Academic journal article Journal of Agricultural and Applied Economics

U.S. Consumers' Valuation of Quality Attributes in Beef Products

Academic journal article Journal of Agricultural and Applied Economics

U.S. Consumers' Valuation of Quality Attributes in Beef Products

Article excerpt

A sample of U.S. consumers were surveyed in a choice based experiment in the Fall of 2005 and Spring 2006 to elicit consumers' preferences for quality attributes in beef products. Based on the resulting data, a random coefficients logit model is estimated, and consumers' willingness to pay for these quality attributes in beef products is obtained. The results indicate that consumers have strong valuation for traceability, grass-fed, and U.S. origin attributes in a standard rib-eye steak and are willing to pay a premium for these attributes.

Key Words: choice experiment, conjoint analysis, quality attributes, random parameters logit, willingness to pay

JEL Classifications: Q10, Q1

Amid high profile food scares and recalls, health concerns, threats of bioterrorism and competition from other protein sources, the U.S. beef industry faces increasing demands from consumers for assurances regarding source and production methods both in domestic and export markets. These attributes (also known as credence attributes) include feed type, animal treatment, quality assurances, process verification, source, and traceability information. The traditional focus in the beef industry has been on volume and efficiency, with marbling as a primary quality measure. However, the trend in consumer demands challenges this view and necessitates looking into differentiation opportunities based on a range of production attributes and their marketability. United State Department of Agriculture (USDA) has devoted resources to support this trend with its program of Know Your Farmer - Know Your Food, a USDA-wide effort to create new economic opportunities by better connecting consumers with local producers. USDA believes "there is too much distance between the average American and their farmer and we are marshalling resources from across USDA to help create the link between local production and local consumption (USDA, 2010)." Perhaps if consumers get to know their farmer as USDA suggests there is no need for traceability in the food chain. In fact, the House Appropriations Subcommittee has cut all funding for the voluntary National Animal Identification System (National Agricultural and Food Law and Policy Blog, 2010). While recent media attention and now government resources have focused on local food and more personal connections between farmer and consumer, questions remain regarding consumer demand for credence attributes and the value they place on them.

Although the Federal mandate is abated, there remains a need to assess the profitability of investing and marketing non-traditional attributes; while many of these attributes exist in current beef products, the additional value/cost contributions of these attributes have not been tested in the market, nor on their impact to the operation and added expense to the supply chain (Lusk and Hudson, 2004). Furthermore, at least in the case of livestock and poultry, the USDA Grain Inspection and Packers and Stockyard Administration (GIPSA) has proposed changes to regulations that some believe will make it harder to reward differentiated products. For example, the proposed changes, "establishes criteria the Secretary may consider in determining if an undue or unreasonable preference or advantage, or an undue or unreasonable prejudice or disadvantage has occurred under the Act" (USDA, GIPSA, 2010). While the example of preference given is volume, will price differences paid for other attributes be considered undue preference? Will a buyer have to justify each price difference paid and will the added burden discourage price and ultimately product differentiation?

The objective of this paper is to provide information on the importance of the aforementioned differentiating production attributes in the U.S. consumers' demand for beef by examining their willingness to pay (WTP) for these attributes. The data comes from a survey based on choice based conjoint (CBC) experiment where potential consumers of beef were asked to choose among rib eye steaks featuring various combinations of production attributes and cost. …

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