Estimation of Import Demand Functions of Two Key Food and Feed Commodities (Corn and Soybean) for India

ABSTRACT The derived demand for the increased demand for meat and dairy products is clearly observed in the fast‐paced growth of the Indian feed industry and its increased demand for agricultural commodities (e.g., corn, soybean, rice, wheat, broken rice, millet, etc.) as feed ingredients. Corn (maize) and soybean meal are the two most important feed ingredients in the poultry diet, and India's domestic production of these two key feed ingredients is insufficient to keep up with the growing demand for these commodities for feed purposes. While India aims to boost the production of the necessary agricultural feedstuff ingredients, India's reliance on import is expected to continue in the foreseeable future. Imports of agricultural commodities do play an important role in the economic growth of the Indian feed manufacturing industry's growth and likely have influence on its future growth. Therefore, it is critical to assess and quantify the import elasticities of the agricultural commodities that are key to manufacturing animal feed, and the tendency to import them because such empirical exercise is critical for economic and public policy formulations. Additionally, there is a general paucity of literature on the estimation of import demand functions of agricultural commodities for India, particularly those are used as both food and feed, and we attempt to address that gap in literature. We use an Autoregressive Distributed Lag (ARDL) model and Error Correction Model (ECM) to examine the long‐run relationship between imports of corn and soybean in India and various factors, such as relative share of GDP spent on food, growth of urban population, import price index, etc. which may impact those long‐run import demand elasticities. Our results show that as India's economic landscape evolves, the expenditure on food and growth of urban population will play a pivotal role in shaping the dynamics of the import of these two crucial commodities, corn and soybean. Our research underscores the intricate balance between domestic derived demand for agricultural commodities for feed (and food) purposes and international trade.