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Product Development, Cost Seasonality, Region Marginalization, And A More Demanding Consumer

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  • Hennessy, David A.

Abstract

Agricultural production is becoming more like manufacturing in the routinization of processes, the extent to which raw materials are processed, capital intensity, and its emphasis on throughput. Some ascribe the changes to demand-side factors while others look to technological innovations. Emphasizing cost seasonality as a reference indicator for nature's role in agricultural production, this paper develops a simple model that includes both supply and demand sides. We show how cost seasonality can impede product development to meet consumer needs and find that there may be a ceiling level of cost seasonality below which a non-seasonal equilibrium production profile occurs. Price seasonality is decreasing in cost seasonality. An increase in demand for more-processed products induces a shift toward non-seasonal production. Regions with strongly seasonal cost advantages will produce lower-value products while less-seasonal regions will produce higher-value products. If a region with high-cost seasonality has a non-seasonal cost disadvantage, then an increase in demand for processing can reduce the region's competitiveness.

Suggested Citation

  • Hennessy, David A., 2004. "Product Development, Cost Seasonality, Region Marginalization, And A More Demanding Consumer," Hebrew University of Jerusalem Archive 18529, Hebrew University of Jerusalem.
    • Handle: RePEc:ags:hebarc:18529
    DOI: 10.22004/ag.econ.18529
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    File URL: https://ageconsearch.umn.edu/record/18529/files/wp040378.pdf
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    References listed on IDEAS

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    1. Boehlje, Michael, 1996. "Industrialization of Agriculture: What are the Implications?," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 11(01), pages 1-4.
    2. Drabenstott, Mark, 1994. "Industrialization: Steady Current or Tidal Wave?," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 9(4), pages 1-5.
    3. David A. Hennessy & John A. Miranowski & Bruce A. Babcock, 2004. "Genetic Information in Agricultural Productivity and Product Development," American Journal of Agricultural Economics, John Wiley & Sons, vol. 86(1), pages 73-87, February.
    4. Nigel Key & William McBride, 2003. "Production Contracts and Productivity in the U.S. Hog Sector," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(1), pages 121-133.
    5. David A. Hennessy & Jutta Roosen, 2003. "A Cost‐Based Model of Seasonal Production with Application to Milk Policy," Journal of Agricultural Economics, Wiley Blackwell, vol. 54(2), pages 285-312, July.
    6. Deiter, Ronald E. & Hayenga, Marvin L. & Brandt, Jon & Boyd, David L., 1985. "The U.S. Pork Sector: Changing Structure and Organization," Staff General Research Papers Archive 11084, Iowa State University, Department of Economics.
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    Keywords

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    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • N5 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries
    • Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics

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