Australasian Agribusiness Review - Vol. 14 - 2006
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Hui-Shung (Christie) Chang, Chung-Jen Hsia and Garry Griffith
In March 1997, a FMD epidemic broke out in the Taiwan pig industry and within four months some 40 per cent of the pig population was lost to the disease. The demand for pork fell substantially following the outbreak due to food safety concerns by consumers, and this raises the question of whether there were any related impacts in the demand for other meats. The objectives of this study were to determine econometrically the relative impact of the FMD outbreak on the demand for imported beef from Australia, New Zealand and the United States, and to draw marketing implications for beef suppliers to Taiwan. The study found that overall the FMD outbreak had little impact on beef imports although beef demand had changed slightly for New Zealand and United States over a six-month period. This result suggests that there might be a missed opportunity for beef suppliers, given that food scares are generally short-term in nature and a quick response immediately after the outbreak is required to take advantage of the situation.
R. J. Cox, S. Johnson and C.M. Cunial
This paper presents a case study of a major food service company within Australia that found itself faced with the above circumstances. A best practice program was developed to address the problem of increasing consumer complaints regarding beef meals. An audit of their wholesale suppliers demonstrated that, despite the provision of product specifications, 41.5% of all the beef audited did not adhere to the product specifications. The Company identified that collaboration with their suppliers was a key initiative to meet their consumers’ requirements.
Collaboration occurred through the development of Quality Partnerships with strategic alliance partners resulting in committed suppliers providing guaranteed quality product. The Quality Partnerships were instrumental in reducing customer complaints by 96% and improving customer satisfaction by 34% for the beef meals served by the Food Service Company. This case study contains an overview of the problem and outlines the wholesale beef audit and the consequential Quality Partnerships developed, before providing a discussion of the results. Finally, important implications from this case study have been identified and provide a checklist for other food service companies wishing to adopt Quality Partnerships with their suppliers.
R. J. Cox and C. M. CunialAbstract
It is often said that the ‘consumer is always right’ and customer satisfaction is paramount for success in a business, so when a major increase in customer complaints of a large Australian food service company occurred it initiated a review. The review identified that 75% of the complaints originated from meat meals. Product quality ranked highest by customers in a benchmark survey study of 761 customers of 12 international and national food service company outlets. This case study reports how a large Australian food service company utilised a best practice strategy, to reduce customer complaints by 96%. It did this over a two-year period by improving customer-eating satisfaction of beef and lamb meals by 34% and 53% respectively. Strategies used to achieve these results included closer relations with customers and suppliers, improvements in quality and consistency of meat meals, comprehensive and efficient quality controls, including accurate specifications and monitoring procedures, development of staff skills and moral and influential leadership.
This case study discusses these outcomes in relation to the adoption of a best practice strategy within an Australian food service company and the use of product testing to achieve better specifications. An overview of the problem, outline of the implementation strategy, discussion of results and implications for other foodservice companies are presented.
Euan Fleming, Terence Farrell, Renato Villano and Pauline Fleming
In this paper, we assess the potential for rehabilitation of comparative analysis under its new guise of benchmarking. After a brief description of comparative analysis, we discuss the deficiencies that surrounded its fall in reputation: neglect of economic principles, limited scope for action, failure to establish causal relations between farming practices and performance, lack of a holistic approach and failure to take account of production risk. Each of these deficiencies is diagnosed, and it is argued that they can be overcome through the careful selection of farm performance criteria and use of long-established and recent methods of efficiency and productivity analysis.
The case is put for widespread application by benchmarkers of recently developed methods of efficiency and productivity analysis. These methods have so far remained almost wholly in the province of research. If successful, their application would enable a benchmarker to examine economic efficiency and its components over many variables by using frontiers to capture the complex relationships between several inputs and several outputs. This form of analysis is useful where farm inputs are not monotonic and where both substitute and complementary relationships exist between them. Examples are provided from benchmarking case studies that show progress has been made in some but not all areas of concern. Regardless of the progress made in methodology, skilled and experienced benchmarkers familiar with the data are needed to interpret and apply results.
Michael Johnson, Bill Malcolm and Ian O'Connor
Investment in agribusiness assets has grown significantly in recent years. The question of interest is whether including agribusiness assets in investment portfolios provide benefits. The effects of diversification by including agribusiness assets in two investment portfolios, a mixed asset portfolio and a diversified share portfolio was investigated using Markowitz’s (1952) Modern Portfolio Theory (MPT) of mean-variance optimization. To measure the performance of agribusiness assets, an index of agribusiness companies listed on the Australian Stock Exchange was used. The results of the study suggested that agribusiness assets provided some diversification benefits in both the mixed asset and diversified share portfolio. The benefits of including agribusiness assets in a mixed asset portfolio were shown to be more significant than in a diversified share portfolio. Allocations of agribusiness assets in the portfolios tended to increase with portfolio risk, up to a peak of 32.10% agribusiness assets in the mixed asset portfolio, with allocations tending to decrease with increasing risk in the diversified share portfolio, peaking at a 17.72% allocation in the minimum risk portfolio. For both the portfolios analysed, agribusiness assets entered efficient portfolios at the minimum risk portfolio.
Zhang-Yue Zhou and Wei-Ming Tian
Grain is China’s most significant agricultural product, its output being the most watched indicator by government officials, traders and researchers inside and outside China. This paper looks into China’s grain production trends in the recent decade, both before and after China’s WTO accession. It examines changes in total grain output, grain crop composition, regional distribution of grain production, and also changes in production technologies and costs. The paper concludes by addressing a number of emerging issues that are likely to affect future grain production in China.
Denise Bewsell and Geoff Kaine
There are several quality assurance (QA) programs operating in Australia for horticulturalists. The documentation of orchard activities and decision making are key features of any QA system. Activities of interest are management of pest and diseases, irrigation, fertiliser management, and fruit production and packing. This documentation provides a means of tracing product flow and is evidence that growers are acting in an environmentally responsible manner to help achieve food safety. QA systems are also often a means to assist growers in their production decisions and in some situations participation in QA is a precondition for supplying fruit to some markets. In this paper we present the findings of research designed to obtain insights into apple growers’ participation in QA programs. The research involved in-depth interviews with growers as well as analysis of a mail survey. In relation to market access, growers observed that they could supply fruit to domestic and (some) exporters and export markets without participating in a QA scheme, provided they could supply spray diaries. Hence, non-participation in a QA program did not necessarily mean exclusion from markets. In the absence of a premium for participation in QA, or exclusion for non-participation, the main benefits to participating in a QA program were the advantages made possible by record keeping, such as improved orchard management. Unfortunately, most growers believed that, apart from using spray diaries to assist in pest and disease management, there were limited benefits in keeping records. Growers therefore were inclined to treat any claims regarding QA programs with suspicion.
Bronwyn Crowe and Jo Pluske
If genetically modified (GM) canola varieties are to be released for commercial cultivation in Australia, the Australian canola supply chain would have to consider segregation options if it wishes to continue marketing non-GM canola and comply with worldwide labelling requirements. The feasibility of segregation and cost effectiveness of three possible segregation methods is investigated in this paper. In considering each of these methods the increase in total grain handling cost due to segregation is expected to be between 5 and 9 per cent. Such an increase is comparable with segregation costs reported in Canadian literature.
Bronwyn Crowe and Jo Pluske
Despite approval being given by the Gene Technology Regulator to plant genetically modified (GM) canola varieties in Australia, the question as to whether farmers would be prepared to grow GM canola is still being explored. The purpose of this paper is to establish not only if producers would grow GM canola in south Western Australia but how they make this decision. Results from a survey aimed at canola producers found that adoption of GM canola will ultimately depend upon price premiums for non-GM canola and personal risk likely to be incurred by growers.
Geoff Kaine and Megan Higson
Governments are increasingly investing scarce economic resources to change landholders’ behaviour in order to improve the management of natural resources. Landholders can respond to a policy initiative in a variety of ways, and only some of these responses are likely to be consistent with the objective of the policy. Consequently, a key concern for government in improving natural resource management is understanding and managing variety in landholders’ responses to policies. Our aim in this paper is to explore the application of marketing theories to better understand how variety emerges in landholders’ responses to policy initiatives.
In this paper, we draw on consumer behaviour theory and use diffusion theory to provide a theoretical framework for identifying the factors that lead to diversity in responses to policy initiatives. We apply this theory to the case of landholders’ responses to natural resource policies and draw conclusions for the design of policies.
Robert J. Farquharson
The use of economic analysis to aid farm input investment decisions has been contentious because of observed flatness of economic response in the region of the optimum input. In this paper an application of a crop simulation model, to specify the production response, in conjunction with production economic theory has been used to develop fertiliser input demand functions. These have been combined with return on investment criteria in a graphical presentation for wheat growers in making nitrogen fertilization decisions at a particular location. The approach provides objective information to which growers can apply their own subjective preferences in making fertilizer input decisions.
Tim Ada, Bill Malcolm and John Williams
Over 95 per cent of Australian cotton producers have attempted to manage price risk at some time, using a range of management strategies. Nearly 60 per cent of Australian cotton producers surveyed in this study stated that price risk management had a positive effect on their farm business. Findings from the study suggest that price risk management is only one of a suite of business management tools. Strategic use of price risk management tools can have positive outcomes. A lack of understanding of price risk management and, more specifically, recent currency exchange losses and high production risks were the key contributing factors for the 21 per cent of the surveyed producers who stated that price risk management had a negative impact on their business.Approximately 10 per cent of the cotton producers surveyed operated dryland production systems. These producers often incurred a broader range of production risks, and the resulting production uncertainty inhibited effective use of some price risk management strategies. One in four of the surveyed cotton producers had an agriculture-related tertiary qualification, yet few (around five per cent) had undertaken any form of specialist price risk management training.
The primary conclusion from the study is that the uptake and effectiveness of price risk management in the Australian cotton industry is constrained by the extent of producer experience, confidence and understanding of price risk management principles and processes.
K Cao and R Johnson
As with most agricultural products in world trade, trade in meat products is restricted by a variety of non-tariff barriers in different countries. In the case of New Zealand meat products there are quota restrictions in the USA, Canada, and EU markets and hygiene regulations of varying standards in most markets. The building of demand models for such products is fraught with difficulties associated with such restrictions as well as problems of specification and error distribution. Gravity models of traded goods offer a possible methodology for handling these difficulties. This paper sets out a combined cross-section and time series model of the New Zealand meat trade for the period 1994-2003 including the impact of quotas and the adoption of mandatory meat hygiene regulations to trade.
Muresk Institute, Curtin University of Technology, Northam, WA 6401, Australia
Chain coordination is growing in importance for those in the food industry to maintain access to global markets and competitive advantage. Information communication facilitates coordination and is seen as the glue that holds organisational chain relationships together. This paper describes how Australian food processors have been exchanging information to coordinate customers and suppliers in their chains along with changes over time. The most frequent information exchanged was to resolve problems. Operational issues were only discussed when exceptions arose and this was decreasing over time, as problems were resolved and processes improved. For the organisations studied, they were increasingly formalising processes to review progress and performance. A wide range of organisational departments were involved in communications with customers and suppliers, especially to resolve problems and develop new products. While the traditional telephone and face-to-face communication methods were the most popular, e-mails were replacing faxes. There were also moves to increasing use of reports, electronic data interchange and intranets for more well developed relationships with larger customers and suppliers. These changes in communication systems were the source of some increased satisfaction with information systems by improving timeliness and depth of information shared. However, there was perceived to be some room for further improvement.
Department of Agriculture, Western Australia and University of Western Australia
Impacts on Australian agriculture of projected climate change are likely to be spatially and temporally diverse, with many regions likely to experience increased downside risk in agricultural production. Some regions, such as south-west Australia, are projected to be particularly at risk of adverse outcomes associated with climate change.
The rate and extent of warming, along with impacts on rainfall distributions, are key determinants of agricultural impacts and will affect the success of adaptation strategies. The likely gradual unfolding of climate change should provide farmers in many regions and industries with sufficient time to utilise or develop adaptation strategies. Many of these strategies are likely to be based on farmers’ current responses to climate variability. Investments in R&D and innovation could be important ingredients in facilitating farmers’ adaptation to climate change.
Farmers are likely to face additional costs of capital adjustment due to climate change. Investment in long-lived climate-dependent agricultural assets such as irrigation infrastructure, vineyards and agroforestry will become more problematic. Investing in ecological assets in rural regions, especially where these assets may become stranded by climate change, also will be increasingly problematic.
Date Created: 03 June 2005