AGRICULTURAL POLICY IN A VERTICAL STRUCTURE OF PRODUCTION WITH AN APPLICATION TO THE MILK INDUSTRY

This paper analyzes the effects of policy instruments used in the dairy sector. The analysis considers the supply of milk, the processing step characterized by joint production and the final demand for processed goods. A short term partial equilibrium model is defined. We use it to determine the effects of different policy scenarios on price, production, consumption and exports for the different products. Because the GATT agreements imply a decrease in the volume of subsidized exports, we particularly analyze the impact of policy instruments on the exports of different milk products.public intervention, dairy industry, multiproduction, vertical structure, joint production., Agricultural and Food Policy, Industrial Organization, Livestock Production/Industries,

Consumer, Manufacturer and Retailer Responses to Health Price Policies: the example of EU Sugar Price Reform on the Soft Drink Market

Healthier food diet is likely to prevent numerous non communicable diseases. Then there is a growing interest in evaluating the impact of food price taxation on food consumption. However, strategic reactions of both manufacturers and retailers are missing in empirical analyses. Rather, passive pricing is assumed. Ignoring strategic pricing might lead to under-estimate or over-estimate the impact of food taxation. Based on the example of the soft drink industry, we analyse the bias which is introduced when assuming passive pricing. Using structural econometric model, we first estimate models of vertical relationships between the beverage industry and the retail industry. After selecting the ’best’ model of vertical relationships, we then simulate different scenrios of input cost changes or final products taxation. Our results indicate that assuming passive pricing by firms leads to under-estimate the impact on food consumption. In our example, the under-estimation amounts to 15% for regular products and 50% for diet ones when contracts between manufacturers and retailers are not taken into account. We thus conclude that for empirical analysis of food price policies for better health, considering strategic pricing is a key issue.vertical contracts, two part tariffs, competition, manufacturers, private labels, retailers, differentiated products, soft drinks, non nested tests, sugar CMO, passthrough, Food Consumption/Nutrition/Food Safety, Health Economics and Policy,

EU dairy policy and WTO negotiations

The EU dairy sector is facing a period of significant changes that are due to three major decisions: the EU enlargement, the Luxemburg reform and on-going WTO negotiations. In this paper, we focus on the analysis of changes in both domestic and trade dairy policies using a spatial model of the dairy sector that includes EU25 member countries, the modelling of the rest of the world including the main world dairy exporter (Oceania) and 4 importing areas (Africa, America, Asia and the Rest of Europe). The paper provides detailed results with respect to dairy markets in the EU. We show that in the context of the Luxemburg reform, the WTO might have positive impacts on EU milk price. The positive impact on EU milk price of a reduction of the tariffs in the importing countries exceeds the negative one of removing export subsidies as well as lowering EU import tariffs. We explore the sensitivity of the results to alternative assumptions on demand for dairy products, EU competitiveness and price transmission in the dairy chain.WTO, agricultural policy, dairy industry, partial equilibrium model, Agricultural and Food Policy, International Relations/Trade,

Confirming the Price Effects of Private Labels Development

We study the price response of national brands to the development of private labels. We use monthly data from a consumer survey reporting their purchases for 218 food products. We show that when private labels have a significant effect on national brands prices (144 cases over 218), that is positive (89%). We also show that the increase in the prices of national brand products is explained by a strategy of product differentiation. Finally, price reaction of national brands differs with the type of private labels they are facing. This paper confirms, on a larger number of products, previous empirical results.private labels, pricing, empirical models, food products, L81, Q13, D40, Demand and Price Analysis,

Imperfect competition in the fresh tomato industry

In this paper, we analyse the market power of the retail industry in the French tomato market. Following the methods developed in the New Empirical Industrial Organization, we develop a structural model of this industry. The analysis is based on detailed data on final consumption and prices at both shipper and consumer levels for two types of tomatoes in France. The structural model is composed of a system of demand equation and supply equation. Supply equation includes a term that represents the market power of the retail sector. We use different models of demand in order to test the robustness of our results. We show that i) elasticity of demand varies during the year ii) the retail sector exercise only a "moderate" market power iii) the estimated mark-up of the retail sector varies from 0 to about 0.13 €/kg depending on the period iv) the mark-up is thus small (3% in average) as compared to the consumer price which is mainly explained by cost of production. We conclude to a moderate exercise of market power of the retail sector in this sector.Market power, Imperfect competition, Fresh products, Crop Production/Industries, Demand and Price Analysis, Marketing, L13, Q13, L66, L81,

Imperfect competition in the fresh tomato industry

In this paper, we analyse the market power of the retail industry in the French tomato market. Following the methods developed in the New Empirical Industrial Organization, we develop a structural model of this industry. The analysis is based on detailed data on final consumption and prices at both shipper and consumer levels for two types of tomatoes in France. The structural model is composed of a system of demand equations, supply equations and pricing equations which include terms which capture the oligopoly and oligopsony power of the retail sector. We show that i) elasticity of demand varies during the year ii) the retail sector exercise only a ‘moderate’ market power iii) the exercise of market power decreases over time iv) If markets were competitive, in the case of tomato ‘ronde’ retail price would decrease by about 1.2% to 4.5% depending on the year; v) In absence of market power, shipping price might be 6% to 24% higher than observed. We find higher distortions in the case of tomato ‘grappe’. We also find that the distortions tend to decrease over time. We conclude to a moderate exercise of market power of the retail sector in the French tomato market.Oligopoly, Oligopsony, Fresh products, Industrial Organization,

Imperfect Competition in the Fresh Fruit and Vegetable Industry

Do retailers exert market power in the fresh fruit and vegetables markets? In the EU countries, as the retail industry distributes a significant part of fruit and vegetables, a non competitive behavior might have significant impact on consumption, on surplus and welfare. In this paper, we shed some light on the degree of non-competitive distortions in the French fresh fruit and vegetable markets. We analyze the market of tomato. The analysis is based on aggregate data on final consumption and prices at both shipper and consumer levels in France. The structural model is composed of a system of demand equations, supply equations and pricing equations which include terms that capture the oligopoly and oligopsony power of the retail sector and that account for product differentiation. We show that: i) elasticity of demand varies during the year ii) the exercise of market power decreases over time iii) if markets were competitive, retail price would decrease by about 2% to 12% depending on the year while shipping price might be 10% to 54% higher than observed. As a general result quantities consumed would not change significantly. We conclude that the retail sector exerts a moderate market power.Oligopsony, oligopoly, retail industry, fruit and vegetable markets., Agricultural and Food Policy,

Price Discrimination and EU Dairy Policy: An Economic Evaluation of Policy Options

In a period of market liberalization and multilateral trade negotiations, price discrimination for commodities with distinct markets provides additional policy options to support farm income. While both the USA and Canada have implemented price discrimination policies in their domestic dairy sector, so far the European Union (EU) has not. This paper evaluates the options of developing a price discrimination policy in the EU dairy sector. The analysis is based on an interregional model of the EU dairy sector, involving milk production, dairy processing, and consumption of ten dairy commodities in nine regions. The paper shows that a price discrimination policy that increases prices for commodities with more inelastic demand (fluid milk, soft dairy products) would generate income that can be redistributed to dairy farmers. The results suggest that, while such a price discrimination policy can be a WTO compatible way to support dairy farm income, the efficiency of the associated income transfers declines in the presence of significant supply response.EU, price discrimination, pooling, dairy policy, Demand and Price Analysis,

ARE FRUIT AND VEGETABLE STAMP POLICIES COST-EFFECTIVE?

In many countries, consumption of fruits and vegetables (F&V) is below recommended levels. We quantify the economic and health effects of F&V stamp policy designed for low income consumers. The analysis combined two models: an economic model which predicts how F&V consumption is affected by a change in policy and a health model which evaluates the impact of a change in F&V consumption in terms of death avoided (DA) and life-years saved (LYS). Finally we computed the costs per DA and LYS as the ratio between the taxpayer cost of the policy and the number of DA and LYS. The main findings of the present study are: (1) F&V stamp policy has a positive and significant impact on the consumption of small F&V consumers of the targeted population, (2) at the aggregate level, this policy has a modest impact on consumption and as a result on health gains, (3) for a given budget allocated to the policy, the cost per DA or LYS decreases when the targeting is smaller, at least as long as consumption remains in plausible values, (4) the policy reduces the health inequalities between low and high income populations, (5) when well designed, F&V stamp policy is as cost-effective as price policy (about 42 k€/LYS).Cost-effectiveness analysis, Fruits and Vegetables, Health Impact Assessment, Health Policy, Agricultural and Food Policy, Consumer/Household Economics, Demand and Price Analysis, Food Consumption/Nutrition/Food Safety, Food Security and Poverty, Health Economics and Policy, D61, I18, Q18,

Technical Change vs Efficiency Change: Performance of Food Industries over Time

This paper proposes an iterative procedure for testing periods of technical progress and periods of technical regress. We apply this methodology to the French food industry.productivity, efficiency, technical change, food industry, Productivity Analysis,