Cottonseed: Derived demand and price analysis



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Despite much research on feed grains and oilseeds, little is known about the dairy industry’s influence on aggregate cottonseed demand. A transcendental logarithmic production model with regional dummy variables is used to estimate the U.S. dairy industry’s derived demand for cottonseed meal, corn, alfalfa hay and other grains. Own-price and cross-price elasticities for the U.S. dairy industry are estimated using a marginal approach. Two case analyses, selected plausible future price events in the feed grains market and increases in milk production, are investigated to estimate the effects on aggregate demand for cottonseed and cottonseed prices. This analysis enables forethought concerning the domestic demand for cottonseed and its implication for cotton farmers and their expected revenues from cottonseed.