Quality control in nonstaple food markets: evidence from India

Using original survey data collected on growers, traders, processors, markets, and village communities, we will compare the situation in four states: Tamil Nadu, Uttar Pradesh, Maharashtra, and Orissa. We examine the way that information about crop attributes is conveyed (or not) along the value chain. We find that little information circulates about unobservable crop characteristics. Growers receive a price premium when they dry, grade, and pack their produce, but we find no evidence that information about crop salubrity or agricultural practices circulates through the value chain or that growers are encouraged to follow specific agricultural practices for quality purposes. Market infrastructure is deficient regarding sanitation, with few public toilets, inadequate drainage, and no coordinated pest control.     

Measuring and causes of inequality in farm sizes in the United States

This article examines the notion of farm size inequality expressed as sales inequality in the United States. The farm size index (FSI) is developed as a measure of farm size inequality. FSIs are calculated for the farming sector in all 50 states and large variation in farm size across the states and over time is determined. The largest FSIs are calculated for a number of Southern, Southwestern, and Pacific states. Increasing FSIs over time are observed in all states as well. The spatial and temporal (between 1987 and 1997) differences in FSIs are explained by running a pooled, cross‐sectional time‐series model. The most influential variables accounting for the differences have to do with the ownership structure, where a larger presence of individual and family farms relative to corporate farms and cooperatives leads to a lower degree of farm size inequality. Also, states and regions having relatively larger number of farms owned by minorities have higher FSIs. Shrinking opportunities in the agricultural sector relative to the rest of the economy, primarily services, are reflected in a declining share of agricultural sector state income in total gross state product (GSP). This in turn leads to an increase in the farming sector's FSI suggesting that only larger, more profitable operations are the likely candidates to pursue farming activities. Finally, grains farming regions have all lower degree of farm size inequality than livestock or fruits and vegetables regions. Profitable grains farming requires relatively large farm size and equipment investments, which leads to a relatively homogeneous structure of grains farms. A larger variation in the size of profitable farm operations is possible in fruits and vegetables and livestock. This leads to the existence of a large number of very small but still sustainable farms, and a relatively small number of large farms that capture most of market sales share.     

Agricultural extension and imperfect supervision in contract farming: evidence from Madagascar

This article tests whether agricultural extension and imperfect supervision—conflated here into the number of visits by a technical assistant—increase productivity in a sample of contract farming arrangements between a processing firm and small agricultural producers in Madagascar. Production functions are estimated which treat the number of visits by a technical assistant as an input and which exploit the variation in the number of visits between the contracted crops grown on a given plot by a specific grower, thereby accounting for district‐, grower‐, and plot‐level unobserved heterogeneity. Results indicate that the elasticity of yield with respect to the number of visits lies between 1.3 and 1.7.     

Accounting for agricultural decline with economic growth in Taiwan

In this paper, we develop an empirical model to decompose the evolution of the agricultural share of GDP into three components: price changes, factor endowment changes and technological change. Our results suggest that relative prices have a positive but small influence on the share of agriculture in GDP in both the long‐run and the short‐run. An increase in capital per unit of labor, on the other hand, is associated with a smaller agricultural share. Technical change has been biased in favor of the agricultural sector but this effect has been swamped by the magnitude of the input effects, in particular, the changes in the capital‐labor ratio.     

Strategic pricing in a differentiated product oligopoly model: fluid milk in Boston

In an imperfectly competitive industry, differentiated products compete with each other with price rather than quantity as the strategic variable. Several previous studies have employed a generalized Nash–Bertrand model: Liang (1989) , Cotterill (1994) , Cotterill et al. (2000) , and Kinoshita et al. (2002) ; however, only Liang has explored the theoretical foundations of that model. This article generalizes the Liang two‐good model to three goods. A surprising and important result follows. Price‐conjectural variations do not exist in models with three or more goods. Price‐reaction functions, however, exist in multiple‐good models. We estimate them jointly with a brand‐level demand system to evaluate the total impact of a brand manager's price change on own quantity. In a differentiated product market, this is a useful addition to a partial demand elasticity approach, because a change in one brand's price typically engenders a price reaction by other brands that affects own quantity via substantial cross‐price elasticities among substitutes. Strategic pricing in the Boston fluid milk market was also influenced by the existence of a raw milk price support program, the Northeast Dairy Compact. We find that the advent of the Compact was a focal point event that crystallized a shift away from Nash–Bertrand to more cooperative pricing. If the downstream market is not competitive, one needs to consider strategic price reactions when designing and evaluating agricultural price programs.     

Productivity growth, catching-up and uncertainty in China''s meat trade

The potential role of China as a major importer of agricultural products, and the likely impact on world markets has been a topic of considerable debate over the past decade. In this paper, we focus specifically on the livestock sector and develop a detailed analysis of productivity growth in China’s pig and poultry production along with projections of China’s likely meat trade in the year 2010. We use a general equilibrium model which permits us to explore the sensitivity of our projections to macro-economic uncertainty as well as uncertainty in livestock productivity growth rates. Our analysis shows that China’s net trade position is very sensitive to both of these factors. With high livestock productivity growth and a slow-down in the rest of the economy, China could be a substantial competitor in export markets by 2010. On the other hand, slow productivity growth in livestock production, coupled with a rapidly growing macro-economy could transform China into a major market for future meat exports.     

Do farmers benefit from participating in specialty markets and cooperatives? The case of coffee marketing in Costa Rica1

Historically low prices in the conventional coffee market have caused financial and social hardship among coffee farmers. In the face of this crisis, specialty markets have attracted the attention of the international donor community. These market segments have shown consistent growth over the last decade and exhibit price premiums in international markets. Therefore, if higher prices are passed on to farmers, access to specialty markets could help to alleviate the crisis brought on by low prices in the conventional sector. The present study attempts to identify the factors that determine farmers' participation in specialized markets and whether participation in these markets leads to higher prices for farmers. A two-stage model is used to analyze farmers' marketing decisions and their effect on the prices received. This procedure allows us to control for the endogeneity bias introduced by the marketing choice. Our results indicate that farmers participating in the specialty coffee segment do in fact receive higher prices than those participating in conventional channels. Additionally, we find that participation in cooperatives has a positive impact on the probability that a farmer chooses to grow specialty coffee and analogously on the prices that they receive. Based on these results, it seems that efforts to increase participation in the specialty coffee segment and in cooperatives would help to lessen some of the hardships brought on by low prices in the conventional coffee sector.     

Pricing a rural development program: uncertainty,indifference, and protest behaviors

This article presents an econometric approach to modeling uncertainty, unwillingness to pay, and protest behavior in contingent valuation studies. For that purpose, a mixture model with sample selection is developed for a multiple‐bounded uncertainty elicitation format. The proposed theoretical framework is applied to evaluate the social welfare impact of implementing a sustainable rural development program. Results show that a “naive” analytical approach that excludes protesters from the analysis would result in significantly higher willingness to pay estimates for those individuals who favor the implementation of the program and agree to reveal their true reservation prices.     

Agrobiodiversity conservation under an imperfect seed system:the role of Community Seed Banking schemes

The study is an empirical investigation of agrobiodiversity conservation decisions of small farmers in the central highlands of Ethiopia. The primary objective is to measure the effectiveness of Community Seed Banking (CSB) in enhancing diversity while providing productivity incentives. Our results indicate a significant impact of participation in CSB on farm‐level agrobiodiversity. However, the level of biodiversity conservation was not found to have the expected reinforcing impact on participation, indicating no support for simultaneity. CSB participation also led to an increase in productivity, consistent with a need for such incentives in order to enhance diversity at a farm level. Our assessment of the performance of the GLS estimator yielded a significant discrepancy between the GLS and bootstrap estimates. This led to the conclusion that bootstrapping asymptotic estimations might be required for appropriate inference.     

Food quality in domestic markets of developing economies: a comparative study of two countries

Food quality has become an important determinant of success in global food trade and growers for international markets have to continuously adjust to buyers’ requirements. It is, however, not clear to what extent there is a demand for food quality—and how much buyers are willing to pay for it—in domestic food markets of developing economies. Based on unique comparable price and trader data in a poor country in Africa (Madagascar) and an emerging economy in Asia (India), we compare food quality and quality's pricing. We find significantly better quality and higher quality premiums (using revealed as well as stated preference methods) in India than in Madagascar. These findings are consistent with a simple theoretical model, solely based on average income gaps between the two countries.     

Testing errors, supplier segregation, and food safety

Diagnostic tests provide valuable information to buyers about credence attributes such as food safety and GMO content. Errors in testing, however, can mislead buyers and lead to problems such as adverse selection. The ability to segregate suppliers who can deliver safe food from suppliers who cannot depends on the accuracy of the test procedure. In this article we examine the effect of test sensitivity, specificity, and sampling error on the ability to segregate safe and unsafe suppliers. We find that there is a maximum level of error below which unsafe suppliers are deterred from accepting a utility maximizing buyer's bid price. The maximum error depends on the probability that a supplier's production is unsafe and the cost of producing an unsafe lot, among other things. Understanding this relationship makes it possible to design contracts and government regulations that discourage unsafe suppliers from trading.     

The Liberalisation of Tariff Rate Quotas under Oligopolistic Competition

Several proposals for liberalising agricultural tariff rate quotas (TRQs) have been proposed within the WTO Doha Development Round. The literature suggests that the effectiveness of liberalisation depends upon which of the three elements of a TRQ constrains imports. Most contributions assume perfect competition. This article uses an oligopoly two‐stage capacity constrained model, in which the mode of competition is endogenous, to investigate the impact of different liberalisation options of TRQs, that is, the reduction in the in‐quota and out‐of‐quota tariffs and the expansion of the quota. This article shows that consideration of the nature of competition between traders may provide unconventional conclusions about the effectiveness of the various TRQ liberalisation options; furthermore, the article shows how an increase in the number of rivals, under certain circumstances, may be more effective in increasing trade than reducing tariffs.     

Acceptance of genetically modified food: comparing consumer perspectives in the United States and South Korea

This study examines public perceptions of biotechnology, specifically the consumer approval of genetically modified food products, from plant as well as from animal origin, based on data collected from national surveys conducted in both the United States and South Korea. South Korean consumers reported better understanding of food production, science, and technology relative to U.S. consumers. South Korean consumers also recalled having heard more about genetic modification than did U.S. consumers. Findings also suggest that consumers in the United States and South Korea who possessed an accurate knowledge of the applications and outcomes of genetic modification technology were more likely to approve of its use for the creation of foods than those who had inaccurate or no knowledge of the technology. Results also indicate that consumers who considered labeling of genetically modified foods to be necessary are less likely to approve of the genetic modification of foods than those who did not. Consumers in both countries are less approving of genetic modification of animals than the genetic modification of plants. However, U.S. consumers are more approving of using genetic modification technology to create animal‐derived foods than are South Korean consumers.     

Acreage response in Pakistan: a co-integration approach

This paper seeks to quantify the acreage responses of wheat, cotton, sugarcane and rice in Pakistan using co‐integration techniques and impulse response analysis. Results indicate that acreages of wheat and basmati rice do not respond significantly to shocks in own‐price while cotton, sugarcane and high yielding variety (HYV) rice do, and that long‐run equilibrium is re‐established after about 4 years. Irrigated area is an important determinant of acreage.     

Land degradation, drought and food security in a less-favoured area in the Ethiopian highlands: a bio-economic model with market imperfections

This paper presents a bio‐economic model of Andit Tid, a severely degraded crop‐livestock farming system with high population density and good market access in the highlands of Ethiopia. Land degradation, population growth, stagnant technology, and drought threaten food security in the area. Drought or weather risk appears to have increased in recent years. The bio‐economic model is used to analyse the combined effects of land degradation, population growth, market imperfections and increased risk of drought on household production, welfare and food security. We find that the indirect effects of drought on household welfare through the impact on crop and livestock prices are larger than the direct production effects of drought. Provision and adoption of credit for fertiliser, although risky in itself, may lead to increased grain production and improved household welfare and food security. Provision of credit may have a negative effect on conservation incentives but this effect may be mitigated by linking a conservation requirement to the provision of credit for fertiliser.     

The impact of marketing systems on soil sustainability of agriculture in developing countries: a method and an application

This article is concerned with soil‐sustainability problems of agriculture in developing countries, in particular with soil erosion. The aim of our study is to develop a comprehensive model that explains the adoption of sustainable agricultural practices with respect to soil conservation. Our approach includes the following special features: (a) the model is comprehensive in that it includes a large number of institutional, personal–social, economic, and physical explanatory variables; (b) particular attention is paid to the influence of marketing systems on the adoption of sustainable agricultural practices, which to our knowledge has been neglected in past research; (c) the concept of adopting sustainable agricultural practices (ASAP) is differentiated into a limited number of basic components of soil conservation; and (d) the model is estimated by Principal Component Regression, which enhances efficient estimation of the impact of many explanatory variables on ASAP. Our model is applied to Cabuyal hillside farming in Colombia. The application demonstrates the usefulness of the proposed model. ASAP is differentiated into three basic components: soil‐disturbance control, soil‐protection practices, and run‐off control. It appears that soil‐disturbance control is particularly influenced by farmers' characteristics, such as education and managerial variables. The second component, soil‐protection practices, appears to be strongly influenced not only by farmers' managerial variables but also by their relationship with their environment, in particular marketing institutions. The third soil‐conservation component, run‐off control, is influenced by the physical characteristics of the plot and by the available farm labor. Our empirical results demonstrate the usefulness of the proposed model in designing agricultural policies, because it can determine which variables are more likely to influence the adoption of a specific type of soil conservation.     

Asymmetric information in cattle auctions: the problem of revaccinations

We analyze the problem of asymmetric information between buyers and sellers in cattle auctions, using the problem of revaccinations as the point of departure. We present a simple model to show that if buyers do not know and cannot verify whether sellers have vaccinated their animals, then they may consider revaccination. Revaccination is only a part of the broader problem of information asymmetry that includes other quality issues and costs that can be saved, thereby affecting the welfare of both buyers and sellers. We consider structural characteristics of ranching, traditions, and consumers' preferences as well as proposals regarding third‐party certification to argue that the problem of asymmetric information in cattle auctions is a persistent one. We also argue for a comprehensive empirical study of the incidence and impacts of buyer revaccination.