Minutes of NE-165 Meeting
Private Strategies, Public Policies, and Food System Performance

Minutes of NE-165 Meeting

Opening Session: Discussion on Three Themes to Develop Conference/Other Forum Projects in the Competitive Strategy Area of the Project

Chairperson Julie Caswell (UMass) opened the meeting at 1:10 p.m. on Monday, October 27 (see attached meeting agenda and list of those attending). After introductions, Julie reviewed the meeting objectives. The first session, organized by Ron Cotterill, sought to spur conference and project ideas within the strategy area. As discussion leader for Market Power and Market Performance, Jim MacDonald (USDA/ERS) brought attention to two major issues within this topic area (see attached summary): (1) Identifying and Estimating Market Power and (2) Market Power: Links to Broader Market Performance. Discussion regarding (1) centered around taking a broad look at the usefulness of existing and evolving empirical techniques used in market power studies. Discussion regarding (2) involved broader performance issues, such as issues of productivity growth and product introductions. Group interest seems to be in pricing strategies, price discrimination, globalization issues, procurement, demand elasticities, and comparing empirical methods. Questions such as "How do you compare between procurement options?" and "What is legitimate economic evidence for price differences?" were raised.

John Connor (Purdue) led group discussion in the area of Policy Analysis. Two important policy areas are antitrust and consumer protection. With regard to antitrust policy, there is interest in investigating the factors that have led to the increasing incidence of international market power (in the form of price fixing/cartels). Possible factors include changes in horizontal coordination capabilities, as well as vertical coordination changes via captive supplies. General discussion involved economies of scale in grocery wholesaling (considerable mergers occurred during early 90's), international antitrust issues (does pricing behavior change across regimes, e.g. U.S. vs. U.K.), and the usefulness of estimates/information in antitrust cases. Warren Preston (GIPSA/USDA) briefed the group on his recent experience as expert economist in the Iowa Beef case. He explained how difficult it is to analyze and explain complex economic issues such as price discrimination in a court.

Group discussion regarding Comparative Analysis was led by Ron Cotterill (UConn). A major point of discussion involved using U.S. and Europe as a "lab" to compare different policy positions. This area is also seen as one with the potential for an international conference. Potential issues to address within this context are the retail and manufacturer power shift, firms active in both markets, private label vs. national brand questions, regional product identification, and antitrust policy. Julie Caswell and Maury Bredahl (Missouri) pointed out that in order to understand horizontal actions of firms, knowledge of vertical relationships within that industry is necessary. The afternoon session ended with a general discussion of making connections between our research and the end-users. Who are our clientele? What do they want? Which techniques/approaches are best?

NE-165 Business Meeting: Reports and Discussion

The final session of the day was a business meeting. Julie called the meeting to order at 4:00. The first item of business was approval of minutes from the June meeting. Ron Cotterill suggested several amendments to the June minutes in order to reflect the activities of the strategy component of the project. Those amendments include: (1) the June 1995 conference "Future Directions of the World Food System " held in Reading, England, had proceedings published in a dedicated issue of Agribusiness, Volume 13, No. 2, April 1997; (2) the June 1997 conference in Italy, "Vertical Relationships and Coordination in the Food System", included several NE-165 members on the organizing committee and as presenters of plenary session papers and other selected papers; (3) the market power symposium organized by Tony Gallo at the AAEA meetings in Toronto in August 1997 where all symposium speakers were NE-165 members; and (4) expert economic analysis by John Connor in the Archer Daniels Midland price fixing case and by Ron Cotterill in a consumer class-action suit against ADM and three other wet corn millers. It was moved and seconded that the minutes be accepted with these revisions. The motion passed. See amended June minutes on the NE-165 website for a detailed description of the amendments.

Susan Welsh, our co-advisor from CSREES, reported on CSREES research activities (see report attached). Susan pointed out "highlights"of the report, including that the funding for the Fund for Rural America (FRA) was reduced as expected at the last meeting. Pages 1 through 3 of her report discuss organizational and personnel changes in areas that could impact this group. Other major points of the report include the NASULGC Board on Agriculture's response to the Senate Agricultural Committee's questions regarding reauthorization of the research, extension and education title of the Farm Bill (see pg. 5, C). The response is available at http://www.nasulgc.nche.edu/cfeee_ba.htm. In addition, the Administration's Guidance for Reauthorization presented to the House Agricultural Committee includes a statement that "human nutrition, food safety, and environmental stewardship are high priorities for funding", which is seen as positive for this research project. She reported that highlights of the Senate version of the bill has a heavy emphasis on "multi-", especially multi-state, multi-disciplinary and multi-country. The bill would also create an initiative for funding "critical emerging agricultural issues such as.....food safety, food technology,...", which is again positive news for this group's work. The President's FY98 Budget Request includes level-funding for Hatch. Susan's report also includes information about some funding opportunities. Those websites are available within her report. She ended with great praise for the NE-165 website and added that she suggests it regularly as an example for other projects.

Dan Rossi (Rutgers), Administrative Advisor to the group, discussed the reauthorization of Title VIII. He reported that the process is currently being held up by discussion regarding the funds from Food Stamp savings and Medicaid issues. The full committee is marking up their version this week. Dan also reported on GPRA. He commented that extension directors are being asked to report progress, which presents some problems because "progress" is not well-defined. He pointed out that it is important that as issues of impact and accountability are addressed, more time-consuming reporting is not imposed on faculty. Most future planning concerns the question "What will extension be?" Dan also mentioned that NEREABS may have up to $2 million for food safety research with the idea of bringing together teachers and researchers. It is possible that a grant program similar to the IPM program would be established. Dan then echoed Susan's comments that NE-165 is an excellent example of a successful regional research group.

Some group discussion followed Dan's comments, as Stan Fletcher (Georgia) asked about the Congressional committee authorized by the FAIR Act to evaluate the future of government's role in agriculture. It appears that there is only one agricultural economist on the committee, which seems unreasonable if this committee's report will be the basis for the next farm bill. Susan Welsh agreed to research the committee's composition and objectives and post an e-mail on the list server.

Julie reported on the website and updated attendees on publication progress. She reported that the website is working well. The lay summary of project impacts was added this summer. She encouraged more use of the list server as a group to share research ideas and information. Julie also reported on the status of publications from past workshops. The 1995 conference in Reading is published in Agribusiness. A publisher is on line for the proceedings from the 1995 conference on vertical coordination and it should be released within 6 months. Older proceedings are now on AgEcon Search and the proceedings from the June 1996 conference, Strategy and Policy in the Food System: Emerging Issues were recently published. On the subject of publication, Ian Sheldon (Ohio State) brought up the issue of web-posting of discussion papers. Some journals won't accept papers that have been on the web or require the authors to remove the papers from such websites when they are submitted for review. There was some discussion of legal issues and revenue concerns for the journals. Ian agreed to check with Spiro Stefanou and post his findings on the list server.

Julie asked Laurian Unnevehr (Illinois) to report on the HACCP conference planned for June 1998. Laurian reported that the conference will be held at the Sheraton City Center in Washington, D.C. on June 15-16, 1998. We have received a $7500 mini-grant from the Farm Foundation to encourage outreach from the conference. A publisher who typically publishes in the Food Science area is interested in the proceedings. The call for papers generated 32 submissions on a variety of topics, including 10 from overseas. The planning committee will meet during this project meeting to select papers and further organize the conference.

Julie reported on the process for the upcoming Executive Committee Election. There are 3 slots to fill---one 2 year term to replace Cathy Durham (Oregon State) and two 3 year terms. The continuing members of the Executive Committee, Randy Torgerson (Rural Business-Cooperative Service), Tanya Roberts (ERS), and Randy Westgren (Illinois) will run the election by e-mail. Each institution will have 1 vote per position. Executive Committee members can be re-elected and non-voting members are eligible for election. Randy Torgerson will put out a call for nominations soon and the election process should be completed by mid-December.

The last item of the business meeting involved upcoming NE-165 conferences. Bill Lesser (Cornell) voiced concern about potential overlap with Food and Agricultural Marketing Consortium (FAMC) conferences. There was further discussion on the geographical scope of upcoming conferences. Both labeling and food safety conferences will include international aspects. After a brief discussion of the scope of these conferences, the business meeting was adjourned at 5:10 p.m.

Strategy Group Planning Session

(The organizing committee for the June 1998 HACCP Conference met concurrently to review abstracts and develop the conference program).

Ron Cotterill led the strategy group's planning session during the morning session of the meeting's second day. The session began with general comments regarding the previous day's discussion. It was agreed that pricing strategy seemed to generate a great deal of discussion. Bill Lesser pointed out that this is a hot issue, considering the evolving structure of input industries (e.g. biotechnology in the seed industry and the resulting contract arrangements) and the evolving antitrust laws internationally. Soji Adelaja (Rutgers) introduced the subject of "nutriceuticals" or "wellness" foods. This prompted a discussion on biotechnology in the food industry in general and the lack of agricultural economists' involvement in studies of this area when our involvement seems necessary. Ian Sheldon brought up issues that demand our involvement, such as innovation, protecting information spillovers, and patent races. Further discussion revealed that several researchers present have related projects. This was also seen as a potential link between the strategy and food safety groups within the project.

John Connor pointed out that there is likely enough on-going research within the group to have a pricing strategy and related policies conference. The conference could be technique-oriented and focus on how to exploit micro-data sets. John suggested as possible titles Positive Economic Studies of Policy or Pricing Strategy and Positive Studies of Policy. At this point, the group took a short break.

When the group reconvened at 10:30 a.m., Randy Westgren presented an idea for the title and content of a conference on biotechnology in agriculture. He suggested the title Exploitation and Protection of Intellectual Property in Agri-Food Industries for a one and a half day conference. He suggested that the first half day center on (1) Rents from innovation and protection innovations, (2) Can downstream firms capture any rents?, and (3) the role of publicly-funded breeding versus private (regulatory hurdles). The second half day would focus on policies to protect intellectual property and the final half day would focus on firm-level innovation processes and strategic alliances. The group agreed to pursue a conference on this topic. The following committee was assigned to further develop the conference: Randy Westgren, Soji Adelaja, Bill Lesser, Ian Sheldon, and Randy Torgerson. Robin Douthitt (Wisconsin) agreed to act as liaison to the Food Safety Group.

 The group agreed to form a committee to further develop the idea of a pricing strategy conference. The tentative suggested title is Pricing Strategy Studies in the Food System. The tentative format includes quantitative studies using micro-level data and cutting edge techniques, with a panel of experts at the close of the conference to discuss policy implications. Jim MacDonald, John Connor, Everett Peterson (Virginia Tech), and Ron Cotterill were assigned to the conference planning committee.

 The third potential conference topic area was an international conference on strategy. The group agreed that elements of this topic could be combined into the previously suggested conferences. Additionally, it appears that ideas for work in the topic area need more discussion and development at this point. John Connor suggested that an international "Intellectual Property Rights" conference would likely generate much international interest. Randy Torgerson also suggested that, with the push to be multinational, more cooperatives are converting to investor-owned firms and a study of the implications could be of interest. The group reported international contacts in Hungary, Slovakia, the U.K., Italy, and a well established European network. Robin Douthitt suggested that an international conference might present an opportunity to recombine the strategy and food safety groups, particularly on a topic such as changing market structure with respect to labeling issues. It was agreed that no conference would be planned as of yet and discussion in this area would be encouraged.

Full NE-165 Group Planning

 The final session of the October meeting was a full NE-165 group planning session. Julie opened the session and turned the floor over to Jim MacDonald. Jim presented a summary of the content for the proposed conference on Consolidation in the Meat Sector. Recent trends in market concentration, plant scale, contractual relationships, and externalities associated with the sector make this an interesting and timely topic. Tanya Roberts (ERS) suggested that we search for a co-sponsor. Potential co-sponsors include the Environmental Protection Agency, National Pork Producers' Council, the AAEA Industry Committee, or the National Cattlemen's Association. The timing for the conference is late 1998 or early 1999. The group decided to proceed with conference planning by putting the summary on the website and list server to solicit comments, by investigating potential sponsors, and by designating a conference planning committee. The committee consists of Jim MacDonald (Chair), Charles Handy (ERS), Julie Caswell, Michael Mazzoco (Illinois), Azzedine Azzam (Nebraska), and Alan Love (Texas A&M). Enthusiastic support for this conference was voiced by both the strategy and food safety components of the project.

 John Connor then reviewed the strategy group's progress in the planning of conferences and other activities. As previously mentioned, the group made plans for two conferences: (1) Exploitation and Protection of Intellectual Property in Agri-Food Industries and (2) Pricing Strategy Studies in the Food System (see previous discussion for details regarding conference content). There was some debate regarding the titles; however, conference planning committees will make final decisions on titles. Sally Thompson said that the FAMC is tentatively planning a conference on risk management which might dovetail nicely with the pricing strategy conference. The general consensus was that it is feasible if an innovative link is defined. Julie mentioned the relationship between the labeling conference planned for June 1999 and the intellectual property conference and the possibility of linking those two conferences. Again, general consensus was that this is certainly possible and desirable via a half day overlap to cover joint interests of the groups. (See the NE-165 website for an up-to-date list of planned conferences.)

Next, Sally Thompson reported on activities of the FAMC. FAMC currently has two conferences planned. The January 1998 conference is being postponed to either a pre- or post-conference at the annual AAEA meetings in Salt Lake City. The details should be on the website by the end of November. The conference will employ a case study approach to assess firm performance and market performance resulting from realignment in the food industry. The January 1999 conference New Economic Approaches to Consumer Welfare in the Food Industry will be cosponsored by ERS and will be held in Washington, D.C. The program will be soon be available on the FAMC website. Julie closed the meeting with a reminder of the election and a reminder that our next meeting will be in conjunction with the HACCP conference in June, 1998. The meeting was adjourned at 2:50 on October 28, 1997.

Respectfully Submitted,

Kellie Raper
Secretary, NE-165

(Attachment: Jim MacDonald)

NE-165: Market Power and Market Performance

As an aid to discussion, I've tried to list a set of issues/keywords below. They are neither exhaustive nor mutually exclusive. Should we piece some together toward a conference or project?

1) Identifying and Estimating Market Power

a) Techniques (or Demand Estimation in Empirical IO?)

• What have we learned from NEIO models?
• How do we id market power in scanner data?
• Would we recognize bid-rigging/collusion if we saw it?
• How do we identify price discrimination?

b) Markets & Topics

• Meat Sector
• Dairy issues--milk and formula procurement, cheese pricing
• Concentration and restructuring in SIC20 commodity industries
• Monopsony among packers and processors
• Private Label Strategies: U.S. and U.K.
• Retailer-Processor Interactions

2) Market Power: Links to Broader Market Performance

a) Productivity Growth

• Scale economies in the food sector
• Mergers, selection, and efficiency
• Changing organizational forms: is Sara Lee right or wrong?
• Measurement: what do we do about productivity growth?

b) Product introductions

• What drives them
• Do they look like price discrimination?
• How are new products priced?

 

Meeting Participants:

 Agenda

Monday, October 27
9:30-11:30AM		Executive Committee Meeting
1:00-1:15PM		Opening Session of Full Committee Meeting Introduction of New Members Meeting Objectives
1:15-3:30PM		Discussion on Three Themes to Develop Conference/Other Forum Projects in the Competitive Strategy Area of the Project Market Power and Market Performance Jim MacDonald, Discussion Leader Policy Analysis John Connor, Discussion Leader Comparative Analysis Ron Cotterill, Discussion Leader
3:30-4:00PM		Break
4:00-5:00PM		NE-165 Business Meeting: Reports and Discussion Approval of Minutes of Last Meeting Comments from Administrative Advisor and CSREES Representative NE-165 Website and Publication Series Plans for HACCP Conference in 1998 Plans for Executive Committee Election Advance Planning for Future Meetings
Tuesday, October 28
8:30AM-12:00PM*		Strategy Group Meets to Plan Joint Research and Formulate Future Conferences and Other Output Activities (Break refreshments will be served from 10:00-10:30 in Room 727.) *The Organizing Committee for the June 1998 HACCP Conference will meet concurrently during the morning to review abstracts and set the program.
12:00-1:15PM		Lunch on Your Own
1:15-3:00PM		Full NE-165 Group Planning Plans for January 1999 Conference: The Economics of Consolidation in the Meat Industry Jim MacDonald, Discussion Leader Additional Future Plans Julie Caswell, Discussion Leader
3:00PM		Meeting Adjourned

 

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