Dynamic Analysis of Policy Options for Mexico's Sheep Sector

The demand for sheep meat in the populous central region around Mexico City has grown rapidly in recent years. To assess the impacts of potential “regional development” policy options, a dynamic model of Mexico’s sheep sector with regional and producer group disaggregation is developed that incorporates interactions between herd dynamics, feed dynamics, market inventories of sheep meat and prices for sheep meat and animals. The model is used to assess the outcomes for commercial and tras patio (backyard, small-scale) Mexican sheep producers and sheep meat consumers of three growth assumptions and two intervention alternatives: a variable cost subsidy or the implementation of a stylized health intervention. Model simulations indicate that the dynamics of growth dominate the policy responses; the principal beneficiaries of producer subsidy and animal health interventions are Mexican sheep meat consumers. Commercial sheep producers will experience increases in cumulative net margin, but tras patio producers will be made worse off than they would have been in the absence of interventions. The Mexican sheep system thus exhibits two characteristics of dynamically complex systems: unintended consequences and policy resistance, with broader implications for interventions in agriculture-based livelihood systems.