Source: UNIVERSITY OF KENTUCKY submitted to NRP
ANALYZING THE INDUSTRIAL ORGANIZATION AND FINANCIAL ECONOMIC PERFORMANCE OF THE GLOBAL AGRIBUSINESS SECTOR
Sponsoring Institution
National Institute of Food and Agriculture
Project Status
COMPLETE
Funding Source
Reporting Frequency
Annual
Accession No.
0187925
Grant No.
(N/A)
Cumulative Award Amt.
(N/A)
Proposal No.
(N/A)
Multistate No.
(N/A)
Project Start Date
Jan 15, 2001
Project End Date
Sep 30, 2005
Grant Year
(N/A)
Program Code
[(N/A)]- (N/A)
Recipient Organization
UNIVERSITY OF KENTUCKY
500 S LIMESTONE 109 KINKEAD HALL
LEXINGTON,KY 40526-0001
Performing Department
AGRICULTURAL ECONOMICS
Non Technical Summary
The findings from the empirical models may be used to help Kentucky agribusinesses strategically position themselves in the global marketplace, help farmers identify expanding markets for their commodities, and help increase the well-being of Commonwealth consumers. The purpose of this Hatch project is to better understand the economic behavior of firms in the global food and beverage industry, how they accumulate market power and conduct business strategies, and how they accumulate wealth.
Animal Health Component
100%
Research Effort Categories
Basic
(N/A)
Applied
100%
Developmental
(N/A)
Classification

Knowledge Area (KA)Subject of Investigation (SOI)Field of Science (FOS)Percent
6026199301020%
6036199301020%
6046199301020%
6066199301010%
6076199301020%
6096199301010%
Goals / Objectives
1. Quantify the nature and implications of market power exercised amongst a set of firms in a single food or beverage industry and how changes in public policy and business strategies, such as pricing, advertising, product differentiation, and vertical coordination, affect market power. 2. Determine the economic forces driving the consumer demand for value-added food and beverage products including the effects of relative prices, income, advertising, merchandising, changing demographics, and relevant public policies. 3. Investigate the relative financial economic performance (wealth creation) of global food and beverage companies and related agribusinesses and how corporate strategies, macroeconomic conditions, and public policies affect performance.
Project Methods
To achieve objectives 1 and 2, simultaneous-equations panel data econometric methods will be used to estimate a general, New Empirical Industrial Organization (NEIO) model of price discovery dynamics in the class of product-differentiated oligopolistic food and beverage markets. Using syndicated scanner data, the model will include a system of demand equations and Bertrand price reaction functions, one for each brand or firm included in the study. To achieve objective 3, contemporary times series econometric methods will be used to estimate wealth creation equations at the firm and industry level using Standard & Poor's COMPUSTAT financial economic database and the United States Securities and Exchange Commission's EDGAR database.

Progress 01/15/01 to 09/30/05

Outputs
In the year 2003, I published 1 peer reviewed journal article and made 4 presentations at international conferences. All research productivity is related to Objective 2 of this Hatch Project. Over the life of the project, I published 3 peer reviewed journal articles, 2 staff papers, made 8 presentations at international conferences and obtained one grant for 140,000 dollars. This project has recently led to two invited papers and one book chapter all forthcoming in 2004, and two articles currently submitted to a peer-reviewed journal. We have found that consumers state preferences that do not correspond to their revealed preferences with respect to GM foods. Our actual market transactions data indicate consumers purchase food according to price and largely ignore labels and the influence of the media. I recommend the GM food marketing research be extended to other regions such as France, Germany, the UK, China and Japan. Current grant proposals under review with the NSF and the USDA-NRI outline a research methodology to do this.

Impacts
There are 4 million food consumers in Kentucky, 286 million food consumers in the United States, and 6.2 billion food consumers worldwide. Within an 80 mile radius of UK and Lexington, KY are headquartered some of the largest agribusinesses in the world and the dollar sales of these firms are 20 plus times larger than the entire Kentucky farm economy.

Publications

  • Marks, L.A., N. Kalaitzandonakes, S.S. Vickner. Evaluating Consumer Response to GM Foods: Some Methodological Considerations. Current Agriculture, Food & Resource Issues. 4(2003):80-94.


Progress 01/01/02 to 12/31/02

Outputs
In the year 2002, I applied for $482,907 worth of extramural funding. Also, I published 2 peer reviewed journal articles and 1 staff paper, and made 2 presentations at international conferences. One article and one presentation related to Objectives 1 and 2 of this Hatch Project, and the others related to Objective 3.

Impacts
There are 4 million food consumers in Kentucky, 286 million food consumers in the United States, and 6.2 billion food consumers worldwide. Within an 80 mile radius of UK and Lexington, KY are headquartered some of the world's largest agribusinesses and the dollar sales of these firms are 20 plus times larger than Kentucky's entire farm economy.

Publications

  • Vickner, Steven S. and Stephen P. Davies. "Estimating Strategic Price Response using Cointegration Analysis: The Case of the Domestic Black and Herbal Tea Industries." Agribusiness: An International Journal. 18(Spring 2002):131-144.
  • Vickner, Steven S. "Food Securities: Where Wall Street Meets Main Street." Choices. 16(Winter 2001-2002):11-14.
  • Vickner, Steven S. "Wealth Creation in the Food-Away-From-Home Distribution Channel." Staff Papers series No. 431, Department of Agricultural Economics, University of Kentucky, (October 2002):1-15.


Progress 01/01/01 to 12/31/01

Outputs
In the year 2001, I applied for $514,920 worth of extramural funding under the umbrella of this Hatch Project. Two proposals were funded for a total of $141,100 and one proposal is still under review. Of the two funded projects, one has an additional $60,000 available in year 2 of the project pending research progress; thus the total will become $201,100. The funded projects are a direct application of Objectives 1 and 2 and of the model outlined in equations 1 to 6 in my Hatch Project to the issue of consumer food demand response to agrobiotechnology and genetically modified organisms. During 2001, I had 2 journal articles accepted and I presented one paper at an international conference. The first article and the paper presentation expanded the definition and application of equation 6 in the model in the my Hatch Project (again, Objectives 1 and 2), with application to a value-added food product. The second article was an extension of Objective 3.

Impacts
The are 4 million food consumers in Kentucky, 286 million food consumers in the United States, and 6.2 billion food consumers worldwide. Within an 80 mile radius of UK and Lexington, KY are headquartered some of the world's largest agribusinesses and the dollar sales of these firms are 20 plus times larger than Kentucky's agricultural economy.

Publications

  • Vickner, Steven S. and Stephen P. Davies. 2001. "Estimating Strategic Price Response using Cointegration Analysis: The Case of the the Domestic Black and Herbal Tea Industries." Agribusiness: An International Journal. forthcoming.
  • Vickner, Steven S. 2001. "Food Securities: Where Wall Street Meets Main Street." Choices. forthcoming.