Impacts on New Zealand’s agricultural sector from premiums of attributes in food in developed and emerging markets

Abstract

Consumer preferences for different credence attributes in food vary across different countries and commodities; and consumers in both developed and developing countries are willing to pay premiums for food carrying these attributes (e.g., food safety, animal welfare, environmental sustainability). Hence, countries like New Zealand and the EU (28) that are large exporters of agricultural commodities can capture price premiums by including credence attributes in food products for overseas markets. This study assessed the potential economic impact of agricultural returns of different levels of premiums for food attributes in the EU (28) and New Zealand. The analytical approach employed the Lincoln Trade and Environment Model (LTEM). This partial equilibrium model forecasts international trade, production and consumption of agricultural commodities. Four scenarios were developed with varying levels of premiums for food attributes in three developing countries (India, China, Indonesia) and six developed countries (Australia, Canada, EU (28), Korea, Japan and the United States of America). Results showed that different ranges of premiums for credence attributes in food products in the countries of interest were projected to increase EU (28) and New Zealand producer returns for dairy, beef and sheep meat by 2024. In particular, for New Zealand significant increases of producer returns were projected for cheese and sheep meat while in the EU (28) returns were high for butter.