Estimating feed utilisation matrices using a cost function approach

In this paper a multiple-output cost function framework is proposed to construct national feed balances or feed utilisation matrices (FUMs). The framework is applied to the Belgian compound feed industry. For estimation purposes a Symmetric Generalised McFadden (SGM) cost function is selected. The cost function is estimated using readily available time-series data for the period 1962-88. Unlike previous studies based on duality theory, this study exploits the properties of nonjointness in animal feed production to establish a complete FUM. The allocation of feed ingredients among different livestock categories as well as the composition of various compound feeds are identified. Also own- and cross-price elasticities of demand for feed ingredients by type of livestock are reported.