Product Development, Cost Seasonality, Region Marginalization, and a More Demanding Consumer

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2004-11-01
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Hennessy, David
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Center for Agricultural and Rural Development

The Center for Agricultural and Rural Development (CARD) conducts innovative public policy and economic research on agricultural, environmental, and food issues. CARD uniquely combines academic excellence with engagement and anticipatory thinking to inform and benefit society.

CARD researchers develop and apply economic theory, quantitative methods, and interdisciplinary approaches to create relevant knowledge. Communication efforts target state and federal policymakers; the research community; agricultural, food, and environmental groups; individual decision-makers; and international audiences.

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Agricultural production is becoming more like manufacturing in the routinization of processes, the extent to which raw materials are processed, capital intensity, and its emphasis on throughput. Some ascribe the changes to demand-side factors while others look to technological innovations. Emphasizing cost seasonality as a reference indicator for nature's role in agricultural production, this paper develops a simple model that includes both supply and demand sides. We show how cost seasonality can impede product development to meet consumer needs and find that there may be a ceiling level of cost seasonality below which a non-seasonal equilibrium production profile occurs. Price seasonality is decreasing in cost seasonality. An increase in demand for more-processed products induces a shift toward non-seasonal production. Regions with strongly seasonal cost advantages will produce lower-value products while less-seasonal regions will produce higher-value products. If a region with high-cost seasonality has a non-seasonal cost disadvantage, then an increase in demand for processing can reduce the region's competitiveness.

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