A Study of Optimal Location: Competitiveness of the Alberta Cattle Feeding Industry with U.S. Regions

Abstract

This study examines optimal location of cattle feeding among Alberta and the north-western U.S. states. Optimal location is based on comparative advantage (reflected in lower cost) in the production of resources such as feeds and feeders, and final product of boxed beef. Transportation costs of resources and final product also influence optimal location. A spatial equilibrium model is developed to determine optimal location amoung seven regions. It is a linear programming cost minimization model that applies to 1988. A production function for transforming intermediate resources into final product (boxed beef) is used and regional demand for boxed beef is specified. Alberta beef supply and disposition for 1988 is simulated, and various policy alternatives are then applied to this base model. Results indicate Alberta can be competitive with U.S. regions in feeding and processing cattle. Comparison of actual 1988 cattle feeding patterns to "optimal" feeding patterns indicated by the model leads to several inferences. Significant impacts on numbers of cattle fed in Alberta arise from removal of (or alterations to) the current method of paying the Crow Benefit. The Alberta cattle sector shows considerable sensitivity to this polocy through its impact on barley price. Study models indicate that Alberta cattle feeding and processing industry would expand with Crow rate removal. Had Pacific Rim demand for high quality beef been greater, both northern and southern Alberta would have increased exports by shipping beef through Vancouver. Exports to the Pacific Rim would have displaced beef shipments from Alberta to eastern Canada. Depreciation of the value of the Canadian dollar would also have led to increased activity in the Alberta cattle sector. Alberta imported more feeders from the U.S. as value added cattle feeding and processing activities increased in Alberta. The additional boxed beed was shipped south to the U.S.