Value creation in the agri-food value chain

Global agricultural markets reflect the increasing complexity of modern consumer demand for food safety and quality. This demand has triggered changes throughout the food industry, and led to greater opportunities for product differentiation and the potential to add value to raw commodities (Goldsmith et al., 2002; Humphrey and Memedovic, 2006).Greater differentiation and value adding have in turn dramatically changed the price spread or marketing bill between the farm value of products and the retail value during the past 18 years. Thus a significantly greater percentage of the final price paid by consumers is garnered down chain rather than up chain. This apparent shifting of value creation, as measured by the marketing margin, has invigorated empirical questions as to where and how much value is created along the agri-food value chain. Using a regression model with a ten-year panel data of financial information taken from 454 agri-food companies worldwide, this paper empirically analyzes value creation in the agri-food value chain. The agri-food value chain can be split into four main stages: input, production, processing and retailer. The main purpose of this study is to analyze the differences in stages within the agri-food value chain by identifying which firms and nodes excel or underperform in the value creation process. For the purpose of this paper, we estimate the Economic Value Added (EVA) metric for each firm. We validate our findings by creating and employing three additional value creation measures—the modified economic value added, the percentage of companies that create value and the persistent value creation—which improve the robustness of our findings and allow this study to find measures that are not biased by company size. The results indicate that agricultural producers—the most commoditized sector—contribute the least amount of value to the chain, while further processing and retailing contribute significantly higher levels of value.

Name thesis:degree_name

M.S.

Level thesis:degree_level

Thesis

Discipline thesis:degree_discipline

Agricultural & Applied Econ

Grantor

University of Illinois at Urbana-Champaign

Year dc:date

2014

Author dc:creator

• Cucagna, Maria

Contributors dc:contributor

• Goldsmith, Peter D.

• Agri-food Value chain
• Value creation
• Economic Valued Added
• Value Chain Members

Statement dc:rights

• Copyright 2014 Maria Cucagna

Language dc:language

en

Handle dc:identifier

http://hdl.handle.net/2142/50474

OAI identifier oai:identifier

oai:www.ideals.illinois.edu:2142/50474