Modeling U.S. Broiler Supply Response: A Structural Time Series Approach

A structural time series model is used to estimate the supply response function for broiler production in the United States using quarterly data and a structural time series model. This model has the advantage of expressing trend and seasonal elements as stochastic components, allowing a dynamic interpretation of the results and improving the forecast capabilities of the model. The results of the estimation indicate the continued importance of feed costs to poultry production and of technology as expressed by the stochastic trend variable. However, seasonal influences appear to have become less important, since the seasonal component was not statistically significant. The estimation of supply response for agricultural products requires a thorough understanding of the biological cycle involved in production. The speci-fication of a valid supply model does not only in-volve good statistical properties; the model must also be in agreement with the postulates of eco-nomic theory within the context of biological re