The Impact of Food Safety Scares on the Food Supply Chain in an Environment of Highly Integrated Monopolostically Competitive Agriculture

NON-TECHNICAL SUMMARY: A key question regarding consumer and producer behavior is how they react when faced with unexpected food safety shocks. Recently, there have been E. coli outbreaks in the fresh spinach market closely followed by an outbreak in the processed beef market. Prior to this, concern was about Bovine Spongiform Encephalopathy (BSE) discovery that received worldwide reporting. This project will explore producers and consumers' reactions to food safety shocks. The purpose of this project is to investigate 1) the market impact of food safety shocks on prices along the supply chain in an environment of highly integrated monopolistically competitive agriculture and food industries; 2) the economic impact of food safety events on consumers' perceptions and preferences and their purchasing habits and behavior; and 3) the economic impact of food safety on producers, supply-channel marketing managers, and retailers, and their strategic responses to food safety incidents.
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APPROACH: Contemporary time-series dynamic system models as well as commodity models will be developed and used to assess the impact of food safety events such as E-coli contamination and other meats and fresh produce safety scares on consumer and producer behavior and price transmission along supply channels. Conceptual models of vertical and horizontal product differentiation will be developed to address specific dimensions of food products and quality, specifically food safety as a quality attribute.
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PROGRESS: 2007/01 TO 2007/12<BR>
Food safety events are the most challenging issues facing marketing channels of agricultural products today. Food safety is also identified as one of the specific priorities of the targets of opportunity of the College of Agriculture. A key question regarding consumer and producer behavior is how they react when faced with unexpected food safety shocks. Firm-level strategic decision making regarding product differentiation, health and wellness functions of food, and consumer responsiveness, in an environment of highly integrated monopolistically competitive agriculture and food industries is at the heart of this research proposal. Better understanding of consumer reactions to food safety scares helps the food industries construct strategies that can restore consumer confidence after safety crises.<p>
IMPACT: 2007/01 TO 2007/12<BR>
Results are expected to help exporters and producer create credible quality assurance programs through more effective, transparent communication with consumers. Heightened visibility has created opportunities for branding, labeling, and product differentiation based on traceability and quality. Credence attribute labeling reduces information costs to consumers and results in increased demand for quality-assured products. Producers and retailers can use these results to further differentiate their products and perhaps earn higher premiums, as a strategic response to consumers' risk perceptions. Findings will also reinforce the need for food industry representatives to provide accurate information when a safety crisis arises. Results will show retailers another way to raise consumer confidence in the nation's supply chain by reducing erosion of demand and market share when safety crises do occur.