Exploring Agricultural Production Systems: Interactions between the Crop and Livestock Sectors

This paper explores the U.S. agricultural production systems, focusing on the interactions between the crop and livestock sectors. The estimation results of the differential input demand system suggest that the demand for hired labor, self-employed labor, intermediate goods, capital, and land significantly increases as crop outputs increase. In addition, the results show that the demand for inputs (except for hired labor) is very inelastic, suggesting that agricultural producers may have little flexibility in adjusting the demand for inputs in response to rapid changes in the prices of inputs. The substitutable relationships among hired labor, self-employed labor, intermediate goods, and capital contribute to alleviating the pressure on production cost in response to a surge in input prices. Statistical evidence also reveals the complementary relationship between capital and land, suggesting that an investment in durable equipment increases proportionally to the expansion of agricultural areas. Furthermore, the estimation results of the differential output supply system suggest that agricultural supply is not very responsive to the respective price changes. There also exists statistical evidence that relative changes in the prices of crop and livestock products alter the composition of crop and livestock supply due to the substitutable relationship.