Updating a Model of Meat Demand in Australia to Test for the Impact of MSA

Summary

The Meat Standards Australia Australia voluntary meat grading system commenced in 1999/2000. The benefits from this scheme have been estimated using MLA survey data on premiums paid for MSA graded cuts each year to the number of carcases that are graded each year and that achieve at least a 3 star score. However no data exist on actual quantities of beef that is sold as MSA.
The aims of this project were to update a basic set of data used in earlier analyses of Australian domestic meat demand to determine if the availability of the MSA system has impacted on the aggregate demand for beef. The aggregate demand for beef was analysed in the context of a number of formal demand systems models inclusive of substitute meats in consumption.
Tests were undertaken to try and detect structural change associated with the introduction of the MSA grading system in 1999-2000. Pre-and-post introduction of MSA subsets of the data were used to generate expenditure and own-price elasticity of demand estimates for the different types of meat.Expectations are that substitution in consumption is likely to occur from non-MSA to MSA graded meat. A more inelastic own-price elasticity of demand for beef in the MSA period would indicate evidence of this. However the results from the structural change test and elasticity comparison proved inconclusive.
Three distinct structural changes were identified in the data with the latter of the three occurring in 1988 with the introduction of pigmeat imports into Australia. Based on these results the preferred own-price and expenditure elasticity estimates derived from the modelling correspond to the data sub sample covering the period inclusive of pigmeat imports. The own-price elasticity of demand estimates over this period imply that consumer demand for beef, lamb and pigmeat has become less responsive to changes in their prices in recent years. The data compiled for this project provides an updated and consistent set of data that can be used to examine other influences on Australian domestic meat demand.