Estimating organic, local, and other price premiums in the Hawaii fluid milk market

Abstract

With retail scanner data, we applied hedonic price modeling to explore price premiums for organic, local, and other product attributes of fluid milk in Hawaii. Within the context of revealed preference, this analysis of organic and local attributes, under a single unified framework, is significant, as research in this area is deficient in the existing literature. This paper finds both organic and local attributes delivered price premiums over imported, conventional, whole fluid milk. However, the estimated price premium for organic milk (24.6%) is significantly lower than findings in the existing literature. Likewise, the price premium for the local attribute is estimated at 17.4%, again substantially lower compared with an earlier, stated preference study in Hawaii. Beyond that, we estimated a robust price premium of 19.7% for nutritional benefits claimed. The magnitude of this estimated coefficient reinforces the notion that nutrition information on food is deemed beneficial and valuable. Finally, package size measures the influence of product weight. With each larger package size, the estimate led to a corresponding larger price discount. This result is consistent with the practice of weight discounting that retailers usually offer with fresh packaged food. Additionally, we estimated a fairly high Armington elasticity of substitution, which suggests a relatively high degree of substitution between local and imported fluid milk when their relative price changes. Overall, this study establishes price premiums for organic, local, and nutrition benefits claimed for fluid milk in Hawaii.

Demand, challenges, and marketing strategies in the retail promotion of local brand milk

“…It is worth to notice that it is not appropriate to interpret the result as a preference for the local feature directly. Previous studies that focus on agricultural products produced locally and nonlocally have shown consumers are willing to pay a premium for local feature (Loke, Xu, & Leung, 2015;Park & Gómez, 2012;Wolf et al, 2011). In our study, all fluid milk is produced locally but branded differently.…”

Quantitative Trait Loci (QTL) Analysis of Fruit and Agronomic Traits of Tropical Pumpkin (Cucurbita moschata) in an Organic Production System

“…However, most of these approaches focus on major crops such as wheat [6], sweet corn [4], tomato [7], and barley [8], and few studies are focused on smaller crops such as pumpkin (Cucurbita moschata: 2n = 2x = 40). Hawai'i presents a unique opportunity to focus on molecular characterization for plant breeding on small crops due to its fertile soils [9], year-round growing environment [10], and consumer demand for organic products [11].…”

Local food: benefits and failings due to modern agriculture

“…For example, in one case study Loke et al (2015) estimated that the price of milk in Hawaii, USA would increase by 17 % if the product was locally produced, and by 25 % if it were both local and organic. This information undoubtedly encourages local and organic production from a local producer's perspective, where increases in market price lead to increases in profit.…”