Date of this Version
Khanal, B. (2016). A Hedonic Analysis of Community Supported Agriculture Share Prices in Midwestern United States. MS thesis. University of Nebraska-Lincoln. Lincoln, Nebraska.
As concerns mount over the consequences of conventional food production for health, the environment, and animal welfare, consumers are increasingly demanding what they perceive as more nutritious, safer, and ethically produced food. Local food in general and community supported agriculture in particular have emerged as promising alternatives that could allay those concerns and, judging by recent growth, the share of local food in total food sales will most likely continue to grow. This represents an opportunity and a challenge for both incumbent farms serving the local food market as well entrants who are looking to capitalize on the growth in demand for local food. Under-standing the drivers of that demand is crucial not only for effective private strategies for production, marketing, and entry decisions; but also for public policies for promoting local food.
This thesis sheds light on what drives demand for local food by developing a hedonic model that estimates the consumer valuations of attributes of produce supplied by community supported agriculture farms (CSAs). Data from the LocalHarvest.org website were used to estimate the hedonic model that relates CSA share prices to several attributes of 466 CSAs located in seven Midwestern states: Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, and South Dakota.
Findings reveal that the most statistically valued CSA attributes are home delivery commanding a premium of about $18, and belonging to the fifth quintile of CSA membership size ($15.00). Next are increased vegetable variety (between $0.80 and $1.20), and USDA organic certification (worth about $10 but sensitive to model specification). Farming practices, such as integrated pest management, and distance to the nearest metropolitan area were not statistically significant as would have been expected, given the stereotypical attributes of locavores (preference for sustainable production practices and shorter food miles).
An implication for CSA private strategies is for farms is to adopt home-delivery marketing strategy, move up the membership scale, offer more vegetable variety, and to a lesser extent seek USDA organic certification. Such strategies come at a cost, however, and their adoption depends on the costs and benefits (premiums) of investing in those attributes. Concerning public policy, since home delivery is the attribute with the most sizable premium, a public policy for subsidizing home delivery to low income families (mostly families without vehicles and with low paid jobs) may be one instrument that would by far not only improve the bottom line of CSAs but also provide the families access to fresh vegetables.
Advisor: Professor Azzeddine Azzam