Supply elasticity in pig production

Abstract

The article analyses determinants influencing supply response in Slovenian pig production, in the
period from January 1995 to December 2005. The two sets of models are developed. Both sets of
models explain the quantity of pigs (live weight) sell on the market. The first set of models
explains the quantity with own producer prices, whereas the second set of models is based on the
gross margin. Standard Cobb-Douglas form of the profit function is used. The models are based
on the ordinary least squares method and the corresponding tests. Based on the testing of various
alternatives, including models, testing of statistical significance of individual lags of the
exogenous variables, two models are developed. The model results reveal that the pig supply is
influenced primarly by the own producer price, implying the achieved gross margins, and
secondly by the price of maize, which also in Slovenia presents the main cost item in pig
breeding. Other statistically significant determinants are the season and some unpredictable
factors, such as the influence of the BSE disease and the crisis on the pork market. The elasticity
of price values was low (about 0.3), as expected, thus confirming the thesis about the inelasticity
of pig supply. Such results can be explained by a low level of producers adaptation to the market
situation and by the presence of quasi-fixed expenses in pig production.