THE EFFECT OF SPATIAL MARKET STRUCTURE ON THE ACREAGE OF BIODIVERSITY-IMPROVING PROTEIN CROPS: EVIDENCE FROM GERMANY

Abstract

One of the challenges currently facing Europe's agri-food system is the availability of sustainable, high-quality protein for animal feed in regions of intensive animal production. The production of grain legumes holds the potential to significantly increase the availability of protein feed in Europe, thereby raising the biodiversity contribution of cropland. Germany is a major protein importer (especially in terms of soy), while grain legumes' acreage remains limited and volatile. Despite agronomic considerations, one reason for this might be the non-competitive structure of grain legume traders. Using district data from 400 German regions, a spatial stochastic frontier analysis is applied to estimate the effect of the spatial market structure on the diffusion of grain legume growing. The analysis shows that the number of agricultural traders in close spatial proximity is significantly and positively associated with farmers’ decision to grow grain legumes. Improving the marketing structure e.g. by establishing marketing cooperatives or investigating potential market power among traders could be promising strategies to capture some of the currently under-utilized protein crop potential in Germany.