Duration: 10/01/2010 to 09/30/2015

Administrative Advisor(s):

NIFA Reps:

Non-Technical Summary

Statement of Issues and Justification

A. The Need as Indicated by Stakeholders: Following the guidelines, we identified three SAAESD Priority Areas (and particular subtopics) that this project will target with its objectives and plans of work. These include:

1. GOAL 1. AN AGRICULTURAL SYSTEM THAT IS HIGHLY COMPETITIVE IN THE GLOBAL ECONOMY

a. Integrated and sustainable agricultural production systems

b. Competitiveness in international markets

c. Public policy & economics of agricultural production systems

2. GOAL 3. A HEALTHY AND WELL NOURISHED POPULATION

a. Nutritional quality of plant and animal food products

b. Food choices for optimum nutrition and individual health

c. Functional foods for enhancing health

3. GOAL 5. ENHANCED ECONOMIC OPPORTUNITY AND QUALITY OF LIFE FOR AMERICANS

a. Economic and policy analysis of agricultural industrialization

b. Agriculture-related social and consumer concerns

In addition to the fact that these are listed as priorities by the region, each committee member has numerous working relationships with industry associations in their state/region that help to frame the research that is conducted and will be planned for the committee's future work. NGOs are a newer stakeholder group that committee members have partnered with, especially in the area of certification programs, nutritional labeling and information and how consumer behavior reacts to such efforts. The new NIFA priority areas emerged since this proposal process started, and discussion of this team's role in those new areas will be a primary topic of the first meeting in late 2010.

B. The importance and extent of the problem. What would be the consequences if the work were not done?

In recent years, greater concerns with respect to diet and nutrition have led to an increased number of marketing and promotional messages focused on the benefits of eating fresh fruit and vegetables. Both consumers and retailers have responded to the spotlight on fresh produce, resulting in increased purchases, marketing resources and even new legislation to promote Specialty Crop production in the US. Between 1987 and 2000, US per capita consumption of fresh fruits and vegetables rose 15% (Govindasamy and Thornsbury, 2006). Retailers have responded by increasing the size and range of produce sold, with the average number of items in fresh produce departments rising from 173 to 350 items between 1987 and 2001 (Progressive Grocer, 2002). The increased popularity of fresh produce represents considerable potential for enhanced marketing revenues to producers if they can recognize and harness opportunities emerging from changes in food purchases. Meanwhile, producers and consumers need to be informed about the emergence of new business strategies, regulations and policies that may influence their confidence in (consumers) and competitiveness within (producers) this quickly innovating marketing sector.

In recent years, increasing numbers of consumers have shown increased interest in foods produced in unique ways, including organic, local, pesticide free, Fair Trade or as functional foods. These individuals and households are also fueling changes in the food system as they seek to purchase their produce through channels as diverse as direct marketing and traditional supermarkets, and with expectations as broad as picking their own produce to highly branded products with 3rd party certifications. This evolution has led a higher number of farmers to consider new marketing strategies including farmers markets, joining a producer alliance, running a Community Supported Agriculture (CSA), beginning their own value-added ventures or producing new crops and cultivars to gain access to specialty niche markets.

Still, the majority of fresh produce is marketed through more conventional, large-scale wholesale and retail partners who are concerned about the efficiencies that such scales brings. And despite the belief that the fruit and vegetable segment of the food market is growing and healthy, little is known about the response of increasingly demanding consumers and food supply chain partners, the changing coordination and supply chain responses of fruit and vegetable enterprises or the response to regulations and policies developed to oversee and guide new innovations in this sector. In short, if this work is not done, producers, wholesalers and retailers are likely to remain reactionary to domestic and global shifts in consumer behavior and policy may be developed without a full assessment of potential implications for consumers and producers.

C. The technical feasibility of the research

For market analyses, consumer studies and supply chain assessments, the team of proposed committee members has a history of securing the necessary secondary data, framing primary survey instruments and developing case studies that are appropriate for the issue at hand. However, each type of research approach the team members will take on (survey, experimental auctions, analysis of secondary retail data) has its challenges and limitations. One value of working together is that the team can share and get feedback on survey instruments, seek out cases where different approaches conducted by different teams reinforce others' findings using a different approach, and joint problem-solving about how to isolate the consumer behavior aspects that are often masked in commonly used sales data.

We see no barriers to completing the proposed research, and state members will secure the resources needed to carry out more targeted projects from competitive grant and industry contract proposals.

D. The advantages for doing the work as a multistate effort

There are several reasons to believe that a multi-state approach is needed. But the most important is the fact that fruit and vegetable issues have a less traditional role in most Ag and Applied Economics programs, so that few of our members have a critical mass of colleagues in their own state with which to collaborate. So, this may help to leverage any one state's program. Moreover, fruits and vegetables are so seasonal, that we find many of us have producer stakeholders and food chain partners that have a presence in a number of our states, to assure more year-round supplies. Thus, many of our jurisdictions overlap in terms of stakeholders.

Starting on page 8, past efforts of previous team members is documented to illustrate the commitment to joint activities by this committee. What may be more subtle is the mentoring role played by members in these efforts, as it has been a common request to use more senior members of the committee as "reference letters" for tenure and promotion cases. This is only possible because of the team activities conducted, and senior members' commitment to integrate more junior members into research projects and publication efforts.

We also believe that a multistate approach is justified in terms of pooling research expertise and leveraging the impact of our deliverables through high profile venues. Three examples of this collaboration are already in initial talks:

- Sharing of survey instruments and experimental auction scripts from past studies to share "best practices" and make future results more comparable across state studies

- Joint proposals for organized symposia through Agricultural Marketing, Agribusiness, Extension and Community Economics track sessions at 2010 and future AAEA meetings as well as future collaborations with local foods, cooperative, sustainable agriculture, direct marketing and value-added agriculture research and practitioner meetings, Webinars and "theme issue" publications

- Proposal for "Special Issue" journal to Journal of Agribusiness and/or International Food and Agribusiness Management Review in year 1, and at least 2 other "theme" issues in the agricultural and applied economics or agribusiness fields over the life of the project.

Specifically, this project has developed team objectives consistent with NIFA and other USDA priority themes and invited new members in an effort to strengthen the opportunities for joint grant projects, research delivery and coordinated outreach with industry stakeholders.

This team will develop at least one multi-state research project in its first 24 months, with the intentions to target the proposal for NIFA, in a program area focused on how marketing, consumer issues and supply chains impact one of its new priorities (most likely Markets and Trade, but Food Safety and Health initiatives are also likely candidate given interests of team members). Given the major restructuring of NIFA and its programs, we intend to invite a Program Leader to attend or call into our first meeting in order to guide the team on short-term programs that are appropriate for social scientists in this area.

E. Benefits or impacts of the research including impact on science

Consumer demand drives the marketplace. For example, sales of organically-certified foods have grown in demand by approximately 20% per year over the last decade due to consumers voting with their dollars. Subsequently, the USDA, food companies and Universities are providing more technical assistance, development resources and programs to support the program. However, these programs need to be focused on the issues that consumer behavior and perceptions suggest are where more market information would be valued (differential nutrition, food safety, implied economic implications to family farms, carbon footprint of different production systems).

On a similar line, other marketing, labeling and supplying chain innovations, driven by an increasingly demanding consumer, have emerged without a clear understanding of the motivations driving consumers and industry partners to value them. Moreover, the implications for market opportunities, conduct and performance are not well understood. A significant benefit of research proposed in this project is to provide such analyses.

In general, third-party certifications supported by consumers' requests for assurances are on the rise. For example, country of origin labeling and carbon footprint labels have emerged in just the past couple of years as a way to share information on the source and environmental implications of a product's life cycle. As another example, the Fair Trade certification program is a non-profit organization that helps ensure fair wages and labor conditions for poor farmers in developing countries, along with supporting environmental sustainability. The Rainforest Alliance is another certification program that works to preserve biodiversity and sustainable agriculture on over 1 million acres in 18 countries.

Grocery stores have their own buying standards and some require third-party certifications of some type. For example, Whole Foods Market, Inc. has a policy of not purchasing genetically-modified products (GMOs). This is a clear competitive advantage for certified organic producers who meet this requirement under the USDA standards. Whole Foods has also instituted a Whole Trade certification program which is focused on ethics, the environment and product quality. Overall, certification programs may help to gain food producers access to some retail and marketing partnerships they would not have otherwise. Certifications may also result in additional price premiums, but there is little research on the returns, market performance implications or financial outcomes of these programs for enterprises along the produce supply chain.

This project will also update studies along more traditional produce marketing issues, including consumer demand studies, trade studies and supply chain case studies. Some of these studies may be refined to include new market innovations as well. For all these studies, there are benefits to businesses, government agencies and technical assistance stakeholders who seek to improve the performance of the industry with better information and assessment of areas where market performance could be more efficient or effective.

F. Identify the stakeholders, customers, and/or consumers for which the activity is intended

The primary stakeholders, partners and customers of our activities are production and consumption enterprises and households in the fresh produce supply chains. These include trade organizations, individual producers, packers, distributors, shippers and retailers, regulatory agencies, certification organizations and community organizations with a focus on improving the performance, efficacy or fairness of markets in the fresh produce sector. We also have a focus on consumer behavior, which we expect to strengthen given the new focus on direct marketing and local food systems.

Jointly, we have no plans to engage individual produce associations, but among the team, there are no fewer than 10 research projects directly identified, and often funded, by state-based fresh produce organizations. There are plans to attend the national Grocers Association meetings in Las Vegas, and with USDA-ERS, to continue exploring opportunities to use sales data and retailer partnerships in evaluating consumer behavior and labeling strategies (Washington, Colorado).

There is some government representation in this project, and several states (Kentucky, New York, Maine, Colorado) have current grants and projects with agencies who are focusing on marketing, supply chain and consumer issues (AMS, ERS, ARS, RD). These partnerships are funded by emerging initiatives and grant programs that intend to explore farmers markets, local food systems, trade implications from market events (food safety, COOL) and new retail price series reports.

Related, Current and Previous Work

An overview of CRIS Search

First, a search was conducted on individual researchers' projects using several different key terms. The results showed many complementary studies, with a significant share in the states (and with partners) that also participate in this project. These projects were more focused on specific marketing programs or regional markets, which would suggest that this committee's past work has helped seed some projects that were helpful to specific stakeholders and encouraged further investigation.

When we searched for fresh produce supply chains, we found 134 records, with 60 active at this time, and a majority in states or with investigators that directly or indirectly participate in this committee. When we searched for fresh produce consumer demand, there were only 32 records and only 17 currently active records. Moreover, many of those were overlapped with the previous search.

This committee's relationship with other regional research committees

It was interesting to search among the set of past and existing research committees. Our first impression was how many could be complementary to our work, and the second was that this committee still serves an important niche (and that the number focused on social sciences and economics appear to be decreasing in number).

Among existing regional research projects, many of the projects that may complement this work are no longer active, but there are some that it may be necessary to set our work in the context of as we move forward. They include: NC219, NC222, NC1001, NE165, NE185, NE183, NE505, NE1012, NE1008, NE1023 and S1016. Some of our members have served on these committees in the past, and priorities that continued from work in those teams influenced the objectives chosen for this project.

There are also several projects that are current and that may be useful for us to interact with, or reach out to, as our work progresses. They are grouped by topics below with some narrative on tentative plans:

Local Foods:

NC1033: Local food choices, eating patterns, and population health (NC1001)

NC1036: Research and Education Support for the Renewal of an Agriculture of the Middle

We have at least one member that overlaps with these committees, and have the goal to partner with them in at least one organized session or theme issue for a publication during the life of the project. NC1036 met at the same meetings in Fall 2010, so there was more coordination among members of the groups. NC1033 is hosting a conference in Summer 2010, and several committee members proposed papers to present at that conference.

Competitiveness

NC140: IMPROVING ECONOMIC AND ENVIRONMENTAL SUSTAINABILITY IN TREE-FRUIT PRODUCTION THROUGH CHANGES IN ROOTSTOCK USE

NE1020: Multi-state Evaluation of Winegrape Cultivars and Clones

NCERA211: Potato Research and Extension Program (was NCT-190)

We have had no previous relationships with these committees, but a goal of the new project will be to explore how more production oriented work may inform some of the committee's research on competitiveness. This may help to expand the suite of budgets developed for Extension audiences and locate high priority pricing and marketing research questions these specific produce sectors identify.

Supply Chains, International Competitiveness, Certifications and Labeling

WERA072: Agribusiness Scholarship Emphasizing Competitiveness

NCERA210: Improving the management and effectiveness of cooperatively owned business organizations

S1043: Economic Impacts of International Trade and Domestic Policies on Southern Agriculture

NC1028: Promoting healthful eating to prevent excessive weight gain in young adults (NC219)

We have at least one member that overlaps the first two committees, and peers that we work with on the third, but little has been done to reach out to the nutrition field. At least two labeling and consumer behavior studies underway by committee members are cooperatively led by a food science or nutrition professional, so our hope is to strengthen those ties and potentially propose a grant or meeting session with members of that committee.

A number of joint activities from the previous S1019 committee are highlighted in the section below. That is followed by additional discussion organized by major issue areas (which align with the objectives laid out later in the proposal). This summary of past work is augmented with research found in other committees and the literature that informs the new elements we are adding to this project, with special attention to labeling and certifications.

Other research we will draw on, but which has not been done directly under the project's committee work is presented in the methods section below.

Joint Activities of S1019 and S222

A number of joint activities were undertaken by member of the previous S1019 and S222 committees. Members from Auburn University, University of Florida, and University of Georgia worked on the joint development of a computerized model for fresh produce, resulting in a commercial computerized model (CAMP) and the following published outputs, including others excluded for brevity.

Adrian, J., J. E. Epperson, and J. VanSickle. 1983. Improved Efficiency Through Electronic Marketing of Fresh Fruits and Vegetables. J. Food Distr. Res. 14(3):24-31.

VanSickle, J. J., J. L.Adrian, Jr., and J. Epperson. 1984. Computerized Marketing of Fresh Fruits and Vegetables -- A Common Sense Alternative to Difficult Marketing Problems. Sou. J. Agr. Econ. 16(1):195.

Members from Georgia, North Carolina, and South Carolina assessed the feasibility of increasing fresh produce production across this three-state area.

Bauer, L. L., J. E. Epperson, J. T. Garrett, and D. C. Sanders. 1989. The South Atlantic Coast Vegetable Project: A Multistate Team Approach to Research on Alternative Farming Opportunities. HortScience. 24:534, 723.

The purpose, activities, and scope of the committee were highlighted at a national conference.

Epperson, J.E., and E.A. Estes. 1999. Fruit and Vegetable Supply-Chain Management, Innovation, and Competitiveness: Cooperative Regional Research Project S-222. J. Food Distr. Res., 30(3):38-43.

Members from Tennessee, Georgia, Kentucky, and North Carolina wrote a joint project proposal that was funded by USDA.

Brooker, John, David Eastwood, Phil Kenkel, Ed Estes, Forrest Stegelin, and Timothy Woods (collaborator); USDA, Integrated Food and Ag Systems grant, "A Marketing Systems Approach to Removing Distribution Barriers Confronting Small-Volume Fruit and Vegetable Growers", 2000-2003, $500,000

As a result of the joint work undertaken as part of this project, the following published and/or presented outputs were generated (along with a number of others excluded for brevity).

Eastwood, David B., John R. Brooker, Charles R. Hall, Alice J. Rhea, Edmund A. Estes, and Timothy A. Woods, "Changing Produce Marketing Barriers: A Comparison Among Three Southern States", invited paper selected for presentation at the 2003 SAEA meetings; published in Journal of Agricultural & Applied Economics 35(2):297-304, 2003.

Charles Hall, John Brooker, David Eastwood, James Epperson, Ed Estes, and Timothy Woods, "A Marketing Systems Approach to Removing Distribution Barriers Confronting Small-Volume Fruit and Vegetable Growers", Choices, 21(4):259-264, 2006.

Brooker, J., D. Eastwood, C. Hall, E. Estes, T. Woods, J. Epperson, and F. Stegelin. 2005. State Department of Agriculture Participation in Fresh Produce Marketing in Georgia, Kentucky, North Carolina, and Tennessee. J. Food Distr. Res., 36(1):220.

Eastwood, D., C. Hall, J. Brooker, E. Estes, T. Woods, J. Epperson, and F. Stegelin. 2005. Produce Growers and Market Development: A Four-State Comparison. J. Food Distr. Res., 36(1):228.

In 2005, members of the committee organized a joint session at the 2005 Annual Meetings of WCC-72. Session Title: Produce Supply Issues and Challenges

Returns to Investment Analysis on State Agricultural Promotional Program: The Case of Jersey Fresh. Dr. Ramu Govindasamy

An Assessment of Direct Marketing Venues for Indiana Fruit Growers. Dr. Jennifer Dennis, Departments of HLA and Agricultural Economics, Dr. Peter Hirst & Dr. Bruce Bordelon

Fresh Produce Supply Chain Trade Practices. Dr. Lourdes Martinez & Dr. Suzanne Thornsbury

Cost-Benefit Analysis of New Shipping Technology Applied to International Tomato and Mango Supply Chains. Jiaoju Ge, Dr. Allen F. Wysocki, Dr. Bruce Welt, & Dr. Lisa House

In 2006, participants from 11 states joined together to highlight committee work in a special thematic issue of Choices.

Ramu Govindasamy and Suzanne Thornsbury (2006). "Fresh Produce Markets: Critical Trends and Issues," Special Theme for Choices, 4th Quarter, 21(4): 225-227. http://www.choicesmagazine.org/.

Individual papers included:

Direct Marketing of Fresh Produce: Understanding Consumer Purchasing Decisions by Jennifer Keeling Bond, Dawn Thilmany, and Craig A. Bond

Ethnic Produce Marketing in the Mid-Atlantic States: Consumer Shopping Patterns and Willingness-to-Pay Analysis by Ramu Govindasamy, Aparna Nemana, Venkata Puduri, and Kim Pappas

Traceability: Formulation and Implementation of an Economic Efficient System in the Fruit and Vegetable Industry by Esendugue Greg Fonsah

Preventive Health Maintenance Information Brought to You by Your Local Fruit and Nut Producers by Hoy F. Carman

Fresh Produce Intermediaries: Impacts of Change in Away-from-Home Food Markets and Trade Practices by Suzanne Thornsbury, Roger Hinson, Lourdes Martinez, and Dixie Watts Reaves

A Marketing Systems Approach to Removing Distribution Barriers Confronting Small-Volume Fruit and Vegetable Growers by Charles Hall, John Brooker, David Eastwood, James Epperson, Ed Estes, and Timothy Woods

Recently, receipt of a USDA Small Farms grant for Small Fruit Extension project has enabled increased on-site collaboration between members from Kentucky and Ohio by funding sabbatical leave. Outputs to date include, but are not limited to:

Timothy Woods, Matt Ernst, Stan Ernst and Nick Wright, "2009 Survey of Community Supported Agricultural Producers", University of Kentucky, Dept of Ag Economics Extension Numbered Series: 2009-11, July, 2009

Woods, Timothy, Wuyang Hu, Marv Batte, and Stan Ernst, "National, Regional, Local, and Micro-Local Markets: How Far Can We Take Local Marketing of Food", paper presented at the WERA-72 Regional Research in Agribusiness meetings, Las Vegas, NV, June, 2009.

Competitiveness and Performance of Supply Chain Activities

The main objective of supply chain management is to minimize time and cost from supply chains, improving profitability and/or competitiveness which is possible through utilization of technological advancement such as computing hardware, software, and other current electronic technologies. In supply chain management systems everything from raw materials to finished product is produced on demand and delivered "just in time" to the next stage of production.

Past work reported in S1019

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. Past projects examined the status of trade policies (including tariffs) on U.S. tart cherry products moving into the EU, particularly Germany and Belgium. Since these measures can have a trade distorting impact as large, or larger, than traditional tariffs, they are worth committing significant research efforts.

One 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. Through the team's Network with MarketMaker, which includes a significant leader among the buyers at Walmart, research questions about supply chain relationships will be explored.

Michigan's blueberry industry is one of the few state green industries to show significant growth during the past five years. Recent work has explored how that industry should position themselves for survival to address aggregate global economic forces impact the current growth stage (increasing price for increasing volume of sales). Ohio has explored similar issues and the teams are collaborating more on what they can learn from one another, along with another state partner, Kentucky.

Assessing Consumer Preferences and Demand

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.

In a new project led by Washington, partnerships with a food service enterprise will manipulate kids' meal offerings with more healthful alternatives to see if such interventions in the supply chain will increase the incidence of produce consumption among at-risk youth populations.

Past work reported in S1019

A few projects in Oregon, Washington and Colorado are matching nutritional claims with other label information to assess part worth values of the nutrition information, using surveys and experiments as well. Together with food scientists and sensory analysis, this provides a richer context in which to gain realistic values.

As one example, Colorado's consumer survey results suggest that, when targeting consumers, there are four potential consumer clusters to consider, 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 (Bond, Thilmany and Bond). A labeling experiment within the consumer survey found buyers do distinguish between competing claims and logos in Colorado. In Delaware, consumer surveys were conducted by web site: 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.

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. 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.

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.

Finally, there has been little attention on how the increasingly diverse consumer base of the United States will impact the long-term demand for various produce categories. A 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.

Innovations in Marketing Strategies

The United States' produce sector is under pressure. The competition among retailers and discount chains plays a strong role in the determination of market prices. The increased competitive pressure arising from intra-regional produce trade, particularly imports from neighboring countries, are making the produce sector more complicated.

There are places where team members are focused on interdisciplinary efforts that need economic assessment of different cropping and marketing alternatives. The organic research program for blueberry production in Florida and Georgia focused on field trials with different mulching techniques to determine the most effective and efficient way of growing organic blueberries. Data collected will be subjected to a comprehensive economic analysis aimed at determining cost of production, yields and profitability. The cost analysis will be crucial in determining the market structure and profitability of organic blueberries. Assisting vegetable growers in the adoption of methyl bromide alternatives for weeds, diseases, and nematodes are also focus of this project.

Past work reported in S1019

A Colorado State University study (Bond, Thilmany and Bond) indicates that producers selling fresh produce direct to consumers may be able to increase patronage by offering diverse, nutritionally enhanced, locally grown produce; located near consumers in target markets; promoting freshness and vitamin content aspects of produce; showcasing colorful produce on-site while enhancing overall visual appeal of offerings; and finally advertising via food and nutrition electronic newsletters and email, blogs, and when practical, local television.

Much of Michigan's blueberry production is held by recent new entrants and takes place on small farms. Small growers often report limited knowledge and access to agricultural market information. In addition many of the new growers are Latino farmers where barriers such as language and cultural differences may represent an additional marketing challenge.

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.

The North Dakota and Northern Great Plains potato industry led researchers to investigate regional shifts in United States potato production and processing. Similarly, Maine has seen a shift in its potato industry and team members may share results to leverage the impact of both. A Florida project worked on improving quality and freshness of produce to compete with non-local supplies. This analysis is only more important in light of recent food scares and the call for either more regulatory oversight, or joint industry programs to provide consumers with greater assurances.

Georgian MALTAG Regional Enterprise Budgets for Organic Vegetables Project budgeting and cash flow analysis are integral parts of assessing costs, financial planning and risk management for agricultural producers. Multi-state budgeting in cooperation with Mississippi, Alabama, Tennessee and Arkansas provides a common base of input files to assist with assessment of regional competitiveness.

Additional Current Research

As an emerging issue for the committee to study, country-of-origin-labeling (COOL) provisions for fresh fruits and vegetables were included in the Farm Security and Rural Investment Act of 2002. These may be the most wide-reaching example of a new labeling program that will have demand, supply chain and marketing strategy implications akin to the focus of this project's proposed focus.

The benefits of COOL will need to be significant to offset increased costs if the cost of implementation is indeed that high. USDA (2008) suggests that available studies indicate that the potential benefits of COOL will likely be small. They concluded that there is little tangible evidence found to support that consumers' stated preferences for COOL information will lead to increased demand for commodities bearing a U.S.-origin label. If correct, COOL is not likely to be of great benefit to consumers or producers, creating a burden on both and resulting in higher prices to consumers and lower returns to producers. Some analysts (Krissoff et al., 2004) have questioned the value of labeling given the infrequency with which voluntary country-of-origin labeling was observed. They conclude that lack of use of voluntary labeling programs suggests that food suppliers see little or no advantage in labeling domestic products as domestic.

Several consumer preference surveys (including those conducted by committee members) have shown that consumers desire COOL, with stated preferences as high as 84 percent for respondents who would like markets to provide information about country of origin of fresh produce (Puduri, Govindasamy, and Onyango, 2006). Other studies (Mabisco, Sterns, House and Wysocki, 2007) have indicated that consumers were willing to pay a premium for product labeled as "U.S.A. Grown".

One study (Plastina and Giannakas, 2007) indicates that consumer demand for apples would need to expand 2.6 to 7.0 percent to pay for the added cost of COOL, while tomatoes would have to increase 8.2 to 22.4 percent. These estimates are dependent on the higher costs of implementing the labeling program.

Objectives

1. Develop demand and market valuation models for the produce sector that can be used to evaluate effects of increasingly complex product differentiation schemes (organic, enhanced health claims, biodynamic), trade, commodity marketing programs, labeling programs (local, food miles, Fair Trade), traceability systems, and food safety events in the U.S. produce markets.
   
2. Analyze the relative benefits and costs, to producers and consumers, of government and industry-led marketing and policy programs (certifications, Leafy Greens marketing order, Country of origin labeling, farmers markets) using both theoretical approaches and empirical evidence from multi-state applied research projects.
   
3. Assess the changing coordination and supply chain management strategies being implemented in the fruit and vegetable sector and identify strategic organizational and marketing implications for a set of firms that are diverse in terms of commodity, marketing approach and size of operation (including small and mid size farms).
   

Methods

In this section, we discuss methods that correspond to each of the preceding objectives. First, we discuss methods that can be utilized to meet Objective 1: Develop demand and market valuation models for the produce sector that can be used to evaluate effects of increasingly complex product differentiation schemes. Consumer expectations for quality in produce markets are increasing and, at the same time, consumers expect increasingly customized products. Many simple commodity markets have evolved into highly differentiated product markets in order to fulfill heterogeneous consumer preferences. This customization of purchases has implications for economic theory and estimation, especially how researchers analyze markets. Approaches that perform well for examining food commodities are not necessarily efficient to understand differentiated food products. For example, a single grocery store may carry 14 varieties of apples, with conventional and organic versions of each variety. If one were to estimate the cross-price effects for this category, then one would need to estimate 784 (28 x 28) parameters. The logit demand model (McFadden, 1973) solves the dimensionality problem by projecting the products onto a space of characteristics. Researchers from Colorado, Illinois, Oregon, and Washington will use these methods to work cooperatively on models, surveying, and experimental approaches to improve the validity of market valuation estimates on a variety of produce claims (production origin, organic, nutrient claims, and other production protocols). As the methods used evolve (as discussed below), the group will collaborate on marketing studies, identified by industry and NGO groups as high priority, to evaluate consumer behavior. Recent advances in discrete choice modeling (e.g., the random-coefficients model) have led to the incorporation of heterogeneity in consumer tastes (Berry, Levisohn and Pakes, 1995; Nevo, 2001) when estimating the demands for differentiated products. Various approaches have been used to examine differentiated markets. Anderson, de Palma, and Thisse (1992) identify three different types of models of demand for differentiated products. They are random utility models, representative agent models, and hedonic price models. The theoretical foundations of discrete choice models lie in the random utility model approach. These models are utilized in many stated preferences approaches to valuation, such as contingent valuation and conjoint analysis. Detailed information on product quality attributes is often missing in traditional sources of food consumption data. Consumer surveys and choice experiments often needed to elicit preferences for new foods, technologies, and policies. Researchers who are interested in the impact of environmental, ethical, or health motivations on organic or ecolabel purchases have used various strategies to elicit information about the strength of individual's values and concerns. Some of this work is cited in the previous work of this research committee (presented above), but new committee members have been recruited who are innovating in this area. As one example, analysts have used a series of questions to elicit the strength of those motivations and convert them to a component score, which is a weighted linear combination of the original variables using principal components analysis. This score can then be utilized as explanatory variables, as in McCluskey, Durham, and Horn (2009). Researchers from Oregon and Washington will lead efforts that also include Colorado, Illinois, and Utah in applying these methods to a broader set of produce categories. In produce marketing applications, there are often a large number of product offerings with a wide variety of product characteristics. In order to make policy statements about optimal product assortment or design of new products, it is important to allow for product characteristics or attributes to enter the utility function. Once product characteristics are considered as drivers of utility, one can consider a characteristics approach to demand. Random coefficient models have contributed to the methodology of estimating demand systems based on product characteristics. These include dimensionality problems and taking care of price endogeneity. There is a consensus emerging from both the developers and appliers of these models to treat product characteristics as endogenous. As with price, product characteristics are typically choice variables of firms, and as such one might worry that they are actually correlated with unobserved components of demand. The hedonic price technique has been utilized to understand the implicit prices of product characteristics for foods, including in the produce sector. The hedonic approach is also an effective tool to isolate the premium for "credence good" product characteristics such as organic certification, local, and geographical indications. Given the focus this new project would have on these attributes, we plan to coordinate hedonic analysis across product categories, and possibly regions, where data are available. Researchers from Colorado, Georgia, Kentucky, New Jersey, South Carolina, and Utah will focus on the emerging local market designations and integrate them into consumer demand and valuation analyses using techniques that incorporate product characteristics and locale. From an empirical point of view, the dependence upon product characteristic space offers the opportunity to use spatial statistical techniques to take advantage of the pervasive spatial autocorrelation among residuals from hedonic pricing models. The use of spatial information helps to control for omitted variables correlated with space. Such variables in produce markets could include location of production origin (especially important for products that rely on collective reputations such as wine, and preferences for local products), preferences for organic foods and other socially responsible food attributes, and the general availability of variety. Participants from Georgia, Florida, Idaho, Indiana, Maine, Nevada, New York, and the USDA will collaborate on fruit and vegetable demand analysis with special emphasis on organics. Methods will include conventional and/or discrete choice demand analysis as well as state-of-the-art price analysis. Second, we discuss the methods that are needed to meet Objective #2: Analyze the relative benefits and costs, to producers and consumers, of government and industry-led marketing and policy programs. Researchers from Colorado, Florida, Kentucky, New York, South Carolina, and Washington will focus on examining the impacts of various governmental health, local food, and marketing order initiatives as well as share expertise on research design, and coordinate in at least one case where a similar marketing platform has been adopted - MarketMaker. Methods used to understand the benefits of industry-led marketing programs are also evolving, and one approach that has become increasingly popular and effective involves economic experiments. Economic experiments are divided into treatments, and each treatment examines how consumers (or producers) respond to a change in prices, products, policies, promotional efforts, and other marketing factors. Many of the current and new members in this regional research group have access to labs designed for experimental economics and decision research, and there may be room to replicate, or expand the number of, treatments within an experiment across institutions. A subgroup of the committee intends to coordinate experiments across states (all which have their own programs) from this point forward so that comparative analyses are also possible. More details on the approach may be informative. In most cases, subjects are given an endowment and during the experiment they bid on products in a series of auctions; therefore, experimental methods avoid the problem of hypothetical bias because the participants actually pay for the products on which they bid. Methods that were originally developed in the field of marketing can be utilized in economic experiments to obtain incentive compatible responses. This process enables researchers to estimate willingness to pay (WTP) from the subjects without any budget constraints or satiation effects. After each auction, subjects complete a short survey to elicit revealed preferences for auctioned items, impressions of any information presented in the experiment, and various pieces of demographic information. These data are used as explanatory variables along with the treatment variables in an econometric model. A common model used to test various hypotheses for the treatment groups is a two-limit random-effects Tobit model. Furthermore, many "field experiments" or "natural experiments" will be utilized by cooperation with grocery stores that can make scanner data available to researchers. These markets are also an ideal environment to incorporate data from other fields such as sensory science. Researchers in Colorado, New Jersey, Oregon, and Washington will work in this realm which is also complementary to Objective 1. Beyond consumer-oriented research, members of the committee from Colorado, Georgia, Michigan, New Jersey, and New York will use estimates from past and on-going market studies to evaluate expected impacts of various policies that form, change, and evolve in produce markets, including, but not limited to Country of origin labeling, food safety, and nutritional claims. Evaluating the effects of government policies has traditionally been done using partial equilibrium and general equilibrium simulation models that examine how policy-induced changes in demand and supply affect surplus measures for producers, consumers, and taxpayers. These methods rely on the specification of several parameters that describe various elasticities, market and cost shares, and policies; many of these parameters are widely available for grains and oilseeds but have been much less available for fruits and vegetables. However, given the increase in international trade patterns for specialty crops, there is renewed interest in collecting information about these parameters and understanding the effects of trade policies applied to horticultural products (e.g., SPS regulations). Developing such models for fruits and vegetables presents another opportunity for joint research projects across members of our regional research group interested in evaluating the effects of trade policies. On the supply side, there is increasing interest in understanding the costs of production and marketing, especially as the variety of production protocols and marketing strategies proliferate. Researchers from California, Colorado, Georgia, Idaho, Indiana, Kentucky, Louisiana, New York, Pennsylvania, and West Virginia will undertake research and outreach in this area. Research that examines the costs of government and industry-led marketing and policy programs has traditionally started with crop budgets that document detailed information about production costs and revenue streams for a representative farm. The target audience for crop budgets is various stakeholders (including input suppliers and lenders, producers, handlers, and processors), and they have been used to assess profitability issues in specialty crop markets. Crop budgets are now being developed (many by members of this regional research group) with three innovative components. First, the analyses now incorporate much more scale-appropriate information; results are provided for different farm sizes and for farms selling to different customers. Second, revenue streams are now more closely linked to WTP studies to highlight how changes in consumer demand affect farm-level profitability. Third, crop budgets are beginning to consider interactions between biophysical, climatic, and management factors and the costs of production. Lastly, we discuss the methods that are needed to meet Objective #3: Assess the changing coordination and supply chain management strategies being implemented in the fruit and vegetable sector and identify strategic organizational and marketing implications for a set of firms that are diverse in terms of commodity, marketing approach and size of operation (including small and mid size farms). The analysis of coordination and management strategies entails a broad range of empirical methods including semi-structured case studies, descriptive assessments, econometric analysis, and simulation techniques. The particular method chosen will vary depending on the context of the specific issue and the data available. Coordination among researchers in multiple states will provide a richness of detail for comparison that is often not achievable through individual efforts. Outcomes are expected to include assessment of changing agri-food structure on competitiveness of U.S. industries. This information is critical for business success, either directly or indirectly, as the balance of power within the marketplace shifts. In Colorado, Delaware, Florida, Georgia, Idaho, Indiana, Kentucky, Maine, Michigan, New Jersey, New York, Nevada, Ohio, Oklahoma, Pennsylvania, and West Virginia team members will develop case studies and best practice research focused on how evolving marketing strategies (buy local campaigns, regional food hubs, organics, marketing orders and retail partnerships) impact the competitiveness and performance of fresh produce enterprises. Descriptive assessment of current fruit and vegetable market structure and production trends can provide a benchmark for further evaluation of proposed or enacted change in strategy. Case studies, anecdotal evidence, literature reviews, and statistical analyses are all tools likely to be employed in a descriptive model. Simulation methods may adopt game theoretic techniques to provide an analysis of strategic interaction between agents in an economy. Since even in cases where regulatory policies increase the net welfare of society there may be agents with individual welfare losses, producers, consumers, and policymakers have incentives to act strategically. Game theory allows such interactions to be modeled in a context of imperfect competition and can be used to analyze agents' behavior in domestic, bilateral, or multinational policy setting arenas. Results will contribute to a better understanding of the underlying market structure in fruit and vegetable industries, and may increase the multi-state research effort of transferring insights to other cases, firms, or industries. Anticipated outcomes would include benchmark comparisons of U.S. firms and industries active in fruit and vegetable markets. For example, one particular project between California and Colorado is focused on developing case studies of Values-Based supply chains where producers are organizing to improve the scale of their operations, but using labels and assurances to secure better returns. Another example is to continue using established networks with the retail community (Colorado and Oregon), MarketMaker team (Colorado, Kentucky, Louisiana, and New York) and USDA Local Food systems network (Colorado, New York, Ohio, USDA-ERS, and West Virginia) to solicit institutional buyer perspectives and feedback on high needs areas for research relevant to those stakeholders. Possible changes in the market structure of the supply chain and competitiveness ramifications for the stakeholders of the produce industry will be analyzed by California, Georgia, and the USDA using case studies, descriptive assessments, and econometric/game theory frameworks. As consumer preferences evolve and globalization of markets continues, change becomes a certainty for U.S. fruit and vegetable industries, as they must constantly assess strategies for remaining (or becoming) competitive in fluctuating markets.

Measurement of Progress and Results

Outputs

• The lists of progress and results we expect to see are listed below. It is important to note that this team is not merely focused on academic channels. In addition to the journal articles and organized sessions commonly expected of a research committee, we expect each team member to present their own, and each others work, at state level meetings of produce associations, retailers, direct marketers, farm organizations and interested consumers. As a team, we hope to engage with one new and relevant stakeholder group each year, with the initial goal being the National Retailers group or the USDA Know your Farmer, Know your Food working group. The deliverables we intend to create, which we believe will be valued by these partners, are categorized below.
• The outcomes we expect to have from this project include a diverse set of publications (journal articles, case studies, industry contract reports, fact sheets), as well as some decision tools and policy briefs. There may also be some nicely integrated data series and market databases which will provide market assessment and coordination tools for stakeholders. In effect, this will be a very applied and integrated research project. As stated earlier in the proposal, there are several joint outputs we plan to do in the near future, as a result of information shared at our annual meetings, networks that have developed among researchers and opportunities to get on programs and in publications as a team of researchers. These include:
• - Sharing of survey instruments and experimental auction scripts from past studies to share best practices and make future results more comparable across state studies
• - Joint proposals for organized symposia through Agricultural Marketing, Agribusiness, Extension and Community Economics track sessions at 2010 and future AAEA meetings as well as future collaborations with local foods, cooperative, sustainable agriculture, direct marketing and Value-added agriculture research and practitioner meetings, Webinars and "theme issue" publications
• - Proposal for "Special Issue" journal to Journal of Agribusiness and/or International Food and Agribusiness Management Review in year 1, and at least 2 other "theme" issues in the agricultural and applied economics or agribusiness fields over the life of the project. At least one will be a cooperative effort with one of the other regional research committees listed in the CRIS background research section of this proposal.
• In addition, there is discussion of writing a multi-state grant targeted at the AFRI Markets and Trade program, which would explore labeling issues related to consumer response to nutritional information (addressing Goal 3 listed earlier). This is an outcome, since it would allow subteam to garner the resources necessary to extend the meeting time, methodological innovations, and applied research impacts of projects that are less national in scope.

Outcomes or Projected Impacts

• The potential impacts of this work will be in three realms; market information, recommendations on improved marketing performance and insights on costs and benefits of value to policymakers that are considering oversight, grading and certification programs to enhance market activities.
• Previous work by committee members has been used by a broad set of stakeholders to make marketing and promotional decisions, inform strategic planning exercises, assess potential implications of proposed policy measures (such as COOL) and substantiate demand for growing market segments. For example, the leafy marketing order resulted from past supply chain research specifically related to food safety assurance, like that proposed in this project (in support of Goal 3 from CSREES). Now the order may become an umbrella initiative covering a broader geographic area. If so, this teams expertise could be brought to bear on any evaluation of its performance.
• In another case, the need for COOL policies for the full array of food products was motivated by various studies conducted to evaluate potential consumer benefits from labels on source of production. Again, the teams exploration of consumer values associated with labeling strategies would be an impact to those evaluating the program in the future. Finally, a small subteam is interested in the economic impact of some niche supply chains (farmers markets, direct sales wineries) and this addresses CSREES goal 5, as any economic impact of reformulated food supply chains to minimize middlemen could provide important answers to the evaluation of these Know your Farmer, Know your Food approaches.
• This focus on economic impact and the new USDA program focused on knowing your farmer also connects well with the relationship several team members have with the Market Maker online directory of producers (a rich resource for assessing large and small stakeholders), eXtensions increasing activity in the area of organic and local food systems outreach materials, and USDA personnel who have been compelled to develop programs in support of various market segments in the current Farm Bill.

Milestones

(2010): At least one coordinated project for each objective/subcommittee will be framed by the fall 2010 meeting, with proposals developed for 2011 USDA, industry or other (e.g., NIH, community health) grant programs.

(2012): Once there are some initial joint research results and findings, each subcommittee will organize at least one symposia at a major agribusiness, food industry or food policy conference by early 2012.

(2013): The group will consider developing another special issue journal, devoted to one of our identified objectives, and this will be published by 2013.

Projected Participation

View Appendix E: Participation

Outreach Plan

The results will published in peer reviewed journals, extension publications, grower meeting proceedings and internet sites. Special efforts have been made by committee members to participate in meetings targeted at previously underserved populations including female, ethnic, part-time and small and mid-sized producers.

For the materials developed to assist trade organizations and producers in using the basic research, a broad-based marketing plan will be developed. Business models and marketing strategies consistent with the production and marketing research will provide any interested producers with the ability to more fully assess the economic costs and benefits of adopting different marketing strategies, including various certifications and distribution approaches.

In addition, results on potential promotional advertising, education or marketing materials will be shared through presentations and fact sheets to give an unbiased assessment of the feasibility of such marketing activities to individual producers or industry groups. Market Maker has an area for each state partner to post case studies and best marketing practice fact sheets, as one possible outlet. eXtension has also approached several team members on integrating more of this research into various Plans of Work within that system.
Several publications and Extension bulletins of value and interest to both large and small farm producers throughout the US will be developed, published and posted on the Internet. There will also be several presentations to marketing, horticulture, and certification organizations. Several team members have had summaries of their research published in trade association newsletters, or they have been invited to present the findings at annual meetings. This is expected to continue within this project given the applied nature of the research.

Organization/Governance

The committee intends to continue with its prior governance structure. There will be a chair and secretary selected for administrative duties. Research planning and coordination will be conducted as subcommittees organized by objectives.

Literature Cited

Anderson, Simon, Andre de Palma and Jacques-Francois Thisse, Discrete Choice Theory of Product Differentiation, Cambridge, MA: The MIT Press,1992.

Berry, S.T., Levinsohn, J., and Pakes, A. 1995. "Automobile Prices in Market Equilibrium." Econometrica 64: 841890.

Bond, C., D. Thilmany and J. Keeling-Bond. Understanding Consumer Interest in Product and Process-Based Attributes for Fresh Produce. Spring 2008. Agribusiness: An International Journal. 24(2): 231-252.

Curry Raper, K. S. Thornsbury, and C. Aquilar (2008). "Regional Wholesale Price Relationships in the Presence of Counter-Seasonal Imports." Journal of Agricultural and Applied Economics. Forthcoming.

Govindasamy, R., and V. Puduri. "Consumer Preferences in United States for Integrated Pest Management Produce," ICFAI University Journal of Agricultural Economics, July 2008.

Govindasamy, R., Calum G. Turvey and V. Puduri. "The Influence of Agro-terrorism on consumers' preference for locally grown products: a case-study from New Jersey", Applied Economic Letters, Dec 21, 2007.

Keeling-Bond, J, D. Thilmany and C. Bond . "What Influences Consumer Choice of Fresh Produce Purchase Location?" Journal of Agricultural and Applied Economics. Forthcoming, April 2009.

Krissoff, B., F. Kuchler, K. Nelson and J. Perry, and Agapi Somwari. "Country of Origin Labeling: Theory and Observation." USDA WRS-04-02. Jan. 2004.

Mabisco, A., J. Sterns, L. House, and A. Wysocki. "Estimating Consumers' Willingness-To-Pay for Country-Of-Origin Labels in Fresh Apples and Tomatoes: A Double-Hurdle Probit Analysis of American Data Using Factor Scores." Selected paper, American Agricultural Economics Association 2008 Annual Meeting. July 24-27, 2007.

McCluskey, J.J., C.A. Durham, and B.P. Horn, 2009. "Consumer Preferences for Socially Responsible Production Attributes across Food Products," Agricultural and Resource Economics Review 39(3): 345-356.

McFadden, D. 1973. "Conditional Logit Analysis of Qualitative Choice Behavior," in Frontiers of Econometrics, Zarembka, P., ed., New York: Academic Press.

Nevo, A. 2001, "Measuring Market Power in the Ready-to-Eat Cereal Industry." Econometrica 69(2): 307-342.

Bond, C., D. Thilmany and J. Keeling-Bond. "What to Choose? The Value of Label Claims to Produce Consumers." Journal of Agricultural and Resource Economics. December 2008.

Puduri, V.S., Govindasamy, R., and B. Onyango. "Country of Origin Labeling of Fresh Produce: A Consumer Preference Analysis." Applied Economic Letters, Dec 14, 2007.

Thilmany, D., C. Bond, and J. Bond. "Going Local: Exploring Consumer Behavior and Motivations for Direct Food Purchases." American Journal of Agricultural Economics., December 2008.

Zhang, F., C.L. Huang, B.H. Lin, and J.E. Epperson. 2008. Modeling Fresh Organic Produce Consumption with Scanner Data: A Generalized Double Hurdle Model Approach. Agribus. Int. J., 24(4):510-522.

Attachments

Land Grant Participating States/Institutions

CO, DE, FL, GA, HI, IL, IN, KY, LA, MS, NC, NE, NJ, NY, OK, OR, PA, SC, TN, TX, UT, WA, WI, WY

Non Land Grant Participating States/Institutions