The Bottom Line
Any system-level study requires the integration of economic impacts. Economic research on supply and demand for hops and mint has been quite limited. Hinman (1999, 2004) reported costs of production for hops, Folwell et al. (United States Hop Industry and the Volume Control Provisions of the United States Federal Hop Marketing Order, Agricultural Research Center: Washington State University, 1982) studied marketing orders for hops, and Balagtas et al. (2006) examined cartel prices for marketing orders for spearmint. But as we began our course of research in the fall of 2009, little or no empirical information had been reported on supply or demand for hops or mint with which to estimate economic impacts. Our economists have been working to fill that critical void.
Progress to Date
- Publication of the Extension Fact Sheet 2011 Cost of Producing Peppermint under Rill and Center-Pivot Irrigation in Washington State
- Publication of the Extension Fact Sheet 2010 Cost of Producing Native and Scotch Spearmint Under Rill and Center-Pivot Irrigation in Washington
- Development of detailed cost estimates for establishing and producing peppermint
- Development of detailed cost estimates for establishing and producing spearmint
- Analysis of chewing gum industry (along with toothpaste, chewing gum is a primary end product for mint)
- literature review completed on the economics of gum consumption
- background information collected on gum production and uses of mint
- public and private data gathered on the gum industry
- production and price data
- consumption data (using AC Nielsen dataset)
- statistics and trends of the gum sector examined
- gum industry and market structure information collected
- economic modeling framework for project conceptualized and initialized; oriented to investigate the demand for gum in the U.S. by the estimation of own- and cross-price elasticities
A central economic challenge in a project of this nature is to consistently estimate demand parameters. With respect to mint and the chewing gum market, the estimation has two challenges: (1) the correlation between prices and market-specific demand shocks, which are included in the econometric error term, and (2) the large number of own- and cross-price elasticities implied by the large number of gum flavors.
Knowledge of demand parameters and consumer preferences for mint will help U.S. mint oil producers to realize the importance of high quality mint oil in the production of final goods and their relative position with respect to the use of lower quality mint oils.
Progress to Date
- article on "Willingness to Pay for Sensory Attributes in Beer" accepted for publication in April 2014 Agricultural and Resource Economics Review
- article on "Production Risk and Maximum Residue Limits" submitted and in review process for Economics Research International.
- literature review completed on the economics of hops production
- background information collected on hops production and uses
- enterprise budgets prepared for estimated production costs
- gathered public and private data on the hops industry
- farm level production and price data
- trade import and export data
- developed a survey for IPM practices among hop growers
- examined statistics and trends of the hops sector
- conceptualized and initialized economic modeling framework for project
- collected beer industry and market structure information
- examined hops contracts
- investigated demand for beer in the U.S.and collected information on
- statistics and trends
- complements and substitutes
- income effects
A central economic challenge is to assess the impact of supply shocks (i.e., water stress), which can impact the quantity and quality of hops production. With the foundation information we have collected and structured thus far, we have the basis to begin this task. Scanner data is also being collected in an effort to better understand the relationships between hop varieties and beer demand. The scanner data for beer is just becoming available, and its feasibility for this study will be known soon.