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Demand for organic rice dependent on many factors: Study

30 Jun 2021

  • Consumer willingness to pay extra based on income and education levels, perception, geographic factors

By Ruwan Laknath Jayakody   As the Government drives a switch to organic farming islandwide, a study has found that the willingness on the part of consumers to pay extra to purchase organic rice is predicated and dependent on the consumers’ income, education level, perception concerning organic rice, and geographic factors. The latter geographic factors included residing in areas with a high vulnerability to chronic diseases such as the chronic kidney disease of unknown aetiology (CKDu), owing to the usage of chemicals in agricultural activities. The study further found that only a minuscule minority (4% over 96% in the said study) would not pay additionally to purchase organic rice, despite knowing that it is both a healthy and environmentally friendly product. These findings were made by A.G.K. Wijesinghe and A.H.P. Nazreen (both attached to the Wayamba University) in a research article titled “Consumer Willingness to Pay for Organic Rice: With Reference to the Kurunegala District”, which was published on 10 June 2020 in Issue One of Volume One of the Kelaniya Journal of Management. Recently, the President announced a switch to organic farming by banning the use of chemical fertilisers and agrochemicals such as pesticides and herbicides/weedicides, citing negative health impacts. The use of pesticides in food production and the resultant harmful chemical residues in food and water, T. Gomiero notes in “Food quality assessment in organic vs. conventional agricultural produce: Findings and issues”, is perceived to be associated with long-term and unknown effects on human health. Wijesinghe and Nazreen elaborate that in Sri Lanka, scientists have argued that agricultural products that contain harmful chemicals such as arsenic are directly linked to serious diseases like kidney failure and illnesses which are the result of chemical poisoning. In this regard, A.G.S.A. Piyasiri and A. Ariyawardana have explained in “Market potentials and the willingness to pay for selected organic vegetables in Kandy” that there are possible adverse effects on human health due to long-term exposure to pesticides, whilst noting that ingredients that make up the latter are carcinogenic, mutagenic, and have various harmful effects with regard to reproduction. Therefore, organic rice is, as noted by Wijesinghe and Nazreen, in high demand due to health-related consequences which even affect local farming communities. Organic consumption is recognised by J.C. Anderson, C.J. Wachenheim, and W.C. Lesch’s “Perceptions of genetically modified and organic foods and processes” as a contributor to a healthy life and sustainable environment. From the food security standpoint, too, Wijesinghe and Nazreen emphasise that the consumption of organic food instead of conventionally produced food is the safest way to achieve and maintain this requirement and related concerns. However, although growing organic rice is the environmentally healthier choice compared to cultivating commercially produced conventional rice, organic farming, Wijesinghe and Nazreen further observe, is challenging due to higher management costs, the risks of learning new farming methods, a fragmented industry that is still young, the higher cost incurred in order to market the value of organic rice, and the related higher cost for consumer engagement. According to Wijesinghe and Nazreen, the most prevalent problem in the organic food market is the low trust placed by consumers concerning organic labelling which producers use to gain publicity with and the absence of proof as to whether they are actually organic (as K. Giannakas notes in “Information asymmetries and consumption decisions in organic food product markets”, consumers may not know whether a product has been produced using organic methods until they have reliable information sources). Moreover, P. Sangkumchaliang and W. Hung’s “Consumers perceptions and attitudes of organic food products in Northern Thailand” mentions that consumers tend to buy organic food only if they perceive that it is free of chemicals, artificial fertilisers, and additives. However, as found by S. Zakowska-Biemans in “Polish Consumer Food Choices and Beliefs about Organic Food”, consumers who value convenience more are less likely to buy organic products. Also, organically produced food products are, Wijesinghe and Nazreen point out, considerably more expensive than conventionally produced food products. As explained by O.O. Ibitoye, N.M. Nawi, N.H. Kamarulzaman, and N. Man in “Consumers awareness towards organic rice in Malaysia”, knowledge and awareness about organically produced rice is, therefore, critical in shaping the consumers’ behavioural attitudes in this regard and also their choice of the variety of organic rice. As per M. Laroche, J. Bergeron, and G. Barbaro-Forleo’s “Targeting Consumers Who Are Willing to Pay More for Environmentally Friendly Products”, factors that influence the intent to purchase organic food pertain to demographics, knowledge, values, attitudes, and behaviour, with age, gender, marital status, income, and education level being found to be the main demographic variables that can influence such a decision. Accordingly, in the case of green products, R. Rao and M.E. Bergem observe in “Price-premium variations as a consequence of the buyer’s lack of information” that the price premium should be fair to the additional value delivered by the product. Further, statistically speaking, as found by P. Jaroenwanit and P. Kantatasiri in “Consumer perception and attitude study for market development of Hommali organic rice products from Thung Kula, Thailand”, women are more likely than men to use information about how to be healthy through proper food consumption behaviours. Desired attributes in rice are food safety, taste, and the size of the grain, note A.I.A.H. Hanis, S. Jinap, M. Nasir, R. Alias, and M. Shahrim in “Consumers Demand and Willingness to Pay for Rice Attributes in Malaysia”. In “Willing to pay for rice traits in the Kurunegala and Hambantota Districts: An application of a spatial hedonic pricing model”, S. Mendis and J.C. Edirisinghe have defined the willingness to pay as the maximum sum a consumer is willing to pay, sacrifice or exchange in order to receive a good, or to avoid something undesired. In this study, the willingness to pay was decided on the basis of perception-related factors (belief of the level of nutrients and nutrient content, the level of quality, the level of residue of pesticides, the high selling price of organic rice, and the difficulty in the identification of organic rice) and demographic factors (age, gender, the number of household members, the monthly household income and the level of education [up to the GCE Ordinary Level or Advanced Level, diploma, degree, post-graduate degree]). Primary data were collected from 100 consumers selected by way of the employment of the multi-stage sampling technique in the Kurunegala District. A total of five divisional secretariats (DSs) were selected in the first stage – namely, Bingiriya, Panduwasnuwara, Ibbagamuwa, Ganewatta, and Kuliyapitiya – and from among them, 10 grama niladhari (GN) divisions were selected in the second stage. Ultimately, in the third stage, 100 households were selected, 10 from each GN division, with the head of each family being interviewed for the purpose. The results revealed that on average, 53% were willing to pay a 5% price premium for organic rice than for the price of conventional rice, while 26% were even willing to pay a 10% price premium for organic rice than for the conventional rice price. In short, 79% of consumers were willing to pay a price premium of between 5-10% while the vast majority (at least 96% – made up 53% who were willing to pay 5%, 26% who were willing to pay 10%, 14% who were willing to pay 15%, 2% who were willing to pay 2%, and 1% who were willing to pay 30%) were willing to pay a 5% price premium to purchase organic rice over the conventional rice price. With regard to the demographic factors, the research also revealed that when considering the willingness to pay a price premium for organic rice, the number of household members, age, and gender are statistically insignificant and not influential and therefore have a negative relationship. However, it can be argued that with the increase in the number of household members, the probability of the likelihood of paying for such decreases, as when the number of household members increases, in turn the cost of living increases and the purchasing power with regard to organic rice will decline with the price premiums. On the other hand, with regard to the willingness to pay a premium for the organic attribute in rice, the monthly household income is statistically significant and a positive driver as there is a positive correlation between a higher income and a higher willingness to pay the said premium. A similar positive relationship was seen with regard to the customer’s level of education as the probability of the willingness to pay the price premium for organic rice increased with the corresponding increase in the education level. Concerning the impact of the perception-related factors on the willingness to pay the price premium for the organic attribute in rice, while all perception-related factors have a positive relationship to the same, the most influential factor was the higher nutrient content in organic rice than conventional rice. Citing this finding, Wijesinghe and Nazreen explain the importance of maintaining nutrient-related qualities as being important when seeking to enhance consumer willingness to pay. Moreover, it was found that consumers who believed that organic rice has a low residue of agrochemicals, specifically pesticides, as compared to non-organic rice, exhibited a higher probability of paying a high premium for organic rice. This meant, as noted by Wijesinghe and Nazreen, that the primary motivation among all when purchasing organic rice involves health-related concerns and not the price or a lofty desire to support the local economy through the consumption of organic rice. Therefore, Wijesinghe and Nazreen were of the view that producers of organic rice should consider the utility of price along with the health attributes of organic rice. Making recommendations to both policymakers and local organic rice producers, Wijesinghe and Nazreen called for policymakers to impose a price discrimination strategy with regard to organic rice for different income categories (in essence, a range of prices and price increases) and introduce new marketing strategies to expand the market segment pertaining to organic rice, and for local organic rice producers to enhance further production.


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