Duration: 10/01/2003 to 09/30/2009

Administrative Advisor(s):

NIFA Reps:

Non-Technical Summary

Statement of Issues and Justification

The produce sector in the U.S. continues to grow. Markets, however, are increasingly complex with new distribution innovations, food safety issues, retailer and wholesaler consolidation, and a changing legal environment for commodity marketing programs. International sources of supply have become more important to U.S. buyers as consumers have demanded more variety and year around supplies. Each of these areas presents promising research subjects. Changing cost structures across competing production regions, new free trade policies being implemented and new technology being developed create a high demand for research on competitiveness, market structure, and innovation. Changes in the commodity marketing strategies, such as those employed by the Washington Apple Committee, will have significant impact on many horticultural commodities that have depended heavily on marketing orders. Research on the impact of changes in promotion strategies and the development of alternatives will become important questions to the S-222 research community.

While standard demand factors such as price, visual appearance, taste and maturity, and substitute availability remain important purchase criteria, undeniably value-added characteristics have influenced overall buying patterns. There is considerable demand for regional and national models to be developed for estimating demand for many of the fruit and vegetable commodities. Consumers are changing. There is a growing interest in the organic sector. There is also interest in produce origin demand among producers and retailers. New legislation and concern about unintended costs and consequences throughout the supply chain have pushed this issue to the forefront of need for research. The development of new value-added products, whether lightly process, better packaged, produced under distinctive production systems, or through new production technology can change relative competitiveness and distribution requirements within a supply chain. Supply system models that can estimate the marginal value of various attributes of current and newly developed products can help growers and others in the marketing system better position their products, but also help industry participants understand the impacts of various promotion strategies on different parts of the system.

Traceability is an emerging feature demanded in the U.S. produce system to ensure product safety, rapid response to related food borne illness, and distribution cost management. This feature is changing the structure of many markets and will impact small producers particularly. There are further important issues to be worked out as trace back systems are implemented, including international sourcing, technology adoption, and quality assurance measures.

County of Origin labeling is another contemporary marketing problem with broad implications to the many participants in the produce industry. Many research questions remain to be addressed, including the implications on current brands, cost and liability distribution through the supply chain, and brand value estimation from such branding strategies.

Market structure continues to shift toward larger producers that are becoming more horizontally and vertically integrated. It is increasingly difficult for the small producer to be profitable as size economies in certain marketing channels become more important. These producers are looking for more innovative ways to market their products while remaining either small or from minor production areas. Research on cooperative and other innovative market strategies for these producers helps develop a viable place for market participation by a more diverse group of producers nationally.

Sustainability has been a research topic in agriculture for the last several decades, but continues to be a subject of keen importance as technology, demand, and market structure change with respect to produce. Biotechnology, food safety, environmental impacts of certain production practices, and food security all relate directly to the produce industry of today. Many important research questions tie directly to these subjects.

The research problems associated with this project lend themselves well to regional collaboration. Data collection, work with produce industry leaders, and national supply chain networks typically involve regional or national effort. Further, many of the models and results developed for one commodity can be transferred with minor adjustment to commodities in other regions. Production and marketing infrastructure are typically viewed by those in the produce industry as regional or national and therefore the market research problems tend to require a regional or national perspective. Issues of trade rules, food safety, new product development, organic certification and marketing, consumer demand, technology and distribution cross state lines and, as past S-222 participants have demonstrated, lend themselves well to collaboration among scientists throughout the country. There are relatively few economists working in the area of produce marketing and the collaboration and sharing of research work helps greatly to leverage limited human resources to meet industry and consumer challenges in these markets.

Research on supply chains, competitiveness, and demand systems will be of particular interest to commodity groups and other actors in the supply chain (shippers, packers, wholesalers, foodservice, retailers). Organizations such as the Produce Marketing Association, The International Fresh Cut Produce Association, and The Food Marketing Institute, The National Restaurant Association, as well as growers organized around specific commodities, are keenly interested in research on produce supply chains, competitiveness, and demand. Consumer groups should also benefit from research that leads to better understanding of demand and marketing innovations that improve orderly development and performance of the various sectors. Government agencies developing trade policies will be interested in using this research to help guide federal purchase programs, marketing orders, and trade policies for the produce industry.

There are strong public-good characteristics to the proposed research and the benefits will accrue to diverse groups within our society. Given the diffuse nature of the potential benefits and the pervasive free rider problem, there is no incentive for commodity-group funding of this type of research. Potential beneficiaries include all of the participants in the fruit and vegetable production-marketing system, such as producers, shippers, processors, brokers, wholesalers, retailers, and consumers. The policy-relevant nature of the research also makes public policy makers important beneficiaries of the proposed research.

More specifically, consumer and marketing research provide for systematic evaluation of changes in long-run domestic and foreign consumer tastes and preferences as well as reactions to environmental impacts of the production-marketing system. Knowledge gained from such research signals changes in product form and changes in production, processing, and distribution methods while providing government agencies with important input for policy and regulatory changes.

Producers, processors, and marketers/distributors benefit from production and marketing research outputs which enable them to improve management decisions and efficiency. Consumers benefit from a more efficient production-marketing system and improved government policies and regulation resulting in an increased availability of safe, high quality fruits and vegetables at affordable prices.

The proposed research is based on advances in the body of knowledge accomplished under S-222, "Fruit and Vegetable Supply-Chain Management, Innovation and Competitiveness." Such advances included measuring the competitiveness of selected fruits and vegetables in domestic and international markets under an array of scenarios, measuring changes in demand and associated factors for selected fruits and vegetables, and examining important changes in the produce marketing system at various levels of the distribution system, such as wholesale, foodservice, and retail.
The proposed research redirects the efforts of S-222 for greater focus on research priorities under national emphasis areas (applied to fruits and vegetables). For example, the proposed research will contribute to the research priorities on: (1) Improving competitiveness in emerging local and global markets, (2) Understanding dietary patterns and related consumer behavior, (3) Compatibility of agriculture, natural resources, and environment, and (4) assessing the risks associated with ensuring food quality and safety.

In an economic setting these priorities are interrelated and cannot be isolated for study in a vacuum. Nevertheless, the task of a complete interactive economic analysis encompassing all of the priorities is not within the realm of possibilities. As a result, research emphasis and tasks must be divided among several researchers based on interests and comparative advantage.
This division of labor is all the more important in that there are over 300 produce items consumed in the United States involving numerous regional differences. Regional differences, for example, exist in growing conditions and methods, length of season, market windows, handling practices, market penetration, and market coordination. Moreover, expansion to the international realm increases exponentially the complexity of the research tasks at hand.

The proposed research can only be accomplished through the cooperation of researchers from various states. The sharing of vital and timely information, division of research tasks, and cooperation through a unified body are essential. The overriding goal is to marshal the diverse talents and interests of the members of the proposed regional project to carry out this important research. Organization as a regional research project has permitted many of the S-222 members to leverage funding for research relevant to the project's objectives. Specifically, this structure permits many committee members to obtain Experiment Station funds which they use as seed money to conduct preliminary research which then attracts more significant funding.

Related, Current and Previous Work

A CRIS search revealed 22 recent projects involving fruit and vegetable industry issues. Current areas of study encompass all facets of the fruit and vegetable value chain. Several studies address fruit and vegetable industry concerns about pesticide use and food safety implications throughout the production and handling process. Effects of retail and wholesale consolidation on small scale and minority farmers and processors are addressed by several projects. NAFTA and other trade-related issues are analyzed to determine resulting impacts on U.S. fruit and vegetable industry channel members. Other projects include research of new policy reforms, including specialty crop risk management products and the effects on producers. Economists and biologists are collaborating on determining consumer and processor acceptance of new value-added produce, especially to improve quality and integrity of products throughout the handling process. Changes in consumer preferences and perceptions are studied with respect to fruit and vegetable demand. Researchers from fruit-producing states continue to explore new opportunities with fresh cut fruit products in response to fresh cut salad success with time-strapped consumers. Research and extension professionals are continuing to develop outreach documents and training programs to assist with legal, structural, marketing and other business issues for small producers and processors. A detailed list of all related CRIS projects have been provided in Appendix I.

S-222 has been a very active regional research group for many years. Recent accomplishments include an invited paper series by the members on the tomato trade issues in North America published in the Journal of Agricultural and Applied Economics (2003). Several free sessions on supply chain management were organized for the American Agricultural Economics Association meetings (2001 and 2002). Joint sessions on supply chain management have been held with the WCC-72 Agribusiness Research group during annual meetings in 2001-02.

The group has published numerous manuscripts in the area of produce marketing, supply chain management, and competitiveness. Selected members within the group have also successfully cooperated on a number of research grants, for example, looking at barriers to growth for smaller scale produce growers in the tobacco states in the South. Additional regional research is being initiated in the areas of new production and market risk management tools for horticultural commodities.

S-222 has held joint sessions with the Food Distribution Research Society to explore common research interests with scientists from that group for over 10 years and have published extensively in the Journal of Food Distribution Research. A special issue of the Journal of Food Distribution Research was dedicated specifically to the S-222 supply chain management objective (1999), following a symposia on the topic at their annual meeting. The group has worked closely with the international community, as well. S-222 members have presented and published in the International Horticulture Council proceedings and have developed a strong research relationship with many in the international community.

A summary of the annual reports and activities of the S-222 group in recent years can be observed at:

https://webct.ufl.edu:9030/public/S222/index.html

This site documents the extensive list of academic, government, and trade publications, professional and trade symposia and meetings, and other research products that have been produced by members of the S-222.

Objectives

1. To assess the evolution of Supply-Chain Management in the fruit and vegetable sector, identifying strategic organizational and marketing implications for diverse firms and specific commodity sub-sectors.
   
2. To analyze the relative costs and competitiveness of fruit and vegetable sub-sectors, either regionally, nationally, and/or globally, using new and established analytical paradigms which incorporate theories from business schools and other fields.
   
3. Develop demand models for the produce sector that can be used to evaluate trade, commodity marketing programs, labeling programs, traceability systems, and structural changes in the U.S. produce markets.
   

Methods

Background The membership, organization, and procedures of the project facilitate the development of methodologies, interdisciplinary collaboration, and applications of results to current market situations and economic issues. Specific methodologies will be discussed in the subsection titled methods used to carry out objectives. Researchers, with specialization and expertise in different areas of production, marketing and, trade will identify and develop common methodologies, data sets, and empirical approaches to address the impacts on producers, marketers, and consumers, ECR (Efficient Consumer Response), EFR (Efficient Foodservice Response), Supply-Chain Management, and regional, national, international competitiveness, and produce demand models. The size of the project allows multiple strains of complementary research to be pursued under each procedure. The collaborative research is accomplished in the following ways. First, the project focuses on advancing common theoretical and empirical approaches to analyzing the behavior of market participants in the fruit and vegetable industry. Researchers discuss key questions about the research to be addressed, consider methods and data needed to address the problem, and then outline how individual researchers will contribute to the procedure and the plans to implement the research. Next, the common approaches are applied to assess the changes impacting the structure, vertical coordination and other priority aspects, of the fruit and vegetable industry and, thus, the opportunities available to market participants. The approach involves a joint effort among agricultural economists and, when appropriate, with other scientists (e.g., horticulture science, biological engineering, and packaging science). The methods and approaches are extended to evaluate economic and business changes internationally for the fruit and vegetable industry. Such extension is necessary as the globalization of the fruit and vegetable industry continues. The project involves a large number of representatives from various states and a government agency. The research objectives outlined above are interrelated and cannot be isolated for independent studies. Furthermore, the task of a complete interactive economic and business analysis encompassing all the necessary components cannot be accomplished by individual researchers working independently. The proposed research can only be accomplished through the cooperation of participating researchers. Given the complexity of the research addressed, the research emphases of tasks are divided among several researchers and representatives based on interests and comparative advantage. Methods Used to Carry Out Objectives The following is a discussion of some of the specific methods used to carry out the objectives of this regional research committee. Each objective will be listed followed by a brief discussion of the methods to be used to reach the stated objective. Objective 1: To assess the evolution of Supply-Chain Management in the fruit and vegetable sector, identifying strategic organizational and marketing implications for diverse firms and specific commodity sub-sectors. Methods used include: * In-depth interviews with producers, brokers, wholesalers, retailers, appropriate government agencies, and consumers. * Telephone and mail surveys. * Use of experimental auctions to assess consumer knowledge and acceptance of various produce-related issues. * Industry-wide strategic planning exercises (including SWOT analysis) with key participants in the produce sub-sector. * Creation of local working papers, presentations at local, regional, and national professional meetings. * The use of local, regional, and national workshops (this is explained in greater detail under organizational structure). Objective 2: To analyze the relative costs and competitiveness of fruit and vegetable sub-sectors, either regionally, nationally, and/or globally, using new and established analytical paradigms which incorporate theories from business schools and other fields. Methods used include: * In-depth interviews with producers, brokers, wholesalers, retailers, appropriate government agencies, and consumers to uncover true costs and benefits of a given produce issue. * Telephone and mail surveys. * The use of transportation and trans-shipment models. * Creation of local working papers, presentations at local, regional, and national professional meetings. * The use of local, regional, and national workshops (this is explained in greater detail under organizational structure). Objective 3: Develop demand models for the produce sector that can be used to evaluate trade, commodity marketing programs, labeling programs, traceability systems, and structural changes in the U.S. produce markets. Methods used include: * In-depth interviews with producers, brokers, wholesalers, retailers, appropriate government agencies, and consumers to obtain needed information for demand models. * Use of experimental auctions to assess consumer knowledge and acceptance of various produce-related issues to be used in demand models. * Creation of local working papers, presentations at local, regional, and national professional meetings. * The use of local, regional, and national workshops (this is explained in greater detail under organizational structure). Organizational Structure to Carry Out Methods The objectives will be accomplished via regular meetings, organized symposia, workshops, regular publications, and use of a list-serve comprised of S-222 committee members. In addition, electronic means, such as use of a worldwide web site, will be used to disseminate project summaries and research results in a timely fashion to a wider research audience. This framework provides effective and continuous peer interaction to research in progress. Thus, S-222 members will be able to communicated findings, adjust approaches, eliminate unfruitful efforts, and ultimately, through the process, have a convergence of appropriate methods of analysis. There are several formal mechanisms by which the cooperative research will be conducted as a group effort and by which interdependencies in the research effort will be enhanced. Three subcommittees will be designated, one for each objective; a chairperson of each subcommittee will be appointed by the technical committee chair. The organization of subcommittees provides an essential mechanism to facilitate the sharing of vital and timely information, division of research tasks, and unified cooperation among various experiment stations and agencies. Subcommittees composed of cooperating states and agencies identified by objective will be responsible for activities conducted relative to each objective. The chairperson of each subcommittee will facilitate coordination of research methodologies and help to plan workshops and regional publications. While individual representatives or groups of individuals may be responsible for developing the various phases of the research procedures, the chairperson of each subcommittee will ensure that the research proceeds cooperatively and keep other project researchers fully informed of progress. Workshops will be an important mechanism for fostering the collaborative aspects of the project to support collaborative research approaches and facilitate the dissemination of research results and findings. These workshops will bring together participants in S-222, Extension, government and industry representatives, agricultural economists, and other scientists to exchange views and explore new ideas. The workshops will also generate information regarding research and education needs and policy goals that are crucial to understanding market structure and firm decision-making in a rapidly changing fruit and vegetable industry. In addition, to serving as forums within which the research teams can share their findings, the workshops provide opportunity for other researchers and practitioners to learn about progress, to offer feedback, and to explore how the results and approaches of each team contribute to the work of the other teams. Three workshops, each lasting a day and a half, are planned to explore the level of knowledge concerning rapid changes in the structure and competitiveness of the fruit and vegetable industry and to explore the development of primary and secondary data sets along with research approach. The first workshop, which will be devoted to the industrialization of the fruit and vegetable industry, is tentatively scheduled for the second year of the project. Related empirical work will be presented and discussed in order to support the evaluation of the approaches used or proposed. While details will be more fully developed during the first annual meeting of S-222, the focus of the first workshop will emphasize, in part, the research conducted under Objective 1. That is, the primary orientation will be on the evolution of Supply-Chain Management, identifying strategic organizational and marketing implications for firms and specific commodity sub-sectors. Related subjects will include traceability, country-of-origin labeling, marketing innovations for small-scale producers and producers in minor production areas, and quality assurance innovations. The second workshop is expected to take place during the third year of the project. The emphasis of this workshop will be on the development of analytical approaches and primary and secondary data for efficient and consistent analysis of important issues regarding the competitiveness of the U.S. fruit and vegetable industry. S-222 members and other participants will be apprised of developments and potential for further empirical research under Objective 2 at this workshop. The third workshop will take place in the fourth year of the project and will focus on problems and methods for estimating demand systems for produce commodities. Application of different models will be discussed. The organization of these workshops provides a means to foster the cooperative use of common methodologies among S-222 participants. Furthermore, the workshops provide a venue for the S-222 participants to update and acquire new knowledge and skills and to compare and validate methods and results at early stages in the research process. This forum of feedback and communication is invaluable and impossible to obtain from traditional professional meetings or journals. The workshops will serve as a means for the summation and presentation of subcommittee activities and as an intermediate step for organizing the research results and findings of S-222 for publication in printed media that may include proceedings, research bulletins, reports, journal articles, and books.

Measurement of Progress and Results

Outputs

• Workshop on supply chain management; corresponding research publications and symposia
• Workshop on costs and competitiveness; corresponding research publications and symposia
• Workshop on produce demand models; corresponding research publications and symposia. Demand models for selected produce sectors.

Outcomes or Projected Impacts

• Improved industry coordination on marketing with respect to several supply chain issues with horticulture producer groups
• Identify costs, sources of competitiveness, and models for sustaining competitive advantage for producers and producer associations
• Facilitate improved fruit and vegetable producer planning for markets by providing them improved understanding of market dynamics

Milestones

(2004): Complete workshop on supply chain management. Develop regional work groups to further develop the subsequent more detailed research agenda. Meet jointly with Agribusiness research group and FDRS to evaluate focus and research priorities. Annual report submitted for work on all objectives.

(2005): Complete workshop on costs and competitiveness. Annual report submitted for work on all objectives.

(2006): Complete workshop on demand models. Annual report submitted for work on all objectives.

(2007): Present sypmosia of research work for American Agricultural Economics Association and Allied Sciences on supply chain and competitiveness objectives. Annual report submitted for work on all objectives.

(2008): Present sypmosia of research work for American Agricultural Economics Association and Allied Sciences on demand analysis objectives. Annual report submitted for work on all objectives.

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Projected Participation

View Appendix E: Participation

Outreach Plan

Information developed by the research group will be readily accessible by all interested parties on the S-222 web site. Workshops for researchers relating to each of the three objectives will be published and promoted through professional associations and through research partnerships in the produce industry currently maintained in the Food Distribution Research Society, Produce Marketing Association, and Food Marketing Institute.

Organization/Governance

The officers for S-222 include: Ramu Govindasamy (New Jersey), Chair; Al Wysocki (Florida), Vice Chair; Cheryl S. DeVuyst (North Dakota), Secretary. Robert Shulstad (Georgia) is currently the administrative advisor. The committee proposes to use the standard form of governance. Subcommittees will be formed to plan and deliver each objectives workshop.

Literature Cited

N/A

Attachments

Land Grant Participating States/Institutions

CA, CO, DE, FL, GA, IN, KY, LA, ME, MI, NJ, NY, OH, OK, OR, PA, PR, TN, TX, WA

Non Land Grant Participating States/Institutions