3rd Africa Rice Congress Theme 4: Rice policy for food security through smallholder and agribusiness development Mini symposium 3: Socio-economic drivers of change in rice sector development Author: Demont

1. Improving Food Security through
Rice Value Chain Upgrading in Africa:
What Can We Learn from Experimental Economics?
Matty Demont
Senior Economist, Market Research and Value Chain Specialist,
International Rice Research Institute (IRRI), Los Baños, Philippines
m.demont@irri.org
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013

2. Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013

3. Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013

4. Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013

5. Three types of countries
• Coastal countries strongly exposed to urban
bias (Senegal, Liberia, Cote d’Ivoire, Ghana,
Togo, Benin, Nigeria, Cameroon)
• Coastal countries not yet strongly affected by
urban bias or with comparative advantage in
rice demand (Gambia, Guinea, Sierra Leone,
Kenya, Tanzania, Mozambique, Madagascar)
• Landlocked countries (Mali, Burkina Faso,
Ethiopia, Rwanda, Zambia)
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013

6. Observation
• In many import-biased countries endowed
with a port, domestic rice fails to compete
quality-wise with imported Asian rice
• As a result of urban bias, urban consumers
have become used to the superior quality of
imported Asian rice and developed
preferences for it
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013

7. Observation
• Domestic rice clearly differentiated from
imported rice
– Quality-wise
– Packaging, branding, image
– Word-of-mouth
– Status considerations (foreign = cool)f-mouth
– Status considerations (foreign = cool)
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013

8. Which ones are domestic rice?
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013

9. Research hypothesis
• Domestic rice now not only has to compete
quantity-wise, but also quality-wise, but how?
• In the absence of strong consumer
attachment to domestic rice, best short- and
medium-term option = dedifferentiating
domestic from imported rice
– Quality-wise
– Packaging, branding, image
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013

10. Research hypothesis
• Proposed three-stage investment sequence for
upgrading rice value chains in import-biased
countries strongly exposed to urban bias:
Quality upgrading, processing infrastructure, certification, branding, ...
Quantity increase, scaling up, aggregation and storage infrastructure
Advertizing and generic promotion
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013
Value-adding
Supply-shifting
Demand-lifting

11. How can we test this hypothesis?
• Can experimental economics help?
• Experimental auctions enable assessing
consumers’ response to upgrading of
1. Intrinsic quality attributes:
• Post-harvest quality upgrading
• Varietal improvement
2. Extrinsic quality attributes:
• Labeling and branding
• Information (radio, video, word-of-mouth)
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013

12. Case studies
Mini-Symposium 4, Sub-Theme 3: Rice
processing and marketing, Hall 3, 14:30–16:00
1. M. Ndour: Branding of local rice in Senegal
2. M. Ouedraogo: Consumers’ response to local
quality rice in Burkina Faso
This presentation:
3. Dedifferentiating imported from local rice in
Cameroon
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013

13. Rice quality upgrading in Cameroon
• Institute of Agric. Research for Development
(IRAD), Cameroon developed uniform steam
distributed (USD) parboiling technology
• Mimics high-grade imported rice in physical and
eating characteristics:
–
–
–
–
–
Whiter
Lower broken fracture
Fewer cracked grains
Absence of burnt grains and impurities
Higher swelling ratio during cooking
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013

14. Rice quality upgrading in Cameroon
IRRI Seminar, International Rice Research Institute (IRRI),
Los Baños, Laguna, Philippines, 4 April 2013

15. Research questions
• Do consumers perceive the IRAD rice as being
similar to imported rice?
• Are they willing to pay price premiums for it?
Relative to
– Traditionally parboiled local rice
– Improved non-parboiled local rice
• Did IRAD technology successfully qualitydedifferentiate domestic from imported rice?
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013

16. Targeting urban market: Yaoundé
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013

17. Setting up laboratory setting
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013

18. Choosing products to be auctioned
• Kept the varietal component constant
• Using a single rice variety: Tox 3145
• Processed into four different end-products
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013

19. Upgrade 1:
nonparboiled
homogenous (NPH)
rice
nonparboiled
broken (NPB)
rice
(benchmark)
Upgrade 3:
improved
parboiled
rice (IRAD)
Upgrade 2:
traditionally
parboiled
(TRAD) rice
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013

20. Randomly recruit shoppers
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013

21. Start the experimental session
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013

22. Explain auction mechanism
Five principles:
1. Endow-and-upgrade
2. First price buys & pays second price
3. Real transaction (bids are binding)
4. Random drawing (1 product & 1 round)
5. Anonymous
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013

23. benchmark
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013

24. Descriptive results
Willingness to upgrade
100%
80%
60%
40%
20%
0%
Willingness to pay
140
120
100
80
60
40
20
0
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013

25. “Perceived dedifferentiation” is measured through a
quiz question: “Which rice variety(ies) are imported?”
12%
63%
5%
16%
IRADimp
0
1
1
1
0
0
1
0
1
0
1
1
0
1
…
Correct answer =
“none”: only 3%
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013

26. Econometric results
Determinants of consumers’ WTP to upgrade non-parboiled broken rice to alternative rice types
Variable
First hurdle: propensity of upgrading
Second hurdle: amount paid
Coefficient
SE
Marginal effect
Coefficient
SE
Marginal effect
NPH
0.524**
0.233
0.123**
–115.492*** 34.526
–32.754***
IRAD
0.593*** 0.207
0.139***
5.081
21.266
15.648
Pre-tasting
0.498*** 0.180
0.117***
1.014
18.800
11.885
Post-CIT
–0.040
0.117
–0.009
–1.987
16.956
–1.700
NPH × pre-tasting
–0.528*** 0.206
–0.124***
–29.346
28.524
–23.588
NPH × post-CIT
0.001
0.138
0.000
19.530
22.450
7.615
IRAD × pre-tasting
0.051
0.239
0.012
3.034
15.055
2.357
IRAD × post-CIT
–0.094
0.165
–0.022
21.677
14.413
6.238
IRADimp
0.564*** 0.205
0.132***
–60.981**
27.894
–10.661**
NPH × IRADimp
–0.424*
0.223
–0.099*
0.672
27.082
–9.519
IRAD × IRADimp
0.127
0.224
0.030
62.015**
24.921
27.010**
Morning
0.060
0.189
0.014
–27.298
18.225
–9.220
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013

27. Conclusion
• Consumers are 14% more likely to upgrade to
improved parboiled rice (IRAD)
• Those who perceive IRAD rice as being imported
(63%)
– Paid 5% price premiums for IRAD rice
– Discounted traditionally parboiled rice by 2%
• Major value of IRAD technology = ability to
successfully quality-dedifferentiate domestic from
imported rice in urban markets in Cameroon 
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013

28. Thank you!
Matty Demont
Senior Economist, Market Research and Value Chain
Specialist, International Rice Research Institute (IRRI), Los
Baños, Philippines
m.demont@irri.org
Third Africa Rice Congress, Yaoundé, Cameroon, 21–24 October 2013