Farm Animal Welfare and Quality Verification

Existing empirical evidence suggests that farm animal welfare may not be a top-of-mind issue for many consumers in North America. Nevertheless, there is pressure from animal welfare groups on food retailers and processors to implement more stringent requirements for their suppliers. Is the demand for more stringent animal welfare protocols primarily determined by a subset of consumers with very strong preferences or by an underlying change in consumer and societal preferences? Who do consumers trust for credible quality assurances with respect to farm animal welfare attributes? This paper provides a basis for further analysis of these issues. The roles of different stakeholders in delivering farm animal welfare quality assurances to consumers are first discussed. Then a social welfare analysis of the Canadian market for animal friendly pork is presented under different scenarios with respect to the strength of consumer preferences and the existence of voluntary standards versus mandatory standards. The analysis suggests that a situation of voluntary labelling that is reasonably credible is desirable as it maximizes the welfare that accrues to all players on the market. Furthermore, this scenario allows heterogeneous consumers to choose between different combinations of price and quality according to their preferences. The paper concludes with suggestions for further research.farm animal welfare, quality assurance, labelling, certification, heterogeneous consumers., Agribusiness, Agricultural and Food Policy, Consumer/Household Economics, Demand and Price Analysis, Food Consumption/Nutrition/Food Safety, Q13, Q18,

Canadian consumer valuation of farm animal welfare and quality verification – the case of pork

There is increasing pressure from animal rights organizations (AROs) on restaurant chains, food retailers, and meat processors to implement more stringent farm animal welfare (FAW) requirements for their suppliers. In the United States, AROs have recently initiated successful ballots to phase out confinement practices in several states. In Canada AROs have been pressuring both public and private sector stakeholders to improve FAW. Are FAW issues, however, paramount in the minds of Canadian consumers? Is the demand for more stringent FAW protocols primarily determined by a subset of consumers with very strong preferences or does it signal a more fundamental underlying change in consumer and societal preferences? Given the credence nature of FAW, who do consumers trust (i.e., government vs. private industry vs. independent third parties) in the market place for the provision of FAW quality assurances? What are the determinants of trust in these organizations for providing accurate information about animal welfare? In order to answer these questions, a stated preference consumer survey encompassing FAW issues specific to the Canadian pork sector was tested on two samples of consumers in summer 2008, namely: a general population sample (GPS) across Canada and a sample of AROs members. Consumers participated in a purchase experiment where they had to chose between pork chops characterized by combinations of different levels of FAW attributes (i.e., housing system, gestation stalls, and use of antibiotics), quality verifying organization, and price. Multinomial Logit and Latent Class Logit Models were used to analyse the survey data. Surprisingly, “outdoor system” does not seem to resonate well with Canadians, as both the GPS and the members of the AROs discounted this attribute. As expected, the AROs members have much stronger preferences for the other FAW attributes than have consumers in the GPS. Nevertheless, significant heterogeneity exists within consumer preferences. Five classes of consumers were identified in the GPS with respect to their preferences for FAW. At one end of the spectrum are the “FAW sensitive” consumers (12.3%) that have higher willingness-to-pay (WTP) for FAW, while at the other end of the spectrum “Price Conscious” consumers (18.3%) do not exhibit any WTP for FAW. The other three classes (69.4%) comprise respondents with mixed perceptions regarding FAW. Government and Third Party verification of FAW quality assurances had the strongest influence on consumers’ preferences in both samples. As well, scientific experts in FAW along with the above two organizations are the most credible in providing information about the welfare of pigs. The extent to which these organizations are knowledgeable about the welfare of pigs is the most important factor enhancing consumers’ trust. Results from this study suggest that there are potential marketing opportunities for pork chops sourced from pigs raised on farms where sows are kept in groups, and where credible quality assurances can be established, that private industry could consider. As well, the results suggest that consumers would derive benefits from the government taking a more active role with respect to validating FAW quality assurances

Co-operation and coordination in the Co-operative Retailing System : essays on economic and identity strategies

This thesis, which consists of three self-contained essays, examines, both theoretically and empirically, some of the economic and identity strategies and mechanisms that federated co-operatives, in particular, and strategic alliances, in general, can use to achieve co-operation and coordination. To accomplish this objective, the thesis uses a combination of industrial organization and game theory concepts from economics, insights from social and cognitive psychology, and evidence from in-depth interviews with decision-makers in the Co-operative Retailing System (CRS) - an association of 264 independent Western Canadian retail co-operatives and their wholesaler, Federated Co-operatives Ltd. (FCL). Essay One combines a case study of the CRS with an examination, in a game-theoretic framework, of the co-operation and coordination problems arising among firms in alliances and the potential solutions to these problems suggested in the economics and business strategy literatures. One of the contributions of this essay is to provide examples of the mechanisms that can be used to implement these theoretical solutions in a business setting - i.e., the essay identifies practical ways for alliances to alter partner firms' payoffs, to provide private rewards, to monitor behaviour, to establish long term goals among partners, to build high group identification within the alliance, and to focus partners' expectations on the efficient outcomes. Another contribution of this essay is to identify some of the second-order co-operation problems that arise in strategic alliances - e.g., lack of incentives by alliance partners to contribute resources that are necessary to develop alliance management mechanisms - and to offer examples of the strategies that can be used to deal with these problems. Essay Two draws upon social identity theory and develops an economic model of behaviour to show how the core firm in a strategic network can promote effective co-operation among network members by inducing them to identify with the network. In addition, the essay offers empirical evidence from the CRS that identity has successfully been used, together with economic mechanisms, to foster co-operation among member retails, and provides examples of the most important mechanisms that FCL, as the core firm in the CRS, has used to manage the identity of the retails. More generally, by incorporating the psychology (and sociology) of identity into an economic model of behaviour, Essay Two contributes to an emerging view that non-economic (behavioural) factors are complementary to the economic ones in the management of strategic partnerships. Essay Three considers the collective action problems that arise in co-operatives when it comes to financing growth and identifies the conditions under which retained patronage can be an effective way for co-operatives to raise growth capital. The essay develops a game-theoretic model to examine the trade-off between the share of patronage refunds a co-operative wholesaler pays to member retails in cash and the share of patronage refunds it retains and invests, so as to provide retails with enough short-run benefits to encourage them to patronize their organization, while still retaining resources to invest in long-term growth. Analytical results show that when there are increasing returns in patronizing the co-operative wholesaler, retails' decisions to patronize their organization are complementary strategies and, as a result, multiple equilibria are possible. Some of these equilibria are ones with high patronage and high investment, while others are characterized by low patronage and low investment. Retails' expectations about the actions of their counterparts are critical in determining the prevailing equilibrium. The analysis also shows that the existence of the horizon problem further constraints the ability of the wholesaler to raise growth capital. Taken together, these results suggest that the retention of patronage refunds can be an effective way for the co-operative wholesaler to raise growth capital, provided it acts to focus retails' expectations on the 'good' equilibrium and to mitigate the horizon problem. By examining the strategies and mechanisms that the CRS has used to achieve co-operation and coordination, and in so doing illustrating the mechanisms that firms can use to manage partner opportunism and prevent coordination failure, the thesis contributes to the alliance management literature. Firms today are increasingly forming strategic alliances with suppliers, buyers, and even competitors in order to achieve sustainable competitive advantage. However, despite their increasing popularity and value-creation potential, alliances more often fail than succeed, with alliance failure often attributed to opportunistic (non-co-operative) behaviour by one or more of the partners and to coordination failure. As a result, it is important to identify strategies and mechanisms that alliance partners can use to achieve co-operation and coordination, and thus realize the benefits from their association. The thesis also contributes to the co-operative literature by shedding light on the age-old debate on whether federated co-operatives need to be centralized to ensure efficiency. In particular, the thesis shows that federated co-operatives can be efficient, provided they address the co-operation and coordination problems that arise among their members, and provides examples of the mechanisms that federated co-operatives can use to achieve co-operation and coordination. In addition, the thesis offers the first analytical treatment of how the horizon problem influences investment decisions in co-operatives

Methodologies to Measure the Economic Impact of Cooperatives: A Critical Review

The uncommon resilience of cooperatives in the aftermath of the 2008 global economic crisis has led to increased interest in measuring the economic impact of cooperatives and in unearthing the most appropriate method to be used. The objective of this paper is to conduct a critical analysis of the methodologies most commonly used to measure economic impact. The tradeoff between data requirements and computational complexity, and how well the model reflects the reality have made Input- Output the most common tool for economic impact analysis. However, several methodological issues need to be addressed when using Input-Output to measure the economic impact of cooperatives. Another important finding is that none of the methods captures the unique outcomes of cooperatives, such as countervailing market power, missing goods and services, or local economic stability. Additional analyses need to be conducted if an accurate assessment of the total economic impact of cooperatives is to be gained

Farm Animal Welfare and Quality Verification

Existing empirical evidence suggests that farm animal welfare may not be a top-of-mind issue for many consumers in North America. Nevertheless, there is pressure from animal welfare groups on food retailers and processors to implement more stringent requirements for their suppliers. Is the demand for more stringent animal welfare protocols primarily determined by a subset of consumers with very strong preferences or by an underlying change in consumer and societal preferences? Who do consumers trust for credible quality assurances with respect to farm animal welfare attributes? This paper provides a basis for further analysis of these issues. The roles of different stakeholders in delivering farm animal welfare quality assurances to consumers are first discussed. Then a social welfare analysis of the Canadian market for animal friendly pork is presented under different scenarios with respect to the strength of consumer preferences and the existence of voluntary standards versus mandatory standards. The analysis suggests that a situation of voluntary labelling that is reasonably credible is desirable as it maximizes the welfare that accrues to all players on the market. Furthermore, this scenario allows heterogeneous consumers to choose between different combinations of price and quality according to their preferences. The paper concludes with suggestions for further research

Mechanisms for Effective Alliance Management: Insights from a Federated Cooperative Marketing System

Despite their continuing popularity and value-creation potential, strategic alliances fail as often as they succeed. Alliance failure is often attributed to opportunistic behavior by one or more of the partners. This paper draws upon empirical evidence from a successful alliance – a federated cooperative marketing system – to shed light on some of the economic and behavioral strategies and mechanisms that alliances can use to promote effective cooperation among alliance partners. The paper also shows how the alliance management body can generate the resources needed to develop and implement such mechanisms, and make alliance partners buy into these mechanisms

Substitutes versus Complements among Canadian Business Risk Management Programs

Business risk management (BRM) continues to be the central objective of agricultural policy in many countries, including Canada and the US. The unprecedented volatility that has characterized the farming sector in recent years is only expected to rise. Thus, governments continue to implement comprehensive suites of BRM programs to assist farmers in coping with these gyrations. This paper aims to examine 1) the relationships between the main Canadian BRM programs (AgriInsurance, AgriStability, and AgriInvest), and 2) if and how those relationships differ across different farms. Understanding the interlinkages between government BRM programs is central for policy makers in order to achieve the desired objectives. The analysis uses data from the Ontario Farm Income Database (OFID), which is a longitudinal farm-level dataset compiled from Ontario farm tax-file records from 2003 to 2011. The dataset contains detailed financial, production and program payment (except for Production Insurance/AgriInsurance payments) data for all Ontario tax-filling farm operations. Additional operator-level Production Insurance/AgriInsurance payment data is linked to farm-level OFID records to complement the program payment data. The paper uses a two-stage approach to examine the relationships between AgriInsurance, AgriStability, and AgriInvest. First, a multinomial probit model is estimated in which the dependent variables are dummies for all eight possible combinations of participation in the three programs and the independent variables include program participation in previous year, operating profit margin, operating expense ratio, leverage, diversification index, size, and sector. In the second stage, the predicted probabilities of the eight participation states from the first stage multinomial function is used as regressors against percentage falls in gross margin (operating revenue minus operating expense), controlled for size and sector. We find that participation in the previous year has a strong and positive effect on participation in the current year, and the three programs are generally treated as compliments. We also find that in general, farms that participate in some combination programs have smaller drops in gross margin compared to those that participate in no programs. Despite this effect, operators continue to drop out of BRM programs

Food QUALITY VERIFICATION: WHO DO CONSUMERS TRUST?

Food markets are increasingly characterized by an array of quality assurances with respect to credence attributes, many of which relate to agricultural production methods. A variety of organizations are associated with these quality assurance claims, including private, third party and public sector organizations. How do quality verifications from different sources affect consumer food choices? Who do consumers trust for assurances about credence attributes? This paper draws upon two recent studies to explore Canadian consumer attitudes toward environmental quality claims in a bread product and animal welfare quality claims in a pork product, along with attitudes toward quality verification from different sources. Analysis from two discrete choice experiments is presented, with latent class models used to explore heterogeneity in consumer preferences. The key message from both studies is the importance of considering heterogeneity in consumer preferences when examining attitudes toward quality verification. Both studies reveal distinct segments of consumers who have a high level of trust in verification by public sector agencies (government). In general, it was the respondents who exhibited the strongest preferences for the quality attributes who also tended to value public sector verification. Both sets of results also reveal a sub-set of consumers who tend to trust farmers, while both also reveal a clear segment of Canadian consumers who might be considered ‘conventional food’ consumers, with little interest in these quality attributes. Suggestions for further research are provided.Choice experiment, animal welfare, environment, quality verification, heterogeneity, Agricultural and Food Policy, Consumer/Household Economics, Demand and Price Analysis, Food Consumption/Nutrition/Food Safety, Food Security and Poverty, Health Economics and Policy, Q13, Q18, D12,

Food QUALITY VERIFICATION: WHO DO CONSUMERS TRUST?

Food markets are increasingly characterized by an array of quality assurances with respect to credence attributes, many of which relate to agricultural production methods. A variety of organizations are associated with these quality assurance claims, including private, third party and public sector organizations. How do quality verifications from different sources affect consumer food choices? Who do consumers trust for assurances about credence attributes? This paper draws upon two recent studies to explore Canadian consumer attitudes toward environmental quality claims in a bread product and animal welfare quality claims in a pork product, along with attitudes toward quality verification from different sources. Analysis from two discrete choice experiments is presented, with latent class models used to explore heterogeneity in consumer preferences. The key message from both studies is the importance of considering heterogeneity in consumer preferences when examining attitudes toward quality verification. Both studies reveal distinct segments of consumers who have a high level of trust in verification by public sector agencies (government). In general, it was the respondents who exhibited the strongest preferences for the quality attributes who also tended to value public sector verification. Both sets of results also reveal a sub-set of consumers who tend to trust farmers, while both also reveal a clear segment of Canadian consumers who might be considered ‘conventional food’ consumers, with little interest in these quality attributes. Suggestions for further research are provided