Thomas L. Sporleder

Managerial Economics of Vertically Coordinated Agricultural Firms

Differing vertical exchange mechanisms are observed across commodity marketing channels. For example, the poultry sector exhibits exchange mechanisms that result in tighter vertical coordination from upstream to downstream industries than in the feed grains sector, which relies primarily on open spot markets to coordinate vertically. The forces that lead to differing exchange mechanisms are not clearly understood, but interesting recent theoretical progress warrants renewed examination of this area. Theoretical progress has led to new contexts for analyses and allows novel potential explanations (Barry, Sonka, and Lajili). Ultimately, the desire is to be able to forecast which sectors will be vertically coordinated through increasing use of contracts or integration in the future and to assist in public policy and business strategy formation.

Knowledge Management Frontier in the Global Food System: Network Embeddedness and Social Capital

though these events are disparate and independent in character, they all have a similar result of shifting the demand for vertical information flow in the global food supply chain. Agricultural biotechnology has raised issues in commodity marketing subsectors relative to identity preservation and trace-back as well as labeling. The need for enhanced information on numerous aspects of the production protocol, such as geographic origin or seed variety, at downstream portions of the supply chain is common (Sporleder and Goldsmith, 2001; Caswell; Hobbs and Young; Hobbs, Kerr, and Phillips). The application of the technology to crop and livestock production has contributed to the need for enhanced vertical information.

Strategic alliances and networks in supply chains: knowledge management, learning and performance measurement

This manuscript defines and analyses the concept of a strategic alliance as one specialized collaborative agreement among vertically-allied firms in the supply chain. Vertical relationships and alliances coagulate among upstream and downstream firms in an effort to form networks that are synergistic and add value beyond what an individual firm may be able to achieve. One driver to form a strategic alliance is intellectual property that serves as a base for maximizing value added within a supply chain. Multiple diverse organizations that collaborate within a supply chain compose a network. Knowledge management is introduced in the analysis of strategic alliances. Knowledge management logic helps in understanding the information-sharing aspects of a strategic alliance. Ambiguity plays a role in the extent to which information is shared. Thus, knowledge management provides novel insight into the foundations of a strategic alliance. The potential of a strategic alliance creating a real option for managers is examined along with the characteristics of networks that are organized around constant learning. Strategic-alliance performance evaluation also is addressed. Sometimes it is not appropriate to evaluate the strategic alliance based on conventional means such as profit and return on investment. Strategic alliances may involve objectives such as entering new markets, learning and obtaining new skills, and/or sharing risks and resources. When a profit centre is not part of the object of cooperation the alliance presents challenges to managers in terms of evaluation. Performance evaluation of alliances is suggested based on a certain-to-fuzzy continuum of inputs and outputs.

The VEST model: An alternative approach to value added

An analysis is provided of the general value added challenge faced by farmers, cooperatives, economic development boards, and others. The VEST model is developed by which publicly traded equities (stocks) can be used directly by farmers as an alternative to traditional value added investment strategies. Numeric VEST Coefficients are developed to serve as investment guidelines for farmers seeking the benefits of value added in the grains, red meat, and poultry sectors.

Capital Market Innovations and Agricultural Cooperatives

The focus of this Principal Paper Session is on both innovation in the capital markets and innovation involving agricultural cooperatives. The most important aspect of this session and the papers in it is to assess the implications for the risk-mitigation role of agricultural cooperatives, given the innovation that is occurring in the capital markets. In addition, the risk-mitigation assessment is linked directly to the structure of the agricultural cooperative. Developments in insurance securitization provide much of the basis for renewed enthusiasm about risk-mitigation potentials involving agriculture. The three principal papers as a set provide an interesting and eclectic view of risk mitigation applied to agricultural cooperatives. The article by Skees provides an overview of the innovations that are emerging in the capital markets. The article by Zeuli discusses potential applications and assesses the usefulness of these innovations to agricultural cooperatives or their members who might apply them. She briefly discusses several examples of new-generation cooperatives (NGCs) that could potentially benefit from the application of specific capital market innovations. Finally, the article by Black and Barnett provides a case example of three NGCs that process sugar beets. Black and Barnett, among other things, analyze a time series on sugar beet yield per planted acre to evaluate a crop yield insurance instrument.

Seven fundamental economic characteristics exclusivity of agrifood supply chains (part 1)

This analysis focuses on defining and describing the unique economic characteristics of agrifood supply chains. The analysis includes seven specific economic characteristics of agrifood supply chains that distinguish them from other industrial manufacturing and service supply chains. The seven characteristics are: 1) risk emanating from the biological nature of agrifood supply chains, 2) the role of buffer stocks within the supply chain, 3) the scientific foundation of innovation in production agriculture having shifted from chemistry to biology, 4) cyberspace and information technology influence on agrifood supply chains, 5) the prevalent market structure at the farm gate remains oligopsony, 6) relative market power shifts in agrifood supply chains away from food manufacturers downstream to food retailers, and 7) globalization of agriculture and agrifood supply chains.