t o f f o r e i g n e x c h a n g e e x c e e d s t h e m a r k e t e x c h a n g e r a t e u s e d t o t r a n s l a t e f o r e i g n c a s h r e c e i p t s and d i s b u r s e m e n t s i n t o C a n a d i a n d o l l a r s . The m a g n i t u d e o f t h i s b e n e f i t d e p e n d s on e x p o r t s u b s i d i e s , i m p o r t t a r i f f s a nd s a l e s t a x ( B a r i c h e l l o ) . J e n k i n s h a s e s t i m a t e d t h e s o c i a l o p p o r t u n i t y c o s t o f f o r e i g n e x c h a n g e i n Canada t o be 13% i n e x c e s s o f t h e m a r k e t e x c h a n g e r a t e ( J e n k i n s ) , w h i c h means e a c h d o l l a r e a r n e d by i n c r e a s e d p r o d u c t i o n of b e e f i n d u c e d by any i ncome s t a b i l i z a t i o n scheme i s w o r t h $1.13 t o C a n a d a . T h i s r a t e o f 1 3 % i s a p p l i e d i n t h i s s t u d y f o r t h e e v a l u a t i o n o f s o c i a l b e n e f i t s g e n e r a t e d , a s i n e q u a t i o n [ 47 ] . T [-47 ] TSB = S 0.13 * P e t * ( Q s t - Q e t ) w here TSB t o t a l s o c i a l b e n e f i t s o v e r t h e s i m u l a t i o n p e r i o d . T h e r e a r e o t h e r t y p e s o f i n d i r e c t d i s t o r t i o n s s u c h as t h e i n c r e a s e i n t h e amount o f c r e d i t s u b s i d i e s f i n a n c e d u n d e r A g r i c u l t u r a l C r e d i t A c t and t h e l a n d c l e a r i n g s u b s i d i e s f i n a n c e d 77 under ALDA. Increases i n beef p r o d u c t i o n can be expected to increase the expenditures of these programs i n d i r e c t l y . Due to the u n a v a i l a b i l i t y of data and/or t h e i r r e l a t i v e l y small expected e f f e c t s on net welfare change, they are n e g l e c t e d in t h i s study's e s t i m a t i o n of welfare change. However, i t should be kept i n mind that these s o c i a l c o s t s w i l l o f f s e t part of the b e n e f i t s gained from a d d i t i o n a l f o r e i g n exchange e a r n i n g s . 4.3.3 Summary of Welfare Change From the above a n a l y s i s , the welfare change generated by any income s t a b i l i z a t i o n scheme can be summarized as below: 1. S o c i a l B e n e f i t s -(a) If a "non-price e f f e c t " i s i n c l u d e d i n the model, there are some resource savings gained by the added e f f i c i e n c y induced by a more s t a b l e p r o d u c t i o n env i ronment. (b) Because s o c i a l o p p o r t u n i t y cost of f o r e i g n exchange in Canada exceeds the market exchange r a t e , b e n e f i t s to s o c i e t y w i l l r e s u l t from the expansion of beef outputs. 2. S o c i a l C o s t s -(a) Income s u b s i d i e s which induce beef producers to i n c r e a s e t h e i r p r o d u c t i o n l e a d to higher resource a l l o c a t i o n c o s t s . (b) The expenditures of ALDA and A g r i c u l t u r a l C r e d i t Act would have i n c r e a s e d due to the expansion of beef product i o n . 78 In summary, the total amount of welfare change presented in the summary measure module includes only the aggregate amount of "the social costs induced by increased production (i.e. 2(a) above) and the social benefits gained from foreign exchange earnings (i.e. Kb) above). 79 4.4 Model V a l i d a t i o n V a l i d a t i o n i s the stage of s i m u l a t i o n procedure where a w e l l accepted process i s probably l e a s t developed (Johnson). T h i s study's model i s designed to t r a c e the marginal changes in B.C. beef p r o d u c t i o n due to the implementation of government income s t a b i l i z a t i o n programs. The changes are r e f l e c t e d by q u a n t i t y changes in h e i f e r r e t e n t i o n , the q u a n t i t y changes in c a l f / y e a r l i n g holdovers and the q u a n t i t y changes due to a "non-p r i c e e f f e c t " . In the v a l i d a t i o n p r o c e s s , i t should be p o s s i b l e to show that the model, under c e r t a i n circumstances, i s a v a l i d r e p r e s e n t i o n of the r e a l world. Two c r i t i c a l steps are i n v o l v e d in the v a l i d a t i o n procedure (Anderson) : (1) to ensure that the assumptions of the model are i n accord with r e l e v a n t theory, experience and general knowledge; (2) to compare the model performance with the r e a l system. Regarding step (1), the p r o d u c t i o n assumptions of the model were set with the guidance of B.C.M.A. c a t t l e s p e c i a l i s t s . The values of the parameters used in t h i s study were based on previous s t u d i e s where a v a i l a b l e , with s u i t a b l e adjustments. Step (2) can be c a r r i e d out using h i s t o r i c a l v a l i d a t i o n . T h i s i s p o s s i b l e because the B.C. Beef Producers' Income Assurance Program has been o p e r a t i n g s i n c e 1974. The a c t u a l f i g u r e s of p r o d u c t i o n are used f o r comparison with the simulated q u a n t i t y estimates generated by the model. S t a t i s t i c a l t e s t s are performed to show the "goodness of f i t " between the observed 80 v a l u e s a n d t h e s i m u l a t e d v a l u e s . S i n c e t h e q u a n t i t y o f b e e f p r o d u c e d b e t w e e n J a n u a r y 1975 and December 1978 a l r e a d y i n c l u d e s t h e e f f e c t s o f t h e o p e r a t i o n o f F I A P , i t i s n e c e s s a r y t o d e s i g n a p r o c e d u r e t o e s t i m a t e t h e e q u i l i b r i u m q u a n t i t y , i . e . when t h e r e was no g o v e r n m e n t p r o g r a m i n e x i s t e n c e . G i v e n t h e q u a n t i t y o f b e e f p r o d u c e d u n d e r F I A P i s known f r o m a c t u a l p r o d u c t i o n d a t a f r o m 1974 t o 1978, by a s s i g n i n g a s u p p l y e l a s t i c i t y b a s e d on p r e v i o u s s t u d i e s , i t i s p o s s i b l e t o e s t i m a t e t h e e q u i l i b r i u m q u a n t i t y i n any g i v e n t i m e p e r i o d . The r e l e v a n t e q u a t i o n i s a s f o l l o w s : Qo - Qe Qe [ 48 ] Esr - Po - Pe Pe t h e n Qe = Qo / 1.0 + E s v * (Po - Pe) / Pe where Qo o b s e r v e d q u a n t i t y ( w i t h F I A P ' s e f f e c t ) i n a g i v e n t i m e p e r i o d . Qe e q u i l i b r i u m q u a n t i t y i n a g i v e n t i m e p e r i o d . Po a v e r a g e p r i c e f a r m e r s r e c e i v e d ( w i t h F I A P s u b s i d y ) i n a g i v e n t i m e p e r i o d . Pe e q u i l i b r i u m m a r k e t p r i c e i n a g i v e n t i m e p e r i o d . . E s v s h o r t r u n s u p p l y e l a s t i c i t y . 81 4.4.1 V a l i d a t i o n Procedure As mentioned in the s e c t i o n above, two c r i t i c a l steps are i n v o l v e d i n v a l i d a t i o n - s e l e c t i n g parameter values and showing that the model i s a reasonable r e p r e s e n t a t i o n of r e a l i t y . 4.4.1.1 S e l e c t i n g Parameter Values The parameters i n c l u d e d i n the model can be grouped i n t o three c a t e g o r i e s : b e h a v i o r a l parameters, t e c h n i c a l parameters and p o l i c y parameters. These parameters and the procedures used to s e l e c t t h e i r values are d i s c u s s e d below. 4.4.1.1.1 Be h a v i o r a l Parameters B e h a v i o r a l parameters show the farmer's response to changes brought about by government i n t e r v e n t i o n . From previous s t u d i e s on the Canadian beef i n d u s t r y , ( Ma r t i n and Hacck, T r y f o s , K u l s h r e s t h a , Kerr ) the e s t i m a t i o n s made by Mar t i n and Hacck seem to be most a p p r o p r i a t e f o r use in t h i s model, because the v a r i a b l e s used in t h e i r study are q u i t e c l o s e l y r e l a t e d to the v a r i a b l e s used in t h i s study. In t h e i r study, inventory of beef cows for breeding purposes i s a f u n c t i o n of stocker c a l f p r i c e with a long run supply e l a s t i c i t y of 0.60 f o r Western Canada. C a t t l e q u a n t i t y i s a f u n c t i o n of the s t e e r p r i c e , which i s assumed to be a proxy for y e a r l i n g p r i c e , with a supply e l a s t i c i t y of 0.37. With these values as s t a r t i n g p o i n t s , d i f f e r e n t b e h a v i o r a l parameters can be estimated by making use of the model with d i f f e r e n t runs. Since no study has been 82 conducted on the "non-price e f f e c t " of a more s t a b l e income environment, the non-price response parameter w i l l be given a zero value i n the experimental runs of the model. The values of the b e h a v i o r a l parameters r e f l e c t farmer responses to income s t a b i l i z a t i o n schemes i n the f o l l o w i n g ways. If the p r i c e of c a l v e s i n c r e a s e s , more h e i f e r s w i l l be r e t a i n e d for breeding purposes, thus d e c r e a s i n g the number of y e a r l i n g h e i f e r s being marketed. When more h e i f e r s are r e t a i n e d , more c a l v e s w i l l go to market 24 months l a t e r and every 12 months t h e r e a f t e r . If there i s an in c r e a s e i n y e a r l i n g p r i c e , more c a l v e s w i l l be heldover and marketed as y e a r l i n g s four months l a t e r . I f there i s an in c r e a s e i n slau g h t e r c a t t l e p r i c e and/or y e a r l i n g p r i c e , more y e a r l i n g s w i l l be heldover to c o l l e c t s u b s i d i e s when they are marketed as f i n i s h e d animals, (at a heav i e r weight) s i x months l a t e r thus d e c r e a s i n g the number of marketed y e a r l i n g s in that p e r i o d . S e v e r a l experimental runs were conducted with d i f f e r e n t parameter values, and the changes in each of the summary measures were in the expected d i r e c t i o n . T h i s suggests that the model i s i n t e r n a l l y c o n s i s t e n t . 4.4.1.1.2 T e c h n i c a l Parameters T e c h n i c a l parameters show the b i o l o g i c a l c h a r a c t e r i s t i c s of beef p r o d u c t i o n in B.C. T h e i r values have been v e r i f i e d by the B.C.M.A. c a t t l e s p e c i a l i s t s . 4.4.1.1.3 P o l i c y Parameters P o l i c y parameters show the degree of government i n t e r f e r e n c e . They are manipulated by the p o l i c y makers and be set a c c o r d i n g l y to examine t h e i r e f f e c t s on the r e l e v a n t summary measures. The values of the b e h a v i o r a l and t e c h n i c a l parameters used in t h i s study are repo r t e d i n Table 4.3. 84 TABLE 4.3 L I S T OF VALUES OF PARAMETERS SYMBOL VALUE TYPE DEFINITION B I 0.0247 b e h a v i o r h e i f e r r e t e n t i o n r e s p o n s e t o a c h a n g e i n y e a r l i n g p r i c e . B3 0.0247 b e h a v i o r h e i f e r r e t e n t i o n r e s p o n s e t o a c h a n g e i n c a l f p r i c e . B5 0.000 b e h a v i o r h e i f e r r e t e n t i o n r e s p o n s e i n d u c e d by a more s t a b l e p r o d u c t i o n e n v i r o n m e n t . B6 0.019 b e h a v i o r c a l f h o l d o v e r r e s p o n s e t o a c h a n g e i n y e a r l i n g p r i c e . B8 0.011 b e h a v i o r y e a r l i n g h o l d o v e r r e s p o n s e t o a c h a n g e i n y e a r l i n g p r i c e . B12 0.98 t e c h n i c a l d e a t h l o s s f o r k e e p i n g a c a l f an e x t r a f o u r m o n t h s . B17 0.20 t e c h n i c a l p r o p o r t i o n o f h e i f e r s s l a u g h t e r e d a f t e r f i r s t w e a n i n g . B18 0.10 t e c h n i c a l p r o p o r t i o n o f h e i f e r s s l a u g h t e r e d a f t e r s e c o n d w e a n i n g . B19 0.10 t e c h n i c a l p r o p o r t i o n o f h e i f e r s s l a u g h t e r e d a f t e r t h i r d w eaning.' B20 0.10 t e c h n i c a l p r o p o r t i o n o f h e i f e r s s l a u g h t e r e d a f t e r f o u r t h w e a n i n g . B22 0.804 t e c h n i c a l a v e r a g e number o f c a l v e s weaned p e r cow a n n u a l l y . B24 0.05 t e c h n i c a l h e i f e r r e t e n t i o n c o n s t r a i n t . B25 0.10 t e c h n i c a l c a l f h o l d o v e r c o n s t r a i n t . B26 0.10 t e c h n i c a l y e a r l i n g h o l d o v e r c o n s t r a i n t . B30 1.243 t e c h n i c a l a d j u s t m e n t f o r d e a t h r a t e o f k e e p i n g a c a l f u n t i l a y e a r l i n g . 85 4.4.1.2 V a l i d a t i n g The M o d e l B e c a u s e t h e B.C. B e e f P r o d u c e r s ' Income A s s u r a n c e P r o g r a m h a s been i n e f f e c t s i n c e 1974, h i s t o r i c a l v a l i d a t i o n c a n be u s e d a s a way t o v a l i d a t e t h e m o d e l . By m a k i n g use of t h e m o d e l , t h e s i m u l a t e d q u a n t i t y of b e e f o u t p u t i n t h e p e r i o d 1 9 7 4 -1978 i s g e n e r a t e d and c o m p a r e d w i t h t h e a c t u a l p r o d u c t i o n d a t a o f t h e same p e r i o d . A d d i t i o n a l l y , i n o r d e r t o c o n f i r m t h a t t h e v a l u e s o f t h e p a r a m e t e r s c h o s e n a r e a p p r o p r i a t e f o r t h e B.C. b e e f i n d u s t r y , t h e m o d el w i l l be r u n f o r t h e p a s t t w e n t y y e a r s ( 1 9 5 9 - 1 9 7 8 ) t o t r a c e t h e y e a r - t o - y e a r c h a n g e s i n b e e f p r o d u c t i o n . 4.4.1.2.1 The 1974-1978 P e r i o d The model i s r u n w i t h z e r o v a l u e p o l i c y p a r a m e t e r s f r o m J a n u a r y 1959 t o December 1973, and w i t h g o v e r n m e n t s t a b i l i z a t i o n p a r a m e t e r s f r o m J a n u a r y 1974 t o December 1978. The T h e i l ' s U-c o e f f i c i e n t i s u s e d t o show t h e " g o o d n e s s of f i t " between t h e o b s e r v e d d a t a and t h e s i m u l a t e ' d q u a n t i t y e s t i m a t e d by t h e m o d e l ( T h e i l ) . T h e i l ' s U - c o e f f i c i e n t i s c a l c u l a t e d a s i n e q u a t i o n t 49 ] . [ 49 ] u = where Y t p r e d i c t e d v a l u e s i n a g i v e n t i m e p e r i o d . 86 Y t o b s e r v e d v a l u e s i n a g i v e n t i m e p e r i o d . T number of t o t a l o b s e r v a t i o n s i n t h e w h o l e s i m u l a t i o n p e r i o d . U T h e i l ' s U - c o e f f i c i e n t . The r a n g e of T h e i l U - c o e f f i c i e n t i s b e t ween 0 and 1, where U=0 i n d i c a t e s a p e r f e c t p r e d i c t i o n and U=l a v e r y p o o r p r e d i c t i o n . The T h e i l ' s U - c o e f f i c i e n t s o b t a i n e d f r o m t h e e x p e r i m e n t a l r u n f o r t h e p e r i o d 1974-1978 a r e 0.0605 f o r c a l v e s , 0.0559 f o r y e a r l i n g s and 0.0639 f o r c a l f - y e a r 1 i n g s , s h o w i n g t h a t t h e m o d e l h a s t h e a b i l i t y t o a p p r o x i m a t e r e a l i t y . 4.4.1.2.2 The 1959-1978 P e r i o d The same v a l u e s o f p a r a m e t e r s l i s t e d i n T a b l e 4.3 a r e u s e d f o r t h e p a s t t w e n t y y e a r s ( 1 9 5 9 - 1 9 7 8 ) t o c h e c k t h e i r a p p r o p r i a t e n e s s . As t h e m a r k e t p r i c e s o f b e e f a r e d e t e r m i n e d by s u p p l y and demand i n t h e m a r k e t , t h e p r i c e s f l u c t u a t e f r o m y e a r t o y e a r . F a r m e r s w i l l r e s p o n d t o p r i c e c h a n g e s by a d j u s t i n g t h e i r o u t p u t q u a n t i t y . F o r p u r p o s e s o f v a l i d a t i o n , we c a n assume p r i c e c h a n g e s o v e r t h e t w e n t y y e a r p e r i o d , 1959-1978 r e s u l t e d f r o m a g o v e r n m e n t income s t a b i l i z a t i o n p r o g r a m i n s t e a d of t h e r e a l c a u s e - c h a n g i n g m a r k e t c o n d i t i o n s . The c u r r e n t y e a r ' s m a r k e t p r i c e was c o m p a r e d w i t h l a s t y e a r ' s p r i c e , a s s u m i n g y e a r t o y e a r d i f f e r e n c e s i n p r i c e s were i n d u c e d by g o v e r n m e n t income s t a b i l i z a t i o n p r o g r a m , w h i c h w o u l d l e a d t o c h a n g e s i n t h e q u a n t i t y of b e e f o u t p u t s . The m a r g i n a l c h a n g e i n c u r r e n t month t ( I Q t ) i s e s t i m a t e d by t h e m o d e l , and a s s u m i n g i t i s p r o p o r t i o n a l t o l a s t y e a r ' s p r o d u c t i o n q u a n t i t y , 87 i s a f u n c t i o n o f t h e c h a n g e b e t w e e n c u r r e n t month's p r i c e ( P t ) and p r i c e t w e l v e months ( P t - 1 2 ) e a r l i e r . I t i s i l l u s t r a t e d a s i n e q u a t i o n [ 50 ] . The s i m u l a t e d q u a n t i t y i n a g i v e n month t ( Q s t ) i s e q u a l t o t h e sum of l a s t y e a r ' s s i m u l a t e d q u a n t i t y ( Q s t - 1 2 ) and any m a r g i n a l c h a n g e i n q u a n t i t y i n t h a t month ( I Q t ) due t o t h e p r i c e d i f f e r e n c e , a s shown i n e q u a t i o n [ 51 ] . T h i s new s i m u l a t e d q u a n t i t y w o u l d a c t a s t h e b a s e i n s i m u l a t i n g t h e f o l l o w i n g y e a r ' s q u a n t i t y , a nd t h e p r o c e s s s i m i l a r l y c o n t i n u e s . The s i m u l a t e d q u a n t i t y o b t a i n e d by t h i s p r o c e d u r e i s c o m p a r e d w i t h t h e a c t u a l p r o d u c t i o n d a t a t o c h e c k t h e p e r f o r m a n c e of t h e m o d e l o v e r a l o n g e r p e r i o d o f t i m e . [ 50 ] I Q t / QSt-12 = B * ( P t - P t - 1 2 ) [ 51 ] QSt = Q S t - 1 2 + I Q t where I Q t m a r g i n a l q u a n t i t y c h a n g e i n month t due t o t h e p r i c e d i f f e r e n c e b e t w e e n p r i c e a t t i m e t and p r i c e a t t i m e t - 1 2 . Q S t-12 s i m u l a t e d q u a n t i t y i n month t - 1 2 . QSt s i m u l a t e d q u a n t i t y i n month t . B e f f e c t o f p r i c e s c h a n g e on t h e c h a n g e i n q u a n t i t y o f b e e f p r o d u c t i o n . P t m a r k e t p r i c e o f b e e f i n month t . P t - 1 2 m a r k e t p r i c e o f b e e f i n month t - 1 2 . The model i s r u n w i t h t h e l i s t e d p a r a m e t e r v a l u e s f o r t h e t w e n t y y e a r s ( 1 9 5 9 - 1 9 7 8 ) t o g e n e r a t e t h e s i m u l a t e d 88 q u a n t i t i e s . The y e a r 1963 was c h o s e n a s t h e i n i t i a l y e a r and t h u s a c t e d a s t h e b a s e t o g e n e r a t e t h e s u b s e q u e n t y e a r s ' b e e f o u t p u t . The p r e v i o u s f o u r y e a r s ( 1 9 5 9 - 1 9 6 2 ) were i n c o r p o r a t e d t o a l l o w t h e i n c l u s i o n o f some l a g g e d c h a n g e s i n p r o d u c t i o n , e.g. t h e c h a n g e i n o f f s p r i n g b e i n g p r o d u c e d due t o a c h a n g e i n h e i f e r r e t e n t i o n c a u s e d by a p r e v i o u s p r i c e c h a n g e . The t e s t of T h e i l U - c o e f f i c i e n t s was a g a i n u s e d h e r e t o c h e c k t h e " g o o d n e s s of f i t " b e t w e e n t h e s i m u l a t e d q u a n t i t y and t h e a c t u a l p r o d u c t i o n q u a n t i t y . The t e s t was f i r s t p e r f o r m e d w i t h t h e m o n t h l y d a t a ( w i t h 180 m o n t h l y o b s e r v a t i o n s ) . The T h e i l U - c o e f f i c i e n t s were 0.2044 f o r c a l v e s , 0.2192 f o r y e a r l i n g s a n d 0.222 f o r c a l f - y e a r l i n g s . When m o n t h l y q u a n t i t i e s were summed t o f o r m a n n u a l d a t a , t h e T h e i l U - c o e f f i c i e n t s o b t a i n e d were 0.1353 f o r c a l v e s , 0.1749 f o r y e a r l i n g s and 0.1825 f o r c a l f - y e a r l i n g s . When p r i c e i n c r e a s e s , f a r m e r s may n o t n e c e s s a r i l y i n c r e a s e t h e i r b e e f s u p p l y ; i n s t e a d t h e y may h o l d s u p p l i e s f r o m m a r k e t i f t h e y e x p e c t h i g h e r p r i c e s i n t h e f u t u r e . L i m i t e d by s t o r a g e f a c i l i t i e s and s c a l e o f economy, t h i s b e h a v i o r c a n o c c u r o n l y w i t h i n c e r t a i n l i m i t s . I t seems r e a s o n a b l e t o e l i m i n a t e t h e s e k i n d s of " u n u s u a l " q u a n t i t y c h a n g e s by a v e r a g i n g t h e n e i g h b o u r i n g y e a r s . H e r e e v e r y t h r e e y e a r s i s c h o s e n a s an u n i t t o c a l c u l a t e t h e " g o o d n e s s o f f i t " ; e.g. we use t h e p r o d u c t i o n f i g u r e s o f J a n u a r y 1 9 6 1 , 1962 a n d 1963 t o g e t t h e a v e r a g e m o n t h l y f i g u r e , g i v i n g a t o t a l o f 72 m o n t h l y o b s e r v a t i o n s . The T h e i l U - c o e f f i c i e n t s o f t h r e e y e a r s ' a v e r a g e q u a n t i t y were 0.0947 f o r c a l v e s , 0.1387 f o r y e a r l i n g s and 0.1513 f o r c a l f -89 y e a r 1 i n g s . In summary, the values of T h e i l U - c o e f f i c i e n t s obtained from d i f f e r e n t sets of data are c l o s e to zero, i n d i c a t i n g the p r e d i c t i v e power of the model i s q u i t e good. The T h e i l U-c o e f f i c i e n t s obtained by M a r t i n and Zwart in t h e i r model ranged between 0.024 to 0.146 (Martin and Zwart). The authors concluded that t h e i r model has the a b i l i t y to p r e d i c t the a c t u a l values of the v a r i a b l e s . In l i g h t of t h i s comparison, the c o e f f i c i e n t s obtained in the v a l i d a t i o n procedure of t h i s study can a l s o termed " s a t i s f a c t o r y " . 4.4.2 L i m i t a t i o n s of the V a l i d a t i o n Procedure Given that the model only captures marginal q u a n t i t y changes due to p r i c e changes, we cannot expect the simulated q u a n t i t y to be e x a c t l y equal to observed p r o d u c t i o n . There are s e v e r a l t h i n g s which may cause the simulated values and the observed values to d i f f e r . (1) We assume the technology of beef p r o d u c t i o n remains the same throughout the twenty year p e r i o d , which may not be too r e a l i s t i c . T h i s may p a r t i a l l y account f o r the b e t t e r f i t i n the beginning years of the p e r i o d . (2) We haven't i n c l u d e d any s t o t a s t i c changes in the model, e.g. d i s e a s e which may decrease beef p r o d u c t i o n , or t a r i f f r e g u l a t i o n changes between the United S t a t e s and Canada that may change the trade p a t t e r n of beef. (3) We haven't included the input c o s t s i n the v a l i d a t i o n procedure, because the data i n d i c a t e d input p r i c e s have 90 only i n c r e a s e d moderatedly throughout the whole p e r i o d . (4) Although the model i n c o r p o r a t e s a "non-price supply s h i f t e r " , i t hasn't been used i n the experimental runs due to the d i f f i c u l t y of knowing what values i t should assume. (5) Only the beef p r i c e i s c o n s i d e r e d in the model, the p r i c e of other supply s u b s t i t u t e s are not i n c l u d e d . Beef producers can, of course, s h i f t t h e i r beef p r o d u c t i o n to other l i v e s t o c k p r o d u c t i o n i f g r e a t e r p r o f i t can be ob t a i n e d . Although i t i s p o s s i b l e to b u i l d a more s o p h i s t i c a t e d model to d e a l with some of these l i m i t a t i o n s , the t r a d e o f f which e x i s t s between s i m p l i c i t y and r e a l i s m must not be l o s t s i g h t o f . T h i s model i s designed to t r a c e the marginal changes i n B.C. beef production due to the implementation of government income s t a b i l i z a t i o n programs, mainly through product p r i c e d e f i c i e n c y payments. The s t a t i s t i c a l r e s u l t s r e p o r t e d above show that the model i s capable of p r e d i c t i n g output changes that are c o n s i s t e n t with a c t u a l p r o d u c t i o n data. T h i s i n c r e a s e s our co n f i d e n c e that the model i s a r e l i a b l e r e p r e s e n t a t i o n of the B.C. beef i n d u s t r y and thus can be used to draw c o n c l u s i o n s to meet the o b j e c t i v e s of t h i s study. 91 CHAPTER V THE RESULTS T h i s c h a p t e r p r e s e n t s t h e r e s u l t s o b t a i n e d by r u n n i n g t h e m o d e l w i t h d i f f e r e n t p o l i c y v a r i a b l e s , a n d u n d e r a l t e r n a t i v e i n c ome s t a b i l i z a t i o n schemes. The r e s u l t s a r e s u m m a r i z e d v i a t h e summary m e a s u r e s ( o r o u t p u t v a r i a b l e s ) t h a t were t h o u g h t t o be o f most i n t e r e s t t o p o l i c y m a k e r s . When t h e r e s u l t s f o r e a c h scheme a r e p r e s e n t e d , a s h o r t a n a l y s i s i s made t o i n t e r p r e t t h e i r r e l e v a n c e t o income s t a b i l i z a t i o n . 5.1 C o m p a r i n g E f f e c t s o f A l t e r n a t i v e S t a b i l i z a t i o n Schemes One o f t h e a d v a n t a g e s o f u s i n g a c o m p u t e r s i m u l a t i o n a p p r o a c h i s t h a t t h e c o s t s a n d e f f e c t s o f d i f f e r e n t schemes c a n be e s t i m a t e d w i t h o u t p u t t i n g them i n t o p r a c t i s e . The model c a n be r u n u n d e r i d e n t i c a l c o n d i t i o n s e x c e p t f o r a c h a n g e i n one o f t h e p o l i c y v a r i a b l e s ; t h e n any d i f f e r e n c e s i n t h e r e s u l t s c a n be a t t r i b u t e d t o t h e i m p a c t o f t h a t v a r i a b l e . To t r a c e t h e i m p a c t s o f a l t e r n a t i v e i n come s t a b i l i z a t i o n schemes on t h e o u t p u t v a r i a b l e s , t h e model was r u n on a m o n t h l y b a s i s o v e r a p e r i o d o f t w e n t y y e a r s , f r o m J a n u a r y 1959 t o December 1978. As m e n t i o n e d e a r l i e r , t h e r e a s o n f o r i n c l u d i n g t w e n t y y e a r s o f d a t a i s t o e n s u r e t h a t t h e m o d e l c a n d e s c r i b e t h e b e h a v i o u r o f B.C. b e e f p r o d u c t i o n o v e r an e x t e n d e d p e r i o d o f t i m e , a v o i d i n g t h e p o s s i b i l i t y o f o n l y d e s c r i b i n g a segment o f t h e b e e f c y c l e . The m o d e l was i n i t i a l l y r u n w i t h o u t any g o v e r n m e n t income s t a b i l i z a t i o n m e a s u r e s , i . e . a l l t h e p o l i c y p a r a m e t e r 92 v a l u e s were s e t e q u a l t o z e r o . L a t e r e a c h scheme was r u n once w i t h t h e p a r a m e t e r v a l u e s r e p o r t e d i n T a b l e 4.3 a n d w i t h t h e r e l e v a n t p o l i c y p a r a m e t e r v a l u e s . The summary m e a s u r e s o b t a i n e d f r o m e a c h scheme were t h e n c o m p a r e d w i t h t h e r e s u l t s o f t h e i n i t i a l r u n ( i . e . w i t h o u t any income s t a b i l i z a t i o n p r o g r a m ) . Any d i f f e r e n c e s i n t h e c o m p u t e d summary m e a s u r e s c a n be a t t r i b u t e d t o t h e p a r t i c u l a r scheme i n o p e r a t i o n . Runs were made f o r t h e f o u r p r o d u c t p r i c e d e f i c i e n t payment schemes d e s c r i b e d i n C h a p t e r I I I and t h e i r r e s u l t s a r e p r e s e n t e d b e l o w . The h e i f e r r e t e n t i o n s u b s i d y scheme d e s c r i b e d i n C h a p t e r I I I i n v o l v e s an i n p u t s u b s i d y a nd h e n c e i s n o t e x a m i n e d i n t h i s s t u d y . F i r s t model r e s u l t s a s s m i n g t h e a b s e n c e o f g o v e r n m e n t i n t e r v e n t i o n a r e g i v e n . 5.1.1 No S t a b i l i z a t i o n Scheme The model was i n i t i a l l y r u n a s s u m i n g t h e a b s e n c e of any g o v e r n m e n t income s t a b i l i z a t i o n p r o g r a m . A l l o f t h e p o l i c y v a r i a b l e s were s e t e q u a l t o z e r o f o r t h i s r u n . T h i s i m p l i e s t h a t t h e e f f e c t i v e b e e f p r i c e t h e a v e r a g e f a r m e r r e c e i v e d ( w h i c h i s t h e s i m u l a t e d p r i c e i f an income s t a b i l i z a t i o n scheme e x i s t s ) i s e q u a l t o t h e e q u i l i b r i u m m a r k e t p r i c e . The r e s u l t s f o r t h e p e r i o d 1959-1978 a r e r e p o r t e d u n d e r "No Scheme" i n T a b l e 5.1. F o r e x a m p l e , w i t h o u t g o v e r n m e n t i n t e r v e n t i o n , t h e a g g r e g a t e c a l f p r o d u c e r g r o s s r e v e n u e w o u l d be 5,063 t h o u s a n d d o l l a r s p e r y e a r . The a b s o l u t e v a r i a t i o n o f c a l f p r o d u c e r n e t income i s i n d i c a t e d by a s t a n d a r d d e v i a t i o n o f 2,758 t h o u s a n d d o l l a r s p e r y e a r . S i n c e no g o v e r n m e n t income s t a b i l i z a t i o n scheme was i n 93 o p e r a t i o n , t o t a l g o v e r n m e n t c o n t r i b u t i o n , t o t a l p r o d u c e r p remiums and g o v e r n m e n t payment w o u l d a l l e q u a l z e r o . 5.1.2 E f f e c t s o f B r i t i s h C o l u m b i a B e e f P r o d u c e r s ' Income A s s u r a n c e P r o g r a m , F I A P ( 1 9 7 7 ) The B r i t i s h C o l u m b i a B e e f P r o d u c e r s ' Income A s s u r a n c e P r o g r a m was a n n o u n c e d i n 1975 and i m p l e m e n t e d r e t r o a c t i v e t o A p r i l , 1 974. I t was amended i n 1977 ( h e r e a f t e r r e f e r r e d t o a s " F I A P ( 1 9 7 7 ) " ) and i n c l u d e d t h e f o l l o w i n g f e a t u r e s : ( a ) f a r m e r s r e c e i v e an i n d e m n i t y when t h e m a r k e t p r i c e o f b e e f f a l l s b e l o w a c o m p u t e d s u p p o r t l e v e l . The s u p p o r t l e v e l i s e q u a l t o t h e e q u i l i b r i u m m a r k e t p r i c e p l u s 75% o f t h e d i f f e r e n c e b e t ween i n p u t c o s t and m a r k e t p r i c e . (b) b o t h f a r m e r s and t h e p r o v i n c i a l g o v e r n m e n t pay a premium on b e e f p r o d u c t i o n on a 1/3 t o 2/3 b a s i s . The t o t a l p r emiums a r e d e t e r m i n e d by d i v i d i n g t h e amount o f a v e r a g e i n d e m n i t y p a i d i n t h e p r e c e d i n g f i v e y e a r s by a v e r a g e b e e f o u t p u t i n t h e p r e c e d i n g f i v e y e a r s . The e s t i m a t e d r e s u l t s a r e p r e s e n t e d i n T a b l e 5.1 a s s u m i n g F I A P Q 9 7 7 ) had o p e r a t e d o v e r t h e p e r i o d 1 9 5 9 - 1 9 7 8 . D i f f e r e n c e s i n the- r e s u l t s b e t w e e n t h e " F I A P ( 1 9 7 7 ) r u n " and t h e "No Scheme r u n " c a n be a t t r i b u t e d t o t h e e f f e c t s o f F I A P ( 1 9 7 7 ) . T h e s e d i f f e r e n c e s a r e a l s o r e p o r t e d i n T a b l e 5.1 t o show t h e e f f e c t s o f F I A P Q 9 7 7 ) . The e s t i m a t e d r e s u l t s i n c l u d e t h r e e l e v e l s o f b e e f p r o d u c t i o n : c a l v e s , y e a r l i n g s , and c a l f - y e a r l i n g s . G r o s s income 94 i s d e f i n e d as t h e p r o d u c t o f b e e f o u t p u t and g r o s s m a r g i n , where g r o s s m a r g i n i s t h e d i f f e r e n c e b e t w e e n t o t a l r e c e i p t s a n d t o t a l v a r i a b l e c o s t s . A v e r a g e g r o s s i n c o m e s f o r c a l f p r o d u c e r s and c a l f - y e a r l i n g p r o d u c e r s a r e f o u n d t o be n e g a t i v e i n t h e e s t i m a t e d r e s u l t s , i n d i c a t i n g t h a t a v e r a g e c o s t e x c e e d s a v e r a g e m a r k e t p r i c e r e s u l t i n g i n a n e g a t i v e a v e r a g e i n c o m e . As t h e g o v e r n m e n t p r o g r a m s c o n s i d e r e d do n o t a f f e c t i n p u t c o s t s , a v e r a g e p r o d u c e r r e v e n u e was r e p o r t e d i n s t e a d of a v e r a g e i n c o m e . The r e s u l t s p r e s e n t e d b e l o w a r e o b t a i n e d a s s u m i n g F I A P ( 1 9 7 7 ) had o p e r a t e d o v e r t h e p e r i o d 1 9 5 9 - 1 9 7 8 : (1) L e v e l o f B e e f P r o d u c t i o n A v e r a g e c a l f p r o d u c t i o n w o u l d h a v e i n c r e a s e d 2,629 t h o u s a n d p o u n ds p e r y e a r , w h e r e a s t h e a v e r a g e y e a r l i n g a n d c a l f -y e a r l i n g p r o d u c t i o n w o u l d have d e c r e a s e d 966 and 563 t h o u s a n d p o u n d s p e r y e a r , r e s p e c t i v e l y . ( T a b l e 5.1) F I A P ( 1 9 7 7 ) w o u l d have i n c r e a s e d t h e a v e r a g e a n n u a l c a l f p r o d u c t i o n by 17%, i n d i c a t i n g t h e c o w - c a l f segment o f t h e B.C. b e e f i n d u s t r y w o u l d have e x p a n d e d i f F I A P ( 1 9 7 7 ) h a d o p e r a t e d o v e r t h e t w e n t y y e a r p e r i o d . T h i s i s e m p i r i c a l l y a f f i r m e d by t h e a c t u a l i n c r e a s e i n c a l f p r o d u c t i o n i n B.C. s i n c e F I A P was i m p l e m e n t e d i n 1974. A c t u a l p r o d u c t i o n d a t a shows t h a t c a l f p r o d u c t i o n i n B.C. h a s i n c r e a s e d f r o m 57,236 h e a d i n 1974 t o 93,655 h e a d i n 1978, a 63% i n c r e a s e ( P a l a c i o s and K e n n e d y ) . The r e a s o n f o r a 3% and 4% d e c r e a s e i n y e a r l i n g and c a l f -y e a r l i n g p r o d u c t i o n i s t w o f o l d . F i r s t , t h e i n c r e a s e i n e f f e c t i v e c a l f p r i c e was assumed t o i n d u c e an i n c r e a s e i n h e i f e r r e t e n t i o n t h u s d e c r e a s i n g t h e q u a n t i t y o f y e a r l i n g s h e i f e r s 95 b e i n g m a r k e t e d . S e c o n d , t h e h i g h e r e f f e c t i v e y e a r l i n g p r i c e i n a g i v e n month was assumed t o i n d u c e more y e a r l i n g s t o be h e l d o v e r i n t h a t month t o c o l l e c t s u b s i d i e s f r o m t h e e x t r a w e i g h t g a i n e d (850 l b s . t o 1,000 l b s . ) . The y e a r l i n g s h e l d o v e r w o u l d r e a c h m a r k e t a s f i n i s h e d a n i m a l s a few months l a t e r , t h u s f u r t h e r d e c r e a s i n g t h e q u a n t i t y o f y e a r l i n g s b e i n g m a r k e t e d i n t h a t month. (2) L e v e l o f E f f e c t i v e B e e f P r i c e R e c e i v e d by A v e r a g e F a r m e r The m o n t h l y e f f e c t i v e b e e f p r i c e w o u l d have i n c r e a s e d $8.54 p e r c w t . f o r c a l v e s , $2.89 p e r c w t . f o r y e a r l i n g s a nd $8.85 p e r c w t . f o r c a l f - y e a r l i n g s . I n c l u d i n g t h e F I A P s u b s i d y , b o t h t h e e f f e c t i v e c a l f p r i c e and c a l f - y e a r l i n g p r i c e w o u l d have i n c r e a s e d 29% a b o v e t h e i r e q u i l i b r i u m p r i c e s l e v e l , w h i l e t h e r e i s o n l y a 10% i n c r e a s e i n t h e e f f e c t i v e y e a r l i n g p r i c e . T h i s shows t h a t b e e f p r o d u c e r s w o u l d have r e c e i v e d a l a r g e r p e r c w t . s u b s i d y f o r c a l f p r o d u c t i o n t h a n f o r y e a r l i n g p r o d u c t i o n . (3) L e v e l o f B e e f P r o d u c e r Revenue F o r c o w - c a l f p r o d u c e r s , a g g r e g a t e r e v e n u e w o u l d have i n c r e a s e d 2,631 t h o u s a n d d o l l a r s p e r y e a r . F o r y e a r l i n g p r o d u c e r s , a g g r e g a t e r e v e n u e w o u l d have i n c r e a s e d 610 t h o u s a n d d o l l a r s p e r y e a r . F o r t h o s e b e e f p r o d u c e r s 1 i n v o l v e d i n b o t h c o w - c a l f and b a c k g r o u n d i n g o p e r a t i o n , t h e i r a g g r e g a t e r e v e n u e w o u l d - h a v e i n c r e a s e d 1,270 t h o u s a n d d o l l a r s p e r y e a r . S u b s i d i e s on c a l f - y e a r l i n g p o u n d s go t o c o w - c a l f p r o d u c e r s , b u t o f c o u r s e n o t a l l c o w - c a l f p r o d u c e r s p r o d u c e c a l f - y e a r l i n g s . 96 The d r a m a t i c i n c r e a s e (51%) i n t h e a v e r a g e a n n u a l g r o s s r e v e n u e f r o m c a l f p r o d u c t i o n i s a t t r i b u t a b l e t o two f a c t o r s : an i n c r e a s e i n c a l f o u t p u t and an i n c r e a s e i n e f f e c t i v e c a l f p r i c e r e c e i v e d by t h e a v e r a g e f a r m e r ( w h i c h i n c l u d e s F I A P s u b s i d y ) . I n c r e a s e s i n r e v e n u e l e v e l s o f y e a r l i n g a nd c a l f - y e a r l i n g p r o d u c e r s a r e r e l a t i v e l y m o d e r a t e , b e i n g 6% and 28% r e s p e c t i v e l y . F o r t h e s e l a t t e r two g r o u p s , i n c r e a s e s i n r e v e n u e due t o p r i c e i n c r e a s e s a r e l a r g e l y o f f s e t by d e c r e a s e s i n o u t p u t . (4) A b s o l u t e V a r i a t i o n o f P r o d u c e r G r o s s Income P e r u n i t g r o s s i ncome i s d e f i n e d a s t h e e f f e c t i v e p r i c e f a r m e r s r e c e i v e l e s s v a r i a b l e i n p u t c o s t . As i n d i c a t e d e a r l i e r , t h e p r o d u c t i o n c o s t i s b a s e d on a h y p o t h e t i c a l p r o d u c t i o n m o del n e g o t i a t e d by t h e B.C. F e d e r a t i o n of A g r i c u l t u r e a nd t h e B.C. M i n i s t r y o f A g r i c u l t u r e . I t i s q u i t e c o n c e i v a b l e t h a t t h i s n e g o t i a t i o n p r o c e s s l e a d s t o h i g h e r p r o d u c t i o n c o s t s t h a n a c t u a l l y e x i s t . The s t a n d a r d d e v i a t i o n o f b e e f p r o d u c e r income i n d i c a t e s t h e income v a r i a b i l i t y o v e r t h e p e r i o d . The a b s o l u t e v a r i a b i l i t y o f b e e f p r o d u c e r a n n u a l income f r o m one y e a r t o t h e n e x t a t a l l t h r e e l e v e l s o f b e e f p r o d u c t i o n w o u l d have been r e d u c e d i f F I A P ( 1 9 7 7 ) had o p e r a t e d o v e r t h e t w e n t y y e a r p e r i o d . T h i s i s i n d i c a t e d by a r e d u c t i o n i n a v e r a g e s t a n d a r d d e v i a t i o n o f 1,771 t h o u s a n d d o l l a r s p e r y e a r on c a l f p r o d u c t i o n , 1,467 t h o u s a n d d o l l a r s p e r y e a r on y e a r l i n g p r o d u c t i o n and 1,835 t h o u s a n d d o l l a r s p e r y e a r on c a l f - y e a r l i n g p r o d u c t i o n . (5) R e l a t i v e V a r i a t i o n o f P r o d u c e r G r o s s Income The r e l a t i v e v a r i a b i l i t y o f g r o s s income i s c o m p u t e d by 97 d i v i d i n g - average income l e v e l by the s t a n d a r d d e v i a t i o n of income l e v e l , and i s shown as the c o e f f i c i e n t of v a r i a t i o n . FIAP(1977) would have reduced the r e l a t i v e v a r i a t i o n of producer a n n u a l income i f i t had o p e r a t e d over the twenty year p e r i o d , shown by a f a l l of 67 i n c o e f f i c i e n t of v a r i a t i o n f o r c a l f p r o d u c e r s , a f a l l of 35 f o r y e a r l i n g p r o d u c e r s , and a f a l l of 64 f o r c a l f - y e a r l i n g p r o d u c e r s . In view of t h e s e r e s u l t s , FIAP(1977) seems c a p a b l e of a c h i e v i n g a p r o v i n c i a l government g o a l of reduced income v a r i a b i l i t y f o r beef p r o d u c e r s . The r e s u l t s suggest FIAP(1977) would be more e f f e c t i v e i n r e d u c i n g income v a r i a b i l i t y a t the c a l f l e v e l than a t the y e a r l i n g l e v e l . Y e a r l i n g p r o d u c e r s b e n e f i t t e d l e s s than c o w - c a l f p r o d u c e r s p a r t l y because the market r e t u r n s of y e a r l i n g s were q u i t e c l o s e t o p r o d u c t i o n c o s t s (as opposed t o b e i n g w e l l below as f o r the c a l f l e v e l ) . T h i s means t h a t the e f f e c t i v e p r i c e r e c e i v e d by y e a r l i n g p r o d u c e r s was r o u g h l y e q u a l t o market r e t u r n . (6) Net Government Payment T o t a l p r o v i n c i a l government c o n t r i b u t i o n under FIAP(1977) over the twenty year p e r i o d would have amounted t o 5,315 thousand d o l l a r s per y e a r . The producer premiums c o l l e c t e d under FIAP(1977) would have amounted t o 1,396 thousand d o l l a r s per y e a r . Thus, the t o t a l net government payment would have been 3,917 thousand d o l l a r s per year over the twenty year p e r i o d . A l t h o u g h the premiums were c a l c u l a t e d i n the way proposed by the p r o v i n c i a l government t o a c h i e v e a s e l f -f i n a n c i n g program, the government would s t i l l r e q u i r e p r o d u c e r s 98 t o pay 3,917 thousand d o l l a r s per year f o r the o p e r a t i o n of FIAP(1977) over the twenty year p e r i o d . T h i s s u g g e s t s the procedure by which producer premiums are c a l c u l a t e d needs some amendments i f the program i s r e a l l y t o be made s e l f - f i n a n e i n g . Of the t o t a l net government payment, 1,656 t h o u s a n d d o l l a r s per year went t o c a l f p r o d u c e r s (42% of t o t a l net government payment), 840 thousand d o l l a r s per year went t o y e a r l i n g p r o d u c e r s ( 2 1 % ) , and 1,419 thousand d o l l a r s per year went t o c a l f - y e a r l i n g p r o d u c e r s ( 3 6 % ) . (7) Net W e l f a r e Change B.C. beef p r o d u c e r s would r e c e i v e h i g h e r e f f e c t i v e p r i c e s t h r o u g h the income a s s u r a n c e s u b s i d y of F I A P ( 1 9 7 7 ) . I t was assumed h i g h e r e f f e c t i v e p r i c e s would induce beef p r o d u c e r s t o expand t h e i r p r o d u c t i o n . To the e x t e n t t h a t they do, r e s o u r c e a l l o c a t i o n c o s t s w i l l r e s u l t . The r e s u l t i n g s o c i a l l o s s i s e s t i m a t e d t o be 88 thousand d o l l a r s per year over the twenty year p e r i o d . T h i s l o s s i s p a r t i a l l y o f f s e t by s o c i a l b e n e f i t s g e n e r a t e d by f o r e i g n exchange g a i n s due t o a decrease i n i mported beef and/or an i n c r e a s e i n e x p o r t e d beef. These b e n e f i t s are e s t i m a t e d , t o be 124 thousand d o l l a r s per year over the twenty year p e r i o d . The net w e l f a r e change g e n e r a t e d by FIAP(1977) over the twenty year p e r i o d would be p o s i t i v e , 36 thousand d o l l a r s per y e a r . TABLE 5.1 ESTIMATED E F F E C T S OF F I A P ( 1 9 7 7 ) , 1 9 59-1978 L E V E L NO SCHEME F I A P ( 1 9 7 7 ) D I F F E R E N C E 1. L E V E L OF B E E F PRODUCTION CALF 15,749 18,378 2 ,629 (AVERAGE PER YEAR IN THOUSAND POUNDS) YEARLING 31,042 3 0 , 0 7 6 - 966 C A L F - Y E A R L I N G 14,073 1 3 , 5 1 0 - 563 TOTAL: 6 0 , 8 6 6 6 1 , 9 6 5 1 ,099 2 . L E V E L OF E F F E C T I V E BEEF P R I C E CALF 29. 5 0 38 .04 8 . 54 .RECEIVED BY AVERAGE FARMER YE A R L I N G 29.38 3 2 . 2 7 2 . 89 (AVERAGE PER MONTH IN DOLLARS PER HUNDRED WEIGHT) C A L F - Y E A R L I N G 29 . 50 38 . 35 8 . 85 3 . L E V E L OF B E E F PRODUCER GROSS R E V E N U E ( 1 ) CA L F 5, 101 7,732 2.631 (AVERAGE PER YEAR IN THOUSAND DOLLARS) YEARLING 9,674 10,284 6 1 0 C A L F - Y E A R L I N G 4,508 5.778 1 , 2 7 0 TOTAL: 19,284 2 3 , 7 9 6 4.512 4 . ABSOLUTE V A R I A T I O N OF PRODUCER GROSS I N C 0 M E ( 2 ) C A L F 2 , 7 6 0 989 -1 ,771 (AVERAGE STANDARD D E V I A T I O N PER YEAR YEARLING 3,206 1 ,739 - 1,467 IN THOUSAND D O L L A R S ) C A L F - Y E A R L I N G 2,305 4 7 0 - 1,835 5 . R E L A T I V E V A R I A T I O N OF PRODUCER GROSS INCOME CALF 89 22 67 (AVERAGE C O E F F I C I E N T OF V A R I A T I O N PER YEAR) Y E A R L I N G 64 29 35 C A L F - Y E A R L I N G 74 10 64 6 . T O T A L GOVERNMENT CONTRIBUTION CA L F 0 2 , 307 2,307 (AVERAGE PER YEAR IN THOUSAND DOLLARS) YEARLING 0 1.087 1 ,087 C A L F - Y E A R L I N G 0 1,918 1,918 TOTAL: 0 5.313 5,313 7 . T O T A L PRODUCER PREMIUM CALF 0 65 1 651 (AVERAGE PER YEAR IN THOUSAND DOLLARS) Y E A R L I N G 0 246 246 C A L F - Y E A R L I N G 0 498 498 TOTAL: 0 1 ,396 1 ,396 8 . NET GOVERNMENT PAYMENT(3) CA L F 0 1 ,656 1 ,656 (AVERAGE PER YEAR IN THOUSAND DOLLARS) Y E A R L I N G 0 8 4 0 8 4 0 C A L F - Y E A R L I N G 0 1,419 1 ,419 TOTAL: 0 3,917 3.917 9 . WELFARE i CHANGE COST 0 88 88 (AVERAGE PER YEAR IN THOUSAND DOLLARS) B E N E F I T 0 124 124 NET CHANGE: . 0 36 36 ( 1 ) PRODUCER REVENUE IS DEFINED AS THE PRODUCT OF BEEF OUTPUT AND B E E F P R I C E ( 2 ) GROSS INCOME IS DEFINED AS THE PRODUCT OF BEEF OUTPUT AND GROSS MARGIN (GROSS MARGIN IS EQUAL TO TOTAL R E C E I P T L E S S TOTAL V A R I A B L E COST) ( 3 ) NET GOVERNMENT PAYMENT EQUALS NET PRODUCER R E C E I P T 100 5.1.3 E f f e c t s o f F I A P U 9 8 0 ) F I A P ( 1 9 7 7 ) was a f i v e y e a r p r o g r a m , e x i s t i n g f r o m 1974 t o 1978. I n r e s p o n s e t o demands f r o m B.C. b e e f p r o d u c e r s f o r c o n t i n u a t i o n o f t h e p r o g r a m , t h e p r o v i n c i a l g o v e r n m e n t p r o p o s e d a new income s t a b i l i z a t i o n scheme, w h i c h came i n t o e f f e c t i n 1980. S l a u g h t e r l e v e l was i n c l u d e d i n t h i s new scheme, h e r e a f t e r r e f e r r e d t o a s " F I A P ( 1 9 8 0 ) " . The new scheme, F I A P Q 9 8 0 ) a l s o d i f f e r s f r o m F I A P ( 1 9 7 7 ) i n t h e f o l l o w i n g r e s p e c t s : (a) s u p p o r t l e v e l o f t h e r e t u r n d e f i c i t ( i . e . t o t a l i n p u t c o s t l e s s m a r k e t r e t u r n ) on b e e f p r o d u c t i o n was i n c r e a s e d f r o m 75% t o 100%. (b) u n l i k e t h e way p r o d u c e r premium was d e t e r m i n e d u n d e r F I A P ( 1 9 7 7 ) , p r o d u c e r premium was c o n s i s t e d o f two c o m p o n e n t s : 1. An a d v a n c e d premium was c o l l e c t e d f r o m p r o d u c e r s a t i n v e n t o r y t i m e e a c h y e a r w h i c h w o u l d be m a t c h e d by t h e p r o v i n c i a l g o v e r n m e n t . - I t s amount was d e t e r m i n e d i n a g r e e m e n t between B.C. M i n i s t r y o f A g r i c u l t u r e and B.C. F e d e r a t i o n o f A g r i c u l t u r e . 2. An a d d i t i o n a l premium was c o l l e c t e d f r o m t h e p r o d u c e r s a t t h e end o f e a c h y e a r . I t s amount was d e t e r m i n e d as f o l l o w s : ( i ) i n y e a r s when t h e g r o s s i n d e m n i t y i s no g r e a t e r t h a n 5% o f t h e p r o d u c t i o n c o s t , t h e a d d i t i o n a l p r o d u c e r premium p e r pound w o u l d e q u a l t h e f u l l g r o s s i n d e m n i t y t h a t p r o d u c e r s r e c e i v e d . 101 ( i i ) i n y e a r s when t h e g r o s s i n d e m n i t y i s g r e a t e r t h a n 5% and no g r e a t e r t h a n 3 1 % o f t h e p r o d u c t i o n c o s t , t h e a d d i t i o n a l p r o d u c e r p r emium p e r pound w o u l d e q u a l t o 50% o f t h e g r o s s i n d e m n i t y t h a t p r o d u c e r s r e c e i v e d , ( i i i ) i n y e a r s when t h e g r o s s i n d e m n i t y i s g r e a t e r t h a n 3 1 % o f t h e p r o d u c t i o n c o s t , t h e a d d i t i o n a l p r o d u c e r p remium p e r pound w o u l d e q u a l t o 50% of t h e g r o s s i n d e m n i t y t h a t p r o d u c e r s r e c e i v e d l e s s t h e i n i t i a l a d v a n c e d premium p a y m e n t . T h i s s e c t i o n e s t i m a t e s t h e r e s u l t s o f t h i s new scheme ( F I A P ( 1 9 8 0 ) ) , h a d i t o p e r a t e d o v e r t h e same t w e n t y y e a r p e r i o d , 1 9 5 9 - 1 9 7 8 . The r e s u l t s a r e shown i n T a b l e 5.2. The r e s u l t s s t i l l p e r t a i n t o c a l f , y e a r l i n g a n d c a l f - y e a r 1 i n g l e v e l s . The s l a u g h t e r l e v e l h a s n o t been i n c l u d e d due t o a l a c k o f c o s t d a t a . D i f f e r e n c e s b e tween t h e e s t i m a t e d r e s u l t s o f F I A P ( 1 9 8 0 ) and F I A P ( 1 9 7 7 ) , a s w e l l as d i f f e r e n c e s b e t ween F I A P Q 9 8 0 ) and "no scheme", a r e a l s o g i v e n i n T a b l e 5.2. The e s t i m a t e d e f f e c t s o f F I A P ( 1 9 8 0 ) a r e p r e s e n t e d b e l o w , a s s u m i n g i t h a d o p e r a t e d o v e r t h e p e r i o d 1 959-1978. (1) L e v e l o f B e e f P r o d u c t i o n Compared t o t h e "no scheme" s i t u a t i o n , a v e r a g e c a l f p r o d u c t i o n w o u l d have i n c r e a s e d 2,584 t h o u s a n d pounds p e r y e a r , w h e r e a s a v e r a g e y e a r l i n g and c a l f - y e a r l i n g p r o d u c t i o n w o u l d have d e c r e a s e d 402 and 257 t h o u s a n d p o u n d s p e r y e a r , r e s p e c t i v e l y . N o t e t h a t t h e i m p a c t s on B.C. b e e f p r o d u c t i o n by F I A P ( 1 9 8 0 ) w o u l d be i n t h e same d i r e c t i o n as F I A P Q 9 7 7 ) , b u t t o 102 a l e s s e r d e g r e e . (2) L e v e l o f E f f e c t i v e B e e f P r i c e R e c e i v e d by A v e r a g e F a r m e r The m o n t h l y e f f e c t i v e b e e f p r i c e u n d e r F I A P ( 1 9 8 0 ) w o u l d h a v e i n c r e a s e d $5.24 p e r c w t . f o r c a l v e s , $2.44 p e r c w t . f o r y e a r l i n g s a n d $6.24 p e r c w t . f o r c a l f - y e a r 1 i n g s , c o m p a r e d t o "no scheme" s i t u a t i o n . Compared t o F I A P ( 1 9 7 7 ) , t h e e f f e c t i v e c a l f p r i c e u n d e r F I A P ( 1 9 8 0 ) w o u l d have been $3.30 p e r c w t . l o w e r , t h e y e a r l i n g p r i c e $0.45 p e r c w t . l o w e r , and t h e c a l f - y e a r l i n g p r i c e $2.61 p e r c w t . l o w e r . (3) L e v e l o f B e e f P r o d u c e r Revenue Compared t o t h e "no scheme" s i t u a t i o n , t h e r e v e n u e of c a l f p r o d u c e r s w o u l d have i n c r e a s e d 1,869 t h o u s a n d d o l l a r s p e r y e a r u n d e r F I A P ( 1 9 8 0 ) . F o r y e a r l i n g p r o d u c e r s , r e v e n u e w o u l d h a v e i n c r e a s e d 780 t h o u s a n d d o l l a r s p e r y e a r . F o r t h o s e b e e f p r o d u c e r s i n v o l v e d i n b o t h c o w - c a l f and b a c k g r o u n d i n g o p e r a t i o n , t h e i r a g g r e g a t e r e v e n u e w o u l d have i n c r e a s e d 927 t h o u s a n d s d o l l a r s p e r y e a r . Compared w i t h F I A P ( 1 9 7 7 ) , F I A P ( 1 9 8 0 ) w o u l d h a v e a l o w e r , e f f e c t on r e v e n u e by 762 t h o u s a n d d o l l a r s p e r y e a r f o r c a l f p r o d u c e r s and 343 t h o u s a n d d o l l a r s p e r y e a r f o r c a l f - y e a r l i n g p r o d u c e r s . F o r y e a r l i n g p r o d u c e r s , r e v e n u e w o u l d have i n c r e a s e d 170 t h o u s a n d d o l l a r s p e r y e a r more u n d e r F I A P ( 1 9 8 0 ) t h a n u n d e r F I A P ( 1 9 7 7 ) . (4) V a r i a t i o n o f P r o d u c e r G r o s s Income T h e ' r e s u l t s i n T a b l e 5.2 i n d i c a t e t h a t F I A P ( 1 9 8 0 ) w o u l d h a v e r e d u c e d income v a r i a b i l i t y f o r a l l t h r e e c a t e g o r i e s o f 103 a n i m a l s , i n b o t h an a b s o l u t e s e n s e (shown by r e d u c t i o n i n s t a n d a r d d e v i a t i o n ) and a r e l a t i v e s e n s e (shown by r e d u c t i o n i n c o e f f i c i e n t o f v a r i a t i o n ) . Compared t o F I A P ( 1 9 7 7 ) , F I A P ( 1 9 8 0 ) showed l e s s a b i l i t y t o s t a b i l i z e p r o d u c e r i n c o m e s . (5) T o t a l P r o d u c e r Premium T o t a l p r o d u c e r premium c o l l e c t e d f r o m b e e f p r o d u c e r s u n d e r F I A P ( 1 9 8 0 ) w o u l d h a v e amounted t o 3,807 t h o u s a n d d o l l a r s p e r y e a r a t t h e t h r e e l e v e l s o f b e e f p r o d u c t i o n o v e r t h e t w e n t y y e a r p e r i o d . T h i s r e p r e s e n t e d 2,411 t h o u s a n d d o l l a r s p e r y e a r more t h a n u n d e r F I A P ( 1 9 7 7 ) . (6) N e t Government Payment The t o t a l n e t g o v e r n m e n t payment u n d e r F I A P ( 1 9 8 0 ) w o u l d be 3,224 t h o u s a n d d o l l a r s p e r y e a r o v e r t h e t w e n t y y e a r p e r i o d . T h i s r e p r e s e n t e s 1,144 t h o u s a n d d o l l a r s p e r y e a r f o r c a l f p r o d u c e r s ( 3 5 % o f t o t a l n e t g o v e r n m e n t p a y m e n t ) , 965 t h o u s a n d d o l l a r s p e r y e a r f o r y e a r l i n g p r o d u c e r s ( 3 0 % ) , and 1,114 t h o u s a n d d o l l a r s p e r y e a r f o r c a l f - y e a r l i n g p r o d u c e r s ( 3 5 % ) . The t o t a l n e t g o v e r n m e n t payment u n d e r F I A P ( 1 9 8 0 ) w o u l d be 693 t h o u s a n d d o l l a r s p e r y e a r l e s s t h a n u n d e r F I A P ( 1 9 7 7 ) f o r t h e p e r i o d 1 959-1978. A l t h o u g h t h e i n c r e a s e d s u p p o r t l e v e l u n d e r F I A P ( 1 9 8 0 ) r a i s e d t o t a l g o v e r n m e n t c o n t r i b u t i o n by 1,718 t h o u s a n d d o l l a r s p e r y e a r , t h i s was more t h a n o f f s e t by t h e i n c r e a s e d p r o d u c e r premium (2,4 1 1 t h o u s a n d d o l l a r s p e r y e a r ) . T h u s , t o t a l g o v e r n m e n t n e t payment u n d e r F I A P ( 1 9 8 0 ) ha s e s t i m a t e d t o be l o w e r t h a n t h a t o f F I A P ( 1 9 7 7 ) o v e r t h e t w e n t y y e a r p e r i o d , c o n c e i v a b l y due t o more premiums w o u l d have 104 c o l l e c t e d f r o m b e e f p r o d u c e r s u n d e r t h e new scheme. (7) Net W e l f a r e Change The n e t w e l f a r e c h a n g e g e n e r a t e d by F I A P ( 1 9 8 0 ) o v e r t h e t w e n t y y e a r p e r i o d w o u l d be p o s i t i v e , 53 t h o u s a n d d o l l a r s p e r y e a r . The r e s o u r c e a l l o c a t i o n c o s t g e n e r a t e d by F I A P ( 1 9 8 0 ) i s e s t i m a t e d t o be l o w e r t h a n t h a t o f F I A P ( 1 9 7 7 ) , a l t h o u g h t h e s o c i a l b e n e f i t g e n e r a t e d i s e s t i m t e d t o be l o w e r as w e l l . Net b e n e f i t s u n d e r F I A P ( 1 9 8 0 ) a r e e s t i m a t e d t o be 17 t h o u s a n d d o l l a r s p e r y e a r more t h a n u n d e r F I A P ( 1 9 7 7 ) . TABLE 5.2 ESTIMATED EFFECTS OF FIAP(1980), 1959-1978 DIFFERENCE DIFFERENCE COMPARED TO COMPARED TO LEVEL FIAP(1980) NO SCHEME FIAP(1977) LEVEL OF BEEF PRODUCTION (AVERAGE PER YEAR IN THOUSAND POUNDS) 2. LEVEL OF EFFECTIVE BEEF PRICE RECEIVED BY AVERAGE FARMER (AVERAGE PER MONTH IN DOLLARS PER HUNDRED WEIGHT) 3. LEVEL OF BEEF PRODUCER GROSS REVENUE(1) (AVERAGE PER YEAR IN THOUSAND DOLLARS) 4. ABSOLUTE VARIATION OF PRODUCER GROSS INCOME(2) (AVERAGE STANDARD DEVIATION PER YEAR IN THOUSAND DOLLARS) 5. RELATIVE VARIATION OF PRODUCER GROSS INCOME (AVERAGE COEFFICIENT OF VARIATION PER YEAR) 6. TOTAL GOVERNMENT CONTRIBUTION (AVERAGE PER YEAR IN THOUSAND DOLLARS) 7. TOTAL PRODUCER PREMIUM (AVERAGE PER YEAR IN THOUSAND DOLLARS) 8. NET GOVERNMENT PAYMENT(3) (AVERAGE PER YEAR IN THOUSAND DOLLARS) 9. WELFARE CHANGE (AVERAGE PER YEAR IN THOUSAND DOLLARS) CALF 18. 333 2,584 - 45 YEARLING 30. 640 - 402 564 CALF-YEARLING 13. 816 - 257 306 TOTAL: 62, 791 1 ,925 826 CALF 34 . 74 5.24 - 3.30 YEARLING 31 .82 2.44 - 0.45 CALF-YEARLING 35 .74 6.24 - 2.61 CALF 6, 970 1 ,869 - 762 YEARLING 10. 454 780 170 CALF-YEARLING 5, 435 927 - 343 TOTAL: 22 . 859 3,575 - 937 CALF 2 , 529 - 231 1 .540 YEARLING 2 . 582 - 624 843 CALF-YEARLING 1 , 61 1 - 694 1.141 CALF 66 23 44 YEARLING 44 20 15 CALF-YEARLING 39 35 29 CALF 2 , 875 2,875 568 YEARLING 1 , 646 1 ,646 559 CALF-YEARLING 2 , 509 2,509 59 1 TOTAL: 7 , 03 1 7 .031 1,718 CALF 1 , 731 1,731 1 .080 YEARLING 681 68 1 435 CALF-YEARLING 1 , 394 1 , 394 896 TOTAL: 3, 807 3,807 2,411 CALF 1 . 144 1 , 144 - 512 YEARLING 965 965 125 CALF-YEARLING 1 . 114 1,114 - 305 TOTAL: 3, 224 3. 224 - 693 COST 65 65 23 BENEFIT 119 1 19 5 NET CHANGE: 53 53 17 (1) PRODUCER REVENUE IS DEFINED AS THE PRODUCT OF BEEF OUTPUT AND BEEF PRICE (2) GROSS INCOME IS DEFINED AS THE PRODUCT OF BEEF OUTPUT AND GROSS MARGIN (GROSS MARGIN IS EQUAL TO TOTAL RECEIPT LESS TOTAL VARIABLE COST) (3) NET GOVERNMENT PAYMENT EQUALS NET PRODUCER RECEIPT O Cn 106 5.1.4 E f f e c t s of Premium/Subsidy Scheme Given a goal of beef producer income s t a b i l i t y , i t seems l o g i c a l to charge producers a premium when beef p r i c e s are high r e l a t i v e to c o s t s , and pay them a subsidy when the opposite h o l d s . The c u r r e n t way of c a l c u l a t i n g producer premiums by FIAP ( i . e . i n every p e r i o d d e s p i t e the l e v e l of market p r i c e s ) , may not be c o n t r i b u t i n g as much as i t c o u l d be to income s t a b i l i z a t i o n . To compare the e f f e c t s of FIAP(1980) with the premium/subsudy scheme, p o l i c y parameters were set in such a way to produce s i m i l i a r net government expenditure under both schemes. F u r t h e r , in order to keep net government expenditures s i m i l i a r , producers were r e q u i r e d to pay a premium every p e r i o d 1 . The premium e q u a l l e d a f i x e d percentage of the f l o o r p r i c e ( f l o o r p r i c e f o r t h i s scheme was set equal to market p r i c e p l u s 75% of re t u r n d e f i c i t ) . At the c a l f and c a l f - y e a r l i n g l e v e l s , the premium e q u a l l e d 14% of the f l o o r p r i c e , and at the y e a r l i n g l e v e l 1% of the f l o o r p r i c e . C e i l i n g p r i c e was set 10% above the f l o o r p r i c e . When the market p r i c e exceeded c e i l i n g p r i c e , the excess was c o l l e c t e d from producers as a d d i t i o n a l premium. Producers r e c e i v e d an indemnity payment when c o s t s of pr o d u c t i o n exceeded market p r i c e . The indemnity e q u a l l e d 75% of of r e t u r n d e f i c i t , where r e t u r n d e f i c i t was equal to t o t a l input *We recognize t h i s c o n t r a d i c t s the l o g i c mentioned above of only r e q u i r i n g producers to pay a premium when beef p r i c e s are hig h r e l a t i v e to c o s t s . 107 c o s t l e s s m a r k e t p r i c e . The e s t i m a t e d r e s u l t s o f t h e p r e m i u m / s u b s i d y scheme a r e g i v e n i n T a b l e 5.3, i f i t had o p e r a t e d o v e r t h e same t w e n t y y e a r p e r i o d , 1 9 5 9 - 1 9 7 8 . D i f f e r e n c e s o f t h e p r e m i u m / s u b s i d y scheme c o m p a r e d t o t h e "no scheme" s i t u a t i o n , a n d c o m p a r e d t o " F I A P ( 1 9 8 0 ) " , a r e a l s o g i v e n i n T a b l e 5.3. The e s t i m a t e d r e s u l t s o f t h e p r e m i u m / s u b s i d y scheme a r e s u m m a r i z e d b e l o w : (1) L e v e l o f B e e f P r o d u c t i o n Compared t o "no scheme" s i t u a t i o n , t h e c a l f p r o d u c t i o n w o u l d have i n c r e a s e d 2,475 t h o u s a n d pounds p e r y e a r u n d e r t h e p r e m i u m / s u b s i d y scheme, y e a r l i n g p r o d u c t i o n w o u l d have d e c r e a s e d 865 t h o u s a n d pounds p e r y e a r , and c a l f - y e a r l i n g p r o d u c t i o n w o u l d h a v e d e c r e a s e d 524 t h o u s a n d pounds p e r y e a r . B e e f p r o d u c t i o n u n d e r t h e p r e m i u m / s u b s i d y scheme w o u l d be q u i t e c l o s e t o t h a t o f F I A P ( 1 9 8 0 ) . The d i f f e r e n c e w o u l d be a d e c r e a s e o f 109 t h o u s a n d pounds p e r y e a r a t t h e c a l f l e v e l , a d e c r e a s e of 463 t h o u s a n d pounds p e r y e a r a t t h e y e a r l i n g l e v e l a n d a d e c r e a s e o f 267 t h o u s a n d p o u nds p e r y e a r a t t h e c a l f -y e a r l i n g l e v e l . (2) L e v e l o f E f f e c t i v e B e e f P r i c e R e c e i v e d by A v e r a g e F a r m e r The p r e m i u m / s u b s i d y scheme w o u l d have r a i s e d t h e e f f e c t i v e b e e f p r i c e r e c e i v e d by an a v e r a g e f a r m e r , w i t h an i n c r e a s e o f $6.40 p e r c w t . a t t h e c a l f l e v e l , $3.33 p e r c w t . a t t h e y e a r l i n g l e v e l , a n d $6.73 p e r c w t . a t t h e c a l f - y e a r 1 i n g l e v e l . The m o n t h l y e f f e c t i v e b e e f p r i c e u n d e r t h e p r e m i u m / s u b s i d y scheme w o u l d be $1.16 p e r c w t . h i g h e r t h a n 108 F I A P ( 1 9 8 0 ) f o r c a l v e s , $0.89 p e r c w t . h i g h e r f o r y e a r l i n g s , and $0.49 h i g h e r f o r c a l f - y e a r 1 i n g s . (3) L e v e l o f B e e f P r o d u c e r Revenue The e s t i m a t e d p r o d u c e r r e v e n u e u n d e r t h e p r e m i u m / s u b s i d y scheme w o u l d be q u i t e c l o s e t o t h a t o f F I A P ( 1 9 8 0 ) , w i t h 212 and 28 t h o u s a n d d o l l a r s p e r y e a r h i g h e r a t t h e c a l f and c a l f -y e a r l i n g l e v e l s , and 5 t h o u s a n d d o l l a r s p e r y e a r l o w e r a t t h e y e a r l i n g l e v e l . (4) V a r i a t i o n o f P r o d u c e r G r o s s Income The a n n u a l income v a r i a b i l i t y of. c a l f a nd c a l f - y e a r 1 i n g p r o d u c e r s w o u l d have shown a r e m a r k a b l e r e d u c t i o n c o m p a r e d t o u n d e r F I A P ( 1 9 8 0 ) , i f p r e m i u m / s u b s i d y scheme had o p e r a t e d o v e r t h e t w e n t y y e a r p e r i o d . T h i s i s i n d i c a t e d by a d r a m a t i c d i f f e r e n c e i n s t a n d a r d d e v i a t i o n o f 1,509 t h o u s a n d d o l l a r s p e r y e a r l o w e r f o r c a l f p r o d u c e r s - , 941 l o w e r f o r y e a r l i n g p r o d u c e r s , a n d 980 l o w e r f o r c a l f - y e a r l i n g p r o d u c e r s . The c o e f f i c i e n t o f v a r i a t i o n o f t h e t h r e e l e v e l s o f b e e f p r o d u c e r income w o u l d be 4 1 , 17 and 24 l o w e r , r e s p e c t i v e l y . The e s t i m a t e d r e s u l t s s u g g e s t t h a t t h e p r e m i u m / s u b s i d y scheme w o u l d be more e f f e c t i v e i n r e d u c i n g b e e f p r o d u c e r income f l u c t u a t i o n s t h a n w o u l d F I A P U 9 8 0 ) . (5) T o t a l P r o d u c e r Premium T o t a l p r o d u c e r premium c o l l e c t e d f r o m b e e f p r o d u c e r s u n d e r t h e p r e m i u m / s u b s i d y scheme w o u l d be l e s s t h a n t h e amount c o l l e c t e d u n d e r F I A P ( 1 9 8 0 ) o v e r t h e t w e n t y y e a r p e r i o d . The d i f f e r e n c e w o u l d be 639 t h o u s a n d d o l l a r s p e r y e a r l e s s a t t h e c a l f l e v e l , 559 t h o u s a n d d o l l a r s p e r y e a r l e s s a t t h e y e a r l i n g 109 l e v e l a n d 566 t h o u s a n d d o l l a r s p e r y e a r l e s s a t t h e c a l f -y e a r l i n g l e v e l . (6) Net G o v e r n m e n t Payment As m e n t i o n e d e a r l i e r , t h e p r e m i u m / s u b s i d y scheme e x a m i n e d i n v o l v e d s e t t i n g t h e l e v e l o f g o v e r n m e n t n e t payment so t h a t i t was s i m i l i a r t o t h a t o f F I A P ( 1 9 8 0 ) . The e s t i m a t e d t o t a l n e t g o v e r n m e n t payments b e t w e e n t h e two schemes w o u l d d i f f e r by o n l y 6 t h o u s a n d d o l l a r s p e r y e a r o v e r t h e t w e n t y y e a r p e r i o d . The t o t a l n e t g o v e r n m e n t payment u n d e r t h e p r e m i u m / s u b s i d y scheme w o u l d be 3,230 t h o u s a n d d o l l a r s p e r y e a r o v e r t h e t w e n t y y e a r p e r i o d . T h i s r e p r e s e n t s 1,170 t h o u s a n d d o l l a r s p e r y e a r f o r c a l f p r o d u c e r s ( 3 6 % of t o t a l n e t g o v e r n m e n t p a y m e n t ) , 966 t h o u s a n d d o l l a r s p e r y e a r f o r y e a r l i n g p r o d u c e r s ( 3 0 % ) , and 1,093 t h o u s a n d d o l l a r s p e r y e a r f o r c a l f - y e a r l i n g p r o d u c e r s ( 3 4 % ) . (7) Net W e l f a r e Change The n e t w e l f a r e c h a n g e r e s u l t i n g f r o m t h e p r e m i u m / s u b s i d y scheme i s e s t i m a t e d t o be p o s i t i v e , 67 t h o u s a n d d o l l a r s p e r y e a r o v e r t h e t w e n t y y e a r p e r i o d . T h i s r e p r e s e n t s 14 t h o u s a n d d o l l a r s p e r y e a r more i n n e t b e n e f i t s t h a n t h a t o f F I A P ( 1 9 8 0 ) . TABLE 5.3 ESTIMATED EFFECTS OF PREMIUM/SUBSIDY SCHEME, 1959-1978 PREMIUM/ DIFFERENCE DIFFERENCE SUBSIDY COMPARED TO COMPARED TO LEVEL SCHEME NO SCHEME FIAPM980) 1. LEVEL OF BEEF PRODUCTION CALF 18,224 2, 475 109 (AVERAGE PER YEAR IN THOUSAND POUNDS) YEARLING 30,177 - 865 - 463 CALF-YEARLING 13,549 - 524 - 267 TOTAL: 61,951 1 ,085 - 840 2 . LEVEL OF EFFECTIVE BEEF PRICE CALF 35.90 6 ;.40 1 . 16 RECEIVED BY AVERAGE FARMER YEARLING 32.71 3 l . 33 0.89 (AVERAGE PER MONTH IN DOLLARS PER HUNDRED WEIGHT) CALF-YEARLING 36.23 6 i . 73 0. 49 3 . LEVEL OF BEEF PRODUCER GROSS REVENUE(1) CALF 7, 182 2,081 212 (AVERAGE PER YEAR IN THOUSAND DOLLARS) YEARLING 10,449 775 5 CALF-YEARLING 5,463 955 28 TOTAL: 23,096 3, 812 237 4 . ABSOLUTE VARIATION OF PRODUCER GROSS INCOME(2) CALF 1 ,020 -1 , 740 - 1 .509 (AVERAGE STANDARD DEVIATION PER YEAR YEARLING 1 .641 - 1 , 565 - 941 IN THOUSAND DOLLARS) CALF-YEARLING 631 - 1 . 674 - 980 5 . RELATIVE VARIATION OF PRODUCER GROSS INCOME CALF 25 - 64 4 1 (AVERAGE COEFFICIENT OF VARIATION PER YEAR) YEARLING 27 - 37 17 CALF-YEARLING 15 - 59 24 6. TOTAL GOVERNMENT CONTRIBUTION CALF 2,262 2. 262 - 613 (AVERAGE PER YEAR IN THOUSAND DOLLARS) YEARLING 1 ,088 1 , 088 - 558 CALF-YEARLING 1 , 922 1 , 922 - 587 TOTAL: 5,272 5 , 272 - 1 , 759 7 . TOTAL PRODUCER PREMIUM CALF 1 ,092 1 , 092 - 639 (AVERAGE PER YEAR IN THOUSAND DOLLARS) YEARLING 122 122 - 559 CALF-YEARLING 828 828 - 566 TOTAL: 2,042 2 , 042 - 1 , 765 8 . NET GOVERNMENT PAYMENT(3) CALF 1 , 170 1 , 170 26 (AVERAGE PER YEAR IN THOUSAND DOLLARS) YEARLING 966 966 1 CALF-YEARLING 1 ,093 1 ,093 21 TOTAL: 3 , 230 3. 230 6 9. WELFARE CHANGE COST 49 49 16 (AVERAGE PER YEAR IN THOUSAND DOLLARS) BENEFIT 1 16 1 16 3 NET CHANGE: 67 67 14 (1) PRODUCER REVENUE IS DEFINED AS THE PRODUCT OF BEEF OUTPUT AND BEEF PRICE (2) GROSS INCOME IS DEFINED AS THE PRODUCT OF BEEF OUTPUT AND GROSS MARGIN (GROSS MARGIN IS EQUAL TO TOTAL RECEIPT LESS TOTAL VARIABLE COST) (3) NET GOVERNMENT PAYMENT EQUALS NET PRODUCER RECEIPT I l l 5.1.5 E f f e c t s o f G u a r a n t e e d P r i c e Scheme T h i s scheme r e s e m b l e s t h e f e d e r a l A g r i c u l t u r a l S t a b i l i z a t i o n A c t i n c a l c u l a t i n g t h e e f f e c t i v e b e e f p r i c e r e c e i v e d by an a v e r a g e f a r m e r i n B.C. The e f f e c t i v e p r i c e ( i . e . g u a r a n t e e d p r i c e ) was d e t e r m i n e d t o be t h e sum of 90% o f a v e r a g e m a r k e t r e t u r n o f t h e p r e c e d i n g f i v e y e a r s and t h e c u r r e n t i n p u t c o s t l e s s a v e r a g e i n p u t c o s t of t h e p r e c e d i n g f i v e y e a r s . No p r o d u c e r premium w o u l d be c o l l e c t e d f r o m b e e f p r o d u c e r s u n d e r t h i s scheme. One o f t h e a d v a n t a g e s o f t h i s scheme i s t h a t t h e l e v e l o f e f f e c t i v e b e e f p r i c e s w o u l d n ' t f l u c t u a t e much f r o m y e a r t o y e a r , b e c a u s e i t s c a l c u l a t i o n i s b a s e d on a f i v e y e a r m o v i n g a v e r a g e . The e s t i m a t e d r e s u l t s o f t h e g u a r a n t e e d p r i c e scheme a r e s u m m a r i z e d b e l o w , a s s u m i n g i t had o p e r a t e d o v e r t h e same t w e n t y y e a r p e r i o d , 1 9 5 9 - 1 9 7 8 . (1) L e v e l o f B e e f P r o d u c t i o n Compared t o "no scheme" s i t u a t i o n , t h e g u a r a n t e e d p r i c e w o u l d have i n c r e a s e d t h e a v e r a g e c a l f p r o d u c t i o n 642 t h o u s a n d p o u n d s p e r y e a r , t h e a v e r a g e y e a r l i n g and c a l f - y e a r l i n g p r o d u c t i o n w o u l d have d e c r e a s e d 232 t h o u s a n d p o u n d s a n d 272 t h o u s a n d p o u n ds p e r y e a r , r e s p e c t i v e l y . B e e f p r o d u c t i o n u n d e r t h e g u a r a n t e e d p r i c e scheme o v e r t h e t w e n t y y e a r p e r i o d w o u l d be 1,942 t h o u s a n d pounds p e r y e a r l e s s t h a n F I A P ( 1 9 8 0 ) a t t h e c a l f l e v e l , 170 t h o u s a n d pounds p e r y e a r more a t t h e y e a r l i n g l e v e l a n d 15 t h o u s a n d pounds p e r y e a r l e s s a t t h e c a l f - y e a r 1 i n g l e v e l . (2) L e v e l o f E f f e c t i v e B e e f P r i c e R e c e i v e d by A v e r a g e F a r m e r The g u a r a n t e e d p r i c e scheme w o u l d have i n c r e a s e d t h e e f f e c t i v e p r i c e r e c e i v e d by an a v e r a g e f a r m e r f o r a l l t h r e e 112 c a t e g o r i e s o f a n i m a l s . Compared t o F I A P ( 1 9 8 0 ) , t h e g u a r a n t e e d p r i c e scheme w o u l d have i n c r e a s e c a l f p r i c e $0.57 p e r c w t . l e s s , y e a r l i n g p r i c e $0.06 p e r c w t . more, and c a l f - y e a r 1 i n g p r i c e $2.92 p e r c w t . l e s s . (3) L e v e l o f B e e f P r o d u c e r Revenue The g u a r a n t e e d p r i c e scheme w o u l d have i n c r e a s e d t h e p r o d u c e r r e v e n u e f o r a l l t h e t h r e e l e v e l s o f b e e f p r o d u c t i o n . The i n c r e a s e s i n b e e f p r o d u c e r r e v e n u e u n d e r t h e g u a r a n t e e d p r i c e scheme w o u l d be q u i t e d i f f e r e n t f r o m u n d e r F I A P ( 1 9 8 0 ) , t h e r e w o u l d be 644 t h o u s a n d d o l l a r s p e r y e a r l o w e r a t t h e c a l f l e v e l , 98 t h o u s a n d d o l l a r s p e r y e a r l o w e r a t t h e y e a r l i n g l e v e l , a n d 378 t h o u s a n d d o l l a r s p e r y e a r l o w e r a t t h e c a l f - y e a r l i n g l e v e l . ( 4 ) V a r i a t i o n o f P r o d u c e r G r o s s Income Compared t o t h e "no scheme" s i t u a t i o n , t h e g u a r a n t e e d p r i c e scheme w o u l d have r e d u c e d t h e p r o d u c e r income v a r i a b i l i t y , f o r a l l t h r e e l e v e l s o f p r o d u c t i o n ' . However, t h e g u a r a n t e d p r i c e scheme a p p e a r s more c a p a b l e i n r e d u c i n g p r o d u c e r income v a r i a b i l i t y t h a n F I A P ( 1 9 8 0 ) d i d . T h i s i s i n d i c a t e d by t h e s t a n d a r d d e v i a t i o n s a r e 1 3 3 3 , 629 a n d 769 t h o u s a n d d o l l a r s p e r y e a r l o w e r t h a n u n d e r F I A P ( 1 9 8 0 ) a t t h e c a l f , y e a r l i n g and c a l f -y e a r l i n g l e v e l s , r e s p e c t i v e l y . The c o e f f i c i e n t s o f v a r i a t i o n o f b e e f p r o d u c e r s income a t t h e t h r e e d i f f e r e n t l e v e l s w o u l d r e s p e c t i v e l y be 36, 11 and 17 l o w e r t h a n u n d e r F I A P ( 1 9 8 0 ) . The a b i l i t y o f t h e g u a r a n t e e d p r i c e scheme t o l o w e r income v a r i a b i l i t y s u g g e s t s t h a t c a l c u l a t i n g e f f e c t i v e b e e f p r i c e s u s i n g a f i v e y e a r m o v i n g a v e r a g e c a n e f f e c t i v e l y dampen p r o d u c e r 113 income f l u c t u a t i o n s f r o m y e a r t o y e a r . (5) Net Government Payment The t o t a l g o v e r n m e n t n e t payment u n d e r g u a r a n t e e d p r i c e scheme w o u l d be 2,251 t h o u s a n d d o l l a r s p e r y e a r o v e r t h e t w e n t y y e a r p e r i o d . T h i s r e p r e s e n t s 898 t h o u s a n d d o l l a r s p e r y e a r f o r c a l f p r o d u c e r s ( 4 0 % o f t o t a l g o v e r n m e n t n e t p a y m e n t ) , 723 t h o u s a n d d o l l a r s p e r y e a r f o r y e a r l i n g p r o d u c e r s ( 3 2 % ) , and 629 t h o u s a n d d o l l a r s p e r y e a r f o r c a l f - y e a r l i n g p r o d u c e r s ( 2 8 % ) . A l t h o u g h no p r o d u c e r premium w o u l d be c o l l e c t e d f r o m b e e f p r o d u c e r s u n d e r t h e g u a r a n t e e d p r i c e scheme, t h e g u a r a n t e e d p r i c e scheme w o u l d n e v e r t h e l e s s c o s t t h e g o v e r n m e n t 973 t h o u s a n d d o l l a r s p e r y e a r l e s s t h a n F I A P ( 1 9 8 0 ) o v e r t h e t w e n t y y e a r p e r i o d . (6) Net W e l f a r e Change The n e t w e l f a r e c h a n g e i s e s t i m a t e d t o be p o s i t i v e , 40 t h o u s a n d d o l l a r s p e r y e a r o v e r the- t w e n t y y e a r p e r i o d , t h i s r e p r e s e n t s 13 t h o u s a n d d o l l a r s p e r y e a r l e s s t h a n t h e n e t c h a n g e u n d e r F I A P ( 1 9 8 0 ) . TABLE 5.4 ESTIMATED EFFECTS OF GUARANTEED PRICE SCHEME. 1959-1978 GUARANTEED DIFFERENCE DIFFERENCE PRICE COMPARED TO COMPARED TO LEVEL SCHEME NO SCHEME F I A P ( 1 9 8 0 ) 1. LEVEL OF BEEF PRODUCTION CALF 16 . 39 1 642 - 1,942 (AVERAGE PER YEAR IN THOUSAND POUNDS) YEARLING 30.810 - 232 170 CALF-YEARLING 13,801 - 272 15 TOTAL: 61,003 137 -1 ,788 2 . L E V E L OF E F F E C T I V E BEEF PRICE CALF 34 . 17 4 .67 - 0.57 RECEIVED BY AVERAGE FARMER YEARLING 31 .88 2 . 50 0.06 (AVERAGE PER MONTH IN DOLLARS PER HUNDRED WEIGHT) CALF-YEARLING 32.82 3 . 32 - 2.92 3 . LEVEL OF BEEF PRODUCER GROSS REVENUE(1 ) CALF 6,326 1 , 225 - 644 (AVERAGE PER YEAR IN THOUSAND DOLLARS) YEARLING 10.356 682 98 CALF-YEARLING 5,057 549 - 378 TOTAL: 21,739 2 ,455 -1, 120 4 . ABSOLUTE VARIATION OF PRODUCER GROSS INCOME(2) CALF 1 , 196 - 1 ,564 - 1,333 (AVERAGE STANDARD DEVIATION PER YEAR YEARLING 1 ,953 - 1 , 253 - 629 IN THOUSAND DOLLARS) CALF-YEARLING 842 - 1 ,463 - 769 5 . RELATIVE VARIATION OF PRODUCER GROSS INCOME CALF 30 - 59 36 (AVERAGE C O E F F I C I E N T OF VARIATION PER YEAR) YEARLING 33 - 31 1 1 CALF-YEARLING 22 - 52 17 6 . TOTAL GOVERNMENT CONTRIBUTION CALF 898 898 - 1,977 (AVERAGE PER YEAR IN THOUSAND DOLLARS) YEARLING 723 723 - 923 CALF-YEARLING 629 629 - 1,880 TOTAL: 2,251 2 , 251 -4,780 7 . TOTAL PRODUCER PREMIUM CALF 0 0 - 1,080 (AVERAGE PER YEAR IN THOUSAND DOLLARS) YEARLING 0 0 - 435 CALF-YEARLING 0 0 - 896 TOTAL: 0 0 -2.411 8 . NET GOVERNMENT PAYMENT ( 3) CALF 898 898 - 246 (AVERAGE PER YEAR IN THOUSAND DOLLARS) YEARLING 723 723 - 242 CALF-YEARLING 629 629 - 485 TOTAL: 2,251 2 .251 - 973 9 . WELFARE CHANGE COST 4 4 61 (AVERAGE PER YEAR IN THOUSAND DOLLARS) BENEFIT 44 44 75 NET CHANGE: 40 40 13 ( 1 ) PRODUCER REVENUE IS DEFINED AS THE PRODUCT OF BEEF OUTPUT AND BEEF PRICE ( 2 ) GROSS INCOME IS DEFINED AS THE PRODUCT OF BEEF OUTPUT AND GROSS MARGIN (GROSS MARGIN IS EQUAL TO TOTAL RECEIPT LESS TOTAL VARIABLE COST) ( 3 ) NET GOVERNMENT PAYMENT EQUALS NET PRODUCER RECEIPT 115 5.2 Comparative E f f e c t i v e n e s s of the A l t e r n a t i v e Income S t a b i l i z a t i o n Schemes The comparative e f f e c t i v e n e s s of a l t e r n a t i v e income s t a b i l i z a t i o n schemes can be shown by comparing t h e i r impacts on producer revenue l e v e l and income v a r i a b i l i t y . R e l a t i v e e f f e c t i v e n e s s can be expected to vary depending on the p o i n t s of view taken. A d i s c u s s i o n on the e f f e c t i v e n e s s of a l t e r n a t i v e schemes i s presented below, f i r s t from the poin t of view of the p r o v i n c i a l government, and then from the poin t of view of B.C. beef producers. A. From the government p o i n t of view: In a c h i e v i n g the goal of income s t a b i l i t y , d i f f e r e n t amounts of expenditure would be r e q u i r e d f o r the a l t e r n a t i v e income s t a b i l i z a t i o n schemes. The c o s t s of implementing these schemes were summarized by the summary measures, such as t o t a l government c o n t r i b u t i o n , t o t a l producer premium, and net government payment. For purposes of comparing the e f f e c t i v e n e s s of a l t e r n a t i v e s t a b i l i z a t i o n schemes from the p r o v i n c i a l government's point of view, we assume that the government would evaluate the e f f e c t i v e n e s s of a l t e r n a t i v e schemes by c o n s i d e r i n g t o t a l e xpenditure, i n c l u d i n g both net government payment and producer premium, to be the r e l e v a n t c o s t f i g u r e . T h i s assumption was based on the b e l i e f that the p r o v i n c i a l government i s concerned with expenditures by beef producers as w e l l as i t s own d i r e c t c o s t s . 116 The e f f e c t i v e n e s s o f e a c h scheme c a n be shown by t h e i n c r e a s e o f p r o d u c e r g r o s s r e v e n u e and t h e r e d u c t i o n i n t h e s t a n d a r d d e v i a t i o n o f p r o d u c e r income p e r t h o u s a n d d o l l a r s o f t o t a l e x p e n d i t u r e , i f t h e s e schemes had o p e r a t e d o v e r t h e p e r i o d 1 9 5 9 - 1 9 7 8 . The c o m p a r a t i v e e f f e c t i v e n e s s o f a l t e r n a t i v e schemes a r e p r e s e n t e d i n T a b l e 5.5 and d i s c u s s e d b e l o w , f i r s t on t h e i r e f f e c t i v e n e s s i n i n c r e a s i n g b e e f p r o d u c e r g r o s s r e v e n u e , t h e n i n r e d u c i n g p r o d u c e r income v a r i a b i l i t y , f o l l o w e d by t h e e s t i m a t i o n o f s o c i a l b e n e f i t t h a t w o u l d g e n e r a t e d by e a c h scheme. (1) E f f e c t i v e n e s s o f A l t e r n a t i v e Schemes i n I n c r e a s i n g B e e f P r o d u c e r A n n u a l G r o s s Revenue F o r e v e r y t h o u s a n d d o l l a r s p e r y e a r of g o v e r n m e n t a n d / o r p r o d u c e r e x p e n d i t u r e on c a l f p r o d u c t i o n d u r i n g t h e t w e n t y y e a r p e r i o d , a g g r e g a t e c a l f p r o d u c e r r e v e n u e w o u l d have i n c r e a s e d by 1,140 d o l l a r s p e r y e a r u n d e r F I A P ( 1 9 7 7 ) , 650 d o l l a r s p e r y e a r u n d e r F I A P ( 1 9 8 0 ) , 920 d o l l a r s p e r y e a r u n d e r t h e p r e m i u m / s u b s i d y scheme, and 1,364 d o l l a r s p e r y e a r u n d e r t h e g u a r a n t e e d p r i c e s c h e m e 1 . ( s e e T a b l e 5.5) F o r e v e r y t h o u s a n d d o l l a r s p e r y e a r of g o v e r n m e n t a n d / o r p r o d u c e r e x p e n d i t u r e on y e a r l i n g p r o d u c t i o n d u r i n g t h e t w e n t y y e a r p e r i o d , a g g r e g a t e y e a r l i n g p r o d u c e r r e v e n u e w o u l d have i n c r e a s e d by 561 d o l l a r s p e r y e a r u n d e r F I A P ( 1 9 7 7 ) , 474 d o l l a r s ^ h e s e f i g u r e s were c a l c u l a t e d by d i v i d i n g t h e a n n u a l i n c r e a s e i n p r o d u c e r g r o s s r e v e n u e ( c o m p a r e d t o "no scheme" s i t u a t i o n ) by t h e t o t a l e x p e n d i t u r e p e r y e a r o v e r t h e 1959-1978 p e r i o d ( f r o m T a b l e 5.1-5.4), and t h e n m u l t i p l i n g by 1,000 d o l l a r s . 1-17 p e r y e a r u n d e r F I A P ( 1 9 8 0 ) , 712 d o l l a r s p e r y e a r u n d e r t h e p r e m i u m / s u b s i d y scheme, and 943 d o l l a r s p e r y e a r u n d e r t h e g u a r a n t e e d p r i c e scheme. F o r e v e r y t h o u s a n d d o l l a r s p e r y e a r o f g o v e r n m e n t a n d / o r p r o d u c e r e x p e n d i t u r e on c a l f - y e a r 1 i n g p r o d u c t i o n d u r i n g t h e t w e n t y y e a r p e r i o d , a g g r e g a t e c a l f - y e a r l i n g p r o d u c e r r e v e n u e w o u l d h a v e i n c r e a s e d by 662 d o l l a r s p e r y e a r u n d e r F I A P ( 1 9 7 7 ) , 369 d o l l a r s p e r y e a r u n d e r F I A P ( 1 ? 8 0 ) , 497 d o l l a r s p e r y e a r u n d e r t h e p r e m i u m / s u b s i d y scheme, and 873 d o l l a r s p e r y e a r u n d e r t h e g u a r a n t e e d p r i c e scheme. From t h e o v e r a l l v i e w ( i . e . s u mmation o f a l l t h r e e l e v e l s o f b e e f p r o d u c t i o n ) , f o r e v e r y t h o u s a n d d o l l a r s p e r y e a r of g o v e r n m e n t a n d / o r p r o d u c e r e x p e n d i t u r e on same a s p e c t of b e e f p r o d u c t i o n d u r i n g t h e t w e n t y y e a r p e r i o d , B.C. b e e f p r o d u c e r r e v e n u e w o u l d h a v e i n c r e a s e d by 849 d o l l a r s p e r y e a r u n d e r F I A P Q 9 7 7 ) , 508 d o l l a r s p e r y e a r u n d e r F I A P ( 1 9 8 0 ) , 723 d o l l a r s p e r y e a r u n d e r t h e p r e m i u m / s u b s i d y scheme, and 1,091 d o l l a r s p e r y e a r u n d e r t h e g u a r a n t e e d p r i c e scheme. T h e s e f i g u r e s p r o v i d e a g e n e r a l i n s i g h t t o t h e e f f e c t i v e n e s s o f e a c h o f t h e a l t e r n a t i v e schemes a t d i f f e r e n t l e v e l s o f b e e f p r o d u c t i o n . The g u a r a n t e e d p r i c e scheme i s shown t o be t h e most e f f e c t i v e i n r a i s i n g r e v e n u e s f o r a l l t h r e e l e v e l s o f b e e f p r o d u c t i o n , w h e r e a s F I A P ( 1 9 8 0 ) i s shown t o be t h e l e a s t e f f e c t i v e . 118 (2) E f f e c t i v e n e s s o f A l t e r n a t i v e Schemes i n R e d u c i n g B e e f P r o d u c e r Income V a r i a b i l i t y F o r e v e r y t h o u s a n d d o l l a r s p e r y e a r o f g o v e r n m e n t a n d / o r p r o d u c e r e x p e n d i t u r e on c a l f p r o d u c t i o n d u r i n g t h e t w e n t y y e a r p e r i o d , c a l f p r o d u c e r income v a r i a b i l i t y w o u l d have d e c r e a s e d , a s shown by a r e d u c t i o n o f s t a n d a r d d e v i a t i o n 768 d o l l a r s p e r y e a r u n d e r F I A P Q 9 7 7 ) , 80 d o l l a r s p e r y e a r u n d e r F I A P ( 1 9 8 0 ) , 769 d o l l a r s p e r y e a r u n d e r t h e p r e m i u m / s u b s i d y scheme, a n d 1,741 d o l l a r s p e r y e a r u n d e r t h e g u a r a n t e e d p r i c e s c h e m e 1 . (.see T a b l e 5.5) F o r e v e r y t h o u s a n d d o l l a r s p e r y e a r o f g o v e r n m e n t a n d / o r p r o d u c e r e x p e n d i t u r e on y e a r l i n g p r o d u c t i o n d u r i n g t h e t w e n t y y e a r p e r i o d , y e a r l i n g p r o d u c e r income v a r i a b i l i t y w o u l d have d e c r e a s e d , a s shown by a r e d u c t i o n o f s t a n d a r d d e v i a t i o n o f 1,350 d o l l a r s p e r y e a r u n d e r F I A P ( 1 9 7 7 ) , 380 d o l l a r s p e r y e a r u n d e r F I A P ( 1 9 8 0 ) , 1,438 d o l l a r s p e r y e a r u n d e r t h e p r e m i u m / s u b s i d y scheme, and 1,733 d o l l a r s p e r y e a r u n d e r t h e g u a r a n t e e d p r i c e scheme. F o r e v e r y t h o u s a n d d o l l a r s p e r y e a r o f g o v e r n m e n t a n d / o r p r o d u c e r e x p e n d i t u r e on c a l f - y e a r l i n g p r o d u c t i o n d u r i n g t h e t w e n t y y e a r p e r i o d , c a l f - y e a r l i n g p r o d u c e r income v a r i a b i l i t y w o u l d have d e c r e a s e d , a s shown by a r e d u c t i o n of s t a n d a r d ^ h e s e f i g u r e s were c a l c u l a t e d by d i v i d i n g t h e a n n u a l r e d u c t i o n i n s t a n d a r d d e v i a t i o n o f p r o d u c e r n e t income ( c o m p a r e d t o "no scheme" s i t u a t i o n ) by t h e t o t a l e x p e n d i t u r e p e r y e a r o v e r t h e 1959-1978 p e r i o d ( f r o m T a b l e 5 . 1 - 5 . 4 ) , and t h e n m u l t i p l i n g by 1,000 d o l l a r s . 119 d e v i a t i o n o f 957 d o l l a r s p e r y e a r u n d e r F I A P ( 1 9 7 7 ) , 277 d o l l a r s p e r y e a r u n d e r F I A P ( 1 9 8 0 ) , 871 d o l l a r s p e r y e a r u n d e r t h e p r e m i u m / s u b s i d y scheme, and 2,326 d o l l a r s p e r y e a r u n d e r t h e g u a r a n t e e d p r i c e scheme. The f i g u r e s i n T a b l e 5.5 i n d i c a t e t h a t t h e g u a r a n t e e d p r i c e scheme i s t h e most e f f e c t i v e a l t e r n a t i v e i n r e d u c i n g p r o d u c e r income v a r i a b i l i t y . The s e c o n d most e f f e c t i v e scheme i s t h e p r e m i u m / s u b s i d y scheme, f o l l o w e d by t h e F I A P ( 1 9 7 7 ) and t h e F I A P ( 1 9 8 0 ) . (3) N e t S o c i a l B e n e f i t s G e n e r a t e d by A l t e r n a t i v e Schemes The n e t w e l f a r e c h a n g e p e r y e a r f o r e a c h o f t h e schemes was shown t o be p o s i t i v e , i n d i c a t i n g s o c i a l b e n e f i t s w o u l d have been g e n e r a t e d had t h e s e schemes o p e r a t e d o v e r t h e p e r i o d 1959-1978.' Net s o c i a l b e n e f i t s g e n e r a t e d p e r t h o u s a n d d o l l a r s t o t a l e x p e n d i t u r e p e r y e a r w o u l d be 7 d o l l a r s p e r y e a r u n d e r F I A P ( 1 9 7 7 ) , 8 d o l l a r s p e r y e a r u n d e r F I A P ( 1 9 8 0 ) , 13 d o l l a r s p e r y e a r u n d e r t h e p r e m i u m / s u b s i d y scheme, and 18 d o l l a r s p e r y e a r u n d e r t h e g u a r a n t e e d p r i c e s c h e m e 1 . ( s e e T a b l e 5.5) T h u s , r e g a r d i n g s o c i a l b e n e f i t g e n e r a t i o n , t h e g u a r a n t e e d p r i c e scheme w o u l d have t h e l a r g e s t e f f e c t o f t h e a l t e r n a t i v e schemes. 1 T h e s e f i g u r e s were c a l c u l a t e d by d i v i d i n g t h e n e t w e l f a r e c h a n g e by t h e t o t a l e x p e n d i t u r e p e r y e a r o v e r t h e 1959-1978 p e r i o d ( f r o m T a b l e 5.1-5.4), and t h e n m u l t i p l i n g by 1,000 d o l l a r s . 120 T a b l e 5.5 E f f e c t i v e n e s s Of A l t e r n a t i v e Schemes P e r $1,000  G o v e r n m e n t And P r o d u c e r E x p e n d i t u r e P e r Y e a r , 1 9 5 9 - 1 9 7 8 . P r e m i u m / G u a r a n t e e d F I A P F I A P S u b s i d y P r i c e L e v e l ( 1 9 7 7 ) (1980) scheme scheme I n c r e a s e i n l e v e l C a l f 1,140 650 920 1,364 o f b e e f p r o d u c e r g r o s s r e v e n u e Y e a r l i n g 561 474 712 943 p e r $1,000 e x p e n d i t u r e p e r y e a r C a l f - 662 369 497 873 ( a v e r a g e p e r y e a r y e a r l i n g i n d o l l a r s ) O v e r a l l 1 849 508 723 1,091 R e d u c t i o n i n C a l f 768 80 769 1,741 a b s o l u t e v a r i a t i o n o f p r o d u c e r n e t Y e a r 1 i n g 1,350 380 1,438 1,733 income p e r $1,000 e x p e n d i t u r e p e r y e a r C a l f - 957 277 871 2, 326 ( a v e r a g e s t a n d a r d y e a r l i n g d e v i a t i o n p e r y e a r i n d o l l a r s ) N e t w e l f a r e c h a n g e 7 8 13 18 p e r $1,000 e x p e n d i t u r e p e r y e a r ( d o l l a r s p e r y e a r ) O v e r a l l r e p r e s e n t s a l l t h r e e l e v e l s o f b e e f p r o d u c t i o n ( i . e . c a l f , y e a r l i n g , and c a l f - y e a r l i n g ) 121 B. From the producer p o i n t of view: P r i o r t o p a r t i c i p a t i n g i n any of the s t a b i l i z a r i o n schemes, p r o d u c e r s may i n t e r e s t t o know how these schemes would i n c r e a s e t h e i r revenue and d e c r e a s e t h e i r income v a r i a b i l i t y . The c o m p a r a t i v e e f f e c t i v e n e s s of a l t e r n a t i v e schemes a r e d i s c u s s e d below, f i r s t on the net r e c e i p t s p r o d u c e r s would r e c e i v e , then on the decrease on producer income v a r i a b i l i t y . (1) Net producer r e c e i p t s under a l t e r n a t i v e s t a b i l i z a t i o n schemes For purposes of comparing e f f e c t i v e n e s s of the a l t e r n a t i v e schemes from the producer p o i n t of view, we assume t h a t p r o d u c e r s are not concerned w i t h the amount of t o t a l government c o n t r i b u t i o n . In o t h e r words, we assume p r o d u c e r s are o n l y c o ncerned about the r e c e i p t s they r e c e i v e under each of the a l t e r n a t i v e schemes; i . e a f t e r t o t a l p roducer premiums are deducted from the s u b s i d i e s the a l t e r n a t i v e schemes p r o v i d e . Net producer r e c e i p t s under a l t e r n a t i v e schemes are e q u a l t o t o t a l government c o n t r i b u t i o n l e s s t o t a l p r o d u c e r premium ( i . e . the same amount as net government payment i n Table 5.1-5.4). Net producer r e c e i p t s under a l t e r n a t i v e schemes are r e p o r t e d i n T a b l e 5.6 and d e s c r i b e d below, i f they had o p e r a t e d over the p e r i o d 1959-1978. The average net p r o d u c e r r e c e i p t s f o r c a l f p r o d u c t i o n would be h i g h e s t under FIAP(1977) w i t h 1,656 thousand d o l l a r s per y e a r , 1,170 thousand d o l l a r s per year under the premium/subsidy scheme, 1,144 thousand d o l l a r s per year under F I A P ( 1 9 8 0 ) , and l o w e s t under the guaranteed p r i c e scheme w i t h 122 898 t h o u s a n d d o l l a r s p e r y e a r . ( s e e T a b l e 5.6) The a v e r a g e n e t p r o d u c e r r e c e i p t s f o r y e a r l i n g p r o d u c t i o n w o u l d be h i g h e s t u n d e r t h e p r e m i u m / s u b s i d y scheme w i t h 966 t h o u s a n d d o l l a r s p e r y e a r , 965 t h o u s a n d d o l l a r s p e r y e a r u n d e r F I A P ( 1 9 8 0 ) , 840 t h o u s a n d d o l l a r s p e r y e a r u n d e r F I A P ( 1 9 7 7 ) , a nd l o w e s t u n d e r t h e g u a r a n t e e d p r i c e scheme w i t h 723 t h o u s a n d d o l l a r s p e r y e a r . . The a v e r a g e n e t p r o d u c e r r e c e i p t s f o r c a l f - y e a r l i n g p r o d u c t i o n w o u l d be h i g h e s t u n d e r F I A P ( 1 9 7 7 ) w i t h 1,419 t h o u s a n d d o l l a r s p e r y e a r , 1,114 t h o u s n a d d o l l a r s p e r y e a r u n d e r F I A P ( 1 9 8 0 ) , 1,093 t h o u s a n d d o l l a r s p e r y e a r u n d e r t h e p r e m i u m / s u b s i d y scheme, and l o w e s t u n d e r t h e g u a r a n t e e d p r i c e scheme w i t h 629 t h o u s a n d d o l l a r s p e r y e a r . Summing t h e t h r e e l e v e l s o f b e e f p r o d u c t i o n , a v e r a g e n e t p r o d u c e r r e c e i p t s w o u l d be h i g h e s t u n d e r F I A P ( 1 9 7 7 ) w i t h 3,917 t h o u s a n d d o l l a r s p e r y e a r , a nd l o w e s t u n d e r t h e g u a r a n t e e d p r i c e scheme w i t h 2,251 t h o u s a n d d o l l a r s p e r y e a r o n l y . (2) E f f e c t i v e n e s s o f A l t e r n a t i v e Schemes i n R e d u c i n g B e e f P r o d u c e r Income V a r i a b i l i t y E a c h o f t h e f o u r s t a b i l i z a t i o n schemes w o u l d have s u c c e s s f u l l y d e c r e a s e d t h e p r o d u c e r income v a r i a b i l i t y , h o w e v e r , w i t h d i f f e r e n t p r o d u c e r c o n t r i b u t i o n s t h r o u g h t h e p r o d u c e r p r emium. The p r e m i u m / s u b s i d y scheme was shown t o be most e f f e c t i v e i n r e d u c i n g t h e s t a n d a r d d e v i a t i o n o f p r o d u c e r n e t income ( f r o m T a b l e 5 . 1 - 5 . 4 ) , t h i s was done w i t h p r o d u c e r premium amounted t o 1,765 t h o u s a n d d o l l a r s p e r y e a r o v e r t h e t w e n t y y e a r 123 p e r i o d . A l t h o u g h t h e d e c r e a s e i n s t a n d a r d d e v i a t i o n o f p r o d u c e r i ncome v a r i a b i l i t y u n d e r t h e g u a r a n t e e d p r i c e scheme was n o t a s low a s t h e p r e m i u m / s u b s i d y scheme, t h a t was done w i t h o u t any p r o d u c e r e x p e n d i t u r e ( s i n c e no p r o d u c e r premium w o u l d be c o l l e c t e d u n d e r t h i s s c h e m e ) . W i t h t h e same p r o d u c e r e x p e n d i t u r e on b e e f p r o d u c t i o n d u r i n g t h e t w e n t y . y e a r p e r i o d , t h e p r e m i u m / s u b s i d y scheme w o u l d be shown a s t h e most e f f e c t i v e o f a l l s t a b i l i z a t i o n schemes i n r e d u c i n g p r o d u c e r income v a r i a b i l i t y 1 , f o l l o w e d by F I A P ( 1 9 7 7 ) , w h e r e a s F I A P Q 9 8 0 ) w o u l d be shown a s t h e l e a s t e f f e c t i v e . 1 T h e s e e s t i m a t i o n s were c a l c u l a t e d by d i v i d i n g t h e a n n u a l r e d u c t i o n i n s t a n d a r d d e v i a t i o n o f p r o d u c e r n e t income ( c o m p a r e d t o "no scheme" s i t u a t i o n ) by t h e p r o d u c e r premium p e r y e a r o v e r t h e 1959-1978 p e r i o d ( f r o m T a b l e 5 . 1 - 5 . 4 ) , and t h e n m u l t i p l i n g by 1,000 d o l l a r s . 124 T a b l e 5.6 A v e r a g e Net P r o d u c e r R e c e i p t s Under  A l t e r n a t i v e S t a b i l i z a t i o n Schemes, 19 5 9 - 1 9 7 8 . P r e m i u m / G u a r a n t e e d F I A P F I A P S u b s i d y P r i c e ( 1 9 7 7 ) (1980) scheme scheme Net P r o d u c e r R e c e i p t s : ( a v e r a g e p e r y e a r i n t h o u s a n d d o l l a r s ) C a l f 1,656 1,144 1,170 898 Y e a r l i n g 840 965 966 723 C a l f - y e a r l i n g 1,419 1,114 1, 093 629 O v e r a l l 1 3,917 3,224 3,230 2,251 1 O v e r a l l r e p r e s e n t s a l l t h r e e l e v e l s o f b e e f p r o d u c t i o n ( i . e . c a l f , y e a r l i n g , and c a l f - y e a r 1 i n g ) . 125 CHAPTER VI CONCLUSIONS T h i s c h a p t e r s u m m a r i z e s t h e most i m p o r t a n t c o n c l u s i o n s t h a t c a n be drawn f r o m t h i s s t u d y . I t i n c l u d e s d i s c u s s i o n s on b o t h m e t h o d o l o g i c a l a s p e c t s a nd m o d e l r e s u l t s . A d i s c u s s i o n on f u r t h e r r e s e a r c h i s p r e s e n t e d a t t h e end of t h e c h a p t e r . 6.1 M e t h o d o l o g i c a l A s p e c t s A number of p o i n t s c a n be c o n c l u d e d w i t h r e s p e c t t o t h e m e t h o d o l o g y e m p l o y e d i n t h i s s t u d y . (1) S i m u l a t i n g a m a t h e m a t i c a l m o d e l has e n a b l e d p r e d i c t i o n o f t h e l i k e l y i m p a c t s o f d i f f e r e n t income s t a b i l i z a t i o n schemes on t h e B.C. b e e f i n d u s t r y , w i t h o u t t h e n e c e s s i t y o f p u t t i n g t h e schemes i n t o p r a c t i s e . (2) The model was b u i l t i n a g e n e r a l and f l e x i b l e way a l l o w i n g i t t o i n c o r p o r a t e r e c e n t c h a n g e s i n g o v e r n m e n t e f f o r t s t o s t a b i l i z e t h e B.C. b e e f i n d u s t r y . (3) The v a l i d a t i o n r e s u l t s g i v e n i n C h a p t e r I V s u p p o r t t h e v i e w t h a t t h e model i s a v a l i d r e p r e s e n t a t i o n o f t h e r e a l w o r l d s y s t e m . The r e s u l t s t h a t t e s t t h e m o d e l ' s p e r f o r m a n c e were r e p o r t e d as "good" o v e r t h e t w e n t y y e a r p e r i o d . The v a l i d a t i o n r e s u l t s a l s o s u g g e s t t h a t t h e b a s i c p r o d u c t i o n a s s u m p t i o n s made f o r t h e B.C. b e e f i n d u s t r y a nd t h e p a r a m e t e r v a l u e s a s s i g n e d t o t h e model a r e v a l i d . (4) The model u s e d i n t h i s s t u d y d i s a g g r e g a t e d B.C. b e e f p r o d u c t i o n i n t o t h r e e d i s t i n c t l e v e l s ( i . e . c a l f , y e a r l i n g a n d c a l f - y e a r 1 i n g ) i n o r d e r t o t r a c e t h e i m p a c t s o f 126 a l t e r n a t i v e schemes on the d i f f e r e n t l e v e l s of beef p r o d u c t i o n . R e s u l t s with relevance to d i f f e r e n t l e v e l s of beef p r o d u c t i o n were c o n s i d e r e d p r e f e r a b l e to the r e s u l t s of aggregate beef outputs, as they provide p o l i c y makers with more i n f o r m a t i o n i n making d e c i s i o n s . 6.2 Model R e s u l t s The model pr o v i d e d u s e f u l i n f o r m a t i o n of two main types: (1) the l i k e l y impacts of s e v e r a l income s t a b i l i z a t i o n schemes for B.C. beef producers, and (2) the comparative e f f e c t s of these schemes. The main c o n c l u s i o n s f o r each of these two types of i n f o r m a t i o n are given in turn below. 6.2.1 L i k e l y Impacts of A l t e r n a t i v e S t a b i l i z a t i o n Schemes The model was run under a l t e r n a t i v e income s t a b i l i z a t i o n schemes, and the estimated r e s u l t s were compared to the "no scheme" s i t u a t i o n . Estimated d i f f e r e n c e s showed the impacts of a l t e r n a t i v e income s t a b i l i z a t i o n schemes. As the v a l i d a t i o n r e s u l t s were reported as "good and a c c e p t a b l e " , the c o n c l u s i o n s drawn from model r e s u l t s can be c o n s i d e r e d h e l p f u l to p o l i c y makers in making r e a l world d e c i s i o n s . However, c a u t i o n must be e x e r c i s e d i n using these r e s u l t s , because they are dependent on the model assumptions and parameter values a s s i g n e d . For example, the r e s u l t s r e l y on assumptions made reg a r d i n g farmer p r o d u c t i o n d e c i s i o n responses. The impacts of four d i f f e r e n t income s t a b i l i z a t i o n schemes were estimated and examined i n t h i s study - the 127 F I A P ( 1 9 7 7 ) , t h e F I A P Q 9 8 0 ) , t h e p r e m i u m / s u b s i d y scheme, and t h e g u a r a n t e e d p r i c e scheme. S e v e r a l p o i n t s c a n be c o n c l u d e d f r o m t h e e s t i m a t e d r e s u l t s o f t h e s e schemes, i f t h e y had o p e r a t e d o v e r t h e p e r i o d 1 9 5 9 - 1 9 7 8 . (1) Compared t o t h e "no scheme' s i t u a t i o n , e a c h o f t h e s t a b i l i z a t i o n schemes c o n s i d e r e d w o u l d have i n c r e a s e d t h e m a r k e t q u a n t i t y o f c a l f p r o d u c t i o n and d e c r e a s e d t h e m a r k e t q u a n t i t y o f y e a r l i n g a nd c a l f - y e a r l i n g p r o d u c t i o n i n B.C. The p e r c e n t a g e i n c r e a s e s i n c a l f p r o d u c t i o n i n a l l c a s e s were g r e a t e r t h a n p e r c e n t a g e d e c r e a s e s i n y e a r l i n g a n d c a l f - y e a r l i n g p r o d u c t i o n . I f p o l i c y m a k e r s w i s h t o e x p a n d B.C. b e e f p r o d u c t i o n , t h e n t h e s t a b i l i z a t i o n schemes c o n s i d e r e d c o u l d be u s e d t o e x p a n d c a l f p r o d u c t i o n , b u t n o t y e a r l i n g o r c a l f - y e a r l i n g p r o d u c t i o n . (2) E a c h of t h e s e schemes w o u l d have s u c c e s s f u l l y i n c r e a s e d b e e f p r o d u c e r r e v e n u e s , h a v i n g more o f a n . e f f e c t a t t h e c a l f l e v e l t h a n t h e y e a r l i n g a n d c a l f - y e a r l i n g l e v e l s . A t t h e y e a r l i n g and c a l f - y e a r l i n g l e v e l s , i n c r e a s e s i n e f f e c t i v e p r i c e were p a r t l y o f f s e t by d e c r e a s e s i n o u t p u t . (3) The income v a r i a b i l i t y o f b e e f p r o d u c e r s w o u l d have d e c r e a s e d ( b o t h i n t h e a b s o l u t e s e n s e and t h e r e l a t i v e s e n s e ) i f any one o f t h e f o u r s t a b i l i z a t i o n schemes were e m p l o y e d o v e r t h e p e r i o d 1 9 5 9 - 1 9 7 8 . (4) Under e a c h o f t h e a l t e r n a t i v e s t a b i l i z a t i o n schemes, e x c e s s b e e f p r o d u c t i o n w o u l d r e s u l t , g e n e r a t i n g a r e s o u r c e a l l o c a t i o n c o s t ; b e n e f i t s w o u l d a l s o be g e n e r a t e d f r o m f o r e i g n e x c h a n g e g a i n s . Net w e l f a r e c h a n g e s f o r e a c h o f 128 t h e schemes were p o s i t i v e , a s s u m i n g t h e y had o p e r a t e d o v e r t h e p e r i o d 1 9 5 9 - 1 9 7 8 . T h i s s u g g e s t s t h a t e x p a n d i n g t h e b e e f i n d u s t r y i n B.C. v i a one o f t h e f o u r s t a b i l i z a t i o n schemes e x a m i n e d i n t h i s s t u d y w o u l d have i n c r e a s e d s o c i a l w e l f a r e i n B.C. i f t h e y had o p e r a t e d i n t h e p e r i o d 1959-1978. T h i s may s u g g e s t t h a t e x p a n d i n g t h e b e e f i n d u s t r y i n B.C. w o u l d i n c r e a s e t h e w e l f a r e o f t h e B r i t i s h C o l u m b i a n . 6.2.2 C o m p a r a t i v e E f f e c t s o f A l t e r n a t i v e S t a b i l i z a t i o n Schemes The m o d e l h a s t h e a b i l i t y t o c o n t r i b u t e some u s e f u l i n f o r m a t i o n on t h e c o m p a r a t i v e e f f e c t s of t h e d i f f e r e n t s t a b i l i z a t i o n schemes. T h i s i n f o r m a t i o n c a n be u s e d by p o l i c y m a k e r s i n a m e n d i n g c u r r e n t s t a b i l i z a t i o n schemes and d e s i g n i n g new o n e s . I n i n t e r p r e t i n g c o m p a r a t i v e e f f e c t s , t h e p a r t i c u l a r m odel a s s u m p t i o n s and a s s i g n e d v a l u e s o f t h e t e c h n i c a l and b e h a v i o r a l p a r a m e t e r s a r e l e s s c r i t i c a l t h a n i n t h e c a s e o f d e t e r m i n i n g t h e i m p a c t s o f a s i n g l e scheme ( a s a b o v e ) . T h i s i s b e c a u s e t h e a s s u m p t i o n s and p a r a m e t e r v a l u e s a r e h e l d c o n s t a n t f o r e a c h o f t h e schemes c o m p a r e d . F o r e x a m p l e , t h e same a s s u m p t i o n s r e g a r d i n g f a r m e r p r o d u c t i o n d e c i s i o n r e s p o n s e s a r e assumed t o h o l d f o r e a c h scheme. Some c o n c l u s i o n s w h i c h c a n be drawn f r o m t h e c o m p a r a t i v e e f f e c t s o f a l t e r n a t i v e s t a b i l i z a t i o n schemes a r e m e n t i o n e d b e l o w . (1) From t h e p r o v i n c i a l g o v e r n m e n t p o i n t o f v i e w , f o r a g i v e n e x p e n d i t u r e , t h e g u a r a n t e e d p r i c e scheme w o u l d be most e f f e c t i v e i n b o t h r a i s i n g b e e f p r o d u c e r r e v e n u e and 129 r e d u c i n g t h e i r income v a r i a b i l i t y . The r e l a t i v e s u c c e s s of t h i s scheme i s due t o t h e way i t s s u p p o r t p r i c e s a r e c a l c u l a t e d . The e f f e c t i v e p r i c e b e e f p r o d u c e r s w o u l d r e c e i v e u n d e r t h e g u a r a n t e e d p r i c e scheme i s b a s e d on a f i v e y e a r m o v i n g a v e r a g e of m a r k e t r e t u r n . T h i s e n a b l e s i t t o e f f e c t i v e l y dampen p r o d u c e r income f l u c t u a t i o n s f r o m y e a r t o y e a r . T h i s i s i n c o n t r a s t t o t h e F I A P c a l c u l a t i o n s of r e t u r n d e f i c i t b a s e d on c u r r e n t p r o d u c t p r i c e s a n d c u r r e n t i n p u t c o s t s , w h i c h t e n d t o f l u c t u a t e w i d e l y b e tween y e a r s . (2) From t h e p r o d u c e r p o i n t o f v i e w , t h e g u a r a n t e e d p r i c e scheme w o u l d y i e l d t h e f e w e s t n e t p r o d u c e r r e c e i p t s o f any of t h e s t a b i l i z a t i o n schemes e x a m i n e d . F I A P ( 1 9 7 7 ) w o u l d y i e l d t h e h i g h e s t n e t p r o d u c e r r e c e i p t s , i . e . t h e h i g h e s t t r a n s f e r payment f r o m t h e p r o v i n c i a l g o v e r n m e n t . (3) U n d er t h e r e c e n t l y i m p l e m e n t e d F I A P ( 1 9 8 0 ) , t h e e f f e c t o f r a i s i n g s u p p o r t l e v e l o f r e t u r n d e f i c i t f r o m 75% t o 100% was o f f s e t by t h e 50% i n c r e a s e i n t h e p r o d u c e r s h a r e o f t o t a l premium and t h e c o l l e c t i o n o f a d v a n c e d premium. F I A P (1980) was shown t o be t h e l e a s t e f f e c t i v e o f a l l t h e s c h e m e s , i n t e r m s o f i n c r e a s i n g b e e f p r o d u c e r r e v e n u e and r e d u c i n g income v a r i a b i l i t y . (4) t h e t y i n g o f p r o d u c e r premium t o g r o s s i n d e m n i t y u n d e r F I A P ( 1 9 8 0 ) was shown t o be l e s s e f f e c t i v e t h a n t h e f i v e y e a r m o v i n g a v e r a g e r a t i o o f i n d e m n i t i e s and b e e f o u t p u t u s e d u n d e r F I A P ( 1 9 7 7 ) , i n t e r m s o f r e d u c i n g p r o d u c e r income v a r i a b i 1 i t y . 130 (5) The t o t a l net government payments on both FIAP ( 1 9 8 0 ) and the premium/subsidy scheme were arranged to be s i m i l i a r . If the government wished to achieve greater r e d u c t i o n s i n producer income v a r i a b i l i t y , then the premium/subsidy scheme would be p r e f e r r e d to FIAP (1980) f o r i t would provide a lower income v a r i a b i l i t y with same amount of government and/or producer expenditure. 6.3 F u r t h e r Research (1) The c o s t data used i n t h i s study i m p l i e s that beef producers in B.C. would have s u f f e r e d d e f i c i t incomes over the twenty year p e r i o d , 1 9 5 9 - 1 9 7 8 . The type of c o s t data on which support l e v e l s of s t a b i l i z a t i o n schemes should be based continues to be questioned. A l t e r n a t i v e s i n c l u d e cash expenses, cash c o s t s l e s s c a p i t a l c o s t s , or cash c o s t s l e s s management input c o s t s . As mentioned e a r l i e r , the cost data used i n t h i s study are determined by a h y p o t h e t i c a l model n e g o t i a t e d by the B.C. M i n i s t r y of A g r i c u l t u r e and B.C. F e d e r a t i o n of A g r i c u l t u r e . More p r e c i s e and r e l i a b l e c a l c u l a t i o n s may improve the e f f e c t i v e n e s s of government income s t a b i l i z a t i o n schemes. A study on the j u s t i f i c a t i o n of v a r i o u s cost items in c a l c u l a t i n g r e t u r n d e f i c i t would l i k e l y be h e l p f u l in improving the e f f e c t i v e n e s s of income s t a b i l i z a t i o n schemes. (2) It i s q u i t e l i k e l y that a more s t a b l e p r o d u c t i o n environment would i n c r e a s e the amount of beef produced in 131 B.C., i n a d d i t i o n to that induced by beef p r i c e changes. Although a "non-price e f f e c t " i s b u i l t i n t o the model, i t hasn't come i n t o e f f e c t because of lack of knowledge about i t s v a l u e . E m p i r i c a l estimates of such a "non-price e f f e c t " would be u s e f u l in improving the u s a b i l i t y of the model. (3) Farmer p r o d u c t i o n responses on s l a u g h t e r animals have been i n c l u d e d i n the model. But r e s u l t s at the s l a u g h t e r l e v e l have not been i n c l u d e d i n t h i s study due to the lack of a v a i l a b i l i t y of cost data r e l e v a n t to the s l a u g h t e r l e v e l . As soon as s l a u g h t e r l e v e l c ost data can be obtained, the model can be e a s i l y extended to i n c o r p o r a t e the s l a u g h t e r l e v e l . L I S T OF REFERENCES A g r i c u l t u r e C a n a d a . L i v e s t o c k M a r k e t R e v i e w . L i v e s t o c k D i v i s i o n , F o o d P r o d u c t i o n a n d M a r k e t i n g B r a n c h . A g r i c u l t u r e C a n a d a . Canada L i v e s t o c k a n d Meat T r a d e R e p o r t . 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B r i t i s h C o l u m b i a M i n i s t r y o f A g r i c u l t u r e , B e e f C a t t l e I n d u s t r y  i n B r i t i s h C o l u m b i a 1969. May, 1969. Drummand, A n d e r s o n and K e r r . " A R e v i e w o f A g r i c u l t u r a l P o l i c y o f C a n a d a " . A g r i c u l t u r a l R e s e a r c h C o u n c i l o f C a n a d a , P u b l i c a t i o n N o . l . H a y s , W . l . a n d W i n k l e r R . l . S t a t i s t i c s , P r o b a b i l i t y , I n f e r e n c e  a n d D e c i s i o n . New Y o r k , R i n e h a r t & W i n s t o n , I n c . , 1 9 7 1 . J e n k i n s , G l e n n P. " The S o c i a l C o s t o f F o r e i g n E x c h a n g e i n an Economy w i t h T r a d e D i s t o r t i o n a n d D i f f e r e n t R a t e s o f D o m e s t i c T a x a t i o n " . D e p a r t m e n t o f R e g i o n a l E c o n o m i c E x p a n s i o n , G o v e r n m e n t o f Ca n a d a , mimeo, 1975. J o h n s o n , S.R. and R a u s s e r , G.C. " N o t e s on V e r i f i c a t i o n P r o b l e m s f o r S y s t e m M o d e l " . D e p a r t m e n t Of A g r i c u l t u r a l E c o n o m i c , U n i v e r s i t y o f C a l i f o r n i a , D a v i s , 1972. K e r r , T.C. D e t e r m i n e n t s o f R e g i o n a l L i v e s t o c k S u p p l y i n Canada K u l s h r e s t h a , S.W. " C a n a d i a n C a t t l e S u p p l y " . C a n a d i a n J o u r n a l  o f A g r i c u l t u r a l E c o n o m i c s , V o l . 2 4 , No.2, J u l y , 1976. L a d u e , E.L. " A C o m p u t e r i z e d Farm B u s i n e s s S i m u l a t o r f o r R e a r c h a nd Farm P l a n n i n g " . U n p u b l i s h e d Ph.D. t h e s i s , D e p a r t m e n t o f A g r i c u l t u r a l E c o n o m i c , M i c h a g a n S t a t e U n i v e r s i t y , 1 9 7 1 . 133 M a n d e r s c h i e d , L.V. " A Framework f o r V i e w i n g S i m u l a t i o n " . Canadian J o u r n a l of A g r i c u l t u r a l Economics, V o l . 1 7 , N o . l , February,1969. M a r t i n , L a r r y and Zwart, Anthony C. " A S p a t i a l and Temporal Model of the N o r t h American Pork S e c t o r f o r the E v a l u a t i o n of P o l i c y A l t e r n a t i v e " . American J o u r n a l of A g r i c u l t u r a l  Economics. V o l . 5 7 , N o . l , F e b r u a r y , 1975. Meadows, D.L. Dynamic Of Commodity P r o d u c t i o n C y c l e , Cambridge, W r i g h t - A l l e n P r e s s , I n c . , 1970. N a y l o r , T.H. Computer S i m u l a t i o n E x p e r i m e n t s w i t h Models of  Economic Systems. New York, John W i l e y & Sons, I n c . , 1971. P a l a c i o s , A l e j a n d r o and Kennedy, George. " Monthly P r o d u c t i o n Data R e l e v a n t t o the Beef I n d u s r t y i n B.C., 1959-1978". Department of A g r i c u l t u r a l Economics, U n i v e r s i t y of B r i t i s h C olumbia, September, 1980. P a l a c i o s , A l e j a n d r o . " A S i m u l a t i o n • A n a l y s i s of A l t e r n a t i v e S t a b i l i z a t i o n Schemes f o r the B r i t i s h Columbia Hog I n d u s t r y " . U n p u b l i s h e d M a s t e r s T h e s i s , Department of A g r i c u l t u r a l Economics, U n i v e r s i t y of B r i t i s h C olumbia, 1978. S a b o u r i n , S y l v i o R. " A Computerized S i m u l a t i o n Model f o r E v a l u a t i n g A l t e r n a t i v e Cow-calf Farm P l a n s " . U n p u b l i s h e d M a s t e r s T h e s i s , Department of A g r i c u l t u r a l Economics, U n i v e r s i t y of M a n i t o b a , 1977. S t a t i s t i c s Canada. Farm Cash R e c e i p t , C a t a l o g u e 21-201. S t a t i s t i c s Canada. Farm Input P r i c e Index, C a t a l o g u e 62-004, Q u a r t e r l y . T h e i l , H e n r i . A p p l i e d Economic F o r e c a s t i n g , C h a c i g o , Rand M c N a l l y & Company, 1966. T r y f o s , P e t e r . " Canadian Supply F u n c t i o n f o r L i v e s t o c k and Meat". American J o u r n a l of A g r i c u l t u r a l Economics. V o l . 5 6 , N o . l , F e b r u a r y , 1974. 134 APPENDIX * * * TABLE A - 1 . 1 * • + MARKET P R I C E S OF CALVES WITHOUT GOVERNMENT INTERVENT ION OOLLARS PER HUNDRED WEIGHT 1 9 5 9 - 1 9 7 8 J A N FEB MAR APR MAY J U N J U L AUG SEP OCT NOV DEC 1959 24 .64 23 . 70 23 . . 77 23 .45 23 . . 27 23 . 24 23 . 7 1 23 . . 37 22 . 58 19 . 00 18 . 4 1 17 . . 73 19GO 18 . 27 17 . 70 17 .98 17 . .96 18. 14 18 . 26 17 .98 18 . 79 16 . 83 17 .  79 19 . 0 2 20 . . 86 19G 1 2 1 .08 2 0 .51 2 0 . 57 19 . 50 17 . 22 17 .85 15 . 27 19 .96 2 0 . 14 18 . 8 0 20 . .52 2 1 . 24 1962 2 0 . 74 19 . 2 0 2 1 . 28 2 1 . 26 2 1 . .06 2 1 . 35 2 1 . 59 22 .85 24 .81 24 . 26 23 72 24 .08 1963 22 .07 2 1 .42 2 1 5 0 22 . 22 2 1 . 44 2 1 .66 22 . 16 2 1 . .95 23 .01 20 . . 9 9 2 0 38 19 . 26 1964 19 . 6 0 19 .87 2 0 .58 18 . 35 18 . 33 19 .79 18 . 9 3 18 . 93 16 14 16. . 45 16 . 49 15 • 32 1965 14 . 86 16 .07 15. . 49 17 .55 18 . 18 18 .68 17 . 54 17 .21 18 . 00 18 . 96 18 . 5 5 18 .88 1966 2 1 . 22 23 . 00 24 . 15 23 .67 23 . . 12 22 .96 2 1 . 5 0 20 . .22 22 . 80 22 . .99 23 . .08 23 . 7 1 1967 24 . 38 24 .98 24 . 4 1 23 . 90 24 8 0 25 . 15 24 . 6 3 23 . 7 5 23 .61 25 . . 47 24 . . 39 23 . 38 1968 22 . 27 22 .88 23 . 43 23 .81 24 58 24 .61 24 .01 24 . 53 25 . 74 23 .66 24 . .63 24 . 99 1969 24 . 82 25 . 14 27 . 16 3 0 . 16 32 .84 33 . 73 34 .62 35 . 43 34 . 33 32 . . 18 32 . . 8 5 34 .68 1970 34 . 9 0 36 .65 35 .71 34 . 77 32 . 28 34 . 10 34 .96 39 .88 33 . 77 33 . .09 34 . 16 33 . 82 1971 34 . 2 1 33 54 . 32 . 36 32 .98 32 . 75 32 .68 33 . 18 36 .47- 35 . 36 36 .99 35 . .94 36 . 43 1972 34 . 9 9 34 .88 35 . . 60 36 . 80 36 . .85 37 .88 37 .63 41 .08 4 1 .51 4 1 . 29 4 1 . 15 4 1 .99 1973 42 . 16 44 .81 49 .64 46 39 47 .07 5 0 .85 53 .03 62 . 27 55 . 3 0 56 . . 46 52 . . 90 47 . 9 9 1974 46 .66 42 . 10 4 3 . .96 44 .53 42 .80 4 0 .03 36 . 74 3 0 . 44 26 .52 28 . 1 1 30 . . 34 29 .63 1975 26 .62 25 .96 24 . .96 25 86 29 . 22 3 0 .09 28 . 55 22 . 16 2 0 . 29 27 .85 25 . .57 26 . 2 0 1976 24 .58 29 . 17 31 . 24 31 .33 32 .87 33 .04 29 . 14 24 . 15 27 .95 27 .48 29 .69 28 . 47 1977 28 . 0 0 3 0 .63 31 . 76 31 .90 3 1 . 26 33 .49 32 .66 31 .61 35 . 55 38 . 2 0 39 . . 19 36 . 52 1978 3 9 .02 4 1 .54 46 . 52 50 . .40 6 0 .66 68 . 16 67 . 13 7 0 . 40 79 .03 8 3 .54 8 0 . 29 8 1 . 7 1 SOURCE: AGR ICULTURE CANADA, L IVESTOCK AND MEAT TRADE REPORT. *** TABLE A-1.2 *** MARKET PRICES OF YEARLINGS WITHOUT GOVERNMENT INTERVENTION DOLLARS PER HUNDRED WEIGHT 1959-1978 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV 1959 20. 92 20. 67 20. 61 21 . 46 20. 64 20. 89 2 1 . .02 20. 78 20. 01 19 . 06 18 . 23 18 . 65 1960 17 . 71 17 . 79 18 . 44 19. 34 19. 50 19 . 53 19 . 50 19. 50 18 68 18 . 62 18 . 89 19 . 22 1961 18 . 74 18 . 70 19 . 91 20. 67 20. 51 20. 29 19 87 20. 30 19 . 29 18 . 92 19 . 17 19 . 61 1962 19 . 83 19 . 51 20 85 21 . 35 21 . 32 21 . 28 21 .60 22 . 46 22 .98 23 39 22 . 43 22 .58 1963 2 1 . 10 21 . 18 21 . 85 22 . 49 22 . 56 22 . 59 23 . 01 23 . 20 23 . 20 22 . 20 2 1 . 80 20 .99 1964 2 1 . 07 21 . 36 22 . 24 22 . 75 22 . 83 22 . 46 22 . 37 21 . 77 21 .67 20. 72 20. 61 20. . 26 1965 20. 18 20. 7 1 20 . 99 21 . 34 21 . 67 22 . 36 22 .21 22 . 06 21 . 74 21 . 50 2 1 . 60 2 1 . 45 1966 2 1 . 32 22 . 64 23 . 39 23 .62 23 . 36 23 32 22 .99 22 . 91 23 . 46 23 . 30 23 . 37 23 . 17 1967 23 . 58 23 . 88 24 . 41 24 . 86 25. . 17 25. .65 25 .45 25. 28 25 .73 25 . 47 25. 27 24 .91 1968 24 . 69 25 . 24 25 . 18 25 . 74 26. .04 26 . 38 26 .81 27 .03 26 . 96 26 78 26 . 58 26 . 19 1969 26 . 29 26 69 28 . 12 29 . 19 31 . 10 3 1 . . 85 30 . 59 29 . 35 28 .97 28 . 25 28. . 4 1 28 .51 1970 29 . 15 30. .00 31 .65 31 .58 30 .93 30 .61 30 . 73 30 . 18 30 . 15 29 .53 30 .09 29 .62 197 1 30. . 33 30. . 54 30 . 89 31 .69 31 . 35 31 . 30 31 . 38 31 . 10 31 .45 32 .07 31 . 57 31 . 44 1972 32 . 55 33 . 4 1 34 . 1 1 34 .40 35 .88 35 .54 33 .92 33 .71 34 .51 35 .80 35 .51 35 .82 1973 37 . 70 39. . 13 43 .01 41 .83 42 .67 44 . 17 45 . 10 52 .46 48 . 4 1 50 . 35 46 . 14 42 . 78 1974 42 . 48 4 1 .46 38 .64 39 . 55 39 . 74 40 .48 40 .66 39 .69 37 .93 40 .89 43 . 18 42 .96 1975 42 . 85 42 . 03 42 . 18 43 . 45 46 . 33 47 .09 46 . 1 1 43 .58 43 . 35 43 .95 43 . 59 43 .82 1976 42 .85 43 .86 44 .45 45 . 14 46 . 45 46 .45 44 .63 43 . 7 1 44 . 56 44 . 20 44 . 25 43 . 63 1977 40 .45 4 1 .57 42 . 59 43 . 53 43 . 25 45 . 14 44 . 23 43 . 76 45 . 46 45 . 75 45 . 47 45 .33 1978 55 . 8 1 57 . 86 60 . 40 62 . 36 66 . 67 69 . 37 68 . 84 67 . 6 1 7 1 .01 70 . 56 67 . 60 68 .73 SOURCE: AGRICULTURE CANADA, LIVESTOCK AND MEAT TRADE REPORT TOTAL INPPUT COSTS ON CALF PRODUCTION IN BRITISH COLUMBIA DOLLARS PER HUNDRED WEIGHT 1959-1978 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 1959 26! : 2 1 26 .60 26 . 40 27 . 46 27 . 23 26 .65 26 .66 26 7 1 26 . 50 26 .67 26. .53 27 . 19 1960 26 .31 26 . 87 27 . 23 28 .46 28 .62 28 .84 28 .97 29 .04 28 . 35 28 . 59 29 . 27 29 73 196 1 28 .92 28 .77 30 . 27 32 . 16 32 . 26 32 . 24 32 .55 32 . 28 30. . 57 29 . 52 29 . 74 29 . 77 1962 30 . 48 30 49 31 6 1 32 .44 31 .56 3 1 .68 32 . 14 32 40 32 . 20 32 . 58 31 . 76 31 .97 1963 30 . 46 30 .62 31 . 45 31 . 70 31 . 79 32 .09 32 . 37 32 .82 32 . 52 3 1 .91 3.1 79 31 . 32 1964 3 1 . . 59 31 .99 33. 38 33 .98 34 . 16 33 .80 33 .89 33. .61 33. . 7 1 31 .97 32 . 4 1 32 . 50 1965 32 . 69 32 . 56 33 . 15 33 .45 33 .61 34 . 22 34 . 46 34 .61 34 . 53 34 . 33 34 . 35 34 . 27 1966 32 66 33. . 76 34 . 82 34 . 74 34 . 16 34 .68 34 .81 35 .06 35. .02 34 .66 34 . 78 33 . 80 1967 34 . 40 35 .04 35 . 48 36 . 39 36 .67 37 . 37 37 . 55 37 .35 37 . 29 36 .95 36 .99 36 . 55 1968 37 Ol 37 . 78 37 . 7 1 38 .03 38 . 19 39 .05 40 . 1 1 40 . 57 40. , 46 40 . 42 40 . 23 40 . 20 1969 40 09 40 .49 4 1 .54 42 . 20 42 . 44 42 .91 42 .26 42. . 28 42 . 03 4 1 .81 42 . 45 42 .09 1970 42 29 42 .56 43 .47 43 .98 44 .46 44 .81 45 .09 44 .88 44 . 81 43 .61 43. , 92 43 .06 197 1 44 . 02 44 . 43 44 . 76 45 .41 45 .64 45 .43 45 .65 45. <*3 . 45 . 72 46 . 34 46 .07 44 .98 1972 46 .06 46. .03 46. .61 47 . 24 48 . 13 48 . 16 47 .72 47 . 61 47 , 63 47 . 73 47 . 97 47 . 50 1973 49 . 87 49. 60 52 . 49 53 .57 53 . 34 53 . 33 53 .90 55 . 28 54 . 22 54 .62 55. .51 54 .33 1974 57 . 37 57 . 19 59 .56 61 .45 62 . 15 61 .48 62 .24 62 . 24 60. .92 66 . 50 70 . 38 70 .01 1975 71 . 94 71 . 35 72 . 19 73 .62 75 .97 77 . 18 77 .79 75 .67 75. .30 75 .95 75 .46 74 .90 1976 77 . 52 77 . 02 77 . 86 77 . 33 79 . 22 81 . 18 80 .06 82 . 1 1 82 . 06 83 . 4 1 82 .81 8 1 .04 1977 8 1 . 01 81 .09 80. .87 82 . 75 82 . 49 85 . 23 84 .06 83 . 36 83. .65 84 . 25 84 .09 83 . 72 1978 83 . 73 85. 10 85 36 84 . 98 88 .84 91 . 58 9 1 .86 88 . 22 88. . 89 88 .64 86 .07 86 .05 SOURCE: "BEEF INCOME ASSURANCE MODE L : BAS IC COST OF PRODUCTION, 1974-1978", B.C.M.A C/l a c Cl co CO CO CO CO CO CO CO-CO CO CO CO CO CO CO CO CO CO CO CO -J -J - 4 or cn CD 0 1 cn cn cn cn cn Ul oo ^1 CT) CJ1 CJ FO - o CO 0 0 Jl cn CJ IO o CO z o o s > cn cn c 3 3 > Z o o a 03 •> C/l n o c/i 73 o a c o a z . CO CO -J QO CO ( J i m c l l C n b C O l J C O C O M I O U U U W W W U U - . j i j i - ^ 0 c o i o - i 0 c s > i c n c j c j u w - " 0 0 ( 0 O l I O i D O l I H O I I K O U b U M i u O - C O O l O O X k c o o c j ^ c o - ' c n - b o o ^ c j o c j c n o c j c j o ^ i o i o i ! i c n b c o u < j c o u u u u u u u u i o u - > ~ j j * r o ^ i-k . k f o r o o c Q~4UicjcjM-'.— - O O c o u i a i o O - ^ O u i o c j c n ~ J O o c o c j c o c o r o c n M r o - i - j ^ i c n o - J c n o o c n j u O c o c o c n c o c n u i K J C J M c n c n c n u i t . c j c j c j c j r o r o M f O M f O f o i o f o r o - . > j b - * 0 9 t > c n u u O < 0 > i 3 i b U b u : ' - > o c 9 c n c n c n f o o c n ~ J O c n c n ~ j - . N j u i o a i c o - - j c a i o c n - ^ o o o & r o c o c n u i c r i ^ i r o c n c o x u u c n o o o c j 9 i t i n c n t > u u u u u u u u u u i o u M U ' - J U i r o c o & c n c o r o O c o - a c n £ . c j f c . r o f O f o — to C O C J — c o a i c B f o O c o c D C D f o — a i f o ~ j ^ . c o i x i T ) O ^ i c n c j c j c j u i c o o i f o c n o o o ~ i u i i . c o o - I C D s i m n n & u u u u u u u u i o u i o u u u - ' 0 3 c j i r o O c j i c n c j i o - . o c » c n j i c j - t u i o — fo — co w c j c n - » - ' C O f o O - J O O * » - » c r i c j c o c n c n j v - j c o c j M O O c o o o — o c o r o o i ~ i c j M r o - * r o c n - * cncncncnjicjcjcjcjcjiofOfOMMMrofoio-* Uit>09iu->uu0'09iuoiuiocaoift& --.ro-umcn^iroooui^iuiuicjiro — cnoocjui-a < n a i o i m ^ u u u u u u u u u M u u u u - > O c n — oooowio-Ck-. — a>ooiouicj-»-JcncJi-4 o i c n o i c n t v c j u c o c o u u r o r o u u u u u u - k ~ J c n c j c o c o < c j u u o c o c n ^ c j i u c j r o r o - > C Q cocnMCOJ^cncjicnwoco-JMUiroji — - i o i c o u c n o o c j o o — cn-~icjoocnoooocn-~Jcnui~4~icJ c n c n c n u i ^ c j c j c j c j c j f o i o f o f o i o r o r o f o f o - . c n c n c j c o o o ~ j c j w M O a o c n i » c j i . c j r o O O c o — — O - ' c n r o i . c j w r o c o o o c j w f o c i i — a icn io f o c o i o u i O C D f o — • — o ui co — co cn cn - J - J C J c n a i c n u i u t c o c j c j c o M r o r o N j r o r o f O f o r o f o - . o o c n j i o o r o - i c j t o — c o c o c n j i c j c j c j i o o o c o N 3 c n r o c o O - c » c j r o - . - o - - c o * . N > - ' f o — focjicj ^ - . a i — C J — J ^ C D - J U I C O — — wcni>ouiO-e>cj c > > T I 71 > c c c c c CO Ul CO CO 0 0 a o a > r-_ Z X I c -( o a C/l -t o a z o * i - < * r- m * j> > X I 3 3 cn 1 - & 0 3 T 3 z r~ m o m 73 -a > X 3 3 i c O fO z O a c fo 3 3 o m -1 * o >—I a * € z z I 0 3 3 3 >—t —t t—t VI X o a r™ c s CO > cncncnuiuicjcjcjcjfowNjpoN3PorosjfOfo- . -J0 " i . t * co&ooc j fo — c o c o c n . & c j t o c j r o o O c o Z o r o o " i - * r o o o ^ i f e c o N > - J O C o c j r o c o o e j c j c o c o < O c j O c j ' j - j - i C j ^ i u i C D f o - J C J C O c n o - ' f o - ' -c n a i c n u i c n c j c j c j c j r o r o r o r o r o M r o f O f o r o r o c n f f i J k C O A c n u M — c o o o c n ^ c J C J C J i o O O O O m oocncj-JcncocjM4^ ~icDcnji-»oococjicot> o J u O - U c n — - . C D U l C O C D C O O D O f O - ' C I l U - l O f O s e x + ** TABLE A-3.1 *** QUANTITIES OF CALVES PRODUCED WITHOUT GOVERNMENT INTERVENTION THOUSANDS OF HUNDRED WEIGHT 1959-1978 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 1959 1 . 49 1 .20 1 . 12 1 .49 0 .86 1 . 29 1 . 72 2 . 72 4 .44 13 . 33 7 . 75 5 .64 1960 4 .42 3 .06 2 .03 4 .44 1 .90 2 . 19 2 . 74 4 . 36 9 .82 20 .96 19 . 50 13 . 70 1961 3 . 59 5 .81 3 .02 3 . 72 2 . 26 2 .62 2 . 52 2 . 7 1 8 .96 28 . 38 28 . 17 10 .59 1962 4 .00 4 .76 3 . 79 4 . 30 3 . 10 3 . 48 3 . 72 4 .07 25 .70 26 .70 25 .55 17 . 18 1963 6 . 76 4 . 44 3 . 62 4 .51 2 .45 3 . 24 3 .03 4 .02 13 .91 25 . 75 31 .04 19 .55 1964 6 .89 4 .94 3 .51 3 .47 2 .83 3 . 54 3 . 52 4 . 58 17 .54 30 . 16 21 . 47 14 . 44 1965 4 .98 4 .65 6 . 29 4 .48 4 . 17 4 .07 6 . 57 9 .02 18 .88 49 .02 35 .21 20 .65 1966 7 . 25 5 . 73 6 . 52 6 . 43 4 . 17 4 . 42 3 . 72 3 .61 20. .32 42 .93 34 .62 15 . 64 1967 8 .00 6 .68 5 .83 5 . 1 1 3 . 16 2 74 4 .68 5 . 28 24 79 32 . 56 22 . 48 9 . 67 1968 4 . 45 3 .53 6 . 18 4 . 07 4 . 54 4 . 52 4 . 1 1 4 . 4 1 25 . 73 37 .07 24 97 20. .05 1969 5 . 92 5 . 26 6 00 6 . 21 5 .02 7 .00 8 . 28 8 . 19 28 . 25 33 . 62 28 , . 78 37 92 1970 10. . 76 1 1 .00 9. . 96 1 1 . .84 8 .54 6 44 7 .35 9 . 29 23 . 16 39. 37 40. 98 15 . 54 197 1 8 . 58 8 .41 8 . 35 8 . 90 7 .46 5 . 32 6 .39 8 .09 18. 02 44 . 69 51 . 24 18 . 48 1972 7 . 95 8 . 27 8 . 60 10. 44 8 .42 6 . 1 1 6 .93 9. . 40 20. 16 43 . 40 48 49 18 . 22 1973 10. 14 7 . 04 8 .99 9. 36 6 64 6 . 00 6. 98 1 1 . 56 26. 07 4 1 . , 32 44 . 94 18 . 65 1974 7 . 16 5. . 35 4 . 48 5 . 01 4 88 4 . 75 4 . 37 5 . 00 15. 17. 22 . 53 38 . 98 18 . 65 1975 8 . 90 5. 90 9 . 81 8 . 74 1 1 . 30 10. 43 8 . 31 10. 49 22 . 64 37 . 79 44 . 42 26. 68 1976 6 . 64 7 . 39 8 . 96 9 . 90 7 . 53 9. 06 6 . 80 9 . 33 26 . 58 30. 82 59. 89 29. 10 1977 10. 20 9. 87 9 05 10. 91 8 20 9. 23 8 . 03 10. 42 33 . 59 47 . 58 50. 18 20. 40 1978 10. 33 9 . 72 10. 09 9. 52 9. 15 9. 19 7 . 07 9 . ,54 30. 66 27 . 46 44 . 09 23 . 85 SOURCE : PALACIOS AND KENNEDY, "MONTHLY PRODUCTION DATA RELEVANT TO THE BEEF INDUSTRY IN B.C., 1959-1978." U.B.C. 1980 QUANTITIES OF YEARLINGS PRODUCED WITHOUT GOVERNMENT INTERVENTION THOUSANDS OF HUNDRED WEIGHT 1959-1978 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 1959 6 . 40 4 .84 5 . 67 8 . 16 2 .80 2 .90 3 .91 4 . 78 15 . 16 58 . 83 37 . 58 27 . 19 1960 1 1 .05 8 . 72 5 . 44 1 1 .02 4 . 19 3 . 33 1 .91 5 .09 18 . 56 40 .80 43. 62 30 .48 1961 8 . 38 10 .49 5 . 73 6 . 82 3 .69 3 . 40 2 . 84 4 . 15 19 . 16 68 . 16 70. 67 24 , .71 1962 10 .87 10 .81 6 .86 10 .06 6 .00 4 .81 5 .59 5. . 26 55 . 10 60. .96 70. 17 47 .07 1963 15 .80 9 . 28 6 .48 10 . 70 4 . 77 4 .97 4 .81 5. .90 25 . 50 56 4 1 81 . 36 43 . 7 1 1964 15 .51 10. .58 7 . 36 6 . 54 4 .95 4 . 86 4 .95 5 . 08 33 . 76 56 . 99 44 59 30 .07 1965 8 . 85 9 47 12 . 10 10 .03 8 . 14 6 42 8 . 87 15. . 36 4 1 . .85 95. . 32 82 . 10 46 . 32 1966 14 .43 10. .95 12 . 74 1 1 .99 6 .45 5 . 70 5 .85 7 . 47 4 1 . 52 81 . 23 70. 33 30 .84 1967 15 43 12 .60 9 .93 9 . 52 6 . 19 4 . 34 6 .71 7 . 31 42 . 78 56 .82 47 54 16 .99 1968 8 . 66 7 . 93 12 . 53 9. ,01 8 .87 7 . 85 6 . 50 5 . 98 46 . 23 7 1 . 28 54 . 98 39. . 14 1969 12 . 56 10. .94 10 . 1 1 13. . 12 8 .88 12 . 71 13 .80 13. 30 52 . 74 65. . 35 57 . 77 71 . 34 1970 22 .06 22 . 57 2 1 . 38 23 , 72 14 . 78 1 1 . 30 15 . 10 19 . 58 50. 81 86 .03 90. 72 32 . 85 197 1 18 . 75 18 . 30 18 .05 19 88 16 . 32 1 1 . 46 13 .4 1 16 . 94 40. .67 97 10 113. 92 39 .80 1972 16 . 77 17 . 57 18 .42 22 . , 93 18 . 24 12 .86 14 . 78 19 88 45 . 05 95 80 109 . 13 4 1 . 1 1 1973 20 81 14 . 57 19 .30 2 1 40 14 . 34 1 1 .95 14 . 19 24 32 55 . 88 91 . 96 101 . 64 40. .57 1974 9 77 7 . 70 6 .08 7 97 6 . 99 6 . 15 5. . 79 6. 00 20. 59 35 . 16 62 . 22 26 .97 1975 13 . 57 9. 14 26 .05 16 . 35 18 .85 13 30 10 . 16 16 . 32 33 . 90 60. .40 68 . 4 1 45 . 35 1976 12 . 85 1 1 . 97 13 4 1 19. ,05 10 .94 14 56 7 .08 8 . 12 29 . 72 38 . 72 69 . 39 41 .91 1977 2 1 . .31 20. 16 20 .89 24. .62 22 .05 18 . 87 14 . 46 18 . 60 58 . 39 87 . 54 100. . 22 40 .65 1978 19 . 09 17 . 83 2 1 .81 20 6.1 16 .21 • 14 . 24 10 . 86 14 . 42 49 . 68 55 .09 86 . 08 40 . 77 SOURCE : PALACIOS AND KENNEDY, "MONTHLY PRODUCTION DATA RELEVANT TO THE BEEF INDUSTRY IN B.C., 1959-1978." U.B.C. 1980 O *** TABLE B-3.3 *** QUANTITIES OF CALF-YEARLINGS PRODUCED WITHOUT GOVERNMENT INTERVENTION THOUSANDS OF HUNDRED WEIGHT 1959-1978 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC 1959 1 . 27 1 .02 O. 96 1 . 27 0. 73 1 . 10 1 . 47 2 . 32 3 . 78 1 1 . 35 6 . 60 4 . 80 1960 3 . 77 2 ,61 1 . 73 3 . 78 1 . 62 1 . 87 2 . 33 3 . 7 1 8 . 36 17 . 85 16 . G 1 1 1 . 67 196 1 3 . 06 4 . 95 2 57 3 . 17 1 . 92 2 . 23 2 . 14 2 . 31 7 . 63 24 . 17 23 . 99 9 . 02 1962 3 . 4 1 4 .05 3. 22 3 . 66 2 . 64 2 . 97 3 . 17 3 . 46 21 . 89 22 . 73 21 . 75 14 . 63 1963 5 . 76 3 . 78 3. 08 3. 84 2 . 08 2 . 76 2 . 58 3 . 42 1 1 . .85 2 1 . .92 26 . 43 16 .65 1964 5 . 86 4 .21 2 . 99 2 . 95 2 . 41 3 . 01 3 . 00 3 . 90 14 .94 25 . 68 18 . 28 12 . 30 1965 4 . 24 3 .96 5 . 36 3 .81 3 . 55 3 . 46 5 . 59 7 68 16 .08 4 1 . . 74 29 .98 17 . 58 1966 6 . 17 4 .88 5. .55 5 . 48 3 . 55 3. . 76 3 . 17 3 . 07 17 .30 36 . 55 29 . 48 13 . 32 1967 6 . 82 5 .69 4 96 4 . 35 2 .69 2 . 33 3 .99 4 . 50 21 . 1 1 27 . 73 19 . 14 8 . 23 1968 3 . 79 3 .01 5. 26 3 . 46 3. .86 3. .85 3 .50 3. . 75 21 . 9 1 31 .57 21 . 27 17 .08 1969 5 .04 4 .48 5 1 1 5 . 29 4 27 5. .96 7 .05 6 .97 24 .05 28 .63 24 .51 32 . 29 1970 . 9 . 16 9 . 37 8 48 10. .08 7 . 27 5 .48 6 . 26 7 .91 19 .72 33 . 53 34 .89 13 . 24 197 1 7 30 7 . 16 7 . 1 1 7 .58 6 . 35 4 . 53 5 . 45 6 , 89 15 . 34 38 .05 43 .63 15 . 73 1972 6 . 77 7 .04 7 . 32 8 . 89 7 . 17 5 . 20 5 .90 8 OO 17 . 17 36 .96 4 1 . 29 15 . 5 1 1973 8 .63 6 .00 7 65 7 . 97 5 .65 5 . 10 5 .94 9 .84 22 . 20 35 . 18 38 . 27 15 . 88 1974 6 . 15 5 .20 4 . 45 4 .98 4 . 85 4 . 72 4 . 34 4 .96 15 .07 22 . 38 38 . 73 18 . 53 1975 8 .84 5 .86 9 28 8 . 27 1 1 . 23 10 . 37 8 . 25 9 .92 2 1 . 42 37 . 54 42 .03 25 . 24 1976 7 . 25 8 .06 9 . 77 10 .80 8 . 22 9 .88 7 .42 9 .69 28 .99 32 .02 62 .21 30 . 23 1977 9 .66 9 .35 8 . 57 10 . 33 7 . 77 8 . 75 7 .60 9 . 87 3 1 .82 45 .07 47 .54 19 . 32 1978 9 .81 9 . 23 9 .57 9 .04 8 .68 8 . 72 6 . 7 1 9 .05 29 . 10 26 .06 4 1 .85 21 . 33 SOURCE : PALACIOS AND KENNEDY, "MONTHLY PRODUCTION DATA RELEVANT TO THE BEEF INDUSTRY IN B.C., 1959-1978." U.B.C. 1980 

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