Source: UNIVERSITY OF CALIFORNIA, DAVIS submitted to
ANALYSIS OF NEW CHALLENGES AND OPPORTUNITIES FOR CALIFORNIA MANDATED MARKETING PROGRAMS
Sponsoring Institution
National Institute of Food and Agriculture
Project Status
TERMINATED
Funding Source
HATCH
Reporting Frequency
Annual
Accession No.
0215359
Grant No.
(N/A)
Project No.
CA-D-ARE-7733-H
Proposal No.
(N/A)
Multistate No.
(N/A)
Program Code
(N/A)
Project Start Date
Oct 1, 2012
Project End Date
Sep 30, 2017
Grant Year
(N/A)
Project Director
Sexton, R.
Recipient Organization
UNIVERSITY OF CALIFORNIA, DAVIS
410 MRAK HALL
DAVIS,CA 95616-8671
Performing Department
Agricultural and Resource Economics
Non Technical Summary
California's mandatory marketing programs face new challenges and opportunities in today's rapidly changing agriculture wherein firms and products are differentiated based upon an increasingly wide range of attributes of products and their production processes. Traditional functions performed by marketing programs may need to be adapted to be effective in this environment. New opportunities present themselves. This project will investigate the economic role of California's mandatory marketing programs in differentiated agricultural product markets using a variety of conceptual and empirical methodologies.
Animal Health Component
0%
Research Effort Categories
Basic
40%
Applied
60%
Developmental
(N/A)
Classification

Knowledge Area (KA)Subject of Investigation (SOI)Field of Science (FOS)Percent
6046230310030%
6066120310010%
6076010310015%
6106230310015%
7126230310010%
6036230310020%
Knowledge Area
607 - Consumer Economics; 610 - Domestic Policy Analysis; 712 - Protect Food from Contamination by Pathogenic Microorganisms, Parasites, and Naturally Occurring Toxins; 606 - International Trade and Development; 604 - Marketing and Distribution Practices; 603 - Market Economics;

Subject Of Investigation
6010 - Individuals; 6120 - International economy and sectors thereof; 6230 - Marketing systems and sectors thereof;

Field Of Science
3100 - Management;
Goals / Objectives
California's mandated marketing programs face new challenges and opportunities as agricultural markets evolve. Today's consumers increasingly demand that the food products they consume satisfy a broad range of product characteristics. In addition to traditional characteristics such as taste, appearance, brand appeal, food safety, and healthfulness, today's food products are differentiated based upon characteristics of their production process (e.g., usage of chemicals, biotechnology, sustainability, location, or confinement conditions of animals), treatment of farm labor, or "fairness" of their marketing arrangements, and implications of production and consumption of the product for the environment. Farms and food marketing firms have become increasingly diverse and differentiated as they seek to respond to opportunities and challenges created in these rapidly changing food markets. We will analyze the roles of mandatory marketing programs in this evolving market environment. Traditional justifications for such programs are based upon the premise that products are fundamentally similar and efforts to improve market conditions through advertising and production research will be subject to free riding. We propose conceptual and empirical research to (i) investigate how generic advertising and promotion programs should be managed in a market environment where firms attempt to differentiate their products, and (ii) how to measure the effectiveness of advertising and promotion programs in these modern market settings. Many of the attributes that differentiate firms and products in today's markets cannot be discerned by consumers either ex ante through search, or ex post through consumption. Rather, they represent credence attributes that must be certified to the consumer in a manner that is credible before rational consumers will pay for the attributes. Providing such certification represents a new opportunity for mandatory marketing programs. We will conduct economic modeling and case-study analysis to examine the potential for mandatory marketing programs to perform certification functions for credence attributes and how the performance of such activities should be organized Mandatory marketing program are controlled by producers and handlers subject to government oversight. Traditional voting and control mechanisms are, however, called into question when farmers and marketers that operate under the program's auspices are increasingly heterogeneous. What are the implications of firm heterogeneity for program governance Are changes in voting procedures and organization of boards of directors needed We propose to conduct conceptual and case-study research to address these questions.
Project Methods
Our methods will involve conceptual economic modeling, econometric analysis, case study investigations, and simulations. We will study generic advertising and promotion programs in differentiated product markets using both "address" models of vertical and horizontal differentiation and "nonaddress" models such as the Chamberlin and Dixit-Stiglitz models. The models must be sufficiently flexible to allow advertising and promotion to affect overall demand in the market and also influence the demand facing individual differentiated sellers. Effectiveness of existing advertising and promotion programs will be studied using actual program data and econometric methods. We will advance the state of the art by developing econometric methods to test impacts of advertising and promotion programs on prices and demands for differentiated-products. Certification of product credence attributes can also be studied using models of vertical differentiation. In the absence of certification products are not differentiated and the equilibrium involves pooling, whereas successful certification creates product differentiation and a separating equilibrium. California programs are on the cutting edge of product certification. We will conduct case studies of these programs, such as the Leafy Green Marketing Agreement, to examine their effectiveness and to derive lessons for other programs. Voting and program governance will be investigated conceptually using models of voting and public choice and empirically using econometric analyses and case-studies.

Progress 10/01/12 to 09/30/17

Outputs
Target Audience:Work was directed to academicians, outreach professionals, federal and state agency officials with oversight responsibility to mandatory marketing programs, and leadership of marketing organizations for producers of agricultural products. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided?Multiple graduate students have worked on this project and contributed to published output, as well as a Humphrey Scholar from Ivory Coast. How have the results been disseminated to communities of interest?Outputs have been disseminated to a technical audience via journal articles. A practitioner audience has been reached through a chapter in a widely accessible book, as well as multiple articles in the outreach publication Agricultural & Resource Economics Update. The results have also been disseminated through presentations by Sexton at professional conferences. The results of the analysis of the Hass Avocado Board's promotional program were presented by Sexton to the Board and interested audience members in attendance at the Board's meeting. What do you plan to do during the next reporting period to accomplish the goals? Nothing Reported

Impacts
What was accomplished under these goals? This project analyzed the effectiveness of commodity promotion programs undertaken by mandatory marketing programs both in terms of issues and challenges impacting effectiveness (Crespi and Sexton 2013) and in terms of the specific impacts of the Hass Avocado Board's promotion programs (Carman, Saitone, and Sexton 2013). Econometric analysis demonstrated that this program was highly effective in increasing grower returns. Research also focused on the implications of the U.S. Supreme Court decision in Horne v. USDA on the future of supply-control programs (Crespi, Saitone, and Sexton 2015). Horne ruled that the raisin marketing order's supply-control program constituted an unconstitutional "taking" by the federal government. Use of supply-control programs has been waning in any event, but the analysis concluded that the Horne decision made it likely that most supply control programs in operation today would face legal challenge under the Horne precedent. Finally, research was conducted on the future prospects for producer collective action and mandatory marketing programs in particular in light of the economic conditions that characterize modern agricultural markets (Saitone and Sexton 2017). This research emphasized that modern agricultural markets are characterized by product differentiation and focus on product quality in multiple dimensions. Marketing programs that treat growers as homogeneous (e.g., most generic commodity promotion programs) will face challenges in this environment unless they evolve to embrace heterogeneity.

Publications

  • Type: Journal Articles Status: Published Year Published: 2015 Citation: M�rel, P.R., T.L. Saitone, and R.J. Sexton. 2015. "Cooperative Stability under Stochastic Quality and Farmer Heterogeneity." European Review of Agricultural Economics 42: 765-795.
  • Type: Journal Articles Status: Published Year Published: 2015 Citation: Crespi, J.M., T.L. Saitone, and R.J. Sexton. 2015. The Supreme Courts Decision in the Raisin Case: What Does It Mean for Mandatory Marketing Programs? Agricultural and Resource Economics Update 18: 1-4.
  • Type: Journal Articles Status: Published Year Published: 2013 Citation: Plakias, Zo� . 2013. "Old Dog, New Tricks: The Changing Role of California's Agricultural Marketing Organizations." Agricultural and Resource Economics Update 17(2): 4 - 7.
  • Type: Book Chapters Status: Published Year Published: 2013 Citation: Crespi, J.M. and R.J. Sexton. 2013.US Generic Advertising and Promotion Programs, in W.J. Armbruster and R.D. Knutson (eds.) US Programs Affecting Food and Agricultural Marketing, New York: Springer.
  • Type: Journal Articles Status: Published Year Published: 2013 Citation: Carman, Hoy F., Tina Saitone, and R. J. Sexton. 2013. "Demand Growth and Commodity Promotions for Fresh Hass Avocados." Agricultural & Resource Economics Update 17: 5 - 8.
  • Type: Journal Articles Status: Published Year Published: 2017 Citation: Saitone, T.L. and R.J. Sexton. 2017. Agri-food supply chain: Evolution and performance with conflicting consumer and societal demands. European Review of Agricultural Economics 44: 634  657.


Progress 10/01/15 to 09/30/16

Outputs
Target Audience:The target audience for this project is management, directors, and producer-members in industries operating under mandatory marketing programs. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided? Nothing Reported How have the results been disseminated to communities of interest? Nothing Reported What do you plan to do during the next reporting period to accomplish the goals?We will continue to work on conceptual and empirical modeling of the role of mandatory marketing organizations in modern agricultural markets.

Impacts
What was accomplished under these goals? We studied the role of mandatory marketing organizations in a Modern Agricultural Markets framework. This framework emphasizes differentiated-products agriculture, wherein an emphasis is placed on multiple and diversified dimensions of product quality. Traditional functions of state and federal marketing boards, such as generic promotion, are challenged in this environment. However, new functions may emerge, such as to certify quality credence attributes. Credence attributes refer to elements of an agricultural product, such as nature of inputs used, sustainability of practices, etc., that are not discernible to consumers through searching or experienceing the product. Certification by a credible third-party organization is required instead. We have investigated the potential for producer organizations to engage in certification.

Publications


    Progress 10/01/14 to 09/30/15

    Outputs
    Target Audience:Work was directed to academicians, outreach professionals, and leadership of marketing organizations for producers of agricultural products. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided?I worked with a Humphrey Scholar, Benoit Malan from Ivory Coast, who works on producer organizations. A paper with Malan on producer organizations in developing countries is in progress. How have the results been disseminated to communities of interest?During this period results were disseminated through a scholarly journal publication, a journal publication targeted to a lay audience, and short "fact sheet" reports targeted to an audience interested in mandatory marketing organizations for catfish producers. What do you plan to do during the next reporting period to accomplish the goals?We will continue to perform work on the benefits and costs to producers from participating in mandatory marketing programs.

    Impacts
    What was accomplished under these goals? We studied producer incentives to join marketing organizations and pool revenues in situations where quality of production is heterogeneous, realization of product quality is stochastic, and producers are risk averse. The problem with revenue-pooling producer organizations is that producers of high-quality products share revenues with low-quality counterparts. This discourages high-quality types' participation in such organizations. However, we showed that the risk-sharing properties of revenue pooling may be sufficient to entice high-quality types to enter into a marketing organization with low-quality types and at least partially pool revenues. We also investigated the impacts of a recent U.S. Supreme Court Decision involving the raisin marketing order and what it implied for the future of mandatory producer marketing organizations.

    Publications

    • Type: Journal Articles Status: Published Year Published: 2015 Citation: M�rel, P.R., T.L. Saitone, and R.J. Sexton. "Cooperative Stability under Stochastic Quality and Farmer Heterogeneity." European Review of Agricultural Economics 42, 2015, 765-795.
    • Type: Journal Articles Status: Published Year Published: 2015 Citation: Crespi, J.M., T.L. Saitone, and R.J. Sexton. The Supreme Courts Decision in the Raisin Case: What Does It Mean for Mandatory Marketing Programs? Agricultural and Resource Economics Update 18, 2015, 1-4.


    Progress 10/01/13 to 09/30/14

    Outputs
    Target Audience: Target audience has been peer professionals working on agricultural market issues and managers and board members involved in decision making for mandatory marketing programs in California and elsewhere Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided? Dr. Tina L. Saitone is engaged in this work under the title of Assistant Project Scientist. How have the results been disseminated to communities of interest? Key ideas of the project were reported to an international audience at the Annual Policy Conference of the Canadian Agricultural Economics Society, January 29-31, Ottawa, Canada. Work with a team of scientists continued to advise U.S. catfish producers regarding opportunities for collective action through a Federal marketing order. This work was disseminated to an industry audience through presentations at various industry forums. What do you plan to do during the next reporting period to accomplish the goals? In addition to continuing ongoing work described elsewhere in this progress report, we intend to examine the current litigation, now before the U.S. Supreme Court, concerning the federal marketing order for raisins and analyze and report on the economic issues involved there and the consequences for mandatory marketing programs depending on how the Court rules.

    Impacts
    What was accomplished under these goals? Work continued on understanding challenges and opportunities for producer collective action through mandatory marketing programs within a framework of modern agricultural markets. Specific work was directed towards identifying optimal regulatory structures and new opportunities for collective action created in quality-differentiated markets, including certification of credence properties of agricultural products--e.g., treatment of animals, sustainability of production practices, and presence or absence of pesticides, genetic modifications, etc.

    Publications


      Progress 01/01/13 to 09/30/13

      Outputs
      Target Audience: This project has reached target audiences domestically and internationally. Effectiveness of the promotion activities of the Hass Avocado Board was analyzed for the second five years of the Program's existence. In addition to providing a written report to the Board, presentations were made to the Hass Avocado Board and the California Avocado Commission. Outreach based upon successful California programs was conducted, including a presentation to the Catfish Farmers of America in February 2013 at their annual convention in Little Rock, AZ. Changes/Problems: Nothing Reported What opportunities for training and professional development has the project provided? A post-doctoral scholar, Tina L. Saitone, has worked on this project. Based upon her training and accomplishments, Dr. Saitone was re-appointed as a Project Scientist during this reporting period. How have the results been disseminated to communities of interest? Results have been disseminated to communities of interest through presentations made to the Hass Avocado Board, California Avocado Commission, and Catfish Farmers of America. Results have also been disseminated to a lay audience through the publication in Agricultural and Resource Economics Update cited in the Products section of this report. What do you plan to do during the next reporting period to accomplish the goals? Work will continue on the challenges and opportunities facing mandatory marketing programs in rapidly changing agricultural market landscape that features increasing concentration of firms at all stages, greater vertical coordination across stages, and increasing attempts by participants to differentiate their products.

      Impacts
      What was accomplished under these goals? A greater understanding was achieved of the benefits and costs of mandatory marketing programs within the context of modern agricultural markets. Generic promotion programs face increasing challenges in modern markets wherein participants seek to differentiate their products and may believe that generic messages work counter to their own marketing efforts. Yet most studies including the recent study of Hass Avocado Board promotions finds that generic programs yield a highly favorable return to producers. New opportunities for mandatory programs have been investigated. An emerging area of potential opportunity was found to be the certification of food-safety practices and other credence attributes of food products.

      Publications

      • Type: Journal Articles Status: Published Year Published: 2013 Citation: Carman, H.F., Saitone, T.L., and Sexton, R.J. Demand Growth and Commodity Promotions for Fresh Hass Avocados. Agricultural & Resource Economics Update, Vol. 17, No. 1, Sept/Oct. 2013, pp. 5-8.
      • Type: Book Chapters Status: Published Year Published: 2013 Citation: Crespi, J.M. and Sexton, R.J. U.S. Generic Advertising and Promotion Programs, in W.J. Armbruster and R.D. Knutson (eds.) U.S. Programs Affecting Food and Agricultural Marketing, New York: Springer, 2013, pp. 171-194.


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

      Outputs
      OUTPUTS: Work was performed on several studies of mandated marketing programs that entail demand enhancements from promotion or post-farm productivity enhancements, or both. A cooperative project with USDA-ERS personnel was conducted on international comparison and assessment of institutional arrangements for financing and managing public agricultural research, with particular emphasis on the use of "check-off" based funding in Australia and Uruguay. A study was undertaken of check-off funded promotion of mushrooms in Tasmania, Australia. Work was undertaken on evaluation of the impact of check-off funded promotion of California table grapes. Conceptual and methodological studies of mandatory marketing programs were also conducted, including (i) a study on sources of institutional failure and underinvestment in levy-funded programs, (ii) an analysis of minimum quality standards implemented by marketing programs that also directly or indirectly control production, and (iii) an investigation into whether quality standards are set too high under mandatory programs from a societal welfare perspective. Findings were communicated in a range of public meetings and conferences and in some formal publications (see attached list). Feasibility of mandatory marketing programs for aquaculture was also investigated and reported at industry forums in the Southeast. Comparative analysis using the California experience was applied to questions of programs for aquaculture industry marketing. Output of this analysis was that, among various authorizing programs available for aquaculture industries, a federal marketing order program would probably be most effective. PARTICIPANTS: The work conducted under this project involves studies of check-off funded programs and their consequences, conducted jointly with colleagues at, California Polytechnic and State University, San Luis Obispo, US FDA, USDA-ERS, UC Davis, , and the University of Saskatchewan. Colleagues who worked on this project during the reporting period include Richard Gray and Murray Fulton (University of Saskatchewan), Jennifer James (Cal Poly, San Luis Obispo), Joanna Parks (US FDA), John Crespi (Kansas State University). TARGET AUDIENCES: Target audiences include professional staff, university extension, and members of boards of directors guiding mandatory marketing programs. This target audience has benefitted from understanding the effectiveness of extant industry programs and from learning about the potential for enhancing success of mandatory programs and avoiding pitfalls that may inhibit success of such programs. These lessons are derived from both domestic and international comparisons. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.

      Impacts
      Reports on the impacts and effectiveness of mandatory marketing programs were communicated to industry and professional audiences through a variety of media. Knowledge regarding the success of these programs has contributed to them being renewed by vote of the producers operating under these programs. Results regarding effectiveness of specific promotional media (e.g., radio, in-store displays, magazine advertisements) has enabled industries to fine-tune their messages to achieve maximum impact from expenditures. Results have also been used to support industry plebiscites over the continuation of the programs and related contexts. Leaders in the U.S. catfish industry are now actively exploring the approval process to establish a federal marketing order.

      Publications

      • Gray, R.S., J.M. Alston and K. Bolek. Some International Successes in Crop Research Funding and the Pathways for Implementation in Canada. Canadian Agricultural Innovation and Research Network, www.ag-innovation.ca (accessed July 15, 2011).
      • Alston, J.M., R.S. Gray, and K. Bolek. Farmer-Funded R&D: Institutional Innovations for Enhancing Agricultural Research Investments. Working paper. Canadian Agricultural Innovation and Research Network (available at http://www.ag-innovation.usask.ca/cairn_briefs/publications%20for%20d ownload/CAIRN_2012_FarmerFundedRD_AlstonGrayBolek.pdf (accessed May 10, 2012).
      • Alston, J.M. and J.S. Parks. The Returns to Promotion of Healthy Choices-Implications from a Market Experiment in Tasmania: Are You in the Dark about the Power of Mushrooms Australian Journal of Agricultural and Resource Economics 56(3)(2012): 347-365.
      • Crespi, J.M. and R.J. Sexton. US Generic Advertising and Promotion Programs, in W.J. Armbruster and R.D. Knutson (eds.) US Programs Affecting Food and Agricultural Marketing, New York: Springer, 2013.


      Progress 01/01/11 to 12/31/11

      Outputs
      OUTPUTS: Work was performed on several studies of mandated marketing programs that entail demand enhancements from promotion or post-farm productivity enhancements, or both. A cooperative project with USDA-ERS personnel was conducted on international comparison and assessment of institutional arrangements for financing and managing public agricultural research, with particular emphasis on the use of "check-off" based funding in Australia and Uruguay. Studies were also undertaken on the effectiveness of check-off funded promotions for specific California programs and commodities including table grape promotion conducted under the auspices of the California Table Grape Commission and Hass avocado promotions conducted under the aegis of the Hass Avocado Board. Conceptual and methodological studies of mandatory marketing programs were also conducted, including (i) a study on sources of institutional failure and underinvestment in levy-funded programs, (ii) an analysis of minimum quality standards implemented by marketing programs that also directly or indirectly control production, and (iii) an investigation into whether quality standards are set too high under mandatory programs from a societal welfare perspective. PARTICIPANTS: The work conducted under this project involves studies of check-off funded programs and their consequences, conducted jointly with colleagues at USDA-ERS, the University of Melbourne, and the University of Saskatchewan. Post-doctoral scholars at UC Davis (Joanna Parks and Tina L. Saitone) obtained professional development and career-enhancement skills through participation in this project. Industry collaborators were also involved in the design and execution of projects. TARGET AUDIENCES: Target audiences include professional staff, university extension, and members of boards of directors guiding mandatory marketing programs. This target audience has benefitted from understanding the effectiveness of extant industry programs and from learning about the potential for enhancing success of mandatory programs and avoiding pitfalls that may inhibit success of such programs. These lessons are derived from both domestic and international comparisons. PROJECT MODIFICATIONS: Not relevant to this project.

      Impacts
      Reports on the impacts and effectiveness of mandatory marketing programs were communicated to industry and professional audiences through a variety of media. Knowledge regarding the success of these programs has contributed to them being renewed by vote of the producers operating under these programs. Results regarding effectiveness of specific promotional media (e.g., radio, in-store displays, magazine advertisements) has enabled industries to fine-tune their messages to achieve maximum impact from expenditures.

      Publications

      • Saitone, Tina L. and Richard J. Sexton. 2011. Producer-Organizations, Self-Regulation, and Economic Welfare: Minimum Quality Standards in Agricultural Markets. Canadian Journal of Agricultural Economics 59: 435-455.
      • Carman, Hoy F. and Richard J. Sexton. 2011. Effective Marketing of Hass Avocado: The Impacts of Changing Trade and Promotion-Information Systems. International Food and Agribusiness Management Review 14: 37-50.


      Progress 01/01/10 to 12/31/10

      Outputs
      OUTPUTS: **Analysis was completed on the effectiveness of promotion programs for Hass avocados. Results showed that the program was effective at increasing producer returns. An innovative information-sharing program operated by the Hass Avocado Board was shown to have reduced volatility in the industry, generating net benefits to producers and consumers as a consequence. **Minimum quality standards imposed by industry marketing boards were studied as to their impacts on producer welfare and overall economic welfare. Such standards may raise economic welfare but standards imposed voluntarily by producers are unlikely to be welfare enhancing.**A proposed supply-management proposal for the U.S. dairy industry was investigated to determine its likely impacts on the level and volatility of milk prices. **Major contributions to analysis of mandatory marketing programs over the 100 year life of the Agricultural and Applied Economics Association were chronicled.**The role mandatory marketing programs may play in certifying product quality of credence-type goods was investigated.**An analysis of transport cost differentials and their relationship to product differentiation was conducted for frozen concentrated orange juice (FCOJ) and not-from-concentrate (NFC) juice, comparing juice from Floria and Brazil.**New methods for understanding the information content in daily price movements were adapted to studying the effects of weather information in orange juice prices. PARTICIPANTS: Julian Alston, Hoy Carman, James Chalfant, Tina L. Saitone, Richard Sexton, and Navin Yavapolkul. Saitone participated in this project as a post-doctoral scholar, and Yavapolkul participated as a doctoral candidate; both gained training and professional development through their participation. TARGET AUDIENCES: Target audiences include farmers who participate in mandatory marketing programs and board members who represent them. Presentations at industry forums were used to inform target audiences regarding options available under mandatory marketing programs and their effectiveness in advancing producer welfare. Findings concerning price analysis were reported in an outreach-oriented publication. PROJECT MODIFICATIONS: Not relevant to this project.

      Impacts
      Results of the analyses of advertising effectiveness for Hass avocados and impacts of supply management for U.S. dairy were presented at industry forums and have helped to frame discussions within those industries regarding the respective policy tools. Previous work on interpreting price movements and information about precommitment contracts in the fresh strawberry industry was disseminated in an outreach publication aimed at industry and policymakers.

      Publications

      • Myers, Robert, Richard J. Sexton, and William Tomek. 2010. A Century of Research on Agricultural Markets, American Journal of Agricultural Economics, 92: 376-402.
      • Carman, H.F., Lan Li, and Richard J. Sexton. 2009. An Economic Evaluation of the Hass Avocado Promotion Order's First Five Years. Giannini Foundation Research Report No. 351, University of California, Division of Agriculture and Natural Resources, 40 p.
      • Saitone, Tina L. and Richard J. Sexton. 2010. Product Differentiation and Quality in Food Markets: Industrial Organization Impacts, Annual Review of Resource Economics, 2: 341-368.
      • Mohapatra, Sandeep, Rachael E. Goodhue, Colin A. Carter, and James A. Chalfant. How Do Forward Contracts Affect Strawberry Prices ARE Update 13(5) May/June 2010:9-11.
      • Sumner, D.A., J.M. Alston, and J.W. Glauber. 2010. Evolution of the Economics of Agricultural Policy. American Journal of Agricultural Economics, Vol. 92, no. 2, pp. 403-423. 92(2)(April 2010): 403-423.


      Progress 01/01/09 to 12/31/09

      Outputs
      OUTPUTS: ** Research has shown that generic advertising and product differentiation are not just passive responses by industry to demand patterns that are exogenously determined, but might instead be used to create and exploit market power. A model of product differentiation by country was developed, and is applied to two types of orange juice---not from concentrated (NFC) and frozen concentrated orange juice (FCOJ). The model applies broadly when one set of producers (e.g., marketing/ processing firm or cooperative; producing region; or country) can establish an apparent advantage over another. In the case of orange juice, Florida has an advantage, relative to Brazil, in that transport costs are prohibitive for NFC from Brazil. The analysis has established conditions under which one group of producers can raise profits at the expense of another, through product differentiation, and when both groups gain. Implications for consumer welfare are under study, and a comparison of the price patterns under demand-driven product differentiation, as opposed to the alternative where differentiation is to create and exploit market power, is underway. ** Work continued on projects to evaluate the effectiveness of commodity promotion programs for Hass avocados and fresh mushrooms. This work emphasized impacts at the retail level on prices and sales using retail scanner data. ** Other work emphasized the use of minimum quality standards implemented through mandatory marketing programs. Econometric investigation of the impacts of minimum quality standards on imports was conducted. ** A proposed policy to implement producer quotas on milk production through the federal marketing order system was analyzed and critique. ** The role of mandatory commodity programs in promoting and certifying aspects of product quality was studied. PARTICIPANTS: Julian Alston, Hoy Carman, Colin Carter, James Chalfant, Tina Saitone, Richard Sexton, and Navin Yavapolkul, all from the University of California, Davis, participated in this project during the reporting period. TARGET AUDIENCES: Target audiences include industry decision makers, especially members of the boards of directors of the mandatory commodity programs. Sexton made presentations to the Hass Avocado Board and Mushroom Council during the reporting period. He also made presentations at dairy industry forums regarding the proposed production-quota program. PROJECT MODIFICATIONS: Lead PI changed from Julian M. Alston to Richard J. Sexton.

      Impacts
      ** Information on the effectiveness of advertising programs and which types of programs worked most effectively enabled decision makers for Hass avocados and fresh mushrooms to fine tune their programs. ** The dairy industry's proposed production-quota program was revised in response to the critique of its provisions.

      Publications

      • Saitone, Tina L. and Richard J. Sexton. "Impacts of Minimum Quality Standards Imposed Through Marketing Orders or Related Producer Organizations." American Journal of Agricultural Economics 92(2010): 164-180.
      • Saitone, Tina L. and Richard J. Sexton. "Supply Management for the U.S. Dairy Industry Opportunities and Challenges." Agricultural and Resource Economics Update 13(2009): 5-8.
      • Sexton, Richard J. and Julian M. Alston. 2009. The Giannini Foundation and the economics of collective action in the marketing of California farm products. @A. P.Giannini and the Giannini Foundation of Agricultural Economics@ / Warren E. Johnston and Alex F. McCalla, editors. Davis, CA: Giannini Foundation of Agricultural Economics, Department of Agricultural and Resource Economics, University of California, pp. 109-128.


      Progress 01/01/08 to 12/31/08

      Outputs
      OUTPUTS: Several studies were conducted under this project during the reporting period. (1) The economic impacts of minimum quality standards (MQS) imposed under authority of mandatory marketing programs were studied. MQS imposed voluntarily by a producer organization will cause the welfare of all consumers of the product to decline and will cause overall welfare to fall in a competitive industry. MQS may have value as a second-best tool to transfer income to producers nonetheless. In cases when an agricultural product producer organization can control volumes produced and marketed (acting in essence as a legal cartel), the organization will under-produce high-quality product relative to the social optimum. A minimum quality standard (MQS) may be a tool in these settings to raise social welfare. However, producer organizations are unlikely to impose welfare-enhancing MQS voluntarily in these cases, and the MQS that are imposed by such organizations based upon a profit criterion are likely to decrease the welfare of all consumers of the product, as well as social welfare. MQS may be used to erect nontariff trade barriers because countries can impose them to raise importers' costs. Empirical analyses of MQS imposed under U.S. federal marketing orders revealed little evidence of trade distortions induced by implementation or changes in MQS. (2) Economic impacts of mandatory commodity promotion programs were studied for U.S. fresh mushrooms and for Hass avocados. Results demonstrated a modest positive impact on sales for in-store promotions of fresh mushrooms. Avocado promotion was shown to have increased demand for avocados in the U.S. PARTICIPANTS: Individuals who worked under this project during the reporting period included Richard Sexton, Tina Saitone, Hoy Carman, James Chalfant, and Julian Alston - all from UC Davis. TARGET AUDIENCES: Nothing significant to report during this reporting period. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.

      Impacts
      In her dissertation research, conducted under this project, Tina L. Saitone (advised by Sexton) analyzed the impacts of minimum quality standards (MQS) imposed by agricultural producer organizations. MQS imposed voluntarily by a producer organization will cause the welfare of all consumers of the product to decline and will cause overall welfare to fall in a competitive industry. MQS may have value as a second-best tool to transfer income to producers nonetheless.

      Publications

      • Tina L. Saitone, "The Economics of Minimum Quality Standards Imposed by Agricultural Producer Organizations," Ph.D. Dissertation, Department of Agricultural and Resource Economics, University of California, Davis, September 2008.