PRODUCT AND PROCESS CERTIFICATION IN IMPERFECTLY COMPETITIVE MARKETS

Consumers, policy makers, and business decision makers are increasingly concerned about food safety and security. In the U.S. meat industry, certification programs could address some of these problems. This study builds a three-sector partial equilibrium model to analyze the distributional effects of implementing a certification program for meat product.Food Consumption/Nutrition/Food Safety,

THE CAPSTONE EXPERIENCE COURSE IN AGRICULTURAL CURRICULUM

Capstone courses are being developed in colleges of agriculture in response to demands from agribusiness firms, students, and other university stakeholders. With data from a faculty survey, the factors affecting the success of capstone courses in agricultural economics as well as other agricultural disciplines are identified.Teaching/Communication/Extension/Profession,

Certification of Pork Products

The objective of this paper is to provide insights on the welfare distributional impact on consumer and producer welfare resulting from the development and implementation of a credence certification program in the U.S. pork sector. The certification program can provide various levels of tracking and tracing in the marketing chain. The modeling framework follows that of Nilsson (2005), which encompasses product differentiation and substitution across meat products at the consumer level and across live animal types at the farm level. Processors and retailers have potentially bilateral market power and can supply either or both certified and conventional meat products. One of the key findings is that while as the conventional market contracts and the certified market expands as expected, the magnitude depends on whether suppliers are single-or multiproduct providers. On aggregate, total welfare increases by 15 to 24 percent depending on industry structure.Marketing,

Traceability -- A Literature Review

In light of recent food safety crises and international trade concerns associated with food or animal associated diseases, traceability has once again become important in the minds of public policymakers, business decision makers, consumers and special interest groups. This study reviews studies on traceability, government regulation and consumer behaviour, provide case studies of current traceability systems and a rough breakdown of various costs and benefits of traceability. This report aims to identify gaps that may currently exist in the literature on traceability in the domestic beef supply chain, as well as provide possible directions for future research into said issue. Three main conclusions can be drawn from this study. First, there is a lack of a common definition of traceability. Hence identifying similarities and differences across studies becomes difficult if not impossible. To this end, this study adopts CFIA’s definition of traceability. This definition has been adopted by numerous other agencies including the EU’s official definition of traceability however it may or may not be acceptable from the perspective of major Canadian beef and cattle trade partners. Second, the studies reviewed in this report address one or more of five key objectives; the impact of changing consumer behaviour on market participants, suppliers incentive to adopt or participate in traceability, impact of regulatory changes, supplier response to crisis and technical description of traceability systems. Drawing from the insights from the consumer studies, it seems as if consumers do not value traceability per se, traceability is a means for consumers to receive validation of another production or process attribute that they are interested in. Moreover, supply chain improvement, food safety control and accessing foreign market segments are strong incentives for primary producers and processors to participate in programs with traceability features. However the objectives addressed by the studies reviewed in this paper are not necessarily the objectives that are of most immediate relevance to decision makers about appropriate traceability standards to recommend, require, subsidize etc. In many cases the research objectives of previous work have been extremely narrow creating a body of literature that is incomplete in certain key areas. Third, case studies of existing traceability systems in Australia, the UK, Scotland, Brazil and Uruguay indicate that the pattern of development varies widely across sectors and regions. In summary, a traceability system by itself cannot provide value-added for all participants in the industry; it is merely a protocol for documenting and sharing information. Value is added to participants in the marketing chain through traceability in the form of reduced transactions costs in the case of a food safety incident and through the ability to shift liability. To ensure consumer benefit and have premiums returned to primary producers the type of information that consumers value is an important issue for future research. A successful program that peaks consumer interest and can enhance their eating experience can generate economic benefits to all sectors in the beef industry. International market access will increasingly require traceability in the marketing system in order to satisfy trade restrictions in the case of animal diseases and country of origin labelling, to name only a few examples. Designing appropriate traceability protocols industry wide is therefore becoming very important.traceability, institutions, Canada, consumer behaviour, producer behaviour, supply chain, Agricultural and Food Policy, Consumer/Household Economics, Food Consumption/Nutrition/Food Safety, Health Economics and Policy, International Relations/Trade, Livestock Production/Industries, Marketing, Production Economics, D020, D100, D200, Q100,

Revisiting the Role of Common Labeling in a Context of Asymmetric Information: Critique and Extensions

Households in the Western Hemisphere are no longer self sufficient in food production. Viewing the product from the shelves in the grocery store makes it difficult for the consumer to gain insight in the production practices and the quality attributes to the product. Formally, we can describe this as the food products purchased from a grocery store contain less search characteristic. Thus, the consumer cannot determine the quality of the product before the purchase. Instead the food products are characterized to be more of experience (quality is revealed after purchase) or credence characteristic (quality is not revealed even after purchase). Although it is not possible to determine the quality of the packaged food product on the shelves, the issues concerning food product quality are not trivial issues in society. The consumers may boycott not only food that can contain food-borne diseases, but also products that may be considered processed or produced in an unethical or hazardous method for the environment. For example, the linkage between the BSE (Bovin Spongiform Encephalopati) in beef and CJD (Creutzfeld-Jakobs Disease) in humans changed the consumption pattern rapidly in Europe, although not all countries reported occurrence of BSE. Consequently, these issues create incentives for the agribusiness firm to design programs for differentiating food products on basis of the perceived quality aspects. Producers supplying products that appeal to consumers? tastes have incitement to differentiate their products by other means than the pricing mechanism. The differentiation process is carried out through implementation of quality-, or certification programs. Certification programs and organizations like ISO, USDA, FAIRTRADE, CROP-WATCH, PDO, PGI, and Organic Europe, distinguish the product quality in terms of in production process, origin, and other tangible or intangible characteristics. When one or several stages in the food chain join to establish specific quality standards, both producers and consumers might reap economic gains through lowered uncertainty and increased efficiency. On the contrary, there is also a probability that the development of quality programs may further enhance market power, thus offset the potential social gains of the program. In essence, a certification program used by individual stages in the agribusiness chain may lead to vertical or horizontal cooperation (collusion), thus potentially moving away from perfect competition. Marette, Crespi, and Schiavina (1999) observe that agricultural markets are working imperfectly due to asymmetric information, where the consumers lack perfect information about the product quality. The suppliers, on the other hand, have incentives to produce both high and low quality products, although the consumers always prefer the higher quality products. The authors hypothesize that the societal welfare increases if consumers can distinguish between high quality and low quality products. Marette et al test this hypothesis by developing a partial equilibrium model under imperfect information in two elaborate scenarios. The model derived by Marette et al treats labeling in agricultural markets in a delicate way. With the certification scheme in place the consumer are able to distinguish between high and low quality products. However, the certification implies that the high quality producers gain market power. The low quality producers are no longer producing, and the high quality producers can exercise market power by either colluding on quantities, e.g. act as a joint monopolist, or play a quantity setting Nash-Cournot game. Essentially, they show that the societal welfare increases when high quality producers come together in a certification scheme and eliminate asymmetric information. Nevertheless, it is crucial to note that the assumptions build in the partial equilibrium framework drives the results. First, the authors choose to use a demand function, which strictly discriminates high quality from low quality products. Second, the authors? assumes that all firms have access to the same technology and have identical marginal cost of production. Third, the certification scheme does not alter the high quality firms? marginal cost. The objective of this study is to analyze certification programs and its impact on the market structure using a programmable mixed complementarity model. This study continues developing the model from Marette et al. Specifically, this study attempts to relief some of the rather restrictive assumptions on consumer and producer behavior that Marette et al have in their paper. First, the results are not stable for perturbations of the quality parameters, and the cost of certification. The results are not invariant to the cost of certification, and for high cost of certification, both producers and consumers are worse off. Second, constructing a utility function that permits demand for low quality products yield rather interesting results as both low quality and high quality producers can coexist under certification. The (aggregate) output level increases with certification. Nevertheless, the prices charged are vastly different between the certified and non-certified product: the high quality products are seven times expensive than the low quality (uncertified) product. Essentially, with certification the consumers? surplus and low quality producers profit decreases, whereas the high quality producers profit increases. The producer profit for high quality producers increases from .02 to .145 units since they produce more units of output to higher price. The low quality producers on the other hand serve the fringe market with relatively small prices, and their profit decreases to .006 units. When there are no high quality producers on the market, the low quality producers supply the whole market. As the high quality producers increase in number, the Nash-Cournot equilibrium approaches the competitive market outcome, i.e. the market price approaches the firm?s marginal cost. Hence, as the market price approaches zero, each producer supplies an infinite small unit of output, and the total welfare approaches unity. Nevertheless, with certification, there is a clear trend towards the low quality producers becoming fringe suppliers. The qualitative difference between varying the number of high and low quality firms is that the welfare is increasing in the number of high quality producer, whereas the total welfare impact is ambiguous when varying the number of low quality producer. Hence, there are two aggregate types of consumers: one inelastic and another elastic segment of consumers. The inelastic high quality type has a strictly higher willingness to pay for high quality products. The second type, on the other hand, also likes high quality, but is more sensitive to price changes than the high quality type. The study proposes by in large three major revisions to the model developed by Marette et al. First, instead of using a linear utility function that serves as a linear approximation to any utility function it is deemed appropriate to first a concrete representation of consumer behavior using a second order Taylor-series approximation to consumer demand where consumers? decision parameters include prices for both certified and uncertified products. Second, rather than assuming a zero unit of production, it is deemed appropriate to extend the framework by developing an underlying production technology with associate marginal cost. Third and lastly, the current model setup does not allow low quality producers to supply high quality goods. This is a rather abstract assumption, however, and should be extended to allow producers to interchangeably supply both high and low quality products, based on profit maximizing principles rather than subjectively chosen rules.

Price Pooling and the Gains from Hedging: Application to a Swedish Grain Cooperative

Optimal hedging strategies are analyzed for a cooperative operating a price pooling system in the presence of price and quantity risk. A three-period model, accounting for default risk and storage, is developed. Hedging allows the cooperative to increase the pool price offered to farmers by 2.8 - 4% for moderate risk parameters.Agribusiness, Marketing,

Method to Assess Magnetic Fields From Welding Against the EU-Directive on Electromagnetic Fields

The EU Directive 2013/35/EU, which will be enforced in all member states July 1st 2016, requires that companies carry out a risk assessment for workers exposure to Electromagnetic fields (EMF). EMF:s are created by electric voltages and currents. Large current are used in welding, which gives rise to high magnetic fields, this means that the worker exposure has to be assessed against the limits. The exposure limit values are expressed as the induced electric field strength in the human body. The induced electric field cannot be measured, only calculated in computer simulations. Therefore the directive also gives action levels expressed in the magnetic field strength, which can be measured. The magnetic fields in welding are often not sinusoidal and for that reason, the waveform of the welding current has to be assessed; this can be done using a technique called weighting filters. If the action levels are exceeded, an assessment against the exposure limit values has to be done. An assessment of welding exposure to EMF can be quite complex and costly. To facilitate this assessment, software has been developed in the EU EMFWELD project

KIMOD 1.0 Documentation of NIER´s Dynamic Macroeconomic General Equilibrium Model of the Swedish Economy

KIMOD 1.0 is an annual large-scale macroeconomic model2 of the Swedish economy and is the result of a project that started in 2002 at the National Institute of Economic Research (NIER) in Sweden. In 2003, the model was used for the first time in policy analysis (see NIER, 2003) and from 2004 onwards it has also been applied for forecasting purposes. In November 2005, the time had come to document the first official version of the model, KIMOD 1.0. This document is a resulting part of the documentation project.

DIFFERENCES IN U.S. CONSUMER PREFERENCES FOR CERTIFIED PORK CHOPS WHEN FACING BRANDED VS. NON-BRANDED CHOICES

Consumers' preferences for credence attributes of a product may differ from each other, when facing the choices between branded and/or non-branded products. We test this hypothesis with conditional and mixed logit regression using data obtained by choice experiment surveys. The results suggest that, on average, consumers are willing to pay more for a certification attribute when the product is branded. Additionally, greater variation in consumer willingness-to-pay is observed in the non-branded case. This latter characteristic of the results may represent the increased uncertainty some consumers internalize concerning quality consistency when brand information is not provided. These results have interesting implications for producers, processors, retailers, and policy makers.Consumer/Household Economics,

Canadian Consumers’ Purchasing Behavior of Omega-3 Products

The development of innovative functional food products is a major trend in today’s food industry. The growth of this industry is driven by increased consumer awareness of their own health deficiencies, increased understanding of the possible health benefits of functional foods, development in formulation technologies, a positive regulatory environment, and changing consumer demographics and lifestyles. While there has been a proliferation of omega-3 products such as milk, eggs, yogurt, and margarine in the Canadian food market, very little is known about consumers of these products. We use ACNielsen Homescanâ„¢ data combined with survey data to develop profiles of omega-3 consumers in Canada. The focus of the study is on consumers of four products: omega-3 milk, omega-3 yogurt, omega-3 margarine, and omega-3 eggs. We investigate whether there are significant differences between consumers and non-consumers of omega-3 products based on their age, income, education, and household composition. We also investigate whether a household’s use of Canada’s Food Guide and the Nutrition Facts table and consideration of the health benefits of food influences the decision to purchase omega-3 products. The results from the ordered probit model estimation show that the aging Canadian population is a major driver of omega-3 purchases. Also, the presence of children in the home increases the purchasing frequency of omega-3 yogurt and omega-3 margarine, and reading the Nutrition Facts table and considering the health benefits of food are important factors that affect omega-3 product purchases.Consumer/Household Economics, Food Consumption/Nutrition/Food Safety,