ECONOMIC AND STRATEGIC BEHAVIOUR IN DYNAMIC BUSINESS ENVIRONMENTS: THE CASE OF THE EX-SUGAR BEET FARMERS OF THE WEST MIDLANDS

Abstract

Abstract

Cropping allocations have normally been studied using frameworks that assume the existence of a representative farmer who cares about maximising gross margin. Evidence has shown that results obtained from these studies to predict cropping allocations in response to policy reforms are not satisfactory. On the other hand, an alternative research using multivariate models (i.e. models that consider economic and social-psychological variables to explain farmers’ behaviour) has been developed with the purpose of identifying farmers’ motivations to adopt specific environmental policies. However, this research has not been extended to study strategic cropping decisions. This is surprising given the fact that policy reforms strongly affect the allocation of crops when they are accompanied with the elimination of domestic distorting policies. The objective of this thesis is to fill this gap by proposing a novel holistic multivariate model designed exclusively to study farmers’ strategic cropping decisions. The proposed model integrates a number of alternative and complementary approaches that can explain farmers’ strategic behaviour. The model was applied to a sample of ex-sugar beet farmers in the West Midlands region of the UK to investigate the way in which these individuals adjusted to the Sugar Regime reform introduced on 20th February 2006. As a consequence of this reform, the sugar beet factory located in Allscott in Shropshire was closed and the sugar beet growers in this area adjusted by replacing sugar beet with alternative crops. Evidence has revealed that these farmers replaced sugar beet with crops with low gross margin such as oilseed. This choice is puzzling because other crops with high levels of gross margin such as carrots and parsnips were also available when the reform was implemented. The proposed multivariate model not only was useful to explain this choice, but also identified heterogeneous behavioural responses that no related research has identified so far.