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When Can a Generic Advertising Program Increase Farmer Returns?

Listed author(s):
  • Freebairn, John W.
  • Goddard, Ellen W.
  • Griffith, Garry R.

Generic advertising has been a widely-used marketing tool of many agricultural industries. The strategy has come under increasing scrutiny lately, especially by levy-paying producers who fund the advertising. Also, for many food products, supermarket chains have developed and advertised their own “store†or “private label†brands in competition with both processor brands and generic advertising of those products. In such an environment, the issue is whether generic promotion will increase producer returns? Farmers gain from a generic advertising program only if the net farm price rises, where the net farm price is inclusive of the levy collected to fund the generic advertising program. A higher net price to farmers increases producer surplus, or the returns on farmer-owned land, management, labour and other resources which are in limited supply. The aim of this research is to examine the conditions under which such an increase in the net farm price is likely to occur. In undertaking this task, two main areas of research are reported. First, the literature is reviewed and theoretical models are developed to assess the conditions under which farmers would gain from a generic advertising program funded by a levy on production. Second, a general model is applied across the range of Australian agricultural products to assess the minimum increase in domestic sales from advertising required if the program is to increase farmer returns. In particular, the assessment distinguishes products by their exposure to international trade.

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Article provided by University of Melbourne, Melbourne School of Land and Environment in its journal Australasian Agribusiness Review.

Volume (Year): 13 (2005)
Issue (Month): ()

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Handle: RePEc:ags:auagre:126556
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  1. Kinnucan, Henry W., 1998. "Advertising Traded Goods," 1998 Annual meeting, August 2-5, Salt Lake City, UT 20965, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  2. Mingxia Zhang & Richard J. Sexton, 2002. "Optimal Commodity Promotion when Downstream Markets are Imperfectly Competitive," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(2), pages 352-365.
  3. Mary K. Muth & Michael K. Wohlgenant, 1999. "A Test for Market Power Using Marginal Input and Output Prices With Application to the U.S. Beef Processing Industry," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(3), pages 638-643.
  4. Xueyan Zhao & John Mullen & Garry Griffith & Roley Piggott & William Griffiths, 2003. "The incidence of gains and taxes associated with R&D and promotion in the Australian beef industry," Agribusiness, John Wiley & Sons, Ltd., vol. 19(3), pages 333-344.
  5. Mingxia Zhang, 1997. "The Effects of Imperfect Competition on the Size and Distribution of Research Benefits," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(4), pages 1252-1265.
  6. Nicholas E. Piggott & James A. Chalfant & Julian M. Alston & Garry R. Griffith, 1996. "Demand Response to Advertising in the Australian Meat Industry," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(2), pages 268-279.
  7. Kinnucan, Henry W., 2003. "Optimal generic advertising in an imperfectly competitive food industry with variable proportions," Agricultural Economics, Blackwell, vol. 29(2), pages 143-158, October.
  8. Cotterill, Ronald W & Putsis, William P, Jr & Dhar, Ravi, 2000. "Assessing the Competitive Interaction between Private Labels and National Brands," The Journal of Business, University of Chicago Press, vol. 73(1), pages 109-137, January.
  9. Richard J. Sexton, 2000. "Industrialization and Consolidation in the U.S. Food Sector: Implications for Competition and Welfare," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(5), pages 1087-1104.
  10. John A. L. Cranfield & Ellen W. Goddard, 1999. "Open Economy and Processor Oligopoly Power Effects of Beef Advertising in Canada," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 47(1), pages 1-19, 03.
  11. Jensen, Helen H. & Schroeter, John R., 1992. "Television Advertising and Beef Demand: An Econometric Analysis of 'Split-Cable' Household Panel Scanner Data," Staff General Research Papers Archive 521, Iowa State University, Department of Economics.
  12. T. F. Funk & Karl D. Meilke & H. Bruce Huff, 1977. "Effects of Retail Pricing and Advertising on Fresh Beef Sales," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 59(3), pages 533-537.
  13. R. W. Ward & C. Lambert, 1993. "Generic Promotion Of Beef: Measuring The Impact Of The Us Beef Checkoff," Journal of Agricultural Economics, Wiley Blackwell, vol. 44(3), pages 456-465.
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