MEASUREMENT OF TEXAS LIVESTOCK CAPACITY AND ITS EFFECT ON THE TEXAS ECONOMY: AN APPLICATION OF QUADRATIC INPUT-OUTPUT ANALYSIS

The ability of the Texas agricultural production sector to provide food and fiber products at reasonable prices to a growing population has always aroused concern among Texas consumers. With retail livestock product prices leading the rapidly rising food prices, it is important for policy makers to be able to assess the effects of alternative livestock oriented policies on both producers and consumers in the Texas economy.;The objective of this study was to develop an analytical framework for estimating the capacity of the livestock production sectors in the Texas economy and examine the effects that specific events and policies might have one economic well-being of this state's producers and consumers.;The above objective was completed by first establishing meaningful definitions of engineering and economic capacity at the firm, sector and economy levels. Engineering capacity was said to be the maximum output possible given current plant and equipment size, normal production intensity, existing technology and the absence of external constraints to production. Economic capacity, on the other hand, was said to be the quantity of output that the firm, sector or economy desires to produce in the current period, given current economic conditions and existing engineering capacity. Alternative methods of estimating capacity were discussed with special emphasis on measuring engineering capacity in the livestock production sectors. Proposals were made for minor modifications of existing primary surveys to provide additional capacity-related information for further analysis.;Alternative methods of accounting for the interdependencies among production sectors in an economy were then reviewed. The most viable method for use in capacity-related issues was determined to be input-output analysis. Of the alternative input-output models available, the quadratic programming approach (QPIO) appeared to provide the greatest flexibility as it allows for analysis of economic capacity questions and provides information on the economic well-being of producers and consumers in the economy.;To assist policy makers in their decision-making process, and to gain a better understanding of how events taking place both inside and outside the Texas economy have upon its current performance, information is needed on the productive capacity of each production sector, the dependencies each production sector has upon the output of other sectors, and their use of primary inputs in their production process. Since the concepts of capacity and sector interdependencies are closely related, these two concepts must be combined into a single analytical framework to analyze specific events in the economy.;To assess the effect of alternative events in the Texas economy on the economic well-being of its producers and consumers, a QPIO model of the Texas economy was utilized, with special emphasis given to livestock and related products sectors. The effects of a sharp reduction in the beef breeding stock and an increase in final demand for fed beef were examined in terms of total output, final demand, prices, input use, and economic well-being of the Texas economy. It was shown, for example, that while product prices for livestock-related commodities rose with a reduction in the beef breeding stock, the economic well-being of the Texas economy as a whole declined. But an increase in final demand for fed beef was limited by the capacity of the beef breeding sector's output, thus demonstrating the concept of "capacity limiting sectors." Cross-price elasticities of demand for livestock products at both the farm and retail level were incorporated into the model to account for the substitution among livestock products. The above information was analyzed in terms of its benefit to policy decision makers in formulating policies for the Texas livestock sector.