Feed-Livestock Relationships: A Model for Analyzing Management Decisions

Economists studying the operation of individual firms have relied in large part on the general theory of production economics as presented in standard references (3) (6).1 Usually some changes are required to increase the usefulness of the theory in formulating realistic and testable hypotheses. Generally it is assumed that the goal of the firm is one of maximizing profits. The objective of this paper is to develop a general model especially helpful for analyzing the operation of firms that produce livestock products. This is based on certain modifications and elaborations of the conventional theory of production. For the purpose of illustrating the use of the general model, a California feeder-steer operation is used. The general model should be helpful in evaluating many other types of livestock operations. The major modification is the separation of the livestock operation into production stages. "The technical definition of a stage is a matter of both convenience and logic, depending on the importance of the elemental operations and the way in which they fit in with the flow of products and materials. . . . Thus, a stage consists of all productive services—durable or nondurable—that cooperate in performing a single operation or a group of minor but closely related operations" (4, p. 545)