Trade liberalization and inter-provincial dumping in a spatial equilibrium model: the case of the Canadian dairy industry

The paper introduces imperfect competition in a spatial equilibrium model of provincial dairy markets to analyze the welfare impacts of trade liberalization. Our model accounts for output restrictions at the farm level and the potential presence of market power at the processing level. Our model builds on the reciprocal dumping model of Brander and Krugman (1983) because processing firms from different provinces compete with one another in several provinces. Simulations reveal that welfare in the Canadian dairy sector could increase by as much as $1 billion per year if aggressive tariff cuts were made while moderate liberalization plans would yield annual gains of$234.5 million. Even large producing provinces like Quebec and Ontario gain from trade liberalization. In comparison, a perfect competition model yields more modest welfare gains in the range of $15.6 million and$34.5 million. Finally, we show that the switch in the sign of the transport cost-welfare relation identified by Brander and Krugman (1983) occurs at transport costs that are too high to be policy-relevant.Supply management, Canadian dairy sector, imperfect competition, bilateral dumping

An Institutional Theory perspective on sustainable practices across the dairy supply chain

AbstractThe need for sustainable practices in the food supply chain, particularly in the area of energy reduction, is becoming acute. The food industry currently has to contend with multiple competing pressures alongside the new challenges of sustainable production. We applied Institutional Theory to explore the role of supermarkets in the development of legitimate sustainable practices across the dairy supply chains. The paper focuses on dairy supply chain organizations and their consumption of energy. We conducted 70 semi-structured telephone interviews with various stakeholders across the supply chain. Findings revealed that the majority of actors in the supply chain identified supermarkets as the dominant player, and that the supermarkets exert pressure on other smaller organizations across the supply chain. Although some organizations wished to pursue a sustainable agenda through integrating new rules and legitimate practices within their own organization, the dominant logic appeared to be one of cost reduction and profit maximization. There was also evidence that supermarkets and other large organizations attempt to replicate publicly available information on green successes for image purposes. We conclude that the dominant logic of cost reduction is so well established that challenging the dominant logic may prove difficult. The challenge is therefore to complement the dominant logic with sustainable practices across the whole supply chain, a role Government needs to play. This will require a broader more systemic approach to encouraging sustainable practices including investment and financing practices, so that all members of the dairy supply chain can co-operate and contribute to energy reduction

The Bargaining Strength of a Milk Marketing Cooperative

As a result of economies of size, food processors are generally large and few in number. These characteristics put processors at a bargaining advantage over independent farmers. Marketing cooperatives were established to counter the uneven bargaining position of individual farmers. This article investigates the relative bargaining strength of one milk marketing cooperative and several fluid milk processors. The Nash bargaining model can be used to analyze the negotiated price in the Florida fluid milk market which acts like a bilateral monopoly. The milk marketing cooperatives have bargained well with the milk marketing processors. The monthly bargaining strength of the Southeast Dairy Cooperative, Inc. (SDC), exceeds the monthly bargaining strength of the processors in all twelve months, ranging from a low of 0.6664 in January to a high of 0.7831 in September. The monthly average bargaining strength across all months for SDC is 0.7326.cooperative, bargaining, bilateral monopoly, dairy, processors, Agribusiness, Marketing,

Cooperative Organizational Strategies: A Neo-Institutional Digest

This paper describes the neo-institutional approaches of transaction cost economics, agency theory, and property rights analysis and summarizes efforts by economists to apply these concepts to cooperatives. Several problems intrinsic to the cooperative organizational form and its property rights structure are reviewed. These problems have been hypothesized to affect the comparative economic efficiency of cooperative firms and have led to the development of life cycle models seeking to explain the formation, growth, and eventual decline of cooperatives as markets evolve. In this context, statistical analyses of the comparative efficiency of cooperatives and ex post studies of cooperative conversions are surveyed.Agribusiness,

Technological Changes in the Transportation Sector--Effects on U.S. Food and Agricultural Trade: A Proceedings

ERS sponsored a workshop, Technological and Structural Change in the Transportation Sector: Effects on U.S. Food and Agricultural Trade, March 17-18, 1999, in Washington, DC. The program's objectives were to raise awareness within ERS about the role and importance of transportation in U.S. food and agricultural trade and to discuss the need of an agency research agenda in this area. More than 60 people attended. Bob Thompson of the World Bank and Jeffrey Frankel of the Brookings Institution led with discussions about the role of transportation in the global food system and the importance of integrating geography and transportation in analysis of international trade. Other panels dealt with transportation technology, past and future, the changing policy environment for ocean shipping, logistical and technological developments aiding exports of specific commodities, including the use of supply chain management. Representatives of the Agricultural Marketing Service discussed the availability of transportation cost data, and the availability of other shipping data was discussed by representatives of the PIERS database, a product of the Journal of Commerce. Two ERS research projects were summarized, one using GTAP and another applying the gravity model to estimate the extent to which distance is less of an inhibiting factor in exporting certain U.S. agricultural exports. The administrator of the Agricultural Marketing Service, the ERS associate administrator, and representatives of the Transportation Research Board, the USDA's World Board, and the Farm Foundation discussed potential ways ERS could include the transportation variable in its research. The program was cosponsored by the Farm Foundation and World Perspectives, Inc.transportation, distance, technology, agricultural trade, United States, Public Economics, Research and Development/Tech Change/Emerging Technologies,

Parmalat

This Discussion Paper describes developments affecting Parmalat of Italy, once one of the world's leading dairy-food firms, which filed for bankruptcy protection in December 2003. After the bankruptcy, it was discovered that fraud on a massive scale had occurred at Parmalat, putting the firm in the infamous category occupied by Enron, Tyco International, and WorldCom. This paper analyzes the origins, growth, strategies, downfall, and restructuring of Parmalat, and identifies implications for the U.S. and world dairy industries and international businesses that flow from the firm's experiences.Parmalat, Fraud, Bankruptcy, Distribution Channels, Brand Proliferation, Fragmented Industries, Debt Aquisition, Agricultural Finance, Demand and Price Analysis, Financial Economics, Industrial Organization, Marketing, Risk and Uncertainty,

Perspectives on Global Concentration and Public Policy

This paper is an essay in political economy. It defines globalization and discusses its key role in economic development over the past two centuries as well as today. Globalization may have broadened markets, thereby affecting the nature of competition within those larger markets, or it may have simply introduced more trade or foreign direct investment to existing markets. One conclusion is that there is no global market for high value food, or for any particular high value food. To date the impacts of multinational firms in political forums at the state, regional or national as well as the global level have been in many instances as important as their impacts on economic markets. Issues and concerns discussed range from general observations on governance of the global economy to the impact of global concentration on specific problems in the agricultural and food markets of the United States. We conclude that the scope and extent of public policy is a direct function of the degree of development and globalization in an economy.International Development, International Relations/Trade, Political Economy,

Food Sector Transformation and Standards in Zambia: Smallholder Farmer Participation and Growth in the Dairy Sector

Market liberalization in Zambia has led to a rapid and fundamental transformation of its dairy sector. Mainly through foreign direct investment and international partnerships, a new formal dairy sector, characterized by institutional, organizational and technological innovation, emerged from the ashes of abandoned government projects. Sensing the development opportunity that arose from an untapped milk supply potential in Zambia's traditional smallholder livestock production and a growing milk demand from the newly emerging formal dairy processing sector, numerous donor-funded smallholder dairy farmer support programs emerged. At the same time, in order to protect its domestic market as well as to be in a better position to enter demanding export markets, stakeholders from the private, public and NGO sector have recently joined forces to develop technical dairy product standards for Zambia based on the CODEX.Livestock Production/Industries,

A Framework for Analyzing the Effects of Spring Load Restriction

Spring Load Restrictions (SLR) impose load restrictions on heavy trucks during the spring thaw period. Although the policies have been implemented for many years, we are still unsure of their economic effects on truckers. This paper overviews practices around the world and sets up a framework to estimate the Benefit/Cost of the SLR policy. A freight demand model in Minnesota was built to estimate the impacts of SLR on the freight transportation pattern. The model allows various policy scenarios to be tested before being tested in practice. A preliminary result of the freight demand model shows the SLR policy increased truck Vehicle Kilometers of Travel (VKT) in Lyon County, Minnesota by about 13 percent.Spring load restrictions, Benefit/Cost analysis, EMME/2, Freight demand model