RIRDC Completed Projects in 2002-2003 & Research in Progress as at June 2003

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To Global Competitiveness  Research in Progress
 

4.1 Global Competetiveness - Completed projects
PROJECT No	PROJECT TITLE	RESEARCHER	PHONE	ORGANISATION

Domestic Impediments to Industry Performance

UNE-79A

Food retailer/processor market power in input markets

Dr. Chris O'Donnell

(02) 6773 2815

University of New England

Trade Policy Reform

CIE-16A	The environmental effects of global agricultural subsidies	Dr. Andrew Stoeckel	(02) 6248 6699	Centre for International Economics
ABA-18A	An Australia-US free trade agreement: business opportunities for agriculture	Mr. Neil Andrews	(02) 6272 2242	ABARE

Markets for Agricultural Products

UA-57A	Global biotechnology adoption and policy responses: consequences for Australian exporters	Prof. Kym Anderson	(08) 8303 4712	The University of Adelaide
UQ-89A	Unlocking successful new rural industries: Is supply chain management the key?	Ray Collins and Lilly Ann Lim	07 5460 1328	School of Natural and Rural Systems Management The University of Queensland Gatton
US-92A	Impact of genetic engineering on consumer demand for milk, potatoes and potato crisps	Dr. Kate Owen	(02) 9351 7368	The University of Sydney

Communications

UMO-27A

Annual awards for excellence in agribusiness

Dr. Lawrie Dooley

(03) 9903 2757

Monash University


 
 

Project title:	Food retailer/processor market power in input markets
RIRDC Project No.:	UNE-79A
Researcher:	Dr. Chris O'Donnell
Organisation:	University of New England
Phone:	(02) 6773 2815
Fax:	(02) 6773 3607
Email:	codonnel@metz.une.edu.au
Objectives	· New empirical information on the competitive structure and conduct of the Australian food processing and marketing sectors in their dealings with farmers, and an assessment of the causes and responses to market power.
Background	In a recent empirical study which examined competition across the entire Australian food marketing chain, Griffith (2000) found evidence of statistically significant departures from a competitive market on the input side of the bread, breakfast cereal and margarine end-product markets. That is, he found that firms in (parts of) the processing and marketing sector exerted market power when purchasing grains and oilseeds from farmers. This finding is consistent with the fact that bread manufacturer George Weston was fined twice during 2000 for non-competitive conduct. The ACCC has also recently pursued cases against Safeway in grains and oilseeds product lines.
Research	Aggregate Australian data were used to estimate a price-transmission and market power model for thirteen grains and oilseeds products handled by seven groups of agents.
Outcomes	We found there is positive probability that flour and cereal food product manufacturers exert market power when purchasing wheat, barley, oats and triticale; that beer and malt manufacturers exert market power when purchasing wheat and barley; and that other food product manufacturers exert market power when purchasing wheat, barley, oats and triticale.
Implications	The project confirmed the preliminary conclusions reached by Griffith (2000). We found evidence of oligopsonistic behaviour by grains buyers – this has implications for the deregulation of marketing boards and the ability of producers to exert countervailing power. We found no consistent evidence of market power by downstream sectors engaged in the sale of flour and other cereal foods, or the sale of bread and other bakery products – this is despite the fact that these sectors had been highlighted by the Prices Surveillance Authority (1994) as being "not effectively competitive"; these sectors also contain firms that have been subject to numerous actions by the ACCC. There is, however, some uncertainty surrounding our estimates. Much of this uncertainty stems from the lack of good quality data. Future research efforts should be directed at improving the collection and integrity of relevant data (including for the retail and distributive sectors of the various markets).
Publications	A paper is currently being prepared for submission to the Journal of Agriculture and Food Industrial Organisation. Two papers have been presented at national conferences: O'Donnell, C.J., Griffith, G.R., Nightingale, J.J. and R.R. Piggott (2003), "Testing for market power in the Australian grains and oilseeds industries: further results", paper presented to the 47th Annual Conference of the Australian Agricultural and Resource Economics Society, Fremantle, 12-14 February. Griffith, G.R. and O'Donnell, C.J. (2002), "Testing for market power in the Australian grains and oilseeds industries", paper presented to the 46th Annual Conference of the Australian Agricultural and Resource Economics Society, Canberra, 13-15 February.


 

Project Title	Environmental effects of global agricultural subsidies
RIRDC Project No:	CIE-16A
Researcher:	Andrew Stoeckel, John Humphreys and Martin van Bueren
Organisation:	Centre for International Economics Ian Potter House Cnr Marcus Clarke & Edinburgh Avenue CANBERRA ACT 2600
Phone:	(02) 6248 6699
Fax:	(02) 6247 7484
Email:	astoeckel@TheCIE.com.au; jhumphreys@TheCIE.com.au
Objectives	To write a clear, concise report suitable for an international audience that draws in key environmental groups to support the removal of global agricultural subsidies that hurt Australia’s interests. The study will demonstrate the harmful impact of perverse subsidies on the environment and mount a case for their removal.
Background	In 2001, RIRDC published the book, ‘Solving the Problem’. This book outlined the political economy issues surrounding agricultural trade reform and outlined the need to build a coalition of interests against farm protection, to increase farm trade to the benefit of the Australian rural export sector. One of the groups identified as vital in building a strong coalition is environmental groups, given the growing influence of green groups and the perverse effects of farm subsidies on the environment. Subsequently, this study was commissioned to identify and highlight the environmental costs from farm protection and pursue a way forward in removing perverse subsidies for economic and environmental gain.
Research	This study has examined global agricultural subsidies – how high they are, the effects they have on the economy and the environment, why they are supported and how they can be removed. Most especially, this study has looked at how the agricultural policies of the European Union, the United States and Japan have negatively impacted on the environment. The research in this study has benefited from the input of members of a Steering Committee – including representatives from the National Farmers Federation, World Wildlife Fund (WWF), Environment Australia (EA), RIRDC, the Department of Foreign Affairs and Trade and the Australian Bureau of Agricultural and Resource Economics.
Outcomes	Information about the negative impact of agricultural subsidies on the environment has been around for a while. However, despite the recognition of ‘perverse subsidies’ (subsidies that have a negative impact on both the economy and the environment), OECD statistics indicate that subsidies remain high, and they remain highly distorting. What is needed is an organisation with a mandate to reform. This reform should involve putting all agricultural subsidies through a consistent and transparent framework to ensure that the subsidies are still necessary, that they are producing a net benefit and that the benefit can not be achieved in a more efficient way. Using the discipline of such a framework would result in the removal of perverse subsidies.
Implications	Many farm subsidies damage both the economy and the environment, yet the size and nature of agricultural subsidies are not being adequately addressed. National governments should address the issue of perverse subsidies by undertaking a consistent and comprehensive review of all farm subsidies, following a framework similar to the one outlined in this study. Groups interested in good economic and/or environmental outcomes should lobby governments to introduce such a system. Already, the WWF and EA have shown a high level of interest in this project.
Publications	A report titled ‘Greening Farm Subsidies: the next step in removing perverse farm subsidies’ has been submitted to RIRDC


 
 

Project Title	An Australia-US free trade agreement: business opportunities for agriculture
RIRDC Project No:	ABA-18A
Researcher:	Mr. Neil Andrews
Organisation:	Australian Bureau of Agricultural and Resource Economics (ABARE)
Phone:	(02) 6272 2242
Fax:	(02) 6272 2318
Email:	nandrews@abare.gov.au
Objectives	The outcome of this project will be better informed Australian and American stakeholders on the nature of existing and potential trade and business benefits of a free trade agreement between Australia and the United States. The key deliverable of this project is a report timed for release during the US 90 day notification period. Key messages from the research will be delivered directly to relevant US players, including negotiators and agricultural business groups, via meetings in Washington DC.
Background	Australia and the United States have agreed to enter into negotiations on a free trade agreement. On 13 November 2002 the US Trade Representative notified the US Congress that the US President intends to initiate negotiations on a free trade agreement with Australia. A key objective of this work is to provide relevant information on the potential implications of more open markets between Australia and the United States in agricultural and related industries.
Research	This study provides relevant information on agriculture and related industry trade and investment flows between Australia and the United States. This is designed to provide an overview of the existing economic relationship between the two countries, with a particular emphasis on agricultural trade patterns. Informal meetings were held with a range of firms that already conduct agricultural business between Australia and the United States. This was an attempt to briefly canvass views on opportunities and impediments that might arise in the context of their bilateral trade relationship and negotiations on a free trade agreement. Understanding of the existing trade and investment patterns, together with knowledge of potential opportunities and impediments to trade provides a platform for consideration of the potential economic impacts of a free trade area between Australia and the United States using ABARE’s GTEM model.
Outcomes	Even without a free trade agreement in place there is already a significant amount of trade between Australia and the United States. Reflecting the already strong US presence in Australia, the US is the largest foreign direct investor in Australia. This investment can form part of a global strategy of US companies already operating and exporting from Australia, but it also reflects US companies taking advantage of Australia’s high productivity, available resources and closeness to major Asian markets.
Implications	For the US, an FTA provides the opportunity for further growth in bilateral economic activity. Australia provides a politically stable, technologically advanced and financially and legally dependable market that is well suited as a base for expanding into the growing Asian markets. The US government has indicated that all areas of the US economy are open for negotiation, including agriculture. Under such conditions, an FTA would provide Australian businesses with closer links with the world’s biggest and most competitive economy.  Analysis is currently being undertaken to quantify the potential impacts of an Australia-United States Free Trade Agreement.
Publications	Joint ABARE Research Report/RIRDC Report.

Project Title	Global biotechnology adoption and policy responses: consequences for Australian exporters
RIRDC Project No:	UA-57A
Researcher:	Professor Kym Anderson and Dr Lee Ann Jackson
Organisation:	Centre for international Economics Studies, University of Adelaide
Phone:	08 8303 4712
Fax:	08 8223 1460
Email:	kym.anderson@adelaide.edu.au
Objectives	To inform Australian farmers, agribusinesses, rural researchers and RDCs about the likely economic effects of alternative responses abroad (and at home) of producers, consumers and policy makers to new GM products
Background	New agricultural biotechnologies, including those that involve genetically modified organisms (GMOs), have great potential for farmers (and ultimately consumers) in Australia and elsewhere. However, consumers and community groups are concerned about their potentially adverse food safety and environmental impacts. Government responses to those concerns include banning the field-trialing, production and/or use of GMOs or mandating strict GMO labelling laws and even bans on consumption and imports. Even the threat of such action has non-trivial impacts on agricultural product markets and hence on agricultural research agendas. In response to the EU moratorium the US launched (on 13 May 2003) a case against the EU on GMOs at the WTO.
Research	Whether Australia should adopt GMO technology if it increases the risk that consumers abroad will not buy Australian foods produced with that technology is a question that can only be answered empirically, and with a model of the global economy such as GTAP. We use that GTAP model, in some cases separating GM-free and GM-inclusive markets within each country/region being modelled.
Outcomes	Simulation results are provided for a range of adoption/response scenarios.
Implications	For Australia and its states (and even regions within states), there is scope to go beyond judging whether the potential gains from adopting GM technology outweigh the potential costs, including decreased market access abroad. A more scientific approach is to determine the nature of any externalities (positive as well as negative) associated with GM technologies and then apply optimal measures to overcome them. In relation to food policy, labelling regulations could play a key role in providing information to consumers. And in relation to the WTO, Australia has to decide whether it is going to support the US challenge to the EU’s moratorium on approving GM products, which the US claims is simply a disguised form of agricultural protection.
Publications	A series of more than a dozen papers have been published and many can be downloaded at http://www.adelaide.edu.au/cies/biopubs.htm


 

Project Title	Unlocking successful new rural industries: Is supply chain management the key?
RIRDC Project No:	UQ-89A (GLC99-21)
Researcher:	Ray Collins and Lilly Ann Lim
Organisation:	School of Natural and Rural Systems Management The University of Queensland Gatton
Phone:	07 5460 1328
Fax:	07 5460 1324
Email:	rcollins@uqg.uq.edu.au
Objectives	The primary purpose of this research is to study the relationship between success or failure in new rural industries in Australia and the adoption of supply chain management thinking, planning and execution. If a linkage with supply chain management principles can be shown to be associated with a new rural industry's prospects of success, it should then be possible to identify approaches that could improve new industry development processes in Australia through the improvement of supply chains.
Background	Several studies have been conducted to identify factors relevant to success or failure of new agricultural industries. McKinna (1998) mentioned effective industry associations, adequate funding at the commercial stage, efficient production and processing capabilities and effective marketing as factors necessary for a new agricultural industry’s success.  Hyde (1998) stated that for new industries to be successful, they must have an industry champion with the right entrepreneurial skills to lead the new industry, an innovative style of operation, and a market focus. Transferable technologies, the right location, adequate financial resources and the proper management of them, and support from the Government were also identified as key factors to success.  Farm production factors, processing factors, market and marketing factors, government involvement factors (R&D excluded) and environmental, social and organisational factors were identified in a study by Wood, Chudleigh and Bond (1994) as the seven broad categories of factors that affect the degree of success of new crop introductions. Of these categories, production and marketing factors were found to have the most significant effect on the success of new crops.  Based on the research outlined above, a wide range of success factors for new rural industries have been identified. Not all are found in successful new industries, and the importance of each factor may vary from one industry to another. There is no ‘recipe for success’ so to say. Using these factors as a checklist of ‘things to ensure’ is impossible as many of them are interdependent. Success factors identified in previous research focus mainly on individual parts of an enterprise, and very little on the processes that industries and firms within it engage in.  These gaps in new rural industry research suggest the need for a holistic approach to the topic. Critical factors should be viewed as part of a bigger system of factors that work interdependently, with the industry itself viewed as a system made of smaller sub-systems of inter-connected firms. The development of supply chain concepts originates from systems thinking – adopting the view that the behaviour of systems cannot be analysed from the behaviour of their individual constituents (New, 1997). Supply chain management, which allows a system wide view of achieving success through partnerships and a focus on consumers, may provide the link to explaining success in new rural industries.
Research	This study is largely qualitative in nature, adopting a case study and inductive approach. Each industry chosen for the study (kangaroo, emu, Asian vegetables, Australian native flowers and olives) was represented by three cases, each case chosen for the richness of data it could provide. Each case comprises one or more organisations in a new rural industry, all of which exhibit aspects of supply chain management thinking, planning or implementation. Data collection mainly involved semi-structured interviews, although a combination of methods was used in order to support data from interviews. A conceptual framework based on supply chain management and new rural industry development theory was developed for the study. The framework guided data collection and analysis.  The analysis was conducted in three stages. Firstly, individual case studies were analysed on the basis of the conceptual framework developed. Each case was rated against each parameter of the framework. Secondly, a cross case analysis was conducted, analysing the performances of each case on each parameter of the framework using SOMine (an advanced tool for analysing and monitoring data sets using Self Organising Maps) and the Statistical Package for the Social Sciences (SPSS) software. Thirdly, qualitative analysis was conducted using the results from SOMine and SPSS.  The results of the SOMine analysis identified three clusters of supply chains, which were further analysed along with the results from SPSS to identify the distinctive characteristics of each cluster. The relationships between the parameters of the conceptual framework were also determined using SPSS, showing those that are highly correlated and those that are not correlated. Thus the characteristics of the clusters could be linked to the supply chain orientation of the cases within each cluster.
Outcomes	From the case studies it was possible to give detailed descriptions of various supply chain structures across a range of new rural industries in Australia, identifying essential features and supply chain practices in each case. Using the conceptual framework, the supply chains were analysed and grouped according to their supply chain performance. Among them, three clusters of new rural industry supply chains were identified; labelled as Achievers, Idealists and Operators. Achievers demonstrated higher levels of supply chain management thinking, planning and implementation, and indicated high chances of success. Idealists demonstrated high levels of supply chain management thinking, but lacked implementation and therefore demonstrated lower levels of success. Operators demonstrated high levels of performance in operational aspects of supply chains, but experienced low levels of success. Relationships between parameters of the conceptual framework were identified based on the performance of all supply chains across all parameters. Results showed that some parameters, such as relationship management and strategy development, exerted the greatest influence across most parameters. At the other extreme, the analysis showed that logistics management had no influence on any other parameter of the framework. Further analysis of the three clusters of supply chains illustrated how relationships between parameters explained the clustering results. In essence, improved levels of supply chain management thinking, planning and implementation improved competitive advantage. Achievers have high competitive advantage and value creation because of good supply chain management practices, while Idealists and Operators had lower levels of competitive advantage due to poorer supply chain management practices.
Implications	The findings of this study impact on theory, policy and practice involving new rural industries. As a contribution to theory, this study has shown that supply chain management can be used a framework for the study of new rural industries, and that supply chains can be used as units of study in research into the development of new rural industries.  Similarly, the use of supply chain management as a framework for analysis, and supply chains as units of analysis, is also applicable to both policy development and practice. The use of public sector funding aimed at new rural industry development may provide greater dividends if a whole of chain approach is taken, as opposed to a focus on industry sectors or individual elements of supply chain management. Private sector managers on the other hand, may utilise a supply chain management framework to assess their performance as part of a supply chain, and use this in order to improve their supply chain performance and gain competitive advantage.
Publications	PhD submitted; others planned but not yet published


 

Project Title:	Impact of genetic engineering on consumer demand for milk, potatoes and potato crisps
RIRDC Project No.:	US-92A
Researcher:	Dr K. Owen, Professor J. Louviere, Mr J Clark
Organisation:	Department of Agricultural Economics, University of Sydney
Phone:	61 2 9351 7368
Fax:	61 2 9351 4953
Email:	k.owen@agecd.usyd.edu.au
Objectives	· To determine the level of consumer and retail/wholesale concern over the introduction of genetically modified foods; and  · To estimate the likely demand response of consumers and retail/wholesalers to selected foods that have been genetically modified.
Background	Biotechnology developments in the production of food and fibre promise substantial benefits for Australia. However, continuing uncertainty over consumers' response to genetically modified foods both in Australia and overseas hinders strategic development in the production sector. The key to reducing this uncertainty is improved understanding of the true level of consumer and retail/wholesale concern and their expected response to genetically modified products.
Research	The research is divided into two stages. The first stage comprises a workshop of stakeholders and a survey of 120 consumers to assess their concerns over the introduction of GM foods. The second stage employs the stated preference method and discrete choice modelling to evaluate demand response to three products: milk, potatoes and crisps. The data was collected through a survey of 1008 consumers. A small pilot survey of 48 retailers was also conducted to assess congruence with consumers.
Outcomes	Results from Stage 1 indicate that the level of concern over GM foods relative to other prevalent concerns in the community and to other food safety issues was minor. However, more than half of those with a positive or indifferent attitude to GM food indicated they would be concerned enough to take action if labelling was incorrect or food was contaminated with GM residues. The type of product and modification influenced respondent acceptance of products. In all cases where there were traces of the modification, or no clear benefits, respondents were less inclined to purchase the product but would increase purchases for benefits such as low fat. There was low awareness of the specific bodies responsible for regulating the production and sale of GM foods with the burden of responsibility falling on an undefined "Government" or Departments of Health.     Stage 2 results indicate consumers are willing to pay for benefits from GM but these must be valued and may only apply to a segment of the market. Also, advantages from GM may be lost if alternative technologies are available. In the absence of benefits consumers would pay to avoid GM but some could be compensated with lower prices. When there is negative information on GM foods respondents discounted the value of the GM benefits heavily but positive information also increased their perceptions of the value of GM with low fat benefits.
Implications	Ongoing GM food research and development, and consumers are likely to purchase products that have clear benifits for them. If there are no direct benefits then some price compensation may improve acceptance. Caveats include: the benefit mustbe valued which means that solid market research needs to be undertaken to ensure this is the case. That research also needs to establish that the size of the market segment(s) who value the benefit are sufficient to be economically viable. Benefits unique to the techonology are more likely to succeed.
Publications	To be advised

Project Title:	Agribusiness Awards
RIRDC Project No.:	UMO-27A
Researcher:	Dr Lawrie Dooley
Organisation:	Monash University Faculty of Business and Economics Department of Marketing PO Box 197 Caulfield East VIC 3145
Phone:	03 99032757
Fax:	03 99031558
Email:	lawrence.dooley@buseco.monash.edu.au
Objectives	Award sponsorship provides RIRDC with an opportunity to present their corporate image to the Agribusiness industry. By supporting this prestigious event, RIRDC is able to show its commitment to promoting excellence in the Australian Agribusiness industry.
Background	In 1996 the Department of Marketing, Faculty of Business and Economics, Monash University combined with Rabobank Australia Group, part of the international Dutch food and agribusiness bank, Rabobank to present the Agribusiness Awards for Excellence. Initially five award categories were established and sponsorship was obtained from another three companies. The awards were the first national awards in agribusiness in Australia.
Research	Members of the business community are invited to nominate organisations or individuals for awards in the various categories. We currently have a mailing list of 6,000 companies and conduct mass marketing via advertisements in selected media. Telemarketing is conducted to invite companies to consider applying for the awards. Leads for applicants are obtained from sponsors and articles of interest collected from BRW, Financial Review, Age and The Australian Newspaper.
Outcomes	This year Monash University is proud to present the 8th Annual Agribusiness Awards for Excellence. There are now eight award categories with sponsorship from business, professional associations and government organizations. Last year the awards dinner was attended by over 300 senior executives, government representatives and academics. Previous winners of the RIRDC value adding award include Meadow Lea Foods for Golden Canola, Manildra Group, Darling Downs Bacon, Lenards for value added chicken products, Harvest Freshcuts, Medihoney and Two Dogs International. Details of winners are on the website www.agribis.net.
Implications	The awards provide sponsors with an opportunity to promote their corporate image and show support for the Australian Agribusiness industry. The Gala dinner and awards presentation provide individuals in the industry with an opportunity to network and interchange ideas. Sponsors can promote their corporate values to the Agribusiness industry
Publications	Over the past seven year’s the RIRDC "Agribusiness Value Adding Award" has received recognition in publications such as the Financial Review, Australian Farm Journal, Rural Business, Food Australia, The Age, Beef Improvement News, Australian Institute of Agricultural Science and Technology, (AIAST) and The Australian . Details of all winners are on the website www.agribis.net.