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Agricultural Input Market Segmentation in Argentina: How do Argentine farmers buy their expendable inputs?

The Case of the Seed Industry

Feeney, Roberto (robertofeeney@gmail.com) Associate Professor, Ph.D. in Business Administration Austral University Argentina Berardi, Valeria (valeriaberardi@hotmail.com) Professor, Master in Applied Statistics, Austral University Argentina

Steiger, Carlos (carlos.steiger@hotmail.com), Director of the Center of Food and Agribusiness, Ph.D. in Business Administration, Austral University Argentina

Center for Food and Agribusiness, Austral University Argentina 1950 Paraguay Street, City of Rosario, Province of Santa Fe, Argentina Telephone: 54-341-522-3000 May 23rd, 2011

Symposium Paper Submission IFAMA Conference, Frankfurt, June 2011

Abstract and Key Words

Abstract: In this paper we analyze the buying behavior of farmers for expendable inputs. In particular, we will study the case of the seed industry in Argentina. We segment them using cluster analysis, identifying 4 distinctive segments of farmers for seed purchasing: performance, price, balance, and convenience. We also use a multinomial logit model to predict Argentine farmers segment membership based on key demographic, educational, commercial, and informational features. Key Words: Expendable agricultural inputs, Seed markets, Cluster analysis, Multinomial Logit Regression Model.

Executive Summary Argentine agribusiness sectors have been moving forward very fast in the past fifteen years, with agricultural production growing from less than 50 million tons in the mid 90 to almost 100 million tons now-a-days, and with agro-industrial exports incomes that have more than doubled. This has pushed the agricultural input demand enormously, as for example the fertilizer market jumped from 1.2 million tons a year to more than 3.5 million tons. The total expenditure of the agricultural sector is more than 17 billion dollars, with a market for expendable inputs such as seed, fertilizers, and agrochemicals of more than 3.5 billion dollars. The seed market alone is worth around 1 billion dollars. In this context in this work we study how Argentine farmers buy their seed inputs, and how to segment these producers according to their purchasing behavior for seeds. Previous works have explained this for the total expendable agricultural markets in other countries such, as the US. However, up to now there has been no work done intending to explain how input markets function in Argentina, and how farmers buy their seed. Additionally, we envisioned to predict farmers segment membership according to their observable characteristics, which would be useful for marketing purposes in agricultural input companies. In order to answer the research question we used data from a survey called the The Need of Argentine Farmers, done in the second half of the year 2009 by the Center for Food and Agribusiness of the Austral University in Argentina. The universe under study were the farmers in the main agricultural area of Argentina (Humid Pampa) which produce 750 or more annual tons in soybeans. The total universe was formed by 7,400 producers, which produce 70% of the total soybean in the main crop area of Argentina. The sample was formed by 502 farmers producing soybeans, corn and wheat responsible of farms with owned or rented land. The main results of this work are that Argentine farmers can be segmented in four clusters according to their seed buying behavior: performance, price, balance and convenience segments, with different profiles. While farmers in the performance and balance segments would be business purchasers, the ones in the price segment are costoriented. The convenience farmers, on the other hand, are those who prioritize location and convenience in their purchases, young and very educated small farmers who want to grow fast. We also built a regression model provided with strong predictive power to predict cluster membership according to the observable behavior of farmers as customers of the input firms. Here we were able to establish six significant relationships which would explain the odds of a farmer becoming a member a segment as the values of his observable behavior increases, or the lesser likelihood to become a member to another segment due to the negative values of his observable conduct. Overall, this work intends to provide some answers of how farmers purchase their seed in Argentina, how they can be segmented, and how to predict their input purchasing membership that better fits according to their observable behavior. It has academic value as very little has been written about these markets for Argentina, as well as empirical value as it can be useful for marketing managers working in agricultural input markets.

Introduction
Agricultural input markets for products such as seeds, crop protection, and fertilizer are important markets in Argentina. Although it varies greatly from year to year, expendable input purchases by Argentine producers can amount for several billion dollars a year: These markets for seeds, crop protection and fertilizer inputs were worth around 3.5 billion dollars for the year 2010. For the seed case, the total informal and formal seed market for major crops in Argentina is about one billion dollars a year: It would be around 400 million dollars for soybean seeds, 400 million dollars for corn seeds, and 200 million dollars for wheat and other seeds. (Vilela et al., 2009; FIS, 2010, CREA 2010) The market for seeds in Argentina is divided in two: The self-pollinated/self-fertilizing crop markets, such as soybeans and wheat; and the hybrid crops markets, such as corn and sunflower. In the first type of markets there are serious intellectual property issues as 70% of the seeds are sold through informal markets, by which there are no easy ways for seed companies to make profits. Here in these markets there are present few international companies and there are more local ones. In the hybrid markets, on the other hand, there are no such intellectual property issues, firms can capture value, and the main players are international firms. Incomes would be split half and half between these two types of markets: Roughly, 500 million dollars each, although the hybrid markets would be more profitable. (Vilela et al., 2009; USDA-FAS, 2011) However, Argentine farmers are not a homogeneous group, nor buy seeds in the same way: They differ in terms of key dimensions such as farm size, educational background, age, location, land tenure, attitudes, risk management practices, technology adoption, and so forth. Grouping farmers by more homogeneous classes, in terms of segmenting farmers and defining their profiles are important issues for agricultural input companies in order to define their marketing strategies. In this paper we will try to define how argentine farmers buy their seeds for crops, segmenting these farmers in different classes with different purchasing profiles. Marketing segmentation helps firms define particular marketing mix strategies that enable them to target customers with specific profiles and needs in each segment. This results from the fact that rarely customers in a particular market have exactly the same needs and expectations. By segmenting their customers companies can get closer to each customer by developing an appropriate marketing mix (Kotler, 1997). Previous work has been done to segment farmers who buy agricultural inputs, especially for the US (Hooper, 1994; Bernhardt, Allen, Helmers, 1996; Gloy and Akridge, 1999; Foley, 2003; Alexander, Wilson and Foley, 2005; Reimer, Downey, Akridge, 2009). However, there is not much work done for Argentine agricultural input markets, in spite of the importance of these markets, as we have explained above. There are some differences, though, with what previously has been studied in the US and what we intend to do: While they have focused on larger farmers, we will also target mid-size producers as well. Also, we will deal with famers that produce soybeans, corn and wheat; while previous author have studied farmers in a wide range of different crops. Accordingly, the problem we want to study is how Argentine farmers buy their seed inputs, and how to segment these producers in order to understand better their
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purchasing behavior for seeds. We will restrict the study to Argentine farmers in the geographic area of the humid pampas (which is equivalent to the US Corn Belt) that produce more than 750 tons of soybeans a year. In this way, the main goal of this paper is to identify distinctive market segments for argentine farmers purchasing seeds. The idea is to segment farmers into buying characteristics according to their purchasing behavior, and to be able to predict farmers segment membership. This will allow us to answer the problem of how Argentine producers purchase their agricultural inputs.

Data
The data we use to segment the farmers input markets is based on the survey on The Need of Argentine Farmers, done in the second half of the year 2009 by the Center for Food and Agribusiness of the Austral University in Argentina, with the partnership of the University of Purdue in the US 1, and the help of the Rosario Stock Exchange of Argentina. This survey was done between August 17th and September 17th 2009, through personal interviews in the farms, surveying 502 producers. The universe under study were the farmers in the main agricultural area of Argentina (Humid Pampa) which produce 750 or more annual tons in soybeans. This covers the provinces of Santa Fe, Crdoba y Buenos Aires. It includes the counties in which the sowing area represents more than 10% of the total production area. The total universe was formed by 7,400 producers, which produce 70% of the total soybean in the main crop area of Argentina. The sample was formed by 502 farmers (producing soybeans, corn and wheat) responsible of farms with owned or rented land, with a degree of statistical confidence of 95%. Surveyed farmers were heads of farms (owned or leased properties) located in selected departments (counties) of the Provinces of Buenos Aires, Santa Fe and Crdoba with a production greater than 750 tons of soybeans per annum (year 2008); 70% of their income came from soybean and the rest (30%) from other crops. Accordingly these farmers located in above defined departments (counties) in the main cropland of Argentine that produced more than 750 tons of soybeans per annum were divided into medium size farmers (250-500 hectares), commercial size (601-1840 hectares) and large (more than 1840 hectares). In annex 1 we show the segmentation of the sample`s population. The survey was done interviewing farm operators responsible for the farmers they manage, by a team of professional people, with personal interviews for each of the 502 farmers. The questionnaire had 37 questions, and took around 60 minutes to answer. Only one was an open question, 29 were closed questions, and seven were semistructured questions. The sample data we gathered in this survey was cross-checked with last National Agricultural Census available in Argentina, from 2002, by which the results of this survey are statistically significant for producers of more than 750 tons a year for soybeans, in the in the main agricultural area of Argentina (Humid Pampa).
The University of Purdue did a similar work Serving Producers in Volatile Times (2008), on which the Argentine survey is based.
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Methodology
Following Gloy and Akridge (1999) and Alexander, Wilson and Foley (2005), we will use cluster analysis to segment the seed input markets. The goal of cluster analysis is to divide a data set into different groups or clusters, based on observed attributes, so that the attributes in a group/cluster are as similar as possible to each other and as dissimilar as possible to the observations in other groups/clusters. According to Aldenderfer (1984) there are five basic steps that characterize all cluster analysis studies: a. Selection of a sample to be clustered; b. Definition of a set of variables on which to measure the entities in the sample; c. Computation of the similarities among the entities; d. Use of a cluster analysis method to create groups of similar entities; e. Validation of the resulting cluster solution. In a cluster-based segmentation we first have to select the sampled data, which in our case are the argentine farmers in the Humid Pampas producing more than 750 tons of soybeans a year, as we explained in the previous section. Then, identify the key variables that ought to characterize the purchasing behavior of argentine farmers for seeds. In this case, our variables are price, performance, convenience and location, personal factors, customer services, and support services for seed inputs. As in Alexander et al. (2005), the key question used in the segmentation analysis asked farmers to weigh the influence of six purchasing factors that they may use in order to purchase their agricultural inputs. The influence of these factors had to sum up 100%. Next, the data on these variables is processed in order to place respondents with similar answers in the same segment/group or cluster. The idea is that through cluster analysis we can group observations in a way that there will be a high level of natural association between group members than those that are not. What follows is to define the cluster analysis method to be used. The two main cluster analysis methods to create groups of similar entities are the hierarchical and nonhierarchical (or partitioning clustering) clustering methods. The hierarchical method joins observations until the researcher decides to stop, while non-hierarchical methods require the researcher to define previously the number of clusters. (Everitt et al. (2001)) Finally, to validate the clusters we used different criteria: the pseudo F statistical value, the cubic clustering criterion (CCC) and the R2 test. The Pseudo F-value, is used to compare variability obtained with K and K+1 groups or clusters, evaluating the relative reduction of variability as we add new clusters. The higher the F value, the higher the variability reduction that is obtained as we add one additional cluster. The cubic clustering criterion (CCC), establishes a comparative measure of the deviation of the segments regarding the expected distribution if the observations would have been obtained from a uniform distribution. A value above two would suggest that the structure of the clusters would be good; value of zero to two would suggest not a very clear structure of a cluster. The negative values of the CCC criteria would be attributed to the presence of out-layers. Finally we have the R2 test, as the proportion of variance explained by the observations belonging to the conglomerate, the higher its value the better the conglomerate.
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Hierarchical clustering involves creating clusters that are hierarchically nested within clusters at earlier iterations, in that each cluster can be included as a member of a larger, more comprehensive cluster at a higher level of similarity. The most familiar expression of the results of hierarchical clustering methods is the tree diagram or dendrogram, which shows graphically the hierarchical structure entailed by the similarity matrix and clustered by the linkage rule. Among agglomerative hierarchical methods, we have the Ward Method. This procedure is designed to optimize the minimum variance within clusters, and it works by joining those groups or clusters that result in the minimum increase in the variance. (Aldenderfer, 1984) Non-hierarchical or partitioning clustering, on the other hand, are methods that divide a data set into a number of clusters by trying to minimize some defined error function. Partitioning methods do not depend on previously found clusters. Partitioning clustering methods work directly upon the raw data, therefore offer the opportunity of handling distinctly larger data sets than hierarchical methods. As they make more than one pass through the data and can compensate for a poor initial partition of the data, thereby avoiding one of the major drawbacks of hierarchical agglomerative methods. Partitioning clustering methods, however, suffer from some drawbacks, as they posit explicit assumptions about the shape of the clusters; calls for an initial guess at the number of clusters that will eventually be found; and are influenced by the choice of initial seeds, the presence of outliers, and by the order in which the seeds are observed and analyzed. (Aldenderfer, 1984) As previous authors have done (Gloy and Akridge, 1999), we will first use a Ward hierarchical clustering method to identify the number of cluster and to get the starting points (seed values) for a second non-hierarchical algorithm procedure, which is the kmeans technique. This second algorithm rearranges the results optimally given the previous results about the cluster means. The next steps would be the segmentation validation through tests of significance for group differences, and finally we have the interpretation of the results. As Alexander et al. (2005) we will use a multinomial logit model to predict segment membership for seed purchases by Argentine farmers, based on observable factors such as demography, behavior, and business management attitudes. For our case, the multinomial logit is a probability model that explains the odds ratio of belonging to a certain cluster if an observable behavior or characteristic of a farmer is present. This is, if the logit value is positive it means that if the regressor/s values (observable behavior) increase the odd that the regressand equals one increases too (become a member of the segment). (Gujarati, 2003)

Results
The data in order to make the clustering analysis was processed, according to how midsize, commercial and large farmers purchased their seed inputs in Argentina. As in Alexander et al. (2005) the key question in our questionnaire was the one that asked respondents to weight the influence of six factors farmers may use to choose a seed provider. These six selected factors were price, performance, convenience and location, personal factors, customer services, and support services.

The Ward Hierarchical procedure was performed to define the number of clusters that there would be for seed inputs. However, as there are no completely satisfactory methods for determining the number of population clusters for any type of cluster analysis, we validate the segmentation through the three methods explained above: the pseudo F statistical value, the cubic clustering criterion (CCC) and the R2 test. (Everitt2001) The results we obtained using the above mentioned criteria are that the Argentine farmers are segmented in four clusters according to their seed buying behavior; performance, price, balance and convenience segments. As it has been mentioned in Alexander et al. (2005) and Gloy and Akridge (1999), we will also show that the results meet the validation criteria by which the members of the segments differ in nonclustering variables such as demography, behavior, and business management attitudes. In the next sections we will present the result of our cluster analysis. In the first section we present the segmentation of farmers in different clusters, as we shall see in Table 1. In the next part, we introduce the description of farmers in each of these segments by non-clustering variables, as described in Tables 2 to 9. Finally, in the last section, we present the logit multinomial regression used to predict segment membership, presented in Table 10. Characteristics of the Segments The largest cluster is Performance, followed by Price and Balance segments, as we can see in Table 1 on next page. The smallest cluster is Convenience, with only 5% of the population. Performance segment has a 37% share. Members of this cluster search for high quality products and services. On average members of this segment placed 77% weight on performance, and only 11% on the second most important factor, which is price. These Performance farmers are quite young (45.24 years versus 46.42 years for the entire population), and well educated, as 50% of the members have a college degree.

In tables 2 and 3 (next page) we can see the demographics, education, farm size, income level, and future growth expectation for each group. The Performance segment is the one with the largest farms (18% farm more than 1840 hectares), with relatively high incomes (41% earn more than half a million dollars), but with low expectation of future growth (31% growth average). As we saw, they are relatively young and educated. The second largest cluster is the Price segment, with a share of 29%. Price as a purchasing factor has a weight of 48%, which would mean that these farmers are costoriented: they buy their seed at a lowest price. In spite of this, performance is the second factor with a weight of 34%, and these two factors account for 82% of the total weight of purchasing factors. The members of this segment are the oldest, with an average of 47.59 years, and less than half of them have a college degree. This group also has relatively high level of incomes (44% earn more than half a million dollars), 12% farm more than 1840 hectares, and have a fairly high growth expectancy in the future with 41% growth. The third segment is Balance, with a share of 28%. These farmers value all factors fairly equal, but give special importance to performance and price (22% and 23%) and then to services/information and personal factors (18% each). This group has the lowest number of college graduates (39%), and is the second oldest segment (47.05 years). Balance farmers are relatively large farmers (14% farm more than 1840 hectares), have high income levels as 46% of them earn more than half a million dollars.

The last group is the Convenience segment, is the smallest as we already mentioned, with 5% share. They place most importance to convenience and location, with a 60% weight. The rest of the factors have a lower weight: 13% for price, 8% service/information, 7% support services, 5% personal factors, and only 6% to performance. They have the highest level of education as 56% have a college degree, and are the youngest group with an average of 44.92 years. The Convenience segment is not only the smallest group, but also they are the ones who farm the smallest amount of land, as only 4% farm more than 1840 hectares. However, for 60% of these farmers their income is between 200 thousand and half a million dollars, and they have the largest expectation of future growth: 52% growth in the amount of land increase they expect to farm for the next years. This gives us a general profile of farmers in each cluster. In the next section we will analyze the commercial attitudes of farmers in these groups. Commercial Attitudes of Farmers in each Segment Here we analyze how farmers consider the concepts Brand Similarity, Brand Loyalty, I Purchase at the Lowest Price, and Loyalty with the Local Dealer, in terms if they consider themselves loyal to brands, to local dealers, or if they buy at the lowest price, or if they consider brands similar. Their answers are on table 4, using a five point Likert scale, in which a 1 would mean I strongly disagree, and a 5 I strongly agree. An answer around 3 would convey some neutral standing regarding the question.

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Farmers in the Performance segment appear to consider brands dissimilar (2.07/5), tend to relatively loyal to brands (3.72/5), they reject buying seeds at the lowest price (1.62/5). These results for the Performance segment would be quite different than the ones for the other groups, in which farmers tend to consider brands a little bit more similar than the Performance group, less loyal to brands, and a little bit more neutral regarding to purchasing at the lowest price. Regarding loyalty to the local dealer, all segments express a weak loyal, with an average of 3.76/5). Another aspect that we can analyze in table 4, in the next page, is the statistical differences between clusters in two of the four observations. Both I purchase at the lowest price level and loyalty with the local dealer have low probabilities of no association, which means that the hypothesis that segments are similar is rejected in both cases. Each cluster has a significant difference in behavior regarding these two observations. In both cases the Performance segment is the one that most rejects the hypothesis of purchasing at the lowest price, and is the one who is most loyal to dealers. The less loyal to local dealers would be the Price segment, while the ones who are less likely to reject the hypothesis of buying at a lowest price are the Price and the Convenience segments. Information Sources Useful for Managing/Purchasing Decisions: Personal and Communication Media Tables 5 presented in the next page shows the useful information sources that farmers use to make managing and purchasing decisions. We present both more personal oriented sources and the communication media information sources. We make the observation that in both cases farmers in different segments have significant statistical differences for all the observations related with information sources they use to make managing and purchasing decisions.

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Regarding the importance of information sources we can see in table 5 that the information of local dealers is valued by all segments, a little bit less by the Price segment, and more than average by farmers belonging to the Convenience group. Now going to the communication media information sources, we observe that both Performance and Convenience segments value all the different sources (all the values above three), although values are higher for the Convenience cluster than Performance. The Price segment does not have any relevant information source. The Balance group values the agricultural section of newspapers, and very weakly the meetings with suppliers. As a summary, local dealers, emails, and agronomic websites would be the main sources of useful information for farmers in order to make managing and purchasing decision. The former source used by all farmers, the two latter ones more by Performance and the Convenience groups. To a lesser extent, the agricultural section of newspapers is relative good information sources for the Balance and Convenience groups. Use of Consultants by Farmers Table 6 presents the information regarding the usage of consultants by farmers, in terms of percentage of farmers who use consultants in different fields. In the case of accounts/tax consultants there is relative high usage for all segments, with almost 90% of all farmers using their services. Then we have the usage of independent crop consultants, which goes from 44% for the case of the Convenience segment to 70% of the Price Segment. For the Balance and Performance groups in average a little bit more than 60% of the farmers use independent crop consultants.

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Pest control consultants are also used to a certain extent with between 20 to 34% of the farmers using their services. Another type of consultant used by farmers is the management consultant, with 14% to 19% of farmers using their services. Financial consultants are not largely used, but the in the Balance cluster 16% of all farmers demand these services. Environment consultants are not extensively used. The only type of consultant in which there would be significant differences in usage between farmers is the case of independent crop consultants. Salespeople Salespersons are a critical assess for input suppliers in order to sell their products. In tables 8 we evaluate how farmers in different segments value the different characteristics that salespeople may have, such as honesty, technical competence, represents my interests, he is a friend, knows well my business. In table 9, on the other hand, intends to answer which are the activities that salespeople do that farmers value the most. The most valued characteristic of a salesperson for farmers in most clusters is that he may have a high level of technical competence. Farmers in three of the four clusters valued this ranked this feature as the most important characteristic for a seed salesperson: almost half of the farmers in each of these clusters rated it as the most important feature. The Convenience group was the one who valued this characteristic the highest (52% of farmers), while the farmers in the Balance segment ranked this feature as the second more important (32%). For the performance and Price segments 49% and 44% of farmers rated this feature as the most relevant for a salesperson.

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The Balance segment rated honestly as the most important characteristic of a salesperson (35%), while for the rest of the clusters this was the second most important feature, with an average of 30% rating. The third most important characteristic rated by farmers was that the salesperson knows their operations well, with the Balance segment rating it the highest (18%), and the rest with an average value of 10%. The Convenience and Price groups were not very convinced about the value of this feature choosing instead represents my interest which was the fourth most valued feature for the rest of the clusters (Performance and Balance). Friendship as a salespersons characteristic was rated as the least important feature, with a rating of between 4 to 0 %. It is important to remark that in the ranking of these characteristics there are significant statistical differences of behavior between the different clusters.

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Regarding the activities that a salesperson performs that are more valued by farmers, there are specially three that farmers tend to value the most: Brings me the best price, Provides relevant/timely information, Provides good follow up service. In all these cases farmers tend to agree that they value these activities relatively strongly (4/5 points in the Likert scale), and for Provides good follow up service and Brings me the best price there are significant statistical differences between clusters. Farmers in the Price group would value the most these activities, while the Convenience segment would value them the least. The other activities such as Provides access to supplier resources, Is a consultant for my business, Brings me innovative ideas, and He is a consultant for my business are also well rated for all clusters, while salespersons telephone calls was not valued highly although there are significant differences between clusters regarding this activity. Predicting Segment Membership Table 9 on next page reports the results of a logit regression model, which shows the odds ratio of belonging to a certain cluster if an observable behavior or characteristic of a farmer is present. If the logit value is positive, it means that if the observable behavior increases the odd the farmer becomes a member of a certain cluster increases too. In case it is negative, the higher the value of the observable behavior would decrease the odd that a certain farmer would belong to that cluster. This is potentially useful for marketing managers because as we will see, observing key behaviors of a client they would be able to predict to which cluster that farmer belongs, and in this way, know what that person values most in his purchases. The model 2statistic (89.37 with 30 degrees of freedom) is significant at a level of 1% level of probability. Likewise, the predicted share for each cluster is consistent with the actual share in each one of the segments. In all the groups, expect for the Balance segment which has only two significant observable variables, there are at least three to six significant observable characteristics that supply significant statistical predictive power for each one of the cluster membership. In this logit regression we find six significant relationships that provide predictive value to the segments membership, explaining why a positive value of that observable characteristic would make a farmer belong to a certain cluster, and the negative value why another farmer would belong to another. In first place, the usage of independent crop consultant observation explains in an 8.25% the likelihood of a farmer belonging to the Price Segment, and in a 3.44% it would be less likely for a farmer to becoming a member of the Convenience Segment. This results from the fact that Convenience Farmers are technological self-sufficient and educated people, as we saw in Tables 2 and 6. The frequent consultation of the manufacturer salesperson as a useful information source makes it a 5.79% more likely for a farmer to be a member of the Performance Segment, and in a 3.18 % less likely to belong to the Price Segment.

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Table 9 Results of a Multinomila Logit Model Predicting Segment Membership Marginal Effects (with standard errors in parantheses) Performance dy/dx Std. Err. -.0651826 (0.0317)** -.0140938 (0.04774) .0579527 (0.01932)*** -.00019955 (0.01989) .0664933 (0.02226)*** -.0198009 (0.02186) -.0453926 (0.01835)** -.0577939 (0.02374)** .0401864 (0.0174)** -.0190974 (0.02595) 37.65% 37.45% Price dy/dx Std. Err. .0118682 (0.02937) .0824578 (0.04322)* -.0318182 (0.01743)* -.0314128 (0.01812)* -.0152157 (0.02052) .0044311 (0.02049) .0164886 (0.0165) .0605335 (0.0196)*** -.023215 (0.01572) .0769323 (0.02678)*** 29.13% 29.28% Producer Segment Balance dy/dx Std. Err. .0475028 (0.03005) -.0339639 (0.04459) -.021036 (0.01756) .0266879 (0.01877) -.0450566 (0.02034)** -.004261 (0.02038) .0184951 (0.01665) -.010912 (0.0211) -.0199755 (0.0159) -.0500795 (0.02296)** 29.39% 28.28% Convenience dy/dx Std. Err. .0058116 (0.01084) -.0344001 (0.01977)* -.0050985 (0.00625) .0067203 (0.00736) -.0066609 (0.00786) .0196308 (0.00804)** .010409 (0.00586)* .0081725 (0.00694) .0030042 (0.0063) -.0077554 (0.00787) 3.82% 4.98%

Variable Sales Crop Consultant Manufacturer salesperson Local Dealer EMAILS Ag websites Brand similarity Lowest Price Local Dealer Loyalty Salesperson offers best prices Predicted share Real Share
2=88.37*** (30 d.f.)

Prob> 2 > 0.001; Single, double, and triple asterisks (*) denote statistical significance at the 0.10, 0.05, and 0.01 level respectively.

The Email usage as a useful source of information from communication media makes it 6.65% more likely for a farmer to become a member of the Performance Segment, and a 4.5% less likely to become a member of the Balance Segment. Performance farmers are open to all sources of information, while this would not so much the case for the priceoriented farmers. This congruent with the information we analyzed in Tables 5 and 6. Likewise, if a farmer considers brands similar he would be 1.04% more likely to belong to the Convenience Segment and 4.54% less likely to become to the Performance segment. The commercial attitudes that are shown in Table 4 explain that Performance farmer do not consider brands similar, while farmers in the Convenient group would tend to be almost neutral regarding brand similarity. If a farmer purchases seeds at the lowest prices, he would be 6.05% more likely to belong to the price segment, and 5.52% less likely of becoming a member of the Performance Segment. Also this is show in Table 4. Finally, if a farmer considers the most important of salesperson activity as bringing the best price, he is 7.69% more likely to belong to the Price Segment, and 5% less likely to become a member of the Balance Segment. Again, this is congruent with the information provided in Table 8. Overall, the logit model has strong predictive power, which is shown by the six pairs of significant relationships we explained above. Conclusions The main goals of this paper was to identify distinctive market segments for argentine farmers purchasing seeds, segmenting farmers into buying characteristics according to their purchasing behavior and in this way provide some answers of how Argentine producers purchase their agricultural inputs. Argentine farmers were segmented in four
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clusters according to their seed buying behavior: performance, price, balance and convenience segments. While farmers in the performance and balance segments would be business purchasers, the ones in the price segment are cost-oriented. The convenience farmers, on the other hand, are those who prioritize location and convenience in their purchases. The data from tables 2 to 8 fitted well with the different segments we defined in this work, as well with the regression model established to predict segment membership. It was clearly established that farmers in the Performance segment value the information coming from the manufacturer salesperson and emails, they do not consider brands similar, they are loyal to brands and would not buy seed at the lowest price. The priceoriented farmers belonging to this segment would be the ones which would purchase seeds at the lowest price and value the activities of salesperson regarding to bring the lowest price; also would tend to hire independent crop consultants. This would represent quite clearly the profiles of Performance and Price Segments of farmers. For the case of the Balance buyers the results are also congruent with the information provided in tables 2 to 8. As in Alexander et Al. (2005) the convenience buyer is the smallest segment. Farmers in this segment in Argentina tend to have less loyalty to brands than other segments, demand a very high level of technical competence to salespersons, and use relatively few independent crop consultants. They do not seem to be significantly more loyal to local dealers than other groups, although they value the information dealers provide them. The Convenient segment farmers in Argentina result to be young and well-educated farmers, intending to grow fast. They are a self-sufficient group, in terms of using few independent consultants, regarding brands more or less similar and not being very loyal to brands. As we can see in annex 2, Convenience farmers are mostly mid-size and commercial operations; while large producers are mainly in the Performance group. So from the data we have, Convenience farmers in Argentina have small operations but are progressive willing to grow fast, more than relational farmers as presented in other works. They are convenience buyers in that location and convenience are important for them to grow their business and save time, not in order to make less effort. In this way we were able to define a profile for each segment, which we summarize in the Table 10 that we present in the next two pages. This work provides two main contributions which are, in first place, identifying four different segments for the seed markets in Argentina. Secondly, defining a very special segment of farmers called convenience with singular characteristics, different from the way they have been defined before for other markets.

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Annexes Annex I

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Annex II

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References Aldenderfer, Mark S.; Blashfield, Roger K, 1984.Cluster Analysis. Sage University Papers Series. Quantitative Applications in the Social Sciences Alexander, Corinne; Wilson, Christine; Foley, Daniel. 2005. Agricultural Input Market Segments: Who is Buying What?, Journal of Agribusiness, Vol. 23, Issue 2 (fall 2005), pages 113-132 Bernhardt, K.J.; Allen, J.C.; Helmers, G.A. 1996. Using Cluster Analysis to Classify Farms for Conventional/Alternative Systems. Review of Agricultural Economics, Vol. 18, No. 4 (Oct., 1996), pages 599-611 CREA. 2010. De la tierra al pas: Una Radiografa de la Inversin 2010/11 en la Argentina, September 2010, CREA Groups Everitt, Brian et al., Second Edition. 2001Handbook of Statistical Analyses Using SAS. Chapman and Hall Publishers Feeney, R; Berardi, V.; Bertossi, O.; Steiger, C.; Piazzardi. 2009. The Needs of Argentine Farmers, Center for Food and Agribusiness, Austral University Argentina FIS/ASSINSEL. The International Seed Trade Federation/The International Association of Plant Breeders for the protection of Plan Varieties. Accessed at URL http://www.worldseed.org/isf/seed_statistics.html, May 13th, 2011. Foley, D. H. 2003. Segmenting the commercial producer marketplace for agricultural inputs. Unpublished Masters thesis, Department of Agricultural Economics, Purdue University, West Lafayette, IN. Gloy, B. A., and J. T. Akridge. 1999. Segmenting the Commercial Producer Marketplace for Agricultural inputs. International Food and Agribusiness Management Review 2, 145S163. Gujarati, D. 2003. Fourth Edition. Basic Econometrics. McGraw Hill Higher Education Hooper, M. A.1994. Segmentation of the Market for Agricultural Inputs: A Nested Approach. Unpublished M. S. thesis, Department of Agricultural Economics, Purdue University Kotler, P. 1997. Marketing and Management: Analysis, Planning, Implementation, and Control, 9th edition. Upper Saddle River, NJ: Prentice-Hall. Reimer, Aaron; Downey, Scott; Akridge, Jay. 2009. Market Segmentation Practices of Retail Crop Input Firms, International Food and Agribusiness Management Review, Vol. 12, Issue 1, 2009 Roucan-Kane, M.; Gray, A; Downey, S.; Alexander, C.; Boehlje, Gunderson, M. 2008. Serving Producers in Volatile Times, Center for Food and Agribusiness Purdue University
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USDA FAS. 2010.Argentina-Annual Biotechnology Report, December 29th 2010 Vilela, F. et al. 2009. El Sistema de Agronegocios de la Soja en la Argentina, su Cadena y Prospectiva al 2020.Ediciones Horizonte, ACSOJA- FAUBA

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