Stabilization Policies for the United States Feed Grain and Livestock Markets

This paper studies economic policy toward feed grain and livestock markets by applying optimal control theory to a quarterly microeconometric model. The results indicate that: (1) farm prices and the retail cost of meat can be stabilized by optimal control relative to unregulated markets, (2) the support price for corn and beef import controls are the most effective instruments while management of corn stocks is neither necessary nor a substitute for other instruments, (3) beef import controls are essential to stabilize producer prices for livestock commodities and (4) there is a definitive limit to the stabilization gain that can be achieved by a more intensive use of the instruments.