Showing papers in "Journal of Agricultural & Food Industrial Organization in 2020"

Hedonic Price Functions and Wine Price Determinants: A Review of Empirical Research

Abstract: Abstract The objective of this paper is to present a descriptive review of all the studies published on wine price determinants. The selection process has been carefully designed to assure that we cover the complete literature of hedonic price functions and wine price determinants. Because of the heterogeneity among these studies, the objective was to classify all the determinants in clusters related to geographical and agricultural factors, time horizon, public information and, supply factors (production costs and volume of production). For this review, we have identified a list of 117 papers published on price determinants over the period 1993 to 2018.

Farmers’ Grain Storage and Losses in Ethiopia

Abstract: While storage losses at the farm are often assumed to be an important contributor to presumed large postharvest losses in developing countries, reliable and representative data on these losses are often lacking. We study farmers’ storage decisions and self-reported storage losses for grains based on two large-scale household surveys conducted in major agricultural areas in Ethiopia. We show that a relatively large share of grain production is stored by farm households for own consumption and that storage technologies are rudimentary. Farmers’ self-reported storage losses amount to an average of 4 % of all grains stored and 2 % of total harvest. These storage losses differ significantly by socioeconomic variables and wealth, as well as by crop and humidity. We further see strong spatial heterogeneity in storage losses being significantly higher in southwest Ethiopia. Efforts to scale up the adoption of improved storage technologies to reduce storage losses at the farm level should consider these characteristics.

Storage Policies: Stockpiling Versus Immediate Release

Abstract: Storage policies are used in many countries to smooth price volatility and thereby support food security. When there is a global decrease in food supply caused by a number of extreme weather effects, food reserves are expected to reduce the potential negative implications for households with low purchasing power. In this paper, the properties of such a stockpiling policy are assessed and compared to a policy with storage but without stockpiling. The results show that a stockholding policy is an expensive strategy that generates economic benefits only in extreme cases.

The economic effects of covid-19 on the producers of ethanol, corn, gasoline, and oil

Abstract: The COVID-19 crisis created large economic losses for corn, ethanol, gasoline, and oil producers and refineries both in the United States and worldwide We extend the theory used by Schmitz, A , C B Moss, and T G Schmitz 2007 “Ethanol: No Free Lunch ” Journal of Agricultural & Food Industrial Organization 5 (2): 1–28 as a basis for empirical estimation of the effect of COVID-19 We estimate, within a welfare economic cost-benefit framework that, at a minimum, the producer cost in the United States for these four sectors totals $176 8 billion for 2020 For U S oil producers alone, the cost was $151 billion When world oil is added, the costs are much higher, at $1055 8 billion The total oil producer cost is $1 03 trillion, which is roughly 40 times the effect on U S corn, ethanol, and gasoline producers, and refineries If the assumed unemployment effects from COVID-19 are taken into account, the total effect, including both producers and unemployed workers, is $212 2 billion, bringing the world total to $1266 9 billion © 2020 De Gruyter All rights reserved

The Influence of Formal Institution Agents on Coopetition in the Organic Food Industry

Abstract: Recent academic research presents a large volume of studies on the organic market from the perspective of consumers’ motivation and purchasing preferences. However, these studies adopt a competitive or cooperative approach, but overlook the institutional complexity of emerging markets. This study aims to investigate the organic food production chain of emerging countries from the perspective of coopetition, taking into account the influence of formal institution agents. We focused our analysis on the chain of the organic food products, with the organic ice-cream producer as the key node of the chain. It is a single-case study conducted through in loco interviews with participants in the organic food products’ chain, along with secondary data. The results show the influence of formal institution agents and non-financial incentives as primary drivers of entrepreneurial strategic decisions. We contributed to the coopetition literature by demonstrating the influence of formal institution agents on value creation and value capture in the organic chain.

The Role of Storage and Trade in Food Security

Abstract: This paper examines the role of storage and trade on food security with respect to milled rice in India for the period 1966–2013. Data on food balances, prices, and population obtained from FAOSTAT allow for the observation of the status quo with storage and trade. Then, using a spatial equilibrium framework, the outcomes without storage or trade are simulated. Our results are consistent with the literature with respect to welfare effects. Storage results in net welfare gains to society, although producers gain while consumers lose. Producers receive a welfare gain from net exports while consumers gain from net imports. From a food security perspective, the use of storage has provided benefits to consumers by increasing stability in the market, as seen through decreased standard deviation in both domestic rice prices and per capita availability. The results are mixed with respect to stability from trade.

The Competitive Impact of Cooperatives on the Spot Market: A Spatial Analysis of Iowa Corn Prices

Abstract: Abstract Imperfect competition in the agricultural input procurement market is prevalent, especially at the local and regional scale. While there is much theoretical work on the positive effect of cooperatives on spatial competition, applied research is relatively scarce. We address the gap in the literature with an empirical study of cash prices in the Iowa corn market. With 589 observations from the 2018 harvest season, we construct a spatial model of price competition among grain handlers within a 20-mile radius. Among other findings, we conclude the ownership structure of Iowa grain handlers is important to explain the spatial dependence in corn cash prices. On average, cooperative grain handlers offer a lower corn cash price as compared to corporate grain handlers (¢1.20–1.72 per bushel), which is likely offset by refunds and dividends at the end of the fiscal year. At the same time, cooperative grain handlers force an adjustment in the behaviour and pricing strategy of nearby competitors. Cooperative grain handlers on average facilitate a significant increase of ¢0.65–2.08 per bushel in the corn cash price of competitors within a 5–17 mile radius. Our novel findings inform recommendations in terms of spatial entry and location decisions by cooperative grain handlers.

What Factors Influence Consumer Preferences for Search and Credence Seafood Characteristics? an Empirical Analysis in Kentucky and South Carolina

Abstract: Consistent with preferences for other food products, consumers increasingly care about a range of search and credence seafood characteristics such as: environmental effects and product form. This study utilized a dataset obtained from an online survey, and a Multivariate Ordered Probit formulation to examine the impact of: demographic characteristics, lifestyle preferences, and seafood consumption frequency on preferences for selected seafood attributes. The findings indicate that the factors influencing consumer preferences differ across the attributes examined. Although some demographic variables have a statistically significant effect on consumers’ preferences for seafood attributes other than price, their predictive power was limited regarding preferences for wild-caught, fresh seafood and the impact of sustainability on purchasing decisions. Furthermore, consumers who utilize direct marketing outlets have stronger preferences towards fresh and wild-caught seafood products.

Impact of Private Labels and Information Campaigns on Organic and Fair Trade Food Demand

Abstract: We use Almost Ideal Demand Systems (AIDS) models estimated by the nonlinear seemingly unrelated regression (SUR) method on scanner data (i) to examine the demand for ecolabeled food products (organic and fair trade) as a function of the good having a private label (PL) or a national brand (NB) and (ii) to assess the impact of information campaigns promoting organic and fair trade products. We find that while demand is elastic for NB organic milk and NB fair trade coffee, it is inelastic for their PL counterpart. As for organic eggs, demand is always inelastic. Cross-price elasticities show substitutability between ecolabeled and conventional goods but only within the NB goods (milk and eggs) and within the PL goods (milk and coffee), but also complementarity between NB conventional and PL ecolabeled goods (milk and coffee). Finally, we find that while information campaigns increase the predicted expenditure shares of PL organic milk by 33%, of NB fair trade coffee by 50%, they decrease the predicted expenditure shares of PL conventional eggs but only by 3%. These effects are non-lasting.

Commodity Storage, Post-Harvest Losses, and Food Security: Panel Data Evidence from Ethiopia

Abstract: In Ethiopia, 95 % of total agricultural output comes from some 11 million smallholder farmers. A relatively significant proportion of the food grown in the country is stored at the household level by smallholder farm households, mainly for own consumption. Storage losses, generally perceived to be high, have significant implications for household food security. This study provides a microeconomic perspective of commodity storage, post-harvest losses (PHL), and food security in Ethiopia. It relies on a large-scale household panel dataset, the Ethiopia Socioeconomic Survey (ESS), which comprises 4,000 households in rural areas and small towns that are representative of the most populous regions of Ethiopia. The data were collected as part of the World Bank’s LSMS-ISA project; it involved three “waves” or collection periods: 2011/12, 2013/14, and 2015/16. Data from only the second and third waves were used to estimate a random-effects probit model. Findings show that the magnitude of PHL is substantial: damage is due to rodents and rotting related to traditional storage facilities, poor ventilation, humidity/temperature, and undesirable post-harvest handling. Findings also show that PHL decreases with better market access and improved storage practices. Mitigation measures that improve and promote modern grain storage facilities appear to provide a double dividend – reducing PHL while addressing food insecurity.

WTO Rules and Public Stockholding for Food Security Purposes

Abstract: The 2007/08 food crisis, which revived interest in public stocks for food security purposes in different parts of the world, has sparked heated debates at every Ministerial Conference of the World Trade Organization (WTO) since the Bali Ministerial in December 2013. At the heart of these debates are the current rules of the WTO that apply to public stockholding and how they limit (or not) the ability of a government to constitute food stocks and pursue its food security objectives. This article discusses the current WTO rules that apply to food stockpiling and the rationale behind them. It describes the current WTO disciplines, notably in the area of domestic support, and examines the different types of support provided by the WTO Members under their public stockholding programs. It concludes by looking at the main arguments for and against the current rules.

Economic Implications of Protecting Regional Reputations

Abstract: Abstract This article develops a theoretical model to analyze how policies such as regional labeling, geographic indications, and quality standards affect welfare when firms have a collective reputation corresponding to a region. The tradeoff is between consumer information and protection of the regional names against the effect of supply restriction, which is often considered to be collusive behavior. Regional labeling is found to increase quality for all firms and increases profits for firms in the high-quality producing region, although the effect on profits for firms in the low-quality producing region is ambiguous. Quality standards may also increase quality and profits in all regions, but can also be used as a way to restrict imports if standards are too high. Quotas can also alleviate the collective information problem and increase profits, but does so at the expense of consumers. We argue that clear labeling and achievable standards are preferable to import quotas due to consumer surplus.

Effects of Stockholding Policy on Maize Prices: Evidence from Zambia

Abstract: Many countries in the developing world use public stockholding programs to stabilize prices for both farmers and consumers. Governments directly purchase and store staple grains, and then sell them to processors or consumers, often at heavily subsidized prices. Despite the substantial costs of these stockholding programs, little is known about their effectiveness in mitigating retail price swings. This paper estimates the effects of purchase and sales activities of the Zambian Food Reserve Agency (FRA) on monthly maize market prices across more than thirty markets in Zambia from 2003 to 2008. To deal with the endogeneity in purchases and sales, we use predicted FRA purchase and sales targets as instrumental variables. Controlling for other policies, we find evidence that FRA activities stabilize retail prices in major district markets within the cropping year. Results show that FRA purchases raise local prices for surplus maize producers about 5 % on average at the time of harvest, and that FRA sales help lower the prices to consumers during the lean season up to 7 %. However, we find limited evidence that the FRA is able to reduce price volatility between years.

Is Commodity Storage an Option for Enhancing Food Security in Developing Countries

Abstract: We revisit the underlying economics of commodity storage and its relation to food security by first clarifying the standard model used to analyze the economic efficiency and distributional effects of commodity storage programs. We find that producers prefer stabilization, although their incomes are more variable, while consumers are indifferent. However, numerical simulations indicate that physical stocks will build up inexorably over a sustained period or the government will need to raise prices continuously over a prolonged period. For the least developed countries facing fluctuating world prices, government should guarantee the price received by producers because, with price uncertainty, farmers could experience losses even under a ‘good’ weather outcome; this would guarantee the producer price, benefitting farmers, while allowing the consumer price to vary with the world price benefits consumers as they prefer price instability. In some cases, however, the government may wish to impose a price ceiling so that households living at or near subsistence can afford to buy grain – an argument based on the grounds of food security. Numerical simulations indicate that such a mixed-price policy increases the wellbeing of both consumers and producers. Physical storage is not a necessity.

Commodity Storage, Price Stabilization, and Food Security

Abstract: The debate over the role of commodity storage in reducing price instability to the net benefit to society continues. Most of the early literature deals with stocks and price instability under price certainty. Little attention is given to the effects of stockholding on food security. Some of the earlier works based on welfare economics (Just, Hueth, and Schmitz 2004) include Waugh (1944), Oi (1961), Massell (1970), and Hueth and Schmitz (1972). Waugh concludes that consumers prefer price instability. As a result, there are costs from commodity storage used to generate price stability. Likewise, Oi concludes that producers prefer price instability; hence, storage is costly for producers. Massell demonstrates that in a market setting that included producers and consumers, society prefers price stability over instability. However, Schmitz (forthcoming) argues that this need not be the case given that both consumers and producers prefer price instability. His arguments are based on an explanation of why stocks are not achievable (Schmitz 2018a) and that producers prefer price instability regardless of the source of the instability (Schmitz 2018b). Later literature expanded the analyses to multi-products. For example, Turnovsky, Shalit, and Schmitz (1980) and Schmitz, Shalit, and Turnovsky (1981) using utility maximization models demonstrated that in the case of multi-products, producers, for example, prefer stability for a subset of the commodities produced but not for the entire set. Tisdell (1972) analyzed stock policy under uncertainty and concluded that the welfare gains from stabilization are highly dependent on the degree of market uncertainty. Feder, Just, and Schmitz (1980) presented a theory of the firm model where, under uncertainty, producers have several risk management tools, including storage. (References to additional papers can be found in Wright and Williams (1984)).

Adherence to Dietary Recommendations and Food Retail Market Structure: Is There a Connection?

Abstract: Abstract We pair IRI household purchase records with Nielsen TDLinx data on the retail food environment to investigate the associations between retail market structure and Americans’ adherence to the Dietary Guidelines. We focus specifically on fruit and vegetable consumption, as proxied by purchases. Controlling for various household characteristics, we find that increased market concentration is associated with lower produce consumption and weaker adherence to recommendations. We also find a number of small but significant associations with respect to the presence of nontraditional retail formats.

COVID-19 and the US Lettuce Supply Chain: Implications for Farmworker Health and Safety and a Secure Supply

Abstract: The COVID-19 pandemic has exposed multiple vulnerabilities in the U S lettuce value chain Restaurants and other food service operations closed almost overnight, leaving farmers with millions of dollars of excess lettuce Because of the rigid value chain, farmers were forced to decide whether to harvest their crops for donation, try to find new customers, or plow their crops under Close working and living conditions increase farmworkers' risk of contracting COVID-19 Though many operations have implemented safety measures to protect farmworkers from COVID-19 in the short-term, larger structural changes must be made to provide workers with fair wages, access to health insurance and paid time off, and affordable housing This review outlines the current value chain of lettuce in the U S and the disruptions caused by COVID-19, analyzes the impacts on farmworker health and safety, and offers recommendations for a more resilient lettuce value chain © 2020 Walter de Gruyter GmbH, Berlin/Boston

The Determinants of the EU Import Demand for Soybean and Maize: What Role for GMOs?

Abstract: In this work, we analyse EU soybean and maize imports using a demand system borrowed from the differential approach to firm theory. Alongside providing own-price and cross-price (i. e. cross-country) elasticities for these two products, we test whether source-specific characteristics exert any influence on complementarity and substitution patterns between international exporters. Specifically, we look at country differences stemming from supply chain efficiency and the asynchronous approval of Genetically Modified (GM) varieties. We do so by introducing two measurements for such features into a linear demand model specified by Laitinen and Theil (1978). Estimation results suggest that the EU import structure is not affected by differences in supply chain efficiency between overseas suppliers while, depending on the product, asynchronous approval does seem to have an influence. We find that imports of maize are more sensitive than those of soybeans to differences in approval statuses between international exporters and the EU. Since soybean availability is a limiting factor for the EU feed industry, avoiding stock shortages may be a priority for European importers, hence the weaker effect of asynchronous approval. On the other hand, the substantial EU self-sufficiency for maize places more emphasis on product characteristics and prices.

Collective Reputation and Quality in Online Platforms

Abstract: This article provides a conceptual framework to understand benefits and costs of private minimum quality standards, increasing seller reputation or warranties when there is a collective reputation for online platforms. Our framework uses a dual reputation model where consumers have a quality expectation based on the reputation of the platform and the reputation of the seller. We also analyze the benefits and costs of various types of fees associated with online platforms and find that the optimal fee structure depends on whether quality concerns or market power concerns are greater. Fees that are fixed, or only depend on quantity, increase market power, but do not hurt product quality. Therefore, they should be used if collective reputation is the main concern. Fees that depend on prices exacerbate bad quality incentives for firms, so they should only be considered if quality is not a concern for consumers. The optimal quality standard depends on the fee structure, as well as the level of compliance to that standard.

Restaurant Tipping Discrimination: Evidence from a Representative Sample of US Households

Abstract: Discrimination in tipping creates concerns of inequity in service quality for restaurant operators (Brewster 2017). We use the National Household Food Acquisition and Purchase Survey data to conduct one of the very few nationally representative examinations of tipping behavior at US restaurants. We focus on differences in tipping behavior between groups with identifiable characteristics and investigate whether tipping differences between groups are robust to inclusion of a variety of controls. We investigate tipping at the extensive and intensive margins. In contrast to earlier studies, we find little evidence that tipping varies by race and gender.

The Impact of Paying for Milk Solids on the Performance of the Dairy Supply Chain and Consumers

Abstract: An important particularity of the dairy chain is that many times the main interest of the dairy industry relies on milk components, the so-called milk solids. Paying for milk solids content is a way of trying to create incentives for farms to invest in improving the solids content. However, little is known about the effects of this type of payment on the dairy supply chain. The paper proposes a microeconomic model to analyze the effects of paying for milk solids content on the performance of farms, dairy processors and consumer welfare. Based on the model, we find that this mechanism improves the yield of milk in producing dairy products and benefits farms, processor and consumers simultaneously. Extensions demonstrate the robustness of results and provide a generalized model and conditions for which these results are valid.

The Influence of Online Reviews on Restaurants: The Roles of Review Valence, Platform, and Credibility

Abstract: Online reviews influence consumer decision making, retrieving valuable information about consumers to the companies. We investigate how review valence, platform type, and review credibility affect purchase intention (visit to restaurants). We use an experimental 2 × 4 between-subjects factorial design with two platforms (company websites and independent websites) and four types of review valences (neutral, negative, positive and balanced), with data of 256 respondents. Results show that purchase intentions are influenced by review valence. The effect is moderated by perceived review credibility. Review platform has no moderating effect on the influence of review valence. Results provide practical information for marketers in the service industry.

The GMO Pipeline, Import Bans and Asynchronous Approvals – The Impact on Agricultural Trade

Abstract: Abstract The divergence in approaches to regulation of genetically modified organisms (GMOs) among countries is a contentious policy issue that has externalities that inhibit trade in agricultural products. One result is that approvals of GMO events is internationally asynchronous. Countries whose approval processes are slower or more stringent often impose import bans or other non-tariff barriers on imports of GM products they have rejected or have yet to approve. These trade barriers have been the subject of considerable investigation. As more and more GMO events are approved in some countries, but not in others, the probability of unintended mingling of GM crops in shipments of non-GM crops increases. Shipments of non-GM crops with a low level presence of non approved GM crops are routinely rejected by importing countries. This growing disruption to trade has not received a great deal of attention. This paper uses information from the GMO research and commercialization pipeline to estimate the potential impact of increases in mingling on international trade flows using a CGE model – GTAP. The results suggest that the growing potential for mingling will have a considerable detrimental impact on trade flows and, hence, tolerance levels should be an important question for multilateral trade negotiations.

Environmental Performance of Food and Beverage Firms in Merger and Acquisition Deals

Abstract: We build upon existing theories of merger and acquisition (M&A) to examine the differences in environmental performance between targets and acquirers in the Food and Beverage processing (F&B) industry. In a cream-skimming strategy, acquiring a firm with better environmental performance may add to the acquirer’s existing green efforts and improve their environmental capabilities. In a turnaround strategy, an acquirer may buy businesses from a dirtier firm and later bring them up to the buyer’s environmental standard. Among a set of 13 M&A deals in the F&B industry, we identify deals where targets have poorer or better environmental performance (toxic chemical management) than their acquirers. Our finding suggests that, among the given set of firms, there is some evidence of improvements in the toxic chemical management rate of targets and acquirers.

Regular Price Stickiness in German Food Retailing

Abstract: The present study investigates the underlying factors of price stickiness in German food retailing using fluid milk as a case study. We distinguish the duration between two actual price changes and two regular price changes as measures for price stickiness. Especially in the case of private labels, the choice of proxy for price rigidity has important implications. If we consider (regular) price changes, private label products are more (less) rigid than national brands. Price rigidity increases in the product’s average price. Prices of low priced private labels are rather flexible. Price adjustment of high priced private labels is similarly sluggish compared to national brands. We rationalize this finding with variable mark-ups under imperfect competition. In line with previous research, we find that price stickiness also depends on product attributes, retail formats, menu costs, psychological price points, and time-varying market conditions.

Price premiums and discounts for Australian sparkling wines

Abstract: Abstract This paper assesses the price premiums and discounts for nine sparkling wine types or names commonly employed in Australia. Hedonic wine price functions are estimated for 10 years of wine releases to identify the specific price impact of different sparkling wine types or names, after controlling for other wine price determining factors. Results identify that important price premiums occur with the use of blanc de blancs and other less common sparkling reds. An important price discount is estimated for prosecco wines. Sparkling wine type interactions with climatic regional conditions and cellaring potential also point to some interesting results. The estimates may have potentially important implications for the strategic use of wine types and names by producers and for consumers in identifying good valued sparkling wines.

Testing Market Power and Welfare Effects in the US Catfish Industry

Abstract: An empirical specification of the conjectural variations model, which conforms to microeconomic theory and has no specification errors, is estimated in the US catfish industry. We find the existence of market power in catfish processing sector. Processors force price paid to catfish growers down by 12% to 37%, and it costs the US catfish growers at least $52 million/year. The catfish growers can deter negative effects of market power by increasing farm supply flexibility. Further studies are needed to address the dynamics issue, competitive game strategies in the US catfish industry.