S1067: Specialty Crops and Food Systems: Exploring Markets, Supply Chains and Policy Dimensions
(Multistate Research Project)
Status: Inactive/Terminating
S1067: Specialty Crops and Food Systems: Exploring Markets, Supply Chains and Policy Dimensions
Duration: 10/01/2015 to 09/30/2020
Administrative Advisor(s):
NIFA Reps:
Non-Technical Summary
Statement of Issues and Justification
A. The Need as Indicated by Stakeholders: Following the guidelines, we identified three Southern Association of Agricultural Experiment Station Directors Priority Areas (http://saaesd.ncsu.edu ) and particular subtopics that this project will target with its objectives and plans of work. These include: 1. GOAL: AN AGRICULTURAL SYSTEM THAT IS HIGHLY COMPETITIVE IN THE GLOBAL ECONOMY a. Integrated and sustainable agricultural production systems b. Competitiveness in international markets c. Public policy and economics of agricultural production systems 2. GOAL: A HEALTHY AND WELL NOURISHED POPULATION a. Nutritional quality of plant and animal food products b. Food choices for optimum nutrition and individual health c. Functional foods for enhancing health 3. GOAL: ENHANCED ECONOMIC OPPORTUNITY AND QUALITY OF LIFE FOR AMERICANS a. Economic and policy analysis of agricultural industrialization b. Agriculture-related social and consumer concerns In addition to our objectives aligning with the priorities for the region, committee members drew on their working relationships with industry associations and programs in their state/region to frame the research that is currently conducted and will be planned for the committee's future collaborative work. B. The importance and extent of the problem. What would be the consequences if the work were not done? Fresh fruits and vegetables have important roles in the efforts to reduce obesity rates and improve dietary habits in the United States (Cook, 2011). Demand for fresh produce has been increasing in the United States and is expected to continue growing due to governmental efforts to increase produce consumption per capita as well as an increased number of marketing and promotional messages focusing on the benefits of eating fresh fruits and vegetables (Cook, 2011; Food and Nutrition Service, USDA, 2015; Huang and Huang, 2007; Clemens, 2004). Between 1987 and 2011, U.S. per capita consumption of fresh fruits and vegetables rose 14% (U.S. Department of Agriculture, Economic Research Service, USDA-ERS). A large percentage of retailers have indicated that the role fresh produce play in healthy diets have finally translated into sales growth, with many produce departments showing fresh produce sales growth that is double the total store sales growth in recent years (Progressive Grocer, 2014). The increased popularity of fresh produce represents considerable potential for enhanced marketing revenues to producers if they can recognize and harness opportunities emerging from changes in food purchases. Meanwhile, producers and consumers need to be informed about the emergence of new business strategies, regulations and policies that may influence their confidence in (consumers) and competitiveness within (producers) this quickly innovating food marketing sector. An example of these regulations is the Food Safety Modernization Act (FSMA), which implicates new quality assurance and safety measures across the entire food supply chain (USFDA, 2011). The FSMA will also help to reduce food safety incidents, which reduce demand. In recent years, a large number of consumers have shown increased interest in foods produced in unique ways, including organic, local, pesticide free, free of genetically modified organisms (GMOs), environmentally sustainable, Fair Trade or as functional foods (Schroeder, n.d.) These individuals and households are also fueling changes in the food system as they seek to purchase their produce through diverse channels ranging from direct markets, e.g. on-farm markets, farmers’ markets, community supported agriculture, pick-your-own, and roadside stands, to more traditional supermarkets, warehouse clubs, and big box stores (Low and Vogel, 2011), and with expectations as broad as picking their own produce to highly branded products with 3rd party certifications. This evolution has led a higher number of farmers to consider new ways to market their produce such as farmers’ markets, farm-to-school and farm-to-institute programs, food hubs, and CSAs (Low et al., 2015). Still, the majority of fresh produce is marketed through more conventional, large-scale wholesale and retail partners (Bond et al., 2006) who are concerned about the efficiencies that such scaling-up strategies provide (Cook, 2011). Despite the belief that the fruit and vegetable segment of the food market is growing, little is known about the response of increasingly demanding consumers and food supply chain partners, the changing coordination and supply chain responses of fruit and vegetable enterprises or the response to regulations and policies developed to oversee and guide new innovations in this sector. In short, if this work is not done, producers, wholesalers and retailers are likely to remain reactionary to domestic and global shifts in consumer behavior and policy may be developed without a full assessment of potential implications for consumers and producers. ? C. The technical feasibility of the research Members of this committee have a history of developing industry and governmental partnerships to solicit priorities and research collaborations within their states and nationally. Moreover, past projects and publications illustrate their ability to secure the necessary secondary data, framing primary survey instruments, and developing case studies that are appropriate for the needed research. However, each type of research approach the team members will implement (survey, experimental auctions, analysis of secondary retail scanner data) has its challenges and limitations. One value of working together is that the team can share and get feedback on survey instruments, seek out cases where different approaches conducted by different teams reinforce others’ findings using a different approach, and joint problem-solving about how to isolate the consumer behavior aspects that are often masked in commonly used sales data. Firms have retail scanner data, so researcher-firm data sharing agreements can be mutually beneficial. It is possible to perform actual “field experiments,” which allow for exciting opportunities for the researcher to gain insights outside of the lab. We see few barriers to completing the proposed research, and state members will secure the resources needed to carry out more targeted projects from competitive grant and industry contract proposals. For example, by working together, committee members have grown industry participation in the MarketMaker program, so that there is a more complete online platform of food businesses in at least twenty states of the U.S. (https://foodmarketmaker.com/). In another case, a research team led by the University of Kentucky, and sponsored by the USDA Agricultural Marketing Service, was able to complete a survey and focus groups focused on CSAs because the lead PI could call on colleagues in this committee. D. The advantages for doing the work as a multistate effort There are several reasons to believe that a multi-state approach is needed. But the most important is the fact that fruit and vegetable issues have a less traditional role in most Agricultural and Applied Economics programs, so that few of our members have a critical mass of colleagues in their own state with whom they can collaborate. Hence, this may help to leverage any one state's programming on specialty crops through cross-state partnerships. Moreover, with fruits and vegetables being seasonal, we find that many of us have producer stakeholders and food chain partners that have a presence in a number of our states, to assure more year-round supplies. Thus, many of our jurisdictions overlap in terms of stakeholders. We also believe that a multistate approach is justified in terms of pooling research expertise and leveraging the impact of our deliverables through high profile venues. Three examples of this collaboration that occurred in the current project include: • Sharing of survey instruments and experimental auction scripts from past studies that serve as "best practices" and to make results collected in the future more comparable across state studies • Numerous joint paper sessions at agribusiness, food distribution, agricultural economics, and food system conferences • Two "Special Issue" journals that compiled work completed by committee members • The Agricultural Marketing Services Technical Assistance (AMSTA) project, co-led by committee member Kynda Curtis, and involving three other members, to provide grant writing support to farms and food processors in 2015 • A member at the University of Kentucky leads an effort that compiles pricing information collected at Kentucky farmers’ markets. A member at the University of Tennessee is also involved in this effort http://www.uky.edu/Ag/CCD/farmersmarket.html Specifically, this project has developed team objectives consistent with NIFA and other USDA priority themes and invited new members in an effort to strengthen the opportunities for joint grant projects, research delivery and coordinated outreach with industry stakeholders. This team will develop at least one multi-state research project in the first 24 months, with the intentions to target the proposal for NIFA’s AFRI or Specialty Crops program. In addition, because many of the committee members also have extension roles, we plan to collaborate on three to four Agricultural Marketing Service grant proposals or cooperative agreements to support farmers’ markets, local foods, and price discovery in alternative markets. E. Benefits or impacts of the research including impact on science Consumer demand drives the marketplace. For example, sales of organically-certified foods have grown by approximately 20% per year over the last decade. Expectations for firm’s ethical conduct, food quality, and anxieties over food risk are all increasing. At the same time, consumers want to make a difference with their purchases. This has resulted in an abundance of food standards, certifications, and labels with claims concerning socially responsible production characteristics, geographic origin, organic status, and other attributes, as firms try to position their products in the market for high-value foods. Many of these attributes relate to environmental and social concerns, including such aspects as “fair-trade” for fair treatment of workers, humane treatment of domestic animals, minimizing the distance food is transported, wildlife and biodiversity preservation, and sustainability. Agricultural sustainability incorporates both the basic notion of preserving productivity and continuing land in its agricultural use. Subsequently, the USDA, food companies, and university researchers and extension specialists are providing more technical assistance, development resources and programs to support producers and food manufacturers interested in developing products with these attributes. However, these programs need to focus on consumer behavior towards such labels and the need to better understand how consumer perceptions are influenced by various types of marketing information (including differential nutrition, food safety, implied economic implications to family farms, carbon footprint of different production systems). Better understanding of food labeling strategies offers significant benefits to other scientists involved in food manufacturing and processing, as well as researchers in the health science arena that examine the consumer health consequences of food and nutrient intake. On a similar theme, other marketing, labeling, and supplying chain innovations, driven by an increasingly demanding consumer, have emerged without a clear understanding of what motivates consumers and industry partners to value them. Moreover, the implications for market opportunities, conduct, and performance are not well understood. A significant benefit of research proposed in this project is to provide such analyses. In general, third-party certifications supported by consumers' requests for assurances are on the rise. For example, country of origin labeling and carbon footprint labels have emerged in just the past couple of years as a way to share information on the source and environmental implications of a product's life cycle. The Fair Trade certification program, non-profit organization, helps ensure fair wages and labor conditions for poor farmers in developing countries, along with supporting environmental sustainability. The Rainforest Alliance is another certification program that works to preserve biodiversity and sustainable agriculture on over 1 million acres in 18 countries. All of these labels and programs require the appropriate amount of consumer research to understand how consumers will respond to labeling and how adoption will affect producer profits. Grocery stores have their own buying standards and some require third-party certifications of some type. For example, Whole Foods Market, Inc. has a policy of not purchasing GMOs. Whole Foods has also instituted a Whole Trade certification program, which is focused on ethics, the environment, and product quality. Overall, certification programs may help food producers gain access to some retail and marketing partnerships they could not have otherwise. Certifications may also result in additional price premiums, but there is little research on the returns, market performance implications, or financial outcomes of these programs for enterprises along the produce supply chain. It is also not clear how these firm-level marketing tools affect produce sales at competing grocery outlets and, more generally, how they impact total sales of fresh produce in the U.S. Again, this is an empirical question that requires consumer research to fully understand. Project team members will also update studies along more traditional produce marketing issues, including consumer demand studies, trade studies, and supply chain case studies. Some of these studies may be refined to include new market innovations. For all these studies, there are benefits to businesses, government agencies, and technical assistance stakeholders who seek to improve the performance of the industry with better information and assessment of areas where market performance could be more efficient or effective. F. Identify the stakeholders, customers, and/or consumers for which the activity is intended Our numerous stakeholders, partners, and consumer activities can be generalized into two broad categories: 1) production/marketing/salesenterprises (primarily) and 2) consumers. Production enterprises include trade organizations, individual producers, packers, distributors, shippers, and retailers, with some attention to the regulatory agencies, certification organizations, and community organizations that support those producers. Our goal is to focus research on improving the performance, efficacy, or fairness of markets in the fresh produce sector. In addition to the AMSTA project mentioned previously, members have engaged their produce industries in projects that explore supply chain and marketing issues associated with a wide variety of produce, from potatoes to citrus to wine. One new area is an exploration of labor supply issues in New York and Colorado that indirectly affect marketing because of concerns about consistent harvest and post-harvest labor supplies. We also have a focus on institutional buyer and consumer behavior, which we will continue to strengthen given the new focus on direct marketing and local food systems. Projects in Hawaii, New Jersey, New York, Pennsylvania, Washington, and Colorado are currently exploring consumer preferences for fresh produce, cider, and wine. Although there is no direct government representation in this project, numerous states have current cooperative agreements, grants and projects with local, state and federal agencies who are focusing on marketing, supply chain and consumer issues (planning commissions, marketing divisions, economic development groups, state departments of agriculture, and NIFA, AMS, ERS, ARS, RD at the federal level). Because of these collaborations, government officials are commonly co-authors and reviewers of published research, and provide talking points or discussant comments at presentations given at conferences, including the Food Distribution Research Society where we commonly hold our annual meeting.
Related, Current and Previous Work
An overview of CRIS Search Searchers were conducted using several different key terms, including: produce, marketing, supply chains, and consumer demand. Results showed many complementary studies, with a significant share in the states (and with partners) that also participate in this project: 1) Fresh produce supply chain. We found 14 records, with four active at this time – not including the previous S1050 project, and a majority in states or with investigators that directly or indirectly participate in this committee. 2) Fresh produce consumer demand. There were only 10 records and none with currently active. 3) Fresh produce and consumer behavior. This search revealed 37 records, a number related to the previous S1050 project. Many records overlapped with the previous search. 4) Fresh produce and health. Twenty-seven active and 33 terminated records resulted from this search; however, a majority focused on breeding and production issues. 5) Fresh produce and sustainability. A list of 11 records was found with most focusing on food safety, packaging, and controlling human pathogens. 6) Fresh produce and competition and Fresh produce and global. Both of these searchers identified 16 records, again, with the focus on post-harvest and packaging issues. This committee's relationship with other regional research committees Several research projects appear to complement our work, but are no longer active. They include: • NC219 Using Stage Based Interventions to Increase Fruit and Vegetable intake in Young Adults • NC222 Impact of Technology on Rural Consumer Access to Food and Fiber Products • NC 1036 NC1036: Research and Education Support for the Renewal of an Agriculture of the Middle • NE165: Private Strategies, Public Policies, and Food System Performance • NE185: Commodities, Consumers, and Communities: Local Food Systems in a Globalizing Environment • NE183: Multi-disciplinary Evaluation of New Apple Cultivars • NE505: Private Strategies, Public Policies, and Food System Performance • NE1008: Assuring Fruit and Vegetable Product Quality and Safety Through the Handling and Marketing Chain • NE1012: Sustaining local food systems in a globalizing environment: Forces, responses, impacts • NE1023: Improving Plant Food (Fruit, Vegetable and Whole Grain) Availability and Intake In Older Adults • S1016: Impacts of Trade and Domestic Policies on the Competitiveness and Performance of Southern Agriculture (S-287) Some of our members have served on these committees in the past, and priorities that resulted from work in those teams influenced the objectives chosen for this project. There are also several projects that are current and that may be useful for us to interact with, or reach out to, as our work progresses. They are grouped by topics below (e.g. local foods, competitiveness) with some narrative on the current linkage with our group, where available: Local Foods NC1033: Local food choices, eating patterns, and population health Competitiveness NC140: Improving economic and environmental sustainability in tree-fruit production through changes in rootstock use NE1020: Multi-state Evaluation of Wine Grape Cultivars and Clones • Several S1050 partners actively work on wine grape marketing issues and continue to look for specific means to link with corresponding production research. NCCC212: Small Fruit and Viticulture Research S294: Quality and Safety of Fresh-Cut Vegetables and Fruits • We have had no previous relationships with these committees, but a goal of the new project will be to explore how more production oriented work may inform some of the committee's research on competitiveness. This may help to expand the suite of budgets developed for extension audiences and locate high priority pricing and marketing research questions these specific produce sectors identify. Supply Chains, International Competitiveness, Certifications and Labeling WERA072: Agribusiness Scholarship Emphasizing Competitiveness NCERA210: Improving the management and effectiveness of cooperatively owned business organizations S1043: Economic Impacts of International Trade and Domestic Policies on Southern Agriculture • We have at least one member that overlaps the first two committees, and peers that we work with on the third. A number of joint activities from the previous S1050 committee are highlighted in the section below, organized by major issue. Joint S1050 Activities In 2006, participants from 11 states joined together to highlight committee work in a special thematic issue of Choices. • Govindasamy, R. and S. Thornsbury. 2006. Fresh produce markets: Critical trends and issues. Special Theme for Choices, 4th Quarter, 21(4): 225-227. http://www.choicesmagazine.org/. Individual papers included: • Keeling Bond, J. D. Thilmany, and C.A. Bond. Direct marketing of fresh produce: Understanding consumer purchasing decisions. • Govindasamy, R., A. Nemana, V. Puduri, and K. Pappa. Ethnic produce marketing in the Mid-Atlantic States: Consumer shopping patterns and willingness-to-pay analysis. • Fonsah, E.G. Traceability: Formulation and implementation of an economic efficient system in the fruit and vegetable industry. • Carman, H.F. Preventive health maintenance information brought to you by your local fruit and nut producers. • Thornsbury, S., R. Hinson, L. Martinez, and D. Watts Reaves. Fresh produce intermediaries: Impacts of change in away-from-home food markets and trade practices. • Hall, C., J. Brooker, D. Eastwood, J. Epperson, E. Estes, and T. Woods. A marketing systems approach to removing distribution barriers confronting small-volume fruit and vegetable growers. In 2005, members of the committee organized a joint session at the 2005 Annual Meetings of WCC-72. Session Title: Produce Supply Issues and Challenges. • Returns to investment analysis on state agricultural promotional program: The case of Jersey Fresh. R. Govindasamy. • An assessment of direct marketing venues for Indiana fruit growers. Dennis, J., P. Hirst and B. Bordelon. • Fresh produce supply chain trade practices. Martinez, L. and S. Thornsbury. • Cost-benefit analysis of new shipping technology applied to international tomato and mango supply chains. Ge, J., A.F. Wysocki, B. Welt, and L. House. In 2014, five S1050 members participated in a co-sponsored session, “Innovations in Short Supply Chains for Horticultural Products” at the WERA-72 meetings. The following is a list of presented papers, which will also be included in an upcoming issue of the Journal of Food Distribution Research. • Woods, T. The Evolution of the CSA Business Model. • Curtis, K.R., K. Allen, and R.A. Ward. Food consumption attitude and behavioral. • Stearns, J. Dollars for Dollars – Comparing research funding levels and relative sales data for select direct marketing supply chains and differentiated food products. • Deng, X., L. Noguiera, S. Yang, and T. Woods. Local wine expenditure determinants in the Northern Appalachian states • Morgan, K. Using audience response systems for extension programming impact evaluation: Findings from Market Ready Farm-to-Restaurant Workshops conducted in Mississippi and Arkansas. Members from New Jersey, New York, and Pennsylvania, along with other researchers, were awarded a USDA Federal State Marketing Improvement in 2012. Research focused on assessing interested in mid-Atlantic wines, promotions and social media tools consumers use to connect with wineries. Outputs to date include: • Oral presentations presented at the 2014 Food Distribution Research Society annual meeting. • A series of blogs and podcasts written help wineries and tasting rooms develop or enhance their marketing strategies. In 2012, S1050 members organized a joint-session at the annual Food Distribution Research Society meeting in San Juan, Puerto Rico, on October 16, 2012. • McCluskey, J.J., C.A. Durham, B.P. Horn, and R.C. Mittelhammer. Valuation of internal quality characteristics. • Kelley, K. and R. Govindasamy. Developing the foundation for ethnic greens and herbs research: Consumer focus group and intermediary survey results. • Govindasamy, R. and Kelley, K. Ethnic crop opportunities for U.S. farmers. Between 2009 and 2013, members from New Jersey and Pennsylvania and other East Coast researchers completed a research project: Locally grown ethnic greens and herbs: Demand assessment and production opportunities for east coast farmers. The project was funded by the Specialty Crop Research Initiative, National institute of Food and Agriculture, USDA. Peer-reviewed journal articles include: • Govindasamy, R., V. Puduri, K.M. Kelley, and J.E. Simon. 2014. Increased purchases of locally grown ethnic greens and herbs due to concerns about food miles. Journal of Food Distribution Research Society 43(3):428-440. • Kelley, K., R. Govindasamy, and J. Hyde. 2012. Using On-line Bulletin Boards to Gather Preliminary Information. Journal of Extension 50(6). Additional joint papers • Costanigro, M., C. Bond, and J. McCluskey (2012). Reputation Leaders and Quality Laggards: Incentive Structure in Markets with Private and Collective Reputation. Journal of Agricultural Economics 2(1):245-264. • Govindsamay, R. and K. Kelley. (2014). Agritourism Consumer’s Participation in Wine Tasting Events: An Econometric Analysis. International Journal of Wine Business Research 26(2):120-138. • Holcomb, R.B., M.A. Palma and M. Velandia. (2013). Food Safety Policies and Implications for Local Food Systems. Choices 28(4). • Lamie, R. D., R. Dunning, E. Bendfeldt, J.M. Lelekacs, M. Velandia and L. Meyer. (2013). Local Food Systems in the South: A Call for a Collaborative Approach to Assessment. Choices 28(4). • Li, J., M.I. Gómez, B.J. Rickard, and M. Skinner. (2013). Factors influencing adoption of integrated pest management in Northeast greenhouse and nursery production. Agricultural and Resource Economics Review. 42(2):310–324. • McCluskey, J.J., B.P. Horn, C.A. Durham, R.C. Mittelhammer, Y. Hu. (2013). Valuation of internal quality characteristics across apple cultivars. Agribusiness: An International Journal. Volume 29, Issue 2, pages 228–241. • Palma, M.A., K. Morgan, T. Woods, and S. McCoy. (2013). Response of Land Grant Universities to the Increase in Consumer Demand for Local Foods in the South. Choices 28(4). • Rickard, B.J., T.M. Schmit, M.I. Gómez, and H. Lu. (2013). Developing brands for patented fruit varieties: Does the name matter? Agribusiness: An International Journal. 29(3):259–272. • Thilmany, D., D. Conner, K. Curtis, K. Liang, K. Mulik, J. O’Hara, M. Sullins and T. Woods. (2013). Researching Market and Supply Chain Opportunities for Local Foods Systems: Setting Priorities and Identifying Linkages. Journal of Agriculture, Food Systems, and Community Development, 3(4):131-137. • Woods, T., L. Noguiera and S.Yang. (2014). Linking Wine Consumers to the Consumption of Local Wines and Winery Visits in the Northern Appalachian States, International Food and Agribusiness Management Review 16(4):181-204. • Woods, Tim, L. Nogueira, and S. Yang. (2013). Linking wine consumers to the consumption of local wines and winery visits in the northern Appalachian states. International Food and Agribusiness Management Review. 16(4):181-205. Competitiveness and Performance of Supply Chain Activities The main objective of supply-chain management is to minimize time and cost from supply chains, improving profitability and/or competitiveness, which is possible through utilization of technological advancement such as computing hardware, software, and other current electronic technologies. In supply chain management systems everything from raw materials to finished product is produced on demand and delivered "just in time" to the next stage of production. Past work reported in S1019 International Trade and Industry Issues • Researchers examined status of trade policies (including tariffs) on U.S. tart cherry products moving into the EU, particularly Germany and Belgium. These measures can have a trade distorting impact as large, or larger, than traditional tariffs. • Studies have addressed the structural changes of the produce industry. One study from Georgia concentrated on the Structure of the Fresh Fruit and Vegetable Industry. A study found no evidence that the U.S. produce industry has changed over the past 25 years. • Recent work has explored how the Michigan produce industry should position themselves for survival to address aggregate global economic forces impact the current growth stage. Ohio has explored similar issues and the teams are collaborating more on what they can learn from one another, along with Kentucky, another state partner. • Researcher found that consumers were willing to pay a premium for product labeled as "U.S.A. Grown." Assessing Consumer Preferences and Demand • In a project led by Washington, partnerships with a food service enterprise manipulated kids' meal offerings with more healthful alternatives to see if such interventions in the supply chain will increase the incidence of produce consumption among at-risk youth populations. • A few projects in Oregon, Washington, and Colorado matched nutritional claims with other label information to assess part worth values of the nutrition information, using surveys and experiments. • In Delaware, researchers conducted an online fresh market consumer preferences survey to 1) identify the types of farm fresh product offerings preferred by consumers and 2) identify specific market niches that may be available to farm fresh marketers including online product offerings. • The North Dakota State project team began work on determining the consumer's value of a "Northern Great Plains" organic/natural dinner plate. Using local scanner data, demand for organic versus traditional will be revealed. Innovations in Marketing Strategies • The organic research program for blueberry production in Florida and Georgia focused on different mulching techniques to determine success in growing organic blueberries. • A Colorado State University study identified the determinants that producers must take into account when selling fresh produce direct to consumers to succeed. • A Michigan project addressed critical issues faced by small farms that are new entrants to the market. • A New Jersey examined the ethnic produce market in the east coast states of United States, from Florida to Maine. • A Florida project worked on improving quality and freshness of produce to compete with non-local supplies. • Multi-state budgeting in cooperation with Mississippi, Alabama, Tennessee, and Arkansas provided a common base of input files to assist with assessment of regional competitiveness. Innovations in Marketing Strategies The United States' produce sector is under pressure. The competition among retailers and discount chains plays a strong role in the determination of market prices. The increased competitive pressure arising from intra-regional produce trade, particularly imports from neighboring countries, are making the produce sector more complicated. There are places where team members are focused on interdisciplinary efforts that need economic assessment of different cropping and marketing alternatives. The organic research program for blueberry production in Florida and Georgia focused on field trials with different mulching techniques to determine the most effective and efficient way of growing organic blueberries. Data collected will be subjected to a comprehensive economic analysis aimed at determining cost of production, yields and profitability. The cost analysis will be crucial in determining the market structure and profitability of organic blueberries. Assisting vegetable growers in the adoption of methyl bromide alternatives for weeds, diseases, and nematodes are also focus of this project. • A Colorado State University study (Bond, Thilmany, and Bond) indicates that producers selling fresh produce direct to consumers may be able to increase patronage by offering diverse, nutritionally enhanced, locally grown produce; located near consumers in target markets; promoting freshness and vitamin content aspects of produce; showcasing colorful produce on-site while enhancing overall visual appeal of offerings; and finally advertising via food and nutrition electronic newsletters and email, blogs, and when practical, local television. • Much of Michigan's blueberry production is held by recent new entrants and takes place on small farms. Small growers often report limited knowledge and access to agricultural market information. In addition many of the new growers are Latino farmers where barriers such as language and cultural differences may represent an additional marketing challenge. • The North Dakota and Northern Great Plains potato industry led researchers to investigate regional shifts in United States potato production and processing. Similarly, Maine has seen a shift in its potato industry and team members may share results to leverage the impact of both. A Florida project worked on improving quality and freshness of produce to compete with non-local supplies. This analysis is only more important in light of recent food scares and the call for either more regulatory oversight, or joint industry programs to provide consumers with greater assurances. • Georgian MALTAG Regional Enterprise Budgets for Organic Vegetables Project budgeting and cash flow analysis are integral parts of assessing costs, financial planning and risk management for agricultural producers. Multi-state budgeting in cooperation with Mississippi, Alabama, Tennessee and Arkansas provides a common base of input files to assist with assessment of regional competitiveness. Additional Research As an emerging issue for the committee to study, country-of-origin-labeling (COOL) provisions for fresh fruits and vegetables were included in the Farm Security and Rural Investment Act of 2002. These may be the most wide-reaching example of a new labeling program that will have demand, supply chain and marketing strategy implications akin to the focus of this project's proposed focus. The benefits of COOL will need to be significant to offset increased costs if the cost of implementation is indeed that high. USDA (2008) suggests that available studies indicate that the potential benefits of COOL will likely be small. They concluded that there is little tangible evidence found to support that consumers' stated preferences for COOL information will lead to increased demand for commodities bearing a U.S.-origin label. If correct, COOL is not likely to be of great benefit to consumers or producers, creating a burden on both and resulting in higher prices to consumers and lower returns to producers. Some analysts (Krissoff et al., 2004) have questioned the value of labeling given the infrequency with which voluntary country-of-origin labeling was observed. They conclude that lack of use of voluntary labeling programs suggests that food suppliers see little or no advantage in labeling domestic products as domestic. Several consumer preference surveys (including those conducted by committee members) have shown that consumers desire COOL, with stated preferences as high as 84 percent for respondents who would like markets to provide information about country of origin of fresh produce (Puduri, Govindasamy, and Onyango, 2007). Other studies (Mabisco, Sterns, House and Wysocki, 2007) have indicated that consumers were willing to pay a premium for product labeled as "U.S.A. Grown". One study (Plastina and Giannakas, 2007) indicates that consumer demand for apples would need to expand 2.6 to 7.0 percent to pay for the added cost of COOL, while tomatoes would have to increase 8.2 to 22.4 percent. These estimates are dependent on the higher costs of implementing the labeling program.
Objectives
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Develop demand and market valuation models for the produce sector that can be used to evaluate effects of increasingly complex product differentiation schemes (organic, enhanced health claims, biodynamic), trade, commodity marketing programs, labeling programs (local, food miles, Fair Trade), traceability systems, and food safety events in the U.S. produce markets.
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Analyze the relative benefits and costs, to producers and consumers, of government and industry-led marketing and policy programs (certifications, Country of origin labeling, farmers markets, California/Arizona Leafy Greens Marketing Agreements) using both theoretical approaches and empirical evidence from multi-state applied research projects.
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Assess the changing coordination and supply chain management strategies being implemented in the fruit and vegetable sector and identify strategic organizational and marketing implications for a set of firms that are diverse in terms of commodity, marketing approach and size of operation (including small and mid size farms).
Methods
In this section, we discuss methods that correspond to each of the preceding objectives. First, we discuss methods that can be utilized to evaluate effects of increasingly complex product differentiation schemes. Consumer expectations for quality in produce markets are increasing and, at the same time, consumers expect increasingly customized products. Many simple commodity markets have evolved into highly differentiated product markets in order to fulfill heterogeneous consumer preferences. This customization of purchases has implications for economic theory and estimation, especially how researchers analyze markets. Approaches that perform well for examining markets for food commodities are not necessarily efficient to understand markets for differentiated food products. For example, a single grocery store may carry 14 varieties of apples, with conventional and organic versions of each variety. If one were to estimate the cross-price effects for this category, then one would need to estimate 784 (28 x 28) parameters. The logit demand model (McFadden, 1973) solves the dimensionality problem by projecting the products onto a space of characteristics. Researchers from Colorado, Florida, Illinois, New Jersey, Oregon, Utah, Pennsylvania, and Washington will use these methods to work cooperatively on models, surveying, and experimental approaches to improve the validity of market valuation estimates on a variety of produce claims (production origin, organic, nutrient claims, and other production protocols). As the methods used evolve (as discussed below), the group will collaborate on marketing studies, identified by industry and nongovernmental organization groups as high priority, to evaluate consumer preference and behavior. Various approaches have been used to examine differentiated markets. Anderson, de Palma, and Thisse (1992) identify three different types of models of demand for differentiated products. They are random utility models, representative agent models, and hedonic price models. The theoretical foundations of discrete choice models lie in the random utility model approach. These models are utilized in many stated preferences approaches to valuation, such as contingent valuation and conjoint analysis. Detailed information on product quality attributes is often missing in traditional sources of food consumption data. Consumer surveys, choice experiments, and auctions are increasingly utilized to elicit preferences for new foods, technologies, and policies. Researchers who are interested in the impact of environmental, ethical, or health motivations on organic or eco-label purchases have used various strategies to elicit information about the strength of individual's values and concerns. Some of this work is cited in the previous work of this research committee (presented above), but new committee members have been recruited who are innovating in this area. As one example, analysts have used a series of questions to elicit the strength of those motivations and convert them to a component score, which is a weighted linear combination of the original variables using principal components analysis. This score can then be utilized as explanatory variables, as in McCluskey, Durham, and Horn (2009). Researchers from Oregon and Washington will lead efforts that also include Colorado, Illinois, and Utah in applying these methods to a broader set of produce categories. More recently, agricultural economists have used choice experiments to directly investigate how consumers’ beliefs influence food choices (Costanigro, Deselnicu, and Kroll, 2015). In produce marketing applications, there are often a large number of product offerings with a wide variety of product characteristics. In order to make policy statements about optimal product assortment or design of new products, it is important to allow for product characteristics or attributes to enter the utility function. Once product characteristics are considered as drivers of utility, one can consider a characteristics approach to demand. Random coefficient models have contributed to the methodology of estimating demand systems based on product characteristics. These include dimensionality problems and taking care of price endogeneity. There is consensus emerging from both the developers and appliers of these models to treat product characteristics as endogenous. As with price, product characteristics are typically choice variables of firms, and as such one might worry that they are actually correlated with unobserved components of demand. Several S1050 researchers have included sensory testing of products along with information on production, nutritional, and other attributes (Costanigro, Kroll, Thilmany, and Bunning 2014; Durham, Wechsler, and Morrissey 2015; Zhang, Gallardo, McCluskey, and Kupferman 2010). Inclusion of sensory testing lends greater authenticity examination of purchase intent. This approach is especially helpful in production choices for new produce varieties or in testing post-harvest treatments. At the 2014 S1050 meeting several researchers (Kentucky, Ohio, Utah) agreed to test a procedure developed by Durham (Oregon) that pairs a simplified consumer test with purchase intent evaluation (Durham, Colonna, Long, and Masoni 2015) which will help value-added producers and entrepreneurs evaluate potential offerings in farmers markets and similar environments. The hedonic price technique has been utilized to understand the implicit prices of product characteristics for foods, including in the produce sector. The hedonic approach can be an effective tool to isolate the premium for "credence good" product characteristics such as organic certification, local, and geographical indications. However, as noted in several studies, price hedonic techniques must be used with great attention to supply and other local factors (Brown and Rosen, 1982; Nerlove, 1995; Rosen, 1974). Given the focus this project would have on these attributes, we plan to coordinate hedonic analysis across product categories, and possibly regions, where data are available, and ensure that methods are coordinated to control for differences in premium values due to time period and regional supply aspects. Researchers from Colorado, Georgia, Kentucky, New Jersey, Oregon, Pennsylvania, South Carolina, and Utah will focus on emerging local market designations and other product characteristics and integrate them into consumer demand and valuation analyses using these techniques. One approach that has become increasingly popular and effective involves economic experiments. Economic experiments allow researcher to randomize treatments (e.g. information), allowing a more direct investigation of how consumers (or producers) respond to changes in prices, products, policies, promotional efforts, and other marketing factors. Many of the current and new members in this regional research group have access to labs designed for experimental economics and decision research, and there may be room to replicate, or expand the number of treatments within an experiment across institutions. A subgroup of the committee intends to coordinate experiments across states (all which have their own programs) from this point forward so that comparative analyses are also possible. More details on the approach may be informative. In most cases, subjects are given an endowment and during the experiment they bid on products in a series of auctions; therefore, experimental methods avoid the problem of hypothetical bias because the participants actually pay for the products on which they bid. Methods that were originally developed in the field of marketing can be utilized in economic experiments to obtain incentive compatible responses. In willingness-to-pay (WTP) experiments, incentive compatibility implies that it is in the participants’ best interest to reveal their truthful valuation or preferences. After each auction, subjects complete a short survey to elicit revealed preferences for auctioned items, impressions of any information presented in the experiment, and various pieces of demographic information. These data are used as explanatory variables along with the treatment variables in an econometric model. A common model used to test various hypotheses for the treatment groups is a two-limit random-effects Tobit model. Furthermore, many "field experiments" or "natural experiments" will be utilized by cooperating with grocery stores that can make scanner data available to researchers. These markets are also an ideal environment to incorporate data from other fields, such as sensory science. Researchers in Colorado, Florida, New Jersey, Oregon, Utah, and Washington will work in this realm, which is also complementary to Objective 1. From an empirical point of view, the dependence upon product characteristic space offers the opportunity to use spatial statistical techniques to take advantage of the pervasive spatial autocorrelation among residuals from hedonic pricing models. The use of spatial information helps to control for omitted variables correlated with space. Such variables in produce markets could include location of production origin (especially important for products that rely on collective reputations such as wine, and preferences for local products), preferences for organic foods and other socially responsible food attributes, and the general availability of variety. Agricultural and applied economists increasingly recognize the value of incorporating economic questions and procedures into interdisciplinary projects. For example, economic experiments can be included in tasting experiments to understand how much consumers value taste, mouth feel, and other palatability attributes, and how these factors change and adapt over time with repeated experience. An approach that has merit for both looking at specific characteristics and specifically to the evaluation and introduction of value-added fruit and vegetable varieties is demonstrated in Durham, Weschler, and Morrissey (2015). In the study new varieties of color-flesh potatoes are compared in a consumer test (sensory) that includes purchase intent questions over a variety of prices. This method can be used to evaluate the impact of the information provided to consumers, about antioxidants in this case, and the premiums the new varieties provide. The combination of sensory and choice experiment also allows for the study of new technologies for example, Gallardo, Kupferman and Colonna (2011) examined consumer choices between pears receiving different storage treatments. The advantages of combining economic and sensory testing as a venue for analysis of new products is discussed more generally in Durham (2010). Participants from Georgia, Florida, Idaho, Indiana, Maine, Utah, New York, Oregon and the USDA will collaborate on fruit and vegetable demand analysis. Methods will include conventional and/or discrete choice demand analysis as well as state-of-the-art price analysis. Second, we discuss the methods that are needed to meet Objective 2: Analyze the relative benefits and costs, to producers and consumers, of government and industry-led marketing and policy programs. Researchers from Colorado, Florida, Kentucky, New York, South Carolina, Utah, and Washington will focus on examining the impacts of various governmental health, local food, and marketing order initiatives as well as share expertise on research design, and coordinate in at least one case where a similar marketing platform has been adopted, such as MarketMaker. Members in states that do not actively participate in MarketMaker do have access to other related database/mapping tools. For example, this project will be leveraged by the work completed by members from South Carolina who are evaluating the performance of MarketMaker and other similar tools. As opportunities present themselves, this group will position itself to provide third-party reviews of the features/benefits/merits of these various tools, and perhaps including the related programs and outcomes of networks these tools help create. We will also leverage existing investments (e.g. MarketReady, which was developed in Kentucky and used in several of our states) to develop even better research-based resources to improve our extension programs. When possible, we will include FSMA updates in order to help producers navigate changes in the food safety regulatory environment. Methods used to understand the benefits of industry-led marketing programs are also evolving. Economic experiments, most recently in auction style, are increasingly used to evaluate new products for industry. Methods used to estimate premiums for various produce attributes (as for objective one) can generate information useful in evaluating many government and industry led marketing programs. Beyond consumer-oriented research, members of the committee from Colorado, Florida, Georgia, Michigan, New Jersey, and New York will use estimates from past and on-going market studies to evaluate expected impacts of various policies that form, change, and evolve in produce markets, including, but not limited to country of origin labeling (COOL), food safety, and nutritional claims. Evaluating the effects of government policies has traditionally been done using partial equilibrium and general equilibrium simulation models that examine how policy-induced changes in demand and supply affect surplus measures for producers, consumers, and taxpayers. These methods rely on the specification of several parameters that describe various elasticities, market and cost shares, and policies; many of these parameters are widely available for grains and oilseeds but have been much less available for fruits and vegetables. However, given the increase in international trade patterns for specialty crops, there is renewed interest in collecting information about these parameters and understanding the effects of trade policies applied to horticultural products (e.g. sanitary and phytosanitary measures regulations). Developing such models for fruits and vegetables presents another opportunity for joint research projects among members interested in evaluating the effects of trade policies. On the supply side, there is increasing interest in understanding the costs of production and marketing, especially as the variety of production protocols and marketing strategies proliferate. Researchers from California, Colorado, Georgia, Idaho, Indiana, Kentucky, Louisiana, New Jersey, New York, Tennessee, Utah, and West Virginia will undertake research and outreach in this area. Research that examines the costs of government and industry-led marketing and policy programs has traditionally started with crop budgets that document detailed information about production costs and revenue streams for a representative farm. The target audience for crop budgets is various stakeholders (e.g. input suppliers and lenders, producers, handlers, and processors), who have used these resources to assess profitability issues in specialty crop markets. Crop budgets are now being developed with three innovative components: 1) the analyses now incorporate much more scale-appropriate information and results are provided for different farm sizes and for farms selling to different customers; 2) revenue streams are now more closely linked to WTP studies to highlight how changes in consumer demand affect farm-level profitability; and 3) crop budgets are beginning to consider interactions between biophysical, climatic, and management factors and the costs of production. Lastly, we discuss the methods that are needed to meet Objective #3: Assess the changing coordination and supply chain management strategies being implemented in the fruit and vegetable sector and identify strategic organizational and marketing implications for a set of firms that are diverse in terms of commodity, marketing approach and size of operation (including small and mid size farms). The analysis of coordination and management strategies entails a broad range of empirical methods including semi-structured case studies, descriptive assessments, econometric analysis, and simulation techniques. The particular method chosen will vary depending on the context of the specific issue and the data available. Coordination among researchers in multiple states will provide a richness of detail for comparison that is often not achievable through individual efforts. Outcomes are expected to include assessment of changing agri-food structure on competitiveness of U.S. industries. This information is critical for business success, either directly or indirectly, as the balance of power within the marketplace shifts. In Colorado, Delaware, Florida, Georgia, Idaho, Indiana, Kentucky, Maine, Michigan, New Jersey, New York, Utah, Ohio, Pennsylvania, Tennessee, and West Virginia team members will develop case studies and best practice research focused on how evolving marketing strategies (buy local campaigns, regional food hubs, organics, marketing orders and retail partnerships) impact the competitiveness and performance of fresh produce enterprises. Descriptive assessment of current fruit and vegetable market structure and production trends can provide a benchmark for further evaluation of proposed or enacted change in strategy. Case studies, anecdotal evidence, literature reviews, and statistical analyses are all tools likely to be employed in a descriptive model. Simulation methods may adopt game theoretic techniques to provide an analysis of strategic interaction between agents in an economy. Since even in cases where regulatory policies increase the net welfare of society there may be agents with individual welfare losses, producers, consumers, and policymakers have incentives to act strategically. Game theory allows such interactions to be modeled in a context of imperfect competition and can be used to analyze agents' behavior in domestic, bilateral, or multinational policy setting arenas. Results will contribute to a better understanding of the underlying market structure in fruit and vegetable industries, and may increase the multi-state research effort of transferring insights to other cases, firms, or industries. Anticipated outcomes include benchmark comparisons of U.S. firms and industries active in fruit and vegetable markets. Another example is to continue using established networks with the retail community (Colorado and Oregon), MarketMaker team (Colorado, Kentucky, Louisiana, New York and Virginia) and USDA Local Food systems network (Colorado, New York, Ohio, USDA-ERS, and West Virginia) to solicit institutional buyer perspectives and feedback on high needs areas for research relevant to those stakeholders. Possible changes in the market structure of the supply chain and competitiveness ramifications for the stakeholders of the produce industry will be analyzed by California, Georgia, and the USDA using case studies, descriptive assessments, and econometric/game theory frameworks. As consumer preferences evolve and globalization of markets continues, change becomes a certainty for U.S. fruit and vegetable industries, as they must constantly assess strategies for remaining (or becoming) competitive in fluctuating markets.Measurement of Progress and Results
Outputs
- Several realistic and substantial outcomes are expected from project members’ individual and combined efforts, which will be disseminated through peer-reviewed publications, association journal articles, popular press articles, extension presentations and organized research sessions. It is important to note that the team is not merely focused on scholarly channels, rather several members are committed to developing materials based on research outcomes that can be implemented by stakeholder groups. Thus, team members are expected to present their own and other’s work to industry associations, retailers, food processors, direct marketers, farm organizations, and interested consumer audiences at national, regional and state-level meetings. As a team, we hope to engage with one new and relevant stakeholder group within the first two years of our project. Potential groups include the Produce Marketing Association, the National Grocers Association, the USDA Know your Farmer, Know your Food working group, or state produce associations.
- The following is a list of deliverables that can be used to disseminate project results to applied and research audiences: 1) a diverse series of publications (e.g. journal articles, case studies, industry contract reports, fact sheets, extension bulletins, online publications, and webinars); 2) decision tools and policy briefs; 3) integrated data series and market databases that provide market assessment and coordination tools for stakeholders; and 4) presentations at professional, industry, and extension meetings.
- In addition members will: 1) Distribute survey instruments and experimental auction scripts in an effort to share “best practices†and allow for research results to be comparable across state studies. 2) Develop joint proposals for organized symposia through Agricultural Marketing, Agribusiness, Extension and Community Economics track sessions at future Agricultural & Applied Economics Association, and Food Distribution Research Society meetings. 3) Submit a proposal for a “special issue†to the Journal of Agribusiness, International Food and Agribusiness Management Review, or The Journal of Food Distribution Research in year three, and at least two other "theme" issues in the agricultural and applied economics or agribusiness fields over the life of the project. Other collaborative publications will focus on local foods, sustainable agriculture, direct marketing, and value-added agriculture. 4) Prepare and submit at least one multi-state grant proposal to a USDA National Institute of Food and Agriculture program based on one of the team’s specific objectives.
Outcomes or Projected Impacts
- The potential impacts of this work will be in three realms: 1) market information to enhance coordination among supply chain participants; 2) recommendations that can be used to improve marketing performance; and 3) insights on costs and benefits of value provided to policymakers who are considering oversight, grading, and certification programs to enhance market activities
- Previous work by committee members has been used by a broad set of stakeholders to make marketing and business planning decisions, inform strategic planning exercises, assess potential implications of proposed policy measures (e.g. COOL) and substantiate demand for growing market segments. Future work could include a focus on the Leafy Greens Marketing Agreements (LGMA), which were industry-initiated and established under state laws in California and Arizona. Drawing on supply chain research specifically related to food safety assurance, similar to that proposed in this project (in support of Goal 3 from CSREES), this team’s expertise could be used to evaluate LGMA performance. The research could also consider the implications of broader LGMA geographical coverage* and the potential for replication for other products.
- In another case, the need for COOL policies for the full array of food products was motivated by various studies conducted to evaluate potential consumer benefits from labels identifying the production source. Again, the team’s exploration of consumer values associated with labeling strategies could serve as the foundation for program evaluation. Finally, a small sub-team is interested in the economic impact of some niche supply chains (e.g. farmers’ markets, direct sales wineries) and this addresses CSREES goal 5, as any economic impact of reformulated food supply chains to minimize middlemen could provide important answers to the evaluation of these Know your Farmer, Know your Food approaches.
- This focus on economic impact and the new USDA program focused on “knowing your farmer†also connects well with the relationship several team members have with the Market Maker online directory of producers (a rich resource for assessing large and small stakeholders), eXtension’s increasing activity in the area of organic and local food systems outreach materials, and USDA personnel who have been compelled to develop programs in support of various market segments in the current Farm Bill.
Milestones
(2016): At least one coordinated project will be framed by the fall 2016 meeting, with proposals developed for 2017 USDA, industry or other (e.g., NIH, community health) grant programs.(2018): Once there are some initial joint research results and findings, at least one symposia will be organized at a major agribusiness, food industry or food policy conference by early 2019
(2020): The group will consider developing another special issue journal, devoted to one of our identified objectives, to be published by 2020.
Projected Participation
View Appendix E: ParticipationOutreach Plan
Results will be published in peer reviewed journals, extension publications, grower meeting proceedings, popular press publications, and available on the Internet. Committee members will make a special effort to participate in meetings targeting underserved populations including female, part-time and small and mid-sized producers, and other minority groups. A broad-based marketing plan will be developed to assist trade organizations and producers with using basic research. Business models and marketing strategies consistent with research will provide producers with the ability to assess the economic costs and benefits of adopting different marketing strategies, including various certifications, and distribution approaches. In addition, results on potential promotional advertising, education, or marketing materials will be shared through presentations and fact sheets to give an unbiased assessment of the feasibility of such marketing activities to individual producers or industry groups. MarketMaker has an area for each state partner to post case studies and best marketing practice fact sheets, as one possible outlet. eXtension is also a viable outlet for research outcomes. Several publications and extension bulletins of value and interest to both large and small farm producers and marketers throughout the U.S. will be developed, published, and posted on the Internet. There will also be several presentations to marketing, horticulture, and certification organizations. Several team members have had summaries of their research published in trade association newsletters, or they have been invited to present the findings at annual meetings. This is expected to continue within this project given the applied nature of the research.
Organization/Governance
The committee governance structure consists of a chair and chair-elect, both of which serve two-year terms. Nominations are requested in the fall semester with terms beginning in December. Duties performed by the committee leadership include organizing the annual meeting and requesting its authorization from the administrative advisor, conducting the annual meeting, completing and submitting the annual report, recruiting new members, and assisting with the organization of special issues in academic journals, symposia, presentation sessions, and similar research/outreach activities. Research planning and coordination will be conducted by establishing subcommittees for each project objective.
Literature Cited
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