An econometric model of the U.S. sheep and mohair industries for policy analysis

Abstract

The U.S. sheep industry has been declining 'in size since 1942. Several factors have played a role 'in the decline of the sheep 'industry. These factors include: decline 'in consumption of lamb and mutton, the use of manmade fibers instead of wool, labor scarcity and cost, and predator losses. A number of policy changes are occurring at this time that will affect the sheep 'industry. First, the U.S. Congress voted to phase out the wool 'incentive program. Second, the federal government has proposed higher grazing fees on public land 'in the West. About 50 percent of U.S. sheep are raised 'in public land states. Third, the sheep 'industry has proposed that tariff rate quotas be imposed on lamb imports to help protect the domestic 'industry from a sudden influx of foreign lamb. U.S. mohair production is concentrated in the Edwards(Ts Plateau region of Texas. In recent years, the U.S. has become the world's largest mohair producer. Mohair is also supported by 'incentive payments under the Wool Act. This industry receives a large majority of its revenue from sales of mohair. The industry will be dramatically affected by the loss of these payments. This analysis uses a capital stock-'inventory accounting methodology to model the supply side of the sheep 'industry. Demand is 'incorporated using traditional single equation estimation methods. Aggregate and regional models are developed and tested. The aggregate model is used to model the impacts of policy changes on the 'Industry. An aggregate mohair model is developed and used to examine the impact of the loss of 'incentive payments. Results indicate that the sheep industry will continue to decline with the phase out of the wool program. A lamb tariff and/or a target price for wool would, however, increase the size of the 'Industry. The angora goat industry will continue to decline 'in size, but rebound slightly in the future as mohair prices respond to lower supply.