A Diagrammatic Framework for Accounting for Externalities in Agriculture and Food Sector Value Chains

Abstract

In recent decades both domestic and global agricultural and food value chains have become more private, powerful, self-regulated, closely-coordinated or fully vertically-integrated, and experience-based. Consumers are now wealthier and have expectations that go beyond the traditional provision of goods. They now seek a food "experience" and meeting this demand requires a well-coordinated value chain. However, the provision of a wider range of attributes increases the probability of unpriced spillovers into these chains or into the broader community. How then should all the chain participants be aligned to deliver these food experiences efficiently, to maximise consumers' willingness to pay, and to account for any externalities that may be present? A diagrammatic procedure is used to develop, outline and explain a framework based on value chain failure due to value chain externalities, and how the provision of value chain goods can internalise these externalities.