Kilmer, Richard L.

Stevens, Thomas J., III

English

Research Papers in Economics

  1
 
 
 
 
 
PBTC 02-6
 
SUPPLY CHAINS MAY DELIVER SAFER TOMATOES AND 
STRAWBERRIES 
 
By 
 
 
Richard L. Kilmer & Thomas J. Stevens III 
 
PBTC  03-11           September  2003
POLICY BRIEF SERIES 
PBTC 03-11   2
INTERNATIONAL AGRICULTURAL TRADE AND POLICY CENTER 
 
MISSION AND SCOPE: The International Agricultural Trade and Policy Center 
(IATPC) was established in 1990 in the Food and Resource Economics Department 
(FRED) of the Institute of Food and Agricultural Sciences (IFAS) at the University of 
Florida. Its mission is to provide information, education, and research directed to 
immediate and long-term enhancement and sustainability of international trade and 
natural resource use. Its scope includes not only trade and related policy issues, but also 
agricultural, rural, resource, environmental, food, state, national and international 
policies, regulations, and issues that influence trade and development. 
 
OBJECTIVES: 
 
 The Center’s objectives are to: 
 
•  Serve as a university-wide focal point and resource base for research on 
international agricultural trade and trade policy issues 
•  Facilitate dissemination of agricultural trade related research results and 
publications 
•  Encourage interaction between researchers, business and industry groups, 
state and federal agencies, and policymakers in the examination and 
discussion of agricultural trade policy questions 
•  Provide support to initiatives that enable a better understanding of trade and 
policy issues that impact the competitiveness of Florida and southeastern 
agriculture specialty crops and livestock in the U.S. and international markets   3
Supply Chains May Deliver Safer Tomatoes and Strawberries 
Richard L. Kilmer and Thomas J. Stevens III 
 
Scientific and technological advances continue to expand and refine our 
knowledge of increasingly subtle aspects of food quality and safety, such as pesticide 
residues, pathogenic serotypes of E. coli and most recently, genetic engineering.  Many 
of these new or technological qualitative aspects of food are imperceptible to human 
senses and can only be determined through costly laboratory analysis and/or the 
collection and sharing detailed information on how it was produced, processed and 
distributed.  Research suggests that increased vertical coordination and integration 
between supply-chain stages results in better control and flexibility over product quality 
as well as quantity (Caswell, Roberts and Jordan; Hennessy).  The more obvious and 
sensational cost incentives to improve coordination for food producing and marketing 
firms are those associated with product safety and liability.  The intent of this article is to 
discuss the results of our efforts to evaluate the relationship between vertical integration 
and the occurrence of pesticide residues in fresh produce. 
The application of pesticides in food production can be viewed as one of a 
number of inputs that influence its quality.  If the levels of pesticide residues in food are 
unknown or uncertain, and may negatively impact a firm's profits, then producers and 
handlers will consider them as quality risk factors and will incorporate this fact into their 
decisions on how to produce and market their products.  This includes strategic decisions 
as to the adoption of integrated pest management practices, precision agriculture 
techniques, or the degree with which to coordinate or share information with adjacent 
market stages. 
Widely recognized economic theory on risk and uncertainty can be employed in 
evaluating and optimizing a firm's decisions under such conditions (Robison and Barry).  
This theory shows that there is a very clear incentive for a firm facing uncertain input 
quality to seek to both increase the level of input quality and decrease input quality 
variability.  Greater vertical coordination between supply-chain stages may be one means 
for firms closer to consumers to accomplish this.  Given the inverse relationship between 
input quality and pesticide residues, it was anticipated that producers who are vertically   4
integrated with firms closer to consumers might have a lower level and variance of 
pesticide residues in their food products. 
To verify this hypothesis, data on fungicide and insecticide residues found in 
Florida strawberries and tomatoes between October 1990 and June 1993 were acquired 
from the State Department of Agriculture.  The growers who produced these samples 
were subsequently interviewed to determine the production and handling practices they 
employed for their crops, as well as their socio-economic characteristics.  Of the 55 
tomato growers interviewed, 16 reported that they were not formally affiliated with the 
packing, distribution or marketing stages and 39 shared common ownership with one or 
more of these stages, i.e., were vertically integrated. Of the 50 strawberry growers 
interviewed, 30 were not formally affiliated with the packing, distribution or marketing 
stages and 20 shared common ownership with the downstream stages.  
  Statistical analysis of these data found that the variability of fungicide and 
insecticide residues in strawberries grown by vertically integrated producers was 
significantly lower than for those grown by non-affiliated producers.  In other words, the 
strawberries coming from vertically integrated growers were more uniform in quality 
than those from non-vertically integrated growers. Furthermore, strawberries from 
vertically integrated growers were of higher quality because fungicide residue levels 
were, on average, lower than those from non-vertically integrated growers. In contrast, 
vertical integration appears to be significantly associated with greater variation in 
fungicide residues in tomatoes; however, insecticide residue levels were found to be less 
varied and more uniform in tomatoes grown by vertically integrated growers. 
This study represents the first known attempt to quantify the relationship between 
food safety and vertical coordination in food supply-chains. The case of fungicide and 
insecticide residues in Florida strawberries and the insecticide residues in Florida 
tomatoes confirm the positive relationship between safer food and increased coordination 
in the food supply chain cited in a growing number of qualitative studies in this area. 
 
 
 
 
 
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For more information 
 
Caswell, J. A., T. Roberts and C.T. Lin. “Opportunities to Market Food Safety.” Food 
and Agricultural Markets: The Quiet Revolution. L. P. Schertz and L. M Daft, 
eds. Washington, D.C.: National Planning Association, 1994.  
 
Hennessy, D. A. “Information Asymmetry as a Reason for Food Industry Vertical 
Integration.” Amer. J. Agr. Econ. 78(November 1996):1034-1043. 
 
Kilmer, Richard L., Anouk M. Flambert, and Thomas J. Stevens III. "Pesticide Residues 
and Vertical Integration in Florida Strawberries and Tomatoes," Agribusiness: An 
International Journal 17(2) (2001): 213-226. 
 
Robison, L. J. and P. J. Barry. The Competitive Firm's Response to Risk. New York: 
Macmillan, 1987. 
 
Stevens, T. J. III and R. L. Kilmer. Empirical Relationships Between Pesticide Residues, 
Producer Attributes, and Production Practices for Florida Grown Strawberries 
and Tomatoes. Florida Agricultural Experiment Station Research Bulletin No. 
329, Gainesville: February 1999, 50 pp. 
 

SUPPLY CHAINS MAY DELIVER SAFER TOMATOES AND STRAWBERRIES

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