Research Reports
Demand Change Factor Analysis in the Hanwoo and Pork Industry
-
AuthorJi, Inbae
-
Publication Date2015.06.18
-
Original
Background of Research
This study aimed to identify the causes of large increases in beef and pork prices in 2014 compared to 2013, focused on changes in demand. Beef prices grew despite a rise in supply, and pork prices surged by 33% in spite of a slight decrease in supply. Therefore, this research examined factors that affected changes in demand for Korean beef (Hanwoo) and pork in 2013-2014, and analyzed their effects.
Method of Research
By collecting related data, we investigated the current state of factors that influenced changes in demand in 2014: large distributors' discount events, increases in meat shop-type restaurants and in demand for processed meat, the expansion of camping culture, the substitution effect of fishery products consumption due to radioactivity, demand replacement owing to highly pathogenic avian influenza (HPAI), and a rise in school meals and Chinese tourists. Through the literature review and our organized data, we analyzed price effects of the factors of changes in demand, using elasticity and flexibility coefficients. We also conducted multivariate regression analysis by estimating demand functions and inverse demand functions, and analyzed the influences of the factors and recent meat consumption trends through a consumer survey.
Research Results and Implications
We examined the degree of effect of each factor in supply and demand changes on prices. As for Korean beef, each factor's price increase effect was as follows: replacement demand owing to radioactivity, 2.8%; substitution demand due to HPAI, 2.9%; substitution effects because of pork price rises, 3.6%; and other factors in demand increases (discount events, the vitalization of meat shop-type restaurants, etc.), 4.0%. In case of pork, each factor's wholesale price rise effect was as follows: replacement demand owing to radioactivity, 8.4%; substitution demand due to HPAI, 8.9%; and other factors in demand increases (expansion of camping culture, preference for low-fat parts, demand for processed meat), 8.5%.
On the factors of changes in demand for Korean beef and pork, we conducted quantitative analysis using demand functions and inverse demand functions (price flexibility functions). Livestock products markets seem to have contributed to growing demand for Korean beef, while camping culture's expansion, radioactive contaminated water leaks, and outbreaks of HPAI are estimated to have influenced a rise in demand for pork. Korean beef demand functions empirically confirmed the result of a growth of holiday demand and price rises, and it was revealed that the occurrence of livestock diseases such as foot-and-mouth disease and PED directly affected prices.
We surveyed consumers to review the factors influencing their decision- making and the present state of meat consumption centered on beef and pork. According to the survey, consumers were more concerned about the danger of radioactivity than about that of HPAI, and they replied that the concern would continue for a long time. HPAI had more impact on the consumption of chicken and duck than on that of beef and pork. According to the survey on the effect of factors in demand changes (camping, meat shop-type restaurants, discount stores' meat sales events, the purchase of processed meat products, etc.) on meat consumption behavior, discount stores' sales events had the biggest impact on meat consumption, followed by the purchase of processed meat products, camping, and meat shop-type restaurants.
We derived the following implications based on the above research results. Recently, as meat consumption has continuously grown, demand's influence on meat prices has gradually risen. Because meat consumption changes due to changes in eating-out and leisure culture have long-term effects, future changes in food culture should be prepared for. Thus, like this study, it is needed to steadily monitor and analyze the factors of changes in demand.
The agents at the production and marketing stages should promptly respond to changes in market demand. The large-scale discount events of the government, producers, and distributors coping with an oversupply of Korean beef and pork are evaluated to have achieved many positive results. The events led to consumption expansion, which increased beef and pork prices and livestock farms' income. Also, distributors gained proper margins and enticed consumers through the mass sale, and consumers could purchase Korean beef and pork at reduced prices. When an oversupply of meat is expected, large-scale sales events can be effective in stabilizing the market.
In case of the livestock outlook, a supply model is relatively well established, but it is necessary to create a demand model that can reflect the factors of changes in demand. The livestock outlook's precision should be improved by analyzing demand changes through the demand model, and market participants including producers, distributors, and consumers should be able to respond to market changes utilizing the information.
Researchers: Ji In-bae, Hwang Yun-jae, Lee Hyung-woo, Han Bong-hee
Research period: 2014. 11. ∼ 2015. 4.
E-mail address: jiinbae@krei.re.kr
- Next
- A Preliminary Study for Developing an Existing FTAs’ Ex Post Impact Assessment Model
- Prev
- The Current Status and Improvement Plans of Agricultural Subsidization