Consumers Willingness to Pay for Geographical Indication Labeling of Thailand s Hom Mali Rice

Transcription

1 Consumers Willingness to Pay for Geographical Indication Labeling of Thailand s Hom Mali Rice Objective: To examinee the economic value of information on geographical indication (GI) labels for jasmine rice in the Thai market. Methodology: Using the random n-th price sealed auction method, which is incentive compatible, willingness to pay (WTP) measures have been examined for the group with information and the group without information. The existence of the difference in WTP has been statistically examined between groups and among rice with and without the GI label. Scope: economic values of the information on GI labeled jasmine rice from Thung Kula Ronghai were examined along with non-gi labeled rice from Thung Kula Ronghai and Chiang Rai among Bangkok consumers. Significance of the study: economic values of policies and institutions to differentiate particular domestic products from others can be understood. 457

2 Thung Kula Rong-hai and Hom Mali Rice: Causal link between GI and quality Because the paddy depended on rain water, cultivation could be carried out only once a year. Harvesting takes place in the cold season when the weather is cold and dry (after the end of the rainy season). According to local knowledge, a flooded paddy field needs to be drained about 10 to 15 days before harvesting to obtain rice of good physical quality, with long, slim, clear and sturdy grains. The cooked rice should be soft and fragrant. This practice, gives Thung Kula Rong-Hai Hom Mali Rice its unique quality, distinctive from Hom Mali rice grown in other areas and recognised by traders and consumers both in the producing country itself and internationally. The slightly saline soil in northern Thailand, the coolness and dryness of the area, the specific rice varieties (KDML 105 and RD 15) used, the climate and the soil nutrients cause the paddy to become stressed and to produce the aromatic substance 2-acetyl-1- pyrriline (2-A-1-P), the same substance which produces the fragrance in pandanus leaves. This is the miracle gift from the nature on Khao Hom Mali Thung Kula Rong Hai. Geographical Indication Rice Yoshihashi et al (2004) found that KDML105 cropped in rain-fed area of Thung Kula Ronghai was higher in 2AP content than other areas, but only in limited water areas. Under Trade-Related Aspects of Intellectual Property Rights GI is defined as indications which identify a good as originating in the territory of a member, or a region or locality in that territory, where a given quality, reputation or other characteristics of the good is essentially attributable to its geographical origin (Article 22(1)) (WTO, 1994) Names already become generic are exempted. there will be no obligation under this agreement to protect geographical indications which are not or cease to be protected in their country of origin (Article 24) (WTO, 1994). 458

3 Thung Kula Rong-Hai Thai Hom Mali Rice (Thailand s GI Jasmine Rice) Thung Kula Rong-Hai Thai Hom Mali Rice (Thailand s GI Jasmine Rice) Geographical Indications Protection Act of Thailand was passed in Thung Kula Rong-hai Thai Hom Mali Rice was the first registered GI rice under GI Protection Act of Thailand on 28 April Registration is given to Jasmine rice trade association of Thailand Physical/chemical standards Being KDML105 or RD15 AC 14-16%, 2AP microgram in the field Lengh 7 mm, 3.2 length-width ratio Production standards Grown in Thung Kula Ronghai (5 provinces in NE) covering 337,230 ha Credible sources of seeds Produce during Apr-Aug, harvest during Oct-Dec Farmers must be registered and have traceable input use and process 8% adulterants 459

4 Thung Kula Rong-Hai Thai Hom Mali Rice (Thailand s GI Jasmine Rice) Processing standard Only in Roiet, Mahasarakram, Surin, Yasothon, Srisaket Processers and millers must be registered Thung Kula Ronghai Jasmine rice Paddies must be bought from registered farmers or farmer groups Identify farmers, place of production, varieties, date, quantity and summarize daily and monthly report Separate Jasmine rice from other rice Quality inspection Transportation and storage: control throughout the whole process. Specify lot no. bill card and separate from normal rice Khao Hom Mali Thung Kula Rong-Hai (PGI Jasmine Rice) under E.C. Submitted 20 Nov 2008 Published 29 June 2010 The European Commission officially registered Khao Hom Mali Thung Kula Ronghai as PGI agricultural product on 11 Feb

5 Information provided to the group with information Three types of rice prepared all hold this label. Fragrant Jasmine Rice The logo with the palm s of the hands presse d together in salute The rice must be milled from the photoperiod sensitive paddy namely Khao Dawk Mali 105(KDM L105) and RD15. The characteristics of these types are naturally fragrant and soft when cooked. The other types of rice are adulterated to have the contents of less than 8%. The quality is certified by the Department of Internal Trade, Ministry of Commerce. Information provided to the group with information Geographical Indication (GI) logo (Thung Kula Rong Hai Thai Hom Mali Rice) The rice must be milled from the photoperiod sensitive paddy namely Khao Dawk Mali 105(KDML105) and RD15 grown in Thung Kula Ronghai and cultivated only once a year. They are naturally fragrant and the other varieties are adulterated to have the contents of less than 8%. The quality is certified by the Department of Intellectual Property, Ministry of Commerce. -The paddy field must be in Thung Kula Ronghai. It is a basin area, dry, sandy loam and saline soil containing Sodium and Silica. The area is inherent low fertility and cultivation mainly depends on rainwater. This land covers 5 provinces, Roiet(986,807 rai or 390,153 acre), Surin (576,993 rai or 228,125 acre ), Srisaket(287,000rai or 113,471 acre), Mahasarakam(193,990 rai or 76,698 acre ) and Yasothorn(64,000 rai or 25,304 acre). - Produced during April August. - Harvested during October December. - A flooded paddy field is needed and be drained about 10 days before harvesting to obtain rice of good physical quality - Farmers must dry the harvested paddy in order to reduce the moisture. - The farmers must be registered before cultivation every year. - Farmers must have traceable input use and process. - The paddy is milled only in Roiet, Mahasarakram, Surin, Yasothon, Srisaket. - The processers and millers must be registered to the Thung Kula Ronghai Jasmine Rice Council. - Paddies must be bought from the registered farmers or farmer groups - The milling process for Jasmine rice must be separated from the process of other rice 461

6 462

7 463

8 464

9 Experimental auction method for the examination of revealed preference Preference Methods Stated Preferences (Hypothetical) Revealed Preferences (Observed Behavior) Contingent Valuation Conjoint Analysis Experimental Auctions Source Yoon(2011) 465

10 Stated Preference Methods Involve people hypothetically rating, ranking, or choosing between competing products or alternatives Open to strategic manipulation by respondent does not provide incentives for respondents to invest sufficient cognitive effort when thinking about their valuation decisions lack of real economic commitment - people overstate the amount they are willing to pay Consumer valuation of novel products from hypothetical studies have been found to be as much as 3 times greater than valuation from non-hypothetical studies could then lead to inaccurate pricing and product adoption decisions and sales forecasts. Source Nayga (2013) Incentive Compatible Methods an elicitation method that provides an incentive for people to truthfully reveal their preferences Bidding true value yields a payoff at least as great as the payoff from all other strategies no matter what bidding strategies other rivals pursue. Ding, Grewal, Liechty (2005) showed that incentive compatible mechanisms more accurately predict purchases than traditional hypothetical elicitation mechanisms Economists now use non-hypothetical experiments to elicit WTP values Source Nayga 2013) 466

11 Experimental Auctions in Bangkok no info with info total August September September September September Total Gender composition No info With info number % number % Total % Male Female

12 Age composition No info With info No info With info number % number % Annual purchase of rice per person at home (kg) No info With info No info With info Total kg kg % % kg % < > Mean(Kg) Median(Kg)

13 Rice price paid when purchased at home (THB/Kg) No info With info No info With info Total % THB THB % % THB % < > Mean(THB) Median(THB) Important points when rice is purchased No info With info No info With info number number % % % Quality including food hygiene, adulteration and the amount of broken rice contained Taste Brand name Variety Price Organic farming or chemical usage Origin or place of production Guarantee certificate from the Food and Drug Administration Jasmine rice guarantee mark (hand pressing mark)

14 Sources of information about good taste of jasmine rice (Multiple answers allowed) No info With info No info With info Total number number % % number % Product label Internet/Websites Public forum and discussions TV/Radio News paper/magazine Others Mean values and coefficients of variation for five bidding rounds Country Round All rounds GI (TKR) No info ( 0.12 ) ( 0.12 ) ( 0.12 ) ( 0.12 ) ( 0.13 ) ( 0.12 ) With info ( 0.13 ) ( 0.11 ) ( 0.10 ) ( 0.10 ) ( 0.10 ) ( 0.11 ) Non-GI TKR No info ( 0.15 ) ( 0.13 ) ( 0.13 ) ( 0.13 ) ( 0.13 ) ( 0.13 ) With info ( 0.15 ) ( 0.15 ) ( 0.14 ) ( 0.14 ) ( 0.16 ) ( 0.15 ) Non-GI CR No info ( 0.16 ) ( 0.15 ) ( 0.13 ) ( 0.13 ) ( 0.15 ) ( 0.14 ) With info ( 0.14 ) ( 0.15 ) ( 0.13 ) ( 0.13 ) ( 0.12 ) ( 0.14 ) The numbers in the parentheses are the coefficients of variation (CV). CV can be calculated by standard deviation (root of variance) / mean value. 470

15 Observations The observed WTP data are reasonable as the coefficient of variance stays almost the same for the first two rounds and last three rounds of auctions. Results of Equivalence of WTP for Jasmine Rice with GI label (all rounds before and after tasting) in Thailand GI: GI jasmine rice grown in Thung Kula Ronghai in a specific way TKR: jasmine rice grown in Thung Kula Ronghai, but not sold as GI rice CR: jasmine rice grown in Chiang Rai, not GI rice t-test for equality of means Mean Treatment Difference Std. Error t-value Without Information H0:WTP_GI=WTP_TKR ** H0:WTP_GI=WTP_CR *** H0:WTP_TKR=WTP_CR With Information H0:WTP_GI=WTP_TKR *** H0:WTP_GI=WTP_CR *** H0:WTP_TKR=WTP_CR With GI information vs. Without GI information H0: GI_with=GI_without H0: TKR_with GI=TKR_without *** H0: CR_with GI=CR_without *** 471

16 Results of Equivalence of WTP for Jasmine Rice with GI label (3-5 rounds with tasting) in Thailand GI: GI jasmine rice grown in Thung Kula Ronghai in a specific way TKR: jasmine rice grown in Thung Kula Ronghai, but not sold as GI rice CR: jasmine rice grown in Chiang Rai, not GI rice Observations The existence of value of information on GI jasmine rice was not statistically confirmed for GI jasmine rice. The existence of negative value of information on GI for non- GI jasmine rice including the one from Thung Kula Ronghai was confirmed. Even without the information on GI jasmine rice, GI jasmine rice has comparative advantage over other types of jasmine rice in the Thai market. 472

17 Model Estimation Results: GI_TKR (All rounds) Source SS df MS No of obs = 630 F( 10, 619) = Model Prob > F = Residual R-sq = Adj R-sq = Total Root MSE = wtp_gitkr Coeff Std Err t-value p-value 95% Conf. Interval interval taste_gitkr *** taste_tkr ** student *** office worker * government officer *** rural resident *** safety for rice purchase * brand for rice purchase *** brand for high quality ** design and packaging *** cons *** Model Estimation Results Non-GI_TKR (All rounds) Source SS df MS No of obs F( 11, 618) Model Prob > F 0 Residual R-sq Adj R-sq Total Root MSE wtp_gitkr Coeff Std Err t-value p-value 95% Conf. Interval interval GI ** taste_gitkr *** taste_tkr *** taste_cr student *** office worker ** government officer *** rural resident brand for rice purchase ** jasmine rice guarantee mark * brand for high quality ** _cons ***

18 Model Estimation Results GI_CR (All rounds) Source SS df MS No of obs 630 F( 13, 616) Model Prob > F Residual R-squared Adj R-sq Total Root MSE wtp_cr Coeff Std Err t-value p-value 95% Conf. Int interval GI *** taste_gitkr ** taste_tkr *** taste_cr *** student *** office worker ** government officer *** rural resident ** safety for rice purchase ** brand for rice purchase *** jasmine rice guarantee mark ** design and packaging for high quality rice *** yeas of education ** cons *** Findings The information on GI jasmine rice had economic value to differentiate the product from other jasmine rice products in Thailand. Demographical factors also contributed to the difference in WTP for Jasmine rice. The important determinants for the difference in WTP are taste, occupation, location of residence, years of education, and concerns on food safety, rice variety and jasmine rice certification label and the design of the rice package, besides the information on the GI label. 474

19 Policy implications Information on geographical indication (GI) has economic values to differentiate the GI jasmine rice from non-gi jasmine rice in Thailand. With this information, the WTP for non-gi rice declines. The WTP for the GI jasmine rice does not change in absolute terms with the GI information. The WTP for the GI jasmine rice increases in a relative term. The GI jasmine rice producers would benefit from the GI certification and label if the GI information is properly explained to the consumers in Thailand. The welfare of non-gi jasmine rice producers would get worse in contrast. 475

20 476