th4_improving food security through rice value chain upgrading in africa:
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3rd Africa Rice Congress Theme 4: Rice policy for food security through smallholder and agribusiness development Mini symposium 3: Socio-economic drivers of change in rice sector development Author: DemontTRANSCRIPT
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Improving Food Security through Rice Value Chain Upgrading in Africa:
What Can We Learn from Experimental Economics?
Matty DemontSenior Economist, Market Research and Value Chain Specialist,
International Rice Research Institute (IRRI), Los Baños, [email protected]
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013
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Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013
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Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013
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Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013
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Three types of countries
• Coastal countries strongly exposed to urban bias (Senegal, Liberia, Cote d’Ivoire, Ghana, Togo, Benin, Nigeria, Cameroon)
• Coastal countries not yet strongly affected by urban bias or with comparative advantage in rice demand (Gambia, Guinea, Sierra Leone, Kenya, Tanzania, Mozambique, Madagascar)
• Landlocked countries (Mali, Burkina Faso, Ethiopia, Rwanda, Zambia)
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013
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Observation
• In many import-biased countries endowed with a port, domestic rice fails to compete quality-wise with imported Asian rice
• As a result of urban bias, urban consumers have become used to the superior quality of imported Asian rice and developed preferences for it
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013
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Observation
• Domestic rice clearly differentiated from imported rice– Quality-wise– Packaging, branding, image– Word-of-mouth– Status considerations (foreign = cool)f-mouth– Status considerations (foreign = cool)
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013
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Which ones are domestic rice?
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013
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Research hypothesis
• Domestic rice now not only has to compete quantity-wise, but also quality-wise, but how?
• In the absence of strong consumer attachment to domestic rice, best short- and medium-term option = dedifferentiating domestic from imported rice– Quality-wise– Packaging, branding, image
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013
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Research hypothesis
• Proposed three-stage investment sequence for upgrading rice value chains in import-biased countries strongly exposed to urban bias:
Quality upgrading, processing infrastructure, certification, branding, ...
Quantity increase, scaling up, aggregation and storage infrastructure
Advertizing and generic promotion
Value-adding
Demand-lifting
Supply-shifting
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013
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How can we test this hypothesis?
• Can experimental economics help?• Experimental auctions enable assessing
consumers’ response to upgrading of1. Intrinsic quality attributes:• Post-harvest quality upgrading• Varietal improvement
2. Extrinsic quality attributes:• Labeling and branding• Information (radio, video, word-of-mouth)
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013
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Case studies
Mini-Symposium 4, Sub-Theme 3: Rice processing and marketing, Hall 3, 14:30–16:001. M. Ndour: Branding of local rice in Senegal2. M. Ouedraogo: Consumers’ response to local
quality rice in Burkina FasoThis presentation:3. Dedifferentiating imported from local rice in
Cameroon
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013
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Rice quality upgrading in Cameroon
• Institute of Agric. Research for Development (IRAD), Cameroon developed uniform steam distributed (USD) parboiling technology
• Mimics high-grade imported rice in physical and eating characteristics:– Whiter– Lower broken fracture– Fewer cracked grains– Absence of burnt grains and impurities– Higher swelling ratio during cooking
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013
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Rice quality upgrading in Cameroon
IRRI Seminar, International Rice Research Institute (IRRI), Los Baños, Laguna, Philippines, 4 April 2013
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Research questions
• Do consumers perceive the IRAD rice as being similar to imported rice?
• Are they willing to pay price premiums for it? Relative to– Traditionally parboiled local rice– Improved non-parboiled local rice
• Did IRAD technology successfully quality-dedifferentiate domestic from imported rice?
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013
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Targeting urban market: Yaoundé
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013
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Setting up laboratory setting
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013
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Choosing products to be auctioned• Kept the varietal component constant• Using a single rice variety: Tox 3145• Processed into four different end-products
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013
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Upgrade 3: improved parboiled rice (IRAD)
Upgrade 2: traditionally
parboiled (TRAD) rice
Upgrade 1: non-
parboiled homoge-nous
(NPH) rice
non-parboiled broken (NPB)
rice (benchmark)
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013
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Randomly recruit shoppers
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013
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Start the experimental session
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013
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Explain auction mechanismFive principles:1. Endow-and-upgrade2. First price buys & pays second price3. Real transaction (bids are binding)4. Random drawing (1 product & 1 round)5. Anonymous
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013
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benchmark
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013
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Descriptive results
0%
20%
40%
60%
80%
100%
Willingness to upgrade
020406080
100120140
Willingness to pay
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013
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“Perceived dedifferentiation” is measured through a quiz question: “Which rice variety(ies) are imported?”
63%
16%
12%
5%
Correct answer = “none”: only 3%
IRADimp01110010101101…
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013
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Econometric results
Determinants of consumers’ WTP to upgrade non-parboiled broken rice to alternative rice types Variable First hurdle: propensity of upgrading Second hurdle: amount paid
Coefficient SE Marginal effect Coefficient SE Marginal effect NPH 0.524** 0.233 0.123** –115.492*** 34.526 –32.754*** IRAD 0.593*** 0.207 0.139*** 5.081 21.266 15.648 Pre-tasting 0.498*** 0.180 0.117*** 1.014 18.800 11.885 Post-CIT –0.040 0.117 –0.009 –1.987 16.956 –1.700 NPH × pre-tasting –0.528*** 0.206 –0.124*** –29.346 28.524 –23.588 NPH × post-CIT 0.001 0.138 0.000 19.530 22.450 7.615 IRAD × pre-tasting 0.051 0.239 0.012 3.034 15.055 2.357 IRAD × post-CIT –0.094 0.165 –0.022 21.677 14.413 6.238 IRADimp 0.564*** 0.205 0.132*** –60.981** 27.894 –10.661** NPH × IRADimp –0.424* 0.223 –0.099* 0.672 27.082 –9.519 IRAD × IRADimp 0.127 0.224 0.030 62.015** 24.921 27.010** Morning 0.060 0.189 0.014 –27.298 18.225 –9.220
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013
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Conclusion
• Consumers are 14% more likely to upgrade to improved parboiled rice (IRAD)
• Those who perceive IRAD rice as being imported (63%)– Paid 5% price premiums for IRAD rice– Discounted traditionally parboiled rice by 2%
• Major value of IRAD technology = ability to successfully quality-dedifferentiate domestic from imported rice in urban markets in Cameroon
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013
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Thank you!
Matty DemontSenior Economist, Market Research and Value Chain Specialist,
International Rice Research Institute (IRRI), Los Baños, [email protected]
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013