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Investment behavior of Canada egg producers

Investment behavior of Canada egg producers PurposeThe purpose of this paper is to document the level of risk in the Québec egg sector (conventional and specialty eggs) and analyze the optimal choices of Québec egg producers that must allocate limited resources to production of different types of eggs.Design/methodology/approachA quadratic programming approach applied to expected mean-variance models is used to analyze the impact of risk on decision to invest when the resources must be allocated to different type of production that have different risk levels. The model is calibrated using monthly data from 2009 to 2016.FindingsResults indicated multiple uncertainty sources (technological, cost of production, price of eggs) that vary according to the types of eggs. Given risk aversion parameters, producer would favor production modes with the lowest producers’ price variance, which correspond to free-run eggs. Results also indicated that in response to a greater intensity of risk aversion, the course of action producers may choose is to increase the relative production of free-run eggs.Research limitations/implicationsThe empirical limits of this research are found in the lack of quality data on producer prices and costs for specialty eggs. Future research could explore the relationship between the growing impact of egg for processing, which price is based on the US price, and its relationship with specialty eggs.Practical implicationsThe findings of the study will be useful for policy makers and managers of eggs supply chain. This is important, given the recent announcement by Canadian’s large retailers and fast food companies to increase cage free eggs offering and, in some cases, eventually only selling these types of eggs.Originality/valueThis study adds to the understanding of the role of risk and uncertainty in the investment decision of egg producers and different mode of production, as well as in the development of the growing production of specialty eggs in Canada. It fills a gap in the literature regarding the impact of risk in Canadian egg production. This gap is likely explained by the perception of a lack of risk in this supply managed sector in Canada and its small size relative to other supply managed sector. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png British Food Journal Emerald Publishing

Investment behavior of Canada egg producers

British Food Journal , Volume 120 (1): 12 – Jan 2, 2018

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References (28)

Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
0007-070X
DOI
10.1108/BFJ-12-2016-0619
Publisher site
See Article on Publisher Site

Abstract

PurposeThe purpose of this paper is to document the level of risk in the Québec egg sector (conventional and specialty eggs) and analyze the optimal choices of Québec egg producers that must allocate limited resources to production of different types of eggs.Design/methodology/approachA quadratic programming approach applied to expected mean-variance models is used to analyze the impact of risk on decision to invest when the resources must be allocated to different type of production that have different risk levels. The model is calibrated using monthly data from 2009 to 2016.FindingsResults indicated multiple uncertainty sources (technological, cost of production, price of eggs) that vary according to the types of eggs. Given risk aversion parameters, producer would favor production modes with the lowest producers’ price variance, which correspond to free-run eggs. Results also indicated that in response to a greater intensity of risk aversion, the course of action producers may choose is to increase the relative production of free-run eggs.Research limitations/implicationsThe empirical limits of this research are found in the lack of quality data on producer prices and costs for specialty eggs. Future research could explore the relationship between the growing impact of egg for processing, which price is based on the US price, and its relationship with specialty eggs.Practical implicationsThe findings of the study will be useful for policy makers and managers of eggs supply chain. This is important, given the recent announcement by Canadian’s large retailers and fast food companies to increase cage free eggs offering and, in some cases, eventually only selling these types of eggs.Originality/valueThis study adds to the understanding of the role of risk and uncertainty in the investment decision of egg producers and different mode of production, as well as in the development of the growing production of specialty eggs in Canada. It fills a gap in the literature regarding the impact of risk in Canadian egg production. This gap is likely explained by the perception of a lack of risk in this supply managed sector in Canada and its small size relative to other supply managed sector.

Journal

British Food JournalEmerald Publishing

Published: Jan 2, 2018

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