Theme Overview: Local Food - Perceptions, Prospects, and Policies

Local Food, Relocalization, Consumer Perception, Growth Prospects, Policy, Food Consumption/Nutrition/Food Safety,

Supply Chain Design for High Quality Products: Economic Concepts and Examples form the United States

The food system is undergoing significant structural change at local, national, and international levels. As the food system evolves, some segments along the chain between producers and consumers are disappearing. Others are being transformed. Supply chain concepts are useful for identifying and assessing alternative designs for the reconfiguration of food product production systems. Changes in the food system will require farm managers to adopt new ways of thinking and new perspectives on collaboration with trading partners. They also will require farm management economists to draw on a wider set of economic theories and concepts than we have in the past. This paper begins with brief descriptions of emerging supply chains for high quality food products in the U.S.: (i) a branded product chain, (ii) a genetics-based chain, and (iii) a production-practice based chain. These illustrate the variety of emerging supply chain structures and the challenges firms face in designing new supply chains. The next section presents an overview of key elements of four theoretical frameworks that are helpful in supply chain analysis and design: (i) transaction cost economics, (ii) agency theory, (iii) property rights theory, and (iv) the resource based view of the firm. Concepts from these theories are used to explain structural differences in the three illustrative cases. Looking to the future, key challenges include improving system-wide efficiency through information sharing and logistics management, promoting transparency and trust among trading partners, and designing incentive systems that ensure an equitable distribution of costs and returns.Farm Management,

A DECISION SUPPORT SYSTEM FOR COMMODITY MARKETING MANAGEMENT

Marketing,

PROBABILISTIC PRICE FORECASTS BASED ON COMMODITY OPTION VALUES

Demand and Price Analysis,

CONVENIENCE STORE PRACTICES AND PROGRESS WITH EFFICIENT CONSUMER RESPONSE: THE MINNESOTA CASE

The adoption of Efficient Consumer Response (ECR) practices by Minnesota convenience store (C- store) is explained in this study. Data were collected through a mail survey distributed to more than 250 Minnesota C-stores ranging in size from single, independently owned stores to over 100 store chains. The survey instrument was developed to collect data on the following components important to C-store operations and the implementation of ECR: information systems, ordering, receiving, inventory management, and pricing practices. Findings are presented from three distinct perspectives: 1. Location: Rural C-stores, which often meet customer needs that were once met by small supermarkets, carried a wider range of products and offered more services than C-stores in urban and suburban locations. However, rural stores had the lowest adoption rate for practices related to the ECR initiative. Urban chains coordinated business practices with suppliers to a greater degree than suburban and rural chains. 2. Chain size: Larger chains were more likely to have implemented the more costly technological practices than were small chains. This was expected since large chains can spread the fixed costs of ECR adoption over a larger number of stores. Larger chains also cooperated and communicated more with their suppliers than small chains. Again, this was expected, since larger chains can economize on transaction costs involved in maintaining these business relationships. 3. ECR practices: ECR adoption and superior performance were positively related. Having adopted six to nine practices was positively correlated with higher inside and outside sales per square foot of selling area and higher annual inventory turns. However, it was not clear whether there was a causal relationship in either direction between ECR practices and store performance. The C-store industry is changing, as new information technologies, new business practices, and new retail strategies are developed. The results from this survey can serve as a baseline for future research monitoring the adoption of these innovations and assessing their impact on productivity and profitability. Minnesota C-Stores appear to be smaller but more productive than the national average. Overall, it appears ECR is just beginning to impact the Minnesota C-store industry. Nonetheless, regression analyses confirmed ECR practices are positively related to store sales performance and those stores adopting the most practices had higher productivity measures.Industrial Organization, Marketing,

An Incentive System for Salmonella Control in the Pork Supply Chain

This paper presents a dynamic principal-agent analysis of an incentive system for Salmonella control in the pork supply chain. The incentive system determines quality premiums to the producer, testing frequencies for hogs delivered, as well as charges to the producer for testing and penalties. Using cost estimates and technical parameters, we evaluate the cost effectiveness of plant and farm control measures and trade-offs between prevalence reduction and related costs and gains. We also assess the impact of ownership structure on incentive system parameters and performance for a wide range of prevalence threshold levels. Differences in control actions, bacteriological prevalence and the overall welfare gain for the chain are very small across ownership structures. Changes in the prevalence threshold level lead to substantial changes in the use of farm and plant control packages and performance measures.dynamic programming, food quality, principal-agent, Food Consumption/Nutrition/Food Safety, Livestock Production/Industries,

ADOPTION OF ECR PRACTICES IN MINNESOTA GROCERY STORES

Efficient Consumer Response (ECR) is an industry-wide, collaborative initiative to re-engineer the grocery supply chain. This report presents findings from a study of ECR adoption in Minnesota grocery stores. Data were collected through interviews with managers of forty stores that are broadly distributed over store sizes, locations, and organizational forms. The interviews focused on business practices and technologies related to inventory management and ordering, shelf-space allocation and product assortment decisions, and product pricing and promotions. Findings are presented from three distinct perspectives: (1) stores grouped by location (metro and out- state), (2) stores grouped by organizational form (corporate chain, independent chain, and single store), and (3) stores grouped by levels of an ECR "readiness index" that indicates the level of adoption for key business practices and technologies that support ECR initiatives. The following general conclusions can be drawn from the detailed results presented in this report. 1. Location in the Twin Cities metropolitan area makes an important difference in implementing some components of the ECR initiative. On average, metro and out-state stores differ little with respect to store size or the adoption of technologies that support ECR. Metro stores are much more likely than out-state stores, however, to coordinate shelf space and product assortment decisions and pricing and promotion activities with outside trading partners. 2. On average, stores that are part of a chain, especially a large corporate chain, are making faster progress toward implementation of ECR initiatives than are single stores. However, three independently owned single stores were also among the most innovative of those we visited. In these stores, it appears that a visionary, energetic owner/manager is able to quickly respond to new opportunities. 3. ECR adoption and superior performance are closely associated. Stores with a high ECR "readiness index" have much higher sales per labor hour, sales per square foot, and annual inventory turns. We cannot determine whether ECR readiness leads to better performance or better performance makes it easier to adopt business practices and technologies that support ECR. We can conclude, however, that competitive forces will almost certainly drive more stores toward adoption of a wider range of technologies and business practices that support the ECR initiative. In summary, ECR is changing the way Minnesota grocers do business, and adopting ECR practices goes hand-in-hand with better financial performance. Findings from this study suggest that stores of any size and organizational form that are willing and able to adopt new technologies, to develop cooperative relationships with their trading partners, and to respond to the unique needs of their customers will increase their chance of success in this competitive market.Agribusiness, Industrial Organization, Land Economics/Use,

CHOICE OF REGRESSION METHOD FOR DETRENDING TIME SERIES DATA WITH NONNORMAL ERRORS

Research Methods/ Statistical Methods,

Minnesota Agricultural Economist 688

Industrial Organization, Marketing,

Accuracy of Numerical Solution to Dynamic Programming Models

Dynamic programming models with continuous state and control variables are solved approximately using numerical methods in most applications. We develop a method for measuring the accuracy of numerical solution of stochastic dynamic programming models. Using this method, we compare the accuracy of various interpolation schemes. As expected, the results show that the accuracy improves as number of nodes is increased. Comparison of Chebyshev and linear spline indicates that the linear spline may give higher maximum absolute error than Chebyshev, however, the overall performance of spline interpolation is better than Chebyshev interpolation for non-smooth functions. Two-stage grid search method of optimization is developed and examined with accuracy analysis. The results show that this method is more efficient and accurate. Accuracy is also examined by allocating a different number of nodes for each dimension. The results show that a change in node configuration may yield a more efficient and accurate solution.Research Methods/ Statistical Methods,