Economics of Food Attributes Linked to Farm Practices
This dissertation explores the economics of food attributes linked to production practices. I consider two distinct farm commodities: pork and carrots. The pork study models and simulates the economic consequences of prospective retail regulations that restrict farm practices used to produce pork products sold within the regulated jurisdiction. The carrot study estimates econometrically retail demand parameters for carrot attributes linked to farm production and processing practices. In the pork study, I analyze the controversial regulations on sales of pork products in California that were mandated by the voter-approved Proposition 12 (Prop 12). Prop 12 requires uncooked pork cuts sold in California must originate from hogs whose mother sows were housed as set forth in Prop 12 and accompanying regulations. As of August 2022, implementation of Prop 12 is on hold pending outcomes of state and federal legal challenges. In this dissertation, I develop a detailed, empirical economic simulation model of the implications of Prop 12 for quantities and prices of hogs and pork. Simulation results show that, using a range of values for applicable parameters, compliant farrowing operations will incur about 4% higher costs, pork processors and marketers also incur added costs, and California retail prices of covered cuts of pork will rise by about 7%. California consumers of covered cuts of pork lose about $260 million annually. Hog producers who comply with Prop 12 standards in order to supply the California market will, on average, receive greater profits. Market impacts are minimal for hog producers who choose not to comply with Prop 12 standards and for prices and quantities of pork sold outside California. The second part of this dissertation investigates consumer demand for carrot product attributes that are linked to two sets of production practices: organic farming and fresh-cut processing practices. The demand for food product attributes tied to production practices is an increasingly important feature of food markets and are related to claims about health and nutrition, convenience, and sustainability broadly. Carrots are a low-cost staple vegetable in the American diet, but little economic research has been devoted to carrot demand or specifically to demand for organic and fresh-cut attributes. For data, I conducted seven waves of large web-based surveys over a period of more than 15 months, before and during the COVID 19 pandemic. My sample includes hundreds of thousands of responses to simple questions about willingness to pay (WTP) for carrots. This empirical approach was feasible because the surveys were conducted with a low-cost online platform. One contribution of my research is to explore the efficacy of such an approach to estimating specific demand parameters. The major empirical findings are that the median respondents who face two carrot packages systematically indicate a significant willingness to pay more for organic and fresh-cut products and the measured WTP differentials are broadly consistent with market evidence. Also, the share of consumers choosing the higher-priced alternative declines markedly with the price differential. Moreover, I found that WTP estimates are consistent over periods before and during the pandemic, which indicates stability in demand for carrot attributes even in the context of massive economic, supply chain, and social dislocation.