Markets Theses

Essays on the EU Trade Policy Reforms and the Namibian Beef Sector

Hikuepi B. Katjiuongua, Ph.D. Dissertation, 2011. Major Professor: Dave Weatherspoon

Linking farmers to dynamic high value agricultural commodity markets is viewed as important for economic growth and poverty reduction in a global economy. Yet, many factors on the supply side and demand side combined with protective trade policies hinder broad-based participation of many smallholder farmers in developing nations. Namibia’s beef exports to the European Union (EU) market presents an interesting case of a mixed success story whereby a small country consistently meets high EU market requirements, yet supply constraints combined with uncertainties related to EU trade policy reforms undermine participation of cattle farmers.

In the first essay, utilizing primary data, a double hurdle model is used to estimate the participation of cattle farmers in the beef export channel. In the first stage a probit model is used to measure the impact of transaction cost related variables and socio-economic variables on participation. In the second stage a factional logit model is applied to measure the intensity of participation. Grade uncertainty, being a male-headed household, having a land title, ownership of a transport equipment and membership in a farmer’s association were found to significantly influence the participation of farmers in the international beef export channel. Payment delay, grade uncertainty, and distance to the market, premiums, part-time farming and cost per head of cattle significantly influenced the intensity of a cattle farmer’s participation. Having indirect contracts with the export abattoirs and herd size are particularly important to communal farmers’ supply decisions.

The second essay estimates EU import demand of beef from Namibia in response to five trade policies scenarios. Beef is treated as a differentiated product composed of both high and low quality beef varieties in all five scenarios: (1) Preferential Market Access, (2) the Economic Partnership Agreement (EPA) and its alternatives, (3) the standard generalized system of preferences (GSP), and two enhanced GSP options (4) GSP + and (5) GSP ++. Results show that the trade alternatives have different effects on the composition of beef imports. The results are consistent with the Alchian-Allen conjecture that demonstrate how per unit transaction cost lowers the relative price and increases the demand for high quality goods, resulting in exporting
high quality goods, and selling lower quality goods domestically. Overall, the results show that the EPA trade policy is the optimal option for the EU and Namibia.  

Determinants of Sustainable Coffee Marketing Channel Choice and Supply Response Among Organic and UTZ Certified Smallholder Farmers: Evidence from Uganda

Martin Angula, Master’s Thesis, 2010. Major Professor: Dave Weatherspoon

Sustainable coffee certification initiatives have created a fast growing niche market that promises to ameliorate smallholder coffee producers’ hardships brought about by low coffee commodity prices in recent years. The current debate has focused on whether these initiatives are accessible, especially by smallholder farmers and whether they indeed deliver on this promise, with certification costs believed to constitute an entry barrier. However, evidence has emerged that even when free certification has been given to smallholder coffee farmers, some farmers continue to sell certified coffee in the conventional coffee markets. This study uses a double hurdle model to identify those factors that shape coffee growers choice of marketing channel and sales volume decisions once a marketing channel has been selected. The study concludes that labor availability (own and hired) and the size of farm holding are the main constraints to both participation in the sustainable coffee marketing channel and the sales volume to this channel.  Revenue from crop sales other than coffee is also an important determinant of participation and sales volume. Age was the only demographic factor that was found to be statistically significantly related to participation and sales volume.

The Impact of the Common External Tariff on Jamaica’s Beef Sector

Eric Bailey, Master’s Thesis, 2009. Major Professor: Dave Weatherspoon

In the context of liberalization of international trade, the governments of CARICOM countries implemented a policy of a phased reduction of the Common External Tariff (CET) in 1991. This policy has been blamed for causing a contraction in the domestic beef sector in Jamaica. This thesis investigates the trade dynamics of the Jamaican beef sector with respect to the world market. The prime focus was to determine what impact, if any, the phased reduction of the CET had on meat import demand and the output of the Jamaican beef sector. It also sought to identify the most effective policy alternatives to increase the competitiveness of the local beef industry.

Using time series data from 1979 to 2005, demand and supply equations were estimated using Seemingly Unrelated Regression to test for structural changes through the use of dummy variables. The analysis revealed that there is substitutability between imported meats and domestic beef, and a statistical significance of the policy change for imported meat. Furthermore, the short term supply response of domestic beef with respect to its own price was inelastic and became more inelastic after the policy change. A welfare analysis conducted on an alternative tariff regime (assuming a 30% increase in tariff), showed a net loss in social welfare.

Strategy Options for Angola’s Agricultural Sector after 27 Years of War: A Perception Based Field Study

Gomes Cambuta, Plan B Paper, 2009. Major Professor: Dave Weatherspoon

The decline in agricultural output over the years and the subsequent pervasive food crisis in most of Africa have motivated governments and international organizations to develop a variety of strategies, policy alternatives and programs aimed at promoting agricultural production and food security. Many of these strategies have been conceived and implemented by international organizations, and in some cases the strategies have fail to address the root cause of failure of the agricultural sector to perform to its potential.

Therefore, this field study uses scenario analysis to engage key players in the agriculture industry to identify causes of Angola’s loss of production capacity over the years, the factors needed to revitalize the agricultural-led economy, factors that can help stabilize the agricultural sector and conditions required for the development and coordination of the food supply chain in Angola.

The framework provided in the paper was based on an evaluation of perceptions of future demand for locally produced agricultural products; the country’s supply response capability; the role of the informal and formal markets; infrastructure needs; and the development of formal supply chains for domestic and export markets.

The methodology used was an adaptation of a methodology used in Industry Strategic Planning and Coordination, and the Technological Demands Determination by Prospective Analysis.

The study revealed that in spite of its high resource endowment, Angola will first need to address institutional and structural agricultural development constraints and develop systems that allow better coordination of development efforts among institutions, before it is able to produce food for export markets. The development priority for the next five years includes creating conditions that stimulate local production, help the country produce enough to become food self sufficient, and gradually reduce food imports. Nevertheless, the production for import substitution should not preclude efforts towards targeting export niche markets.

Carbonated Soft Drink Demand: Are New Product Introduction Strategies a Viable Approach to Industry Longevity

Marcus Coleman, Master’s Thesis, 2009. Major Professor: Dave Weatherspoon

In an industry dominated by multiple product introductions differentiated at the attribute level, carbonated soft drinks (CSDs) experience demand pressure from all aspects of the beverage industry that go beyond CSDs. The main objective of this paper is to analyze demand for new and sector leading CSDs, which are characterized by multiple product consumer purchasing behavior, firm promotional activity and differentiation at the attribute level. Given the many unique strategies for innovation in CSD new product introductions (NPIs), it is imperative to find out just how effective firm innovation strategies are in using NPIs to stimulate and revitalize demand for CSDs. Using the linear approximate version of the almost ideal demand system that incorporates product attributes through distance metrics, the results of this study show how consumers react to price increases in both NPIs and sector leading CSDs. The combination of the information gained from both the own-price and cross-price elasticity results as well as the attribute results indicate the relative instability in demand found across the CSD industry, particularly for NPIs. Despite the instability, the results also provide information for product attribute categories where strategies can be formulated to aide in improving the longevity of the CSD industry.

South Africa’s Agriculture Broad Based Black Economic Empowerment (AGRIBEE) Policy: Implications from a Domestic Content Model

Kudzai Mukumbi, Master’s Thesis, 2008. Major Professor: Dave Weatherspoon

The problem of market access for previously disadvantaged producers in the South African agricultural market has remained despite the removal of the apartheid policy. The South African Agricultural Broad Based Black Economic Empowerment policy (AgriBEE) seeks to redress this issue. This study examines the potential economic effects of the preferential procurement aspect of the proposed AgriBEE policy. The AgriBEE policy has a target that fifty percent of agricultural produce sold by retailers must be procured from previously disadvantaged producers. The study is an empirical analysis of the potential effects of the policy using a partial equilibrium framework. The welfare implications of the proposed AgriBEE policy on retailers, large and small-scale producers are analyzed. An international trade tool, (the domestic content policy) was adapted to analyze a domestic issue (AgriBEE policy) in the context of a single dualistic economy composed of previously disadvantaged farmers and large-scale commercial farmers. Data from the tomato, cabbage and butternut squash markets was used to quantify the welfare implications of the policy. Results from the analysis indicate that consumers are penalized with the policy but there is potential for the previously disadvantaged farmers to benefit from the policy. Another key result is that the higher the target set for preferential procurement under AgriBEE the higher the dead weight loss of the policy.