## Domestic Retail Meat Demand Calculations
Nominal retail meat prices - Calculated by USDA/ERS from data collected and published by the Bureau of Labor Statistics (BLS) as part of the monthly cost of living survey. Deflated retail meat prices - The nominal retail meat prices are deflated using the Consumer Price Index for all urban consumers (CPI) published monthly by the BLS Formula: The deflated retail meat price equals the nominal retail meat price divided by the CPI Formula: The percent change in deflated retail meat price equals the deflated retail meat price in month X divided by the deflated retail meat price in month (X minus 12) times 100 minus 100.
Monthly commercial meat production - Calculated by USDA/AMS and published by USDA/NASS Monthly imports and exports of meat - Calculated by USDA/ERS from data collected by the Foreign Trade Division of the Bureau of the Census. Monthly stocks in cold storage - Calculated from surveys conducted by USDA/NASS Formula: The monthly domestic meat usage equals commercial production minus exports plus imports plus beginning stocks in cold storage minus ending stocks in cold storage. Adjustment for the number of work days in a month - The amount of meat produced in a month depends, in part, on the number of work days in the month. This changes year to year. For example, in some years August has 21 work days. In some years it has 22 work days and in some years 23. The impact of holidays can also vary year to year. New Year's Day has a different impact on slaughter depending whether it falls on week day or a week end. The impact of Saturdays varies seasonally. Formula: The slaughter-day adjusted monthly domestic meat usage equals the monthly domestic meat disappearance divided by the number of work days in the month times 21.25 (21.92 for pork). Monthly U.S. population - the U.S. resident population is published by the Bureau of Census Formula: The monthly per capita domestic meat usage equals the slaughter day adjusted monthly domestic meat usage divided by the U.S. resident population Formula: The percent change in per capita domestic meat usage equals per capita domestic meat disappearance in month X divided by per capita domestic meat disappearance in month (X minus 12) times 100 minus 100.
Own price elasticity is an economic term that measures the relationship between a change in quantity sold and the accompanying change in price. The formula for elasticity is percent change in quantity sold divided by the percent change in price. For example, if the price of an item goes up by 1% and sales drop by 1%, then the calculated elasticity is -1 (-1% divided by +1%). Over time, the calculated elasticity of meat at retail tends to average reasonably close to -0.75, e.g. a 1% price increase is likely to result in a 0.75% decrease in quantity sold. Note: I use a Marshallian demand function rather than a Hicksian demand function. My demand model is simply D=f(% change in deflated price and % change in per capita usage). Formula: The expected percent change in per capita domestic meat consumption equals the percent change in deflated retail meat price times -0.75. Formula: The percent change in domestic retail meat demand equals (the actual percent change in per capita domestic meat usage plus 100) divided by (the expected percent change in per capita domestic meat usage plus 100) minus 1, times 100.
There are lots of them - Forecast vs Estimated vs Preliminary vs Final. Prices - price data for a month is usually published about 20 days into the following month and is rarely revised. Stocks in cold storage - preliminary data on cold storage stocks for a month are usually published about 24 days into the following month and revised one month later. The final value is usually published in March of the following year. Meat production - preliminary data on meat production for a month are usually published about 22 days into the following month with typically very minor revisions one month later. The final value is usually published in April of the following year. Meat trade - The import and export data for a month is usually published about 6 weeks after the end of the month with usually very minor revisions over the next year. Population - The Bureau of Census continuously updates their estimate of the U.S. population. There are frequent revisions with the final value not released until two years after the decadal survey. This means we will not know the final estimate of 2001 per capita meat consumption until the results of the 2010 census are released in 2011. Because of these many ongoing revisions in data, the calculated pork demand for a month will frequently change.
Garbage in garbage out - The estimate of meat demand is no more accurate than the data used in the calculation. People are naturally most interested in recent changes in meat demand. In order to calculate the change in meat demand for the most recently completed month, an estimate must be made of meat imports and exports. If the estimate is poor, the calculation of meat demand will be poor.
The calculation of work days in a month is a bit subjective, especially when it comes to estimating the impact of minor holidays and Saturdays. Others who attempt to calculate meat demand may chose to use a different data series, use unrevised data, use different elasticities or use an entirely different model for demand. |