Victoria Salin

Stock Market Reaction to Food Recalls

The costs of food recalls are examined from the perspective of capital markets. A partial event analysis technique is used in this quantitative investigation of firm-specific repercussions of incidents of microbiological contamination of food. These recalls vary by product, company size and scope, and severity. Returns to shareholders fell in some cases, but stock market reaction was not discernible in other incidents. Effects on volatility of returns also are mixed. These findings point out the potentially distinct crisis management tools that would be used for reputation in the stock market versus measures to communicate with the general public.

Information Technology In Agri-Food Supply Chains

High-tech information systems can offer competitive advantages to agri-food firms when the systems support a supply chain strategy that suits the demand for the product. This article discusses differences between supply chains for functional versus innovative products and the relevance for managers in agri-food firms. Unique characteristics of agriculture and food products and economic concentration in food industries affect the appropriate supply chain approach.

A cold chain network for food exports to developing countries

This article examines the business relationships in the cold chain used for exporting food to new markets in developing countries. The American Potato Trade Alliance, a cross‐network alliance that includes all levels of the value chain, is the subject of case study research involving participant observation and fieldwork in the Philippines and Thailand. Multinational restaurant companies manage technical challenges in target markets with tight specifications and exclusive supply chains, while smaller firms use extensive networks to supply imported frozen potatoes. Pricing strategies for cold chain services are closely related to quality and potentially affect the availability of outsourced cold chain services. Opportunistic behavior by buyers could reduce incentives for private investment in cold chain infrastructure, while long‐term commitment by chain partners would strengthen the potential for private markets to provide cold chain services in newly developing markets.

Stock market reaction to food recalls: a GARCH application

How food recalls due to bacterial contamination affect the stock prices of two companies are examined using a version of the financial market model that accounts for Generalized Autoregressive Conditional Heteroscedasticity (GARCH) effects. GARCH methodology was necessary to uncover the time-varying volatility in the series and it contributed to more efficient econometric results. The initial food recall undertaken by the company is associated with reduced mean returns and higher volatility of the companies studied. Repeated recalls by the same company are not associated with strong reactions. Volatility spillovers across firms suggest potential industry-wide repercussions from bacterial contamination incidents.

Exploring the Market for Agricultural Economics Information: Views of Private Sector Analysts

This survey of 100 economic analysts in agriculture, outside of government and academia, assesses the changing public-private balance in information services in agriculture. Its objectives were to (1) contact frontline private sector analysts who handle economic issues in agriculture and ask them about the data and information they most value and why; (2) experiment with measurement instruments to segment and describe information attributes that users value; and (3) assess the interest of front line analysts in the changing public-private balance in information provision. The results provide a list of information services used by analysts, descriptive responses on attributes that contribute to value added, and statistical analysis relating respondent characteristics to the use of information from the U.S. Department of Agriculture (USDA). Respondents use a wide spectrum of information services. USDA was the single source of agricultural economics information mentioned most often. Education of the respondent is positively associated with the probability of using USDA information services, and experience is negatively associated with the use of USDA information services.

Impact of Food Contamination on Brands: A Demand Systems Estimation of Peanut Butter

A 2007 food-borne illness incident involving peanut butter is linked with structural change in consumer demand. Compensated and uncompensated own- and cross-price elasticities and expenditure elasticities were calculated for leading brands before and after the product recall using the Barten synthetic model and weekly time-series data from 2006 through 2008. Statistically significant differences in price elasticities for the affected brand, Peter Pan, were absent. After a period of 27 weeks, this brand essentially recovered from the food safety crisis. Significant differences in price elasticities were evident among non-affected brands. Hence, spillover effects and heightened competition are associated with the recall.

Food safety considerations for innovative nutrition solutions

Failure to secure safe and affordable food to the growing global population leads far too often to disastrous consequences. Among specialists and other individuals, food scientists have a key responsibility to improve and use science‐based tools to address risk and advise food handlers and manufacturers with best‐practice recommendations. With collaboration from production agriculture, food processors, state and federal agencies, and consumers, it is critical to implement science‐based strategies that address food safety and that have been evaluated for effectiveness in controlling and/or eliminating hazards. It is an open question whether future food safety concerns will shift in priority given the imperatives to supply sufficient food. This report brings together leading food safety experts to address these issues with a focus on three areas: economic, social, and policy aspects of food safety; production and postharvest technology for safe food; and innovative public communication for food safety and nutrition.

Diversification effect of real estate investment trusts: Comparing copula functions with kernel methods

Value at Risk estimated with joint distribution methodologies demonstrates that risk is lower for portfolios of real estate investment trusts (REITs) and small-business equities compared with a single-asset holding. Benefits from diversification were largest in 2001–2003 and the smallest from 2006–2008. Previous research using Value at Risk points out the importance of model selection. Various estimation approaches affected results modestly over the entire period (1989–mid 2008). The Value at Risk is -3.1% for two copula models and -3.2% for a nonparametric empirical joint density, at a 1% probability level for weekly returns. After June 1996, the nonparametric copula model consistently returned the lowest risk estimate among the three joint distribution methods. Time-varying risk is a more important driver in the results than model specification. The highest portfolio risk was found for the period after August 2006 (weekly losses of 4.4% to 5%). The distribution-based model results were closer to the undiversified model results than in the earlier time periods, which supports the premise that contagion across asset classes characterises the post-2006 real estate bust, but is not a strong characteristic of the market over a longer investment horizon that includes growth phases of the business cycle.

Expiration dates and order quantities for perishables

We address the problem of how to set expiration dates for perishable products in the context of a retailer that sells a random lifetime product under periodic review. Although the lifetime is random, the retailer, in addition to deciding when and how much to order, must also determine an expiration date that corresponds to the maximum number of periods that inventory may remain available for sale before it must be discarded. Unlike other models of perishable inventory, but similar to real-world processes, it is possible to unknowingly sell products that have reached the limit of their retail shelf life, or to discard products that are still good for sale. As a result, retailers must balance hazard costs and perishing costs by setting a remaining shelf life that provides customers with a reasonable time for storage at home before the product actually spoils.