A study of the spatio-temporal competition in the diary industry : with particular reference to Vancouver Island
Date
1978
Authors
Moyo, Enock Ephraim Elnotte
Journal Title
Journal ISSN
Volume Title
Publisher
Abstract
This study qualitatively describes oligopolistic behaviour and institutional response in a sector of the food industry. The analysis focuses on the dairy industry on Vancouver Island. In particular, it attempts to identify some inefficiencies and spatial inequality in the dairy industry.
The problem concerns the identification of the optimum size, the location and number of processing plants that would minimize the total costs of the dairy industry on Vancouver Island. A trans-shipment model of linear programming is used to evaluate costs of shipping raw milk, processing and shipping the final product to the consumer. An iterative procedure is used to incorporate economies of scale in processing in addition to transfer costs in obtaining the minimum cost solution.
All the dairy farms on Vancouver Island constitute sources of milk in the model, and five cities on Vancouver Island chosen on the basis of their population sizes constitute potential plant sites, and the population in hinterlands constitutes the market for processed milk.
The solution of the linear programme problem shows that the present plant size pattern and plant numbers is inefficient, in terms of total industry processing costs and total transfer costs. The solution suggested would save processors and farmers a considerable some of money in transfer costs. However, savings in processing costs cannot be computed because of lack of current data. It suffices to mention that the suggested transfer cost minimization schema would be both equitable and efficient in terms of using local resources efficiently and distributing the benefits of such a development equitably among the consumers, processors, and retailers. It would also enable processors to rationalize their locational choices in order to ensure long term benefits from the operation of the dairy industry.
The solution also shows that the attainment of optimum conditions in the dairy industry is conditional to the Province limiting the movement of milk within specific regions. Related legislation, already in existence, could be activated to implement this recommendation. The solution calls for a system of monitoring both the efficiency and spatial equity aspects of the industry.