Product Development, Cost Seasonality, Region Marginalization, and a More Demanding Consumer
David A. Hennessy
November 2004 [04-WP 378]
Hennessy, D.A. 2004. "Product Development, Cost Seasonality, Region Marginalization, and a More Demanding Consumer." Working paper 04-WP 378. Center for Agricultural and Rural Development, Iowa State University.
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.
Keywords: industrialization, lifestyle changes, regional production systems, value added.
JEL classification: D2, L2, N5, Q