Whoa, you're using an old browsers aren't you? This site would look better if you upgraded. We recommend Mozilla Firefox

S1019: Fruit and Vegetable Marketing Innovations and Demand Assessment (S-222)

Annual/Termination Reports (SAES-422): [12/16/2005] [12/16/2006] [01/07/2008] [11/25/2008]

Date of Annual Report: 12/16/2005

Report Information:
  • Annual Meeting Dates: 10/15/05 to 10/15/05
  • Period the Report Covers: 01/2005 to 12/2005

  • Participants:
    Brief Summary of Minutes of Annual Meeting:
    The committe discussed and approved the proposal for 2006 and pariticipants presented 2005 states research and outreach activities. All participants mailing addressess were updated. In connection with research projects, the participants exchanged their views and current funding opportunites with respect to USDA, USAID and The Federal and State Marketing Improvement Program (FSMIP). And senior members of the committee, those who have received funds from the respective organisations shared their experiences in prpearing good proposal to get funding. Pariticipants discussed the possibilities to organize a symposia in comming AAEA conference. Members discussed potential participation in WERA-72 (old WCC-72) and S-1019 to have a session at their 2006 meeting . As usual, WERA-72 meeting will be held in Las Vegas in June 2006. The overall research activites and potential impacts of the members of the committee is being reported under the broad objectives.

    Accomplishments:
    Objective 1. To assess the evolution of Supply-Chain Management in the fruit and vegetable sector and identify strategic organizational and marketing implications for diverse firms and specific commodity sub-sectors.

    Supply Chain Management Activities

    A supply chain is a network of producers and marketers interacting in a unique fashion to produce and sell or deliver product into a target market segment. Participating producers, suppliers, wholesalers and retailers coordinate together with the market activities. This coordination or collaboration increases the produce market efficiency and productivity of farmers. The market stratagies and segmentation are influenced by supply chain management activities and vise versa. Price and quality of the produce is closely embeded in the supply chain management. Fruits and vegetables are the best examples to explain the embededness of supply chain management activities.

    The Georgia project focused on Changing Structure of the Fresh Fruit and Vegetable Supply Chain. The overall purpose of this study is to determine whether produce wholesalers and brokers have been adversely impacted by the increase in mass merchandisers and retailers in the food industry. The specific objectives of the study targeted to determine whether there is evidence of deterioration in the profitability and leverage ratios of wholesalers and brokers in the past 20 years and also to determine the extent of consolidation and change in concentration over time as possible signals of adversity by produce market intermediaries.

    The Banana production and marketing study of Georgia aimed to investigate the possibility of growing bananas in sub-tropical area for the U.S. niche and ethnic markets respectively. And if it were possible, marketing, distribution channels, pricing, production costs and other studies could be initiated. Thai bananas sell for $1.79 in the Atlanta metro area and the U.S. is the largest consumer and net importer of bananas in the world. The result of this study would provide information on the economic and agronomic/horticultural feasibility of adopting the production of this important crop in Georgia. Other objectives included production for landscape, ornamental and nursery or the Green Industry, and the determination of banana cultivars with sufficient cold hardiness under Georgia weather conditions.

    A study of strawberry consumer preferences in geographic areas relevant to Louisiana production area was conducted. A survey instrument was developed based on conjoint analysis methodology that included the attributes brand/origin, price, container, and farmer's pesticide program. Data analysis revealed a strong preference for the Louisiana berry, in terms of average product ratings and in terms of relative importance as measured by conjoint analysis results. These respondents placed little importance on container or farmer's pesticide program. Demographic information was captured, and preferences were estimated and reported, again using conjoint analysis, for the demographic subgroups. Behavior of grocery retailers was also evaluated by studying their print promotions (newspaper and mailed advertisements). Strawberries from California and Florida dominated among the major retailers, while Louisiana berries were promoted by local grocers. There is a strong stated preference for the local product through direct (farmers' markets, etc) and local grocers. A preliminary case study analysis of responses of small and medium sized produce wholesalers and distributors to industry concentration is being initiated.

    Two separate studies of Michigan State focused on changes within specific sectors of fruit and vegetable supply chains and the implications for organizational structure and strategy. The fresh produce wholesale sector is an intermediate stage in the supply chain comprised of business operations which in general do not transform a specific fresh product, but rather provide services related to the sale of this product. This project is designed to present a general overview of current trade practices wholesalers utilize to adapt to these changes and to document future trends and the role of wholesalers in the fresh produce distribution system in the U.S. Three areas where wholesalers have had to significantly adapt to new market structures include requirements for certification, business model, trade practices. A second study evaluates changes in the pattern of structural adjustments between the 1970/71 and 1999/00 seasons among Florida fresh grapefruit packers in response to sweeping trends in produce markets. Empirical results from the fresh grapefruit packing sector are indicative of an industry near equilibrium with little expectation of change in the distribution of firm sizes. While individual firms enter and exit the market and move between size categories, there are no profound structural changes suggesting acceleration in concentration in this downstream produce sector. At the same time, sluggishness in packing sector adjustment does not prohibit changes elsewhere in the supply chain. Lags in the packing sector adjustment process in the face of sweeping forces of change in fresh produce markets are likely to have put this sector of the fresh grapefruit supply chain at a relative disadvantage in terms of market power.

    A study on "Ethnic Produce Stores" in New Jersey State was conducted during 2005. The general objective of this study is to explore the available opportunities for farmers in the northeast region to grow ethnic crops from a market demand perspective. More specifically, this study analyses the distributors of ethnic produce and their ability to provide produce. The report, by way of survey data collection, will study 22 ethnic produce stores in NJ and make inferences on the potential profitability of ethnic produce by studying store characteristic, store activity, and item pricing and performance. It is clear that there is a significantly large market willing to buy from NJ farms, but the low level of purchasing is most likely due lack of or minimal production of the specialty ethnic produce by New Jersey farmers. The availability of ethnic produce from local farms will reduce the transportation cost and the supply chain management process.

    A research project relating to relationships between channel participants in the food industry in North Dakota was completed and published. This study offers an explanation for the use of slotting allowances and failure fees in the retail grocery industry. An understanding is gained of slotting allowances, failure fees, two moments of the demand distribution (hence, incorporating demand risk), and the relationship they have with asymmetric information and credible relay of information. Mechanism design modeling concepts are employed to solve adverse selection problems by aligning retailer and manufacturer incentives. This study shows that a menu of contract terms can induce manufacturers to reveal product demand distribution information and either to propose or not propose new products based on available contracts. The inefficiency of asymmetric information is shown. The symmetric information case would be possible if the retailer owned the manufacturer (or private-label product) and all of the demand distribution information. Two qualitative results are particularly noteworthy. First, as wholesale price increases, asymmetry of information becomes more costly to the retailer. Overestimating mean and/or underestimating variance of demand may impose higher costs since the downside potential is higher when the wholesale price is higher. Second, contracts under symmetric information include trade allowances, because even with symmetric information, demand variability exists, imposing economic costs on retailers. Retailer margin is lower with higher wholesale price, indicating that increases in wholesale prices are not completely passed on to consumers. Slotting allowances and the possibility of receiving failure fees may offset higher wholesale prices and cause the retailer to not pass those increased costs on to consumers.

    Another case study in North Dakota focused on agribusiness decision making. The case examines the decision-making process of a new generation food processing cooperative to accept or reject genetically-enhanced inputs from its member/owners. The case study emphasizes the impact of one participant's decision on the rest of the market channel and the effect of consumer perceptions on the entire production and marketing process.

    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.

    Competitiveness

    Supplying fruits and vegetables at competetive price and quality address the produce industry concern about usage of pesticides and food safty implications. Produce life cycle and cost will affect international competetion, quality and price. Efficient cost management and lower price will reduce the international competetion and increses the profitability of local producers. Local available resources, climatic conditions and effecient research will boost the local production. Packaging, lableling and efficient storage technologies, low transportation cost will lead to profitability.

    A study initiated in California examined the impacts of Mexican Avocado imports on California's Avocado industry. Imported avocados, which accounted for less than 1.5 percent of total U.S. avocado supply during the 1970's and 1980's, increased their share to over 44 percent in 2002-03 and further increases are on the horizon. With inelastic demand, imports placed substantial pressure on domestic avocado prices, but demand increases due to generic advertising and promotion, higher consumer incomes and population growth helped offset increased avocado supplies and domestic prices were maintained. The new Hass Avocado Promotion and Research Order will continue to offset a portion of the price impacts of increased imports from Mexico, Chile and other suppliers.

    The Colorado project recently began to assess the economic impact and strategic market position of the Colorado Wine industry. A consumer/grape grower/vintner and a feasibility of a cooperative crush/bottling facility survey was strated during 2005. And also in 2005, a Colorado State University team of Colorado received a USDA-NRI Small Farms grant to explore produce differentiation by nutritional claims between 2005 and 2007. The project will examine whether the health benefits of nutritionally superior vegetables can be important to market competitiveness of small farms. After assessing the true nutritional benefits of more nontraditional cultivars, grown both conventionally and organically, and project team will assess whether they provide a competitive supply niche for producers. Using a national consumer survey, the team will assess consumer demand for nutritionally superior produce cultivars. Estimates will be developed for willingness to pay for this differentiated product and evaluate potential labeling, promotion and educational marketing strategies. Finally, the project aim is to develop appropriate educational materials for small farm producers to influence adoption of produce cultivars with superior nutritional quality, and assist with educational programming to help producers promote these new produce lines to consumers. Another study concentrated on analyzing the price behavior and geographical market integration of major NAFTA trading partners in the tomato industry.

    The Georgia study mainly concentrated on overcoming barriers to the national produce market. The purpose of this study was to examine factors contributing to the development of the produce industry in Georgia and to find ways for producers to overcome barriers to entry into the national fresh fruit and vegetable market. A survey of produce growers in Georgia was conducted in 2003-2004. Information obtained from the respondents included economic and operational characteristics of grower enterprises. Additional information was ascertained about factors limiting production, expected operational changes, and marketing practices. Grower tendencies are revealed through cross tabulation of survey responses with sales from produce and refined through econometric analysis. Factors found important in overcoming barriers to national market entry stem from the degree of specialization and sophistication of producers.

    Another study by Georgia was initiated on "Effect of Trellis Types on Yield and Fruit Size of 'Chickasaw' Blackberry" targeted to solve the growing problems of the crop. Thorny, erect blackberries have usually been grown in the U.S. without trellises. However, the first year, thorny erect blackberries are usually semi-trailing and low to the ground without trellising. From the second year on, canes are more erect, but are prone to partial collapse near harvest if not given some support. It is difficult to locate the ripe fruit on collapsed canes. In addition, sand splashing onto the fruit on low canes can be a serious problem. Sand may splash as high as 18 inches or more during summer thunderstorms. Another problem on non-trellised blackberries is weed control. Without trellises, uniform application of weed control chemicals is difficult and significant plant damage may occur on low hanging canes. Trellis type should be sufficient to meet the needs of the plant, but not "over-engineered". In an effort to determine what type of trellis is most cost effective on thorny, erect blackberries, several types of trellis were tested. Results depicts marketing quality of blackberries can be obtained if the adoption of trellis is implemented.

    The project "Financial and Market Efficiency of Methyl Bromide Alternatives: A Case Study of Fumigant for Georgia's Bell Pepper Industries in Georgia" focused on the problems of pesticide usage. This study concentrated on alternative fumigation methods for Georgia's bell pepper production and marketing with production efficiency of MeBr. Enterprise budget analysis indicate the comparable financial feasibility of certain technically efficient fumigant systems vis-à-vis the conventional production plan involving MeBr, that is extensively used to control weeds, nematodes, soil-borne pests, and diseases. Although most of the data used in previous economic impact analyses regarding the elimination of MeBr has been obtained through the testing of tomatoes and strawberries in Florida and California, this study which focuses on bell pepper production, is aimed at evaluating the economics of three alternative fumigants and herbicides and determine which alternative will provide the best yield, marketable quality and profitability of bell pepper comparable to MeBr.

    The Georgian study "Economic Analysis of Producing Rabbiteye Blueberries" estimated the current cost price analysis and evaluated profitability of the crop. Southern high-bush blueberries, Rabbiteye blueberries and High Density blueberries are a fast emerging crop with a bright future in Georgia. However, blueberry, like other fruit crops, embrace price and yield fluctuations. These fluctuations depend on several factors, including the variety produced and sold (i.e. fresh or frozen), locality, aggregate productivity, targeted market and timing. As a result, profit margin is hard to determine. Surveys, farm visits and interviews were conducted to study the blueberry operations in the study area and collect the necessary primary data needed to estimate cost of production and to obtain information into the type and cost of current practices in southern high bush, rabbit eye and high density blueberry culture respectively. Several specialists, Extension Agricultural Economists, Horticulturists, Biological and Ag Engineers, and County Agents were visited and interviewed to gather agronomic, irrigation and equipment data required for this estimate. Vendors of agricultural inputs (fertilizers, chemicals and equipment) were contacted to obtain latest prices needed to generate variable and fixed costs components concomitantly. USDA, NASS and other publications were consulted to obtain historical information on productivity, marketing, price and overall outlook of blueberries.

    The project entitled "Trade Regulations and Technical Barriers to Trade" is aimed at investigating regulations that might directly or indirectly affect domestic, regional and international market and price trend for Georgia fruits and vegetables in particular and the U.S at large. This study further addresses issues concerning country of origin labeling (COOL), traceability, ISO-90009004, ISO-14000, ISO-22000 and Euro-Gap.

    The Louisiana state project of Fruit and Vegetable Marketing Innovations and Demand Assessment initiated to estimate the cost budget for production of fruits and vegetables. Costs of production and net returns over a range of yields and prices were estimated for 20 vegetable crops with differing combinations of machinery size and market channel, for a total of 37 budgets. Most combinations had returns above direct expenses in the range of $100.00 to $1000.00 per acre. Multi-state budgeting in cooperation with Mississippi, Alabama, Tennessee and Arkansas states through use of common input data files on machinery, equipment and operating inputs has been developed. This gives a common base of input files as to assist with regional competitiveness. Preliminary investigation of the potential to develop cost of production budgets for long-cycle crops, including fruits (Satsuma and mayhaw), nut (pecan), sod, and containerized woody plants is in progress.

    The north-eastern state Maine project focused on impacts of changes in production on prices in the northeaster American potato production region, including Maine, Prince Edward Island, Quebec, and New Brunswick.

    The Michigan study documented main characteristics of the tart cherry processing industry in Michigan; namely, business characteristics, category of products, supply sources, market outlets. Also, the study aims to assess business strategies and future expectations for the industry in Michigan. Results are indicative of an industry where very little change has, or is expected, to occur. Processors continue to market primarily for remanufacture and almost one-half expect their companies to remain unchanged in market share in the future. Changes that do occur are driven primarily by outside forces: new requirements from customers and changes in the way products are marketed, more commitments from growers and processors and more direct buying from farmers, and pressures from imported products. Poland is a developing country with a growing presence in world markets for tart cherries (and other tree fruits), including those of the United States. Competitiveness among producing regions will ultimately be driven by a combination of relative prices, income levels, consumer preferences, and market promotion. The study evaluates competitiveness based on grower ability to lower annual operating costs or increase production volumes by adopting cost reducing, yield increasing alternative harvesting technologies. Currently per unit cost of production is roughly equivalent in the two countries. Although there are a large number of small farms in the Polish tart cherry sector (in 2004, there were over 133,000 tart cherry growers in Poland and 94 percent had less than 3 acres of cherries) consolidation is underway. The potential for technological leap-frogging exists as Polish growers obtain sufficient size to adopt new over-the-row mechanical harvesters while U.S. growers are already heavily invested in alternative technologies.

    The New Jersey projects concentrated over local fresh fruits and vegetables made available to the Jersey consumers at lower price. Jersey Fresh and Ethnic produce market studies identified consumer market segments that are most likely to buy these products. A new NRI project was started on ethnic consumers produce during 2005. This study mainly focuses to document the ethnic produce market in east-coast of United States. And sample states will conduct pilot ethnic production according to the selected ethnic fruits and vegetables identified in the survey.

    In North Carolina, the Dole Foods has announced plans to build two (one fruit and one vegetable) processing plants and to work with the University of North Carolina system to create a "biopolis" center near Charlotte. Dole Food will invest $1 billion to establish the "biopolis" biotechnology campus. In addition, Dole and the State of North Carolina agreed to establish the Institute for Advanced Fruit and Vegetable Science to bolster economically viable fruit and vegetable in the Southeastern U.S. Also, the UNC system will establish Nutrition Institute for the purpose of boosting the nutritional content of fruits and vegetables and to conduct applied research in order to increase agricultural production in North Carolina. It is anticipated that 30 new faculty positions in the College of Agriculture and Like Sciences will be funded as part of the Dole Food initiative. The initial project of the "biopolis" will target blueberries and efforts will be directed to ward development of larger blueberry varieties. Vegetable crop research will focus on romaine lettuce. Each department in the College was asked to develop a "white paper" that identifies specific faculty, tasks, and topics that could contribute to value added agriculture in the state if sufficient funds were available. Identified topic areas include economic analysis of contracts, attribute valuation, food safety, biotechnology assessment, rural economic development, and post-harvest handling.

    In North Dakota a study was initiated on potato and vegetable industries. Irrigated potato producers continue to search for high-value crops for alternating years of potato rotations. Movements of U.S. potato production are being studied through a spatial econometric analysis.

    Okalahoma research report reflects the quality and productivity aspect by using best alternative and cost effective pesticides to control the deceases like Cercospra leaf spot on Turnip Greens. The researchers also tried to find the price effective alternatives to control the decease. This kind of process and positive results will be fruitful to the producers to reduce their cost of production and address the environment and food safety issues.

    The goal of the New York research project is to evaluate the 2002 Farm Bill and analyze specialty crop options for the 2007 Farm Bill. Specifically, it focuses on the Farm Bill as it relates to specialty crop agriculture in the Northeast (defined as including ME, NH, VT, MA, RI, CT, NY, NJ, PA, DE, and WV), especially on the impacts on small farms, sustainability and the environment. The Northeast with its diversified agriculture intermixed with the population centers along the east coast, is an ideal setting to study rural-urban fringe issues, including land and water allocation. Policies that would enhance the competitiveness of specialty crop enterprises, and at the same time, contribute to the enhancement of the environment and providing aesthetic amenities, are addressed. Public policy briefs, research reports and presentations will be made available during 2006. In 2005, other State studies continued risk management education with horticultural producers. Working with USDA Risk Management Agency personnel, consultants and New York Department of Agriculture and Markets, case studies and education programs were developed to illustrate use of a new crop insurance product, Adjusted Gross Revenue-Lite program, around the state. In addition to the traditional specialty crop audience, special attention was paid to organic and small farms.

    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.

    Demand Models

    The Colorado state project continues to work on direct marketing and market analysis for value-added enterprises by farmers and ranchers. The Colorado Crop to Cuisine project advised, which markets to chefs in Northern Colorado, has added several new value-added lines and started a Farm-to-School program in Colorado this year. The research in this area became more closely connected to the rural development interests as it represents the Colorado Agriculture Promotion Task Force (established by the Colorado state legislature), Colorado Department of Agriculture Advisory Board, Specialty Crops program Advisory Board and Colorado Food and Agriculture Policy Council.

    The Delaware state project started to evaluate the consumer interest in organic, genetically modified, and conventional food markets and the effects of some consumers' desire to avoid GM foods on organic demand. The specific objectives of the study mainly focused on to determine consumer willingness to pay (WTP) for non-GM and certified organic foods, and determine the amount of organic food demand generated by those wishing to avoid GM foods. The preliminary results shows the premiums were apparent for both non-GM and Organic foods. The size of the premium for the latter, however far outweighed the premium on the former. From these it appears that a separate non-GM segment is not currently needed in the food system. Questionnaire results, however, showed consumers had very little knowledge of GM foods or the extent to which they are present in their foods. This suggests these results could be subject to change as consumers become gradually more informed.

    A Georgia study took initiation towards price premium and demand analysis of fresh organic produce using homescan data. Another study of fruits and vegetables provide Georgia growers in particular and the Georgia Fruits and Vegetable Growers Association, Georgia Department of Agriculture, Financial and other agricultural related institutions with an update and trend of the fruit and vegetable markets and prices. The analysis covers domestic, regional and international markets respectively.

    A study of demand for special packs of Louisiana sweet potatoes for shipment to the United Kingdom market continues. Interviews within distribution and retailer companies in England confirmed that there is a market for specialty pack sweet potato, and the Beauregard variety appears to have characteristics that make it attractive to that market.

    The Maine study objective was to assess the feasibility of farmer markets in the region and the project completed the analyses of consumer attitudes toward farmers' markets in the Piscataquis and Penobscot Counties, Maine. Besides the study result provides information about the market segment mostly to purchase at the farmers' markets and product assortments for the markets. A small report was generated on small food producers' interests in a shared-use kitchen and storage facilities to be located in Bucksport, Maine.

    The New Jersey Food policy institute study on "Consumers perception on biotechnology evaluates factors driving consumer approval and acceptance of plant and animal genetic modification (GM)". This study was conducted using a telephone survey during 2004 in USA. Results suggest that the public is relatively more approving of plant based genetic modifications than animal based genetic modifications. Knowledge of biotechnology, trust in the GM regulatory framework, and trust in biotechnology corporations' motives are critical for acceptance.

    Another study in New Jersey on "Asian Ethnic Consumers Perceptions and Behavior towards Buying Produce from Ethnic Stores - A study in Northeastern States of United States of America" has documented the ethnic consumer buying behavior and estimating the ethnic demand in Northeastern states. The ethnic consumers' mail survey was conducted during October 2004 in New Jersey, New York and Pennsylvania. The overall sample size was 1800 and composition of Chinese, Indians and Koreans. The return rate was about 25%. The survey results indicate, about 93% of the overall respondents who had bought ethnic produce in the past was ethnic shoppers. Over 40% of survey respondents shopped once a week and this pattern is seen among all ethnic groups. Survey respondents were asked about the type of ethnic grocery suppliers they frequented most. Retail supermarkets are the highest sellers of ethnic groceries. The overall trends remain almost the same among different ethnicities, with the exception of Chinese buying more than the other groups from roadside stands, and Indians from farmers markets. Among the overall respondents, 75% of them shop at more than one food store. There are some differences in how much each ethnic group spends on ethnic groceries per visit - about 25% of Chinese buy within $10 during each visit whereas the Koreans and Indians spend around $10 - $30 per visit. But the Chinese also make more visits to the grocery stores than the other two ethnicities in this study. The average number of visits to the grocery store is around 3 - 6 per month. Taking the population and sample size into consideration, the size of the Asian produce market in the Northeastern U.S. is estimated at $866,201,974 with a range of between $826,096,822 and $906,307,125.

    One of the New York state projects on "Identifying Consumer Preferences and Marketing Opportunities for New Sauerkraut Products" was designed to assess the market viability of six new sauerkraut formulations developed in Cornell University. It encompassed a mail survey administered to 2,500 individuals in five Northeast and Midwest U.S. cities and a more in-depth preference sensory evaluation test conducted with 81 untrained panelists. The results explain the consumption frequency of sauerkraut was very low. Most of the individuals identified themselves as non-consumers of sauerkraut and are not a target market for the new formulations because of their indicated aversion to fermented, pickled, sauerkraut or cabbage-derived products. Since most sauerkraut consumed at home was purchased from a store, retail stores would be an adequate marketing channel for the new sauerkraut products. Among the six new sauerkraut formulations listed in the mail survey, three generated the highest interest: sauerkraut with garlic, sauerkraut with onion, and sauerkraut with dill. They were further tested through a sensory evaluation. The sensory evaluation showed that two of the three new sauerkraut formulations, sauerkraut with garlic and sauerkraut with dill, were acceptable to most of the panelists in all age groups. On the other hand, sauerkraut with onion received lower ratings, which indicated an unfavorable market perspective. Moreover, slightly lower ratings were given to the appearance of sauerkraut with dill. Further product development is needed for this formulation. Panelists under 34 years old exhibited a higher degree of enthusiasm toward the new formulations. Promoting health benefits of sauerkraut would likely increase its consumption among all age groups.

    The goals of Pennsylvania state project are to assess the consumer Interest in Fresh, Inshell Edamame and Acceptance of Edamame-based Patties. An in-store consumer research study was conducted in metro-Philadelphia to determine consumer demand for and interest in fresh, in shell edamame. The respondents indicated that they had heard of or were familiar with edamame prior to purchasing the container and 78.8% had previously purchased edamame from supermarkets, natural food stores, farmers markets, or restaurants. In addition, a friend's recommendation, price, and sample of the product at the supermarket were rated highest among factors likely to affect respondent's purchasing decisions regarding new produce items. Based on the total number of packages sold and conversations with produce department managers, there appears to be a demand for fresh, inshell edamame among supermarket consumers in metro-Philadelphia. And a consumer sensory evaluation was conducted in February 2005 to determine consumer acceptance of two edamame-based patties. The two patties were primarily composed of edamame, mushrooms, and onion; however, they differed based on the type of mushroom (either button or Portobello), seasonings used, and the addition of walnuts to one of the recipes. Based on the sample evaluated, 43.4% and 35.9% of participants, each day, indicated that they "probably would buy" or "definitely would buy" this item from a supermarket. Results suggest that consumers found the two edamame-based patties acceptable indicating their potential for commercial production. Across the two studies, there appears to be consumer interest in purchasing either fresh, inshell edamame or edamame-based patties from a supermarket.

    Impact Statements:
    1. Supply Chain Management research provides greater understanding of the food marketing channel for all participants. Contract specifications and trade allowances are explained in terms of demand risk and information sharing. A guide for food processor decision making can be used in extension and classroom presentations to aide understanding by producers and managers.
    2. Information learned from the studies will help us better understand market behavior with respect to consumption and demographic or geographic trends in the use of specific products and the impact of government policies on specialty crops. The overall goal is to define the competitive context for produce products and identify potential marketing opportunities and to provide quantitative economic and marketing information that will allow the produce industry to evaluate profitability and select effective marketing strategies.
    3. The seasonal fruits and vegetable market require demand analysis time to time. This kind research and analysis provide information to the producers regarding what needs to be produced and in which quantities are to be produced? On the part of the consumers, one should evaluate the consumers tastes and preferences to meet the demand. Most of the produce farmers concentrate over local markets due to lack of information about the other markets. The diversified produce market research provides sufficient information about the non-local markets to the producers. The price analysis and cost analysis made producers easy to alter their prodcution and variety.
    Last Modified: unknown

    Date of Annual Report: 12/16/2006

    Report Information:
  • Annual Meeting Dates: 10/14/06 to 10/14/06
  • Period the Report Covers: 10/2005 to 09/2006

  • Participants:
    Brief Summary of Minutes of Annual Meeting:
    Members mailing addresses were updated. In connection with research projects, the participants exchanged their views and updates on current funding opportunities with respect to USDA, USAID and the Federal and State Marketing Improvement Program (FSMIP). Senior members of the committee, those who have received funds from the respective organizations shared their experiences in preparing successful proposals. Calls for papers for the next WERA-72 meeting by the committee chairman will be out sometime in the spring. The committee members discussed collaborating with another organization (possibly an AAEA section) for a session during the 2007 AAEA meeting in Portland. Participants discussed collaboration on the upcoming articles that will appear in Choices. The committee members also had a discussion about elements of reviews of articles submitted to Choices journal. These articles are scheduled to appear in the late 2006 edition of Choices. The committee planned to pursue a collaborative proposal and funding opportunities through USDA/CSREES for organics. Finally all the participants presented 2006 research and outreach activities for each state.

    Accomplishments:
    Objective 1: To assess the evolution of Supply-Chain Management in the fruit and vegetable sector and identify strategic organizational and marketing implications for diverse firms and specific commodity sub-sectors.

    Supply Chain Management Activities

    The fresh produce sector in the United States continues to grow. As in all sectors of agriculture, markets for these products are increasingly complex. Unlike many agricultural sectors, fresh produce markets often involve much higher risks, with the potential for correspondingly higher rewards. Innovations in distribution and technology, retailer and wholesaler consolidation, the changing legal environment, international policy changes, food safety issues, and health concerns create new challenges and new opportunities in a sector where per acre cost of production is already high and traditional government safety-nets do not exist.

    The fresh produce market has experienced significant changes, driven in large part by increased consumer demand and sophistication and by corresponding adaptations to streamlined supply-chains. These changes have been accompanied by consolidation of retailers, an expansion of product offerings, movement towards year-round supply, increases in imports, and shifts in marketing efforts.

    In 1997, fresh fruit and vegetables with a value of $71 billion were sold to U.S. consumers. Since then, in response to the growing demand for specialized and value-added products, traditional outlets, requiring large-volumes and year-round supplies, are beginning to bypass traditional wholesalers altogether and increase volume of direct purchases. Thus, the dollars moving through specialized produce wholesalers have increased significantly but there has been a decline in the share of sales to food retailers (and increase in the share of foodservice) over the same time period by the traditional wholesalers.

    Mass merchandise and warehouse club stores are rapidly expanding and capturing a significant percentage of retail food sales. Large supermarket retailers continue to strive for lower labor and capital costs, product differentiation, and improved consumer services in order to remain profitable in this increasingly competitive environment. As a result, there has been a trend toward consolidation of large retailers and distributors to reduce costs and streamline and improve supply-chain management practices. Innovations in procurement and distribution of produce such as inventory mechanization, direct delivery by suppliers, use of specialty wholesalers, and fixed contracts with suppliers help to reduce costs and increase efficiencies.

    A study in the Colorado area under an ongoing USDA NRI Small and Midsized Farms Competitiveness grant involves an examination of where consumers make their fresh produce purchases and what factors influence that choice. The study uses a national consumer survey dataset. Emphasis is on the point of purchase, as well as the sources of information that consumers use in making food and nutrition choices. The project will continue to explore the supply chain issues challenging the growth and sustainability of the organics sector.

    At Indiana State, two studies have been conducted under the S1019 project. A mail survey was conducted in February 2006 to assess attitudes towards a State Sponsored-Branding program being developed to assist Indiana produce growers. Measures of willingness-to-pay were queried and analyzed. The results have been analyzed and a written report is being prepared. A second survey was also conducted to gather information on direct marketing practices of Indiana Fruit Growers. The mail survey, sent out from the Indiana Agriculture Statistics Service, gathered information on number of fruit operations, acreage per fruit type, gross sales, marketing channels used, direct sale trends, etc. Data has been analyzed and a written report is also being prepared on this project.

    A Kentucky study of which took a national look at produce intermediaries that handle organic produce was initiated to examine trends and outlook in procurement practices and business-to-business interactions. A sample of firms was selected from the Red Book Credit Services. The study illuminated many of the specific business trends and transactions costs in the rapidly changing organic sector. The study documents expectations by these intermediaries with respect to the growth in organic SKUs, the concentration of organic suppliers, contracting for organic produce, and a comparison of the importance of various supply chain issues for organic versus conventional sources of supply.

    A regional study of wineries and vineyards was completed for the Mid-South U.S., specifically seeking to document procurement strategies and the price outlook for these wineries. The number of wineries in this region has exploded in the last 10 years and the outlook from the wine makers indicate that further expansion is likely. The study examines the business-to-business interactions between wineries and the growers which supply them with raw products. The issues surrounding contracting, the limited use of the spot market, and the extent of information exchange between wineries and growers are examined. Also included in the study are projections on production, expansion intentions, and demand for various grape varieties.

    Another study, from Louisiana, evaluated the impacts of concentration of intermediaries on small and midsized produce wholesalers. Specifically, a case study format from Louisiana was used as a survey instrument pretest and to develop a preliminary information base. Three wholesalers and one distributor responded in personal interviews to questions on supply chain technology use, firm characteristics, and competitive strategies. All firms felt that their most fruitful approach was differentiation through service level and product selection.

    A Michigan State project examines major changes such as retail consolidation, technological changes in production and marketing, and growing consumer demand for quality and variety have altered the wholesale system and the role wholesalers play in the produce supply chain. The fresh produce wholesale sector is an intermediate stage in the supply chain comprised of business operations which in general do not transform a specific fresh product, but rather provide services related to the sale of this product. This project of Michigan State is designed to present a general overview of current trade practices wholesalers utilize to adapt to these changes and to document future trends and the role of wholesalers in the fresh produce distribution system in the U.S. Three of the areas where wholesalers have had to significantly adapt to new market structures are requirements for certification, business model, trade practices.

    A NRI ethnic consumer study from New Jersey focuses primarily on examination of the ethnic produce market in the east coast of United States, from Maine to Florida. Now selected states will conduct pilot ethnic production programs according to the factors which the study identified as relevant to production and sale of ethnic fruits and vegetables in the East. In the original ethnic sturdy, consumer telephone surveys were conducted between April and May, 2005 ensure an adequate response rate and to obtain a statistically significant randomized sample. Appropriate sample sizes for each ethnicity were identified based on 2000 Census populations for Chinese, Asian Indians, Mexicans and Puerto Ricans in the 16 East Coast states and Washington D.C. (specifically CT, DE, FL, GA, ME, MD, MA, NH, NJ, NY, NC, PA, RI, SC, VT, VA, and D.C.) Sample sizes of 271 surveys for each of the four ethnic groups were statistically determined (to achieve a desired 90% Confidence Interval w/ 5% margin of error) for a total of 1,084 surveys of ethnic produce consumers. Further sample size requirements were established, based upon ethnic group by state, in accordance with a stratified random sampling method (i.e. stratified random sampling was used where the sample is selected such that the Asian groups of interest are represented in the same proportion as they occur in the population, per Census 2000). Statistical analysis was conducted during June, 2006 and the report will be ready by mid 2007. All ethnic produce items which were the subjects of the surveys were ranked. The information has now been transferred to New Jersey, Massachusetts and Florida to allow these states to conduct pilot production to demonstrate application of the results for selected produce items, for four selected ethnic groups. The general purpose of this study is to explore the opportunities available for local farmers in the eastern region to grow and supply ethnic crops for which market demand had been identified.

    A Pennsylvania researcher worked with a group of 12 farmers from Ukraine, the Kiev Fruit and Vegetable Farmers (KFVF), to determine potential markets for fresh fruits and vegetables, as well as opportunities for value-added products. The researcher conducted two training sessions where participants learned basic marketing strategies and viewed examples of products, packaging, and promotions used by small-scale growers in the U.S. The researcher also visited growers on their farms and discussed their individual marketing problems, interests, and potential opportunities. To gain a perspective on how fresh fruits and vegetables, processed produce, and frozen produce is marketed and purchased, researcher visited several open-air markets, supermarkets, and club stores in Kiev and Bila Tserkva. During the visits researcher observed consumers shopping, documented retail prices and product offering, and used the information to help the growers understand what product categories are saturated with goods and where potential still exists.

    Potential Impact of Supply Chain Management activities

    The national consumer surveying in the Indiana projects is important in that it provides producers who are involved in direct marketing with information about the characteristics of their potential consumers that may be important to developing effective marketing strategies. The more specific work on organic supply chains may help inform policy and marketing decisions in the organics industry, but its most immediate impact is to raise the profile of the industry and motivate additional allocation of Land Grant human and research resources directed at organic research questions.

    Both Indiana projects will help to establish a baseline of information for the state's produce growers. The direct sales study provides useful information about the structure of the industry including the number of fruit operations that participate in Farmers' Markets, Roadside Stands, etc. This information also helps to establish trends for direct sale marketing techniques. To our knowledge, this information has not been previously collected for Indiana. Information on willingness to pay for locally branded produce was collected at a time that the Indiana State Department of Agriculture program was just forming. This study examined growers' attitudes toward a state branding program such as New Jersey Fresh or Ohio Proud. The majority of respondents were small growers (annual sales < $50,000) that sold directly to the consumer. Small growers were neutral and did not see the benefits of such a program, as described in the survey scenarios. Medium and larger growers expressed a more favorable response. All growers could possibly benefit from the implementation of such a program.

    The organic supply chain study in Kentucky is providing important documentation on the dynamics of change within this subset of the produce supply system. The study was presented at the American Agricultural Economics Association annual meeting and is being distributed to various trade association groups.

    The winery study was published in Wine East magazine and posted on the New Crop Opportunities web page. The study opens the door for further examination of contracting behaviors, market efficiency, and strategies for differentiation for smaller Mid-south wineries.

    The Louisiana State study illustrates the benefits of research on the wholesale produce industry demonstrating that certain practices work to the advantage of small enterprises, whether in the marketing chain or whether growers. Almost all Louisiana marketers and growers are small when compared to industry leaders. With this information, the industry there can structure its selling arrangements to reduce exposure to risks.

    The Michigan project underscored that changes in fresh produce supply chain distribution and management have created new forms of commercial relationships between suppliers and wholesalers. In many cases these changes represent valuable opportunities for business, in addition to the demand for additional marketing services from suppliers. The New Jersey ethnic study will provide information to local farmers which will allow them to better utilize the opportunities offered by growing diversified ethnic produce items to increase the profitability of the farm. Local farmers can supply these produce items most freshly to the consumers and save substantial transportation costs meeting the higher demand with lower prices. In the study by the Pennsylvania researcher, conversations with farmers and an analysis of all markets that were visited, showed that consumers in Ukraine expect certain fruits and vegetables to be available year-round, while others are welcomed seasonally. Therefore, the availability of a storage facility may very well benefit the farmers when selling to open-air-markets. Farmers who can begin exploring other outlets for their produce, such as the growing number of supermarkets and restaurants, and who can supply produce at times other than harvest will have an advantage over their competitors. Exploring the value-added market, primarily the frozen food category, indicates that prices for frozen fruit (strawberries, cherries, blackberries, blueberries, raspberries, and mixes of fruit) are too expensive for the average Ukrainian, with brands being imported mainly from Poland.

    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.

    Competitiveness

    Profitability and farm viability has been particularly challenging for many growers competing in this era of super centers and warehouse retailers, with these firms striving to cut costs starting at the farm-gate. In the 21st century, success in commercial production and sales for small farmers and retail firms alike will likely depend on their ability to focus on high value, specialty crops targeted at specific niche markets. Small farmers and retailers of fresh produce will need to become adept at identifying such market niche opportunities and successfully differentiating their products. This will enable them to achieve market penetration and increase share (without the substantial costs typically required to dominate the market), uniquely position their products in the eyes of the consumer, optimize product mix, and establish early brand loyalty (either by private labeling or early-to-market efforts) to ensure their economic survival.

    The role of mandated marketing programs as a tool to enhance the competitiveness for California commodities was examined. Through the USDA NRI Small and Midsized Farms grant, initial work on comparative cash flow budgets for organic and conventional produce crops has begun in the Colorado study referenced above.

    In the state of Louisiana, individual enterprise budgets to estimate costs of production of vegetable crops were prepared for thirty seven combinations of crop, market channel and machinery size. For most crop combinations, net returns were less than $1,000. The enterprise budgets for selected orchard crops were created using the current version of the Mississippi State Budget Generator. Specifically, enterprise budgets for citrus (navel orange and satsuma) and mayhaw (mayhaw juice can be blended with other juices and for jellies, but is not consumed fresh) were completed. Production practices, machinery and operating inputs and input prices were updated. For both citrus and mayhaw, an 8 to 10 year time frame is needed to recover the investment and costs of non-producing years. A pecan budget is being developed for a 40 acre orchard size, using a procedure similar to that used for citrus and mayhaw. Multi-state cooperation on preparing and sharing such budgets continues in Mississippi, Alabama, Tennessee and Arkansas continues, providing a common base of input files to assist with assessment of regional competitiveness.

    Previous Michigan State work on fruit and vegetable supply chains in Poland was extended to other Central and Eastern European markets (Serbia, Ukraine). The scope of the existing project was also expanded to examine impacts of tariff policies on trade flows. A second Michigan project considered the extent to which those same European fresh produce markets respond to price changes in related markets.

    Spatial price relationships are of particular relevance to farmers in designing market strategies. A new study analyzed spatial wholesale price relationships for fresh U.S. peaches using vector autoregressive analysis on weekly prices from the primary wholesale markets. Primary objectives of the study were: (1) to determine the degree of market segmentation as well as the direction and magnitude of market integration among regions, and (2) to evaluate the sensitivity of U.S. fresh peach wholesale markets to individual shocks. The New Jersey projects concentrated on local fresh fruits and vegetables made available to the Jersey consumers at a lower price than the same produce brought from out-of-state. The New Jersey "Jersey Fresh" and ethnic produce market studies identified consumer market segments that are most likely to buy these products. As noted under Objective 1, a new NRI project was started on ethnic consumers produce during 2005. This study mainly focuses to document the ethnic produce market in east-coast of United States. And sample states will conduct pilot ethnic production according to the selected ethnic fruits and vegetables identified in the survey.

    Potential Impact of Competitiveness

    The California research has resulted in new programs by innovative California producer funded marketing organizations to maintain and expand demand for the producers products. These programs include 1) programs based on health and nutrition research to document the contributions of California commodities to consumer well-being, 2) food safety and inspection programs to prevent loss of consumer confidence in the California products, and 3) market information programs accessible on-line to all market participants to help better match supply to demand in time and space.

    A better understanding of the differential cash returns for organic produce in Colorado will be useful to producers there in their production planning and market pricing.

    The chief risk or dynamic of selling fresh products is perishability. Knowledge of variable and fixed costs of production enables growers to make informed decisions regarding minimum prices. The Louisiana/southern enterprise budget creation is providing guidance in developing that benchmark. Within the business community, lenders need regular updates about production costs to make decisions on loan applications. Government service providers, industries that support agriculture, Extension specialists, and others are also interested in production costs and resource requirements. For marketing, growers need additional information about the market size and characteristics and preferences of consumers, and these projects are geared to provide meaningful information.

    Impacts of the expanded Michigan work include 1) increased awareness and understanding of Eastern European markets among Michigan produce industries; 2) information and contacts that led at least two large Michigan agribusiness firms to begin exploring cross-country alliances that may result in increased fruit exports and/or fruit production; 3) an on-going relationship with researchers in Central and Eastern Europe to provide continued marketing information to Michigan over time. Further impacts include 1) recognition of a potential need for a decrease in EU tariffs on products of interest; 2) identification of inconsistency in US Harmonization System HS codes; 3) comparison of tariff and trade flow data from multiple sites to facilitates.

    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.

    Demand Models

    The average national per capita consumption of fresh fruits and vegetables has risen at a significant rate, up a total of 15% between 1987 and 2000 (going from 283 lbs. in 1987 to 326 lbs. in 2000). Moreover, since 1987, the variety of fresh produce items offered by retailers has at least doubled (173 items in 1987 to 345 items in 1997) and branded items share of produce sales has more than doubled (seven percent in 1987 to 19% in 1997). Fresh-cut and packaged salad sales have risen even more substantially (one percent in 1987 to 15% in 1997). These growth trends reflect increasing consumer demand for variety, quality, and convenience. There has also been an approximately three-fold increase in the share of sales by produce wholesalers to the foodservice sector over the same time period (eight percent in 1987 to 21% in 1997), reflecting the rise in food dollars spent in the foodservice/restaurant sector (with spending now approaching half of U.S. consumers' total food dollars). This rising proportion of foodservice/restaurant sales is another reflection of consumer desire for convenience and value-added products.

    The California study model of f.o.b. avocado demand was designed and used to evaluate the impacts of imports and industry promotion programs. A second model of retail pricing was used to evaluate the impact of avocado promotion in specific retail markets.

    The USDA NRI Small and Midsized Farms research project of Colorado included a national consumer survey with questions that will help identify most advantageous consumer segments to target for organic, local and nutritionally superior produce, willingness to pay for such produce, as well as choice sets that will reinforce the value consumers place on different attributes and certifications.

    A Georgia-based study addressed several important issues regarding consumer demand for fresh organic produce in the United States in recent years using scanner data. It consists of three parts discussed in more detail below: 1) organic produce consumption, 2) the interrelationship between organic and conventional produce demand, and 3) organic price premiums paid by U.S. households. The results of this research have implications for organic retailers in formulating organic produce marketing strategies and implications for organic producers in making production decisions.

    More specifically, the first part of the study is intended to identify important consumer demographic characteristics related to the growth of the fresh organic produce market using a generalized double hurdle model. Natural log transformed consumption data were used to deal with the non-normality problem usually associated with such data. Market participation and conditional/unconditional consumption elasticities were computed for the generalized double hurdle model.

    The second part of the Georgia study provides an overview of the organic fresh vegetable market by investigating market shares and price premiums for selected organic fresh vegetables and estimating the interrelationship between consumer demand for organic and conventional fresh vegetables. Of the alternative demand models, the linear Almost Ideal Demand System was found to best fit the data. Expenditure, own, and cross price elasticities were computed for both organic and conventional vegetables based on this model.

    Using multivariate regression on data for prices with respect to produce characteristics, buyer demographics, and interactions, the third part of the Georgia study investigates price premiums paid by U.S. consumers for selected organic produce and identifies factors explaining variation in such organic price premiums. The econometric problem, with each buyer having multiple records in the purchase data, is addressed in the model.

    A study on the changing structure of the fresh fruit and vegetable supply chain is in progress. The overall purpose of this study is to determine whether produce wholesalers and brokers have been adversely impacted by the increase in mass merchandisers and retailers in the food industry. Specific objectives are to 1) Determine whether there is evidence of deterioration in the profitability and leverage ratios of wholesalers and brokers in the past 20 years,; and 2) Determine the extent of consolidation and change in concentration over time as possible signals of adversity by produce market intermediaries.

    A survey of Kentucky restaurants examined produce procurement practices with a special emphasis on demand for locally grown produce. The survey documented strong demand for local produce for local produce for local produce among restaurant produce buyers. Participation in "Restaurant Rewards," a merchandising support program managed by the Kentucky Department of Agriculture, was very limited, however, largely due to lack of program promotion.

    There is continued work on the analysis of intra-regional price relations in the northeastern America potato production region, including Maine and Canadian Maritime Provinces. The primary objective is to assess the impact of changes in production in the region on the farm prices. Work focuses on building an up-to-date database on potato production, prices, and product flows, and on developing price linkage models. A New Jersey fresh produce study investigated the response of consumers in that state to a survey question on their willingness to purchase local food over imported food. Respondents were specifically asked if the threat of terrorism increased their preference for locally grown food defined as fresh fruits and vegetables marketed under the state-sponsored Jersey Fresh label. Thirty-three percent of respondents indicated that the threat of agro-terrorism has caused them to think locally when it comes to their produce purchases. The results of a Logistic regression showed that there are some specific attributes common to those who show such a preference. Although empirical and theoretical investigations into consumer behaviors in the face of current terrorism risks are in their infancy, this paper provides some needed insight into such problems and the results are easily replicable. Another research report of New Jersey investigates the relationships between country of origin labeling (COOL) issues and consumers concern about safety and health towards using of foreign produce. Results show that those who were married, self employed, had higher incomes, or possessed more education were more likely to support COOL. A consumer survey showed that about 84% of respondents overall, and more specifically, about 84% of female and 83% of male respondents would like markets to provide information about country of origin of fresh produce. The result also shows that about 73% of respondents regularly read food advertisements in newspapers and grocery brochures.

    Planned Work

    As discussed in the 2006 meeting, members are applying for a USDA NRI grant under the Integrated Organic Program. A sub group of members has already started working towards drafting the proposal. This grant is due on December 18, 2006. In addition, members wanted to share their experiences from various fruit and vegetable project executions, as well as knowledge of markets, consumer trends and technical know-how. All of the state project researchers, and implementers continue to work together with mutual cooperation to provide solutions to their similar problems in agricultural produce research. Members also discussed various possibilities and opportunities for new funding from national and international agencies. Once again, all the committee members proposed to participate in symposia in the AAEA conferences in upcoming years.

    Dr. Govindasamy, the chairmen of the committee, discussed the status of upcoming papers contributed by S 1019 members. During 2006, six papers from members were selected by reviewers of Choices magazine. All articles went through the review process and they all have been accepted for publication in the upcoming issue. These upcoming papers fall under a special theme of Fresh Produce Marketing: Critical Trends and Issues guest edited by Dr. Govindasamy and Dr. Thornsbury. As in earlier years, all the participants are willing to publish results from their S-1019 project work in various agricultural and horticultural journals.

    Impact Statements:
    1. The results of the California work provide information to industry participants, decision makers and policy makers on the impacts and returns from industry funded promotion programs conducted by the avocado industry in that state. Factors to be considered in planning promotion programs and scheduling packing and shipping are the actions of retailers in pricing avocados when 1) industry advertising is underway, 2) at various holidays, 3) when imports are available, and 4) when f.o.b. prices are changing.
    2. The Colorado Study produced a better understanding of consumer segments and their valuation of attributes, and will help producers assess whether new production processes, certification programs and consumer information/education are effective marketing strategies.
    3. The Kentucky study was featured in the Packer trade journal and has been widely cited by states working to develop programs for local products in local markets. The study has also been featured through the New Crop Opportunity Center. The outcomes include renewed emphasis on marketing to restaurants and on the need for additional state funding for the Restaurant Rewards program
    4. The Maine study will provide the potato industries in the region with information useful in making production and marketing decisions.
    5. The New Jersey State study shows that concerns regarding agro-terrorism and country of origin labeling influence consumer behavior towards imported versus local produce. Recent concerns about agro-terrorism require an understanding of how these threats affect consumer behavior and markets. Although empirical and theoretical investigations into consumer behaviors under conditions of terrorism risk are in their infancy, this study provides some needed insight into such problems and the results are easily replicable.
    Last Modified: unknown

    Date of Annual Report: 01/07/2008

    Report Information:
  • Annual Meeting Dates: 11/04/07 to 11/04/07
  • Period the Report Covers: 10/2006 to 10/2007

  • Participants:
    Brief Summary of Minutes of Annual Meeting:
    The S-1019 meeting was held on November 4, 2007, at the Hotel Monteleone in conjunction with the Food Distribution Research Society meetings in New Orleans. The committee was pleased to welcome two new members and reminded to continue to solicit new members. The committee chair congratulated those committee members who collaborated on the articles that appeared in Choices during 2006. All the committee members presented their involvement and experience with respective state agricultural production and marketing activities. Members also discussed the problems and solutions to current agricultural production and marketing scenarios. The committee members had decided to develop a proposal for the WERA-72 meeting as WERA-72 will host its annual meeting June 18-20, 2008, in Santa Clara, California, and the abstracts are due February 28, 2008.

    Members briefly discussed other funding opportunities available, including programs in conjunction with each state department of agriculture. Since the 2007 organics proposal was not successful, members discussed the merits of re-submitting during 2008. Finally the committee members decided to revise and resubmit the previous organic proposal in 2008 for a 2009 submission. The S-1019 meeting will be held in Columbus, OH, in October, 2008.

    Ramu Govindasamy will be stepping down as committee chair. All the members expressed their gratitude for the wonderful job he has done. Dawn Thilmany agreed to become the committee chair from 2008 onwards, while Al Wysocki will continue as vice chair and Cheryl DeVuyst will continue as secretary. Once again members mailing addresses were updated.

    Accomplishments:
    Objective 1: To assess the evolution of Supply-Chain Management in the fruit and vegetable sector and identify strategic organizational and marketing implications for diverse firms and specific commodity sub-sectors.

    Supply Chain Management 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. A Colorado State University study, funded by USDA NRI Small and Midsized Farms Competitiveness grant 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. Through an interim position with USDA CSREES, a Colorado investigator worked on assessing the marketing barriers for organics and potential policy solutions within a USDA Organic Working Group. Since 2003, Georgia's ongoing research on both edible and ornamental banana production attempting determine hardiness of cultivars to be grown in Georgia is gaining momentum. The researchers are getting closer to finding a cultivar that might become a new potential economic crop for Georgia, and perhaps, neighboring states. The edible crop will target niche and ethnic market chains while the ornamental cultivars will target the green and nursery market.

    Another study from Georgia concentrates on the "Structure of the Fresh Fruit and Vegetable Industry." There is no convincing evidence that the market structure of the U.S. produce industry has markedly changed over the past 25 years. While supermarket concentration has increased noticeably, the same cannot be said for produce market intermediaries such as brokers and wholesalers. Increased vertical integration between retailers and packer-shippers via contracts (marketing and production), obviating the need for market intermediaries, has not occurred. There has not been an increase in produce contracting over the study period. Purported increased monopsony power by retailers should have manifested in weakening financials for market intermediaries over the study period. However, the financial analyses did not reveal clear evidence to this end. The census data allowed another view where the produce market intermediaries could be largely delineated in two segments: brokerage versus wholesale firms. Both segments of this intermediary industry were not found to be concentrated, though the brokerage component was shown to be more concentrated than that of wholesalers. Overall, the number of establishments and real sales increased while market concentration increased mildly over the study period. However, when looking at brokerage firms specifically, the number of establishments and real sales declined. It would appear that the wholesale component has been doing well servicing smaller retail food companies and the ever bourgeoning food service sector as the away from home market has continued to grow. Though the census data suggest that the produce brokerage business has experienced a mild decline in recent years, it is entirely plausible, because of market experience, that many of the produce wholesale firm entrants in recent years are former brokerage firms.

    In Louisiana, information collected in a survey relating to development of supply chains was incorporated in a co-authored article published in Choices.

    Michigan's blueberry industry is one of the few state green industries to show significant growth during the past five years. Much of Michigan's 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. This is an important finding as Michigan seeks to build capacity among small blueberry farmers of Michigan and better position themselves for survival beyond the point where aggregate global economic forces impact the current growth stage (increasing price for increasing volume of sales). The opportune time to address strategic change is before economic crisis and this project seeks to help Michigan's blueberry growers do so, thus contributing to long-run survival of an important green industry.

    During 2007, New Jersey continued to examine the ethnic produce market in the East coast states of United States, from Florida to Maine. According to the consumer survey conducted in 2006, four ethnicities (Chinese, Asian Indians, Mexicans and Puerto Ricans) top 10 produce item purchases were ranked and these were selected as relevant to production and sale of ethnic fruits and vegetables. Florida, Massachusetts and New Jersey were identified to setup either demonstration and/or research plots during 2007. The main objective of conducting pilot production is to explore the opportunities available for local farmers in the East-coast region to grow and supply ethnic produce items in the local market.

    In Delaware, consumer surveys were conducted utilizing the following web site: www.ari-culturehealth.com. The produce market survey main objectives are: 1. To conduct an online fresh market consumer preferences survey. 2. Identify the types of farm fresh product offerings preferred by consumers. 3. Identify specific market niches that may be available to farm fresh marketers including online product offerings. 4. Demonstrate the value of www.agri-culturehealth.com to potential users: fresh market growers, farmers markets and consumers.

    Potential Impact of Supply Chain Management Activities

    Consumer surveying is important in that it informs producers who are direct marketing about the characteristics of their potential consumers that may be important in effective marketing strategies. Work on organic supply chains may help inform policy and marketing decisions among the organics industry, but its most immediate impact is to raise the profile of the industry and get more Land Grant human and research resources directed at organic research questions.

    United States remains the largest consumer of banana in the world with an import value of over $1 billion yearly. All the bananas come from either Central or South America (for the Cavendish variety) and from Asia (for the ethnic or exotic cultivars). The ethnic produce sells for $1.79/lb compared to $0.45/lb for the Cavendish cultivar. If locally grown, ethnic and/or exotic banana production and marketing might interest growers seeking to diversify. The economic impact (purchasing of input, labor, ag-equipment etc) will have a spillover effect to other sectors of the economy. The U.S. produce industry continues to be highly competitive allowing ample opportunities to existing and prospective U.S. produce producers and importers.

    New Jersey's pilot production system will provide information to local producers and marketers to better utilize the local opportunities by growing a variety of fruits and vegetables, in a cost effective manner, to increase the profitability of the produce sector. Maine's blueberry studies impacts include: 1) better understanding of the marketing channels available to small scale blueberry growers; 2) increased opportunities for market access by Latino growers; and 3) expanded outreach from the land grant university to a growing constituency.

    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.

    Competitiveness

    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.

    Changes within the North Dakota and Northern Great Plains potato industry led researchers to investigate regional shifts in United States potato production and processing. Initial results indicate that, although some shifts occurred over the years, potato production has been centered in the same regions and states. While other areas of agricultural production, such as hog production, have shifted regionally where available land and labor resources are available, potato production is more "sticky" to certain areas. This in part may be due to necessary components for soil types, irrigation potential, growing conditions and other institutional factors. In essence, changes in potato production were quite inelastic to traditional economic factors, including price. Building on the project's initial study results, and understanding the importance of water availability for sustaining a competitive advantage in potato production, researchers investigated the impact irrigation water permits and conditional permits have on the North Dakota potato industry.

    Florida's project entitled "Systems Approach to Identifying Critical Handling Steps and Cost-effective Technologies to Maintain Quality of Fresh Fruits and Vegetables," funded by the USDA TSTAR Special Research Grants Program, worked on improving quality and freshness of produce to compete with non-local supplies. In addition, researchers conducted a workshop on "Winning the War on Invasive Species" in Miami, November 7-9, 2007.

    No emerging market has received more attention in recent years than that of China. Rapid growth in exports from China (including agricultural products), a large U.S. bilateral trade deficit, and accession to the WTO (thus gaining access to most-favored-nation tariff rates) have all raised awareness of China as a world competitor. Global industry expansion is a phenomenon that pressures Michigan fruit industries to find new ways of doing business. Ultimately, competitiveness among producing regions in the world will be driven by a combination of production and shipping costs, fruit quality, marketing management (linking with others who have good distribution networks in emerging markets such as Asia, Latin America, and Central/Eastern Europe, and marketing promotion), and organizational approaches such as strategic alliances. This project focuses on evaluation and analysis of a key set of information critical to Michigan horticultural firms seeking to enter the markets in China, or seeking to understand how Chinese produce might enter the U.S. market. A second project examined the status of trade policies (including tariffs) on U.S. tart cherry products moving into the EU, particularly Germany and Belgium. Tariffs are border policies that raise the effective price of imported goods. Governments impose tariffs for a number of reasons including protection for domestic industries and a source of public revenue. The market impact is a pricing distortion when compared with perfectly competitive outcomes. Non-tariff policies include measures such as quotas, subsidies, or phytosanitary standards. These measures can have a trade distorting impact as large, or larger, than traditional tariffs.

    New Jersey's ethnic NRI project concentrated on local fresh fruits and vegetables made available to East-coast consumers at competitive prices. The project provides significant produce statistics to the local farmers through its research and demonstration plots. The cost and produce figures will be available by the end of 2008.

    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. Enterprise budgets are the basic building blocks to this evaluative process. The inter-disciplinary regional project includes six states and provides business planning resources to an underserved audience, specialty crop producers. Enterprise budget uses: (1) Farmers who evaluate their planning and management needs, as well as evaluate new enterprise resource needs, (2) Extension personnel in providing educational programs to farmers, (3) State/federal service providers to estimate crop resources, (4) Landowners who lease to farmers, (5) By lenders as a basis for credit, (6) To inform non-farmers of the costs incurred and methods used by farmers in the production of food and fiber crops.

    Enterprise budgets to estimate costs of production of vegetable crops were prepared by researchers in Louisiana. Thirty seven combinations of crop, market channel and machinery size were budgeted annually. 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. Production practices, machinery and operating inputs and input prices were created and updated as appropriate. A pecan budget is being finalized, intended to represent a small (40 acre) orchard size. Procedures were similar to those used for other orchard crops. Through the Colorado USDA NRI Small and Midsized Farms grant, initial work on comparative enterprise budgets for organic and conventional produce crops are in development.

    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.

    Potential Impact of Competitiveness Activities

    North Dakota's study focused on understanding the impacts of irrigation water permits and conditional availability is paramount to the potato industry. Producers can use this information in planning production and land purchase decisions while policy makers can better understand the impact of granting water permits for irrigation. Processors can use this information to help understand producer constraints and design better contracts to suit processor and producer needs.

    A better understanding of the differential cash returns to organic produce will be useful to producers in their production planning and market pricing. Colorado State researchers are helping producers to target their marketing and promotional messages to target consumers thereby allowing for more effective marketing, and subsequently, a more competitive fresh produce sector.

    Impacts from Michigan's study include 1) increased awareness and understanding of China horticultural markets among Michigan produce industries; 2) information and contacts providing potential for Michigan agribusiness firms to explore cross-country alliances that may result in increased fruit exports and/or fruit production; 3) an on-going relationship with researchers in China; 4) recognition of a decrease in EU tariffs on selected products of interest; 5) identification of inconsistency in US HS codes; 6) comparison of tariff and trade flow data from multiple sites to facilitate understanding.

    The New Jersey's NRI ethnic project is expected to create an impact on the ethnic fruits and vegetables sector in the East-coast region by providing selected ethnic crops information to the local farmers so they will be able to compete with non-local produce suppliers. These production data sheets will provide sufficient information to the farmers to determine profitability of crops.

    According to a Georgia study, farmers, lending institutions, state/federal service providers, agricultural support industries, educators, and legal advisors are all interested in the cost estimates and resource needs outlined in budgets. Additionally, demands from these audiences for specialty enterprise budgets are increasing as farmers search for effective diversification strategies. As the study from Louisiana indicated, these budgets are intended to assist producers in pricing and negotiation, and in other risk management efforts.

    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.

    Demand Models

    Americans have increased their consumption of fruit and vegetables as they are concerned with healthier lifestyles. And also higher consumption of fruits and vegetables is associated with decreased risk for chronic diseases, because fruits and vegetables have low energy density, eating them as part of a reduced-calorie diet can be beneficial for weight management. According to 2005 Behavioral Risk Factor Surveillance System (BRFSS), about 33% of adults consumed fruit two or more times per day and 27% ate vegetables three or more times per day. The results underscore the need for continued interventions that encourage greater fruit and vegetable consumption among U.S. adults.

    Colorado's consumer survey results suggest that, when targeting consumers, there are four potential consumer clusters to consider: Urban, Assurance Seekers, Quality and Safety Consumers, Price Conscious Consumers and Personal Value Buyers, all with varying perceptions and values, but with the former two representing the greatest short term potential to producers who directly market differentiated fresh produce at a premium. A labeling experiment within the consumer survey found buyers do distinguish between competing claims and logos in Colorado. Claims relating to a healthy diet rich in fruits and vegetables were most effective in attracting consumers and consumers may look for additional certification standards and scientific evidence that organic products are of higher quality. Maine's agricultural research project developed a seemingly unrelated regression (SUR) model to assess intraregional farm potato price relations in the Northeast production region, which includes four producing areas: Maine, Prince Edward Island (PEI), New Brunswick, and Quebec. Using data between 1980 and 2005, the model was estimated and the price impact of changes in production across the four potato producing areas was analyzed. The North Dakota State project team begun 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. This will be compared to evidence on valuation of organic produce by coastal states and more densely populated areas.

    The New Jersey study was undertaken to document and quantify the ethnic produce market and to identify opportunities for farmers to grow crops targeted from a demand perspective. The rapid expansion of ethnic population presents significant opportunities for fruit and vegetable producers along the East Coast to take advantage of their close proximity to densely populated areas. The specific ethnic market subjects of study are the Asian and Hispanic segments, chosen for their strong recent growth and continued growth expectations. The top two sub-groups within each of these segments were chosen for the study; Chinese and Asian Indian (Asian sub-groups) and Puerto Rican and Mexican (Hispanic sub-groups). The geographic focus is the East Coast and includes Washington D.C. and sixteen states bordering the East Coast. The consumers' survey collected three types of ethnic consumer expenditures; total produce expenditure, ethnic produce expenditure, and expenditures for specific ethnic produce items. The total demand for ethnic fruits and vegetables of east-coast states will be available by the end of 2008.

    Domestic wine consumption has increased, along with competition among Pennsylvania wineries and wineries. The best tool for a wine producer, as a method of developing and maintaining the domestic industry, is access to consumer data. Demographic information describing the average U.S. wine consumer exists; however, characteristics specific to those who purchase Pennsylvania wine are not readily available. Since it is anticipated that consumption of wine, wine products, and visits to tasting rooms will continue to increase, current and future wine producers and tasting room operators need to know their customers' interests, attitudes, and behaviors in an effort to stay competitive in the marketplace. Proposals and pre-proposals have been submitted to state and regional funding agencies and to appropriate associations. Other federal funding agencies have been identified and will be targeted in early 2008.

    Potential Impact of Demand Models

    Since 2005 there have been collaborative efforts by the United Growers of America and the United Growers of Canada to manage overall potato supply through acreage reduction programs. The estimation result of the Maine's research work can be used to assess the effect of a coordinated acreage reduction programs in the region.

    In North Dakota, local producers and retailers can use this information to understand consumer purchase habits and demand for an organic dinner, including organic produce. This information will impact the production and selling decisions throughout the Northern Great Plains organic industry.

    A better understanding of how Colorado consumers process information available on labels, including certification claims, might influence how the industry markets to consumers, and where government marketing programs might need to educate and do consumer outreach based on consumer perceptions.

    New Jersey's ethnic project will provide information pertaining to the demand for fruits and vegetables. Additional demand analysis will be conducted to model ethnic consumer expenditures and demographics relative to patterns, preferences, and practices. This will support grower efforts to target specific ethnic markets based on unique demographic profiles and help match supply with local demand to optimize marketing efforts.

    In Pennsylvania the research addressed the following issues: frequency of wine purchases, purpose of purchase (e.g. special occasions or as "everyday" wines), brand and origin preference (e.g. foreign, domestic, or state), varietals in greatest demand, and where products are most likely purchased (e.g. tasting rooms as opposed to Wine and Spirit Shops). Questions will be asked to better understand the most effective and appealing on-site and off-site (e.g. festivals and events) wine-sales opportunities, promotional and experiential strategies, and advertising methods. Surveys will also be designed to understand attitudinal differences between wine consumers and non-wine consumers, to determine how to encourage purchasing by non-wine consumers and what benefits and promotional strategies would most likely appeal to different populations.

    Planned Work

    As members discussed, the committee will develop a proposal for the WERA-72 meeting in Santa Clara, California in 2008. Dawn Thilmany and Jennifer Dennis volunteered to explore session topics and areas of collaboration. Considering members opinions, the organic multistate project will be revised and resubmitted for the 2009 competition year. Members of S-1019 planned to meet along with the FDRS annual meeting in Columbus, Ohio in October, 2008. The participants will also be working together to explore new opportunities to help local farmers in the area of production and marketing. Dawn Thilmany will take lead to conduct upcoming S-1019 committee meetings in conjunction with FDRS annual meetings.

    Impact Statements:
    Last Modified: 08-Jan-2008

    Date of Annual Report: 11/25/2008

    Report Information:
  • Annual Meeting Dates: 10/11/08 to 10/15/08
  • Period the Report Covers: 10/2007 to 09/2008

  • Participants:
    Brief Summary of Minutes of Annual Meeting:
    The meeting was called to order at 1 pm by Dawn Thilmany McFadden. She welcomed Cathy Durham, the newest member of the committee.

    As a way to outline the notes for the October 12th meeting, Dawn Thilmany integrated introductions, state reports and ideas for the new project proposal into the first hour of the meeting.

    Those in attendance, and their current role and responsibilities related to fruit and vegetable demand and market assessments include:

    1. Dawn Thilmany Colorado State University-Chair, Alternative Market Assessments and Competitiveness

    2. Maurus Brown-The Ohio State University-Piketon Small Fruit Crop Specialist

    3. Cathy Durham, NEW MEMBER-Oregon State University-Food Innovation Center, retail and organic fruit studies and sensory research, new to the group

    4. Roger Hinson-Louisiana State University-crop budgets and marketing projects, long time member

    5. Carl Toensmeyer-Delaware-vegetable marketing, roadside marketing, new Website for marketing

    6. Jim Epperson-Georgia- fruit and vegetable marketing, long time member

    7. Tim Woods-Kentucky- long term member, fruit and vegetable direct marketing, value-added new product development

    8. Ramu Govindasamy-Rutgers/New Jersey-past Chair, ag marketing with specialty crop and direct marketing projects, ethnic markets

    9. Suzanne Thornsbury-Michigan State University-fruit and vegetable competitiveness and supply chains

    10. Jennifer Dennis-Purdue-joint with Horticulture

    The state reports were given, in addition to the written forms that have been sent or will be sent by November 1st. These state reports will be integrated into the final report for 2008.

    1. Update on project Extension

    a. Dawn Thilmany reported that the group received a one-year extension to the project for the 2008-09 year, but that it is with the understanding that a new proposal would be forwarded to the administrator with sufficient time to allow for any changes or improvements that may be recommended.

    b. Dawn distributed a very rough outline of the proposal, including a new title, for the group to discuss.

    2. Plan for Developing new Project

    a. Following the outline that was distributed to the group, each member was asked to discuss their potential role in the new objectives, as a way to begin planning for our future committees work.

    b. The listing of these state reports by new draft objective are attached below the main minutes.

    3. Plan for joint meetings

    a. S-1019 session at the Agribusiness meeting in Las Vegas in June 2009.

    i. Tim Woods and Jennifer Dennis offered to lead this effort to organize any group of presentations from the committee to the Las Vegas meetings.

    b. FDRS pre-conference on Supply Chains with Farm Foundation, Ag in the Middle

    i. Dawn Thilmany McFadden will host these meetings in the Denver area in October 2009, and we will have our usual committee meeting at that conference.

    ii. Any ideas for sessions that this group could sponsor should be forwarded to Dawn.

    4. Plan for joint NR proposal/research (follow up on NRI organic produce proposal)

    a. At this time, there were no clear ideas for joint funding proposals.

    5. Dawn encouraged everyone to consider other people who may want to participate in the new project, as this is an excellent time to bring new members to the group.

    Accomplishments:
    Objective 1: To assess the evolution of Supply-Chain Management in the fruit and vegetable sector and identify strategic organizational and marketing implications for diverse firms and specific commodity sub-sectors.

    Supply Chain Management 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.

    Suzanne T's work in Michigan is exploring competitiveness of fresh peaches by looking at seasonal differences in price relationships so they can inform the industry on how to strategically position themselves given such market conditions. Michigan is also working on international supply chains, particularly focused on China, for the tree fruit industry, as part of their competitiveness analysis.

    In preparing for an organic talk for Italy in 2008, Cathy Durham in Oregon found that we must explore the segmentation of organics, as a much higher share now moves through conventional marketing channels than one might believe. Earlier work from Georgia concentrated on the "Structure of the Fresh Fruit and Vegetable Industry." There is no convincing evidence that the market structure of the U.S. produce industry has markedly changed over the past 25 years. While supermarket concentration has increased noticeably, the same cannot be said for produce market intermediaries such as brokers and wholesalers. Price analyses (outlined in Objective 3) have complemented this analysis by showing how price behavior in this sector has been in several product categories.

    Tim Woods at Kentucky has focused much of their work on direct marketing, supplementing the NASS data on direct marketing, and more on planting intentions survey focused on assessing intended marketing outlets. Have found growth in auctions and also working with Market Maker on coordination efforts among direct marketing stakeholders (including other members of the S1019 committee). They are also identifying strategies for direct marketers to deal with high demands of food industry (GAP, assurances).

    Kentucky has had a large increase in wineries, as is the case with other states, but they are struggling with coordination. They have coordinated with the Ohio State University and Purdue on regional wine industry development issues. Maurus from Ohio is working with the Sustainable Ag Team as a small fruit specialist and has seen the same as many states in terms of growth in interest in alternative systems. 2200 acres of wine grapes and 109 wineries poses a new challenge providing marketing assistance to this emerging sector. He sees a nice complement to fruit wines and development of partnerships among fruit growers and wineries.

    Jim Epperson is working to meet with the 66 certified organic producers in Georgia to explore their challenges and barriers to compete, but is finding that many small, mostly new enterprises, motivated by goals other than profits and have independent capital resources. Roger H. has also worked with distributors and supply chain sector with a focus on specialty and small and mid-sized operations, exploring the challenges of competing in that sector against larger scale competitors.

    Farmers markets growing in Ohio as well, and Market Maker has been adopted in Ohio, to develop culinary and food based tourism. Ohio has begun some work on developing marketing to food institutions. Firm size and food safety elements have also continued to be unique elements and considerations of developing Best Management Practices with producers. A Colorado State University study, funded by USDA NRI Small and Midsized Farms Competitiveness grant, indicates that producers may be provided some marketing transparency and trust to consumers through local and direct food systems supply chains. So, in addition to perceived quality improvements, increased marketing costs may be justified if "credence" attributes of fresh produce to consumer are perceived as greater.

    Jennifer Dennis at Purdue worked with a student on organizational structures of farmers markets with a past graduate student. Just received a Farmers Market Promotion grant to continue day long workshops on farmers market regulatory and management issues, but will now broadcast through Purdue to all counties in 5-6 different broadcasts, and will include some enterprise planning. Future work may also focus on some consumer issues.

    Ohio, Purdue and Kentucky are collaborating on small farm marketing analyses that integrate some health claims that may also be location specific. It was not funded, but will be resubmitted in future cycles.

    Given all the activity in direct marketing and local food systems, the committee agreed that this may be a more primary focus of the new project.

    Potential impact of Supply Chain Management activities.

    The case studies in New Jersey will provide the information towards profitability of ethnic crops in North-eastern States of United States. The information could be helpful to the respective state agricultural policy makers, extension specialists, researchers, prospective producers, distributors and retailers. The output in terms of presentations and publications will explicit state consumer's perceptions, preferences and opinions towards locally grown, organically grown and genetically modified ethnic produce. Producers and marketers will be able to alter their produce items positioning based on the consumers responses. The work from the Delaware team will help both producers to more fully understand what consumers are looking for in a Farm Market Web site. Therefore, consumers will have better Farm Market sites available to them and can make better buying decisions.

    Consumer surveying is important in that it informs producers who are direct marketing about the characteristics of their potential consumers that may be important in effective marketing strategies. Work on organic supply chains may help inform policy and marketing decisions among the organics industry, but its most immediate impact is to raise the profile of the industry and get more Land Grant human and research resources directed at organic research questions.

    New Jersey's pilot production system will provide information to local producers and marketers to better utilize the local opportunities by growing a variety of fruits and vegetables, in a cost effective manner, to increase the profitability of the produce sector. Maine's blueberry studies impacts include: 1) better understanding of the marketing channels available to small scale blueberry growers; 2) increased opportunities for market access by Latino growers; and 3) expanded outreach from the land grant university to a growing constituency.

    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.

    Competitiveness

    No emerging market has received more attention in recent years than that of China. Rapid growth in exports from China (including agricultural products), a large U.S. bilateral trade deficit, and accession to the WTO (thus gaining access to most-favored-nation tariff rates) have all raised awareness of China as a world competitor. Global industry expansion is a phenomenon that pressures Michigan fruit industries to find new ways of doing business. Ultimately, competitiveness among producing regions in the world will be driven by a combination of production and shipping costs, fruit quality, marketing management (linking with others who have good distribution networks in new growing markets such as Asia, Latin America, and Central/Eastern Europe, and marketing promotion), and organizational approach such as strategic alliances. This project focuses on evaluation and analysis of a key set of information critical to Michigan horticultural firms seeking to enter the markets in China, or seeking to understand how Chinese produce might enter the U.S. market. A second Michigan-based project examined the nature and extent of spatial price relationships among four geographically distinct regions in the U.S. fresh peach wholesale market. Counter-seasonal imports of fresh produce facilitate year-round availability in the U.S. and may impact the seasonal structure of market price relationships. When domestic production is available (summer) market prices among regions exhibit greater spatial differences, including greater independence, due to local supply influences while lack of domestic production during the winter marketing season results in greater equilibration of market prices among regions. Summer marketing season prices are led by the two main production regions - the West and South - while the East maintains some degree of autonomy. The West and the East, in particular, see changes in spatial price relationships as they swap the role of major supply region from summer to winter and as peach deficit regions of the Midwest and the South become influential over prices.

    New Jersey's ethnic NRI project concentrated on local fresh fruits and vegetables made available to East-coast consumers at competitive prices. The project provides significant produce statistics to the local farmers through its research and demonstration plots. The cost and produce figures will be available by the end of 2008.

    A current case study project among producers (2008) in New Jersey will provide successful produce items pricing and marketing strategies for ethnic crop producers. Producers will be able to appropriately price their products based on the information provided. In another state, Kentucky, they are exploring the economic benefits of using Electronic Benefits technology at farmers markets to explore participation enhancement and meeting objectives of that program. Given the increased demand for WIC and AFDC benefits and the electronic transition of those programs, this seems worth exploring.

    National marketing studies indicate that consumer interest in local and certified-organic produce will continue to increase over the next several years. Consumer benefits of purchasing local produce include production accountability, potentially lower prices, and increased variety, and freshness. The Pennsylvania fruit industry is interested in determining consumer demand for locally-grown and certified-organic apples as well as value-added apple products that will illuminate local marketing opportunities. An Internet survey of consumers residing in metropolitan Philadelphia was conducted in July of 2008 to identify attitudes, behaviors, and demographics of those who prefer these products. Results are currently be analyzed and manuscripts will be submitted to appropriate journals.

    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. Enterprise budgets are the basic building blocks to this evaluative process. The inter-disciplinary regional project includes six states and provides business planning resources to an underserved audience, specialty crop producers. Greg in Georgia has worked with the committee on budgets for the Southeast with others on the committee. Ohio is also working on specialized organic budget systems for fruits and vegetables, which may be imperative given input cost pressures in recent times.

    At LSU, Roger H. is using Risk Management Agency support to develop fresh produce enterprise budgets, including a standardized template to better coordinate the regional efforts (Mississippi, Alabama, Tennessee, Louisiana, Georgia). Further efforts have explored how organic budgets could be extended from the broader budgeting project. Working with horticulturalists on making the budgets more realistic, given the originals are based on inputs available in markets, not necessarily what is really happening on farms. In short, the organic budgets may look too "conventional."

    Through the Colorado USDA NRI Small and Midsized Farms grant, they have modified their approach by developing a typical "CSA market basket" budget. They have applied for a follow up Risk Management Agency grant to continue developing grants in the Southeast, but were not successful in 2008. Colorado is also considering development of more direct market budgets through their state's Building Farmers program.

    Louisiana has been asked by their Department of Agriculture to explore efficient promotional activities with respect to vegetables and sweet potatoes, and some key stakeholders have been brought together to assess their perceptions of effectiveness using the Delphi method. Expect different results for sweet potatoes because of the small number of sellers.

    Purdue is working on economic impact analysis of Indiana wine industry to justify an excise tax for that industry. Purdue is also cooperating with Rigoberto Lopez on assessing marketing strategies that include sustainability with the ornamental sector of the horticultural industry, including barriers to entry and adoption of new business practices. In terms of competitiveness, trade agreements with Kenya for cut flowers represents one case study they hope to explore in this area.

    Potential impact of Competitiveness Activities

    The impacts of studies on China include 1) increased awareness and understanding of China horticultural markets among Michigan produce industries; 2) information and contacts providing potential for Michigan agribusiness firms to explore cross-country alliances that may result in increased fruit exports and/or fruit production; 3) an on-going relationship with researchers in China. Impacts include 1) better understanding of seasonal price relationships in the U.S. fresh peach market; 2) potential to develop regional strategies for managing price in these markets. Similarly, in Pennsylvania, the future direction of organic-apple marketing research will be greatly influenced by current studies scheduled for November 2008. Assessments of potential markets, both within Pennsylvania and in bordering states, for organically-grown apples and value-added apple products are necessary to determine which opportunities are truly feasible and which are not as practical. Learning directly from the consumer as to their wants and needs is absolutely crucial for any effort to be successful and economically sustainable.

    The wide array of budgeting projects, that integrate more information on marketing alternatives and certification processes than traditional budgets, represent essential business planning tools for stakeholders. This project has a tradition of blending research and Outreach into integrated projects, and these innovative budgets represent some of the most successful in terms of addressing stakeholders stated needs.

    The New Jersey's NRI ethnic project is expected to create an impact on the ethnic fruits and vegetables sector in the East-coast region by providing selected ethnic crops information to the local farmers so they will be able to compete with non-local produce suppliers. This production data sheets will provide sufficient information to the farmers to determine profitability of crops. The ethnic crop research trials demonstrated crop production procedures and documented yield variations which will help educate potential growers and the appropriate crop types for their local market. In a broader context, a better understanding of the differential cash returns to organic produce in different regions of the country will be useful to producers in their production planning and market pricing.

    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.

    Demand Models

    The New Jersey study was undertaken to document and quantify the ethnic produce market and to identify opportunities for farmers to grow crops targeted from a demand perspective. The rapid expansion of ethnic population presents significant opportunities for fruit and vegetable producers along the East Coast to take advantage of their close proximity to densely populated areas. The specific ethnic market subjects of study are the Asian and Hispanic segments, chosen for their strong recent growth and continued growth expectations. The top two sub-groups within each of these segments were chosen for the study; Chinese and Asian Indian (Asian sub-groups) and Puerto Rican and Mexican (Hispanic sub-groups). The geographic focus is the East Coast and includes Washington D.C. and sixteen states bordering the East Coast. The consumers' survey collected three types of ethnic consumer expenditures; total produce expenditure, ethnic produce expenditure, and expenditures for specific ethnic produce items. The total demand for ethnic fruits and vegetables of east-coast states will be available by the end of 2008.

    In Kentucky, Tim Woods is working with market assessments of value of local foods, including how local is local, as part of Small Farm NRI project with the Ohio State University. Micro-local and regional designations are the focus of that project. They are also looking at the intersection between nutritional claims and local food market development. Kentucky has a Food Consumer panel that allows them to quickly assess demand and interest in a variety of food crops. They are also exploring economic benefits of sampling through a Farmers Market Promotion Program grant.

    Previous studies using consumer surveys based on contingent valuation gave inconsistent or even contradictory results with respect to the impact of some consumer characteristics on organic food consumption. Using actual retail level data on organic produce (fruits, vegetables and baby food from Nielsen sources), and exploring how strong the demand elasticities were for these products over the 1990s and more recent years, the Georgia study provides an objective view of consumer socio economic characteristics related to the growth of the fresh organic produce market.

    Among various organic foods, fresh fruits and vegetables have much higher market penetration rates than others. For example, in 2002, organic fresh fruit and vegetable sales accounted for 4.5% of total fresh fruit and vegetable sales. Sales of packaged fresh produce in natural food supermarkets had the highest growth rate among sales of all organic products during 2003-2004, expanding 35.4% annually on average to $171.9 million. Despite the projected high growth in consumption of fresh organic produce, consumer characteristics contributing to growth have not been well understood.

    The objective was to identify important consumer demographic characteristics that are associated with fresh organic produce consumption and investigate effects on consumption. The results indicate that marketing strategies targeting higher income and higher educated consumers can be effective in both attracting new consumers and eliciting more sales from current consumers. Age of the household head had mixed effects regarding decisions for organic market participation and consumption levels. Minority households are an important segment of the fresh organic produce market which retailers can target effectively.

    Oregon future participation (it is a new member) will be strongly related to value-added aspects of consumer demand including credence attributes such as organic production or nutrient levels (Durham) and also on the value added by sensory attributes (Durham, Marin). The principle Oregon project will use retail store sales data to examine consumer demand and the substitutability between organic and conventional fruits and vegetables in conventional supermarkets. Data collection has already been established and data is being organized for analysis. This analysis will use classical demand models. A second project involves a multidisciplinary team with sensory scientists to improve methods for the evaluation of new fruit and vegetable varieties with respect to consumer acceptance, purchase intent, and demand potential. Colorado's consumer survey results have provided evidence about willingness to pay, but more indirectly through analyses focused on segmenting consumers, exploring those who buy produce direct and exploring how consumers use label information to decide on products and prices. A labeling experiment within the consumer survey found buyers do distinguish between competing claims and logos in Colorado. Claims relating to a healthy diet rich in fruits and vegetables were most effective in attracting consumers and consumers may look for additional certification standards and scientific evidence that organic products are of higher quality.

    Domestic wine consumption has increased, along with competition among Pennsylvania wineries and wineries. The best tool for a wine producer, as a method of developing and maintaining the domestic industry, is access to consumer data. Demographic information describing the average U.S. wine consumer exists; however, characteristics specific to those who purchase Pennsylvania wine are not readily available. Since it is anticipated that consumption of wine, wine products, and visits to tasting rooms will continue to increase, current and future wine producers and tasting room operators need to know their customers' interests, attitudes, and behaviors in an effort to stay competitive in the marketplace. Proposals and pre-proposals have been submitted to state and regional funding agencies and to appropriate associations. Other federal funding agencies have been identified and will be targeted in early 2008.

    Although it is not directly linked to fruit and vegetable marketing, Jennifer Dennis at Purdue is looking at consumer interest in sustainably produced and marketed ornamental horticulture goods, with the idea that there may be similarities among organic produce and those consumers.

    Potential Impact of Demand Models

    Although each state has slightly different focus to their work, the group continues to learn from one another on appropriate methods and approaches to answer industry questions, and there was great sharing among the participants with respect to survey instruments, appropriate funding resources and effective outreach tools.

    The ethnic research New Jersey project utilizes this consumer demand information to develop production trials, grower recommendations, and strategies to coordinate year-round production of select ethnic crops to serve this market niche and address the existing local supply-demand gap.

    For Georgia's work on organics, knowing effective target markets is a major tool for continued increased sales of fresh organic produce. The Agribusiness Center at Georgia works on marketing technical assistance with the tobacco money in Georgia, but that is only lightly connected with the Economics program in Georgia. The organic project will provide new information about how consumers substitute between conventional and organic fruit and vegetables as prices and availability change. The findings will provide useful information for investigations of antitrust issues for natural food stores, and aid producers and retailers in understanding pricing strategies in conventional grocery stores that now carry approximately 28% of all organic produce sales. For producers, the impact of sensory attributes on consumer willingness to pay aids in the selection of new produce varieties, and helps establish baseline pricing information by which to evaluate added production or distribution and marketing costs.

    In Delaware, Carl reported that the Food Institute reported recently that there is some perceived resistance toward the organic premiums being noted by retailers. Agri-culturehealth.com is a Website they helped to develop, and one of its goals is to assess the role of Websites to connect with consumers and identify the best market niches for fresh market producers, consumers and agritourism operations in New Jersey and Delaware.

    Americans have increased their consumption of fruit and vegetables as they are concerned with healthier lifestyles. And also higher consumption of fruits and vegetables is associated with decreased risk for chronic diseases, because fruits and vegetables have low energy density, eating them as part of a reduced-calorie diet can be beneficial for weight management. According to 2005 Behavioral Risk Factor Surveillance System (BRFSS), about 33% of adults consumed fruit two or more times per day and 27% ate vegetables three or more times per day. These results, together with the results from several state-based projects, underscore the need for continued marketing innovations that encourage greater fruit and vegetable consumption among U.S. adults.

    A better understanding of how Colorado consumers process information available on labels, including certification claims, might influence how the industry markets to consumers, and where government marketing programs might need to educate and do consumer outreach based on consumer perceptions.

    In Pennsylvania the research addressed the following issues that were prioritized as important marketing information by the industry: frequency of wine purchases, purpose of purchase (e.g. special occasions or as everyday wines), brand and origin preference (e.g. foreign, domestic, or state), varietals in greatest demand, and where products are most likely purchased (e.g. tasting rooms as opposed to Wine and Spirit Shops). Questions will be asked to better understand the most effective and appealing on-site and off-site (e.g. festivals and events) wine-sales opportunities, promotional and experiential strategies, and advertising methods. Surveys will also be designed to understand attitudinal differences between wine consumers and non-wine consumers, to determine how to encourage purchasing by non-wine consumers and what benefits and promotional strategies would most likely appeal to different populations.

    Impact Statements:
    1. As members discussed, the committee will develop a proposal for the WERA-72 meeting in Las Vegas, NV in 2009. Mike Woods and Jennifer Dennis volunteered to explore session topics and areas of collaboration. The group will also explore having more direct planning responsibility for sessions at the 2009 FDRS annual meeting in Denver, CO, in October, 2009. The majority of other work will focus on developing the new multi-state project in late 2008 (with expected revisions in early 2009).
    Last Modified: 25-Nov-2008
    Back to Top