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Value Chain Analysis in the Canadian Egg Industry: Estimating the Bargaining Power of Farmers, Graders and Retailers in the Determination of Price

Conventional egg production in Canada is supply managed and farm prices are determined by production costs. The context differs for specialty eggs, since the premium at the farm is individually negotiated between graders and farmers. Given that specialty egg production such as cage free or organic involved significant farm investment in fixed cost, it is of interest to assess potential bargaining power in the value chain, especially given significant commitments from retail store and fast food restaurant to move exclusively to cage free eggs in the next few years. This paper assesses theoretically and empirically the bargaining power of the value chain stakeholders (producers, graders and retailers) for specialty eggs and identifies the actor that benefit most. Five provinces are considered in our analysis, namely, Quebec, Ontario, Alberta, Saskatchewan and British Columbia. A theoretical model of joint profit maximization and price adjustment is developed and estimation is done to compare the bargaining power of the different actors of the value chain. The results show that the bargaining power of downstream actors is greater than the power of producers in most provinces and for most market.

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