Valuing the benefits and costs of improved food safety and nutrition

Assuring the quality of food products, especially their safety and nutrition levels, is an increasing focus for governments, companies, and international trade bodies. In choosing quality assurance programs, public and private decision-makers must assess the benefits and costs of expected improvements in food safety and nutrition. This article discusses methods for measuring these benefits and costs as well as how these valuations are related to the mix of voluntary and mandatory quality management systems used in particular countries or trading blocs. These relationships are illustrated by a short case study of safety assurance systems for meat and poultry products.     

Do input subsidy programs “crowd in” or “crowd out” commercial market development? Modeling fertilizer demand in a two‐channel marketing system

Many governments in developing countries distribute fertilizer at subsidized prices in an effort to stimulate small farmers' agricultural productivity and food security. Prior fertilizer demand studies have largely failed to account for the effects of government programs on farmers' commercial purchases. Using a double hurdle model and nationally representative rural household panel data in Zambia, we distinguish between these sources and measure the contemporaneous "crowding in" and "crowding out" effects of government input programs on commercial fertilizer sales. Where the private sector is relatively active and average wealth is higher (areas seemingly more likely to be targeted by government programs), results indicate that subsidies have substantially crowded out the private sector, in some cases to the point that such programs could actually lower overall fertilizer use. On the other hand, in poorer areas where the private sector is relatively inactive, subsidies help to generate demand and crowd in private sector retailers. Empirical studies explicitly modeling farmers' fertilizer purchase behavior within a dual marketing framework can provide important insights for agricultural policy discussions in developing countries.     

Consumers' Perception of Food Product Quality in Tunisia

Abstract

This paper investigates consumers' perception of food quality in Tunisia. In fact, the development of quality standards is driven by government regulations and mostly in response to export markets regulations. The role of consumers in this process is quite missing. This paper first highlights the current food safety and quality programs undertaken by the Tunisian government. Second, we use a sample of 150 consumers chosen at random at two of the largest hypermarkets in Tunisia to analyze consumers' behavior regarding quality. The paper shows strong concerns about hygiene among other quality attributes and strong awareness about quality and quality assurance schemes in general. Consumers are also motivated by habits of consuming home made products for hygiene and taste reasons. If appropriate quality systems were implemented to assure consumers about such attributes this would boost up demand for quality products.     

Traceability in the Canadian Red Meat Sector: Do Consumers Care?

Increased traceability of food and food ingredients through the agri-food chain has featured in recent industry initiatives in the Canadian livestock sector and is an important facet of the new Canadian Agricultural Policy Framework (APF). While traceability is usually implicitly associated with ensuring food safety and delivering quality assurances, there has been very little economic analysis of the functions of traceability systems and the value that consumers place on traceability assurances. This paper examines the economic incentives for implementing traceability systems in the meat and livestock sector. Experimental auctions are used to assess the willingness to pay of Canadian consumers for a traceability assurance, a food safety assurance, and an on-farm production method assurance for beef and pork products. Results from these laboratory market experiments provide insights into the relative value for Canadian consumers of traceability and quality assurances. Traceability, in the absence of quality verification, is of limited value to individual consumers. Bundling traceability with quality assurances has the potential to deliver more value.     

Food Consumption Trends in the Pacific Rim

The growing affluence of the Pacific Rim countries has changed food consumption patterns. Diets in the region have become more diverse and well-balanced nutritionally. Western-style foods are becoming increasingly popular and available to people in the region. The rapid growth of fast-food chains and supermarkets present U.S. agricultural exporters with a myriad of opportunities for exporting food products to the Pacific Rim. Food producers who are willing to modify their products to the tastes of Pacific Rim consumers will have the most success. By reformulating food products and developing new packaging technologies more high-value foods can be sold in the Pacific Rim. U.S. food processors must also develop improved methods of processing traditional foods eaten by people in the region into more convenient forms. Finally, it is important for U.S. agricultural exporters to keep a close watch on the changing trends in food consumption in the region in order to stay competitive and increase their opportunities for entering new markets.     

Economic Incentives for Firms to Implement Enhanced Food Safety Controls: Case of the Canadian Red Meat and Poultry Processing Sector

This study assesses quantitatively the economic incentives for firms to adopt food safety controls and the potential impact of a number of firm- and market-specific characteristics on this behavior, focusing on the red meat and poultry processing sector in Canada. The results suggest that market-based (private) incentives have a greater impact on the food safety responsiveness of firms in this sector than government regulatory actions. This creates challenges for regulators in defining policy instruments that promote greater levels of food safety control in food processing sectors rather than constraining firms from taking initiatives that exceed regulatory requirements.     

The State and Marketing in African Countries

The paper reviews policies and regulations concerning the marketing of food and other consumer items in Ghana for the period 1970-85. Major reasons advanced for government intervention have been the need to control inflation and the belief that traditional and private sector distribution systems are inefficient. The examination indicates the disastrous effects of government intervention. In particular it led to widespread shortages of food, smuggling, hoarding and corruption. Intervention created a class of newly rich people who had preferred access to government officials. The impact of intervention in Ghana mirrors the experience of other African countries. Analysis of the experience with intervention suggests that problems attributed to food marketers are actually the result of government macroeconomic policies. Changes in macroeconomic policies are therefore necessary if marketing is to contribute effectively in making food available at reasonable prices. Marketers need to become more aware of political variables in their environments as a result of these macroeconomic policies as well as how to adapt their marketing strategies.     

Do subsidies cause a less competitive milk market in China?

After 2008, China dairy industry has experienced a consolidation supported by the government mainly for the reason of food safety. Subsidies are one of the tools to shape a concentrated market with goals of reducing regulation cost and accomplishing quality control. This gives a serious concern that subsidies would generate a less competitive dairy industry. We construct a parametric model and use the firm‐level panel data, specifically the top eight dairy firms, to test if government subsidies strengthen the market power in the dairy industry. Our empirical results indicate government subsidies have a negative impact on the Lerner index for the top privately owned firms, but no significant effect on state‐controlled ones after controlling for advertising, time trend, and proprietorship. It is possible that the subsidies give more room for private firms to increase the scale or suppress the price, which eventually reduces the market power and benefits dairy customers in the downstream.     

The Effects of Maize Market and Policy Reforms on Price Discovery and Competitiveness in Zimbabwe, 1991–1997

Abstract

Maize is Zimbabwe's staple food. An adequate supply of maize is essential to food security and domestic stability. A series of droughts and government mismanagement of the economy led to a maize production and food security problem in the 1980s. Zimbabwe's maize marketing system was transformed dramatically from a government monopoly to a competitive market system in which prices are determined by market forces in the 1990s. This paper examines the steps that Zimbabwe took towards maize market reform and the benefits of that reform. The movement to a competitive market led to formation of a commodity exchange to improve price discovery and increase price transparency. De-regulation has increased entry and competitiveness from new private sector hammer millers and traders. Farmers, millers, and traders face new profit opportunities and new price and financial risks that have increased management responsibilities. Consumers enjoy lower cost maize meal products and more convenient service. The benefits of the 1991–1997 reforms indicate what could be achieved in the long run if prices are determined by the market, rather than by the government.     

Necessarily or Sufficiently Trade-Impeding for Africa?1 The Agri-food Safety Regulations

The dearth of empirical studies on Africa’s food export effects of the food safety regulations in the European Union has really affected evidence-based policies that could stimulate compliance. This study investigates whether the technical regulations necessarily or sufficiently constitute trade-impediment for Africa. This study adopts an augmented Helpman, Melitz and Rubenstein two-step selection model for all the applicable food safety regulations in this market. Three commodities are selected; Banana, Grape and Tomato at the HS-6-digit level covering the period from 1995 to 2016. Owing to the heterogeneity in exporters’ capacity and exporting performance as well as their size structure, this study finds that the food safety regulations are necessarily trade-impeding for the grapes and tomatoes but not for banana at the decision to export stage. However, at the intensity of the commodities’ exporting, the measures become sufficiently trade-enhancing due to quality standards upgrading, compliance and certification of exports.     

Credence Good Labeling: The Efficiency and Distributional Implications of Several Policy Approaches

A model of vertical product differentiation is used to analyze the labeling of credence goods, focusing on the manner by which quality is communicated. The results indicate that firms prefer private labeling options. In addition, firms may hire private certifiers as well as paying for mandated government labels when the government's quality benchmark substantially deviates from firms' private quality choices. The average consumer prefers a mandatory, discrete label with a high-quality standard while poor consumers prefer a mandatory, discrete label with a low standard.     

Adoption of Food Safety and Quality Controls: Do Firm Characteristics Matter? Evidence from the Canadian Food Processing Sector

This study explores the association between the adoption of food safety and quality assurance practices in the Canadian food processing sector and firm characteristics. A conceptual model is developed recognizing that the relative importance of a firm's incentives to adopt enhanced food safety and quality assurance practices is influenced by the firm's characteristics and activities. Binomial logit models are estimated to explore the association between adoption of various combinations of food safety and quality assurance practices including hazard analysis and critical control point (HACCP). The findings show that the adoption of food safety and quality practices varies widely between individual firms according to, among others, firm size, country of ownership and control, level of innovativeness, level of export orientation, forms of food safety inspection, and the subsector in which the firm operates. Incentives of being able to access foreign markets play an important role in influencing HACCP adoption. La présente étude analyse le lien entre l'adoption de pratiques visant la salubrité et l'assurance de la qualité des aliments au sein de l'industrie canadienne de la transformation et les caractéristiques des entreprises. Nous avons élaboré un modèle conceptuel reconnaissant que l'importance relative des incitatifs qui motivent une entreprise à adopter des pratiques améliorées en matière de salubrité et d'assurance de la qualité des aliments est influencée par les caractéristiques et les activités de l'entreprise. Nous avons estimé des modèles logit binomiaux pour examiner le lien entre l'adoption de diverses combinaisons de pratiques visant la salubrité et l'assurance de la qualité des aliments, y compris les systèmes HACCP (analyse des risques et maîtrise des points critiques). Les résultats ont montré que l'adoption de ces pratiques variait considérablement d'une entreprise à l'autre en fonction, entre autres, de la taille de l'entreprise, du pays de propriété et de contrôle, du degré d'innovation, du degré de vocation exportatrice, des programmes d'inspection de la salubrité des aliments et du sous‐secteur dans lequel une entreprise évolue. La perspective de pénétrer les marchés étrangers joue un rôle important dans l'adoption de systèmes HACCP.     

Food safety issues and fresh food product exports from LDCs

Fresh food products have a high income elasticity of demand and few traditional trade barriers in high income markets. As such, they represent an important opportunity for less developed country (LDC) exporters. Fresh food product exports account for half of all food and agricultural exports from LDCs to high income countries. But these products may be subject to greater food safety risks and potential trade barriers arising from sanitary regulation. This paper reviews the challenges and issues facing LDCs in meeting food safety standards for export. These issues include: (a) the importance of fresh food product trade by region and the kinds of issues that arise from those products; (b) the role of farm to table approaches and hazard analysis critical control points (HACCP) in ensuring safety; (c) the role of the public sector in LDCs in facilitating trade; (d) the potential role of the SPS Agreement in resolving disputes and determining equivalency of standards between high and low income countries.     

Agricultural trade liberalization and economic development: the role of downstream market power

A model is developed to characterize the vertically linked and concentrated nature of developed‐country food markets. This model is then parameterized and used to simulate the effects of varying food market structures on the benefits to developing‐country exporters of agricultural commodities from trade liberalization by developed countries. Results demonstrate that even relatively modest departures from perfect competition can cause much of the benefits from trade liberalization to flow to marketing firms instead of producers in the developing country. The distributional effects under downstream market power differ significantly from the perfectly competitive case and may result, somewhat paradoxically, in developing countries receiving a lower share of the total value added within the food chain as trade reform occurs.     

New marketing channels for food quality products in Norway

Marketing is an important and challenging competitive instrument for small-scale quality food producers. Traditional commercial channels may be unprofitable and small-scale food producers often lack access to a highly concentrated retail sector. In this situation a number of strategic alliances between farmers and between farmers and other public and private actors have emerged. The aim of this paper is to discuss and compare initiatives to develop alternative marketing channels for small-scale specialty food producers. The three examples of emerging channels we investigate are (i) the 'new' farmers markets, (ii) retail initiatives where local producers deliver their produce directly to shops, and (iii) companies founded by large cooperatives to market specialty products. Recent research has justified that such initiatives can be conceptualized as hybrid governance structures, i.e. complex structures that entail properties of both market and hierarchy. We pay particular attention to the problem of quality enforcement in emerging marketing channels.     

Reputations, Market Structure, and the Choice of Quality Assurance Systems in the Food Industry

Many food traits desired by consumers are costly to provide and difficult to verify. A complicating factor is that delivered quality can only be affected stochastically by producers and imperfectly observed by consumers. Markets for these goods will emerge only if supplying firms can be trusted. We develop a repeated purchases model to explore how quality discoverability, market structure, nature of reputations, market premiums, and discount factors drive firm choice about the stringency of quality assurance systems designed to gain consumer trust. Reputation protection is key incentive for firms to invest in high-quality goods and quality assurance systems.     

A continuing evolution in U.S. agricultural and food policy - The 1990 Act

This paper reports the results of a study of the economic content and the decision-making process of the recently adopted U.S. 1990 agricultural and food policy. It is the most comprehensive policy of its type. It represents the broadest participation of private individuals and interests groups, and will affect the economy of not only the United States, but also the ***economies of trading countries around the world. The study examines the economic conditions leading up to the policy, a theoretical foundation of public policy determinants, the role of economic analysis in that policy development, the provisions of the Act compared with the previous policy, and its extensive economic implications. Results of the study support features of a conceptual framework for economic policy of a participatory government. The study also reveals the unique policy process of the United States and the provisions of its price and income policy for the food and agricultural sector. Finally, this article identifies the interrelations between the 1990 policy and on-going GATT negotiations, the emerging importance of environmental and food quality issues in agricultural and food policy, and sources for further study of this Act.     

Food Product Acceptance in Foreign Distribution Channels

This article examines some of the factors associated with gaining product acceptance by middlemen in export channels. Our thesis is that a major problem for (potential) exporters is not so much to select, but rather to be selected by middlemen in the target country. If significant differences of opinion occur between exporter and importer regarding the importance of certain product and/or organizational factors, the product acceptance decision may be negative. This study focuses on the opinions of U.S. importers and Dutch exporters of food and beverage products with respect to the final step of the import-export interaction model; the buying decision.     

Enhancing food security in South Sudan: the role of markets and regional trade

South Sudan faces serious problems of food insecurity due to low levels of domestic food production, periodic droughts, widespread poverty, and since late 2013, renewed armed conflict. This article explores market price behavior using cointegration analysis and estimates the effects of production and trade shocks through multimarket model simulations. We show that market prices in the capital city, Juba, of both maize and sorghum are cointegrated with import parity prices of these cereals sourced from Uganda, consistent with observed trade flows. Model simulations, using econometrically estimated demand parameters, suggest that private sector imports of maize and wheat would greatly mitigate the potential fall in consumption in the case of a decline in domestic cereal production. Other simulations indicate that if total imports of cereals are reduced by one‐third (still more than two times the levels of food aid in 2013) because of disruptions to private market flows, domestic prices of cereals could rise by 45% or more. The article concludes that whatever measures are taken involving national food security reserves, it is crucial that government policy serves to maintain incentives for private sector imports to avoid destabilizing market supplies, domestic prices, and ultimately, food consumption of the poor.     

Economics of household food waste

Food waste has drawn increasing public attention, and the high levels of estimated waste are largely considered to be a failure of our current food system. Recently, economists have begun to weigh in, showing food waste can emerge as the result of a complex equilibrium affected by consumers’ preferences for convenience; expectations about future food prices and availability; food safety concerns; producers’ costs of holding inventory, transportation, and storage; government regulation; and technology. If food waste is a form of inefficiency, there are either strong economic motivations to reduce waste, or unmeasured costs or preferences affecting waste decisions. If consumers have behavioral biases, suffer from information asymmetries, or do not pay the full cost of their waste, there may be a role for government intervention to reduce waste, but most empirical models in the literature have not articulated or quantified the extent of the deadweight loss from the market failures in relation to food waste. In some cases, waste reduction efforts could harm producers if overall demand for food is reduced or harm consumers if overconsumption is encouraged, quality or safety degrades, or supply disruptions occur. Technological innovations, which lower the cost of storage or extend shelf life have the potential to improve both consumer and producer welfare.