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University
MiaTxilms
International
300 N. ZEEB ROAD. ANN ARBOR, Ml 48106
18 BEDFORD ROW, LONDON WC1R 4E J, ENGLAND

8013762

K l e in , M a r v in L ee

AN INFORMATION SYSTEM APPROACH TO THE STUDY OF PRICE
DATA: A CASE STUDY OF THE MICHIGAN POTATO INDUSTRY

Michigan State University

University
Microfilms
International

300 N. Zeeb Road, Ann Arbor, MI 48106

PhD.

1979

18 Bedford Row, London WC1R 4EI, England

AN INFORMATION SYSTEM APPROACH TO
THE STUDY OF PRICE DATA:

A CASE STUDY OF

THE MICHIGAN POTATO INDUSTRY

By
M arvin Lee K le in

A DISSERTATION
S u b m itte d to
. M ic h ig an S t a t e U n i v e r s i t y
i n p a r t i a l f u l f i l l m e n t o f t h e r e q u ir e m e n ts
f o r th e d e g re e o f
DOCTOR OF PHILOSOPHY

D ep a rtm en t o f A g r i c u l t u r a l Economics
1979

ABSTRACT
AN INFORMATION SYSTEM APPROACH TO THE
STUDY OF PRICE DATA: A CASE STUDY
OF THE MICHIGAN POTATO INDUSTRY
By
M arvin Lee K le in

V a rio u s p a r t i c i p a n t s i n th e p o t a t o i n d u s t r y have
q u e s t i o n e d t h e v a l i d i t y o f p o t a t o p r i c e d a t a p u b l i s h e d by
th e U .S. D epartm en t o f A g r i c u l t u r e .

They c la im t h a t c u r ­

r e n t d a t a do n o t a d e q u a t e l y r e f l e c t r e a l i t y and h av e r e ­
q u e s te d r e v i s e d d a t a s e r i e s .

T h is s tu d y a d d r e s s e s th e

adequacy o f c u r r e n t d a t a f o r u se by p r o d u c e r s and s u g g e s ts
m o d i f i c a t i o n s i n th e c u r r e n t sy stem .
M ich ig an i s u se d as a c a s e s t u d y .

The s tu d y exam ines

th e c h a n g in g n a t u r e o f t h e M ic h ig an p o t a t o i n d u s t r y and th e
r e l a t i o n s h i p o f th o s e changes to n ee d e d changes i n t h e d a t a
sy stem .
An i n f o r m a t i o n sy ste m a p p ro a c h i s p r e s e n t e d as an
i n t e l l e c t u a l framework f o r r e s e a r c h i n v o l v i n g i l l - d e f i n e d
problem s o f p r i c e d a t a and i n f o r m a t i o n s y s te m s .

A m a il

s u rv e y o f M ich ig an p o t a t o p r o d u c e r s p r o v id e d th e b a s i c d a t a
fo r a n a ly sis.
The c h a n g in g s t r u c t u r e o f p o t a t o p r o d u c t i o n and m ar­
k e t i n g h av e a f f e c t e d p r i c i n g m ethods and a g g r a v a te d th e

p ro b lem s o f e s t i m a t i n g and r e p o r t i n g p r i c e d a t a and i n f o r ­
m a tio n .

T h ree ty p e s o f pro b lem s i n p u b l i c p r i c e d a t a and

i n f o r m a t i o n sy ste m s a r e :

(1) c o n c e p u t a l o b s o l e s c e n c e ,

o p e r a t i o n a l d e f i n i t i o n , o r (3) m easurem ent p r o b le m s .

C2)
F ur­

th e rm o r e , ch ang es i n t h e p o t a t o i n d u s t r y r e q u i r e r e e v a l ­
u a t i o n o f s t a t i s t i c a l p r i o r i t i e s among com p eting ty p e s o f
p r i c e d a t a and i n f o r m a t i o n .
C o n c e p u ta l o b s o le s c e n c e a r i s e s when ch an ges i n
r e a l i t y u n derm ine th e c o r r e s p o n d e n c e o f a g iv e n c o n c e p t
w ith r e a l i t y o r w here chan ges i n r e a l i t y r e s u l t i n d i f f e r ­
e n t u s e s o f d a t a and i n f o r m a t i o n .

T hus, we m ig h t e x p e c t

th e v a l u e o f d a t a and in f o r m a t i o n f o r d e c i s i o n making to
v a r y among d i f f e r e n t m a rk e t s t r u c t u r e s .
Problem s w i t h th e o p e r a t i o n a l d e f i n i t i o n a r i s e when
th e o p e r a t i o n a l i z a t i o n o f a c o n c e p t, i . e . ,

th e m e a s u r a b le

p ro xy o r r e a l w o rld v a r i a b l e s e l e c t e d t o r e p r e s e n t a c o n ­
c e p t , becomes outmoded b e c a u s e o f ch ang es i n r e a l i t y .
M easurem ent p ro blem s a r i s e from th e g r e a t e r d i f f i c u l t y o f
a c c u r a t e l y m e a s u rin g an o p e r a t i o n a l i z e d c o n c e p t b e c a u s e o f
changes i n th e s t r u c t u r e o f a g r i c u l t u r a l p r o d u c t i o n and
m a r k e tin g .
A m a il q u e s t i o n n a i r e was s e n t to a l l com m ercial p o ­
t a t o g ro w ers i n M ic h ig a n .

The q u e s t i o n n a i r e i d e n t i f i e d

th e p ro d u c in g f i r m , i t s m a r k e tin g p a t t e r n , and th e p r o ­
d u c e r ’ s d a t a s o u r c e , and th e p r o d u c e r 's e v a l u a t i o n o f p r i c e
d a t a and i n f o r m a t i o n f o r d e c i s i o n m aking.

T ele p h o n e i n t e r v i e w s w ere c o n d u c te d w i t h a random
sam ple o f t h e n o n - r e s p o n d e n ts to i d e n t i f y t h e e f f e c t s o f
r e s p o n s e b i a s on th e m a il s u rv e y r e s u l t s .

E v id e n c e was

fou n d t h a t t h e r e s p o n d e n ts and n o n - r e s p o n d e n ts do n o t b e ­
lo n g t o t h e same p o p u l a t i o n ; r e s p o n d e n ts to th e m a i l q u e s ­
t i o n n a i r e h a d l a r g e r farm s and more s p e c i a l i z a t i o n i n
p o ta to p ro d u c tio n .

T h is f i n d i n g c o n firm s th e f a l l a c y o f

i g n o r i n g th e n o n - r e s p o n d e n ts to a m a i l q u e s t i o n n a i r e .
P o t a t o b u y e r s and fa rm e r o r g a n i z a t i o n r e p r e s e n t a t i v e s
w ere i n t e r v i e w e d t o i d e n t i f y t h e i r p r i c e d a t a and in f o r m a ­
tio n u ses.

The r e s p o n d e n ts w ere s e l e c t e d t o r e p r e s e n t

g ro u p s r a t h e r th a n ran d o m ly .
P r i c e q u o t a t i o n s and p r i c e f o r e c a s t s w ere g iv e n th e
h i g h e s t r a t i n g f o r u s e f u l n e s s i n d e c i s i o n making b y a l l
g ro u p s o f th e r e s p o n d e n t p o t a t o g ro w e rs .

However, t h e r e

i s e v id e n c e t h a t p r i c e d a t a and i n f o r m a t i o n n eed s and u s e s
d i f f e r among th e t a b l e s t o c k , p r o c e s s i n g and se e d m a r k e ts .
F o r ex am p le, p r o c e s s i n g p o t a t o g ro w ers s t r e s s th e u s e o f
p r i c e d a t a f o r t h e d e c i s i o n on w h e th e r o r n o t to b a r g a i n
fo r a p re-season c o n tra c t.

P r e - s e a s o n c o n t r a c t i n g and r e ­

l a t e d changes i n a g r i c u l t u r a l p r o d u c t i o n may be d e c r e a s i n g
th e r e l a t i v e im p o rta n c e o f p r i c e d a t a f o r s h o r t r u n d e ­
c i s i o n m aking.
The p r i n c i p a l o b s o le s c e n c e p ro b lem s c o n f r o n t i n g
th e p u b l i c p r i c e d a t a sy stem s a r e o p e r a t i o n a l i z a t i o n and
m easurem ent g iv e n t h e chan ges i n p o t a t o p r o d u c t i o n and
m a r k e tin g .

V e r t i c a l i n t e g r a t i o n o f p r o d u c t i o n and

m a r k e tin g f u n c t i o n s a t t h e farm l e v e l c o m p lic a te s th e t a s k
o f o p e r a t i o n a l l y d e f i n i n g th e p o i n t o f s a l e and t h e p r o ­
d u c t , and th u s a f f e c t s th e m easu red "fa rm p r i c e , "

The

p r i n c i p a l m easurem ent p rob lem s in v o l v e d e f i n i n g an a p p r o ­
p r i a t e sa m p lin g fram e a s i n d u s t r y s t r u c t u r e c h a n g e s , and
a c c u r a t e l y m e a s u rin g p r i c e i n t h i n m a rk e ts c h a r a c t e r i z e d
by s u b s t a n t i a l fo rm u la o r fo rw a r d c o n t r a c t p r i c i n g ,

DEDICATION
To D iane who gave more th a n s h o u ld h av e b e e n
a s k e d , E r i n who p r o v id e d d i v e r s i o n and s a n i t y , Mom who
t a u g h t th e p h ilo s o p h y o f p e r s e v e r a n c e , and Dad who
i n s i s t e d we alw ays do o u r b e s t .

ACKNOWLEDGMENTS

More p e o p le a r e d e s e r v i n g o f my g r a t i t u d e f o r su p ­
p o r t i n g m e* th ro u g h g r a d u a t e s c h o o l th e n can h e l i s t e d h e r e .
My f e l l o w g r a d u a t e s t u d e n t s and f r i e n d s who s h a r e d i n th e
good tim e s and t o l e r a t e d t h e d i f f i c u l t tim e s d e s e r v e s p e c i a l
re c o g n itio n .
P r o f e s s o r s A1 Schmid, Jim S h a f f e r and Jo h n B rak e, who
s e r v e d on my g r a d u a t e c o m m itte e , p r o v id e d t h e i n t e l l e c t u a l
s t i m u l a t i o n and p e r s o n a l c o u n s e l i n g t h a t made my g r a d u a t e
s t u d i e s a dem anding, m e a n in g f u l, and r e w a rd in g e x p e r i e n c e .
S p e c i a l a p p r e c i a t i o n i s e x te n d e d t o P r o f e s s o r Tom
P i e r s o n who s e r v e d on my t h e s i s co m m ittee and p r o v id e d u n ­
w a v e rin g s u p p o r t i n my r e s e a r c h e f f o r t s .

He p ro v ed to be

a c r u c i a l so u n d in g b o a r d f o r my i d e a s i n th e d i s s e r t a t i o n
p r o c e s s , and h e alw ay s p r e s e n t e d f r e s h i d e a s .
P r o f e s s o r s L e s t e r M a n d e rsc h e id and Jim Bonnen d e s e r v e
s p e c i a l r e c o g n i t i o n f o r t h e i r r o l e s i n m aking my g r a d u a t e
s t u d i e s more m e a n in g f u l.

As t h e s i s s u p e r v i s o r , D r. M ander­

s c h e i d came to my r e s c u e d u r in g a v e r y d i f f i c u l t p e r i o d o f
tim e .

His u n d y in g op tim ism and s u p p o r t w i l l alw ay s be

remembered.

H is i n s i s t e n c e on c l a r i t y i n t h o u g h t , and i n

w r i t t e n w ord, f o r c e d me to o r g a n i z e and p r e s e n t m y s e lf and
my i d e a s b e t t e r .

H is c r i t i c a l , i n s i g h t f u l , and im m ediate

r e s p o n s e s t o d r a f t s o f t h e t h e s i s w ere p a r t i c u l a r l y h e l p f u l ;
iii

iv

and a p p r e c i a t e d ; h e a l s o d e s e r v e s s p e c i a l th a n k s f o r l a b o r ­
in g t h r o u g h th o s e e a r l y d r a f t s o f t h e t h e s i s .
As my m a jo r p r o f e s s o r , Dr. Bonnen s e r v e d a s t h e
c i p a l c o u n s e lo r f o r my g r a d u a t e pro gram .

p rin ­

H is open m in d e d ­

n e s s and i n t e l l e c t u a l c u r i o s i t y a llo w e d me to grow i n
g r a d u a t e s c h o o l.

His do or was alw ays open and he p r o v id e d

warm p e r s o n a l c o u n s e lin g when i t was n e e d e d , b u t a t th e
same tim e , he demanded a commitment to i n t e l l e c t u a l a d v a n c e ­
ment .
Mabel and S h e r ry d e s e r v e a s p e c i a l th a n k you f o r t h e
e x c e l l e n t jo b th e y d i d i n ty p in g

a f i r s t d r a f t o f th e

th e sis.

I t i s a jo b t h a t i s as th a n k le s s as i t i s d i f f i c u l t .
L a s t and m ost c e r t a i n l y n o t l e a s t ,
D ia n e .

I w ant to th a n k

Her c o n t in u e d s u p p o r t and trem endous p s y c h ic en e rg y

e x e r t e d to my g r a d u a t e p rog ram , p a r t i c u l a r l y th e t h e s i s ,
d e s e r v e s as much c r e d i t a s my own e f f o r t s .

She and E r i n

seemed n e v e r to g e t t h e i r s h a r e o f c r e d i t d u r in g t h e good
t i m e s , b u t y e t th e y w ere alw ays a v a i l a b l e f o r s u p p o r t i n
t h e bad t i m e s .

TABLE OF CONTENTS
Page

L ist of

T a b l e s ........................................

x

L ist of

F i g u r e s ...........................................x i i

C h a p te r
1
INTRODUCTION............................ .....................................................
1 .1

2

1

B ackground.........................................................................

2

1 .1 .1

The P o t a t o I n d u s t r y ......................................

3

1 .1 .2

The USDA D ata S y s te m s .................................

6

1 .2

Problem S ta te m e n t and O b j e c t i v e s ........................

9

1 .3

C h a p te r

D e sc rip tio n s.

. ' ..................................

MARKET STRUCTURE AND PRICE DATA PROBLEMS: A
REVIEW OF THE LITERATURE...................................
2 .1

2 .3

18

Changing M ark et S t r u c t u r e and P r i c e D ata
C o lle c tio n :
The I s s u e s ..........................
18
2 .1 .1

2 .2

15

C hanging M arket S t r u c t u r e and
P r i c i n g M e c h a n is m s - I m p lic a tio n s
F o r The R o le o f P r i c e D ata In
D e c is io n M a k i n g .....................................

22

2 .1 .2

S e ttin g S t a t i s t i c a l P r i o r i t i e s

28

2 .1 .3

M arket S t r u c t u r e and I m p l i c a t i o n s
F o r P r i c e M e a s u r e m e n t .......................

. . .

E m p ir ic a l S t u d i e s I d e n t i f y i n g P r i c e M e asu re­
m ent P ro b lem s and I n f o r m a t i o n U ses . . .

30
36

2 .2 .1

P r i c e M easurem ent S t u d i e s ............

2 .2 .2

P r i c e D ata and I n f o r m a t io n Use
S t u d i e s .......................................................

41

S u m m a ry ............................................... ................................

51

v

37

vi

C h a p te r
3

Page

CONCEPTUAL FRAMEWORK............................................................

54

3 .1

55

An I n f o r m a t io n System F r a m e w o r k .......................
3 .1 .1
3 .1 .2

3 .2

3 .3

4

C o n c e p u ta l O b s o le s c e n c e ............................

61

. . .

65

3 .2 .1

U s e rs and U ses o f P r i c e D a ta . . . .

65

3 .2 .2

D e f in in g t h e P r i c e D ata and
I n f o r m a t i o n System P ro b lem .

71

. . .

A M ark et and I n f o r m a t i o n S y s t e m .......................

73

A M a rk e t System i n A g r i c u l t u r e P r i c i n g P o i n t s ..........................................

73

3 .3 .2

A M arket I n f o r m a t io n S y stem ...................

76

3 .3 .3

A P r o d u c e r D e c is io n S t r u c t u r e .

80

. . .

S u m m a ry ...............................................................................

83

METHOD AND PROCEDURE ............................................................

85

4 .1

P o p u l a t i o n s I n v e s t i g a t e d ..........................................

85

4 .2

P r o c e d u r e s ......................................................................

.

87

4 .2 .1

M a il Q u e s t i o n n a i r e .....................................

87

4 .2 .2

N on-R espondent T ele p h o n e I n t e r v i e w s .

4 .2 .3

Buyer I n t e r v i e w s ..........................................

94

A n a l y s i s ...............................................................................

95

THE STRUCTURE OF MICHIGAN POTATO PRODUCTION
AND MARKETING......................................................................

98

4 .3
5

55

I n f o r m a t i o n and D ata System P ro b le m s.

3 .3 .1

3 .4

D ev e lo p in g and M a i n t a i n i n g t h e
S y ste m ............................................................

5 .1

92

C h a r a c t e r i s t i c s o f M ic h ig a n P o t a t o Farms
Based on t h e M a il S u r v e y ................................

98

5 .1 .1

M a rk e t S p e c i a l i z a t i o n ................................

98

5 .1 .2

S i z e o f M ic h ig a n P o t a t o Farm s.

. . ,

102

vii
Chapter

Page

5 .2

C h a r a c t e r i s t i c s o f t h e S e l l i n g A rran g em en t . 104
5 .2 .1

F i r s t B uyers o f M ic h ig a n P o t a t o e s . . 106

5 .2 .2

P r i c e D is c o v e r y Mechanisms U t i l i z e d

5 .2 .3
5 .2 .4
5 .3

5 .4
6

. 109

P r e - s e a s o n C o n t r a c t i n g hy M ic h ig a n
P o t a t o P r o d u c e r s .....................................

113

F u n c tio n s P erfo rm e d on P o t a t o e s By
P r o d u c e r s P r i o r to S a l e ........................... 114

A C om parison o f N on-R esp on den ts and Res p o n d e n t s - t h e R e s u l t s o f t h e NonR esp o n d en t I n t e r v i e w s ............................................. 119
5 .3 .1

S iz e o f N on-R espondent and R e sp o n d en t
P o t a t o Farms
.................................... 120

5 .3 .2

N on-R espondent and R e sp o n d en t P r i c e
D is c o v e r y M e th o d s .........................................123

S u m m a r y .................................................................................. 127

SOURCES AND USES OF PRICE DATA AND INFORMATION
BY MICHIGAN POTATO PRODUCERS ......................................

129

6 .1

130

6 .2

6 .3

P i l o t I n t e r v i e w s - P ro d u c e r s .................................
6 .1 .1

P r o c e s s i n g G ro w e rs............................................ 130

6 .1 .2

T a b l e s t o c k G ro w e rs............................................133

M a il Q u e s t i o n n a i r e - A l l R esp o n d en t
P r o d u c e r s ......................................................................... 135
6 .2 .1

I n f o r m a t i o n Used i n D e c is io n Making . 136

6 .2 .2

S o u rc e s o f P r i c e D a t a ...................................138

6 .2 .3

U s e f u ln e s s o f P r i c e D ata i n
D e c is io n M aking............................................. 142

6 .2 .4

I n f o r m a t i o n and t h e P r i c i n g
D e c i s i o n ........................................................... 144

M a il Q u e s t i o n n a i r e - R esp o n d en t P r o d u c e r s
b y M a r k e t ...................... * ............................................... 149

viii
Chapter

6 .4
7

8

Page

6 .3 .1

USDA As A S o urce o f P r i c e D ata by
M a r k e t ........................................................149

6 .3 .2

I n f o r m a t io n Used In D e c is io n Making
by M a r k e t................................................... 153

6 .3 .3

S o u rc e s o f P r i c e D a ta by M ark et . . . 159

6 .3 .4

U s e f u ln e s s o f P r i c e D ata i n D e c is io n
Making by M arket ....................... . . . 1 6 2

6 .3 .5

I n f o r m a t io n and t h e P r i c i n g
D e c is io n by M a r k e t ............................ 165

Summary................................................................................ 168

SOURCES AND USES OF PRICE DATA AND INFORMATION
BY NON-PRODUCERS....................................................................169
7 .1

P ro d u c e r O r g a n i z a t i o n I n t e r v i e w s ........................ 169

7 .2

Buyer I n t e r v i e w s ............................................................. 172

7 .3

Summary................................................................................ 176

CONCLUSIONS AND IMPLICATIONS................................................. 178
8 .1

8 .2

How th e C u r r e n t P u b lic D ata System M eets th e
Needs o f M ich ig an P o ta to P r o d u c e r s . . . . 179
8 .1 .1

USDA N o n -P ric e D a t a ................................. 179

8 .1 .2

USDA P r i c e D a t a .......................................... 180

I m p l i c a t i o n s .................................................................. 136
8 .2 .1

AMS M ark et N e w s .................................... . . .

186

8 .2 .2

ESCS:

188

8 .2 .3

I m p l i c a t i o n s For A Chaging R ole o f
P u b l i c P r i c e R e p o r tin g ....................... 191

8 .2 .4

I m p l i c a t i o n s F or t h e R ole o f A g r i ­
c u l t u r a l E c o n o m is ts .............................193

8 .2 .5

I m p l i c a t i o n s f o r M ic h ig an P o ta to
P r o d u c e r s ....................................................194

S ta tistic s

.........................................

ix
Chapter

Page

8 .3

The I n f o r m a t i o n System Framework
As An
A n a l y t i c a l A pproach To S tu d y in g
P r i c e D a ta P r o b l e m s .......................................... 196

8 .4

C o n c lu s io n . . .

A ppendix I
A ppendix I I
A ppendix I I I
A ppendix IV

........................................................... 199

P r i c e D ata U s e r s / U s e s ..................................... 201
P ilo t In te rv ie w s:

P ro d u c e r s . . . . . .

202

P ro d u c e r M a il Q u e s t i o n n a i r e and
F o llo w -u p L e t t e r s ........................... .............. 205
Sample Q u e s t io n s :

Buyer I n t e r v i e w s .

. . 215

Sample Q u e s tio n s : I n t e r v i e w s w ith
C o o p e r a tiv e and B a r g a in in g
A s s o c i a t i o n .................................................... 216
B i b l i o g r a p h y ................................................................................................ 21-7

LIST OF TABLES

T a b le

Page
...........................................

99

5 -1

M a il S u rv ey C h a r a c t e r i s t i c s

5 -2

M ark et S p e c i a l i z a t i o n by M ic h ig an P o ta to
P r o d u c e r s ( R e s p o n d e n ts ) .........................................................101

5-3

A v erag e A c r e s , Volume, and Y ie l d o f M ic h ig an
P o t a t o Farms by M arket ( R e s p o n d e n t s ) ........................ 103

5 -4

The M ic h ig an P o t a t o M a rk e t:
P ro d u c ers, A cres,
and Volume by M ark et ( R e s p o n d e n t s ) .............................105

5-5

F i r s t Buyers o f M ic h ig a n P o t a t o e s
( R e s p o n d e n ts ) ................................................................................107

5-6

P r i c e D is c o v e ry Mechanisms U t i l i z e d by M ich ig an
P o t a t o P ro d u c e r s (R esp o n d e n ts) ................................

Ill

5-7

C o n t r a c t P r o d u c t i o n 1978 ( R e s p o n d e n ts ) ......................... 114

5-8

F u n c tio n s P erfo rm ed on P o t a t o e s P r i o r to F i r s t
S a l e s ( R e s p o n d e n ts ) ..................................................................115

5-9

P r o p o r t i o n s o f R e sp o n d en ts and N o n -re s p o n d e n ts
P ro d u c in g 4 A cres o r L ess (C la s s VI fa rm s) . .

122

5-10

P r o p o r t i o n s o f R e sp o n d e n ts and N o n -re s p o n d e n ts
P ro d u c in g 10 A cres o r L e s s ............................................... 122

5-11

O r g a n i z a t i o n P e rfo rm in g t h e P r i c e D is c o v e ry
F u n c tio n - R e sp o n d en ts and N on-R espondents . .

124

R e sp o n d e n ts and N o n -re s p o n d e n ts F a m i l i a r i t y
w i t h USDA P r i c e s .........................................

125

5-12
5-13

R e sp o n d e n ts and N o n -re s p o n d e n ts F in d in g USDA
P r i c e s U s e f u l ............................................................................... 125

6 -1

U s e f u l n e s s o f I n f o r m a t io n i n D e c is io n Making
by A l l R esp o n d en t P o t a t o P ro d u c e r s .......................

6-2

137

P u b l i s h e d P r i c e I n f o r m a t io n Used by R e sp o n d en ts
i n D e c is io n M a k i n g ..................................................................139
x

xi
Table

6-3

6-4
6-5

6-6
6-7
6-8

6-9

6-10

6-11

6-12

Page

U s e f u ln e s s o f S o u rc e s o f I n f o r m a t i o n i n
D e c is io n Making by A l l R e sp o n d en t P o t a t o
P r o d u c e r s ...................................................................................

141

U s e f u l n e s s o f P r i c e D ata f o r S p e c i f i c
D e c is io n s by A l l R esp o n d en t P r o d u c e r s . . . .

143

Types o f I n f o r m a t i o n I m p o r ta n t t o P o t a t o P r o ­
d u c e r s When D e c id in g on a S e l l i n g P r i c e
( A ll R esp o n d en t G r o w e r s )
•. .

145

Number and P r o p o r t i o n o f R esp o n d en t M ic h ig an
P o t a t o P r o d u c e r s F a m i l i a r w i t h USDA P r i c e s . .

151

Number and P r o p o r t i o n o f R esp o n d en t M ic h ig an
P o t a t o P r o d u c e r s F in d in g USDA P r i c e s U s e f u l .

151

C r o s s - t a b u l a t i o n s b etw e en C o n t r a c t P r o d u c t i o n
and U s e f u l n e s s o f USDA a s a S o urce o f P r i c e
I n f o r m a t i o n by M a i l ............................................................

152

A v erage R anking o f U s e f u ln e s s o f I n f o r m a t io n
Types I n D e c is io n Making By A l l M ich ig an
P o t a t o P r o d u c e r s and By P rim a ry M arket
(M ail S urvey R e s p o n d e n ts ) ..............................................

154

A v erag e Ranking o f S o u rc e s o f P r i c e D a ta and
I n f o r m a t i o n By A l l P r o d u c e r s and By P rim a ry
M arket (M ail S urvey R e s p o n d e n t s ) ..................................

160

A verage R anking o f P r i c e D ata f o r V a r io u s
D e c i s i o n s By A l l M ic h ig a n P o t a t o P ro d u c e r s
And By P rim a ry M ark et (M ail S urvey
R e s p o n d e n t s ) ..............................................................................

163

A v erage R anking F o r Im p o rta n c e o f V a rio u s
Types o f I n f o r m a t io n i n D e c id in g on a S e l l i n g
P r i c e By A l l M ic h ig a n P o t a t o P r o d u c e r s and By
P rim a r y M a rk e t (M ail S urvey R e s p o n d e n t s ) . . .

166

LIST OF FIGURES

F ig u re

Page

3 -1

An I n f o r m a t i o n S y s t e m .............................................................. 56

3 -2

P u b l i c v s . P r i v a t e D ata U s e .................................................69

3-3

P r i c i n g P o i n t s i n An A g r i c u l t u r a l M a rk e t.

3 -4

A M ark et I n f o r m a t i o n S y s t e m ................ ..........................77

3-5

A H y p o t h e t i c a l D e c is io n S t r u c t u r e f o r
A P r o d u c e r .....................................................................................81

5-1

Two P r o d u c e r s P r i c e D is c o v e ry M ethods ...................

xii

. . .

74

118

CHAPTER 1

INTRODUCTION
The c h a n g in g s t r u c t u r e o f - a g r i c u l t u r a l p r o d u c t i o n ,
m a rk e tin g and p r i c i n g a rra n g e m e n ts h ave r e s u l t e d i n e x p r e s s e d
c o n c e rn s r e g a r d i n g a g r i c u l t u r a l s t a t i s t i c s i n g e n e r a l and
p ric e d ata in p a r t ic u la r .

In 1977 t h e U n ite d S t a t e s

D ep a rtm en t o f A g r i c u l t u r e (USDA) and t h e A m erican A g r i c u l ­
t u r a l Economics A s s o c i a t i o n (AAEA) c o - s p o n s o r e d a w orkshop
on t h e p ro b lem s c o n f r o n t i n g th e a g r i c u l t u r a l and r u r a l d a t a
sy stem s ( A g r i c u l t u r a l and R u r a l D a ta , 1 9 7 7 ).
The p ro b lem s c o n f r o n t i n g th e p u b l i c p r i c e d a t a sy ste m
i n a modern a g r i c u l t u r a l m a rk e t a r e a n a ly z e d and r e p o r t e d
in t h i s stu d y .

S p e c i f i c a l l y , t h i s s tu d y r e p o r t s an a n a l y s i s

o f t h e ch a n g in g s t r u c t u r e o f modern a g r i c u l t u r a l p r o d u c t i o n
and m a r k e tin g and th e c o n s e q u e n t n e e d f o r m o d i f i c a t i o n s i n
th e p u b l i c p r i c e d a t a s y ste m .

A c a s e s tu d y o f th e M ich ig an

p o t a t o i n d u s t r y was s e l e c t e d t o i l l u s t r a t e t h e a p p r o a c h .
The p r e s e n t c h a p t e r i n c l u d e s a s t a t e m e n t o f th e r e s e a r c h
pro b lem , i n c l u d i n g a b r i e f d e s c r i p t i o n o f th e M ich ig an
p o t a t o i n d u s t r y and t h e USDA p r i c e d a t a and i n f o r m a t i o n s y s ­
tem.

T h is w i l l b e f o llo w e d by a s t a t e m e n t o f th e o b j e c t i v e s

o f th e re s e a r c h .

The l a s t s e c t i o n o f t h i s c h a p t e r b r i e f l y

o u t l i n e s th e r e m a in d e r o f t h e t e x t .

2

1 .1

Background
T h is r e s e a r c h c o n c e n t r a t e s on p o t a t o p r i c e d a t a u s e s

by p o t a t o p r o d u c e r s and th e problem s o f p r i c e d a t a c o l l e c ­
t i o n c a u sed by th e s u b s t a n t i a l changes i n p r o d u c t i o n and
d i s t r i b u t i o n methods i n th e p o t a t o i n d u s t r y i n r e c e n t y e a r s .
T his s tu d y f o c u s e s on t h e p o t a t o m a rk e t b e c a u s e e x t e r n a l
e v id e n c e s u g g e s ts p r i c e in f o r m a ti o n p ro blem s c u r r e n t l y e x ­
i s t i n p o t a t o m a r k e ts .

The USDA h as b een u n d e r p r e s s u r e

from r e p r e s e n t a t i v e s o f p o t a t o p r o d u c e r s to p r o v id e d i f f e r ­
e n t p r i c e d a t a on th e p o t a t o i n d u s t r y .

A lso , s t a t i s t i c i a n s

f o r th e Econom ics, S t a t i s t i c s and C o o p e ra tiv e S e r v ic e (ESCS)
o f th e USDA p o i n t o u t t h a t n o n - r e s p o n s e t o USDA s u r v e y s i s
h i g h e r f o r p o t a t o e s th a n f o r many o t h e r c o m m o d ities.
T his r e s e a r c h w i l l e n t a i l a c a s e s tu d y o f th e Mich­
ig a n p o t a t o i n d u s t r y inasm uch as a d e t a i l e d s tu d y o f one
com m odity--one s m a ll segm ent o f th e a g r i c u l t u r a l i n f o r m a t i o n
sy ste m —w i l l p r o v id e an o p p o r t u n i t y to v e r i f y e m p i r i c a l l y
th e i m p l i c a t i o n s w hich th e c h a n g in g s t r u c t u r e o f a g r i c u l t u r e
h as f o r th e p r i c e d a t a and i n f o r m a t i o n sy ste m , and th e r e b y
i d e n t i f y th e problem s c o n f r o n t i n g th e p r i c e d a t a and i n f o r ­
m a tio n sy ste m .

I n a d d i t i o n , a d e t a i l e d c a s e s tu d y w i l l

p r o v id e a more m e a n in g fu l t e s t o f th e a p p l i c a b i l i t y o f th e
i n f o r m a t i o n sy stem a p p ro ac h i n a n a ly z in g t h e r e l i a b i l i t y o f
p r i c e d a t a and th e problem o f s e t t i n g p r i o r i t i e s among com­
p e tin g uses of p r ic e d a ta .

3

1 .1 .1

The P o t a t o I n d u s t r y
The U n ite d S t a t e s p o t a t o i n d u s t r y h a s b een c h a r a c ­

t e r i z e d by s u b s t a n t i a l ch ang es i n s t r u c t u r e i n r e c e n t y e a r s .
F re s h p o t a t o co n su m p tio n d e c l i n e d from 100 pounds p e r c a p i t a
i n 1950 t o 5 9 .6 pounds i n 1970, w h i l e p r o c e s s e d p o t a t o con ­
su m p tio n i n c r e a s e d from 6 .3 pounds to 59 pounds ( H a r r i s o n ,
e t a l . , 1976, p . 2).^"

T hus, i n 1970 n e a r l y h a l f o f th e

p o t a t o e q u i v a l e n t s consumed w ere p r o c e s s e d .
The s h i f t to p r o c e s s i n g h a s i m p l i c a t i o n s f o r th e p r i c e
and i n f o r m a t i o n s y s te m and th e m a r k e tin g o f p o t a t o e s .

In

g e n e r a l , a s u b s t a n t i a l p o r t i o n o f th e p o t a t o e s s o l d f o r
p ro c e ssin g a re so ld v ia c o n tr a c ts .

H arriso n p o in ts o u t th a t

t h i s i s p a r t i c u l a r l y th e c a s e i n t h e f r o z e n p o t a t o m a rk e t
w here t h e l a r g e f ir m s p r e d o m in a te and t h e p r o c e s s o r s n eed a
g u a r a n t e e d s u p p ly o f p o t a t o e s .
Changes i n th e M ic h ig a n p o t a t o i n d u s t r y a r e i l l u s t r a t e d
by th e number and s i z e o f th e p o t a t o g row er o p e r a t i o n s .

Be­

tween 1964 and 1974 t h e number o f p o t a t o g row ers i n M ich ig an
d e c l i n e d from 3154 to 860, w h i l e t h e a c r e a g e p e r farm i n c r e a s e d from 12 to 47 a c r e s .

2

These f i g u r e s may a c t u a l l y

1

The m a t e r i a l i n t h i s s e c t i o n i s d e v e lo p e d l a r g e l y
from a s t u d y o f t h e M ic h ig an p o t a t o i n d u s t r y by H a r r i s o n
e t a l . , 1976.
2

U .S. D ep a rtm e n t o f Commerce, 1969 Census o f A g r i ­
c u l t u r e , 1972, P a r t 13, M ic h ig a n , S e c t i o n 2, V ol. I ,
W ash in gto n, D .C ., 1972.
U .S. D ep a rtm en t o f Commerce, 1974 Census o f A g r i­
c u l t u r e , V o l. I I , S t a t i s t i c s by S u b j e c t , P a r t 6, C rop s,
N u rs e ry and G reenhouse P r o d u c t s , W a sh in g to n , D.C.

4

u n d e r s t a t e t h e d e g r e e o f change t n t h e s i z e o f p o t a t o p r o ­
d u c in g farm s and th e r e l a t i v e im p o r ta n c e o f l a r g e f a r m s .
H a r r i s o n r e p o r t s t h a t " i n 1969 th e 136 g ro w e rs w i t h farm s
o f 500 a c r e s o r more ( 1 1 .5 p e r c e n t o f a l l g ro w e rs) p ro d u c e d
a b o u t h a l f o f t h e t o t a l q u a n t i t y o f p o t a t o e s p ro d u c e d i n
M ic h ig a n ." (p. 45)
W ith in M ic h ig a n , th e w e s t e r n c o u n t i e s , su c h as Mont­
calm , M e co sta , M a n is te e and A lle g a n p ro d u c e p r i n c i p a l l y f o r
a l l t h r e e m a r k e ts :

f r o z e n , c h i p p i n g , and t a b l e s t o c k .

Ore

I d a , th e f r o z e n p o t a t o p r o c e s s i n g f i r m , h a s a p l a n t l o c a t e d
i n Montcalm County and p u r c h a s e s m o st o f i t s p o t a t o e s from
grow ers i n t h a t a r e a .

F r i t o - L a y , a l a r g e c h i p p in g p o t a t o

bu y er, c o n tra c ts f o r a s u b s t a n t i a l p o r tio n o f i t s p o ta to
s u p p l i e s w i t h t h e C h ie f W abasis C o o p e r a tiv e , w hich i s a l s o
l o c a t e d i n th e Montcalm c o u n ty a r e a .

In a d d i t i o n , t h e r e

a r e some l a r g e t a b l e s t o c k g ro w ers i n t h e a r e a t h a t p ro d u ce
and s e l l d i r e c t l y to s t o r e s i n th e w e s t e r n M ich ig an m e tro ­
p o lita n areas.

The e a s t e r n c o u n t i e s , su c h as Bay, T u s c o la ,

and Monroe c o u n t i e s , s e l l to b o t h t a b l e s t o c k and c h ip p in g
m a rk e ts b u t n o t th e f r o z e n m a r k e t.

Upper p e n n i n s u l a c o u n t i e s

s e l l p r i n c i p a l l y to th e t a b l e s t o c k m a rk e t ( H a r r is o n e t a l . ,
p. 45 -4 9 ).
T here a r e two f r o z e n p o t a t o p r o d u c t p r o c e s s o r s i n th e
s t a t e and o n ly one o f t h e s e buys p o t a t o e s from M ich igan p r o ­
du cers.

Ore I d a , a s u b s i d i a r y o f H .J . H einz Company, owns

and o p e r a t e s a p l a n t i n G r e e n v i l l e .

The se c o n d p l a n t , Mid­

A m erican w hich i s l o c a t e d i n Grand R a p i d s , buys n e a r l y a l l

5

o f i t s p o t a t o e s from th e Red R iv e r V a l l e y i n M in n e so ta and
th e D a k o ta s.

Ore I d a c o n t r a c t s f o r a p p r o x im a te l y 90% o f i t s

p o t a t o n e e d s i n M ic h ig a n .

The c o n t r a c t i s n e g o t i a t e d w i t h

th e M ic h ig an A g r i c u l t u r a l C o o p e r a tiv e M a rk e tin g A s s o c i a t i o n
(MACMA) and th e p r o c e s s o r buys m ost o f i t s p o t a t o e s from 45
t o 50 p r o d u c e r s ( H a r r i s o n e t a l . , p. 6 9 ) .
I n th e p o t a t o c h ip p in g m a rk e t t h e r e a r e n i n e c h ip p in g
p l a n t s i n M ic h ig a n .

S ix o f t h e s e p l a n t s a r e l o c a t e d i n

D e t r o i t , one ea ch i n F l i n t , Bay C i t y , and B a t t l e C reek.
These p l a n t s p r o c e s s a p p r o x im a te ly two m i l l i o n cw t. p e r y e a r ,
w hich was a p p r o x im a te ly 20% o f M ic h ig a n ’ s p o t a t o p r o d u c t i o n
i n 1974.
F r i t o - L a y , w hich i s a n a t i o n a l f i r m , i s th e l a r g e s t
c h ip p in g p r o c e s s o r i n t h e s t a t e .

F rito -L a y c o n tra c ts fo r

a m a j o r i t y o f i t s M ic h ig a n s u p p ly th r o u g h th e C h ie f W abasis
C o o p e r a tiv e .

The s m a l l e r c h i p p e r s buy t h e i r p o t a t o e s p r i ­

m a r i l y th ro u g h b r o k e r s , a l th o u g h t h e r e seems to b e a t r e n d
tow ard more d i r e c t g ro w er c o n t r a c t s i n t h i s m a rk e t a l s o
( H a r r is o n , e t a l . , p . 6 4 - 6 5 ) .
The o t h e r m a jo r b u y e r s o f M ic h ig an p o t a t o e s a r e th e
r e t a i l g r o c e r y s t o r e s o r th e w h o l e s a l e r s t h a t s u p p ly r e t a i l
sto re s.

G e n e r a l l y , c h a i n s t o r e s buy t h e i r own p o t a t o e s and

d i s t r i b u t e them th r o u g h o u t th e s t a t e to t h e i r s t o r e s , . I n d e ­
p e n d e n t s t o r e s may e i t h e r buy i n d e p e n d e n t l y o r th e y may
p u r c h a s e t h e p o t a t o e s th r o u g h a c o l l e c t i v e l y owned and
o p e r a t e d w h o le s a le w a re h o u sin g o p e r a t i o n .

1 .1 .2

The USDA D ata System s
The U .S. D ep artm en t o f A g r i c u l t u r e h as two m a jo r d a t a

s u b - s y s te m s :

ESCS:

S t a t i s t i c s and th e M arket News B ranch

o f t h e A g r i c u l t u r a l M a rk e tin g S e r v i c e (AMS).

Both a r e

c o o p e r a t i v e f e d e r a l - s t a t e v e n t u r e s , and b o t h o f t h e s e o r g a n ­
i z a t i o n s r e p o r t p r i c e d a t a and o t h e r a g r i c u l t u r a l s t a t i s t i c s .
However, th e y hav e q u i t e d i f f e r e n t o b j e c t i v e s .
As t h e p r im a r y s u p p l i e r o f s t a t i s t i c s i n th e a g r i ­
c u l t u r a l s e c t o r , t h e p u rp o s e o f ESCS:

S t a t i s t i c s i s to

p r e s e n t a p i c t u r e o f th e c u r r e n t and n e a r f u t u r e s u p p l i e s
o f a g r i c u l t u r a l p ro d u c ts.

T hus, t h i s agency p u b l i s h e s

numerous d a t a on th e p o t a t o m a r k e ts .

M onthly and s e a s o n

a v e ra g e p r i c e s a r e r e p o r t e d f o r p o t a t o e s .

P ro sp e c tiv e

p l a n t i n g s , a c r e s p l a n t e d , h a r v e s t e d , y i e l d s and p r o d u c t i o n
are a l l re p o rte d .

In a d d i t i o n , grow er and l o c a l d e a l e r

s t o r a g e s t o c k s i n f a l l p r o d u c in g a r e a s a r e r e p o r t e d by
s t a t e s m o n th ly d u r in g th e s e a s o n .

T here a r e a l s o r e p o r t s

on t h e p r o d u c t i o n , farm d i s p o s i t i o n and u t i l i z a t i o n o f
p o ta to e s.
in January.

I n a d d i t i o n , r e v i s e d m o n th ly p r i c e s a r e r e p o r t e d
(Crop R e p o r tin g Board C a ta lo g o f 1978 Re­

le a se s) .
The Scope and Methods p o i n t s o u t t h a t a "m ain u s e r i s
th e p r o d u c e r s . . . .

O th e r i m p o r t a n t u s e r s o f a g r i c u l t u r a l

s t a t i s t i c s a r e farm o r g a n i z a t i o n s , a g r i b u s i n e s s , s t a t e and
n a t i o n a l farm p o lic y m a k e r s , and f o r e i g n b u y e r s o f a g r i ­
c u ltu r a l p ro d u c ts ."

(Scope and M ethods, p g . 1 - 2 ) .

7

The ESCS:

S t a t i s t i c s p r i c e d a t a a r e c h i e f l y u se d to

" e v a l u a t e m a r k e tin g o f com m odities and th u s to d ev e lo p
e s t i m a t e s o f income to a g r i c u l t u r e . "
pg. 99).

(Scope and M ethods,

The p r i c e s r e c e i v e d by f a r m e r s a r e e s t i m a t e d to

r e f l e c t s a l e s o f a l l c l a s s e s and g r a d e s o f t h e commodity.
Thus, t h e c o n c e p t m easu red by t h i s agency i s an a v e ra g e
p r i c e f o r a l l g r a d e s and c l a s s e s o f th e commodity a t th e
p o in t of f i r s t s a le .
The p u r p o s e o f t h e M arket News B ranch o f AMS i s
somewhat d i f f e r e n t th a n ESCS:

S ta tis tic s .

The M arket News

" s t r i v e s to p r o v i d e a w ide v a r i e t y o f m a rk e t i n f o r m a t i o n to
a l l members o f t h e N a t i o n 's a g r i c u l t u r a l i n d u s t r y , from t h e
fa r m e r s th ro u g h th e r e t a i l e r . "
pg. 1 ) .

(USDA Handbook #365, V ol. 10,

T his agen cy a t t e m p t s t o p r o v id e a m a rk e t r e p o r t i n g

f u n c t i o n to k eep p a r t i c i p a n t s in fo rm e d o f c u r r e n t m a rk e t
c o n d i t i o n s as t h e s e c o n d i t i o n s f l u c t u a t e from day t o day.
F u r t h e r , th e c o n c e p t u n d e r l y i n g th e M ark et News B ranch o f
USDA i s t h a t " F a i r B a r g a in in g can e x i s t o n ly w here b o th
p a r t i e s to a t r a n s a c t i o n h av e a c c e s s to a common s o u r c e o f
r e l i a b l e i n f o r m a t i o n ; su ch a s o u r c e d i d n o t e x i s t b e f o r e
m a rk e t news came on th e s c e n e . "
pg. 2 ) .

(Handbook #365, V ol. 10,

T hus, th e a u t h o r a r g u e s t h a t th e M a rk e t News s e r ­

v i c e e x i s t s a t l e a s t p a r t l y to e q u a l i z e i n f o r m a t i o n i n th e
m a rk e t p l a c e i n s p e c i f i c and c u r r e n t t r a n s a c t i o n s .
The M arket News s e r v i c e g a t h e r s and d i s s e m i n a t e s num­
e ro u s d a t a on t h e m a rk e t c o n d i t i o n s f o r c o m m o d itie s :

in fo r­

m a tio n on s u p p ly , demand, l o c a l s t o c k s , commodity movements,

8

w e a th e r c o n d i t i o n s , e t c .
th o s e p r o v id e d by ESCS:

T hese d a t a a r e more s p e c i f i c th a n
S ta tistic s.

r e p o r ts th a t in c lu d e p r ic e d a ta a re :

The t h r e e M ark et News
t h e t e r m i n a l m a rk e t

r e p o r t s , th e s h i p p i n g p o i n t m a rk e t r e p o r t s , and t h e n a t i o n a l
s h ip p i n g p o i n t t r e n d s .
The t e r m i n a l m a rk e t r e p o r t s a r e i s s u e d d a i l y and th e y
i n c l u d e p r i c e d a t a on com m odities t r a d e d on t h e l o c a l w h o le ­
s a l e m a rk e t.

Thus, t h e s e p r i c e s r e p r e s e n t p r i c e s r e c e i v e d

by w h o l e s a l e r s .

The r e p o r t s a l s o show r a i l and t r u c k r e ­

c e i p t s and u n lo a d s (Handbook #36 5 , V ol. 10 and USDA/AMS # 6 1 ) .
I n M ic h ig an t h i s r e p o r t o r i g i n a t e s i n D e t r o i t .

T h ere a r e

a l s o a n n u a l p r i c e summ aries o f ea ch t e r m i n a l m a rk e t a t th e
end o f ea ch y e a r .
The s h i p p i n g p o i n t r e p o r t s a r e i s s u e d d a i l y f o r m a jo r
grow ing a r e a s .

The p r i c e s a r e r e p o r t e d by ty p e o f s a l e and

show w hat t h e g ro w er o r s h i p p e r r e c e i v e s p e r u n i t .

T hese

a r e F .O .B . s h ip p i n g p o i n t p r i c e s and th e y r e p r e s e n t th e
m ost u n ifo rm l e v e l o f t r a d i n g r e p o r t a b l e .

T h ere a r e

s e a s o n a l s h ip p i n g p o i n t sum m aries t h a t g i v e p r i c e s f o r th e
m ost r e p r e s e n t a t i v e day and th e p r i c e s a r e r e p o r t e d by
g r a d e , c o n t a i n e r and s t a t e o f o r i g i n .

(USDA/AMS # 6 1 ) .

The s h i p p i n g p o i n t r e p o r t s g iv e t h e p r i c e f o r p o t a t o e s
by v a r i e t y , i . e . , R u s s e t B urbank, Round W h ite s , e t c . , and
th e y r e p o r t t h e p r i c e s f o r p o t a t o e s i n d i f f e r e n t s i z e d co n ­
ta in e rs , i . e . ,

10 l b . b a g s , 100 l b . b a g s , e t c .

T hese p r i c e

r e p o r t s a r e s u b j e c t to t h e i r b e in g s a l e s from w hich to r e p o r t
a p ric e .

A ls o , M arket News r e p o r t s show a r a n g e o f p r i c e s

t h a t i n d i c a t e d i f f e r e n t s i z e s , q u a l i t i e s and o t h e r f a c t o r s
th a t a ffe c t p ric e s.

I n M ich ig an t h e s h ip p i n g p o i n t r e p o r t

o r i g i n a t e s i n Benton H a rb o r.
The t h i r d M arket News r e p o r t i s th e N a t i o n a l S h ip p in g
p o in t tre n d s.

T h is i s i s s u e d w ee k ly from Kansas C i t y ,

Denver and P h i l a d e l p h i a , and i t g iv e s b ac k g rou nd in f o r m a t i o n
a t v a r i o u s s h ip p i n g p o i n t s on such f a c t o r s as s h ip m e n t s ,
p r i c e s , t h e p a s t weeks t r a d i n g , th e o u tlo o k f o r t h e n e x t
two w eeks, e t c .

(AMS # 6 1 ).

I n summary, t h e ESCS:

S t a t i s t i c s b ra n c h p r e s e n t s

d a t a o r i e n t e d tow ard m o n it o r i n g th e p erfo rm a n c e o f th e a g r i ­
c u l t u r a l s e c to r in c lu d in g p r ic e d a ta th a t a re used in e s t i ­
m a tin g a g r i c u l t u r a l income and d a t a u s e f u l i n p la n n in g
fu tu re o p e ra tio n s .

The M arket News Branch on th e o t h e r

h an d , p r e s e n t s d a t a i n t e n d e d f o r use i n making s h o r t - r u n
m a rk e tin g d e c i s i o n s .

The d a i l y and w eekly p r i c e r e p o r t s

and r e p o r t s o f p o t a t o s h ip m e n ts , i l l u s t r a t e t h i s .

In th is

s e n s e th e M arket News Branch seems to b e o r i e n t e d more to
p r o v i d i n g tim e ly d a t a and i n f o r m a t i o n t h a t w i l l be u se d to
im prove th e flo w o f p r o d u c ts and th u s im prove a l l o c a t i v e
e f f i c i e n c y o f m a rk e tin g r e s o u r c e s w i t h i n th e m a rk e tin g
season.
1 .2

P roblem S ta te m e n t and O b je c tiv e s
The c e n t r a l h y p o t h e s i s o f t h i s r e s e a r c h i s t h a t

changes i n m a rk e tin g c h a n n e ls and m a rk e tin g i n s t i t u t i o n s ,
i n c r e a s e d p r o d u c t d i f f e r e n t i a t i o n f o r p o t a t o e s due to

10

d i f f e r e n t en d u s e s o f t h e p r o d u c t , and an i n c r e a s e i n l o c a ­
t i o n a l c o n c e n t r a t i o n o f p r o d u c t i o n due to s p e c i a l i z a t i o n
h ave g iv e n r i s e to t h r e e p o s s i b l e ty p e s o f p ro b lem s i n
th e p u b l i c p r i c e d a t a and i n f o r m a t i o n sy ste m :
tu a l o b so le sc e n c e ,

(1) c o n c e p ­

(2) o p e r a t i o n a l ( o r d e f i n i t i o n a l ) p r o ­

b le m s, o r (3) m easu rem en t p ro b le m s .
C o n c e p u ta l o b s o l e s c e n c e may a r i s e when changes on
r e a l i t y , f o r ex am p le, t h e s t r u c t u r e o f a m a r k e t, u n d e r ­
mine th e c o r r e s p o n d e n c e o f a g iv e n c o n c e p t w ith r e a l i t y o r
w here changes i n m a rk e t s t r u c t u r e r e s u l t i n d i f f e r e n t u s e s
o f d a t a and i n f o r m a t i o n .

T h e r e f o r e , we m ig h t e x p e c t t h a t

th e v a l u e o f i n f o r m a t i o n and d a t a f o r d e c i s i o n making may
v a r y among d i f f e r e n t m a rk e t s t r u c t u r e s t o th e e x t e n t t h a t
th e se s tr u c tu r e s r e q u ire a d i f f e r e n t concept or r e l a t i v e
mix o f c o n c e p ts f o r d e c i s i o n m aking.
O p e r a t i o n a l p rob lem s a r i s e when, g iv e n a v a l i d co n ­
c e p t , t h e o p e r a t i o n a l i z a t i o n o f t h e c o n c e p t, i . e . ,

th e

m e a s u r a b le r e a l w o rld p ro x y o r v a r i a b l e s e l e c t e d to r e p r e ­
s e n t a c o n c e p t, becomes outmoded b e c a u s e o f ch ang es i n
re a lity .

F o r ex am p le, t h e c o n c e p t o f a v e r a g e p r i c e a t th e

farm g a t e a s a b a s i s o f e s t i m a t i n g a g r i c u l t u r a l income may
re m a in v a l i d .

However, t h e d e c i s i o n w h ich o p e r a t i o n a l l y

d e f i n e s (and th u s a llo w s one to m e asu re) t h a t p r i c e a t th e
p o i n t o f s a l e t o t h e f i r s t h a n d l e r l o s e s v a l i d i t y when some
m a r k e tin g f u n c t i o n s and t h e i r u s e s s h i f t from th e f i r s t hand
l e r to t h e f a r m e r , and a r e i n c l u d e d i n t h e p r i c e .

11

M easurem ent p ro b lem s may a r i s e from th e g r e a t e r d i f ­
f i c u l t y o f a c c u r a t e l y m e a s u rin g an o p e r a t i o n a l i z e d c o n c e p t
b e c a u s e o f ch an ges i n th e s t r u c t u r e o f a g r i c u l t u r a l p r o ­
d u c t i o n and m a r k e tin g .

Some exam ples o f m easurem ent p rob lem s

i n c l u d e t h e p ro b lem o f a c c u r a t e l y m e a s u rin g a r e p r e s e n t a t i v e
m a rk e t p r i c e from t h i n m a r k e t s , as th e p r o p o r t i o n o f t o t a l
p r o d u c t i o n t h a t i s p r i c e d on t h e open m a rk e t d e c l i n e s , th e
p ro b lem s o f d e f i n i n g th e a p p r o p r i a t e sa m p lin g fram e f o r
p r o b a b i l i t y sa m p lin g , th e c o r r e c t m easurem ent th e o r y o r
te c h n iq u e su c h a s a sam ple o r a c e n s u s , e t c .

M easurem ent

p ro b lem s and m easurem ent e r r o r a r e w hat we r e f e r to as
s ta tis tic a l erro r.
S t r u c t u r a l ch ang es i n p o t a t o m a rk e ts th e n may h av e
a g g r a v a te d th e p ro b lem s i n v o l v e d i n th e c o n c e p t u a l i z a t i o n ,
o p e r a t i o n a l i z a t i o n , and m easurem ent o f p r i c e d a t a by a
n e u t r a l ag e n t.

G iven th e chan ges i n p r o d u c t i o n , m a rk e tin g

and t h e i n c r e a s e i n p r o d u c t d i f f e r e n t i a t i o n , th e p o i n t o f
f i r s t s a l e , farm g a t e p r i c e , o r ev en more g e n e r a l l y , p o i n t
o f s a l e , l o s e s t h e h o m o g e n eity o f i t s m eaning i n two r e s p e c t s :
(1)

because o f d if fe re n c e s in th e p o in t o f f i r s t p r ic in g f o r

th e same p r o d u c t , and (2) b e c a u s e o f p r o d u c t d i f f e r e n c e s a t
th e p o i n t o f f i r s t p r i c i n g .

T hus, s t r u c t u r a l changes i n

m a rk e ts can i n c r e a s e t h e d a t a c o l l e c t i o n b u rd e n by sim p ly
m aking i t more d i f f i c u l t o r more e x p e n s iv e to o p e r a t i o n a l l y
d e f i n e and to m easu re t h e same c o n c e p t.
D i f f e r e n c e s i n th e p o i n t o f f i r s t p r i c i n g f o r i d e n t ­
i c a l p r o d u c ts a r i s e b e c a u s e o f ch ang es i n m a r k e tin g c h a n n e ls

12

and i n s t i t u t i o n s .

I n some i n s t i t u t i o n a l a rra n g e m e n ts t h e r e

may s im p ly be no p r i c e g e n e r a t e d and c o n s e q u e n t ly no
o p p o r t u n i t y f o r a p r i c e q u o te u n t i l t h e p r o d u c t h as p r o g r e s ­
s e d f u r t h e r th r o u g h th e v e r t i c a l c h a in .

T hus, assum ing

t h a t an i d e n t i c a l p r o d u c t i s t r a d e d th r o u g h d i f f e r e n t m ar­
k e t i n g a r r a n g e m e n t s , p r i c e d a t a c o l l e c t i o n may b e c o n f r o n t e d
w i t h th e p ro b le m o f o p e r a t i o n a l i z i n g a homogeneous p r i c i n g
p o i n t i n t h e v e r t i c a l p r o d u c t i o n / m a r k e t i n g c h a in .

In th is

s i t u a t i o n , t h e r e may be some a m b ig u ity r e g a r d i n g any q u o te d
p ric e .

I n o t h e r w o rd s, i t i s n o t c l e a r e x a c t l y w hat f u n c ­

t i o n p r i c e p e r f o r m s , o r w h at p r i c e d a t a th e p a r t i c i p a n t s
n ee d

f o r d e c i s i o n m aking.
F u r th e r m o r e , i t i s n o t c l e a r e x a c t l y w hich p a r t i c i p a n t s

a r e i n v o l v e d a t th e f i r s t p r i c i n g p o i n t .

F o r exam ple,

t h e r e may b e a v a r i e t y o f m a rk e t a c t o r s i n v o l v e d i n t h e
f i r s t p ric in g tra n s a c tio n fo r p o ta to e s:

p ro d u cers, a g e n ts/

b ro k e rs, w h o le sa le rs, r e t a i l s to r e s , p ro c e sso rs, e tc .

Thus,

a m easurem ent p ro b lem e x i s t s b e c a u s e o f t h e d i f f i c u l t y o f
m a i n t a i n i n g a r e l i a b l e sa m p lin g fram e o f t h e p a r t i c i p a n t s
a t th e f i r s t p r i c i n g p o i n t .
P roduct d if f e r e n c e s e x i s t a t th e p o in t o f f i r s t p r i c ­
i n g b e c a u s e p r o d u c e r s and t h e i r a s s o c i a t i o n s may m a rk e t t h e
p o t a t o e s i n s u b s t a n t i a l l y d i f f e r e n t fo rm s .

Some p o t a t o e s

a r e s o l d b u l k w i t h no a d d i t i o n a l f u n c t i o n s p e rfo rm e d beyond
h a r v e s t i n g , w h ile o t h e r s a r e s o l d a f t e r s t o r a g e , w a sh in g ,
g r a d i n g , p a c k in g , e t c .

P o ta to e s w ith d i f f e r e n t q u a l i t y c h a r­

a c t e r i s t i c s may a l s o b e p ro d u c e d and s o l d f o r u s e i n th e

13

t h e t a b l e s t o c k m a r k e t, p r o c e s s i n g m a rk e t o r s e e d m a rk e t.
At t h e p o i n t o f f i r s t s a l e , t h e s e v a r i a t i o n s in v o l v e t h e
p r ic in g o f e s s e n t i a l l y d i f f e r e n t p ro d u c ts.

T hus, even

assum ing t h e s e p r o d u c t s a r e s o l d u n d e r i d e n t i c a l m a r k e tin g
a rra n g e m e n ts, p r ic e d a ta c o l le c tio n i s co n fro n te d w ith th e
p ro b le m o f hom ogeneously d e f i n i n g th e p r o d u c t , and th u s th e
o p e r a t i o n a l i s a t i o n o f t h e c o n c e p t o f a p r i c e f o r th e p r o d u c t .
T h is a g a in r e s u l t s i n a m b ig u ity a b o u t th e m eaning o f
t h e r e p o r t e d p r i c e and i t s v a l u e t o t h e s e v e r a l u s e r s w i t h
t h e i r v a rio u s uses o f p r ic e d a ta .

I t i s d i f f i c u l t i n su ch

a s i t u a t i o n to d e te r m in e w hich p r o d u c t i o n and m a r k e tin g
f a c t o r s a r e b e i n g r e n u m e r a te d by a p r i c e q u o te .

In a d d itio n ,

i t may b e more d i f f i c u l t and c o s t l y to m eet one s e t o f u s e r s
p a r t i c u l a r n e e d s to r e f l e c t a s p e c i f i c c o n f i g u r a t i o n o f
fu n c tio n s in a p ro d u ct p r ic e .

F o r exam ple, p r o d u c e r s may

n e e d p r i c e d a t a r e f l e c t i n g o n ly th e r e t u r n s to p r o d u c t i o n .
I t c o u ld impose a m a jo r b u rd e n on th e d a t a c o l l e c t i o n ag e n cy ,
o r i t may even b e im p o s s i b l e w ith a c c e p t a b l e a c c u r a c y , to
s e p a r a t e v a l u e s f o r th e m a rk e tin g f u n c t i o n s p e rfo rm e d b e ­
f o r e t h e f i r s t s a l e from t h e v a l u e o f th e h a r v e s t e d p o t a t o
a t th e farm g a t e .
A c c u r a te e s t i m a t i o n and r e p o r t i n g o f p r i c e s by a
p u b l i c agen cy b r i n g s up a more fu n d a m e n ta l q u e s t i o n - - w h i c h
u s e s o f p r i c e d a t a and i n f o r m a t i o n a r e to b e s e r v e d by th e
p u b l i c p r i c e d a t a and i n f o r m a t i o n sy stem ?

I n o t h e r w o rd s,

t h e s t a t i s t i c a l agency may b e c o n f r o n t e d w i t h th e p ro b lem
o f s e t t i n g s t a t i s t i c a l p r i o r i t i e s among com p eting u s e s o f

14

o f p r i c e d a t a and i n f o r m a t i o n , e s p e c i a l l y when t h e s e p r i o r ­
i t i e s change o v e r tim e .

As r e a l i t y c h a n g e s , d i f f e r e n t

d e c i s i o n s and i n f o r m a t i o n n e e d s may emerge as i m p o r t a n t .
T h is s t u d y w i l l a d d r e s s th e p o t a t o i n d u s t r y u s e s o f
p r i c e d a t a and i n f o r m a t i o n w i t h s p e c i f i c em p h asis on p o t a t o
p ro d u c e rs ' p r ic e d ata needs.

Thus, i t s h o u ld be n o te d t h a t

t h e r e may b e n o n - p r o d u c e r u s e s o f USDA p r i c e d a t a w hich a r e
n o t e x p l i c i t l y c o n s i d e r e d i n t h i s s tu d y .
The o b j e c t i v e s o f t h i s s tu d y a r e :
(1)

I d e n t i f y and d e s c r i b e t h e s t r u c t u r a l make up o f p o t a t o
p r o d u c t i o n , m a r k e tin g and p r i c i n g a t th e p r o d u c e r /
f i r s t h a n d l e r l e v e l i n M ic h ig an .

(2)

I d e n t i f y p o t a t o p r o d u c e r u s e s o f p r i c e d a t a and i n f o r ­
m a tio n , and th e s o u r c e s o f p r i c e d a t a u s e d by p r o d u c ­
e r s , and i n f o r m a t i o n u se d i n d e c i d i n g on a s e l l i n g
p ric e .

(3)

D ete rm in e w h e th e r t h e r e i s e v id e n c e o f a r e l a t i o n s h i p
b e tw e e n th e s t r u c t u r e o f p o t a t o p r o d u c t i o n and m a r k e t­
in g and t h e p r o d u c e r u s e s and s o u r c e s o f p r i c e d a t a
and i n f o r m a t i o n .

(4)

I d e n t i f y c o n c e p t u a l , o p e r a t i o n a l and m easurem ent p r o ­
blem s c o n f r o n t i n g th e i n f o r m a t i o n and p r i c e d a t a
s y ste m f o r M ic h ig an p o t a t o e s .

(5)

E v a l u a t e th e c u r r e n t p u b l i c p r i c e d a t a and i n f o r m a t i o n
sy ste m f o r M ic h ig an p o t a t o p r o d u c e r s a g a i n s t p r o d u c e r
d e c isio n needs.

15

(6)

E v a l u a t e t h e I n f o r m a t i o n sy ste m a p p r o a c h as a t o o l
i n i d e n t i f y i n g , d e f i n i n g , and e v a l u a t i n g th e p ro blem s
o f p r i c e d a t a and i n f o r m a t i o n .

1 .3

C h a p te r D e s c r i p t i o n s
C h a p te r 2 i n c l u d e s a d i s c u s s i o n o f t h e b a c k g ro u n d t h a t

l e d to t h i s r e s e a r c h .

T h is i n c l u d e s a r e v ie w o f th e l i t e r ­

a t u r e on t h e p ro b lem s t h a t t h e c h a n g in g s t r u c t u r e o f a g r i ­
c u l t u r a l m a rk e ts p o s e f o r an o p e r a t i n g p u b l i c p r i c e d a t a
and i n f o r m a t i o n sy ste m .

T hese p ro b lem s c o n s i s t o f c h a n g in g

n e e d s f o r , and u s e s o f p u b l i c p r i c e d a t a , s e t t i n g s t a t i s t i c a l
p rio ritie s,
p ric e s.

and th e o p e r a t i o n a l i z a t i o n and m easurem ent o f

The se c o n d p a r t o f th e c h a p t e r p r e s e n t s a re v ie w

o f s t u d i e s w hich h av e s p e c i f i c a l l y exam ined th e p ro blem s
w i t h p r i c e d a t a and i n f o r m a t i o n .
C h a p te r 3 d e v e lo p s th e c o n c e p t u a l fram ew ork u n d e r l y i n g
t h i s r e s e a r c h and d i s c u s s e s th e p r o p e r t i e s o f i n f o r m a t i o n
and d a t a .

An I n f o r m a t i o n sy ste m a p p ro a c h i s p r e s e n t e d as

an i n t e l l e c t u a l fram ew ork f o r r e s e a r c h i n v o l v i n g i l l - d e f i n e d
p ro b lem s o f th e p u b l i c p r i c e d a t a and i n f o r m a t i o n sy ste m .
F u r t h e r , a model o f a m a rk e t i n f o r m a t i o n s y s te m i s i n t r o ­
duced and d i s c u s s e d i n te rm s o f t h e f u n c t i o n s p e rfo rm e d by
th e a c t o r s i n t h e m a r k e t.
The r e s e a r c h m eth o d o lo g y and th e s p e c i f i c p r o c e d u r e s
em ployed by t h i s s tu d y a r e d e v e lo p e d i n C h a p te r 4.

T h is

w i l l i n v o l v e a d i s c u s s i o n o f t h e p o p u l a t i o n s t u d i e d , sam p l­
in g , 'ind t h e r e s e a r c h d e s i g n , and t h e d ev e lo p m e n t o f £he su rv e y

16

ques t i o n n a i r e .
C h a p te r 5 d e s c r i b e s th e c u r r e n t s t r u c t u r e o f th e
p r o d u c e r / f i r s t h a n d l e r t r a n s a c t i o n i n th e M ichig an p o t a t o
in d u s try .

These r e s u l t s w ere d e r i v e d p r i n c i p a l l y from a

s u rv e y q u e s t i o n n a i r e t h a t i d e n t i f i e d t h e m anner i n w hich
M ichigan p r o d u c e r s m a rk e t t h e i r p o t a t o e s .

The r e s u l t s

p r e s e n t e d i n c lu d e a co m p ariso n b etw een th o s e who re sp o n d e d
to a m a il q u e s t i o n n a i r e and t h e te le p h o n e i n t e r v i e w s o f a
random sample o f th o s e p r o d u c e r s who d id n o t re s p o n d to th e
m a il q u e s t i o n n a i r e .

T h is co m p arison i l l u s t r a t e s t h a t th o s e

who re sp o n d e d to th e m a il q u e s t i o n n a i r e d i f f e r from th e non­
r e s p o n d e n ts i n th e s i z e o f t h e i r o p e r a t i o n s and t h e i r u se a g e
o f USDA p r i c e d a t a .
C h a p te r 6 p r e s e n t s th e r e s u l t s o f th e p r o d u c e r e v a l ­
u a t i o n s o f p r i c e d a t a and i n f o r m a t i o n and t h e s o u r c e s o f
p r i c e d a t a th e y u se d i n d e c i s i o n m aking.

C ross t a b u l a t i o n s

among t h e s e v a r i a b l e s and th e p r im a r y m a rk e t i n w hich th e
p r o d u c e r s s e l l p o t a t o e s a r e a l s o p r e s e n t e d and d i s c u s s e d .
The a n a l y s i s o f th e p r o d u c e r e v a l u a t i o n s o f th e u s e f u l n e s s
o f p r i c e d a t a was r e s t r i c t e d to th o s e p r o d u c e r s who re sp o n d e d
to th e m a il q u e s t i o n n a i r e s i n c e th o s e c o n t a c t e d i n th e t e l e ­
phone f o llo w -u p s would n o t re s p o n d to a lon g q u e s t i o n n a i r e .
F u rth e rm o re , s t a t i s t i c a l t e s t s on t h e r e s p o n d e n t group w ere
n o t n ee d ed inasmuch as th e a n a l y s i s was b a s e d on a cen su s o f
t h e s u b - p o p u l a t i o n co m p rised o f r e s p o n d e n t s .

B ecause t h e r e

i s no i n f o r m a t i o n on t h e n o n - r e s p o n d e n t s , one m ust i n f e r
from t h e o r y and th e r e s p o n d e n t answ ers to o b t a i n an e s t i m a t e

17

o f th e r e s p o n s e o f a l l M ic h ig a n p o t a t o p r o d u c e r s .
C h a p te r 7 w i l l p r e s e n t t h e r e s u l t s o f n o n - p r o d u c e r
i n t e r v i e w s i n c l u d i n g i n t e r v i e w s w i t h o t h e r p r im a r y m a rk e t
a c to rs.

The s u b j e c t s f o r t h e s e i n t e r v i e w s w ere c h o sen on

t h e b a s i s o f q u o ta sa m p lin g and w ere d e s ig n e d to g e t some
p e r s p e c t i v e on how t h e s e m a rk e t a c t o r s u s e p r i c e d a t a as
w e l l as t h e i r s o u r c e s o f t h e p r i c e d a t a th e y u s e .
C h a p te r 8 p r e s e n t s th e c o n c l u s i o n s an d i m p l i c a t i o n s
o f th e f i n d i n g s o f th e s tu d y f o r t h e p r i c e d a t a and i n f o r ­
m a tio n s y ste m .

The i n f o r m a t i o n sy ste m fram ew ork i s d i s c u s s e d

as a t o o l i n i d e n t i f y i n g , d e f i n i n g and e v a l u a t i n g th e p r o ­
blem s o f p r i c e d a t a and i n f o r m a t i o n s y ste m .

The USDA

p r i c e d a t a sy ste m s a r e e v a l u a t e d i n terras o f p r o d u c e r s
n e e d s and u s e s o f p r i c e d a t a and i n f o r m a t i o n as d e f i n e d
by th e s t r u c t u r e o f th e M ich ig an p o t a t o m a r k e t.

In a d d itio n ,

th e p ro b lem s w i t h th e o p e r a t i n g p u b l i c p r i c e d a t a sy stem
a r e i d e n t i f i e d a s b e i n g p r i n c i p a l l y o p e r a t i o n a l and m e a s u re ­
ment p r o b le m s .

The i m p l i c a t i o n s f o r th e /p u b li c p r i c e d a t a

and i n f o r m a t i o n sy ste m and f o r f u r t h e r r e s e a r c h a r e th e n
p re se n te d .

CHAPTER 2

MARKET STRUCTURE AND PRICE DATA PROBLEMS:
A REVIEW OF THE LITERATURE
T his c h a p t e r w i l l in v o lv e a b ac k g ro u n d d i s c u s s i o n o f
th e problem s c o n f r o n t i n g an o p e r a t i n g p u b l i c p r i c e d a t a and
i n f o r m a t i o n sy stem .

T his w i l l i n c l u d e th e i m p l i c a t i o n s t h a t

th e ch a n g in g m a rk e t s t r u c t u r e h a s f o r th e u s e s o f p r i c e d a t a ,
th e p rob lem o f s e t t i n g s t a t i s t i c a l p r i o r i t i e s and th e pro blem
o f o p e r a t i o n a l i z i n g and a c c u r a t e l y m e a su rin g p r i c e d a t a .
The se co n d p a r t o f th e c h a p t e r w i l l c o n s i s t o f a re v ie w o f
s t u d i e s t h a t have a tte m p te d to e m p i r i c a l l y d e s c r i b e i n f o r ­
m a tio n u s e s and th e problem s w ith p r i c e m easurem ent.
2 .1

Changing M arket S t r u c t u r e and P r i c e D ata C o l l e c t i o n :
The I s s u e s
E conom ists have b een f a s c i n a t e d w i t h v a r i o u s p r i c i n g

system s i n one form o r a n o t h e r f o r many y e a r s .

In d i s c u s s ­

in g th e n eed f o r r e s e a r c h on p r i c i n g m eth o d s, Rogers (1970)
c i t e s S h e p h e r d 's s u g g e s t i o n t h a t p r i c i n g mechanisms i n a g r i ­
c u l t u r e change o v e r tim e .

T his view h o ld s t h a t p r i c i n g

m ethods p r o g r e s s from b a r g a i n i n g on ea ch t r a n s a c t i o n to
c e n t r a l i z e d m a r k e t s , th e n to d e c e n t r a l i z e d m a rk e ts and f i n ­
a l l y t o a p r i c e com m ittee sy stem , i . e . ,
p r i c i n g sy stem .

an a d m i n i s t e r e d

These ch ang in g p r i c e d is c o v e r y mechanisms

19.

h a v e two l i k e l y c o n s e q u e n c e s f o r th e p r i c e d a t a s y ste m .
F i r s t , t h e d i f f e r e n t p r i c e d i s c o v e r y mechanisms may a f f e c t
t h e a b i l i t y o f a n e u t r a l a g e n t to c o l l e c t a r e p r e s e n t a t i v e
p r i c e q u o te .

F o r ex am p le, i n some p r i c e d i s c o v e r y mechan­

ism s , no p r i c e i s g e n e r a t e d u n t i l a l a t e r p o i n t i n th e
v e r t i c a l p r o d u c t i o n / m a r k e t i n g c h a in , e . g . , i n a v e r t i ­
c a l l y i n t e r g r a t e d firm .

T hus, i t may b e more d i f f i c u l t to

hom ogeneously d e f i n e a p o i n t o f s a l e a c r o s s p r i c e d i s c o v e r y
mechanisms o r m a rk e t s t r u c t u r e s .

On th e o t h e r h an d , d e­

c e n t r a l i z e d m a r k e ts sim p ly may make p r i c e d a t a c o l l e c t i o n
more c o s t l y .
The se c o n d c o n seq u en c e o f c h a n g in g p r i c i n g m ethods i s
t h a t d i f f e r e n t p r i c e d i s c o v e r y m echanisms may r e s u l t i n
d i f f e r e n t p ro b lem s f o r th e m a rk e t p a r t i c i p a n t s .

Tomek and

R o binson (1972) p o i n t o u t t h a t th e p a r t i c i p a n t s i n th e
m a rk e t a r e a f f e c t e d by p r i c e d i s c o v e r y mechanisms a l s o .
Some p r i c e d i s c o v e r y mechanisms may l e a d to more s t a b l e
p r i c e s b u t th e y may r e s u l t i n p o o r a d j u s tm e n ts to m a rk e t
c o n d itio n s.

F u r t h e r , d i f f e r e n t p r i c i n g mechanisms may r e ­

s u l t i n a d i f f e r e n t s e t o f pro b lem s t o b e s o l v e d .

For

exam ple, b a r g a i n i n g f o r a h i g h e r p r i c e may g iv e r i s e to
o v e r p r o d u c t i o n and t h e n ee d f o r c o n t r o l l i n g o u t p u t .

On th e

o t h e r h an d , a p r i c i n g mechanism t h a t a d j u s t s r a p i d l y to
c h an g es i n m a rk e t c o n d i t i o n s may l e a d to p r i c e s t h a t a r e to o
u n s ta b le f o r r e l i a b l e p ro d u c tio n g u id e s.
To th e e x t e n t t h a t d i f f e r e n t p r i c e d i s c o v e r y mechan­
ism s r e s u l t i n d i f f e r e n t d e c i s i o n s , o r d i f f e r e n t p ro b lem s

20

to s o l v e , t h e r e may b e d i f f e r e n c e s b etw e en th e p r i c e d a t a
and i n f o r m a t i o n n ee d s b etw e en t h e s e m a rk e t s t r u c t u r e s .
F u r t h e r , t h e s p e e d and a c c u r a c y o f t r a n s m i t t i n g econom ic
i n f o r m a t i o n may v a r y b e tw e e n t h e p r i c i n g m echanism s, and t h e
c o s t o f o b t a i n i n g i n f o r m a t i o n w i l l m ost l i k e l y v a r y b etw een
t h e s e mechanisms.^"
At t h i s p o i n t , t h e im p o r ta n c e o f d i s t i n g u i s h i n g b e ­
tween p r i c e d e t e r m i n a t i o n and p r i c e d i s c o v e r y s h o u ld b e
illu stra te d .

B reim y er (1976) p o i n t s o u t t h a t p r i c e d e t e r ­

m in a tio n r e f e r s to th e r e s p o n s e o f f a c t o r s o f p r o d u c t i o n
and co n su m p tio n to t h e u n d e r l y i n g f o r c e s o f s u p p ly and demand
c o n d itio n s.

P r i c e d i s c o v e r y in v o l v e s th e m ethods and th e

i n s t i t u t i o n a l a rra n g e m e n ts em ployed by m a rk e t p a r t i c i p a n t s
i n d e t e r m in in g th e p r i c e a t w hich th e y w i l l t r a d e .

Tomek

and R o binson (1972) l i s t f i v e t y p e s o f p r i c e d is c o v e r y
m echanism s:
in g ,

(1)

in d iv id u a l n e g o tia tio n ,

(3) o r g a n i z e d a u c t i o n s o r e x c h a n g e s ,

p r i c i n g , and (5) a d m i n i s t e r e d p r i c i n g .

(2) grou p b a r g a i n ­
(4) fo rm u la

I n o t h e r w o rd s,

th e p r i c e d is c o v e r y mechanisms em ployed i n an a g r i c u l t u r a l
m a rk e t a r e th e i n s t i t u t i o n a l a rra n g e m e n ts th ro u g h w hich m ar­
k e t a c t o r s a t t e m p t to a s c e r t a i n th e u n d e r l y i n g f o r c e s o f
s u p p ly and demand t o d e te r m in e t h e i r t r a d i n g p r i c e .
^ Numerous a u t h o r s h av e d e v e lo p e d t h e t h e o r e t i c a l
i m p l i c a t i o n s and r e l a t i o n s h i p s o f i n f o r m a t i o n , m a rk e t s t r u c ­
t u r e , and t h e c o s t o f s e a r c h on m a rk e t a c t o r s and a l l o c a t i v e
e ffic ie n c y .
See f o r exam ple, Arrow (1 9 7 6 ), Grossman and
S t i g l i t z ( 1 9 7 6 ), and A c k e r lo f (1 9 7 0 ).

21

One o f t h e more a p p e a l i n g f e a t u r e s o f th e m a rk e t
sy ste m and t h e a s s u m p tio n s o f th e c o m p e t i t i v e econom ic model
i s t h a t th e m a rk e t econom izes on i n f o r m a t i o n c o l l e c t i o n and
d is s e m in a tio n .

The m a rk e t model i m p l i e s t h a t a l l r e l e v a n t

i n f o r m a t i o n i s em bodied i n t h e m a rk e t and r e f l e c t e d i n th e
p ric e

(Arrow, 1 9 7 4 ).

The econom ic th e o r y o f p r i c e d e t e r ­

m in a tio n assumes t h a t i n f o r m a t i o n i s t r a n s m i t t e d r a p i d l y
( g e n e r a l l y , p e r f e c t i n f o r m a t i o n i s assu m ed ), t h a t a homogene­
ous p r o d u c t i s t r a d e d and t h a t th e c o m p le te t r a n s a c t i o n ta k e s
p l a c e i n s t a n t a n e o u s l y , i . e . , w i t h o u t a tim e l a g .

E sse n tia lly

t h e s e a s s u m p tio n s l e a d - - i n t h e o r y , a t l e a s t — t o th e "law
o f one p r i c e " (B re im y e r, 19 76 ).
B ecause o f d i f f e r e n c e s b etw e e n th e tim e , l o c a t i o n and
form o f t r a n s a c t i o n s , and q u a l i t y o f p r o d u c ts and l e s s th a n
p e r f e c t i n f o r m a t i o n , we w ould n o t e x p e c t t h e law one p r i c e
to p r e v a i l i n th e r e a l w o r ld .

When th e "law o f one p r i c e "

does n o t h o l d , t h e d i s t r i b u t i o n o f p r i c e s and a b i l i t y to c o l l e c t p r i c e s become c r i t i c a l .

2

I n o t h e r w o rd s, p r e c i s e know­

le d g e o f th e tim e , form and l o c a t i o n o f t h e p r i c e e s t i m a t e d
i s i m p o r t a n t i n d e t e r m in in g th e e x t e n t and th e s o u r c e o f
2

A n o t e i s i n o r d e r a t t h i s p o i n t . Any d i s c u s s i o n
o f "la w o f one p r i c e " m ust n o t e t h e s t r i c t c o n d i t i o n s im pos­
ed by e q u a l i t y i n tim e , l o c a t i o n , and form . S t r i c t l y s p e a k ­
in g t h e s l i g h t e s t d e p a r t u r e from any o f t h e s e c o n d i t i o n s
le a d s to d i f f e r e n t p r i c e s .
Thus, t h e law o f one p r i c e as a
t h e o r e t i c a l c o n c e p t i s d i f f i c u l t to r e f u t e ; t h e o b s e r v a t i o n ,
i n r e a l i t y , o f d i f f e r e n t p r i c e s f o r a p r o d u c t t h a t a p p e a r s to
b e th e same on t h e s u r f a c e m ig h t be j u s t i f i e d by a p p e a l i n g to
some d i f f e r e n c e i n tim e , p l a c e o r form . The p r i c e m e a s u re ­
ment p ro b le m i n r e a l i t y th e n becomes an a t t e m p t to s e p a r a t e
th e d i f f e r e n c e s i n tim e , p l a c e and form so as to d e f i n e a
homogenous p r o d u c t f o r a c c u r a t e p r i c e m easurem en t.

22

d e v i a t i o n s from t h e law o f one p r i c e .

F u r th e r m o r e , i n

making d e c i s i o n s a b o u t r e s o u r c e a l l o c a t i o n , t h e m anager
m ust b e f u l l y in fo rm e d a b o u t t h e p r i c e e x i s t i n g i n t h e m ar­
k e t t o e n s u r e th e p r i c e a t w hich h e t r a d e s conform s w i t h
t h e p r i c e c u r r e n t l y e x i s t i n g f o r an e q u i v a l e n t p r o d u c t i n
tim e , p l a c e and form .
2 .1 .1

Changing M arket S t r u c t u r e and P r i c i n g M echanism sI m p l i c a t i o n s f o r th e R ole o f P r i c e D ata i n D e c is io n
Making
Inasm uch as econom ic t h e o r y p o s i t s t h r e e p r im a r y f u n c ­

tio n s t h a t p r ic e perform s:
b etw e en a l t e r n a t i v e u s e s ,

(1) t h e a l l o c a t i o n o f r e s o u r c e s
(2) t h e d i s t r i b u t i o n o f th e c o s t s

and r e t u r n s from r e s o u r c e u s e , and (3) th e e q u i l i b r a t i o n o f
m a rk e t s u p p ly and demand, t h e q u e s t i o n em erges as t o w hat
r o l e p r i c e d a t a c o l l e c t i o n and r e p o r t i n g i s t o p e r f o r m .

In

o t h e r w o rd s, to th e e x t e n t t h a t d i f f e r e n t o b j e c t i v e s o f
p r i c e r e p o r t i n g in v o l v e d i f f e r e n t o p e r a t i n g p r o c e d u r e s by
t h e d a t a a g e n c i e s , t r a d e o f f s may n e e d t o b e made i n a l l o ­
c a t i n g r e s o u r c e s to d a t a c o l l e c t i o n among u s e s t o b e s e r v e d .
The f u n c t i o n s p r i c e p e rfo rm s th e n a i d i n d e l i n e a t i n g th e
p o te n tia l u se rs of p r ic e d ata.

M i l l e r (1977) b r e a k s th e

u s e r s o f a g r i c u l t u r a l i n f o r m a t i o n i n t o two g r o u p s :
k e t u s e r s and (2) n o n -m a rk e t u s e r s .

(1) m ar­

The m a rk e t u s e r s c o n s i s t

o f p r o d u c e r s , m a r k e tin g f ir m s and f o r e i g n and d o m e s tic con­
su m ers.

The n o n -m a rk e t u s e r s c o n s i s t o f governm ent e x e c u t i v e

p o l i c y m a k e rs, governm ent pro gram a d m i n i s t r a t o r s , and

23

i n d i v i d u a l s and o r g a n i z a t i o n s c o n d u c tin g b a s i c and a p p l i e d
research .

A ppendix

I

g iv e s a g e n e ra l o u tli n e o f th e se

u s e r s and t h e i r i n t e r e s t i n p r i c e d a t a .
T h is c l a s s i f i c a t i o n o f u s e r ' s r o u g h ly c o r r e s p o n d s to
a c l a s s i f i c a t i o n o f th e u s e to b e s e r v e d by th e p r i c e d a t a
and i n f o r m a t i o n .

F o r exam ple, m a rk e t u s e r s would be p r i n ­

c i p a l l y i n t e r e s t e d i n p r i c e d a t a and in f o r m a t i o n t h a t w i l l
h e l p them make s p e c i f i c p r o d u c t i o n and m a rk e tin g d e c i s i o n s ,
i.e .,

a llo c a tiv e d e c isio n s .

The f ir m m a n a g e r's o b j e c t i v e i n

making t h e s e d e c i s i o n s may b e p r o f i t m a x im iz a tio n .

The non-

m a rk e t u s e r s on th e o t h e r hand would seem to be i n t e r e s t e d
i n d a t a and in f o r m a t i o n t h a t w i l l e x a n te a s s i s t i n im p rov in g
th e p e rfo rm a n c e o f th e a g r i c u l t u r a l s e c t o r and e x p o s t m oni­
t o r th e p e rfo rm a n c e o f t h e a g r i c u l t u r a l s e c t o r .

In o th e r

w o rd s, t h e n o n -m a rk e t u s e r s m ig h t be i n t e r e s t e d i n p r o v i d i n g
d a t a and in f o r m a t i o n t h a t a t te m p t to e s t i m a t e t h e flow o f
p r o d u c ts i n th e f u t u r e , and th e n e s t i m a t e d a t a t h a t a llo w s
f o r an e x p o s t e v a l u a t i o n o f th e s y s t e m 's p e rfo rm a n c e .
These two o r i e n t a t i o n s a p p e a r to c o rre s p o n d q u i t e
c l o s e l y w i t h t h e c u r r e n t d a t a and i n f o r m a t i o n sy stem s o f th e
USDA:

th e s t a t i s t i c a l b r a n c h o f th e Econom ics, S t a t i s t i c s

and C o o p e ra tiv e S e r v ic e (ESCS) and th e M arket News Branch o f
th e A g r i c u l t u r a l M a rk e tin g S e r v i c e .

F or exam ple, th e ESCS:

t a t i s t i c s p r i c e d a t a a r e an a v e ra g e p r i c e c o n c e p t t h a t i s
su p p o se d to r e f l e c t t h e p r i c e r e c e i v e d f o r th e p r o d u c t a t
th e p o i n t o f f i r s t s a l e and i s r e p o r t e d m on th ly and a n n u a l l y .
These d a t a w ould be o f l i m i t e d v a l u e i n making s h o r t ru n

24

a llo c a tiv e d e c isio n s .

On t h e o t h e r h an d , AMS p r i c e s a r e more

s p e c i f i c to p r o d u c t q u a l i t y and a r e r e p o r t e d d a i l y and
w e e k ly ,

C o n c e p tu a lly , th e AMS p r i c e d a t a r e p r e s e n t th e p r i c e

f o r t h e commodity a t th e s h ip p i n g p o i n t .

These p r i c e d a t a

w ould b e more u s e f u l f o r s h o r t ru n m a rk e tin g d e c i s i o n s th a n
th e ESCS p r i c e d a t a .
S e v e r a l a u t h o r s have d i s c u s s e d th e p ro b lem s in v o lv e d
i n e s t i m a t i n g and r e p o r t i n g p r i c e s i n modern a g r i c u l t u r a l
m a r k e ts .

These d i s c u s s i o n s i l l u s t r a t e th e pro blem s in v o lv e d

i n moving from t h e o r e t i c a l c o n c e p ts o f a d i s c i p l i n e such as
economics to th e p r a c t i c a l p rob lem o f o p e r a t i o n a l i z i n g and
m e a su rin g r e p r e s e n t a t i v e p r i c e d a t a .
Upchurch (1977) p o i n t s o u t t h a t s p e c i a l i z a t i o n o f
f u n c t i o n b etw een th e s t a t i s t i c i a n and th e ec o n o m ist h as
r e s u l t e d i n an i n t e l l e c t u a l s e p a r a t i o n betw een d a t a c o l l e c ­
t i o n and economic a n a l y s i s .

The r e s u l t o f t h i s h a s b ee n to

r e d u c e th e e c o n o m i s t 's and s t a t i s t i c i a n ' s s e n s e o f i n t e r d e ­
pendence f o r th e d e s ig n o f th e d a t a sy stem .

The p r i n c i p a l

developm ent o f th e p r e s e n t system o f a g r i c u l t u r a l economic
d a t a o c c u r r e d p r i o r to World War I I w ith s u b s t a n t i a l im p rov e­
m ents made i n th e 1 92 0' s and 1 9 3 0 ' s as a g r i c u l t u r a l econ o­
m i s t s demanded b e t t e r d a t a to a d d r e s s t h e economic problem s
o f th e tim e .

In s p i t e o f im provem ents i n th e q u a l i t y and

c o v e ra g e o f some k in d s o f d a t a , e c o n o m ists and s t a t i s t i c i a n s
h av e r e c e n t l y begun to r a i s e s e r i o u s q u e s t i o n s a b o u t

q

F o r a more d e t a i l e d d e s c r i p t i o n o f th e o b j e c t i v e s
o f t h e ESCS: S t a t i s t i c s and AMS d a t a s y s te m s , and a d e s ­
c r i p t i o n o f t h e i r r e p o r t s , s e e C h a p te r 1.

25

a g r ic u ltu r a l d ata.
F u r t h e r , s t r u c t u r a l , ch a n g es i n a g r i c u l t u r a l m a rk e ts
a f f e c t th e r e l i a b i l i t y o f a g r i c u l t u r a l d a t a and t h e p ro b lem
of d ata c o lle c tio n .

U pchurch (1977) c i t i n g a r t i c l e s on a g r i ­

c u l t u r a l s t a t i s t i c s by T r e lo g a n s t a t e s t h a t chan ges i n t h e
s t r u c t u r e o f a g r i c u l t u r e d u r in g t h e l a s t t h r e e d ec ad e s seems
to c a l l f o r " a r e - e x a m i n a t i o n o f d a t a on p r o d u c t s , p r i c e s ,
s u p p l i e s and l a b o r to e n s u r e t h a t d a t a a r e c o m p a tib le and
c o n s i s t e n t w i t h c o n c e p t s , and m o d e ls, and a n a l y t i c a l t o o l s
u t i l i z e d i n a g r i c u l t u r e t o d a y . ” (p. 3 1 7 ).
U sing th e B reim y er (1976) t h e s i s t h a t t h e s h a r p e s t d e ­
p a r t u r e from th e law o f one p r i c e e x i s t s when t r a d e r s do n o t
e n t e r th e p r i c i n g m aking p r o c e s s and th e y t r a d e on o t h e r s '
p r i c e s , p r i c e d a t a c o l l e c t i o n and r e p o r t i n g w ould seem to b e
more im p o r t a n t i n d e - c e n t r a l i z e d m a rk e ts w here t r a n s a c t i o n s
a r e s p r e a d th r o u g h tim e and s p a c e .

However, com bining t h e

law o f one p r i c e w i t h th e R ogers and Voss t h e s i s c i t e d by
B reim y er t h a t one k i n d o f t r a n s a c t i o n s e t s t h e b a s e p r i c e f o r
a l l a s s o c i a t e d t r a d i n g , i t i s n o t p r e c i s e l y c l e a r w here to
c o l l e c t and r e p o r t p r i c e s so as to a d e q u a t e l y in f o rm a l l
a s s o c i a t e d t r a d e r s o f m a rk e t c o n d i t i o n s .

A ls o , th e t r a n s a c ­

t i o n t h a t s e t s t h e b a s e p r i c e , a c c o r d in g to R ogers and V oss,
may o c c u r a t d i f f e r e n t s t a g e s f o r d i f f e r e n t co m m o d ities.
Thus, e f f e c t i v e p r i c e d a t a c o l l e c t i o n and r e p o r t i n g f o r th e
t r a n s m i s s i o n o f econom ic c o n d i t i o n s may d i f f e r among p r o d u c t s .
Manley (1976) and H a l l b e r t (1977) seem t o b e a d d r e s s i n g
t h i s p ro blem when th e y s t r e s s t h e n e e d f o r r e s e a r c h to s tu d y

26

t h e econom ic, i n s t i t u t i o n a l and p o l i t i c a l r a m i f i c a t i o n s o f
c o l l e c t i n g and r e p o r t i n g p r i c e s a t d i f f e r e n t l e v e l s .

They

a l s o s t r e s s t h e n e e d to i d e n t i f y s t r u c t u r a l c h a r a c t e r i s t i c s
o f a g r i c u l t u r a l i n d u s t r i e s to i d e n t i f y d a t a n e e d s and th e
l e v e l a t w h ich p r i c e s h o u ld b e r e p o r t e d .
C o l l i n s (1959) d i s c u s s e d t h e ch a n g in g r o l e o f p r i c e i n
a g r i c u l t u r a l m a r k e t i n g , and h i s d i s c u s s i o n q u e s t i o n s th e
im p o rta n c e o f p r i c e r e p o r t i n g by s t r e s s i n g th e im p o r ta n c e o f
n o n - p r i c e i n f o r m a t i o n to m a rk e t p a r t i c i p a n t s i n modern a g r i ­
c u l t u r a l m a r k e ts .

C o l l i n s c la im s t h a t p r i c e s a v a i l a b l e from

c e n t r a l o r t e r m i n a l m a rk e ts a r e n o t c o n s i s t e n t l y r e l a t e d to
a b r o a d ra n g e o f n o n - p r i c i n g f a c t o r s , and t h u s , i t i s d i f f ­
i c u l t to deduce t h e ty p e o f p r o d u c t d e s i r e d f o r a n a l y s i s from
r e p o r t e d r e l a t i o n s h i p s and to a n a ly z e th e i m p l i c a t i o n s f o r
farm p r o d u c t i o n p l a n n i n g .

As a ’’d i r e c t i v e " m echanism , t h i s

p ro b lem i s more a c u t e when one remembers t h a t th e p r i c e s
r e l e v a n t to any t r a n s a c t i o n a r e n o t d e te r m in e d u n t i l a f t e r
t h e p r o d u c t i o n d e c i s i o n i s made.

I n o t h e r w o rd s, he seems

to be a r g u in g t h a t r e p o r t e d p r i c e s s e r v e l i t t l e u s e as an
a l l o c a t i v e m echanism.
C o l l i n s p o i n t s o u t th e i n c r e a s e d p r e c i s i o n i n r e p o r t ­
in g w i l l r e q u i r e v e r y c o s t l y d e t a i l e d d e s c r i p t i o n , and im­
p ro v em e n ts i n m a rk e t r e p o r t s w i l l be a s s o c i a t e d w i t h p r o ­
d u c ts g e n e r a l l y d e f i n e d w ith r e s p e c t to i m p o r t a n t c h a r a c ­
te ris tic s.

He s t a t e s t h a t " v e r y im p o r t a n t

d a t a on t e c h n i c a l

c o n d i t i o n s f a c i n g i n d u s t r y members w i l l b e masked o r l o s t i n
th e r e p o r t i n g p r o c e s s .

The r e s u l t i n g i n e f f i c i e n c y i n

27

r e s o u r c e a l l o c a t i o n , compared w i t h t h a t p o s s i b l e u n d e r co n­
d i t i o n s o f p e r f e c t kn ow led ge, s h o u ld b e c o n s i d e r e d a c o s t
o f u s i n g th e m a rk e t p r i c e as t h e m a jo r c o o r d i n a t i n g mechan­
is m ." (pg . 532)

He a l s o a r g u e s t h a t t r a d e r s o f t e n a v o id

t h e c o s t s o f r e l y i n g on p r i c e by a d m i n i s t r a t i v e d e a l i n g s ,
f o r exam ple, v e r b a l p r o d u c t and c o n t r a c t s p e c i f i c a t i o n .
T h u s, C o l l i n s s e e s a d e c l i n e i n t h e im p o r ta n c e o f
p r i c e as an a l l o c a t i o n m echanism and te n d s to downplay th e
im p o r ta n c e o f p r i c e r e p o r t i n g .

T h is d im in is h e d im p o r ta n c e

f o r p r i c e r e p o r t i n g a r i s e s from t h e t r a d e r s n e e d and d e s i r e
f o r more s p e c i f i c c h a r a c t e r i s t i c s o f th e p r o d u c t and th e
t r a n s a c t i o n t h a t a r i s e i n t r y i n g to c o o r d i n a t e p r o d u c t i o n
and d i s t r i b u t i o n b etw e en s t a g e s i n t h e v e r t i c a l s t r u c t u r e
from p r o d u c t i o n to f i n a l co n su m p tio n .

More p r e c i s e n e e d s

f o r p r o d u c t s p e c i f i c a t i o n s a r e n e e d e d b e c a u s e modern p r o c e s s ­
in g p r o c e d u r e s r e q u i r e p r o d u c t u n i f o r m i t y .

I t s h o u ld be

n o te d t h a t a l th o u g h C o l l i n s seems to downplay t h e im p o rta n c e
o f d e t a i l e d p r i c e r e p o r t i n g , h e does s t a t e t h a t t h e r e m ig h t
be a n e e d f o r p r i c e r e p o r t i n g t h a t i s g e n e r a l i n n a t u r e .

In

o th e r w o rd s, p r ic e r e p o r tin g fo r a lo o s e ly d e fin e d p ro d u ct
t h a t w ould g iv e a g e n e r a l i n d i c a t i o n o f t h e m a rk e t.
C o l l i n s a l s o s t a t e s t h a t we can compare t h e c o s t o f
th e open m a rk e t sy ste m and i t s i n e f f i c i e n c i e s due to im p e r­
f e c t know ledge w i t h th e c o s t s a s s o c i a t e d w i t h a d m i n i s t r a t i v e
a r r a n g e m e n ts .

However, he does n o t o f f e r any reco m m en datio ns

on how to d e r i v e o p e r a t i o n a l e s t i m a t e s o f th e c o s t s and
b e n e f i t s o f t h e s e two sy ste m s o f c o o r d i n a t i o n .

28

Cox (1946) and C o l l i n s

(1959) e s s e n t i a l l y a r g u e , t h a t

ch an g es i n m a rk e t s t r u c t u r e h a v e p l a c e d g r e a t e r demands on
th e d a t a c o l l e c t i o n a g e n c y .

I n o t h e r w o rd s, more r e s o u r c e s

w i l l b e demanded to p r o v id e more d e t a i l e d d e s c r i p t i o n s o f
t h e n a t u r e o f t h e t r a n s a c t i o n s and th e te rm s o f t r a d e t h a t
a f f e c t th e p r ic e .
C o l l i n s a s s e r t s t h a t a d m i n i s t r a t i v e h a g g l i n g i n th e
s p e c i f i c a t i o n o f t h e p r o d u c t i s n e c e s s a r y i n m odern a g r i ­
c u l t u r a l m a rk e ts.

I f t h i s i s t r u e th e h i g h t r a n s a c t i o n s

c o s t s a s s o c i a t e d w i t h t h i s h a g g l i n g m ig h t p r o v i d e an im p e tu s
f o r c o n t i n u e d ch ang es i n th e p r i c i n g o f a g r i c u l t u r a l p r o ­
d u c t s , th r o u g h v e r t i c a l i n t e g r a t i o n .

W illia m so n (1971)

a r g u e s t h a t f ir m s may i n t e r g r a t e b e c a u s e " . . . . f i a t i s
f r e q u e n t l y a more e f f i c i e n t way to s e t t l e m in o r c o n f l i c t s . . .
th a n i s h a g g l i n g on l i t i g a t i o n . "
2 .1 .2

(pg. 114)

S e ttin g S t a t i s t i c a l P r i o r i t i e s
W. W illia m s ( 1 9 6 8 ), a lth o u g h s p e c i f i c a l l y w r i t i n g

a b o u t th e l i v e s t o c k i n d u s t r y , s t r e s s e d t h e n e e d f o r d e s c r i p ­
t i v e r e s e a r c h to i d e n t i f y d e f i c i e n c i e s i n t h e p r e s e n t i n f o r ­
m a tio n and p r i c e r e p o r t i n g sy ste m and to d e s ig n an im proved
sy ste m .

F u r t h e r , h e a s k s "w hat ty p e o f f e d e r a l l i v e s t o c k

and m eat m a rk e t news s e r v i c e a c t u a l l y i s n e e d e d to d a y o r
w i l l b e n e e d e d t e n y e a r s from now i f we a r e t r u l y i n t e r e s t e d
i n s e r v i n g t h e n ee d s o f th e i n d u s t r y , i n c l u d i n g p r o d u c e r s ,
as a c c u r a t e l y and m e a n i n g f u l l y as p o s s i b l e ? " (pg. 36)
He go es on t o c a l l f o r r e s e a r c h to d e te r m in e t h e ty p e s and

29

tim in g o f p r i c e and o t h e r i n f o r m a t i o n a c t u a l l y n e e d e d by t h e
a c t o r s i n c o m m e r c ia liz e d a g r i c u l t u r e , and w h ic h n ee d s f o r
im proved d a t a a r e to t a k e p r i o r i t y .
I n s t r e s s i n g th e n e e d f o r r e s e a r c h on who and w hich
u s e s s h o u ld b e s e r v e d by t h e d a t a sy s te m , a t w h ich l e v e l
p r i c e s h o u ld be r e p o r t e d , e t c . ,

t h e a u t h o r ' s c i t e d above

a r e e s s e n t i a l l y a r g u in g t h a t r e s e a r c h i s n e e d e d on th e
m eth o d o lo g y o f a d d r e s s i n g t h e econom ics o f i n f o r m a t i o n .
E i s g r u b e r (1978) when d i s c u s s i n g t h e econom ic t h e o r y o f
i n f o r m a t i o n makes th e p o i n t t h a t n e i t h e r th e t h e o r y n o r m eth­
o d o lo g y c u r r e n t l y e x i s t to a d d r e s s t h e econom ics o f in f o r m a ­
tio n .

He l i s t s f o u r f a c t o r s t h a t c o n t r i b u t e to t h i s

d e fic ie n c y :
(a) "For m ost i n f o r m a t i o n s y s te m s , p a r t i c u l a r l y th e
p u b l i c i n f o r m a t i o n s y s te m s , t h e r e i s no m a rk e t
p r i c e t h a t w ould s u g g e s t th e v a l u e o f i n f o r ­
m a tio n and i n f o r m a t i o n s y s te m s ;
(b)

i n f o r m a t i o n i s n o t a p h y s i c a l good an d , t h e r e ­
f o r e , l a c k s th e c o n c r e t e n e s s t h a t p r o v i d e s a
b a s i s f o r v a l u i n g many ite m s su c h a s , f o r
exam ple, a r e c l a m a t i o n p r o j e c t ;

(c)

m ost i n f o r m a t i o n sy ste m s do n o t h a v e an im p a c t
t h a t i s o b s e r v a b l e i n e a s i l y m e a s u r e a b le v a r i ­
a b les.

T h e re fo re , c u r r e n tly e x i s tin g econo­

m e t r i c t e c h n iq u e s a r e o f l i t t l e
e s tim a tin g in fo rm a tio n v a lu e s;

a s s is ta n c e in

30

(d)

p u b l i c and p r i v a t e v a l u e o f i n f o r m a t i o n may
d i f f e r s i g n i f i c a n t l y , " (pg , 1)

I n e s s e n c e i n f o r m a t i o n as a commodity f a l l s i n th e
r e a lm o f goods t h a t e c o n o m is ts c l a s s i f y a s c a s e s o f "m a rk e t
fa ilu re ."

I n f o r m a t i o n h a s c h a r a c t e r i s t i c s t h a t l e a d to

a d iv e r g e n c e b etw e en t h e p r i v a t e and s o c i a l r e t u r n s .
B ecause o f th e d i f f i c u l t i e s i n p l a c i n g a v a l u e on in f o r m a ­
t i o n i t i s p a r t i c u l a r l y d i f f i c u l t to d e te r m in e th e amount
and ty p e t h a t s h o u ld b e s u p p l i e d , and f o r whom i t s h o u ld
b e p r o v id e d .

The R e p o rt o f th e P a n e l on M ethodology f o r

S ta tis tic a l P rio ritie s

(1976) s t r e s s e d t h e l a c k o f a w e l l

d e v e lo p e d m e th o d o lo g y f o r d e t e r m in in g th e v a l u e o f I n fo rm a ­
t i o n and i n e s s e n c e a r g u e d f o r a u s e r o r i e n t e d a p p ro a c h
t h a t a t t e m p t s to d e te r m in e t h e b e n e f i t s o f d a t a and i n f o r ­
m a tio n to t h e u s e r s o f such d a t a and i n f o r m a t i o n .
2 .1 .3

M ark et S t r u c t u r e and I m p l i c a t i o n s F or P r i c e M easu re­
ment
Much o f t h e l i t e r a t u r e on p r i c e and p r i c e r e p o r t i n g

em p h asiz es th e p ro b lem s w h ich chan ges i n p r o d u c t i o n and
m a r k e tin g p r a c t i c e s and a r r a n g e m e n ts p o se f o r e s t i m a t i n g and
re p o rtin g p r ic e s .

Some o f t h e s e p ro b lem s h ave b e e n d i s ­

c u s s e d s i n c e t h e governm ent b eg a n t h e b u s i n e s s o f c o l l e c t i n g
and r e p o r t i n g d a t a .

R e a v is Cox (1946) d i s c u s s e d some o f th e

p ro b lem s in v o lv e d i n e s t i m a t i n g p r i c e s once one moves from
" a b s t r a c t r e a s o n i n g from p u r e l y h y p o t h e t i c a l a s s u m p tio n s o f
f a c t w here t h e p u r p o s e i s to deduce laws o f p r i c e

31

d e t e r m i n a t i o n r a t h e r th a n to m e asu re o b s e rv e d p r i c e s "
Cpg. 3 7 2 ).

Cox th e n p o i n t s o u t t h a t th e g e n e r a l a p p ro a c h

h a s b e e n to c a t e g o r i z e f a c t o r s as p r i c e and n o n - p r i c e w here
p r i c e f a c t o r s a r e l e g i t i m a t e l y r e f e r r e d to as c o s t s o f p r o ­
d u c t i o n w h i l e n o n - p r i c e f a c t o r s a r e th o s e t h a t e n t e r t h e
exch ang e e q u a t i o n i n d i r e c t l y th r o u g h th e s u b j e c t i v e v a l u a t i o n
o f th e p r o d u c t , i . e . ,

th o s e t h a t a l t e r th e demand c u r v e .

He

th e n s t a t e s t h a t f o r " . . . e m p i r i c a l econom ic r e s e a r c h i n v o l v ­
in g p r i c e m e asu rem e n t, t h i s way o f s e t t l i n g th e m a t t e r i s no
so lu tio n a t a l l .

H ere, t h e m o st i m p o r t a n t c o n s i d e r a t i o n i s

p r e c i s e l y t h a t i n p r a c t i c e one can s e p a r a t e m a rk e t b e h a v i o r
p r o p e r l y d en o m in ated p r i c e c o m p e t i t i o n from m a rk e t b e h a v i o r
p r o p e r l y c o n s i d e r e d n o n - p r i c e c o m p e t i t i o n o n ly w i t h v e r y
g reat d iffic u lty "

(pg. 3 7 2 ).

A c c o rd in g to Cox th e q u a n t i t a t i v e m easurem ent o f p r i c e s
may be p u r s u e d a lo n g two l i n e s :

firs t,

an a t t e m p t can be

made t o i s o l a t e i n d i v i d u a l m a rk e ts and to t i e g ro u p s o f b u y ­
e r s and s e l l e r s to s p e c i f i c p o i n t s o f s a l e w here p r i c e quo­
t a t i o n s can b e o b t a i n e d ; t h e se c o n d d i r e c t i o n w ould aim a t
e x p l a i n i n g d i f f e r e n c e s among p r i c e s w i t h i n a p a r t i c u l a r m ar­
k et.

In t h i s a p p ro a c h one h a s to e n s u r e t h a t t h e r e a r e no

d i f f e r e n c e s i n th e b u n d le s t r a d e d .
I t seems t h a t th e f i r s t a p p ro a c h w ould s t r e s s th e
i s o l a t i o n and t h e d e f i n i t i o n o f th e m a r k e t.

D iffe re n c e s in

p r i c e s w ould th e n b e e x p l a i n e d by th e n o n - p r i c e term s o f th e
tra d e .

32

The se c o n d approach, w ould fo c u s on d e f i n i n g th e p r o ­
d u ct,

Two a p p ro a c h e s to a c h i e v i n g t h i s r e s u l t a r e l i s t e d .

One a p p ro a c h d i v i d e s p r o d u c t i o n and d i s t r i b u t i o n i n t o s u c ­
c e s s i v e s t a g e s and d i f f e r e n t p r i c e s a r e o b t a i n e d f o r p r o d u c ts
a t th e d i f f e r e n t s ta g e s .

However, a s Cox p o i n t s o u t th e

c o n c e p ts u n d e r l y i n g t h e s t a g e s a r e i l l - d e f i n e d and i n v a r i ­
ab le.

Thus, f o r exam ple, th e te rm w h o le s a le can c o v e r such

a w ide ex p a n se o f b u s i n e s s a c t i v i t y t h a t a w h o le s a le p r i c e
d e fie s u s e fu l a n a ly s is .
The se c o n d a p p ro a c h to d e f i n i n g a c o n s i s t e n t p r o d u c t
l i e s w i t h th e a t t e m p t to a llo w f o r d i f f e r e n c e s i n s e r v i c e s
p e rfo rm e d w here t h e c o s t i s s e p a r a b l e and m e a s u r e a b le .

T his

a llo w a n c e i s w h at p r i c e c o l l e c t e r s h a v e i n mind when th e y
r e f e r to F .O .B . and d e l i v e r e d p r i c e s .

A g ain , Cox p o i n t s o u t

th e te r m in o lo g y and p r o c e d u r e s a r e i m p r e c i s e .
W ith in t h i s l a s t a p p ro a c h , Cox p o i n t s o u t t h a t a r e ­
f in e m e n t o f th e c h a n n e l down w hich goods p a s s th ro u g h s u c ­
c e s s i v e p r o c e s s e s o f p r o d u c t i o n and d i s t r i b u t i o n m ig h t b e a
u s e f u l way o f lo o k in g a t th e p ro b lem .

However, he s u g g e s ts

t h a t a more p r e c i s e a p p ro a c h would n e c e s s i t a t e lo o k in g upon
goods as moving s i m u l t a n e o u s l y th r o u g h a g ro u p o f r e l a t e d
b u t d i f f e r e n t c h a n n e ls ea ch r e p r e s e n t i n g a s u c c e s s i o n o f
e n t e r p r i s e s t h a t p e r f o rm some p a r t o f th e complex o f a c t i v ­
i t i e s n e c e s s a r y t o move goods i n t o co n su m p tio n .
C h a n n els m ig h t b e th o u g h t

o f as a g e n c ie s t h a t p h y s ­

i c a l l y h a n d l e t h e g o o d s , o r a s a g e n c ie s th r o u g h w hich i n f o r ­
m a tio n c o n c e r n in g o f f e r i n g s o f p r o d u c e r s and d i s t r i b u t o r s

33

and i n f o r m a t i o n c o n c e r n in g t h e demands o f consum ers i s
p a s s e d b a c k and f o r t h .

The t r a d i t i o n a l c h a n n e l h a s b een

t h e s u c c e s s i o n o f ow ners th r o u g h whose han d s th e goods p a s s ,
and i t i s on t h i s b a s i s t h a t goods a r e s a i d to move from
producers

t o w h o l e s a l e r , to r e t a i l t o consum er.

View ing

th e c h a n n e l as a s e t o f a g e n c ie s th r o u g h w h ich i n f o r m a t i o n
p a sse s, r e s u lt s in s u b s ta n tia lly d if f e r e n t p a tte r n s .

Cox

s t a t e s t h a t w hat i s n e e d e d , even once t h e e a s y q u e s t i o n o f
th e p r e c i s e number and n a t u r e o f c h a n n e ls to b e u s e d i s
d e te r m in e d , i s a s y ste m o f m easu rem en t a n a lo g o u s to t h o s e
i n p h y s i c a l s c i e n c e s to i n d i c a t e d i s t a n c e t r a v e l e d o r work
done.

"The m ost o b v io u s o f su c h p o i n t s a r e th e b e g i n n in g s

o f p r o d u c t i o n , i n t h e b r o a d e s t s e n s e o f t h e te rm , and th e
c o m p le tio n o f c o n s u m p tio n , a l s o i n t h e b r o a d e s t s e n s e o f th e
te rm .

F i x i n g th e p o s i t i o n o f t h e p u r c h a s e o r s a l e i n term s

o f economic work done o r t o b e done, o r o f econom ic d i s t a n c e
t r a v e l e d o r to b e t r a v e l e d , w ould i n t r o d u c e a much h i g h e r
d e g r e e o f p r e c i s i o n i n t o p r i c e m easurem ent th a n i s p o s s i b l e
th r o u g h th e u s e o f v a g u e ly d e f i n e d s t a g e s o r s t e p s o f m ar­
k e t i n g " (pg. 3 8 2 ).
More r e c e n t l y , a u t h o r s h a v e s t r e s s e d t h e im p a c ts t h a t
th e s t r u c t u r e o f p r o d u c t i o n and m a r k e tin g h av e h a d on p r i c e
r e p o r t i n g and even th e p o s s i b l e i m p l i c a t i o n s t h a t p r i c e r e ­
p o r t i n g may h a v e on a l l o c a t i o n and d i s t r i b u t i o n g iv e n t h a t
t r a d i t i o n a l p r o d u c t i o n , m a r k e tin g and p r i c i n g a rra n g e m e n ts
h ave ch ang ed.

Bonnen (1975a) a r g u e s t h a t c o n t r a c t i n g and

v e r t i c a l i n t e g r a t i o n hav e u n d erm in ed t h e t r a d i t i o n a l c o n c e p t

34

o f t h e farm t h a t u n d e r l i e s th e a g r i c u l t u r a l p r o d u c t i o n and
m a r k e tin g s t a t i s t i c s .

I n C o x 's te r m in o lo g y c o n t r a c t i n g and

v e r t i c a l i n t e g r a t i o n b l u r th e d i s t i n c t i o n b etw e en th e farm
and t h e f i r s t h a n d l e r .

Thus, i t becomes more d i f f i c u l t to

r e p o r t a p r i c e a t t h a t s t a g e i n th e p r o d u c t i o n - d i s t r i b u t i o n
sequence.
Houck (1977) i n d i s c u s s i n g t h e im p o r ta n c e t h a t th e
s t r u c t u r a l make up o f m a rk e ts p l a y i n p r i c e r e p o r t i n g p o i n t s
o u t t h e s u b s t a n t i a l d i f f e r e n c e b e tw e e n p r i c e as an a b s t r a c t
t h e o r e t i c a l c o n c e p t and p r i c e as i t e x i s t s i n r e a l w o rld
m a r k e ts .

In r e a l i t y , p r i c e s a r e h i g h l y s p e c i f i c b e c a u s e

o f term s o f s a l e , q u a l i t y and l o c a t i o n due to ea c h t r a n s a c t ­
io n , and t h i s h ig h s p e c i f i c i t y l e a d s to a g r e a t e r l a c k o f
know ledge a b o u t p r i c e on th e p a r t o f p a r t i c i p a n t s .
Houck s t a t e s " o f s p e c i a l i n t e r e s t a r e t h e f ra g m e n te d
p e r c e p t i o n s o f p r i c e t h a t seem to b e o c c u r r i n g i n m a rk e ts
w here chan ges i n te c h n o lo g y and i n s t i t u t i o n a l s t r u c t u r e
a r e u n r a v e l i n g th e t r a d i t i o n a l m a r k e tin g and p r i c e making
n e t w o r k s ."

(pg. 11)

He i n c l u d e s p r o d u c t i o n p r o j e c t s t h a t

h av e an im p o r t a n t tim e la g o r m a rk e ts w here s p o t m a rk e ts do
n o t e x i s t , as ch ang es i n m a rk e ts t h a t r e s u l t i n fra g m e n te d
p e rc e p tio n s o f p r ic e .

T hese fra g m e n te d p e r c e p t i o n s o f p r i c e

o c c u r when t h e r e a r e i n s u f f i c i e n t open m a rk e t p r i c e s f o r th e
e le m e n ts i n a p r i c i n g e q u a t i o n to i m p l i c i t l y d e r i v e th e p r i c e
o f t h e o t h e r e l e m e n ts , e . g . , Pp +

= P^.

I f Pp e q u a ls th e

p r i c e a t t h e fa rm , P^ r e p r e s e n t s th e p r i c e o f a r e s o u r c e
t h a t a l t e r s th e p r o d u c t i n tim e , p l a c e o r form , and PR

35

re p r e s e n ts th e r e t a i l p r ic e ,

th e n th e l a c k o f an open m a rk e t

p r i c e f o r two o f th e e le m e n ts r e s u l t s i n w hat Houck c a l l s a
fra g m e n te d p e r c e p t i o n o f p r i c e .

He s p e c i f i c a l l y i n c l u d e s

v e r t i c a l i n t e g r a t i o n and p r o d u c t i o n c o n t r a c t i n g i n a g r i ­
c u l t u r a l m a rk e ts as exam ples w here fra g m e n te d p e r c e p t i o n s
o f p r i c e o c c u r , and adds t h a t i n t h e s e two s i t u a t i o n s , s h o r t
ru n p r i c e r e p o r t i n g may h ave l i t t l e r e l e v a n c e and may n o t
even b e p o s s i b l e .

I n o t h e r w o rd s , he seems to be s a y in g

t h a t t h e r e may b e l i t t l e n e e d f o r s h o r t r u n p r i c e r e p o r t i n g
i n su c h m a r k e t s , and f u r t h e r m o r e , t h e r e w i l l n o t b e any
p r i c e to r e p o r t i n su c h m a r k e ts , i . e . ,

th e use o f v e r t i c a l

i n t e g r a t i o n e l i m i n a t i n g th e m a rk e t p r i c e .
A rm b ru s te r and Crom (1977) q u e s t i o n how th e d a t a c o l ­
l e c t i o n a g e n c ie s go a b o u t c o l l e c t i n g and r e p o r t i n g p r i c e s .
They p o i n t o u t t h a t th e p r i c e d a t a a r e r e p o r t e d as thou gh
a l l o f th e t r a n s a c t i o n s to o k p l a c e u n d e r s i m i l a r c o n d i t i o n s .
T his a p p e a r s to echo th e s e n t i m e n t s and c o n c e rn s o f Cox and
a l s o H o u ck 's s t a t e m e n t t h a t t r a n s a c t i o n s and p r i c e s a r e
h ig h ly s p e c if ic in r e a l i t y .
I n g e n e r a l , t h e s e c o n c e rn s a r e m a n i f e s t e d by th e d e ­
c l i n e i n im p o rta n c e o f th e c e n t r a l m a rk e ts and th e s u b s e ­
quent d e -c e n tra liz a tio n in a g r ic u ltu r a l product m a rk e ts .
R e p o rte d p r i c e s a r e l i k e l y to b e b a s e d on a s m a ll f r a c t i o n
o f t h e t o t a l o u t p u t and as su ch m ig h t n o t a d e q u a t e l y r e f l e c t
t h e t r u e m a rk e t c o n d i t i o n s .

I f fo rm u la p r i c i n g becomes p r e ­

dom inant t h e r e i s no m a rk e t p r i c e , o r a t th e v e r y b e s t
t h e r e i s o n ly a p r i c e r e p o r t e d from a t h i n m a rk e t on w hich

36

to b a s e t h e fo ru m u la ,

I n t h e e x tre m e c a s e o f a l l s a l e s

moving v i a a f o rm u la t h e r e w ould b e no r e p o r t e d p r i c e upon
w h ich to t i e t h e f o rm u la .
From an econom ic s t a n d p o i n t a m a jo r c o n c e r n w i t h
f o rm u la p r i c i n g i s t h a t p r i c e s may b e d e te r m in e d by a s m a ll
number o f t r a n s a c t i o n s , o r a s m a ll volum e, and t h e p o t e n ­
t i a l f o r m a n i p u l a t i o n o f su ch a sy ste m o f p r i c i n g .

F or

exam ple, w i t h m ost p r i c e s t i e d to a fo rm u la b a s e d on a few
tr a n s a c tio n s , th e o p p o rtu n ity e x i s t s f o r m a n ip u la tio n o f
p r i c e s , b e c a u s e p r i c e may become d iv o r c e d from m a rk e t con ­
d itio n s .
In l i g h t o f th e p r e c e d i n g i t can b e s e e n t h a t chan ges
i n t h e s t r u c t u r e o f m a rk e ts i n g e n e r a l and i n p r i c i n g p r a c ­
t i c e s i n p a r t i c u l a r h a v e t h r e e m a jo r i m p l i c a t i o n s f o r th e
p u b lic p ric e d a ta c o lle c tio n .

F irs t,

th e p r i c e d a t a need s

o f u s e r s m ust b e i d e n t i f i e d b e c a u s e we m ig h t e x p e c t d i f f e r ­
e n c e s i n p r i c e d a t a n ee d s r e l a t e d to th e s t r u c t u r e o f m ar­
k e ts.

Second, t h e d a t a a g e n c y m ust s e t p r i o r i t i e s among

com p eting u s e s , and t h i r d t h e p r i c e m u st be o p e r a t i o n a l l y
d e f i n e d and a c c u r a t e l y m e a su re d .
2 .2

E m p ir ic a l S t u d i e s I d e n t i f y i n g P r i c e M easurem ent P roblem s
and I n f o r m a t i o n Uses.
R e l a t i v e l y few s t u d i e s h av e b e e n c o n d u c te d on th e

t h r e e pro b lem s d i s c u s s e d i n th e p r e v io u s s e c t i o n .

T h is s e c ­

t i o n w i l l r e v ie w some e a r l i e r r e s e a r c h e f f o r t s t h a t h av e
a t te m p te d to e m p i r i c a l l y s tu d y t h e p ro b lem o f a c c u r a t e l y
m e a su rin g a g r i c u l t u r a l p r i c e s and th e u se o f i n f o r m a t i o n by

37

a g r ic u ltu r a l producers.
2 .2 .1

P r i c e M easurem ent S t u d i e s
One s e t o f s t u d i e s h a v e c o n c e n t r a t e d on t h e problem s

in v o lv e d i n e s t i m a t i n g an a v e ra g e p r i c e .

P r in c ip a lly , th e se

s t u d i e s c o n c e n t r a t e on m easurem ent pro b lem s and th u s im p ly a
s p e c i f i e d u s e f o r th e p r i c e d a t a .

T hese s t u d i e s th e n a tte m p t

to d e te r m in e how to i n c r e a s e t h e a c c u r a c y o f p r i c e r e p o r t i n g .
A s e r i e s o f s t u d i e s w ere u n d e r ta k e n i n ■North C a r o l i n a ,
O hio, C o lo ra d o , and t h e Red R iv e r V a lle y b etw een th e y e a r s
1950-1975 to i n c r e a s e t h e a c c u r a c y o f p r i c e d a t a e s t i m a t i o n
and r e p o r t i n g .

(USDA/SRS, 1977 and S jo d in and D ah l, 1 97 5).

These s t u d i e s e s s e n t i a l l y ta k e a s g iv e n th e p e rfo rm a n c e
o b j e c t i v e o f a c c u r a t e l y r e p o r t i n g th e a v e ra g e p r i c e f o r a
commodity i n modern a g r i c u l t u r a l m a rk e ts and th e n a d d r e s s e d
t h e p roblem s in v o lv e d i n a c c u r a t e l y e s t i m a t i n g a p r i c e .
The P r i c e R e se a rc h P r o j e c t s (USDA/SRS, 1977) su rv e y e d
a sam ple o f f a r m e r s i n N o rth C a r o l i n a , Ohio and C o lo rado to
d e te r m in e t h e m a rk e tin g f o r numerous a g r i c u l t u r a l com m odities
— l i v e s t o c k and f i e l d c r o p s .

One o f th e m a jo r g o a ls o f

t h e r e s e a r c h e f f o r t was to compare t h e outcome o f d i f f e r e n t
m ethods o f e s t i m a t i n g t h e a v e ra g e p r i c e r e c e i v e d by fa rm e rs
f o r t h e p r o d u c ts th e y s e l l .
The Red R iv e r V a ll e y s tu d y ( S jo d in and D ah l, 1975)
s u rv e y e d p o t a t o g row ers and s i x p o t a t o b u y e rs to d e te r m in e
t h e e x t e n t o f c o n t r a c t i n g and th e e f f e c t c o n t r a c t p r i c e s have
on p r i c e s r e p o r t e d .

T hese s u r v e y s w ere b o t h m a il

38

q u e s t i o n n a i r e s and i n t e r v i e w s .

I n a d d i t i o n , th e a u t h o r s

i n t e r v i e w e d t h e s t a t e o f f i c e s o f t h e Crop R e p o r tin g Board
i n N o rth D akota and M in n e so ta to d e te r m in e th e p r o c e d u r e s
u s e d i n e s t i m a t i n g and r e p o r t i n g p r i c e s .
T hese s t u d i e s i n d i c a t e t h e p o t e n t i a l f o r n o n -s a m p lin g
e r r o r s i n p r i c e e s t i m a t i o n due t o t h e p ro b lem s in v o lv e d i n
e s t a b l i s h i n g a r e p r e s e n t a t i v e sa m p lin g fram e from th e d i ­
v e r s e r a n g e o f b u y e r s i n th e m a r k e t.

I n o t h e r w o rd s , th e

d i v e r s i t y o f m a rk e tin g c h a n n e ls and b u y e r s o f a g r i c u l t u r a l
com m odities makes i t d i f f i c u l t to e s t a b l i s h an a d e q u a te
sa m p lin g fram e from w hich to draw a p r o b a b i l i t y sam p le.
T h is c o n c l u s i o n was drawn by th e P r i c e R e s e a rc h P r o j e c t
a u t h o r s when th e y r e f e r t c " t h e c o m p le x ity o f t h e m a r k e tin g
p a t t e r n f o r a g r i c u l t u r a l c o m m o d itie s, and th e c o n s e q u e n t imp r a c t i b i l i t y o f e s t a b l i s h i n g any s i n g l e sa m p lin g fram e t h a t
w i l l s u f f i c e f o r p r i c i n g a l l co m m o d itie s" (page 1 5 ).

A sim ­

i l a r c o n c l u s i o n was r e a c h e d by th e a u t h o r s o f th e Red R iv e r
V a ll e y P r i c e R e p o r tin g R e s e a rc h P r o j e c t when th e y p o i n t o u t
t h a t th e r e le v a n t p r ic e f o r r e p o r tin g purposes i s th e p r ic e
r e c e i v e d by th e g ro w er f o r th e p ro d u c e and, g iv e n th e ra n g e
o f m a r k e tin g c h a n n e ls and s e l l i n g p r o c e d u r e s , i t i s c l e a r
t h a t a number o f s o u r c e s e x i s t t h a t m ig h t p r o v i d e t h i s i n ­
f o r m a tio n .
The P r i c e R e s e a rc h P r o j e c t a l s o s t r e s s e d t h e i d e n t i ­
f i c a t i o n o f t h e i m p o r t a n t r o l e p la y e d by t h e in d e p e n d e n t
b u y e r and th e d i f f e r i n g im p a c t o f t h e c o o p e r a t i v e as a means
of sa le .

More i m p o r t a n t l y , th e a u t h o r s n o t e t h a t ,

"The

39

C hannel S urvey p r o v id e d some e v id e n c e t h a t g e o g r a p h i c a l
d i s t r i b u t i o n , s i z e o f town, and ty p e o f d e a l e r i n f l u e n c e s
p r i c e " (p g, 3 0 ),

Thus, t h i s f i n d i n g te n d s to im p ly t h a t

d e f i n i n g th e p o p u l a t i o n o r e s t a b l i s h i n g a sa m p lin g fram e
w i l l n o t be s u f f i c i e n t .

A c c u r a te p r i c e e s t i m a t i o n would

n ee d t o n o t e th e ty p e o f b u y e r , and t h i s q u i t e p o s s i b l y
would i n c l u d e th e i n s t i t u t i o n a l r e l a t i o n s h i p b etw e en th e
b u y e r and s e l l e r .
An i n t e r e s t i n g and p e rh p a s r e l a t e d o b s e r v a t i o n was
made w i t h r e g a r d to i d e n t i f y i n g th e s o u r c e o f v a r i a n c e i n
p r i c e s p a i d by f a rm e rs f o r goods th e y p u r c h a s e d .

I t was

fou n d t h a t th e p r i c e s p a i d by f a r m e r s v a r y more b etw een
in d e p e n d e n t and c h a in s t o r e s th a n th e y do b etw e en g e o g ra p h ­
i c a l a r e a s o r b etw e en towns o f d i f f e r e n t s i z e s .

(USDA/SRS,

p p . 2 6 0 -2 6 6 ).
Some o t h e r m a jo r f i n d i n g s o f t h e s e s t u d i e s w ere t h a t
i t i s v e r y d i f f i c u l t to e s t i m a t e v a l i d a v e ra g e p r i c e s b e ­
c a u se o f t h e v a r i a t i o n w i t h i n a g e n e r a l p r o d u c t s p e c i f i c a ­
tio n .

I n f a c t , t h i s v a r i a t i o n was found t o be t h e m a jo r

c o n t r i b u t o r to th e v a r i a n c e i n e s t i m a t e d p r i c e s .

A ls o , i t

i s d i f f i c u l t to e s t i m a t e p r i c e s a t th e b e g in n in g and end o f
th e m a r k e tin g s e a s o n due to t h e p a u c i t y o f m a r k e tin g s f o r
many c o m m o d itie s .
The a u t h o r s i n t h e Red R iv e r V a lle y S tud y a l s o s t r e s s e d
t h e problem s in v o lv e d w i t h e s t i m a t i n g and r e p o r t i n g p r i c e s
i n m a rk e ts c h a r a c t e r i z e d by b o th open m a rk e t and p r e - s e a 3 o n
co n tra c t sa le s .

They found e v id e n c e t h a t th e r e p o r t s o f

40

p r i c e s p a i d to f a r m e r s b y p r o c e s s o r s v i a c o n t r a c t s d i f f e r e d
m a rk e d ly from t h e p u b l i s h e d a v e r a g e p r i c e f o r a l l t y p e s o f
p o t a t o e s b e c a u s e t h e c o n t r a c t p r i c e s may b e a r l i t t l e

resem ­

b la n c e to th e p r ic e s e x i s t i n g a t h a r v e s t.
F or a c c u r a t e l y e s t i m a t i n g an a v e ra g e p r i c e r e c e i v e d ,
i t w ould seem t h a t t h e p r e c e d i n g p ro b lem may n o t b e t h a t
se rio u s .

F o r a c c u r a c y i n m easu rem en t, t h e d a t a c o l l e c t i o n

ag en cy w ould s im p ly n e e d to m o n ito r th e amount t r a d e d i n
b o t h th e open m a rk e t and t h e c o n t r a c t m a rk e t so as to u p ­
d a t e t h e w e ig h ts to a t t a c h to e a c h .

However, i t s h o u ld

a l s o b e n o te d t h a t , a l th o u g h th e s o l u t i o n to t h i s p ro b lem
seems r e l a t i v e l y s im p le , i t , d o e s impose a g r e a t e r b u rd e n on
th e d a t a agency to c o n t i n u o u s l y u p d a te d a t a on t h e flo w o f
com m odities and h e n c e th e w e ig h ts to a t t a c h to open m a rk e t
and c o n t r a c t s a l e s .
The s t u d i e s m e n tio n e d above e s s e n t i a l l y s t r e s s e d some
o f th e pro blem s in v o lv e d w i t h a c c u r a c y i n th e m easu rem en t o f
a g ric u ltu ra l p ric e s .

They p r i n c i p a l l y a d d r e s s e d su c h p r o ­

blems as d e f i n i n g a s a t i s f a c t o r y sa m p lin g fram e f o r p r o ­
b a b i l i t y sa m p lin g ; t h e v a r i e t y and c o m p le x ity o f m a r k e tin g
c h a n n e l s , a c t o r s , and s e l l i n g a r r a n g e m e n ts ; th e e f f e c t s o f
c o n t r a c t s a l e s , on e s t i m a t e d p r i c e s ; e t c .

T h ere was e v id e n c e

t h a t t h e v a r i a t i o n i n p r i c e s r e p o r t e d i s a t t r i b u t e d t o th e
ty p e o f b u y e r and th u s im p l ie s th e p o t e n t i a l l y im p o r t a n t
r o l e p la y e d by t h e i n s t i t u t i o n a l s e t t i n g o f th e s a l e s a g r e e ­
m ent,

T hese s t u d i e s a l s o p o i n t e d o u t th e p e r s i s t e n t and

i m p o r t a n t p ro b lem o f n o n - r e s p o n s e and n o n - c o o p e r a t i o n on th e

41

p a r t o f m a rk e t p a r t i c i p a n t s ,
T hese ty p e s o f s t u d i e s ; h a v e p r i n c i p a l l y c o n c e n t r a t e d
on m easurem ent a c c u r a c y .

In o t h e r w o rd s, t h e s e s t u d i e s h av e

b a s i c a l l y ta k e n as g iv e n t h e c o n c e p t o f p r i c e th e y w ant to
e s t i m a t e and h av e th e n a d d r e s s e d t h e p rob lem s o f
m e a su rin g t h a t p r i c e .

a c c u ra te ly

In t h a t s e n s e s t u d i e s o f t h i s ty p e

a p p e a r to c o r r e s p o n d more c l o s e l y w i t h th e d i s c i p l i n a r y
t r a i n i n g o f th e s t a t i s t i c i a n s .
2 .2 .2

P r i c e D ata and I n f o r m a t i o n Use S t u d ie s
A se co n d g rou p o f s t u d i e s in v o lv e s a t te m p ts to lo o k a t

f a r m e r / p r o d u c e r i n f o r m a t i o n n eed s and u s e s .

S tu d ie s o f t h is

ty p e s h o u ld p r o v i d e u s e f u l i n f o r m a t i o n i n th e s e t t i n g o f
s ta tis tic a l p rio ritie s.

I n o t h e r w o rd s, t h e s e s t u d i e s w i l l

g iv e an i n d i c a t i o n o f th e i n f o r m a t i o n n ee d s o f p r o d u c e r s i n
d e c i s i o n m aking.
As was a r g u e d e a r l i e r , i t seems l i k e l y t h a t t h e u s e o f
i n f o r m a t i o n and h e n c e t h e demand f o r i n f o r m a t i o n and d a t a
w ould l i k e l y be r e l a t e d t o t h e s t r u c t u r e o f th e m a rk e t.
Thus, one o f t h e r e l e v a n t v a r i a b l e s t h a t n e e d s p r e s e n t a t i o n
i s t h e s t r u c t u r e o f t h e m a rk e t and th e s e l l i n g a rra n g e m e n t.
One c h a r a c t e r i s t i c o f modern a g r i c u l t u r a l p r o d u c t i o n
and m a r k e tin g i s t h e e x i s t e n c e o f f o rw a r d p r i c i n g o r d e f e r ­
red d e liv e ry .

A s u b s t a n t i a l p o r t i o n o f a g r i c u l t u r a l commod­

i t i e s i s s o l d v i a s u c h a mechanism .

A lth o u g h t h e r e a r e no

p r e c i s e f i g u r e s on t h e volume s o l d v i a fo rw a r d c o n t r a c t s ,
th e e x i s t i n g numbers i n d i c a t e t h a t t h e r e a r e d i f f e r e n c e s

42

among c o m m o d itie s .
A s tu d y on th e U .S, g r a i n t r a d e t h a t in v o lv e d s u r v e y in g
a random sam ple o f g r a i n s t o r a g e f a c i l i t i e s

(H e ifn e r, e t a l . ,

1977) e s t i m a t e d t h a t a p p r o x im a te l y o n e - t h i r d o f th e w h ea t and
o n e - h a l f o f th e U .S. c o r n and so y b e an c ro p s p u r c h a s e d from
f a r m e r s w ere i n some s o r t o f d e f e r r e d d e l i v e r y a g ree m en t
(p p. 4 5 - 4 9 ) .

F o r p o t a t o e s , " t h e amount c o n t r a c t e d can v a r y

from 30 to 75 p e r c e n t o f th e p r o c e s s o r s ' r e q u i r e m e n t s .
P o ta to in d u s try e x p e rts g e n e ra lly ag ree t h a t in a ty p ic a l
y e a r p r o c e s s o r s w i l l c o n t r a c t f o r a b o u t 50 p e r c e n t o f t h e i r
n e e d , buy i n th e open m a rk e t a b o u t 45 p e r c e n t o f th e y s u p p ly
and grow a b o u t 5 p e r c e n t , "

( P h i l l i p s , e t a l . , 1975, p . 1 3 ),

Inasm uch as t h e u s e r and u s e o f p r i c e d a t a and i n f o r ­
m a tio n i s i m p o r t a n t i n e v a l u a t i n g an i n f o r m a t i o n and d a t a
s y s te m , u se o f a g e n ts and b r o k e r s would be a s t r u c t u r a l
v a r i a b l e w o rth y o f c o n s i d e r a t i o n .

We m ig h t e x p e c t t h a t a

p r o d u c e r who t u r n s t h e m a r k e tin g f u n c t i o n o v e r to an a g e n t
o r o r g a n i z a t i o n would be a l e s s a c t i v e u s e r o f m a r k e tin g i n ­
f o r m a tio n th a n a p r o d u c e r who s e l l s h i s own p r o d u c t .

A

s tu d y i n C a l i f o r n i a t h a t in v o lv e d i n t e r v i e w i n g 150 p o t a t o
g ro w ers ( J e s s e n and M i k l i u s , 1962) fo un d some e v id e n c e t h a t
th o s e engaged i n th e m a r k e tin g d e c i s i o n a l s o o b t a i n e d and
u se d more m a r k e tin g i n f o r m a t i o n th a n t h o s e who w ere l e s s
a c t i v e l y in v o lv e d i n m a r k e tin g .

I t a l s o i s w o r th n o t i n g

t h a t i n t h e C a l i f o r n i a s tu d y o n ly 14 p e r c e n t o f t h e g ro w ers
p e rfo rm e d t h e i r own m a r k e tin g f u n c t i o n w i t h th e r e m a in d e r
r e l y i n g on a b r o k e r o r a c o o p e r a t i v e o r g a n i z a t i o n ( p g . I I ) ,

43

A su rv e y q u e s t i o n n a i r e and p e r s o n a l i n t e r v i e w s o f
a sam ple o f M ichigan p r o d u c e r s o f numerous a g r i c u l t u r a l
com m odities i d e n t i f i e d o th e r' v a r i a b l e s t h a t seemed to i n ­
f l u e n c e i n f o r m a ti o n and d a t a u s a g e .

More s p e c i f i c a l l y ,

th e M ichigan s tu d y s u g g e s te d t h a t t h e k in d o f p r o d u c t and
th e manner o f p r i c i n g seemed r e l a t e d to t h e u s e f u l n e s s o f
m a rk e tin g in f o r m a ti o n and t h e d e c i s i o n o f w here to s e l l
and th e p r i c e t o a c c e p t (G e ra ld , 1960).

F u r t h e r , th e

a u t h o r s s t a t e t h a t t h o s e p r o d u c e r s s e l l i n g a t an a u c t i o n
seemed to be l e s s c o n c e rn e d w i t h p r i c e a c c e p t a b i l i t y th a n
th o s e who h ave th e p r i c e s e t by t h e b u y e r a t d e l i v e r y , and
t h a t a l a r g e r p r o p o r t i o n o f th e l a r g e l i v e s t o c k grow ers
r e l i e d on n o n - l o c a l o r "mass m ed ia" p r i c e in f o r m a t i o n i n
d e c i s i o n m aking.

In a d d i t i o n , th e a u t h o r s s t a t e t h a t t h e r e

seems to be some e v id e n c e t h a t y o u n g er, b e t t e r e d u c a te d and
l a r g e r g r o s s income fa r m e r s u s e more m a r k e tin g in f o r m a ti o n
(pp. 1 3 - 1 5 ) .
I d e n t i f y i n g th e ty p e s o f i n f o r m a t i o n and th e s o u rc e s
o f t h i s in f o r m a ti o n was a m a jo r g o a l o f m ost o f th e s t u d i e s
re v ie w e d .

P r i c e in f o r m a t i o n i n v a r i o u s form s was s t r e s s e d

f r e q u e n t l y by th e r e s p o n d e n t s .

In f a c t ,

t h e M ich igan s tu d y

c o n c lu d e d t h a t p r i c e - o u t l o o k and c u r r e n t p r i c e s w ere u se d
by more fa rm e rs th a n any o t h e r ty p e o f i n f o r m a t i o n .

These

r e s u l t s m ig h t b e e x p e c te d inasm uch as t h e r e i s a la g i n th e
p r o d u c t i o n p r o c e s s so t h e p r o d u c e r i s i n t e r e s t e d i n a f o r ­
ward p r i c e t h a t g iv e s an i n d i c a t i o n o f th e m a rk e t a t p l a n t ­
in g tim e , and a t a l a t e r tim e t h e p r o d u c e r i s i n t e r e s t e d in

44

k e e p in g a b r e a s t o f r a p i d changes i n t h e m a rk e t so as to
c a p t u r e th e b e n e f i t s , o r a v o id th e c o s t s , o f changes i n
s p o t m a rk e t p r i c e s .
Some o f t h e s e s t u d i e s have a tte m p te d to a s s e s s th e
r o l e t h a t f u t u r e s m a rk e ts p la y i n p r i c i n g a g r i c u l t u r a l com­
m o d it ie s .

The s tu d y o f th e U.S. g r a i n t r a d e ( H e if n e r , e t a l . )

co n c lu d e d t h a t f u t u r e s p r i c e s p l a y a m a jo r r o l e i n g r a i n
p ric in g .

A n o th er s tu d y c o n d u c te d f o r th e Commodity F u tu r e s

T ra d in g Commission by th e USDA, su rv e y e d a sam ple o f U .S.
f a rm e rs w i t h g r o s s commodity s a l e s o f g r e a t e r th a n $10,000
to d e te r m in e th e e x t e n t and n a t u r e o f t h e i r t r a d i n g i n
f u t u r e s m a r k e ts .

(USDA/SRS 1 978).

The s tu d y fou n d t h a t

80% o f th e f a rm e rs who engage i n fo rw a rd c o n t r a c t i n g c la im
t h a t th e fo rw a rd p r i c e i s b a s e d on th e f u t u r e s p r i c e . ^

F ur­

t h e r , t h i s s tu d y found t h a t th e m anagers o f l a r g e r fa rm s,
i.e .,

o v e r $100,000 i n g r o s s s a l e s , showed a h i g h e r f r e ­

quency o f u s e o f f u t u r e s p r i c e s th e n th e m anagers o f
s m a l l e r fa rm s.

A q u e s t i o n n a i r e s e n t to a l l p o t a t o grow ers

i n Maine a l s o fou nd e v id e n c e t h a t grow ers who engage i n
p re-sea so n c o n tra c tin g fu e l fu tu re s p ric e s are u s e fu l in
n e g o t i a t i n g f o r th e p r e - s e a s o n c o n t r a c t s .

( P e ls u e , 1 9 7 5 ).

^ The 1977 s u rv e y r e s u l t s w ere 80 p e r c e n t w h ile th e
1976 r e s u l t s w ere 48 p e r c e n t . Some o f t h i s i n c r e a s e m ig h t
be t i e d to a q u e s t i o n n a i r e e f f e c t from th e p r e c e d in g y e a r ' s
s u r v e y . However, i t s t i l l a p p e a rs a s u b s t a n t i a l p o r t i o n o f
th e fa r m e r s c la im to u s e f u t u r e s p r i c e s when s ig n i n g f o r ­
w ard c o n t r a c t s .

45

An i m p o r t a n t c o n s i d e r a t i o n i n e v a l u a t i n g p r o d u c e r
u s e s o f d a t a and i n f o r m a t i o n i a th e q u e s t i o n o f w hich
s o u r c e s o f th e i n f o r m a t i o n th e y s t r e s s .

In o t h e r w o rd s,

w hich a c t o r s i n t h e m a rk e t and i n f o r m a t i o n sy ste m p r o v id e
th e i n f o r m a t i o n f o r th e p r o d u c e r s .

Over h a l f o f th e Maine

p o t a t o g ro w ers c la im to f r e q u e n t l y u s e d e a l e r s / b r o k e r s ' and
r a d i o and TV r e p o r t s .

(P e lsu e , p. 4 ).

The s tu d y on g r a i n

p r i c i n g s t a t e s t h a t th e g r a i n m e rc h a n ts and b r o k e r s " s t a n d
a t th e c e n t e r o f th e f lo w o f g r a i n m a r k e tin g i n f o r m a t i o n . "
( H e if n e r e t a l . , p g . 6 ) .

T hus, t h e s e s t u d i e s i d e n t i f y

a g e n t s / b r o k e r s as v e r y i m p o r ta n t s o u r c e s o f m a rk e tin g i n f o r ­
m a tio n .
However, th e r e l a t i v e im p o rta n c e o f s o u r c e s o f c u r r e n t
m a rk e t i n f o r m a t i o n may b e r e l a t e d to th e s i z e o f th e farm .
The s tu d y on th e C a l i f o r n i a p o t a t o i n d u s t r y found t h a t l a r g e
f irm s had a c c e s s to and s t r e s s e d th e u s e o f t e l e t y p e s w h ile
th e s m a l l e r g ro w ers s t r e s s e d n e w s p a p e r s , r a d i o and g e n e r a l
farm p u b l i c a t i o n s as s o u r c e s o f i n f o r m a t i o n .

( J e s s e n and

M ik liu s, pg. I I ) .
The u s e s t h a t p r o d u c e r s made o f m a r k e tin g in f o r m a t i o n
w ere v a r i e d .

The d e c i s i o n s on w here to s e l l t h e i r p r o d u c t

and th e p r i c e t o a c c e p t w ere m e n tio n e d t h e m ost f r e q u e n t l y
as th e r e a s o n s f o r f i n d i n g m a rk e tin g i n f o r m a t i o n u s e f u l by
M ich ig an p r o d u c e r s ( G e ra ld , pg. 4 ) .

Maine p o t a t o g ro w e rs ,

on th e o t h e r h a n d , s t r e s s e d q u a n t i t y and v a r i e t y o f p o t a t o e s
to p l a n t and th e y u s e d th e c u r r e n t m a rk e t p r i c e and th e
fu tu re s p r ic e f o r th e se d e c is io n s .

46

The g r a i n t r a d e s t u d y c l a s s i f i e d th e u s e o f p r i c e i n ­
f o r m a tio n i n t o two g r o u p s :

1) i t s u s e i n making th e p r i c i n g

d e c i s i o n and 2) i t s u s e i n a s s e s s i n g g e n e r a l m a rk e t t r e n d s .
One o f t h e more c o n s i s t e n t r e s u l t s a c r o s s a l l o f t h e s e s t u d ­
i e s was t h e f i n d i n g t h a t USDA r e p o r t s a r e o f l i t t l e v a l u e i n
making p r i c i n g o r m a r k e tin g d e c i s i o n s .

E ig h ty p e r c e n t o f

th e r e s p o n d e n t s i n t h e C a l i f o r n i a p o t a t o s tu d y r e c e i v e d
M arket News R e p o rts and m ost s a i d th e y u s e d t h e s e r e p o r t s
f o r a f t e r s a l e e v a l u a t i o n s o f th e p r i c e s th e y r e c e i v e d
( J e s s e n and M i k l i u s , p g. I I ) .

T h is r e s u l t i s s i m i l a r to

t h e M ic h ig an s tu d y o f a few y e a r s e a r l i e r (G e ra ld , 19 60 ).
The g r a i n t r a d e s tu d y fo u n d t h a t p r o d u c e r s s t r e s s e d
th e a s s e s s m e n t o f m a rk e t t r e n d s as a u s e o f USDA p r i c e r e ­
p o r t s w i t h much l e s s em phasis on u s e f o r t h e p r i c i n g d e c i ­
sio n .

F u r t h e r , t h e a u t h o r s o f t h e s tu d y c o n c lu d e d t h a t th e

USDA r e p o r t s h av e l i m i t e d a p p l i c a b i l i t y f o r p r i c i n g d e c i ­
s i o n s b e c a u s e th e y a r e o u t o f d a t e when r e c e i v e d ( H e if n e r
e t a l . , pp. 5 9 - 6 5 ) .
I t s h o u ld b e n o t e d t h a t th e v a l u e o f USDA p r i c e s m ig h t
b e u n d e r e s t i m a t e d i f one r e l i e s s o l e l y on t h e p r i c i n g and
m a r k e tin g d e c i s i o n .

A s u b s t a n t i a l number o f t h e p r o d u c e r s

c la im e d to r e c e i v e and u s e USDA r e p o r t s (80% f o r th e C a l i ­
f o rn ia stu d y ),

A ls o , i n M aine, t w o - t h i r d s o f th e p r o d u c e r s

c la im e d to r e f e r to USDA p r i c e s f r e q u e n t l y o r o c c a s i o n a l l y ,
and by r a n k i n g i n f r e q u e n c y , t h o s e r e p o r t s w ere f o u r t h o f
t e n s o u r c e s ( P e l s u e , pp. 6 - 7 ) .

I t appears t h a t p ro d u cers

may r e l y on th e USDA r e p o r t s t o p r o v i d e a ch eck on th e

47

th e p r i c e s o f f e r e d and p a i d to them by t h e i r b r o k e r s / d e a l e r s
or o th e r b uyers.
Three m a jo r i m p l i c a t i o n s f o r improvem ents t h a t sh o u ld
be made i n th e c u r r e n t i n f o r m a t i o n system emerge from th e s e
stu d ie s.

The C a l i f o r n i a p o t a t o p r o d u c e r s s t r e s s e d th e n eed

f o r a c c u r a t e and tim e ly d a t a and i n f o r m a t i o n and. c la im e d
t h a t th e m a jo r problem s w ith p r i c e i n f o r m a t i o n was t h a t i t
was i n f a c t i n a c c u r a t e and t h a t i t was to o l a t e to be o f
v a l u e i n d e c i s i o n making ( J e s s e n and M ik l iu s , pp. 3 - 5 ) .

The

g r a i n t r a d e s tu d y s t r e s s e d th e n ee d f o r in f o r m a t i o n from
numerous l o c a t i o n s to a s s e s s m a rk e t c o n d i t i o n s b e c a u s e o f
th e d i s p e r s e d n a t u r e o f th e p r i c i n g i n g r a i n m a rk e ts ( H e if n e r
e t a l . , pp. 6 6 - 6 8 ), and th e M ichig an s tu d y found e v id e n c e
t h a t a l a r g e r p r o p o r t i o n o f h i g h e r income f a rm e rs ( l a r g e r
farm s) r e l i e d on "mass m edia" ( n o n - l o c a l ) s o u r c e s o f p r i c e
i n f o r m a t i o n when making d e c i s i o n s .

We m ig h t e x p e c t t h i s

r e s u l t , g iv e n t h a t th e r e l e v a n t m a rk e t h as expanded due to
p r o c e s s i n g and modern t r a n s p o r t a t i o n .

In o t h e r w ord s, p r o ­

d u c e rs may be more aware o f th e in te r d e p e n d e n c e o f numerous
l o c a l m a r k e ts , and i n f a c t a r e more s o p h i s t i c a t e d i n t h e i r
e v a l u a t i o n o f m a rk e tin g a l t e r n a t i v e s .
The p ro blem o f n o n - r e s p o n s e i n p r i c e e s t i m a t i o n su rv e y s
i s a l s o f r e q u e n t l y s t r e s s e d i n d i s c u s s i n g th e p u b l i c d a t a
and in f o r m a ti o n sy stem .

The n o n - r e s p o n s e p roblem m ig h t be

r e l a t e d to a d i s s a t i s f a c t i o n w i t h th e p u b l i c d a t a and i n f o r ­
m a tio n sy stem .

I n o t h e r w ords, p o s s i b l y th e s u b j e c t s o f

s u r v e y s p e r c e i v e t h a t th e r e p o r t i n g o f th e r e s u l t a n t

48

in f o rm a tio n , i s o f l i t t l e v a l u e to them.
The s t a t i s t i c a l b r a n c h o f th e Econom ics, S t a t i s t i c s ,
C o o p e r a tiv e S e r v i c e o f th e USDA (ESCS:

S t a t i s t i c s ) acknow­

l e d g e s i n a s t u d y by t h e c o m p t r o l l e r G e n e ra l (GAO, 1978)
t h a t f a r m e r s a r e a p r im a r y t a r g e t group o f t h e a g e n c ie s
re p o rts

(P la n tin g in te n tio n s , p ro d u c tio n e s tim a te s , e t c . ) .

Y et t h e c o m p t r o l l e r ' s r e p o r t found t h a t o n ly 45% o f th e
fa r m e r s i n t e r v i e w e d i n th e f i v e s t a t e s sam pled acknow ledged
t h a t th e y r e c e i v e th e a g e n c i e s r e p o r t s , and o v e r h a l f s a i d
th e y w ere n o t aware o f t h e s e go vern m en t r e p o r t s .

S e v e n ty -o n e

p e r c e n t o f t h e f a r m e r s i n t e r v i e w e d b e l i e v e d t h a t th e r e p o r t s
w ere o f l i t t l e u s e to them i n t h e i r p r o d u c t i o n and m a r k e tin g
d e c i s i o n s , w h ile 44 p e r c e n t f e l t t h e r e p o r t s w ere i n a c c u r a t e .
In g e n e r a l , f a r m e r s f e l t , t h a t th e r e p o r t s w ere m a n ip u la te d
and t h a t th e y w ere r e c e i v e d

to o l a t e to be o f u s e i n p r o d u c ­

t i o n and m a r k e tin g d e c i s i o n s

(GAO, pp. 4 - 1 3 ) .

The Red R iv e r V a ll e y s tu d y a l s o fo u n d e v id e n c e t h a t
th e re i s a g e n e ra l d i s s a t i s f a c t i o n w ith p r ic e re p o r tin g
and t h e a u t h o r s c o n c lu d e t h a t " N e i t h e r b u y e r s n o r s e l l e r s
a r e l i k e l y to v o l u n t a r i l y c o o p e r a te by ex p e n d in g tim e and
e f f o r t s on an e n d e a v e r w hich th e y f e e l i s o f no v a l u e to
th e m .”

( S jo d i n and D ah l, p . 5 6 ) .

T hese a u t h o r s th e n recom ­

mend t h a t e f f o r t s b e u n d e r ta k e n to m eet s p e c i f i c n e e d s o f
b u y e rs and s e l l e r s so as to

g iv e them a s t a k e i n im p ro v in g

t h e q u a l i t y and a c c u r a c y o f p r i c e d a t a .
I n summary, two ty p e s o f s t u d i e s w ere r e v ie w e d .

The

f i r s t s e t o f s t u d i e s p r i n c i p a l l y a d d r e s s e d t h e p ro b le m o f

49

a c c u r a t e l y m e a su rin g p r i c e s .

The se co n d ty p e o f s t u d i e s

a tte m p te d to i d e n t i f y th e ty p e of i n f o r m a t i o n u se d by p r o d u c e r s .
The p r i c e m easurem ent s t u d i e s i l l u s t r a t e d th e im por­
ta n c e t h a t th e s t r u c t u r e o f th e m a rk e t, i . e . ,

th e d i v e r s i t y

o f a c t o r s and m a rk e tin g c h a n n e l s , and th e pro b lem s t h a t th e
s t r u c t u r e p o se s f o r a c c u r a t e l y e s t i m a t i n g a p r i c e r e c e i v e d
by f a r m e r s .
F u r t h e r , t h e s e s t u d i e s found e v id e n c e o f v a r i a n c e s
betw een p r i c e s by th e ty p e o f b u y e r .

I n o t h e r w o rd s, p r i c e

q u o te s d i f f e r e d betw een d i f f e r e n t ty p e s o f b u y e r s .

A lth o u g h

th e a u t h o r s d id n o t e l a b o r a t e c o n c e rn in g th e ways i n w hich
th e b u y e rs d i f f e r e d , i t i s l i k e l y t h a t th e d i f f e r e n c e s w ere
a r e s u l t o f s t r u c t u r a l c h a r a c t e r i s t i c s such as th e term s o f
th e t r a n s f e r a g re e m e n t, f u n c t i o n s p e rfo rm e d and p o s s i b l y
even th e s i z e o f th e f irm s and th e o r g a n i z a t i o n o f th e m a rk e t.
The s t u d i e s i d e n t i f y i n g t h e u s e s and s o u r c e s o f i n f o r ­
m a tio n by p r o d u c e r s found e v id e n c e t h a t USDA p r i c e s w ere
u se d p r i n c i p a l l y f o r a f t e r s a l e e v a l u a t i o n o f th e p r i c e
th e y r e c e i v e d .

B ro kers and d e a l e r s w ere i d e n t i f i e d as v e r y

im p o r ta n t s o u r c e s o f p r i c e i n f o r m a t i o n and p r o d u c e r s g e n e r ­
a l l y s t r e s s e d b o th c u r r e n t p r i c e s and p r i c e o u tlo o k f o r e ­
c a s t s as in f o r m a t i o n th e y u s e d f r e q u e n t l y .

F u rth e r, p ro ­

d u c e rs i n g e n e r a l f e l t t h a t USDA p r i c e r e p o r t s w ere i n a c c u r ­
a t e and to o l a t e to be o f u s e i n d e c i s i o n m aking.
I n g e n e r a l th e two s e t s o f s t u d i e s te n d to n e g l e c t
th e in te r d e p e n d e n c e b etw een th e a c t o f m e a su rin g p r i c e d a t a
and t h e u se t h a t i s to be made o f th e p r i c e d a t a .

In o th e r

50

w o rd s, b e f o r e one can a c c u r a t e l y m easu re th e p r i c e d a t a
n eed ed f o r a d e c i s i o n one m u st d e c i d e w hat to m e asu re.

Thus,

t h e s t u d i e s i d e n t i f y i n g th e p r o d u c e r u s e s o f p r i c e d a t a i s
a s t e p i n t h e d i r e c t i o n o f e s t a b l i s h i n g p r i o r i t i e s among
a lte r n a tiv e d e fin itio n s of p ric e .
However, th e s t u d i e s on i n f o r m a t i o n u s e do n o t a t te m p t
to r e l a t e i n f o r m a t i o n u s e by p r o d u c e r s to th e s t r u c t u r e o f
th e m a rk e t.

I n o t h e r w ords, t h e s e s t u d i e s g e n e r a l l y assume

a homogeneous demand f o r p r i c e d a t a and i n f o r m a t i o n and n e ­
g l e c t p o t e n t i a l l y i m p o r ta n t d i f f e r e n c e s i n th e o r g a n i z a t i o n
o f th e p r o d u c t i o n and m a rk e tin g seq u en ce t h a t may a f f e c t
i n f o r m a t i o n u s e s and n e e d s .
The P r i c e R e se a rc h P r o j e c t s t u d i e s do im ply t h a t m ar­
k e t s t r u c t u r e , may a f f e c t t h e e s t i m a t e s o f p r i c e s r e c e i v e d
by f a r m e r s .
q u e stio n ,

However, th e s e p e r a t i o n o f th e s t a t i s t i c a l

(m easurem ent from th e economic q u e s tio n ) an

a n a l y s i s o f t h e u s e s o f th e p r i c e d a t a , does n o t a llo w f o r
a s y s t e m a t i c e v a l u a t i o n o f th e p r i c e d a t a and in f o r m a ti o n
t h a t i s c u r r e n t l y a v a i l a b l e to p r o d u c e r s .
i n m easurem ent te c h n iq u e s may do l i t t l e

Thus, im provem ents

to improve th e a c c u r ­

acy o f d a t a to th e e x t e n t th e c o n c e p t and i t s o p e r a t i o n a l i ­
z a t i o n t h a t i s b e in g m easured does n o t a c c u r a t e l y r e p r e s e n t
r e a l i t y o r f i t th e d e c i s i o n s t h a t m ust be made.
I n o t h e r w o rd s, t h e s e s t u d i e s do n o t e x p l i c i t l y r e c o g ­
n i z e t h a t , a c c u r a c y h as t h r e e com ponents;
acy,

(1) c o n c e p tu a l a c c u r ­

(2) o p e r a t i o n a l a c c u r a c y and (3) m easurem ent a c c u r a c y .

51

Are th e c o n c e p t u a l i z a t i o n and o p e r a t i o n a l i z a t i o n a c c u r a t e
r e f l e c t i o n s o f r e a l i t y and th e d i s c u s s i o n s t h a t m ust be
made and i s t h e o p e r a t i o n a l i z e d c o n c e p t b e in g m easured w ith
an a c c e p t a b l e d e g re e o f a c c u ra c y ?

The c o n c e p u ta l and o p e r ­

a t i o n a l q u e s t i o n f i r s t in v o lv e s e t t i n g p r i o r i t i e s , i . e . ,
d e te rm in g w hich u s e s t h e p r i c e d a t a a r e to <be s e r v e d , and
o p e r a t i o n a l l y d e f i n i n g th e c o n c e p t t h a t i s to b e m easured .
Then t h e m easurem ent q u e s t i o n would b e a d d r e s s e d .
The p r e s e n t s tu d y w i l l s p e c i f i c a l l y a t te m p t to r e l a t e
d i f f e r e n c e s i n th e s t r u c t u r e o f p r o d u c t i o n and m a rk e tin g to
d i f f e r e n c e s i n p r i c e d a t a u s e s and n e e d s .

Then th e d a t a and

c o n c e p ts o f p r i c e t h a t a r e e s t i m a t e d and r e p o r t e d by USDA
w i l l be e v a l u a t e d i n term s o f t h e s e u s e s and n e e d s .

In

o t h e r w o rd s, t h i s s tu d y w i l l a t te m p t to overcome th e f a i l ­
u r e s o f p r e v io u s s t u d i e s by making th e r e l a t i o n s h i p o f p r i c e
d a t a u s e and p r i c e d a t a c o l l e c t i o n more e x p l i c i t .
2 .3

Summary
Numerous a u t h o r s have e x p r e s s e d co n c e rn o v e r th e im­

p l i c a t i o n s t h a t changes i n a g r i c u l t u r a l p r o d u c t i o n and
m a rk e tin g h ave f o r p r i c e m easurem ent, p r i c e r e p o r t i n g and
i n f o r m a t i o n c o l l e c t i o n and d i s s e m i n a t i o n .

F u r t h e r , some

a u t h o r s have begun to q u e s t i o n th e p o t e n t i a l e f f e c t s t h a t
p r i c e r e p o r t i n g m ig h t h av e on r e s o u r c e a l l o c a t i o n , d i s t r i ­
b u t i o n and th e e q u i l i b r a t i o n o f s u p p ly and demand g iv e n
changes i n th e m a r k e ts .

S t i l l o t h e r a u t h o r s a rg u e t h a t

r e s e a r c h i s n eed ed to i d e n t i f y who s h o u ld be s e r v e d b y th e

52

p u b l i c d a t a and i n f o r m a t i o n s y s te m o r a t w h ic h l e v e l s p r i c e s
s h o u ld b e r e p o r t e d , w h i l e some s t i l l go so f a r as t o c la im
t h a t th e r o l e o f p r i c e h a s chan ged i n im p o r ta n c e i n a g r i ­
c u ltu r a l m a rk e ts.
I t seems upon a r e v ie w o f t h e l i t e r a t u r e t h a t we m ig h t
c o n s i d e r t h e p ro b lem from two s l i g h t l y d i f f e r e n t w ays.
F i r s t , we m ig h t assume a g iv e n p e rfo rm a n c e o b j e c t i v e t h a t
p r i c e r e p o r t i n g i s t o f u l f i l l and expend r e s e a r c h e f f o r t s
i n t h e d i r e c t i o n o f d e t e r m in in g how t o go a b o u t a c c u r a t e l y
m e a s u rin g t h a t p r i c e g iv e n s t r u c t u r a l im p e d im e n ts, i . e . ,
v iew th e p ro b lem as p u r e l y a p ro b lem o f a c c u r a t e l y m e a s u r in g a
p a r t i c u l a r concept o f p ric e .
A n o th er a p p ro a c h

w ould b e to f o c u s r e s e a r c h on th e

o b je c tiv e s of p ric e re p o rtin g .

In

o t h e r w o rd s, i d e n t i f y

th e

u s e r s and u s e s o f p r i c e d a t a and i n f o r m a t i o n , and i d e n t i f y
t h e im p o r ta n c e o r v a l u e o f t h i s d a t a i n d e c i s i o n m aking.
T h is a p p ro a c h w ould i n e s s e n c e t r y to v e r i f y w h e th e r p r i c e
i s u s e f u l i n d e c i s i o n m aking.

I n o t h e r w o rd s, do p r o d u c e r s

n e e d d i f f e r e n t c o n c e p ts o f p r i c e , o r a d i f f e r e n t o p e r a t i o n ­
a l l y d e f i n e d c o n c e p t o f p r i c e , r e l a t e d to th e d e c i s i o n s t h a t
th e y m u st make i n modern p o t a t o p r o d u c t i o n and m a r k e tin g ?
T h is a p p ro a c h w ould a t t e m p t to i d e n t i f y i n s t i t u t i o n a l and
s t r u c t u r a l c h a r a c t e r i s t i c s o f f ir m s and m a rk e ts t h a t g iv e
v a l u e to c e r t a i n ty p e s o f i n f o r m a t i o n and to p r i c e d a t a .
P r e v io u s s t u d i e s
d epen den ce o f a c c u r a t e
p ric e d ata.

h a v e f a i l e d to r e c o g n i z e th e i n t e r ­
m easurem ent and t h e u s e s o f th e

T hus, p r e v i o u s a s s e s s m e n ts o f p r i c e d a t a

53

sy ste m p ro b lem s h a v e i g n o r e d t h e im p o r t a n t in te r d e p e n d e n c e s
o f t h e c o n c e p tu a l and m easurem ent q u e s t i o n s .

The a p p a r e n t

l a c k o f a w e l l d e v e lo p e d m eth o d o lo g y f o r s e t t i n g s t a t i s t i c a l
p r i o r i t i e s among d i f f e r e n t a n d / o r com petin g u s e s , i n c l u d i n g
t h e d e t e r m i n a t i o n o f who s h o u ld b e s e r v e d , w hat d e te r m in e s
th e v a l u e o f d a t a and i n f o r m a t i o n , and a t w h ich l e v e l i n
t h e v e r t i c a l p r o d u c t i o n / m a r k e t i n g c h a in p r i c e s s h o u ld b e
r e p o r t e d , n e c e s s i t a t e s r e s e a r c h i n m ethods o f e v a l u a t i n g
t h e p r i c e d a t a and i n f o r m a t i o n sy s te m .

T h is r e s e a r c h w i l l

t e s t th e a p p l i c a b i l i t y o f t h e i n f o r m a t i o n sy ste m a p p ro a c h .
The s p e c i f i c t o o l to a c h ie v e t h e s e g o a l s in v o l v e s a
c a s e s tu d y i n t h e M ich ig an p o t a t o i n d u s t r y to i l l u s t r a t e
t h e i m p l i c a t i o n s t h a t th e c h a n g in g s t r u c t u r e o f p r o d u c t i o n
and m a r k e tin g have f o r th e p u b l i c p r i c e d a t a and i n f o r m a t i o n
sy ste m .

The p u b l i c p r i c e d a t a and i n f o r m a t i o n sy ste m w i l l

be e v a l u a t e d f o r th e M ich ig an p o t a t o p r o d u c e r s .

CHAPTER 3

CONCEPTUAL FRAMEWORK
The p r e c e d in g c h a p t e r p r e s e n t e d a r e v ie w o f th e
l i t e r a t u r e on th e s u b j e c t o f th e p r i c e d a t a and i n f o r m a t i o n
sy ste m and t h e p r o b le m s , o r p o t e n t i a l p ro b le m s , w i t h t h e
sy ste m as s e e n from th e p e r s p e c t i v e o f a g r i c u l t u r a l e c o n ­
o m i s t s , e c o n o m is ts and s t a t i s t i c i a n s .

F u r t h e r , i t was h yp o­

t h e s i z e d t h a t chan ges i n th e s t r u c t u r e o f a g r i c u l t u r a l p r o ­
d u c t i o n , m a r k e tin g and p r i c i n g a rra n g e m e n ts p o se p rob lem s
f o r th e i n f o r m a t i o n and p r i c e d a t e a c c u r a c y t h a t m ig h t be
c l a s s i f i e d as (a) c o n c e p t u a l p ro b le m s ,
blem s o r (c) m easurem ent p r o b le m s .

(b) o p e r a t i o n a l p r o ­

The groundwork was a l s o

l a i d f o r th e argum ent t h a t th e p roblem s c o n f r o n t i n g th e
p r i c e d a t a and i n f o r m a t i o n sy ste m f a l l i n a c l a s s t h a t m ig h t
be r e f e r r e d to as i l l - d e f i n e d p ro b le m s , and as su ch do n o t
le n d th e m s e lv e s to th e p r e c i s e m e th o d o lo g ic a l c l a s s i f i c a ­
tio n s o f a s in g le d is c ip lin e .
T h is c h a p t e r w i l l p r e s e n t th e i n f o r m a t i o n s y ste m fra m e ­
work as a g e n e r i c model u s e d i n t h e r e s e a r c h to e v a l u a t e th e
p r i c e d a t a and i n f o r m a t i o n sy ste m f o r t h e M ic h ig an p o t a t o
m a rk e t.

T h is w i l l b e f o llo w e d by a b r i e f d i s c u s s i o n o f th e

u s e s o f i n f o r m a t i o n and some o f t h e pro b lem s in v o lv e d i n
p l a c i n g a m a rk e t v a l u e on i n f o r m a t i o n and d a t a .

Then, a

m a r k e t / i n f o r m a t i o n sy ste m i s o u t l i n e d t h a t i d e n t i f i e s th e
54

55

a c t o r s and t h e p r i c i n g p o i n t s and f o c u s e s on i n f o r m a t i o n as
an o u t p u t .

Then an o u t l i n e o f a h y p o t h e t i c a l d e c i s i o n

s t r u c t u r e fo r a p o ta to p ro d u cer t h a t w i l l be used to e v a lu ­
a t e t h e p u b l i c p r i c e d a t a and i n f o r m a t i o n s y ste m i s p r e s e n t e d .
3 .1
3 .1 .1

An I n f o r m a t io n System Framework
D ev e lo p in g and M a in ta i n in g t h e System
Bonnen (1975a) p r o v id e s a fram ew ork f o r v ie w in g a

d a t a sy ste m as a s u b s e t o f an i n f o r m a t i o n sy ste m .

H is

fram ew ork w i l l s e r v e as th e c o n c e p u t a l b a s i s f o r t h e s tu d y
on p o t a t o p r i c e d a t a and i n f o r m a t i o n and w i l l b e th e b a s i s
f o r t h e s u b s e q u e n t dev elop m ent o f th e r e s e a r c h e f f o r t .
The i n f o r m a t i o n sy ste m framework view s a d a t a sy ste m
as a s u b s e t o f an i n f o r m a t i o n sy ste m ( s e e F i g u r e 3 - 1 ) .
T h is p arad ig m s t r e s s e s t h e o v e r r i d i n g im p o r ta n c e o f th e i n ­
t e r a c t i o n b etw e en t h e d e d u c t i v e r e a s o n i n g im posed by t h e o r y
and t h e i n d u c t i v e r e a s o n i n g c o n d i t i o n e d by o b s e r v a t i o n o f
th e e n v iro n m e n t.
f o r m a tio n .

A lso , d a t a m ust b e d i s t i n g u i s h e d from i n ­

D a ta a r e d e v o id o f m eaning w i t h o u t th e a n a l y s i s

p r o v id e d by a t h e o r e t i c a l and n o r m a tiv e fram ew ork.

In

o t h e r w o r d s , d a t a o n ly h av e m eaning when a n a ly z e d i n co n ­
j u n c t i o n w i t h a t h e o r e t i c a l fram ew ork w h ich s t a t e s c a u s a l
r e l a t i o n s and a s e t o f n o r m a tiv e p r o p o s i t i o n s w hich p r o v id e
purpose or o b je c ti v e .

F o r exam ple, p r i c e d a t a ta k e on p a r t

o f i t s m eaning when we t h i n k a b o u t p r i c e w i t h r e f e r e n c e to
t h e econom ic t h e o r y o f p r i c e and th e s h a r e d n o r m a tiv e b e l i e f
t h a t th e commodity i n q u e s t i o n and i t s n e a r s u b s t i t u t e s h av e

Decision Making

I n f o r m a t io n f o r D e c is io n Makers
Information

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R e a lity

FIGURE 3-1
An I n f o r m a t io n System

System

T h e o r e t i c a l C oncepts

>

Inquiry

System

vS p e c i f i c a t i o n \
vx and T e s t i n g \ x\ o f A n a ly tic a l\
M easurement
\ Framework
V \
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O p e r a tio n a liz a tio n o f C o n c e p ts\ \
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57

some exchange a n d / o r s c a r c i t y v a l u e .

In t h i s c o n te x t, p r ic e

d a t a s h o u ld g iv e a d e c i s i o n maker o r an a n a l y s t some i n f o r ­
m a tio n a b o u t th e s t a t e o f t h e m a rk e t.
I n F ig u r e 3 - 1 , i t i s i m p o r ta n t to n o t e t h a t d a t a o n ly
p r o v id e s i n f o r m a t i o n a f t e r a n a l y s i s g i v i n g th e d a t a form and
m eaning f o r a s p e c i f i c u s e h a s b ee n p e rfo rm e d .

In o th e r

w o rd s , f o r d a t a to ta k e on m eaning i t n ee d s an o r d e r i n g
t h e o r e t i c a l framework.

At th e same tim e , i t m ust be n o te d

t h a t d a ta i s a very im p o rta n t in p u t in to th e in fo rm atio n
system b e c a u s e th e r e p r e s e n t a t i o n o f r e a l i t y p o r t r a y e d by
th e d a t a w i l l most l i k e l y a f f e c t th e a c c u r a c y o f th e a n a l y s i s
u n d e r ta k e n .

I n o t h e r w o rd s, t h e i m p o s i t i o n o f a t h e o r e t i c a l

model whose v a r i a b l e s a r e n o t c o m p a tib le w ith th e c o n c e p tu a l
b a s i s o f th e d a t a w i l l be i n a c c u r a t e .

Thus, i f d i f f e r e n t

u se s o f p r i c e d a t a in v o l v e d i f f e r e n t t h e o r e t i c a l fram ew orks,
th e same s e t o f d a t a would n o t be e q u a l l y v a l u a b l e to th e
d iffe re n t u sers.
The p r e c e d in g a n a l y s i s im p l ie s t h a t th e r e s p o n s i b i l i t y
f o r th e developm ent and m a in te n a n c e o f a d a t a and in f o rm a ­
t i o n sy stem does n o t l i e e x c l u s i v e l y w ith one d i s c i p l i n e .
In f a c t , Bonnen (1975b) s t a t e s t h a t e c o n o m ists do n o t seem
com m itted to m a i n t a i n i n g th e c o n c e p tu a l b a s i s o f th e d a t a
sy stem and th e y do n o t seem to s e e t h a t th e t h e o r e t i c a l
s t r u c t u r e o f th e d i s c i p l i n e i s a l s o th e c o n c e p u ta l b a s e o f
th e d a t a sy stem .

F u r t h e r , t h e s t a t i s t i c i a n o f t e n l a c k s th e

a n a l y t i c a l t o o l s w hich a r e n e c e s s a r y to e v a l u a t e th e d a t a
n eed s o f a d i s c i p l i n e su c h as e c o n o m ic s .

T h u s, Bonnen

58

s t r e s s e s ' t h e r e s p o n s i b i l i t y o f e c o n o m is ts as w e l l as s t a t ­
i s t i c i a n s i n m a i n t a i n i n g t h e r e l i a b i l i t y o f t h e d a t a arid
i n f o r m a t i o n sy ste m .
The d a t a s u b - s y s te m i s g e n e r a l l y managed by s t a t i s t i ­
c i a n s who a r e r e s p o n s i b l e f o r tb « m easurem ent o f phenomena.
They h ave t h e e x p e r t i s e to manage t h e m easurem ent p r o c e s s
t h a t can p r o v i d e t h e m ost a c c u r a c y f o r a g iv e n b u d g e t.
The i n t e r a c t i o n o f d i s c i p l i n e s f o r d a t a o u t p u t , h o w ev er, i s
s u g g e s te d by th e d ia g ra m i n t h a t t h e m easurem ent and d a t a
a r e t h e outcome o f th e o p e r a t i o n a l i z a t i o n o f t h e o r e t i c a l
c o n c e p ts .

As m e n tio n e d ab o v e, t h e c o n c e p t i s d i c t a t e d by

th e o r y , i n o u r c a s e , econom ic t h e o r y and t h e u s e t o w hich
i t i s to b e p u t .

P r i c e i s a c o n c e p t from econom ic t h e o r y

and th e m easurem ent o f p r i c e d a t a i s th e r e s u l t o f o p e r a ­
t i o n a l i z i n g th e c o n c e p t o f p r i c e , i . e . ,

s e t t i n g up c a t e g o r ­

i e s o f o b s e r v a b l e phenomena t h a t r e l a t e t h e e le m e n ts to
ea ch o t h e r i n a m e a n in g fu l m anner.

F or ex am p le, th e p r o c e s s

o f m e a s u rin g th e f . o . b . farm p r i c e f o r p o t a t o e s i m p l i e s t h a t
e v e n ts h ave b e e n o r d e r e d i n su ch a way t h a t t h e p r i c e r e p ­
r e s e n t s some s p e c i f i e d u n if o rm p r o d u c t ,

--

a w ashed,

g ra d e d and p a c k e d raw p o t a t o p r i o r to b e i n g t r a n s p o r t e d from
t h e p r o d u c e r 's l o c a t i o n , o r an unw ashed, p o t a t o b u l k lo a d e d
p r i o r to t r a n s p o r t a t i o n , e t c .
The e c o n o m is t p r o v i d e s th e a n a l y t i c a l fram ew ork - t h e a n a l y s i s and i n t e r p r e t a t i o n — t h a t g i v e s m eaning to
th e p r i c e d a t a .

Thus, i t i s th e e c o n o m i s t 's r e s p o n s i b i l i t y

59

t o e v a l u a t e th e d a t a s u b - s y s te m w i t h r e s p e c t to c o n c e p tu a l
and d e f i n i t i o n a l c o n s i s t e n c y w i t h th e a n a l y t i c a l s u b - s y s te m .
As p o i n t e d o u t ab o v e , i t i s t h e a n a l y s i s f u n c t i o n t h a t g i v e s
m eaning t o d a t a .

Thus, th e a n a l y s i s f u n c t i o n i s c r i t i c a l

i n any d i s c u s s i o n and i n t e r p r e t a t i o n o f d a t a ,
I t a l s o s h o u ld be n o te d t h a t th e
i n c l u d e s th e d e c i s i o n making f u n c t i o n .

n f o r m a tio n
In f a c t ,

ystem

th e

i n f o r m a t i o n sy ste m fram ew ork s t r e s s e s t h e im p o r ta n c e o f th e
d e c i s i o n maker and th u s th e d e c i s i o n s f o r w hich p r i c e d a t a
a r e to b e u s e d .

" A l l i n f o r m a t i o n sy ste m s a r e p ro b le m s o l v ­

i n g o r p u r p o s iv e b e c a u s e th e y a r e s u b s e t s o r components o f
s o c i a l sy ste m s w hich a r e d e s ig n e d f o r some p r o b le m - s o lv i n g
purpose.

Thus, d a t a c o l l e c t i o n and a n a l y s i s alw ays h a v e a

p u r p o s e an d can o n ly be u n d e r s to o d f u l l y i n a s o c i a l sy ste m
o r d e c isio n c o n te x t."

(Bonnen, 1975a, p . 3 9 8 ).

The em ph asis p l a c e d on th e v a l u e o f i n f o r m a t i o n a r i s ­
in g o u t o f th e u s e o f th e d a t a and i n f o r m a t i o n i n d e c i s i o n
making i s echoed by numerous a u t h o r s .

Lucas (1978) i n d i s ­

c u s s i n g t h e f a i l u r e o f p r i v a t e i n f o r m a t i o n sy ste m s w i t h i n a
f i r m a r g u e s t h a t t h e f a i l u r e i s m ost o f t e n c a u s e d by i n a d e ­
q u a t e r e p r e s e n t a t i o n o f th e n ee d s o f t h e u s e r s o f th e
sy ste m i n th e d ev elo p m en t and m a in te n a n c e o f t h e sy ste m .
I m p lie d i n t h i s l a s t p o i n t i s a l s o th e o b s e r v a t i o n
t h a t i n f o r m a t i o n sy ste m s may n ee d to change o v e r tim e as t h e
p ro b lem s to be s o l v e d ch an g e,

Dunn (1974) e x p l i c i t l y a r g u e s

t h i s when he p o i n t s o u t t h a t th e e a r l y i n f o r m a t i o n and d a t a
sy stem s w ere s e t up to a d d r e s s p ro b lem s i n t h e p e rfo rm a n c e

60

mode - d a t a and i n f o r m a t i o n f o r s p e c i f i c a d m i n i s t r a t i v e
d e c i s i o n m aking t h a t an sw e re d a s p e c i f i c q u e s t i o n .

However,

he c la im s t h a t i n f o r m a t i o n sy stem s now a r e n e e d e d t h a t
p r o v id e d a t a and i n f o r m a t i o n i n a d e v e lo p m e n ta l mode.

T h is

ty p e o f i n f o r m a t i o n a d d r e s s e s p ro b lem s t h a t e v o lv e o v e r tim e ,
a r e more com plex and i n e s s e n c e a r e p ro b lem s w here th e g o a l
c a n n o t be c o m p le te ly s p e c i f i e d a t any p a r t i c u l a r p o i n t i n
tim e .

T hus, d a t a and i n f o r m a t i o n sy ste m s m u st be a d a p t a b l e

to t h e c h a n g in g n e e d s .
The p a n e l on M ethodology f o r S t a t i s t i c a l P r i o r i t i e s
(1976) i n d i s c u s s i n g th e p ro b lem s o f th e d a t a and in f o r m a ­
t i o n sy ste m a l s o s t r e s s t h e im p o rta n c e o f d a t a u s e r s and
d e c i s i o n m akers and t h e i r i n p u t i n e v a l u a t i n g d a t a and i n f o r ­
m a tio n and i n s e t t i n g s t a t i s t i c a l p r i o r i t i e s .

The P a n e l

"h as i d e n t i f i e d th e u s e f u l n e s s o f d a t a i n d e c i s i o n making
as th e m ost i m p o r t a n t c r i t e r i o n i n s e t t i n g s t a t i s t i c a l
p rio ritie s.

I t f o llo w s t h a t l e a r n i n g who t h e d e c i s i o n makers

a r e and d e v e lo p in g a m ethod f o r o r g a n i z i n g t h e i r d i v e r s e
n e e d s i n t o m anag eable p a r t s a r e m a jo r s t e p s i n e s t a b l i s h i n g
s ta tis tic a l p rio ritie s ."

(pg. 2 3 ).

T hus, th e o b j e c t i v e s o f t h e d e c i s i o n m akers and th e
p ro b lem s to b e s o l v e d b y d e c i s i o n m akers ta k e s on s u b s t a n ­
t i a l im p o r ta n c e i n d i s c u s s i n g th e i n f o r m a t i o n and p r i c e d a t a
sy ste m .

I n o t h e r w o rd s , th e r e l i a b i l i t y o r a c c u r a c y o f

d a t a and i n f o r m a t i o n a r e r e l a t e d to t h e d e c i s i o n f o r w hich
th e d a ta w i l l be used.

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3 .1 .2

C o n c e p tu a l O b s o le s c e n c e
Dunn (1971) d i s c u s s e s two ty p e s o f i n f o r m a t i o n sy stem s

t h a t h av e s e r v e d b u s i n e s s m anagers i n t h e p a s t .

F irs t,

t h e r e i s th e i n f o r m a t i o n sy ste m t h a t p r o v id e s s im p ly i n d i ­
c a to r s , e . g . , r a t e o f p ro d u c tio n , s a le s , e tc .

E sse n tia lly ,

t h e s e i n d i c a t o r s p r o v id e s i g n a l s t h a t a r e u s e d i n m o n ito r in g
and a d j u s t i n g th e p e rfo rm a n c e o f th e components o f t h e
sy ste m .
The se co n d ty p e o f i n f o r m a t i o n sy ste m i s more i n t e ­
g r a t i v e o f th e w hole sy ste m .

T h is sy ste m g iv e s " e m p i r i c a l

c o n t e n t to an image o f th e f u n c t i o n a l r e l a t i o n s h i p s t h a t
d e f i n e th e t o t a l sy ste m i t s e l f .

They p r o v id e an i n f o r m a t i o n

b a s e f o r t o t a l sy ste m g u id a n c e and m anagem ent."
1971, pg. 4 6 ).

(Dunn,

T h is o r i e n t a t i o n a p p e a r s to b e p r i n c i p a l l y

more o f a " s y s te m s " a p p ro a c h to t h e dev elo p m en t and m ain ­
te n a n c e o f an i n f o r m a t i o n and d a t a sy ste m .

I n o t h e r w o rd s,

Dunn seems to be s t r e s s i n g t h e im p o r ta n c e o f t h e i n t e r d e ­
p e n d e n c ie s o f th e com ponents o r t h e s u b - s y s te m s .
The AAEA Committee on Economic S t a t i s t i c s

(1 9 7 2 ),

Dunn (1974) and Bonnen (1975) h av e r e c o g n i z e d th e em ergence
o f c o n c e p u t a l o b s o le s c e n c e a s a d a t a sy ste m ag es and have
d i s c u s s e d t h i s pro blem i n one form o r a n o t h e r .
o b s o le s c e n c e can a r i s e from two s o u r c e s :

C o n c e p tu a l

1) ch an g es i n th e

i n s t i t u t i o n a l s t r u c t u r e o f a m a rk e t may r e s u l t i n th e mea­
s u r e d c o n c e p t no lo n g e r a d e q u a t e l y r e p r e s e n t i n g th e r e a l i t y
i t p u r p o r t e d l y r e p r e s e n t s , a n d / o r 2) changes i n t h e p o l i c y

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agenda o r p ro b lem s c o n f r o n t i n g d e c i s i o n m a k e rs.

T hese p r o ­

blem s a r e o f t e n r e l a t e d , b u t n o t necessarily s o , and c a u s a l ­
i t y may r u n i n e i t h e r , o r b o t h , d i r e c t i o n s .

F o r ex am p le,

ch an ges i n th e i n s t i t u t i o n a l s t r u c t u r e may l e a d to a d i f ­
f e r e n t s e t o f p ro b lem s t o b e s o l v e d b y d e c i s i o n m a k e rs , o r
ch an ges i n p ro b lem s to b e s o l v e d may l e a d to the. d ev e lo p m e n t
o f d i f f e r e n t i n s t i t u t i o n a l a r r a n g e m e n ts , i . e . ,

chan ges i n

re a lity .
I t s h o u ld b e n o t e d i n F i g u r e 3 -1 t h a t any s e t o f d a t a
i s t h e outcome o f a c o n c e p t u a l i z a t i o n o f r e a l i t y ,

th e o p er­

a t i o n a l i z a t i o n o f t h a t c o n c e p t and i t s s u b s e q u e n t m e a s u re ­
m ent.

T h e r e f o r e , any d a t a w i l l , a b s t r a c t from r e a l i t y and

as such we c a n n o t e x p e c t t h a t th e m e a su re d c o n c e p t w i l l
b e a r a one to one c o r r e s p o n d e n c e w i t h r e a l i t y .

However,

we m ig h t e x p e c t t h e d a t a to become l e s s r e p r e s e n t a t i v e o v e r
tim e i f th e c o n c e p t u n d e r l y i n g th e m easurem ent becom es

le s s

re p re se n ta tiv e of r e a lity .
In l i g h t o f th e p re c e d in g , t h i s r e s e a r c h i s m o tiv a te d
by th e p e r c e i v e d p ro b lem o f ch ang es i n th e m a rk e t s t r u c t u r e
o f a g r i c u l t u r e r e s u l t i n g i n an i n c r e a s i n g l y s e r i o u s d i v e r ­
gence b etw een th e w o rld r e p r e s e n t e d and s e r v e d b y t h e
e x i s t i n g p r i c e d a t a and i n f o r m a t i o n sy ste m and t h e s o - c a l l e d
r e a l w o r ld , and th e d a t a n e e d s o f d e c i s i o n m a k e rs.

T hus,

changes i n t h e i n s t i t u t i o n a l s t r u c t u r e o f m a rk e ts and i n
t h e p o l i c y agenda f a c i n g d e c i s i o n m akers g iv e r i s e to con ­
c e p t u a l o b s o le s c e n c e a s t h e o p e r a t i o n a l i z e d c o n c e p t u n d e r ­
l y i n g a g r i c u l t u r a l p r i c e d a t a may no lo n g e r p r o v i d e an

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a c c u r a t e image o f t h e r e a l i t y p u r p o r t e d l y b e in g r e p r e s e n t e d
and t h e u s e s o f p r i c e d a t a to m eet th e n e e d s o f th e d e c i s i o n
m ak ers.

Thus, a q u e s t i o n a r i s e s a s to w h e th e r th e c u r r e n t

p r i c e d a t a and i n f o r m a t i o n sy ste m p r o v id e s d a t a t h a t a d d r e s s
th e problem s o f d e c i s i o n m ak ers.
A ls o , Dunn (1971) does n o t downplay th e im p o rta n c e o f
p r o v id in g d a t a on " s im p le " economic i n d i c a t o r s , i n an i n t e ­
g r a t e d s t a t i s t i c a l sy ste m .

He m a i n t a i n s t h a t t h e s e economic

i n d i c a t o r s t h a t w i l l s e r v e th e n eed s o f m anagers p l a y a
v e r y i m p o r ta n t r o l e i n th e i n t e g r a t e d s t a t i s t i c a l sy ste m .
I n o t h e r w o rd s , he seems to b e a r g u in g t h a t th e developm ent
o f an i n t e g r a t e d s t a t i s t i c a l sy stem r e q u i r e s r e l i a b l e i n p u t
from th e v a r i o u s components o f t h a t sy stem i n c l u d i n g th e
n eed s o f v a r i o u s m a n a g e r s .
The in f o r m a t i o n sy stem framework w hich s t r e s s e s conc e p u t a l i z a t i o n , o p e r a t i o n a l i z a t i o n and m easurem ent le a d s
one to view a c c u r a c y problem s i n a p r i c e d a t a and in f o r m a t i o n
sy stem , and th u s a s o u r c e o f t h e i r s o l u t i o n i n d i f f e r e n t
ways.

The d a t a sy stem m ig h t sim p ly be c o n f r o n te d w i t h a

m easurem ent pro b lem .

One m ig h t assume a g iv e n u se o f p r i c e

d a t a and a change i n m a rk e t s t r u c t u r e t h a t does n o t i n v a l i ­
d a t e th e c o n c e p t b u t i n c r e a s e s t h e d i f f i c u l t y o f m e a su rin g
th e o p e r a t i o n a l l y d e f i n e d c o n c e p t.

T h is s i t u a t i o n would

sim p ly b e c l a s s i f i e d a s a m easurem ent p rob lem and would
n e c e s s i t a t e a change i n s t a t i s t i c a l m easurem ent t e c h n iq u e s .
For exam ple, t h e r e l e v a n t p o p u l a t i o n a c t o r s to sam p le, i . e . ,
th e a p p r o p r i a t e sa m p lin g fra m e, may change, o r i t may be

64

i n c r e a s i n g l y d i f f i c u l t to a t t a i n a s u f f i c i e n t l y l a r g e sam­
p l e s i z e to o b t a i n a d e s i r e d d e g r e e o f a c c u r a c y s l i c e due
to " t h i n m a r k e t s , " e t c .

E f f o r ts to in c r e a s e th e accuracy

o f m e asu red d a t a m ost l i k e l y c o u ld d e r i v e a q u a n t i t a t i v e
e s t i m a t e o f t h e i n c r e a s e i n p r e c i s i o n o b t a i n a b l e by g iv e n
ch ang es on m easurem ent t e c h n i q u e s .
The o t h e r form s o f o b s o l e s c e n c e , i . e . ,

c o n c e p u t a l and

o p e r a t i o n a l a f f e c t th e r e l i a b i l i t y and a c c u r a c y o f t h e d a t a
when u s e d i n d e c i s i o n m aking.

F irst,

t h e r e m ig h t b e th e

change i n p r o d u c t i o n and m a r k e tin g t h a t s im p ly makes a t h e o ­
r e t i c a l c o n c e p t o r i t s o p e r a t i o n a l i z a t i o n outm oded.

In

o t h e r w o r d s , th e c o n c e p t t h a t l i e s b e h in d a p r e v i o u s m e a su re ­
m ent may no lo n g e r e x i s t i n r e a l i t y .

Thus, an a n a l y s i s u s in g

t h e new c o n c e p t and t h e o l d d a t a w o uld b e i n a c c u r a t e .
G eithm an and M ario n (1978) seem t o be a d d r e s s i n g a c c u r ­
acy i n t h i s manner i n t h e i r c r i t i c i s m o f t h e u s e o f p r i c e
d a t a from th e B ureau o f L abo r S t a t i s t i c s i n m a rk e t s t r u c t u r e
a n a ly sis .

F o r exam ple, a m a rk e t s t r u c t u r e a n a l y s i s t h a t

c o n c e iv e s o f a g r i c u l t u r a l m a rk e ts as c h a r a c t e r i z e d by l a r g e
p r ic e -a u to n o m o u s f i r m s , w ould b e i n a c c u r a t e l y a n a ly z e d from
p r i c e d a t a c o l l e c t e d and r e p o r t e d as th o u g h th e p r i c e s w ere
r e p r e s e n t a t i v e o f p r i c e d d e te r m in e d a t a l a r g e c e n t r a l a u c ­
t i o n w i t h many b u y e r s and s e l l e r s .
The se co n d exam ple o f c o n c e p u t a l o b s o le s c e n c e l i e s i n
t h e p r e s u m p tio n t h a t ch ang es i n t h e d e c i s i o n h o r i z o n and
agenda f o r d e c i s i o n m akers make a g iv e n s e t o f d a t a and i n ­
f o r m a tio n l e s s u s e f u l o r l e s s a c c u r a t e .

Thus a c c u r a c y o f

65

d a t a and in f o r m a t i o n i s r e l a t e d to th e a c c u r a c y i n u s e f o r
a g iv e n d e c i s i o n .

F or exam ple, a p r o d u c e r may n e e d d i f f e r ­

e n t ty p e s o f in f o r m a ti o n f o r b a r g a i n i n g f o r a p r e - s e a s o n
c o n t r a c t th a n s e l l i n g on a d a i l y s p o t m a rk e t.

T h erefo re,

a p r i c e q u o t a t i o n f o r th e s e l l i n g p r i c e a t a s p e c i f i c l o ­
c a t i o n f o r a s p e c i f i c day w ould b e more a c c u r a t e f o r th e
d e c i s i o n o f s e l l i n g to d a y th a n f o r th e d e c i s i o n to b a r g a i n
fo r a p re-seaso n c o n tra c t.
3 .2

I n f o r m a t io n and D ata System Problem s
The p r e c e d in g d i s c u s s i o n s t r e s s e s th e im p o rta n c e

p la c e d on d e c i s i o n making when a n a ly z i n g an i n f o r m a t i o n and
d a t a sy stem .

T his s e c t i o n w i l l a t te m p t to a p p ly t h e fra m e ­

work to i n f o r m a t i o n and d a t a problem s t h a t e x i s t i n r e a l i t y .
T his w i l l i n c lu d e a b r i e f p r e s e n t a t i o n o f some o f th e i s s u e s
and c o m p le x i tie s t h a t a r e i n h e r e n t i n i n f o r m a t i o n and p r i c e
d ata re se a rc h .
3.2.1

U sers and Uses o f P r i c e D ata
Because p r i c e d a t a has i t s p rim a ry v a l u e i n th e con­

t e x t o f d e c i s i o n m aking, t h e d a t a o u tp u t m ust b e view ed i n
r e l a t i o n t a th e u s e r ( th e d e c i s i o n m a k e r ) , t h e u s e ( th e
d e c i s i o n s t h a t r e q u i r e p r i c e d a t a ) and th e a n a l y s i s p e r ­
formed on th e d a t a i n making th e d e c i s i o n .

T h e r e f o r e , in

d i s c u s s i n g th e p ro blem s o f t h e d a t a and in f o r m a t i o n sy stem ,
i t i s n e c e s s a r y to c o n s i d e r who u s e s p r i c e d a t a and f o r w hat
p u rp o s e .

In o t h e r w o rd s, w hat d e c i s i o n s r e q u i r e p r i c e d a ta ?

66

A ls o , i t i s l i k e l y t h a t p o i n t s o f c o n f l i c t b etw een u s e r s and
u s e s may e x i s t and s h o u ld t h e r e f o r e b e made e x p l i c i t .
As was d i s c u s s e d i n th e p r e v i o u s c h a p t e r , econom ic
t h e o r y p o s i t s t h r e e p r im a r y f u n c t i o n s t h a t p r i c e p e r f o r m s :
1) t h e a l l o c a t i o n o f r e s o u r c e s among a l t e r n a t i v e u s e s , 2)
th e d i s t r i b u t i o n o f t h e c o s t s and r e t u r n s from r e s o u r c e
u s e , and 3) t h e e q u i l i b r a t i o n o f m a rk e t s u p p ly and demand.
I t s h o u ld b e remembered t h a t i n th e a b s t r a c t econom ic model
w here th e a s s u m p tio n s a r e m e t, i . e . ,

th e a s s u m p tio n s o f

p e r f e c t know ledge and f o r e s i g h t w h ich n e g a t e th e e x i s t e n c e
o f u n c e r t a i n t y , t h a t i n f o r m a t i o n i s n o t a v a l u a b l e commodity.
I n f o r m a t io n becomes a v a l u a b l e commodity i n th e f a c e o f u n­
c e r t a i n s t a t e s o f n a t u r e o r e v e n ts w hich e x i s t i n r e a l w o rld
m a r k e ts .

A ls o , econom ic th e o r y makes r i g i d a s s u m p tio n s

a b o u t t h e tim in g o f t h e a v a i l a b i l i t y o f p r i c e i n f o r m a t i o n .
I n o t h e r w o rd s, w i t h p e r f e c t know ledge and f o r e s i g h t a l l
f u t u r e s t a t e s a r e a p p r o p r i a t e l y d i s c o u n t e d and a r e r e f l e c t e d
in th e p r i c e .

A g ain , t h e s e a s s u m p tio n s do n o t conform to

r e a l w o rld e v e n ts and one m ust d e a l w i t h i n f o r m a t i o n as a
v a l u a b l e commodity b e c a u s e o f th e e x i s t e n c e o f u n c e r t a i n t y .
The a c q u i s i t i o n and d i s s e m i n a t i o n o f d a t a and i n f o r ­
m a tio n i n v o l v e s p o i n t s o f c o n f l i c t b etw e en p a r t i c i p a n t s t h a t
a l s o m u st b e c o n s i d e r e d .

R ie m e n sc h n e id e r CL977) i n r e v ie w ­

in g t h e l i t e r a t u r e on econom ics and in f o r m a t i o n p o i n t s o u t
t h a t th e j u s t i f i c a t i o n o f p u b lic p ro v is io n o f d a ta i s r e ­
l a t e d to th e f a c t t h a t d a t a and i n f o r m a t i o n a r e c h a r a c t e r ­
i z e d by h i g h e x c l u s i o n c o s t s and n o n a p p r o p r i a b i l i t y o f t h e

67

r e t u r n s o f i n f o r m a t i o n s u p p ly .

A lso th e i n c e n t i v e t o s u p p ly

i n f o r m a t i o n and, t h e a b i l i t y to c a p t u r e th e re w a rd s i s r e ­
l a t e d to m a rk e t s t r u c t u r e , i . e . ,

a m o n o p o lis t may b e a b l e

to a p p r o p r i a t e t h e r e t u r n s to i n f o r m a t i o n p r o d u c t i o n and
d iss e m in a tio n .

T h is s i t u a t i o n p o se s p roblem s i n terras o f

th e p o t e n t i a l u s e o f monopoly power to g a i n a d v a n ta g e o v e r
t h e l e s s w e l l in fo rm e d by n o t p r o v i d i n g i n f o r m a t i o n , o r p r o ­
v id in g b ia s e d in fo rm a tio n w ith th e subsequent im p lic a tio n s
o f d i s t o r t i n g m a rk e t r e l a t i o n s h i p s .
In o t h e r w o rd s, i n f o r m a t i o n as a commodity f a l l s i n
t h a t c l a s s o f goods f o r w hich a m a rk e t p r i c e may n o t e x i s t .
More i m p o r t a n t l y , f o r th e p u b l i c s e c t o r ' s u s e o f in f o r m a t i o n
and d a t a , t h e r e may be a d iv e r g e n c e b etw een t h e p r i v a t e
b e n e f i t s and s o c i a l b e n e f i t s , and t h e r e f o r e a d iv e r g e n c e
b etw een t h e o p tim a l l e v e l o f in f o r m a t i o n f o r p r i v a t e u s e and
in fo rm a tio n f o r p u b lic u se.

T h is i s e s s e n t i a l l y th e a g r u -

ment r e g a r d i n g th e p o t e n t i a l m is u s e o f monopoly power v i a
in fo rm a tio n a d v a n ta g e s.
I n g e n e r a l , th e arg um ent f o r p u b l i c p r o v i s i o n o f i n ­
f o r m a tio n stem s from th e f a c t t h a t a l a r g e number o f s m a ll
f irm s w i l l u n d e r s u p p ly i n f o r m a t i o n p r o d u c t i o n and d is s e m in a ­
tio n .

T h is i s p r i n c i p a l l y a r e s u l t o f th e n o n - a p p r o p r i a b i l ­

i t y o f t h e r e t u r n s to i n f o r m a t i o n s u p p ly .

I n o t h e r w o rd s,

i n f o r m a t i o n once i t h a s b e e n p ro d u c e d i s c h a r a c t e r i z e d by
h ig h e x c lu sio n c o s ts , i . e . ,

once t h e i n f o r m a t i o n h a s b ee n

p ro d u c e d and a c t e d upon i t i s d i f f i c u l t and c o s t l y to e x ­
c lu d e o t h e r s from th e know ledge o r from t h e i n f o r m a t i o n .

68

T hus, s m a ll f ir m s w i l l p ro d u c e l e s s th a n i s s o c i a l l y
o p tim a l.
L a r g e r f ir m s w ould te n d to p r o d u c e i n f o r m a t i o n b e c a u s e
th e y c o u ld c a p t u r e th e b e n e f i t s , nam ely th r o u g h i n t e r n a l i ­
z a t i o n , i . e . , n o t l e t t i n g th e i n f o r m a t i o n become p u b l i c , and
by t h e f a c t t h a t th e p r o d u c t i o n and d i s s e m i n a t i o n o f i n f o r ­
m a tio n a r e c h a r a c t e r i z e d by d e c r e a s i n g c o s t c o n d i t i o n s ,
i.e.,

s u b s t a n t i a l s e t up c o s t s .
T h u s, i t a p p e a r s t h a t a t one e x tre m e t h e r e i s an

arg um ent f o r p u b l i c i n f o r m a t i o n p r o d u c t i o n and d i s s e m i n a ­
tio n , i . e . ,

th e c a s e w here th e m a rk e t i s d o m in a te d by a

l a r g e number o f s m a ll f irm s t h a t r e s u l t s i n an u n d e r s u p p ly
o f in fo rm a tio n .

I n th e m id d le r a n g e , one m ig h t e x p e c t t h e

l a r g e r f ir m s to s u p p ly t h e i n f o r m a t i o n and a d e g r e e o f com­
p e t i t i o n w ould e n s u r e t h a t t h e i n f o r m a t i o n s u p p l i e d was u n ­
b i a s e d (W illia m so n , 1 9 7 5 ).

At th e o t h e r end o f th e c o n t i n ­

uum w here t h e m a rk e ts a r e d o m in ated by l a r g e m o n o p o l i s t i c
f i r m s , th e f ir m s m ig h t p r e s e n t b i a s e d i n f o r m a t i o n , o r n o t
make r e l e v a n t i n f o r m a t i o n a v a i l a b l e .
it,

As W illia m so n s t a t e s

t h e s e f ir m s m ig h t p r a c t i c e " o p p o r tu n is m w i t h g u i l e , "

The argu m en t f o r p u b l i c p r o v i s i o n may a r i s e b u t i t w i l l be
q u a l i t a t i v e l y d i f f e r e n t th a n i n t h e c a s e o f a l a r g e number
o f s m a ll f i r m s .

In t h e m o n o p o l i s t i c c a s e t h e p u b l i c s e c t o r

m ig h t w ant i n f o r m a t i o n f o r r e g u l a t o r y p o l i c i e s o r to m o n ito r
th e p e rfo rm a n c e o f t h e l a r g e f i r m s , w h ile i n t h e s m a ll
numbers c a s e th e i n f o r m a t i o n m ig h t b e d i s s e m i n a t e d to a i d
in reso u rce a llo c a tio n d e c isio n s.

69

I n g e n e r a l t e r m s , th e c o n f l i c t betw een p a r t i c i p a n t s
may be i d e n t i f i e d by r e f e r r i n g to F ig u r e 3 -2 .

E s se n tia lly ,

in f o r m a t i o n and d a t a may b e u s e d by t h e p u b l i c s e c t o r o r th e
p riv a te se c to r.

A lso , d a t a may b e p u b l i c l y s u p p l i e d ,

e . g . , USDA a g r i c u l t u r a l d a t a , o r i t may be p r i v a t e l y s u p p l i e d
as th e d i s c u s s i o n above i l l u s t r a t e d .
FIGURE 3-2
P u b l i c Vs. P r i v a t e D ata Use

D ata
Use

P u b lic

P riv a te

P u b lic

(1)

(2)

P riv a te

(3)

(4)

Assuming t h a t t h e q u e s t i o n o f t h e g o v e rn m e n t's r i g h t
to such in f o r m a t i o n i s r e s o l v e d , box (1) p o se s no s u b s t a n ­
t i a l p ro blem s i n term s o f c o n f l i c t .

Box (3) may a l s o be

c o n s id e r e d a r e l a t i v e l y c o n f l i c t f r e e s i t u a t i o n .

I t s h o u ld

b e n o t e d , how ever, t h a t t h e b e n e f i t s a c c r u in g to th e p a r t i c ­
i p a n t s from th e p r i v a t e u s e o f p u b l i c d a t a may be b i a s e d i n
f a v o r o f o r g a n i z a t i o n s t h a t have g r e a t e r a n a l y t i c a l c a p a ­
b ilitie s, i.e .,
a n a ly sts.

l a r g e f ir m s t h a t can h i r e more h i g h l y t r a i n e d

I n f a c t , a s tu d y by th e Government A ccou nting

O f f i c e Cl978) p o i n t e d o u t t h a t m ost a g r i c u l t u r a l p r o d u c e r s
f e e l t h a t th e governm ent r e p o r t i n g o f m a rk e t c o n d i t i o n s ,

70

i,e,,

cro p r e p o r t s , e t c , , i s to t h e d is a d v a n ta g e o f th e

grow er v i s a v i s b u y e r .
The p r i n c i p a l a r e a s o f c o n f l i c t seem to e x i s t i n boxes
(2) and ( 4 ) .

E s s e n t i a l l y , box (2) i s a p r i v a t e v s . p u b l i c

r i g h t t o in f o r m a t i o n .

An an exam ple, p r o c e s s o r s may f e l l t h a t

th e p u b l i c s e c t o r h a s no r i g h t to i n f o r m a t i o n on t h e i r o p e r a ­
t i o n s o r th e i n f o r m a t i o n t h a t th e y h a v e a c q u i r e d on th e s t a t e
o f t h e m a rk e t, o r p r o d u c e r s and t h e i r a s s o c i a t i o n s may f e e l
t h a t th e p u b l i c s e c t o r h a s no r i g h t to d a t a on t h e i r income.
Box ( 4 ) , on th e o t h e r hand , i s e s s e n t i a l l y a c o n f l i c t
betw een th e p a r t i c i p a n t s i n th e p r i v a t e s e c t o r .

P ro d u c e rs

and t h e i r a s s o c i a t i o n s may w ant more d a t a and i n f o r m a t i o n on
th e p r o c e s s o r s and r e t a i l e r s ' o p e r a t i o n s , p r a c t i c e s and d e­
mand e s t i m a t e s w h ile t h e p r o c e s s o r s and r e t a i l e r s may con­
s id e r t h i s s o le ly p r o p r ie ta r y in fo rm a tio n .
I t m ig h t a l s o be th e c a s e t h a t d e te r m in in g w hich i n ­
f o rm a tio n and d a t a a r e to be p r e s e n t e d , i . e . , who and w hat
a r e to be s e r v e d , w i l l be compounded i n d i f f i c u l t y when we
c o n s i d e r t h a t th e a l l o c a t i o n o f r e s o u r c e s to d a t a and i n f o r ­
m a tio n c o l l e c t i o n and d i s s e m i n a t i o n m ust ta k e p l a c e h o r i z o n ­
t a l l y a c c r o s s th e m a rk e t a l s o .

In o t h e r w ord s, th e q u e s t i o n

o f who and w h at d e c i s i o n s a r e to b e g iv e n p r e f e r e n c e i n p r i c e
d a t a and i n f o r m a t i o n r e p o r t i n g may a r i s e w i t h i n a s i n g l e l e v e l
o f th e m a rk e t, e . g . , a c r o s s a m a rk e t a t th e w h o le s a le l e v e l .
Thus, t h e a l l o c a t i o n pro blem , i . e . ,

ch o o sin g among

com peting u s e s i n d a t a and i n f o r m a t i o n c o l l e c t i o n and d i s ­
s e m in a tio n may be viewed as a th re e -w a y a l l o c a t i o n :

71

1) p r i v a t e v s . p u b l i c , 2). p r i v a t e v s , p r i v a t e v e r t i c a l l y
b etw e en d i f f e r e n t l e v e l s i n t h e m a r k e t, i . e . , b u y e r s and
s e l l e r s , o r 3) p r i v a t e v s , p r i v a t e h o r i z o n t a l l y w i t h i n a
s i n g l e l e v e l , i , e , , b etw e en p r o d u c e r s .

As was p o i n t e d o u t

i n t h e p r e c e d i n g c h a p t e r , t h i s r e s e a r c h e m p h asiz es t h e p r i ­
v a te use of

t h e p u b l i c d a t a and. i n f o r m a t i o n s y s te m , and i t

a l s o p r i n c i p a l l y s t u d i e d t h e p o t e n t i a l co m p etin g u s e s w i t h i n
a h o r i z o n t a l l e v e l o f t h e m a r k e t, i . e . , th e p r o d u c e r u s e s
i n t h e d i f f e r e n t p o t a t o m a rk e ts ( t a b l e s t o c k , p r o c e s s i n g and
seed ).
3.2.2

D e f in in g th e P r i c e D a ta and I n f o r m a t i o n System P roblem
The p r e c e d i n g i l l u s t r a t e s t h e p o t e n t i a l p ro b lem s i n

p r e c i s e l y d e f i n i n g th e p ro b le m w i t h an i n f o r m a t i o n and
p r i c e d a t a sy ste m .

The q u e s t i o n s t h a t a r i s e a r e v a r i e d :

1) who s h o u ld b e s e r v e d , 2) w hat d e c i s i o n s s h o u ld t a k e
p r e c e d e n c e , 3) s h o u ld t h e p u b l i c o r p r i v a t e s e c t o r s u p p ly
th e d a t a and i n f o r m a t i o n , 4) how much d a t a and i n f o r m a t i o n
s h o u ld b e s u p p l i e d by th e p u b l i c s e c t o r , 5) a r e t h e d a t a and
in f o r m a t i o n s y ste m

p ro b lem s m easurem ent p r o b le m s , o p e r a ­

t i o n a l i z a t i o n p ro b lem s o r a r e th e y c o n c e p tu a l p r o b le m s ? , e t c .
Bonnen and R ie m e n s c h n e id e r (1978) p o i n t o u t t h a t i n ­
f o r m a tio n s y ste m

p ro b lem s te n d t o be i l l - s t r u c t u r e d p r o ­

blem s g iv e n t h e c u r r e n t s t a t e o f k now ledge.

Ill-stru c tu re d

p ro b lem s a r i s e when d e c i s i o n m akers a r e u n c e r t a i n a b o u t
t h e i r a c t s o r th e s t a t e o f n a t u r e , and w i t h su c h p ro b lem s
" th e g r e a t e s t d i f f i c u l t y in th e s o lu tio n l i e s i n a c t u a l l y

72

d e f i n i n g th e p ro b lem " (pg. 4 ) .

S o lu tio n s to th e s e

p ro b lem s

o f t e n r e q u i r e m u l t i - d i s c i p l i n a r y r e s e a r c h e f f o r t s and " t h i s
ty p e o f i n q u i r y sy ste m i s s i m i l a r to w hat can b e th o u g h t o f
as th e sy ste m s a p p r o a c h " (pg. 4 ) .

I t i s t h e sy ste m s a p p ro a c h

t h a t u n d e r l i e s t h e i n f o r m a t i o n sy ste m fram ew ork, and th e
g o a l s and v a l u e s o f th e d e c i s i o n m aker m ust b e r e f l e c t e d
i n t h e d e s ig n o f t h e i n f o r m a t i o n sy ste m .
Thus, t h e i n f o r m a t i o n s y ste m fram ew ork w ould g u id e
r e s e a r c h t o an i d e n t i f i c a t i o n o f th e n e e d s o f t h e d e c i s i o n
m akers i n t h e i r u s e o f d a t a and i n f o r m a t i o n .

'The fo c u s o f

th e r e s e a r c h e f f o r t w ould be on t h e o b j e c t i v e s o f th e o r g a n ­
i z a t i o n s t h a t a r e i n v o l v e d i n u s i n g th e p r i c e d a t a and i n ­
f o r m a tio n .

The P a n e l on t h e M ethodology f o r S e t t i n g S t a t ­

is tic a l P rio ritie s

(1976) i n a d d r e s s i n g t h e q u e s t i o n o f

s e t t i n g p r i o r i t i e s w i t h i n a d a t a s y ste m s t a t e t h a t th e
p r o c e s s o f s e t t i n g p r i o r i r i t e s i n v o l v e s g o in g beyond who
u s e s th e d a t a s y s te m to su c h q u e s t i o n s as w hat d e c i s i o n s a r e
to b e s e r v e d by t h e d a t a sy ste m and t h e r e f o r e , w h at d a t a
are a c tu a lly needed.
The a p p ro a c h ta k e n i n t h i s r e s e a r c h p r o j e c t m ig h t b e
e s s e n t i a l l y c l a s s i f i e d as t h e f i r s t s t e p i n t h e sy stem s
a p p ro a c h ,

M anetsch and P a r k (1974) s t a t e t h a t th e f i r s t

s t e p i n sy ste m s a n a l y s i s r e q u i r e s th e i d e n t i f i c a t i o n o f
u s e r s ’ n eeds, i . e . , needs a n a ly s is .

In a d d itio n , th is

r e s e a r c h i s e s s e n t i a l l y a c a s e s tu d y c f an i n f o r m a t i o n
sy ste m s i n c e i t c o n c e n t r a t e s on one commodity and f o c u s e s
on one s e t o f i n f o r m a t i o n u s e r s .

S a l t e r (1948) d e fe n d s th e

73

c a s e a p p ro a c h t o r e s e a r c h by a r g u in g t h a t i t i s a v i a b l e
and d e s i r a b l e a p p ro a c h when one w an ts t o c a r e f u l l y s p e c i f y
t h e sy ste m and t o s t u d y th e c o m p lic a te d i n t e r a c t i o n s o f th e
p a r t s to c l o s e t h e " s e q u e n t i a l g a p s " i n t h e " u n i t o f a c t i o n s "
e x p e r i e n c e (pg. 7 1 ) .

I n o t h e r w o rd s, t h e c a s e s tu d y

a p p ro a c h i s u s e f u l when one w an ts to se e k o u t p o t e n t i a l l y
i m p o r t a n t i n t e r d e p e n d e n c i e s b etw e en com ponents i n th e
sy ste m .

G iven th e i l l - s t r u c t u r e d n a t u r e o f th e p ro b lem p r e ­

s e n t e d above and th e g o a l o f i d e n t i f y i n g th e i m p l i c a t i o n s o f
m a rk e t s t r u c t u r e f o r th e p r i c e d a t a and i n f o r m a t i o n sy stem
f o r a s e t o f u s e r s , i t was f e l t t h a t a c a s e s tu d y w ould
p r o v id e t h e m ost m e a n in g f u l r e s u l t s . .
3 .3
3.3.1

A M arket and I n f o r m a t i o n System
A M arket System i n A g r i c u l t u r e - P r i c i n g P o i n t s
I t i s h e l p f u l to view t h e m a rk e t sy ste m and i t s p a r ­

t i c i p a n t s i n te rm s o f th e f u n c t i o n s p e rfo rm e d o r th e r o l e s
t h a t each a c to r perfo rm s.

F ig u r e 3-3 g i v e s a b r i e f o u t l i n e

o f a m a rk e t sy ste m and t h e a c t o r s i n th e sy ste m .

The p u r ­

p o se o f t h e d ia g ra m i s t o show some o f t h e v a r i e t y i n m ar­
k e t i n g c h a n n e ls o r m a r k e tin g p r a c t i c e s t h a t m ig h t e x i s t i n
an a g r i c u l t u r a l m a rk e t and t o i d e n t i f y p r i c i n g p o i n t s i n
th e m a rk e t.
The h ea v y s o l i d l i n e s i n d i c a t e s e l l i n g a r ra n g e m e n ts
w here g ro w ers s e l l d i r e c t l y to a n o t h e r p a r t y .

In o th e r

w o rd s, t h e p r o d u c t and o w n ersh ip o f t h e p r o d u c t i s

74

FIGURE 3-3

P r i c i n g P o i n t s I n An A g r i c u l t u r a l M arket

INPUT SUPPLIERS

P R O D U C E R S
1
AGENTS, BROKERS
V

IN

i
PRODUCER ORGANIZATIONS
( B a r g a in in g A s s o c /C o o p e r a tiv e s )
_______ -........... .

L

tn b u to rs

RETAIL STORES

PROCESSORS |3

\
WHOLESALERS

{

\
{ RETAIL STORES

y ______________

CONS UME RS

GROWERS

75

t r a n s f e r r e d d i r e c t l y b e tw e e n th e g ro w er and t h e b u y e r w i t h
no more i n t e r m e d i a r i e s .

T hus, i t w ould seem to b e r e l a t i v e l y

e a s y t o i d e n t i f y and m easu re a farm g a t e p r i c e .
one q u a l i f i c a t i o n t h a t m ust b e a d d r e s s e d ,

T h ere i s

The c a s e w here

th e p r o d u c e r p e r f o rm s f u n c t i o n s beyond p r o d u c t i o n and h a r ­
v e s t i n g su c h as w a s h in g , g r a d in g and p a c k in g s t i l l p o s e s a
p ro b lem f o r i d e n t i f y i n g a homogenous p r o d u c t .

In o th e r

w o rd s, t h e p r i c e p a i d to t h e g row er r e p r e s e n t s m a rk e t r e ­
tu r n s f o r p e r f o rm in g f u n c t i o n s beyond t h a t o f th e p r o d u c t i o n
o f p o ta to e s.
The arro w s i n e a c h c a s e i n d i c a t e t h e p o i n t w here a
p r i c e may b e d e te r m in e d .

Thus, c o n c e iv a b ly a p r i c e c o u ld

b e m e a su re d a t t h e s e p o i n t s .

However, d e te r m in in g w hat

th e p r i c e r e f l e c t s a t t h e s e p o i n t s i s more d i f f i c u l t i n
th o s e c a s e s w here t h e d a s h e d l i n e s a r e drawn.

F o r exam ple,

th e a g e n t / b r o k e r c l a s s o f a c t o r s and t h e p r o d u c e r o r g a n i ­
z a t i o n s c o m p lic a te th e m eaning o f a p r i c e .quote.

I t is not

c l e a r i n p r a c t i c e e x a c t l y w hat f u n c t i o n s a r e b e i n g rem u n e r­
a t e d by th e p r i c e and i t may n o t be c l e a r w h ich a c t o r
makes th e s e l l i n g d e c i s i o n .
The p r i n c i p a l g o a l o f F i g u r e 3-3 i s to g i v e an
i n d i c a t i o n o f t h e d i f f e r e n t m a r k e tin g a rra n g e m e n ts co n­
f r o n t i n g a p r o d u c e r i n s e l l i n g th e p r o d u c t .

The p r i c e

e s t i m a t i o n and r e p o r t i n g p ro b le m , from p u r e l y a m e a s u re ­
ment s t a n d p o i n t , th e n i n v o l v e s s t a n d a r d i z i n g th e p r o d u c t
f o r w h ich p r i c e i s to b e r e p o r t e d to some a c c e p t a b l e d e g r e e
of erro r.

T h is in v o l v e s d e f i n i n g t h e p r o d u c t a t th e p o i n t

76

of sa le , i . e . ,

i d e n t i f y i n g f u n c t i o n s t h a t h av e a l t e r e d th e

p r o d u c t , and i d e n t i f y i n g th e f u n c t i o n s t h a t h a v e b e e n p e r ­
form ed b y v a r i o u s a c t o r s i n moving th e p r o d u c t th r o u g h th e
v e r t i c a l m a r k e tin g p r o c e s s , i . e . ,

t r a n s p o r t a t i o n , a s se m b ly ,

e t c . , so t h a t a common p o i n t o f s a l e may b e i d e n t i f i e d .
T h is i n e s s e n c e i s w h at one m ig h t c a l l t h e d a t a c o l l e c t i o n
a g e n c y 's m easurem ent and o p e r a t i o n a l i z a t i o n p ro b lem .
3.3.2

M ark et I n f o r m a t i o n System - th e A c to r s and t h e i r
F u n c tio n s
I f we expand th e m a rk e t sy ste m d ia g ra m and e x p l i c i t l y

i n c l u d e i n f o r m a t i o n as p a r t o f th e s y ste m , t h e number o f
a c to rs in c r e a s e s .

I n t h i s expanded m a rk e t and i n f o r m a t i o n

sy ste m th e p r im a r y o u t p u t i s i n f o r m a t i o n .

T h is v ie w i s

s i m i l a r to C o x 's s u g g e s t i o n o f v ie w in g t h e s y ste m as
c h a n n e ls th r o u g h w hich i n f o r m a t i o n i s p a s s e d .

T h erefo re,

some o f th e r e l e v a n t a c t o r s may n o t b e i n v o l v e d w i t h p h y s ­
i c a l l y moving o r t r a n s p o r t i n g th e p r o d u c t .

F i g u r e 3 -4

r e p r e s e n t s thfe m a rk e t and i n f o r m a t i o n sy ste m e x i s t i n g f o r
an a g r i c u l t u r a l commodity.
The m a rk e t and i n f o r m a t i o n sy stem a r e b r o k e n i n t o
f o u r g ro u p s i n F i g u r e 3 - 4 . T h is f i g u r e i s m ean t t o i l l u s t r a t e
a l l o f t h e p o s s i b l e a c t o r s i n a d a t a and i n f o r m a t i o n
s y ste m f o r a s i n g l e commodity and t h a t a l l o f t h e s e a c t o r s
a re in te rd e p e n d e n t.

T hus, t h e f o u r t h box i s m eant to i n ­

c l u d e th o s e g ro u p s and i n d i v i d u a l s t h a t may b e r e l a t e d i n ­
d i r e c t l y to t h e s i n g l e commodity u n d e r c o n s i d e r a t i o n .

The

77

FIGURE 3 -4
A M ark et I n f o r m a t i o n System
D ata S u b -sy ste m :

ESCS - S t a t i s t i c s
AMS - M ark et News

A n a la y sis:

P u b lic
S ecto r

\ A gents
D ata S u b -sy s te m : \ B ro k e rs
I B a r g a in in g A sso c.
A n a ly s is:
I C o o p e r a tiv e s
✓ N ewspapers
D e c is io n Making: | M agazines
I T rad e A ssoc.
/ E tc .

P riv a te
S ecto r
(In fo rm a tio n
S p e c ia lists)

ESCS - Economics
AMS - M arket News
mciyn i sMaker3
tra to rs
D e c is io n M aking: j/ A
P odU
E tc .

D ata S u b -sy ste m :
A n a ly sis:
D e c is io n Making:

D ata S ubsystem
A n a ly s is
D e c is io n Making

P ro d u c e r s
Buyers
( r e t a i l p ro cesso rs
sh ip p e rs
w h o le sa le rs)
Consumers
Etc.

A Commodity
M a rk e t

O th e r
/ Commodity
M a rk e ts

78

p r i n c i p a l i n t e r e s t f o r t h i s s tu d y l i e s w i t h th e f i r s t t h r e e
boxes.
The f i r s t box r e p r e s e n t s t h e p u b l i c s e c t o r .

W ith in

t h i s s e c t o r t h e r e a r e two b a s i c o r g a n i z a t i o n s m anaging d a t a
s u b - s y s te m s :
S e rv ic e ,

ESCS:

S t a t i s t i c s and A g r i c u l t u r a l M a rk e tin g

T hese d a t a may b e p r e s e n t e d d i r e c t l y to t h e p r i ­

v a t e s e c t o r w i t h o u t an a n a l y s i s a s t y p i c a l l y i n ESCS:
S t a t i s t i c s p u b l i c a t i o n s , - - o r t h e s e d a t a may be p r e s e n t e d
accom panied by an a n a l y s i s as commonly done i n AMS M arket
News S e r v i c e o r p u b l i c a t i o n s from ESCS:

E conom ics.

T hese

d a t a may th e n be f u r t h e r a n a ly z e d by p r i v a t e m a rk e t p a r t i c ­
i p a n t s i n d e c i s i o n making

p r i o r to p r e s e n t a t i o n to ad d ­

itio n a l u se rs.
The se c o n d box i l l u s t r a t e s a c l a s s o f p a r t i c i p a n t s
t h a t m ig h t b e c o n s i d e r e d as b e i n g p r i n c i p a l l y i n th e d a t a
and i n f o r m a t i o n b u s i n e s s .

I n o t h e r w o rd s, t h e s e f i r m s ,

g ro u p s o r i n d i v i d u a l s a r e h e a v i l y in v o lv e d i n c o l l e c t i n g ,
a n a l y z i n g and r e p o r t i n g d a t a and i n f o r m a t i o n .

T h is c l a s s

o f p a r t i c i p a n t s may u s e d a t a and i n f o r m a t i o n from th e p u b l i c
s e c t o r o r th e y may e s t i m a t e t h e i r own.

In a d d i t i o n , t h i s

d a t a and i n f o r m a t i o n may be s u p p l i e d to t h e m a rk e t p a r t i c i ­
p a n t s d i r e c t l y o r i t may be accom panied by an a n a l y s i s .
A n o t e i s i n o r d e r r e g a r d i n g an i l l - d e f i n e d s e t o f
a c t o r s , nam ely t h e s h i p p e r , w h o l e s a l e r , d i s t r i b u t o r , a g e n t /
b r o k e r group and t h e c o o p e r a t i v e s .

I n F i g u r e 3 -4 a g e n ts and

b r o k e r s w ere p l a c e d i n th e i n f o r m a t i o n f u n c t i o n c a te g o r y
w h i l e s h i p p e r s , w h o l e s a l e r s and d i s t r i b u t o r s w ere p la c e d

79

i n t h e m a rk e t c a t e g o r y .

The l o g i c o f t h i s l i e s w i t h th e

a s s u m p tio n t h a t t h e a g e n ts and b r o k e r s p r o v i d e o n ly an
i n f o r m a t i o n f u n c t i o n , i . e . ' , c o n n e c t b u y e r s and s e l l e r s , and
th e y do n o t h a n d l e t h e p r o d u c t .

S h i p p e r s , w h o l e s a l e r s and

d i s t r i b u t o r s a r e assum ed to p r o v i d e more f u n c t i o n s th a n i n ­
f o r m a tio n s e r v i c e s .
C o o p e r a tiv e s w ere p l a c e d i n b o t h c a t e g o r i e s b e c a u s e
o f th e r a n g e o f a c t i v i t i e s i n w h ich th e y a r e i n v o lv e d .
Some c o o p e r a t i v e s p r i n c i p a l l y p r o v id e i n f o r m a t i o n s e r v i c e s
w h i l e o t h e r s a r e in v o lv e d i n p r o c e s s i n g and d i s t r i b u t i o n .
I n o p e r a t i n g m a rk e ts t h e s e c l a s s i f i c a t i o n s a r e more
d iffic u lt.

T h is i s p a r t i c u l a r l y th e c a s e r e g a r d i n g th e

s h i p p e r , d i s t r i b u t o r , w h o l e s a l e r , b r o k e r / a g e n t g ro u p .

It

seems t h a t t h e s e t i t l e s a r e u s e d d i f f e r e n t l y by d i f f e r e n t
in d iv id u a ls.

T h u s , a b r o k e r may o n ly p r o v id e in f o r m a t i o n

i n t h e ey es o f one i n d i v i d u a l b u t to a n o t h e r th e te rm may b e
a p p l i e d to a p a r t i c i p a n t t h a t ta k e s t i t l e ,

s t o r e s , w ashes

and p a c k s t h e p r o d u c t p r i o r to r e s e l l i n g i t .
The m a rk e t p a r t i c i p a n t s a r e t h o s e whose p r i n c i p a l
a c t i v i t y i n t h e s y ste m i s h a n d l i n g th e p r o d u c t a t some p o i n t
from p l a n t i n g t o co n su m p tio n .

I n a d d i t i o n , t h i s group h a s

d e c i s i o n m akers t h a t a c t on t h e d a t a and i n f o r m a t i o n t h a t i s
a v a i l a b l e t o them.

T h is a c t i o n in v o l v e s an a n a l y s i s f u n c ­

t i o n p e rfo rm e d on th e b a s i c d a t a t h a t i s a v a i l a b l e .

Thus,

p r i v a t e d e c i s i o n m akers m ig h t be th o u g h t o f as u s i n g an
a n a l y t i c a l fram ew ork t h a t p ro d u c e s i n f o r m a t i o n from d a t a .

80

As i m p l ie d by t h e arro w s on t h e l e f t h and s i d e o f th e
d ia g ra m , i n f o r m a t i o n and d a t a flo w b o t h w ays, i . e . , betw een
t h e p a r t i c i p a n t s i n ea ch o f t h e b o x e s .

I t s h o u ld a l s o b e

n o te d t h a t d a t a and i n f o r m a t i o n f lo w b a c k and f o r t h b etw een
a c to r s in each o f th e b oxes.

F u r th e r m o r e , d a t a and i n f o r ­

m a tio n flo w b ack and f o r t h b etw e en a c t o r s w i t h i n . e a c h c a t e ­
g o ry .

F o r exam ple, p r i c e d a t a and i n f o r m a t i o n flo w b etw een

p r o d u c e r s , b etw een p r o d u c e r s and th e b u y e r s , e t c .
3.3.3.

A P ro d u c e r D e c is io n S t r u c t u r e
T h is r e s e a r c h e v a l u a t e s th e p r i c e d a t a and i n f o r m a t i o n

sy stem from th e p e r s p e c t i v e o f M ic h ig an p o t a t o p r o d u c e r s .
Inasmuch as th e i n f o r m a t i o n sy stem fram ew ork e m p h asiz es t h e
im p o rta n c e o f d e c i s i o n making i n e v a l u a t i n g an o p e r a t i n g
p r i c e d a t a and i n f o r m a t i o n s y s te m , one m ust d e a l d i r e c t l y
w i t h th e d e c i s i o n s c o n f r o n t i n g th e p o t a t o p r o d u c e r .
F ig u r e 3-5 p r e s e n t s a h y p o t h e t i c a l d e c i s i o n s t r u c t u r e
fo r a p o ta to producer.

T h is f i g u r e m ig h t b e view ed as an

e x t e n t i o n and e l a b o r a t i o n o f th e u sa g e o f p r i c e d a t a as
p o s i t e d by eco no m ics, and i t does n o t n e c e s s a r i l y im p ly d i f ­
f e r e n t m o t i v a t i o n s th a n econom ics assum es.

F o r exam ple, i t

i s p o s s i b l e to assume t h a t th e p r o d u c e r i s p r i n c i p a l l y i n ­
t e r e s t e d i n m ax im izing r e t u r n s .

F u rth e r, each d e c is io n i n ­

v o lv e s a c h o ic e and th e c h o ic e i n v o l v e s a d e c i s i o n r e g a r d i n g
th e a l l o c a t i o n o f r e s o u r c e s .

F o r ex am p le, a d e c i s i o n b e ­

tw een p r i c e d is c o v e r y mechanisms in v o lv e s an a l l o c a t i o n
d e c i s i o n to t h e e x t e n t t h a t e a c h p r i c e d i s c o v e r y u t i l i z e s

FIGURE 3-5
A Hypothetical Decision Structure for a Producer

P ro d u c e r
1/
—P ro d u ce—
- > NO
YES

NO

I
amount

p l a n t a n o t h e r cro p
C leav e Id le
liq u id a te

Y SS

(

Con : r a c t

in d iv id u a l' nego­
tia tio n
g ro u p n e g o t i a t i o n
how much t o c o n t r a c t
how much t o p ro d u c e

>YES

V

I

how much t o p ro d u ce.

when t o p l a n t

'I/

when to h a r v e s t
Where to s e l l

I

T a b le s to c k

P ro c essin g

♦

I

s to r e p o ta to e s
YESI
I

J
el
Si

s to r e p o ta to e s

*no

YES'

p ric e d is ­
c o v e ry to
u s e , and
form to s e l l
p o ta to e s in

when t o s e l l ,
p r i c e d is c o v e r y
to u s e , form to
s e l l p o ta to e s in .

Seed

I

§
s

s to r e p o ta to e s

kN0

NO

p rL
d isc o v e ry
to use

when to s e l l ,
p r ic e d isc o v e ry
to u s e .

y

p ric e
d is c o v e r y ,
& form .

when t o s e l l ,
p r ic e d isc o v e ry
t o u s e ; form to
s e l l p o ta to e s in .

i
Assumes t h a t th e d e c i s i o n o f w h ich m a rk e t to s e l l
t h e p o t a t o e s i n i s made i n d e p e n d e n t l y o f th e p l a n t i n g de
c i s i o n ; a l t h o u g h q u a l i t y r e q u ir e m e n ts and p r e - s e a s o n co n ­
t r a c t i n g r e s u l t i n some o f t h i s d e c i s i o n b e i n g made p r i o r
to p l a n t i n g .

82

d i f f e r e n t r e s o u r c e s q u a l i t a t i v e l y and q u a n t i t a t i v e l y ,
A v e r y i m p o r t a n t c h a r a c t e r i s t i c o f F ig u r e 3 .5 i s t h a t
i t i l l u s t r a t e s t h e im p o r ta n c e o f tim e i n p r o d u c e r d e c i s i o n
making, and th u s , i t i m p l i e s th e im p o r ta n c e o f tim e i n e v a l ­
u a t i n g an o p e r a t i n g d a t a and i n f o r m a t i o n s y s te m .

Moving

from t h e to p to t h e b o tto m o f th e d ia g ra m i m p l i e s a movement
th r o u g h tim e .

T h e r e f o r e , we can s e e t h a t th e c h o i c e s i n ­

v o lv e d i n th e d e c i s i o n s r e g a r d i n g p r o d u c t i o n and m a r k e tin g
u n fo ld

th r o u g h tim e .

A ls o , i t i s d i f f i c u l t to s p e c i f y th e

c o n t i n g e n c i e s o f a c h o ic e a t th e tim e o f t h a t c h o i c e .
F u r t h e r , some d e c i s i o n s a t tim e p e r i o d one n e g a t e th e n ee d
fo r d ec isio n s a t a l a t e r p o in t.

F o r exam ple, once a p ro d u ­

c e r sig n s a p re -se a so n c o n tr a c t,

th e m a r k e tin g d e c i s i o n

h as b e e n made.
b ee n made.

T h e r e f o r e , t h e d e c i s i o n on when t o s e l l h a s

However, p u t t i n g o f f t h e d e c i s i o n to c o n t r a c t

i n p e r i o d one m ig h t n o t r u l e o u t t h e p o s s i b i l i t y o f con­
t r a c t i n g i n p e r i o d tw o --w h ere p e r i o d two s t i l l in v o lv e s th e
same p r o d u c t i o n and m a r k e tin g y e a r .

I n o t h e r w o rd s, a p r o ­

d u c e r m ig h t d e c id e n o t to c o n t r a c t ah ead f o r h i s p r o d u c t i o n
p r i o r to p l a n t i n g , i . e . ,

d e c id e s to p l a y th e m a r k e t, b u t

i t i s p o s s i b l e t h a t h e w i l l h a v e th e o p p o r t u n i t y to c o n t r a c t
l a t e r i n th e c ro p s e a s o n .

T h is assu m es, o f c o u r s e , t h a t he

can f i n d a b u y e r t h a t w i l l o f f e r th e c o n t r a c t .
From t h i s h y p o t h e t i c a l d e c i s i o n s t r u c t u r e , i t can b e
i n f e r r e d t h a t t h e r e may b e co m petin g demands f o r p r i c e d a t a
and i n f o r m a t i o n among p o t a t o p r o d u c e r s .

In o th e r w o rd s, d i f ­

f e r e n t o p e r a t i o n a l l y d e f i n e d c o n c e p ts o f p r i c e may b e

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d e s i r a b l e f o r m aking t h e s e d e c i s i o n s , and d i f f e r e n t l e v e l s
o f a c c u r a c y i n m easurem ent may b e t o l e r a b l e f o r d i f f e r e n t
d e c isio n s.

F o r exam ple, a p r o d u c e r may demand a g r e a t e r

d e g r e e o f a c c u r a c y i n a p r i c e q u o te f o r th e d e c i s i o n o f
s e l l i n g to d a y v e r s u s s e l l i n g tom orrow, th a n w ould b e r e ­
q u i r e d f o r th e d e c i s i o n o f s e l l i n g t h i s week as o p po sed to
s i x months from now.
3 .4

Summary
The i n f o r m a t i o n s y s te m fram ew ork Ttoill b e u s e d to

e v a l u a t e t h e p r i c e d a t a and i n f o r m a t i o n s y s te m f o r M ic h ig an
p o ta to pro d u cers.

T h is fram ew ork s t r e s s e s th e i n t e r d e p e n ­

dence among t h e c o n c e p u t a l i z a t i o n , o p e r a t i o n a l i z a t i o n and
t h e m easurem ent o f phenomena, and th u s i t s t r e s s e s th e
m u l t i d i s c i p l i n a r y r e s p o n s i b i l i t y o f m a i n t a i n i n g th e d a t a
and i n f o r m a t i o n sy stem .
C o n c e p tu a l o b s o le s c e n c e i s se e n as an im p o r t a n t pro blem
c o n f r o n t i n g t h e o p e r a t i n g d a t a and i n f o r m a t i o n s y s te m s .
T h is o b s o le s c e n c e m a y a r i s e from two s o u r c e s :

1) when

ch an ges i n r e a l i t y u n d erm in e t h e c o r r e s p o n d e n c e o f a g iv e n
c o n c e p t w ith t h e r e a l i t y i t p u r p o r t e d l y r e p r e s e n t s , and
2) w i t h chan g es i n th e p ro b lem s f a c i n g d e c i s i o n m akers ch an g e.
The i n f o r m a t i o n sy ste m fram ew ork s t r e s s e s t h e im p o r­
ta n c e o f d e c i s i o n making i n e v a l u a t i n g a d a t a and in f o r m a ­
t i o n s y ste m .

I t was p o i n t e d o u t t h a t co m p etin g u s e s o f a

d a t a and i n f o r m a t i o n sy stem n e c e s s i t a t e th e s e t t i n g o f
p r i o r i t i e s f o r a d a t a and i n f o r m a t i o n sy ste m

h i l e th e

34

" p u b l i c good" c h a r a c t e r i s t i c s o f i n f o r m a t i o n make i t d i f f ­
i c u l t t o p l a c e a v a l u e on p u b l i c p r i c e d a t a and i n f o r m a t i o n .
T hus, t h e a p p ro a c h u s e d i n t h i s s tu d y i s p r e s e n t e d as th e
s t e p i n a sy stem s a p p ro a c h f o r " i l l - d e f i n e d " p ro b le m s .
T h is r e s e a r c h e v a l u a t e s t h e p r i c e d a t a and in f o r m a ­
t i o n sy ste m f o r one s e t o f m a rk e t u s e r s —M ic h ig an p o t a t o
producers.

The m a rk e t and i n f o r m a t i o n sy ste m a r e c o n s i d ­

e r e d w i t h em phasis on t h e a c t o r s whose p r i n c i p a l f u n c t i o n
i s h a n d lin g in fo rm a tio n .

The c u r r e n t p u b l i c p r i c e d a t a

and i n f o r m a t i o n s y ste m i s th e n com pared w i t h t h e u s e s and
n e e d s o f M ic h ig an p o t a t o p r o d u c e r s w ith e x p l i c i t c o n s i d e r ­
a t i o n g iv e n t o t h e d e c i s i o n s t h e s e p r o d u c e r s s t r e s s .

i

CHAPTER 4
METHOD AND PROCEDURE
T h is c h a p t e r w i l l p r e s e n t t h e m ethods and p r o c e d u r e s
em ployed i n th e s t u d y , i n c l u d i n g t h e p o p u l a t i o n i n v e s t i g a t e d ,
t h e d ev e lo p m e n t o f t h e m a i l q u e s t i o n n a i r e and i n t e r v i e w s ,
and a d i s c u s s i o n o f th e a n a l y s i s .
4 .1

P o p u la tio n s I n v e s tig a te d
The p r i n c i p a l u s e r g rou p t o be exam ined by t h i s s tu d y

w ere M ic h ig a n p o t a t o p r o d u c e r s .

An " i n d e p th " s tu d y o f

th e i n d u s t r y i n one s t a t e can more e f f e c t i v e l y i d e n t i f y
t h e i m p l i c a t i o n s o f th e i n d u s t r y s t r u c t u r e f o r t h e p r i c e
d a t a and i n f o r m a t i o n s y ste m .
The M ic h ig an Crop R e p o r tin g B o a r d 's l i s t o f p o t a t o
p r o d u c e r s i n t h e s t a t e o f M ich ig an was u s e d as th e p o p u la ­
t i o n to b e s u r v e y e d .^

£ m a il q u e s t i o n n a i r e was s e n t to

e a c h o f t h e 424 names on t h i s l i s t .

T h is l i s t i s m a in ­

t a i n e d p r i n c i p a l l y f o r th e p u rp o s e o f e s t i m a t i n g M ic h ig a n 's
t o t a l p o t a t o a c r e a g e and p r o d u c t i o n .

The p r e s e n t s tu d y e x ­

c lu d e d t h o s e p r o d u c e r s who p ro d u c e d l e s s th e n f i v e a c r e s o f
p o t a t o e s and t h o s e f a r m e r s on th e l i s t who no lo n g e r p ro d u c e d
p o ta to e s.

I t was o b s e rv e d t h a t f i v e a c r e s a p p e a r e d t o be t h e

^ B ecause t h i s l i s t o f p o t a t o p r o d u c e r s i s c o n f i d e n ­
t i a l , th e Crop R e p o r tin g Board m a ile d t h e q u e s t i o n n a i r e and
t h e f o l l o w up l e t t e r s to t h e p r o d u c e r s .
85

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minimum p o i n t a t w hich g ro w e rs c la im e d t o s e l l p o t a t o e s .
Inasm uch as th e g ro w ers w i t h l e s s th a n f i v e a c r e s d i d n o t
s e l l p o t a t o e s , f o r t h e p u r p o s e o f t h i s s t u d y i t was assumed
th e y w ere n o t u s e r s o f p o t a t o p r i c e d a t a and i n f o r m a t i o n .
On t h e b a s i s o f th e r e s p o n d e n ts who no lo n g e r s e l l p o t a t o e s
and t h e e s t i m a t e d p r o p o r t i o n o f t h e n o n - r e s p o n d e n ts who no
l o n g e r s e l l p o t a t o e s , a t o t a l o f 341 f a r m e r s w ere i d e n t i f i e d
as c o m p ris in g th e p o p u l a t i o n o f M ic h ig a n com m ercial p o t a t o
producers.
I n o r d e r to o b t a i n i n f o r m a t i o n on a c r o s s s e c t i o n o f
t h e a c t o r s i n th e M ich ig an p o t a t o i n d u s t r y , and th u s d e s c r i b e
many a s p e c t s o f t h e p r i c e d a t a and i n f o r m a t i o n s y ste m , p e r ­
s o n a l i n t e r v i e w s w ere c o n d u c te d w i t h s e v e r a l n o n - p r o d u c e r s .
These in c l u d e d t h e f o l l o w i n g :

t h e m anager o f a c o o p e r a t i v e ,

a r e p r e s e n t a t i v e o f t h e b a r g a i n i n g a s s o c i a t i o n and an a g e n t /
b ro k er.

These s u b j e c t s w ere s e l e c t e d b e c a u s e o f t h e i r know­

le d g e o f th e M ichigan p o t a t o i n d u s t r y .

In a d d itio n , f iv e

p r o c e s s i n g p o t a t o b u y e r s w ere i n t e r v i e w e d and a s i x t h f i r m
was s e l e c t e d b u t r e f u s e d t h e i n t e r v i e w .

These s u b j e c t s w ere

ta k e n from th e M ich ig an P o t a t o I n d u s t r y C om m ission’ s m a i l i n g
l i s t and w ere n o t r e p r e s e n t a t i v e o f th e s t a t e ’ s p r o c e s s o r s .
I n g e n e r a l , t h e i n t e r v i e w s w ere s e l e c t e d by means o f
t h e p r i n c i p l e o f q u o ta sa m p lin g r e f e r r e d to by Moser and
K a lto n (1 9 7 2 ).

The s e l e c t i o n o f th e a c t o r s to b e i n t e r v i e w e d

was b a s e d on a s t r a t i f i c a t i o n o f th e m a rk e t by f u n c t i o n s p e r ­
form ed, e . g . , p r o d u c e r s , p r o d u c e r s ' r e p r e s e n t a t i v e s , and
p ro c e s sin g p o ta to b u y e rs, v a rio u s r e p r e s e n ta tiv e s o f th e se

87

g ro u p s w ere recommended by p e r s o n s k n o w le d g e a b le o f th e
M ic h ig an p o t a t o i n d u s t r y .
The p r i n c i p a l arg u m en ts i n f a v o r o f q u o ta sa m p lin g a r e
t h a t i t i s l e s s c o s t l y and a d m i n i s t r a t i v e l y e a s y .

In a d d i­

t i o n , M oser and K a lto n a rg u e t h a t i t may b e t h e o n ly
p r a c t i c a b l e m ethod o f sa m p lin g a p o p u l a t i o n f o r w h ich no
s u i t a b l e fram e i s a v a i l a b l e .

I n th e p r e s e n t s t u d y , one o f

th e o b j e c t i v e s was to i d e n t i f y p ro b lem s i n th e p r i c e d a t a
and i n f o r m a t i o n sy ste m from th e p e r s p e c t i v e o f v a r i o u s
p o t e n t i a l u s e r s o f th e p r i c e d a t a .

Thus, t h e s e i n t e r v i e w s

w ere u t i l i z e d t o a s s i s t i n d e te r m in in g t h e e x t e n t o f u s e o f
th e p u b l i c p r i c e d a t a sy ste m and th e p o t e n t i a l f o r t h a t
sy ste m s e r v i n g th e n e e d s o f t h e s e a c t o r s .

In th a t case,

p e r s o n a l i n t e r v i e w s w i t h " s e l e c t e d " i n d u s t r y o f f i c i a l s w ere
deemed more a p p r o p r i a t e .
4 .2

P ro c e d u r e s
The s tu d y p r i n c i p a l l y c o n s i s t e d o f t h r e e p a r t s :

1) a

m a il q u e s t i o n n a i r e to M ich ig an p o t a t o p r o d u c e r s , 2) t e le p h o n e
i n t e r v i e w s w ith a random sam ple o f th e p r o d u c e r s who d i d n o t
r e s p o n d to t h e m a i l q u e s t i o n n a i r e , and 3) p e r s o n a l i n t e r ­
view s w i t h s e l e c t e d i n d u s t r y p a r t i c i p a n t s .
4.2.1

M a il Q u e s t i o n n a i r e
A p i l o t s t u d y was u n d e r ta k e n to a i d i n th e dev elo p m en t

o f t h e p r o d u c e r m a il q u e s t i o n n a i r e .

The p i l o t s t u d y co n ­

s i s t e d o f p e r s o n a l i n t e r v i e w s w i t h s i x p o t a t o g r o w e rs , an

83

a g e n t / b r o k e r , a c o o p e r a t i v e m anager and a r e p r e s e n t a t i v e o f
th e b a r g a i n i n g a s s o c i a t i o n .

A l i s t o f th e i n t e r v i e w q u e s ­

t i o n s i s i n A ppendix I I .
On th e b a s i s o f d a t a o b t a i n e d from p i l o t i n t e r v i e w s ,
a m a i l q u e s t i o n n a i r e was d e v e lo p e d f o r a s u r v e y o f M ichigan
p o ta to p ro d u cers.

P r i o r to m a i l i n g th e p r o d u c e r q u e s t i o n ­

n a i r e , i t was p r e - t e s t e d on f i v e M ic h ig an p o t a t o p r o d u c e r s .
T h is p r e - t e s t i n g i n c l u d e d m a i l i n g th e q u e s t i o n n a i r e and
c o v e r l e t t e r f o llo w e d by a p e r s o n a l v i s i t w i t h th e p r o d u c e r s
t o d i s c u s s th e w o rdin g and c l a r i t y o f th e q u e s t i o n s on th e
q u e stio n n a ire .

(See A ppendix I I I )

A f t e r r e v i s i o n s to e l i m i n a t e am b ig io u s q u e s t i o n s , th e
q u e s t i o n n a i r e was m a ile d to M ic h ig an p o t a t o p r o d u c e r s l i s t e d
w i t h th e Crop R e p o r tin g B oard.
The f i r s t m a i l i n g in c l u d e d a c o v e r l e t t e r and a copy
o f th e q u e s t i o n n a i r e .

A stam ped s e l f - a d d r e s s e d e n v e lo p e

was a l s o e n c lo s e d i n w h ich to r e t u r n th e q u e s t i o n n a i r e .

A ls o ,

t h e r e t u r n e n v e lo p e s w ere p r e - c o d e d t o p r o t e c t th e c o n f i d e n ­
t i a l i t y o f th e r e s p o n d e n ts b u t y e t a llo w f o r i d e n t i f i c a t i o n
o f th e n o n - r e s p o n d e n t s .

A f o llo w - u p l e t t e r was s e n t to th e

n o n - r e s p o n d e n t p r o d u c e r s a p p r o x im a te ly t h r e e weeks f o llo w in g
th e i n i t i a l m a i l i n g .

T h is was f o llo w e d by a t h i r d l e t t e r ,

a n o t h e r copy o f th e q u e s t i o n n a i r e , and an a d d r e s s e d r e t u r n
e n v e lo p e a f t e r t h r e e more w eeks,
The q u e s t i o n n a i r e h ad two m a jo r o b j e c t i v e s :

1) to

i d e n t i f y th e s t r u c t u r e o f M ich ig an p o t a t o p r o d u c in g f ir m s
and t h e m a r k e tin g a rra n g e m e n ts c u r r e n t l y e x i s t i n g i n t h e

89

M ic h ig an p o t a t o i n d u s t r y , and 2) t o i d e n t i f y th e ty p e s and
s o u r c e s o f p r i c e d a t a and i n f o r m a t i o n u se d i n d e c i s i o n making
by M ic h ig an p o t a t o p r o d u c e r s .
The f i r s t p a r t o f t h e q u e s t i o n n a i r e a s k e d q u e s t i o n s
t h a t w ere aim ed a t i d e n t i f y i n g th e p r o d u c in g f i r m and i t s
m a r k e tin g p r a c t i c e s ( s e e A ppendix I I I ) ,

F o r exam ple,

q u e s t i o n 2 i d e n t i f i e s t h e m a rk e t i n w h ich th e p r o d u c e r s e l l s
p o t a t o e s j q u e s t i o n s 3 and 4 i d e n t i f i e s th e a c t o r s i n t h e
f i r s t t r a n s a c t i o n , and q u e s t i o n 5 i d e n t i f i e s th e p r o d u c t a t
th e f i r s t t r a n s a c t i o n .
Q u e s tio n s 9 and 10 a r e aimed a t i d e n t i f y i n g th e p r i c e
d i s c o v e r y mechanisms em ployed by th e p r o d u c e r s .

In o th e r

w o rd s, w hat a r e th e m a jo r i n s t i t u t i o n a l r u l e s d e f i n i n g how
t h e p r o d u c e r s " d i s c o v e r " t h e p r i c e a t w hich th e y w i l l t r a d e
th e ir p o ta to e s.

Q u e s tio n 12 a s k s th e p r o d u c e r w hat p r o p o r ­

t i o n o f t h e cro p i s s o l d on a p r e - s e a s o n c o n t r a c t .

O th e r

s t r u c t u r a l q u e s t i o n s i d e n t i f i e d th e s i z e o f th e farm s and t h e
o p e r a t o r ' s ag e .
Q u e s tio n s 14-23 a s k e d th e p r o d u c e r s a s e r i e s o f q u e s ­
t i o n s a b o u t t h e i n f o r m a t i o n th e y u s e , t h e d e c i s i o n s f o r
w hich th e y u s e p r i c e i n f o r m a t i o n , i . e . , w here th e y a c q u i r e
t h e i r p r ic e in fo rm a tio n .

The p u rp o s e o f t h e s e q u e s t i o n s was

to i d e n t i f y t h e ty p e s o f i n f o r m a t i o n n e e d e d by p r o d u c e r s
i n d e c i s i o n m aking, t h e d e c i s i o n s deemed i m p o r ta n t by t h e s e
p r o d u c e r s and t h e s o u r c e s o f t h e s e d a t a and i n f o r m a t i o n t h a t
th e producers fin d u s e f u l.

90

The i d e n t i f i c a t i o n o f th e s t r u c t u r e o f M ic h ig an
p o t a t o farm s and th e u s e s and s o u r c e s o f p r i c e d a t a and i n ­
f o r m a t i o n , w ere u n d e r ta k e n to s e r v e t h e o v e r a l l g o a l o f
a t t e m p t i n g to r e l a t e t h e s t r u c t u r e o f t h e f i r m and i t s
s e l l i n g p r a c t i c e s t o t h e e v a l u a t i o n o f p r i c e d a t a and i n ­
f o r m a tio n and th e s o u r c e s o f t h e s e p r i c e d a t a and i n f o r m a t i o n .
I n o t h e r w o r d s , i s t h e r e e v id e n c e o f a r e l a t i o n s h i p betw een
s t r u c t u r e and t h e u s e s / n e e d s f o r p r i c e d a t a and i n f o r m a t i o n .
The q u e s t i o n n a i r e in c l u d e d b o t h open ended : and p r e coded q u e s t i o n s .

Moser and K a lto n (1972)

2

p o i n t o u t t h a t th e

c h o ic e o f q u e s t i o n ty p e s i s d i c t a t e d by t h e o b j e c t i v e s o f
th e s u r v e y and th e r a n g e o f an sw ers one w an ts to c o n s i d e r !
I n o t h e r w o rd s , one w ould u s e open ended q u e s t i o n s b e c u a s e
o f t h e d e s i r e f o r t h e r e s p o n d e n t to h a v e freed o m i n c h o o s in g
th e a s p e c t , t h e form , t h e d e t a i l and t h e l e n g t h o f t h e
an sw er.

I n th e c u r r e n t s t u d y , s i n c e t h e n a t u r e o f t h e p r o ­

blem was n o t w e l l d e f i n e d , i t was f e l t t h a t a p o r t i o n o f th e
q u e s t i o n s s h o u ld a llo w t h e r e s p o n d e n t t o d e f i n e a l l a s p e c t s
o f th e r e s p o n s e .

F u r t h e r , i n some o f t h e q u e s t i o n s , e . g . ,

q u e s t i o n 15, i t was f e l t t h a t t h e p u r p o s e o f t h e su rv e y
would be b e t t e r s e r v e d i f p r o d u c e r s w ere g iv e n no l e a d s ,
th u s i n c r e a s i n g th e l i k e l i h o o d t h a t r e s p o n d e n t s w ould l i s t
t h e s o u r c e s th e y a r e m o st aw are o f and t h e s o u r c e s th e y r e l y
on f o r p r i c e d a t a .
2

Open end ed q u e s t i o n s su c h as 15 a l s o

L a n sin g and Morgan C1971) was a l s o e x t e n s i v e l y u s e d
i n t h e dev elo p m en t o f t h e m a il q u e s t i o n n a i r e ,

91

te n d t o g r a d u a l l y f u n n e l t h e r e s p o n d e n t 's a t t e n t i o n to a
more s p e c i f i c s u b j e c t , e . g . , p r i c e d a t a and i t s s o u r c e s .
P r e - c o d e d q u e s t i o n s w ere u s e d f o r d e t e r m in in g su ch
f a c t o r s as who buys th e p o t a t o e s from t h e p r o d u c e r s and t h e
p r i c e d i s c o v e r y m ech an ism s.

I t was f e l t t h a t t h e s e q u e s t i o n s

demanded s p e c i f i c an sw ers and t h a t o p e n -e n d e d q u e s t i o n s w ould
l e a d t o a w ide r a n g e o f an sw ers t h a t w ould n o t le n d them­
s e l v e s t o c l a s s i f i c a t i o n by econom ic c r i t e r i a .
Q u e s tio n 14, 16, 17 and 18 a r e s c a l i n g q u e s t i o n s t h a t
a t t e m p t to p r o v i d e a m easurem ent o f t h e i n t e n s i t y o f th e
p r o d u c e r 's o v e r a l l a t t i t u d e s a b o u t p r i c e d a t a and in f o rm a 3
t i o n an d t h e i r s o u r c e s o f t h e s e d a t a . Moser and K a lto n
(1972) p o i n t o u t t h a t th e b a s i s f o r a t t i t u d e m easurem ent i s
t h a t t h e r e a r e u n d e r l y i n g d im e n sio n s a lo n g w h ich a t t i t u d e s
can be ra n g e d .

O r d i n a l s c a l e s r a n k i n d i v i d u a l s a lo n g a c o n ­

tin u u m o f c h a r a c t e r i s t i c s b e in g s c a l e d , b u t t h e a u t h o r s
p o i n t o u t t h a t t h e r e i s no i m p l i c a t i o n o f d i s t a n c e b e tw e e n
th e s c o re s .

I n o t h e r w o rd s , we c a n r a n k th e r e s p o n s e s to

t h e s e q u e s t i o n s , b u t we c a n n o t make s t a t e m e n t s r e g a r d i n g how
much more s t r o n g l y one r e s p o n s e i s th a n t h e n e x t r e s p o n s e .
A L i k e r t s c a l i n g p r i n c i p l e , w hich Moser and K a lto n
p o i n t o u t a p p e a r s to be a r e a s o n a b l e o r d i n a l s c a l e , was
used.

I n t h i s ty p e o f s c a l i n g o r a t t i t u d e m e a s u re ­

m en t, t h e r e s p o n d e n t i s a s k e d t o c h o o se among s e v e r a l r e s p o n s e
c a t e g o r i e s i n d i c a t i n g v a r i o u s s t r e n g t h s o f ag re e m e n t o r
^ See Moser and K a lto n (1972) C h a p te r 14 f o r a d i s ­
c u ssio n o f s c a lin g .

92

d is a g r e e m e n t w i t h t h e s t a t e m e n t .

By a s s i g n i n g a number to

th e c a t e g o r i e s , t h e r e s p o n d e n t 's a t t i t u d e i s m e asu red by th e
t o t a l sco re.
The q u e s t i o n s em ploying a L i k e r t r e s p o n s e s c a l e p r e ­
s e n t e d t h e r e s p o n d e n ts w i t h an ev en number o f p o s s i b l e
r e s p o n s e s f o r ea c h ite m , e . g . , v e r y u s e f u l , m o d e r a te ly u s e ­
fu l, r a r e ly u se fu l or n o t u se fu l.

The p u rp o s e o f an even

number o f c h o ic e s was to f o r c e th e r e s p o n d e n ts on one s i d e
o r a n o th e r o f th e a t t i t u d e s c a le , i . e . ,

t o a v o id th e n e u t r a l

response.
4 .2 .2

N on-R espondent T eleph on e I n t e r v i e w s
A t e le p h o n e s u r v e y o f a sam ple o f th e n o n - r e s p o n d e n ts

was u n d e r ta k e n to o b t a i n a d e s c r i p t i o n o f th e n o n - r e s p o n d e n t
p r o d u c e r s to i d e n t i f y s y s t e m a t i c d i f f e r e n c e s betw een r e s p o n ­
d e n t and n o n - r e s p o n d e n t f ir m s t h a t m ig h t r e s u l t i n b i a s e d
e s t i m a t e s o f t h e M ic h ig an p o t a t o m a rk e t and i t s c h a r a c t e r i s ­
tic s .
Moser and K a lto n (1972) p o i n t o u t t h a t a l th o u g h i t i s
d i f f i c u l t to p r e c i s e l y d e te r m in e th e e f f e c t o f n o n - r e s p o n s e
b i a s , i t i s p o s s i b l e to d e te r m in e th e p r o b a b le n a t u r e and
d i r e c t i o n o f th e b i a s .

F u r t h e r , i t i s d e s i r a b l e t o s tu d y

th e n o n - r e s p o n d e n ts b e c a u s e p r e v io u s s t u d i e s h a v e shown t h a t
t h i s grou p d i f f e r s a lo n g i m p o r ta n t c h a r a c t e r i s t i c s from th e
r e s p o n s e g ro u p .

For exam ple, r e s p o n d e n ts h av e b e e n shown

to b e g e n e r a l l y more h i g h l y e d u c a te d th a n n o n - r e s p o n d e n t s ,
and r e s p o n s e seems to b e c o r r e l a t e d w i t h i n t e r e s t i n th e

93

su b je c t.

Both o f t h e s e c h a r a c t e r i s t i c s w ould seem to r e s u l t

i n m i s r e p r e s e n t a t i o n o f t h e p o p u l a t i o n u n d e r s tu d y ,
Moser and K a lto n a l s o s u g g e s t t h a t i t i s h e l p f u l to
view t h e s u r v e y p o p u l a t i o n as b e in g made up o f two s u b -p o p ­
u la tio n s or s tr a ta :

r e s p o n d e n ts and n o n - r e s p o n d e n t s .

The s u r v e y a c q u i r e s i n f o r m a t i o n a b o u t th e r e s p o n d e n ts and
f a i l s to a c q u i r e i n f o r m a t i o n a b o u t t h e n o n - r e s p o n d e n t s .
D i f f e r e n t a p p ro a c h e s m ig h t be u n d e r ta k e n to a d d r e s s
th e p ro b le m o f n o n - r e s p o n s e i n m a il q u e s t i o n n a i r e s .

The u s e

o f f o llo w - u p l e t t e r s such as t h o s e s e n t i n th e p r e s e n t s tu d y
reduce th e n o n -resp o n se r a t e .

The u s e o f d i f f e r e n t s u r v e y

p r o c e d u r e s su c h as a t e le p h o n e i n t e r v i e w o f a sam ple o f t h e
n o n - r e s p o n d e n ts hav e b e e n fou n d t o be a u s e f u l m e th o d .^
In t h e c u r r e n t s tu d y , a random sam ple o f 20 p e r c e n t
(a t o t a l o f 50) o f th e n o n - r e s p o n d e n t p o t a t o p r o d u c e r s i n
M ic h ig an was u n d e r ta k e n .

The o b j e c t i v e o f t h e s e i n t e r v i e w s

was t o a c q u i r e i n f o r m a t i o n on th e s t r u c t u r e o f th e p ro d u c in g
f i r m , how th e p o t a t o e s w ere s o l d , th e p r o p o r t i o n s o l d on con­
t r a c t , e t c . , and to i d e n t i f y th e p r o d u c e r u s e s and s o u r c e s o f
p r i c e d a t a and i n f o r m a t i o n .
As i t t u r n e d o u t , l i m i t e d i n f o r m a t i o n was o b t a i n e d on
th e u s e s and s o u r c e s o f i n f o r m a t i o n u s e d by t h e s e p r o d u c e r s
inasm uch as th e y g e n e r a l l y r e f u s e d to answ er enough o f th e
q u e s t i o n s to a s c e r t a i n t h e i r e v a l u a t i o n s o f p r i c e d a t a and
^ F o r a d i s c u s s i o n o f n o n - r e s p o n s e p ro blem i n m a il
q u e s t i o n n a i r e s and r e f e r e n c e s on th e s u b j e c t , s e e Moser
and K a lto n (1 9 7 2 ), C h a p te r 14.

94

in fo rm a tio n .

Thus, i t i s n o t p o s s i b l e to p r e c i s e l y d e te r m in e

th e e f f e c t o f n o n - r e s p o n s e b i a s on t h e p r o d u c e r e v a l u a t i o n s
o f p r i c e d a t a and i n f o r m a t i o n .
However, i m p o r t a n t i n f o r m a t i o n was o b t a i n e d on t h e
s tr u c t u r e o f th e se firm s.

S p e c i f i c h y p o th e s e s w ere t e s t e d

to compare t h e r e s p o n d e n t and n o n - r e s p o n d e n t f i r m s to d e ­
te r m in e w h e th e r th e y d e r i v e from th e same p o p u l a t i o n . ^
These t e s t s in c l u d e d b o t h i n f e r e n c e s a b o u t th e mean v a l u e s
o f th e two p o p u l a t i o n s and p r o p o r t i o n s e x h i b i t i n g p a r t i c u l a r
c h a ra c te ris t i c s . ^
4 .2 .3

Buyer I n t e r v i e w s
The r e s e a r c h d e s ig n i n c l u d e d s e l e c t e d p e r s o n a l i n t e r ­

view s w i t h p r i n c i p a l d e c i s i o n m akers on th e b u y e r ’ s s i d e o f
th e exch an ge e q u a t i o n .

The i n t e r v i e w s c o n d u c te d w ere w ith

F o r exam ple, i t was h y p o t h e s i z e d t h a t th e n o n - r e s p o n ­
d e n t f ir m s would be s m a l l e r th a n th e r e s p o n d e n t f i r m s .
S ta ­
t i s t i c a l l y t h i s was a n a ly z e d by t e s t i n g th e n u l l h y p o t h e s i s
t h a t th e a v e ra g e s i z e o f th e n o n - r e s p o n d e n t f ir m s w ould be
e q u a l t o th e a v e r a g e s i z e o f t h e r e s p o n d e n t f ir m s v e r s u s th e
a l t e r n a t i v e h y p o t h e s i s t h a t th e n o n ^ r e s p o n d e n t f ir m s would
be s m a l l e r .
Hq : X = d
H : X < d
I t s h o u ld be n o te d t h a t X r e p r e s e n t s an e s t i m a t e o f t h e a v e r ­
age s i z e o f t h e n o n - r e s p o n d e n t f i r m s .
On t h e o t h e r hand (d)
r e p r e s e n t s t h e t r u e v a l u e o f th e a v e r a g e s i z e o f r e s p o n d e n t
f irm s inasm uch as i t was d e r i v e d from a 100 p e r c e n t sam ple
o f t h e r e s p o n d e n t f i r m s . T hus, t h e h y p o t h e s i s t e s t s t h a t
th e e s t i m a t e d v a l u e f o r n o n - r e s p o n d e n t p o p u l a t i o n i s s m a l l e r
th a n t h e p o p u l a t i o n p a r a m e te r o f th e r e s p o n d e n t p o p u l a t i o n .
^ See t h e d i s c u s s i o n o f th e n o n - r e s p o n d e n t i n t e r ­
view s and th e accom panying t a b l e s f o r t h e h y p o th e s e s t e s t e d
and th e r e s u l t s .

95

p o ta to p ro c e s sin g firm s.
The o b j e c t i v e o f t h e s e i n t e r v i e w s was to i d e n t i f y th e
p r i c e d a t a and i n f o r m a t i o n p ro b lem s o f t h e b u y in g f i r m s ,

One

o f th e g o a ls o f t h i s p a r t o f th e s tu d y was to i d e n t i f y t h e
b u y e r 's u s e o f and r e l i a n c e on USDA r e p o r t s , and to a s c e r ­
t a i n ch ang es i n t h e p r i c e d a t a and i n f o r m a t i o n sy stem t h a t
m ig h t a i d t h e s e f i r m s .
A sa m p lin g o f t h e ty p e s o f q u e s t i o n s a sk e d i n t h e s e
b u y e r i n t e r v i e w s i s p r e s e n t e d i n A ppendix IV.

These

q u e s t i o n s and t h e s u b s e q u e n t i n t e r v i e w s w ere m eant to b e
e x p l o r a t o r y i n n a t u r e and th e p u r p o s e was p r i n c i p a l l y to
a s c e r t a i n th e f e a s i b i l i t y o f o b t a i n i n g i n f o r m a t i o n on p r i c ­
in g p r i o r i t i e s and p ro b lem s from th e p e r s p e c t i v e o f p o t a t o
bu yers.

B ecause o f th e l i m i t e d i n f o r m a t i o n o b t a i n e d t h a t

was p e r t i n e n t f o r th e p u b l i c p r i c e d a t a s y ste m , t h e s e
i n t e r v i e w s w ere t e r m i n a t e d a f t e r t a l k i n g w i t h p r o c e s s i n g
p o ta to b u y ers.
4 .3

Thus, no t a b l e s t o c k b u y e r s w ere i n t e r v i e w e d .

A n a ly s is
The u s e o f i n f e r e n t i a l s t a t i s t i c s was l i m i t e d i n t h i s

s tu d y to t e s t i n g h y p o th e s e s com paring th e n o n - r e s p o n d e n t
f ir m s to th e r e s p o n d e n t f i r m s .

The m a il q u e s t i o n n a i r e was

s e n t to a l l M ic h ig a n p o t a t o p r o d u c e r s so th e e s t i m a t e d c h a r ­
a c t e r i s t i c s a r e n o t s u b j e c t to sa m p lin g e r r o r .
e r r o r l i e s in th e n o n -resp o n se s t r a t a ,

The sa m p lin g

The o b j e c t i v e o f

th e n o n - r e s p o n d e n t i n t e r v i e w s was to gauge t h e p r o b a b l e
e f f e c t o f n o n -resp o n se in th e q u e s tio n n a ire r e s u l t s acro ss

96

i m p o r t a n t a t t r i b u t e s t h a t a p p e a r to a f f e c t t h e p r i c e d a t a
and i n f o r m a t i o n sy ste m .
The a n a l y s i s o f t h e q u e s t i o n n a i r e r e s p o n s e s p r i n c i p a l l y
c o n s i s t e d o f p r e s e n t i n g f r e q u e n c i e s and p r o p o r t i o n s o f r e ­
s p o n d e n ts e x h i b i t i n g v a r i o u s c h a r a c t e r i s t i c s , e . g . , a c r e s ,
p l a n t e d by m a r k e t, who t h e p o t a t o e s a r e s o l d t o , . h o w th e
producer s e l l s h is p o ta to e s , e tc .

These s t a t i s t i c s a r e d e s ­

c r i p t i v e o f th e s t r u c t u r e o f M ich ig an p o t a t o p r o d u c t i o n and
m a r k e tin g a t th e p r o d u c e r / f i r s t - h a n d l e r l e v e l .
F r e q u e n c ie s and p r o p o r t i o n s o f th e p r o d u c e r s e v a l u a t i n g
th e u s e f u l n e s s o f p r i c e d a t a and i n f o r m a t i o n and th e s o u r c e s
o f t h e s e d a t a and i n f o r m a t i o n w ere a l s o p r e s e n t e d .

In

a d d i t i o n , c r o s s t a b u l a t i o n s w ere com puted among th e s o u r c e s
o f p r i c e i n f o r m a t i o n and th e ty p e s o f i n f o r m a t i o n u s e d i n
d e c i s i o n making and v a r i o u s f ir m v a r i a b l e s su c h as t h e m a rk e t
i n w hich th e p r o d u c e r s e l l s ,

th e p r i c e d is c o v e r y m echanism

u s e d , to whom t h e p o t a t o e s a r e s o l d , e t c .
The f r e q u e n c y d i s t r i b u t i o n s and c r o s s t a b u l a t i o n s w ere
th e n a n a ly z e d i n f e r e n t i a l l y by e q u a t i n g th e u s e s and e v a l u ­
a t i o n s to th e s t r u c t u r e .

I n o t h e r w o rd s, u s e s and n e e d s a r e

i n f e r r e d from th e s t r u c t u r e o f th e s e l l i n g a rra n g e m e n t and
t h e s e a r e compared w i t h t h a t i n f o r m a t i o n and d a t a t h a t a r e
a v a ila b le .
S p e c ific a lly ,

th e s t r u c t u r e o f th e p r o d u c e r / f i r s t -

h a n d l e r s e l l i n g - b u y i n g a rra n g e m e n t g iv e s r i s e to a s e t o f
in f o r m a t i o n and d a t a n e e d s as e v id e n c e d by th e p r o d u c e r e v a l ­
u a tio n s.

Then, t h e s e u s e s and n ee d s a r e compared w i t h th e

97

d a t a and i n f o r m a t i o n c u r r e n t l y a v a i l a b l e from t h e USDA
t o e v a l u a t e t h e p r e s e n t s y s t e m 's f u l f i l l m e n t o f p r o d u c e r
needs.

CHAPTER 5
The S t r u c t u r e o f M ic h ig an P o t a t o
P r o d u c t i o n and M a rk e tin g
T h is c h a p t e r w i l l c o n s i s t o f two s e c t i o n s , ' F i r s t ,

th e

r e s u l t s o f t h e m a i l q u e s t i o n n a i r e i d e n t i f y i n g th e s t r u c t u r e
o f th e M ic h ig an p o t a t o g r o w e r s ' o p e r a t i o n s and th e n a t u r e
o f th e f i r s t t r a n s a c t i o n i n p o t a t o m a r k e tin g w i l l be p r e ­
s e n t e d .^ -

The se c o n d s e c t i o n w i l l p r e s e n t th e r e s u l t s o f

th e t e le p h o n e i n t e r v i e w s o f t h e n o n - r e s p o n d e n t p r o d u c e r s to
i d e n t i f y r e s p o n s e b i a s e s i n th e m a i l q u e s t i o n n a i r e r e s u l t s .
5 .1

C h a r a c t e r i s t i c s o f M ic h ig an P o t a t o Farms Based On
The M ail Survey
R e sp o n d en ts w ere a s k e d t o c l a s s i f y t h e i r o p e r a t i o n on

th e b a s i s o f th e p r im a r y f u n c t i o n p e rfo rm e d , i . e . , p r o d u c ­
t i o n , d i s t r i b u t i o n o r p r i c e d i s c o v e r y and a s se m b ly ; a l l 130
r e s p o n d e n ts c l a s s i f i e d t h e i r o p e r a t i o n as a p r o d u c t i o n u n i t .
5 .1 .1

M arket . S p e c i a l i z a t i o n
Q u e s tio n 2 i d e n t i f i e d t h e p r i n c i p a l m a rk e t i n w hich

th e p o t a t o e s a r e s o l d .

T h is p r o v id e d an i n d i c a t i o n o f th e

^ Q u e s t i o n n a i r e s w ere s e n t to t h e 424 M ich ig an p o t a ­
to p r o d u c e r s who make up t h e Crop R e p o r tin g S e r v i c e s l i s t o f
p o ta to p ro d u cers in th e s t a t e .
A c h a r a c t e r i z a t i o n o f th e r e ­
s p o n s e s i s p r e s e n t e d i n T a b le 5 -1 .
98

99

TABLE 5 -1
M ail S urvey C h a r a c t e r i s t i c s

T o t a l number o f M ic h ig an p o t a t o
p r o d u c e r s l i s t e d by M ic h ig an Crop
R e p o r tin g S e r v i c e s
T o ta l # q u e s tio n n a ire s re tu rn e d :
Not i n r e l e v a n t p o p u l a t i o n (no lo n g e r
p ro d u c e , o r do n o t s e l l ) :
R e fu se d to r e s p o n d e , b u t r e t u r n e d
ques t i o n n a i r e :

424
167
31
6

T o ta l # u se a b le q u e s tio n n a ire s :

130

Maximum S ix e o f r e l e v a n t popu­
la tio n :*

393

M ail q u e s t i o n n a i r e r e s p o n s e r a t e :

33.08%

* L i s t o f M ic h ig an p o t a t o p r o d u c e r s , l e s s th o s e no lo n g e r
p r o d u c in g o r s e l l i n g p o t a t o e s b a s e d on r e s p o n s e to m a il
q u e s tio n n a ire .

100

d e g r e e o f m a rk e t s p e c i a l i z a t i o n c u r r e n t l y e x i s t i n g i n
M ic h ig a n .

The r e s u l t s o f t h i s q u e s t i o n a r e sum m arized i n

T a b le 5 - 2 .

N e a rly h a l f o f th e p r o d u c e r s r e p o r t t h a t th e y

p ro d u c e s o l e l y f o r th e t a b l e s t o c k m a r k e t, and t w o - t h i r d s
p ro d u c e o v e r h a l f o f t h e i r cro p f o r t h i s m a r k e t.

Twenty-

two p e r c e n t o f th e g ro w e rs s e l l a m a j o r i t y o f t h e i r p o t a ­
to e s v i a t h e p r o c e s s i n g m a rk e t.

Seed g ro w ers seem to b e

more d i v e r s i f i e d inasm uch as o n ly 11 p e r c e n t o f t h e g ro w ers
p ro d u c e o v e r h a l f o f t h e i r c ro p f o r t h i s m a r k e t, w h ile
17 p e r c e n t o f t h e g ro w ers p ro d u c e from one to 49 p e r c e n t
o f t h e i r c ro p f o r th e s e e d p o t a t o m a rk e t.
T a b le 5 - 2 (b) h i g h l i g h t s th e d e g r e e o f s p e c i a l i z a ­
t i o n i n more d e t a i l .

Over h a l f (59 p e r c e n t ) o f th e r e ­

s p o n d e n ts p ro d u c e f o r o n ly one m a rk e t.
sp e c ia liz a tio n , i . e . ,

The d e g r e e o f

t h e p r o p o r t i o n s e l l i n g 100 p e r c e n t

o f t h e i r s a l e s i n one m a r k e t, w i t h i n th e t a b l e s t o c k and
p r o c e s s i n g m a rk e ts a p p e a r s to b e a b o u t t h e same, 67 p e r c e n t
and 61 p e r c e n t , r e s p e c t i v e l y .

The s e e d g ro w e rs seem to b e

l e s s s p e c i a l i z e d w i t h o n ly one p r o d u c e r s e l l i n g a l l o f
h i 3 c ro p i n t h a t m a rk e t.

I n summary, i t a p p e a r s t h a t

t h e r e i s s u b s t a n t i a l s p e c i a l i z a t i o n by m a rk e t i n t h e M ich­
ig a n p o t a t o i n d u s t r y .
H a r r i s o n , e t a l . , (.1976) fo un d t h a t 67 p e r c e n t o f h i s
M ic h ig an p o t a t o p r o d u c e r r e s p o n d e n ts p ro d u c e d e x c l u s i v e l y
f o r t h e t a b l e s t o c k m a rk e t and 14 p e r c e n t p ro d u c e d s o l e l y f o r
t h e p r o c e s s i n g m a rk e t.

N in e te e n p e r c e n t th e n s o l d i n some

c o m b in a tio n o f th e two o u t l e t s .

The c u r r e n t s t u d y fo un d

101

TABLE 5 - 2

M ark e t S p e c i l i a z a t l o n By M ich ig an P o t a t o P r o d u c e r s (R e s p o n d e n ts )
(a ) MICHIGAN POTATO PRODUCER SALES BY MARKET

PROPORTION OF
FIRMS SALES
1007.
5 0 -9 9 1
X.-491
None
TOTAL

•A'fe'LESTOCk----------AbSOl. Relaeivi Cusulati.ve
Fr/*n .
Fr.o . F ri>ii.

No.
59
29
19
23
130

P er­
cent
4 5 .4
2 2 .3
14.6
1 7 .7

100 .0

P er­
cent
4 5 .4
6 7 .7
3 2 .3
1 0 0 .0

.... PROCESSING "
""1
SEED
Absol. Relaclv. Cijsuladvc Ahsol. P.elatlve C u s u la tlv e
Tmn .
fr.-t.
Frro.
P er­
P er­
P er­
P er­

No.
17
11
10
92
130

cent
1 3 .1
3 .5
7 .7
70.8
1 0 0 .1

cent
1 3 .1
• 2 1 .6
2 9 .4
100.1

No.
1
13
22
94
130

cent

.a
1 0 .0
16.9
7 2 .3

cent
.3
10.3
2 7 .7
1 00.0

100 .0

(b ) NUMBER AND PROPORTION 0? MICHIGAN POTATO PRODUCERS SELLING
PRINCIPALLY IN ONE MARKET1
PROPORTION CP
IV 1.1L,
77
17
59
1
(2 2 .1 )7 .
(100.0)7.
(7 6 .5 )7 .
(1 .3 )*
1007.
(7.1 )7.
( 59.2)7.
(6 7 .0 )7 .
(6 0 .7 )7 .
53
29
11
13
(2 0 .3 )7 .
(2 4.5)7 .
(100.0)7.
<54.7)7.
50-997.
( 40.3)7.
(3 9 .3 )7 .
(3 3 .0 )7 .
(92.9)7.
14
130
23
S3
<67.6)7.
(10 .3)7.
( lO O .l)T
TOTAL
(2 1 .5 )7 .
(100.0)7.
(100.0)7.
(1 0 0 .0 )*
i
* The n u n b e r s i n e a c h . s e l l r e p r e s e n t t h e a b s o l u t e n r a b e r , t h e row p e r c e n t a g e ,
and t h e c o l u a n p e r c e n t a g e r e s p e c t i v e l y .

‘

102

t h a t 45 p e r c e n t s o l d e x c l u s i v e l y i n t h e t a b l e s t o c k m a rk e t
and 13 p e r c e n t e x c l u s i v e l y i n th e p r o c e s s i n g m a rk e t.

The

d e c r e a s e i n s p e c i a l i z e d t a b l e s t o c k p r o d u c t i o n may i n d i c a t e
e i t h e r a s l i g h t s h i f t t o p r o d u c in g some o f t h e cro p f o r p r o ­
c e ssin g s a le s , or a r e f l e c t i o n o f y e a r- to - y e a r v a r ia tio n .
5 .1 .2

S iz e o f M ic h ig an P o ta to Farms
The l i t e r a t u r e on i n f o r m a t i o n s t r e s s e s t h a t th e v a l u e

o f in f o r m a t i o n i s r e l a t e d to t h e s i z e o f t h e fa rm .
a s e r ie s o f q u e stio n s

Thus,

( q u e s t i o n s no. 24, 25, and 26) w ere

a s k e d o f p r o d u c e r s to d e te r m in e t h e s i z e o f t h e i r p o t a t o
o p e ra tio n s.

The a v e ra g e a c r e s p l a n t e d , th e volume s o l d and

y i e l d s a r e p r e s e n t e d i n T a b le 5-3 by th e m a rk e t i n w hich th e
p ro d u cers s e l l .
P r o c e s s i n g m a rk e t gro w ers r e p o r t th e l a r g e s t p o t a t o
o p e r a t i o n s a v e r a g in g a p p r o x im a te ly 250 a c r e s p e r farm and
a s a l e s volume o f 6 8 ,0 2 0 cw t.

T a b le s to c k g ro w ers f o llo w

w i t h an a v e ra g e p l a n t i n g o f 97 a c r e s and a s a l e s volume o f
2 2,380 cw t. p e r farm w h i l e se e d g ro w ers a v e ra g e d a b o u t 45
a c r e s and 1 1,060 cw t. p e r farm .
An e s t i m a t e o f y i e l d p e r a c r e from th e q u e s t i o n n a i r e
i s a l s o shown i n T a b le 5 - 3 .

The p r o c e s s i n g and se e d grow ers

h a v e h i g h e r y i e l d s th a n th e t a b l e s t o c k g row ers w i t h a p p r o x ­
i m a t e l y 270 cw t. p e r a c r e compared to 245 cw t. p e r a c r e f o r
th e t a b l e s t o c k g ro w e rs ,

W e ig h tin g th e y i e l d i n e a c h

m a rk e t by th e number o f p r o d u c e r s i n th e m a rk e t r e s u l t s
i n an a v e ra g e y i e l d p e r a c r e o f 253 cw t. f o r a l l p r o d u c e r s .

TABLE 5-3

AVERAGE ACRES, VOLUME, AND YIELD OF
MICHIGAN POTATO FARMS BY MARKET
(RESPONDENTS)

M a rk e t1
S o ld I n 1

19 78 Ac r e s
Pl a n t e d
AVG. MIN. MAX.

Avg. Ac r e s P l a n t e d
l a s t f iv e years
AVG. MIN. MAX.

TABLESTOCK

96

0

750

91

4

700

PROCESSING

250

60

1 ,4 0 0

252

60

1,5 0 0

47

6

85

42

8

80

SEED
WEIGHTED
AVERAGE

^ Based
2
Based
3
Based
4
Based
5

1252

1203

Volume S o ld i n an
A verage Y ear ( c w t . )
AVG. MIN. MAX.
2 2,378

65 200,000

Y ie l d P e r
A cre ( c w t.)
AVG.
2455

68 ,0 2 0 2 ,5 0 0 300,000

270

25.00C

266

11,066

16

3 1 ,9 8 2 4

2536

on 50% o r more o f s a l e s .
on 83 t a b l e s t o c k , 27 p r o c e s s i n g , and 13 s e e d g ro w e rs .
on 82 t a b l e s t o c k , 26 p r o c e s s i n g , and 13 s e e d g ro w e rs .
on 72 t a b l e s t o c k , 25 p r o c e s s i n g , and 10 s e e d g ro w e rs .

Computed by d i v i d i n g a v e ra g e volume by 1978 a c r e s p l a n t e d .

^ W eighted a v e ra g e b a s e d on 83 t a b l e s t o c k , 26 p r o c e s s i n g , and 13 s e e d g ro w e rs .

104

T h is c o r r e s p o n d s c l o s e l y w i t h t h e 257 cw t. p e r a c r e a v e r a g e
y i e l d r e p o r t e d f o r M ic h ig an i n 1977

(M ic h ig a n

A g ric u ltu ra l

S t a t i s t i c s , 19 7 8 ).
The r e l a t i v e im p o r ta n c e o f t h e t h r e e m a r k e ts i n th e
s t a t e ' s p o t a t o i n d u s t r y i s d e p e n d e n t on th e m ethod o f r e p r e ­
s e n t i n g ea c h m a r k e t.

T a b le 5 -4 i l l u s t r a t e s t h r e e m ethods

f o r m e a s u rin g t h e r e l a t i v e im p o r ta n c e o f t h e m a r k e t s :
s t o c k , p r o c e s s i n g and s e e d .

ta b le -

P r o c e s s i n g g ro w ers r e p r e s e n t

a p p r o x im a te ly 30 p e r c e n t o f th e r e s p o n d e n t p o t a t o p o p u l a t i o n
b u t p l a n t 44 p e r c e n t o f t h e a c r e a g e and s e l l 47 p e r c e n t o f
t h e volum e.

Seed g r o w e rs , on t h e o t h e r h a n d , r e p r e s e n t 28

p e r c e n t o f th e p r o d u c e r p o p u l a t i o n , and a p p r o x im a te ly 8
p e r c e n t o f th e a c r e a g e and t h e p r o d u c t i o n .

T a b l e s t o c k grow­

e r s a c c o u n t f o r 82 p e r c e n t o f t h e g r o w e r s , b u t o n ly 46 p e r ­
c e n t o f th e p o ta to o u tp u t.
5 .2

C h a r a c t e r i s t i c s o f t h e S e l l i n g A rran g em en ts
T h is s e c t i o n w i l l p r e s e n t th e answ ers to t h e q u e s t i o n s

c o n c e r n in g s e l l i n g p r a c t i c e s i n th e v a r i o u s m a rk e ts f o r p o t a ­
to e s .

T h is i n c l u d e s who r e c e i v e s t h e p o t a t o e s , who pays th e

p r o d u c e r , f u n c t i o n s p e rfo rm e d by v a r i o u s a c t o r s — i n c l u d i n g
p r i c e d i s c o v e r y f u n c t i o n s and p r o d u c t a l t e r a t i o n - - and t h e
p r o p o r t i o n o f a p r o d u c e r 's p o t a t o e s t h a t a r e s o l d on a p r e ­
season c o n tr a c t.
I t s h o u ld b e n o t e d t h a t t h e r e a r e more r e s p o n s e s f o r
some o f t h e s e q u e s t i o n s th a n t h e r e a r e p r o d u c e r s .
r e s u l t o f a l lo w in g m u l t i p l e r e s p o n s e s .

T h is i s a

P ro d u c e r s who s e l l

105
TABLE 5-4

THE MICHIGAN POTATO MARKET: PRODUCERS,
ACRES, AND VOLUME BY MARKET
(R e sp o n d e n ts)
PRODUCERS
A bsol
R e l.
F r e q . F re q .
No. P e r c e n t

MARKET

"" ACRES'' PLANTED....
1978
A b so l. R e l.
F req .
F re q .
No. P e r c e n t

_ —

_ v o ;

LTME~"
SiOLD
A b so l.
R e l.
F req . F req .
No. P e r c e n t

TABLESTOCK

107

8 2 .3

7302

4 8 .0

1789.0

4 5 .6

PROCESSING

38

2 9 .2

6752

4 4 .3

1 823.0

4 6 .5

SEED

36

2 7 .7

1174

7 .7

3 1 2 .3

8 .0

15228

100 .0

TOTAL

1811

2

3 9 2 4 .3 1 0 0 .1

^ The column adds t o more th a n 130 b e c a u s e p r o d u c e r s
w ere a llo w e d to mark more th a n one m a rk e t f o r t h e i r s a l e s .
2
The r e l a t i v e f r e q u e n c e s f o r t h i s column a r e b a s e d on
130 r e s p o n d e n t s , i . e . , 107 o f t h e 130 r e s p o n d e n ts p ro d u c e
some p o t a t o e s f o r s a l e i n t h e t a b l e s t o c k m a r k e t; th u s t h e
sum o f th e f r e q u e n c i e s i n t h i s column do n o t add up t o 100%.

i n two m a r k e ts , e . g . ,

th e t a b l e s t o c k m a rk e t and t h e p r o c e s s ­

in g m a rk e t, w ere a s k e d to an sw er t h e s e q u e s t i o n s f o r e a c h
m a rk e t.

F o r th e p u r p o s e o f t h e q u e s t i o n n a i r e and th e

s tu d y , t h e r e l e v a n t i n f o r m a t i o n i s t h e r a n g e o f s a l e s a g r e e ­
m ents w i t h i n a p a r t i c u l a r m a rk e t as w e l l as b etw e en m a r k e ts ,
and t h i s r a n g e can b e b e t t e r i d e n t i f i e d by i n c l u d i n g as much
o f th e p r o d u c t i n t h a t m a rk e t as p o s s i b l e .

I n o t h e r w o rd s,

we do n o t w ant to e x c lu d e t a b l e s t o c k s a l e s s im p ly b e c a u s e
th e y a r e a m i n o r i t y o f th e s a l e s volum e i n some o p e r a t i o n s .
Thus, even th o ug h e a c h grow er h a s a s t a n d a r d o p e r a t i n g p r o ­
c e d u re f o r e a c h m a r k e t, t h e s e p r o c e d u r e s m ig h t d i f f e r

106

b etw een m a r k e t s .
5 .2 .1

F i r s t Buyers o f M ich ig an P o t a t o e s
I n T a b le 5 - 5 ( a ) , we can s e e t h a t 61 p e r c e n t o f th o s e

s e l l i n g p o t a t o e s i n th e t a b l e s t o c k m a rk e t d e l i v e r p o t a t o e s
to th e w h o l e s a l e r - d i s t r i b u t o r - a g e n t

c l a s s o f m a rk e t a c t o r s

( r e f e r r e d t o as b r o k e r s o r a g e n ts h e r e a f t e r ) .

F u rth e r,

T a b le 5 - 5 (b) shows t h a t a b o u t 65 p e r c e n t o f t h e t a b l e s t o c k
g ro w ers r e c e i v e paym ent f o r t h e i r p o t a t o e s from t h i s c l a s s o f
a c to rs.

A p p ro x im a te ly 40 p e r c e n t o f th e t a b l e s t o c k g ro w ers

d e l i v e r p o t a t o e s d i r e c t l y to r e t a i l s t o r e s and a p p r o x im a te ly
o n e - t h i r d r e c e i v e t h e i r paym ent d i r e c t l y from th e r e t a i l
sto re .
In g e n e ra l i t appears t h a t a s l i g h t l y h ig h e r p ro p o rtio n
o f g ro w e rs a r e p a i d by t h e a g e n t / b r o k e r s th a n d e l i v e r p o t a t o e s
th r o u g h t h i s c h a n n e l.

T h is d is c r e p a n c y m ig h t b e e x p l a i n e d by

th e f a c t t h a t some g ro w ers d e l i v e r t h e p o t a t o e s t o t h e f i n a l
d e stin a tio n , e .g .,

th e r e t a i l s t o r e o r th e p r o c e s s o r , b u t

th e y d e l i v e r y th e p o t a t o e s on th e i n s t r u c t i o n o f th e a g e n t .
I n e s s e n c e , th e a g e n t / b r o k e r h a s a c c e s s to t h e m a rk e t o u t l e t ,
9

T h ere i s s u b s t a n t i a l c o n f u s io n a b o u t th e d e f i n i t i o n s
o f d i s t r i b u t o r s , s h i p p e r s , a g e n t s , b r o k e r s and w h o l e s a l e r s .
I n w r i t i n g t h e q u e s t i o n n a i r e , th e r e s p o n d e n ts w ere g iv e n th e
o p p o r t u n i t y to cho ose b etw e e n (a) w h o l e s a l e r s , d i s t r i b u t o r s ,
s h i p p e r o r (b) a g e n ts and b r o k e r s . The r a t i o n a l e f o r th e
b r e a k was b a s e d on t h e a s s u m p tio n t h a t some a c t o r s su ch as
a g e n ts and b r o k e r s p e rfo rm e d o n ly a p r i c e d i s c o v e r y o r i n f o r ­
m a tio n f u n c t i o n and d i d n o t t a k e t i t l e to th e p o t a t o e s , How­
e v e r , t h e r e s u l t s o f th e q u e s t i o n n a i r e i n d i c a t e d t h a t p r o d u c ­
e r r e s p o n d e n ts d i d n o t seem t o d i f f e r e n t i a t e b e tw e e n th e
g r o u p s . T h e r e f o r e , i n p r e s e n t i n g th e r e s u l t s t h e y a r e g ro u p ­
ed t o g e t h e r as one s e t o f a c t o r s .

107

TABLE 5-5
FIRST BUYERS OF MICHIGAN POTATOES (Respondents)
(a)

Whac is she flrsc point of destination beyond your operation for the
major portion of the potatoes you selL?
All Producers
Absol. Rel.
Freq..
Freq.
No.
Percent

Tabloseock
Absol.
Rel.
Free.
Freq.
No.
Percent

78

46.7

63

30

13.0

0

0

5

3.0

1

Retail
Score

40

24.0

40

Other
(Grower)

14

3.4

0

100.0

104

Point
of
Destination
Wholesaler,
Shipper,
Agent/
Broker
Processor
Cooperative
or Coopera­
tive pro­
cessor

TOTAL

(b)

1671

60.6

Processing
Absol Rel.
Freq. Freo.
No. Fereene

Seed
Absol
Rel.
Freq.
Freo.
No.
Percent

4

10.5

11

44.0

30

78.9

0

0

1.0

4

10.5

0

0

38. S

0

0

0

0

0

0

14

56.0

99.9

25

100.0

0
100.1

33

From whom do you receive payment for the major portion of the potatoes
you sell?

Source of
payment
for
potatoes
Wholesaler,
Shipper,
Agent/
Broker

All Producers
Absol. Rel.
Freq.
Freo.
l.to.
Percent

Tablestock
Processing (
Seed
Absol.
Absoli P.el. { Absol. P.el.
Rel.
Freo.! Freo. i Freo,
Freo.
Freo.
Free.
NO.
Percent;
No. Percent
No. iPercent

79

50.3

64

65.3

Processor

26

16.6

0

0

5

3.2

1

Retail
Store

33

21.0

Ocher
(Grower)

14

Cooperative
or Coopera­
tive pro­
cessor

TOTAL

1571

36.4

7

13.9

3

26

70.2

0

0

1.0

4

10.8

0

0

33

33.7

0

0

0

0

9.0

0

0

0

0

14

63.6

100.0

98

99.9

22

100.0

100.0

37

The column adds to more than 130 because producers were allowed to make
multiple responses, i.e., a response for each market in which they sell
potatoes.

108

a r r a n g e s t h e t r a d e , i s p a i d by th e b u y e r , and p ay s th e p r o d ucer.
Over t h r e e - f o u r t h s o f th e p r o d u c e r s s e l l i n g i n t h e p r o ­
c e s s i n g m a rk e t d e l i v e r d i r e c t l y t o t h e p r o c e s s o r and a p p r o x ­
i m a t e l y 70 p e r c e n t r e c e i v e payment d i r e c t l y from th e p r o ­
cessor.

A p p ro x im a te ly 19 p e r c e n t o f t h e s e g ro w e rs a r e p a i d

by a g e n t / b r o k e r s and 11 p e r c e n t a r e p a i d by c o o p e r a t i v e s .
Viewed on t h e b a s i s o f who i s p e r f o rm in g th e m a r k e tin g
f u n c t i o n , i t a p p e a r s t h a t 30 p e r c e n t o f th e p r o c e s s i n g
g ro w ers r e l y on a g e n t s / b r o k e r s o r c o o p e r a t i v e s .
Seed g ro w ers s e l l th r o u g h two o u t l e t s .

F o rty -fo u r p e r­

c e n t d e l i v e r to s h i p p e r s and 36 p e r c e n t r e c e i v e paym ent from
th e s h i p p e r s .

A h i g h e r p r o p o r t i o n o f th e s e e d g r o w e r s * s a l e s

a r e d i r e c t to g r o w e rs .

F i f t y - s i x p e r c e n t d e l i v e r to g ro w ers

w h ile 64 p e r c e n t r e c e i v e paym ent from th e g r o w e rs .

In th is

m a rk e t, a h i g h e r p r o p o r t i o n c la im e d to r e c e i v e paym ent from
th e g ro w e r- b u y e r th a n d e l i v e r to th e g r o w e r - b u y e r .

In o th e r

w o rd s, th e f u n c t i o n o f t h e "middleman*1 i n t h i s m a rk e t a p p e a r s
to be d i f f e r e n t th a n i n th e c a s e s o f th e t a b l e s t o c k and p r o ­
c e s s i n g m a r k e ts .

Thus, i n th e s e e d m a rk e t a h i g h e r p r o p o r ­

t i o n o f t h e p r o d u c t i s h a n d le d by th e s h i p p e r th a n i s p a i d
by t h e s h i p p e r .

The i m p o r t a n t p o i n t f o r t h e p u r p o s e o f t h i s

s tu d y i s t h e i m p l i c a t i o n t h a t o v e r h a l f o f t h e s e e d s a l e s
a r e d i r e c t l y to o t h e r g ro w e rs , w ith a p p r o x im a te ly o n e - t h i r d
o f t h e s e s a l e s a r r a n g e d th ro u g h a g e n t s / b r o k e r s .

109

Q u e s tio n 4 may b e u s e d to h e l p d e te r m in e t h e o r g a n i ­
z a t i o n , o r t h e a c t o r , t h a t i s p r i n c i p a l l y c h a rg e d w i t h t h e
p r ic e d isc o v ery fu n c tio n .

We may assume t h a t th e p r o d u c e r

p e rfo rm s t h e p r i c e d i s c o v e r y i f th e y r e c e i v e paym ent d i r e c t l y
from th e b u y e r .

On t h e o t h e r h a n d , i n t h o s e c a s e s w here t h e

a g e n t / b r o k e r pays th e p r o d u c e r we can assume t h a t t h e p r i c e
d i s c o v e r y i s b a s i c a l l y a f u n c t i o n o f t h e s e a c t o r s and n o t
3
th e p ro d u c e rs .
With t h i s i n t e r p r e t a t i o n , n e a r l y t w o - t h i r d s o f t h e t a b l e s t o c k g ro w ers t u r n th e p r i c e d i s c o v e r y f u n c t i o n o v e r to th e
a g e n ts/b ro k e rs.

On th e o t h e r h a n d , o n ly 36 p e r c e n t o f s e e d

g ro w ers and 29 p e r c e n t o f t h e p r o c e s s i n g g ro w ers t u r n t h e
p r i c e d i s c o v e r y f u n c t i o n o v e r to n o n - p r o d u c e r f i r m s .
5 .2 .2

P r i c e D is c o v e ry Mechanisms U t i l i z e d

Q u e s tio n s 9 and 10 a s k e d how th e p r o d u c e r s " d i s c o v e r "
t h e m a rk e t p r i c e o r t h e p r i c e a t w hich th e y w i l l t r a d e .

The

l i t e r a t u r e on p r i c e d i s c o v e r y mechanisms g e n e r a l l y l i s t f i v e
b a s i c m echanism s:
n e g o tia tio n s,

(1) o r g a n i z e d a u c t i o n s ,

(3) gro up b a r g a i n i n g ,

(5) a d m i n i s t e r e d p r i c i n g .

(2) i n d i v i d u a l

(4) f o rm u la p r i c i n g , and

T hese mechanisms w ere d i v i d e d

The p u r p o s e o f lo o k in g a t t h i s q u e s t i o n i n t h i s way
i s t o s e p a r a t e i n d i v i d u a l l y n e g o t i a t e d s a l e s b etw een grow ers
and b u y e r s , i n r e t a i l s t o r e s o r p r o c e s s o r s , from i n d i v i d u a l l y
n e g o t i a t e d s a l e s th r o u g h a g e n ts and b r o k e r s . T h is i n t e r p r e ­
t a t i o n o f q u e s t i o n 4 n e g l e c t s t h e c a s e o f p r i c e d i s c o v e r y by
MACMA and i n some c a s e s , th e c o o p e r a t i v e .
I n o t h e r w o rd s, a
p r o d u c e r may b e lo n g to MACMA, b u t h e w i l l s t i l l b e p a i d d i r ­
e c t l y by th e p r o c e s s o r . T hus, we m ig h t e x p e c t t h i s q u e s t i o n
to o v e r s t a t e t h e p r o d u c e r 's r o l e i n p r i c e d i s c o v e r y f o r th e
p r o c e s s i n g m a rk e t.

i n t o two s e p a r a t e g ro u p s i n q u e s t i o n s 9 and 10 b e c a u s e t h e r e
i s some c o n f u s io n r e g a r d i n g t h e q u a n t i t a t i v e a s p e c t s o f th e
tra d e , i . e . ,

th e number o f h o r i z o n t a l a c t o r s i n v o l v e d , and

th e q u a l i t a t i v e a s p e c t s .
As an exam ple, group b a r g a i n i n g and i n d i v i d u a l n e g o t i ­
a t i o n may b o th i n v o l v e f o rm u la p r i c i n g .

A g ro u p n e g o t i a t e d

c o n t r a c t , su c h as t h e f r o z e n p o t a t o c o n t r a c t , i n c l u d e s a
b a s e p r i c e and premiums f o r h i g h e r q u a l i t y p o t a t o e s .

On

th e o t h e r h an d , a p r o d u c e r s e l l i n g i n d i v i d u a l l y to a r e t a i l
s t o r e may a g r e e to h av e h i s p r i c e t i e d to a r e p o r t e d m a rk e t
p r i c e , o r h e may b e g iv e n premiums f o r h i g h q u a l i t y p o t a t o e s .
I n e i t h e r c a s e , t h e p r i c e r e c e i v e d by t h e p r o d u c e r would be
b a s e d on a fo rm u la .
T a b le 5 - 6 (a) p r e s e n t s th e r e s u l t s t o q u e s t i o n number 9.
N e a rly 90 p e r c e n t o f t h e t a b l e s t o c k g ro w e rs d i s c o v e r m a rk e t
p r i c e s v i a i n d i v i d u a l n e g o t i a t i o n , and a p p r o x im a te ly 97 p e r ­
c e n t o f th e s e e d g ro w ers c la im to " i n d i v i d u a l l y " d i s c o v e r
p ric e s.
The p r o c e s s i n g g r o w e rs , on t h e o t h e r h a n d , h a v e o r g a n i z - .
ed and f o r m a l i z e d grou p b a r g a i n i n g th r o u g h t h e M ich ig an A g r i ­
c u l t u r a l C o o p e r a tiv e M a rk e tin g A s s o c i a t i o n (MACMA).

Thus 39

p e r c e n t o f th e p r o c e s s i n g g ro w ers r e p o r t e d t h a t g roup b a r ­
g a i n i n g was t h e m ethod th e y u s e d f o r d i s c o v e r i n g p o t a t o
p ric e s.
The m a jo r p r i c e d i s c o v e r y f u n c t i o n i s more c e n t r a l i z e d
i n th e p r o c e s s i n g m a rk e t — c e n t r a l i z e d i n t h e MACMA b a r g a i n ­
in g a s s o c i a t i o n and th e c h i e f W abasis c o o p e r a t i v e .

On th e

I ll

TABLE 5-6

PRICE DISCOVERY MECHANISMS UTILIZED 3Y MICHIGAN
POTATO PRODUCERS (RESPONDENTS)
(a)

Q uestion No. 9: Which o f the fo llo w in g approaches most
n e a r ly d e s c rib e s how you become aware o f the p r i c e fo r
the p o ta to e s you s e l l ?

ITAS'LESTOCK
SEE d
i
-------PKSCES'SISa i
PRICE
\BS0L RELATIVE ABSOL RELATIVE ABSOL. RELATIVE
DISCOVERY ,FREQ.
FREQ. 1
FREQ
FREQ. FREQ.
FREQ.
MECHANISMS ' No.
Percent
No.
P e rce n t No.
Percenc
I n d iv id u a l
N e g o tia tio r 79
88.8
22
61.1
28
96.5
Group Bar­
g a in in g
0
0
14
38.9
0
0
M i s c e ll ­
aneous
10 !1 11.2
0
0
1
3 .4
89

TOTAL
(b)

100.0

|

36

i

100.0

29

9 9 . 92

Q uestion No. 10: Which o f the fo llo w in g b e s t d e sc rib e s
how you know the s p e c i f i c p r i c e you w i l l re c e iv e f o r
the major p o rtio n o f the p o ta to e s you s e l l ?

TABLc STOCK.
PROCESSING " "i
SEED
PRICE
ASSOL RELATIVE ABSOL RELATIVE A330L. RELATIVE
DISCOVERY ^frREQ.
FREQ. 1 FREQ.
FREQ.
FREO.
FREQ.
MECHANISMS 1 No.
P ercent
No.
Percenc r n o .
P ercent
Adminis­
44
tere d
48.9
24.2
10
8
47.6
18.9
51.5
Formula
17
17
3
14.3
Other
21.2
0
0
0
0
( c o n tr a c t)
7
Other (Mar­
5 .0
0
1
8.9
0
k e t Report) 8
3.0
5 .0
1
1
8
8.9
Auction
Other (Mis­
14.4
0
0
28.6
6
c e lla n e o u s) 13
rOTAL

70

100.0

33

99.9

21

10 0.5Z

^ The r e l a t i v e fre q u e n c ie s a re c a l c u l a t e d on the b a s i s
of those producers who responded to the q u e s tio n and claim ed
to s e l l any p o ta to e s in each m arket.
Z D eviation s from 1007, a re due to rounding e r r o r s .

112

o th e r hand, th e p r ic e d isc o v e ry f u n c tio n i s h ig h ly d e - c e n tr a ­
l i z e d and i n d i v i d u a l i s t i c a t th e g row er l e v e l i n t h e t a b l e s t o c k and s e e d m a r k e ts .
The o b j e c t i v e o f q u e s t i o n 10, s e e T a b le 5 - 6 ( b ) , was to
i d e n t i f y f u r t h e r t h e p r i c e d i s c o v e r y mechanisms u t i l i z e d by
M ich ig an p o t a t o p r o d u c e r s .

The r e s p o n s e c a t e g o r i e s r e l a t e

more t o q u a l i t a t i v e f a c t o r s th a n i n t h e p r e c e d i n g q u e s t i o n .
In o t h e r w o rd s, t h e p r e c e d in g q u e s t i o n d e a l t p r i n c i p a l l y
w i t h th e number o f p a r t i c i p a n t s i n v o l v e d i n th e p r i c e d i s ­
c o v e ry p r o c e s s .

T h is q u e s t i o n a t te m p te d to i d e n t i f y more

how p r o d u c e r s p e r c e i v e th e p r i c i n g m echanisms and t h e p r i c e
th e y w i l l a c t u a l l y r e c e i v e f o r t h e i r p o t a t o e s .
N e a rly h a l f o f b o th t a b l e s t o c k and s e e d r e s p o n d e n ts
(49 p e r c e n t and 48 p e r c e n t r e s p e c t i v e l y ) f e l t t h a t th e p r i c e s
w ere a d m i n i s t e r e d to them by th e b u y e r .

One m ig h t e x p e c t

t h i s r e s u l t g iv e n t h a t f a r m e r s a r e u s u a l l y t h o u g h t o f as
p r i c e t a k e r s a n d , i n f a c t , one m ig h t b e s u r p r i s e d t h a t a
h i g h e r p r o p o r t i o n d i d n o t mark a d m i n i s t e r e d .

(A d m in is te re d

was d e f i n e d as a " t a k e i t o r le a v e i t " o f f e r . )
N in e te e n p e r c e n t o f th e t a b l e s t o c k g ro w e rs s a i d th e
p r i c e was d e c id e d by a fo rm u la w h i l e 9 p e r c e n t s a i d a u c t i o n
and 9 p e r c e n t w r o te i n t h a t a m a rk e t r e p o r t d e te r m in e d th e
p r i c e th e y w ould r e c e i v e .

The fo rm u la and m a rk e t r e p o r t

r e s p o n s e s m ost l i k e l y mean t h a t t h e s e p r o d u c e r s ' p r i c e i s
d e te r m in e d by some r e p o r t e d p r i c e , w h ich m ig h t b e view ed as
a form o f f o rm u la p r i c i n g .

I n o t h e r w o rd s, i t i s p r o b a b le

t h a t b o t h th e f o rm u la r e s p o n s e s and th e m a rk e t r e p o r t

1X3

r e s p o n s e s i n d i c a t e t h a t t h e s e g ro w e rs d e l i v e r t h e i r p o t a t o e s
to b u y e r s , i . e . ,

r e t a i l s t o r e s , and t h a t t h e p r i c e th e y r e ­

c e i v e i s t i e d to a m a rk e t r e p o r t .

Thus, 28 p e r c e n t o f th e

t a b l e s t o c k g ro w e rs a p p e a r to be r e l y i n g on a f o rm u la b a s e d
p ric e .
Over h a l f o f t h e p r o c e s s e d g ro w ers s a i d th e y know t h e
s p e c i f i c p r i c e th e y w i l l r e c e i v e from a f o rm u la .
21 p e r c e n t w r o te i n th e r e s p o n s e " c o n t r a c t . "

In a d d itio n ,

Thus, we can

c o n c lu d e t h a t a b o u t 73 p e r c e n t o f t h e p r o c e s s i n g g ro w ers
s a i d t h e i r p r i c e was b a s e d on a f o rm u la .
Of th e s e e d g r o w e rs , 48 p e r c e n t s a i d p r i c e s w ere a d ­
m i n i s t e r e d to them.

F o u r te e n p e r c e n t s a i d t h e i r p r i c e was

d e te r m in e d by a f o rm u la , one g ro w er s a i d an a u c t i o n , and
one g ro w er s a i d a m a rk e t r e p o r t .
fo rm u la o f some s o r t .

Thus, 24 p e r c e n t s a i d a

A l a r g e p r o p o r t i o n , 29 p e r c e n t ,

w ro te i n a v a r i e t y o f m e th o d s, and w ere lumped u n d e r th e
m i s c e l la n e o u s c a t e g o r y .
Q u e s tio n 11 a sk e d th o s e p r o d u c e r s who s a i d t h e i r p r i c e
was d e te r m in e d by a fo rm u la to b r i e f l y d e s c r i b e th e c h a r a c ­
t e r i s t i c s o f t h e f o rm u la .

N e a rly a l l p r o c e s s i n g r e s p o n d e n ts

l i s t e d t h e te rm s o f t h e c h i p p in g o r t h e f r o z e n f r e n c h f r y
c o n t r a c t s w h i l e t h e t a b l e s t o c k gro w ers g e n e r a l l y l i s t e d
m a rk e t r e p o r t s .
5 .2 .3

P r e - S e a s o n C o n t r a c t i n g by M ich ig an P o t a t o P ro d u c e r s
T a b le 5-7 p e r c e n t s some f i g u r e s on th e e x t e n t o f p r e ­

s e a s o n c o n t r a c t i n g on th e p a r t o f M ic h ig an p o t a t o p r o d u c e r s .

114
TABLE 5 -7
C o n t r a c t P r o d u c tio n - 1978 (R esp o n d e n ts)
C ol, 1

C ol. 2

T o ta l
A cres
C o n t r a c te d

4,850.6

T o ta l
A cres
for
P ro c essin g
6,752.0

C ol. 3
T o ta l
M ich ig an
A rc re s

15,228.0

C ol. 4
P ro p o rtio n
o f P ro ces­
s i n g A cres
C o n t r a c te d

C ol, 5
P ro p o rtio n
of T o ta l
A c re s whicli
a r e con­
tra c te d

727a1

327o2

1 Column 1 d i v i d e d by Column 2.
2 Column 1 d i v i d e d by Column 3.
T h i r t y - f o u r p r o d u c e r s c la im e d to c o n t r a c t a p o r t i o n o f t h e i r
c ro p .

The a c r e s c o n t r a c t e d came t o 4 8 5 0 .6 (assu m in g t h a t

th e y an sw ered on b a s i s o f th e 1978 c r o p ) , w h ich r e s u l t s i n
an a v e ra g e o f 1 42.7 c o n t r a t e d a c r e s p e r c o n t r a c t i n g farm .
Of th o s e p r o d u c e r s c la im in g to c o n t r a c t some o f t h e i r c r o p ,
t h e a v e ra g e p r o p o r t i o n c o n t r a c t e d p e r farm i s a b o u t 60
p e rc e n t.

N e a rly t h r e e - f o u r t h s o f th e p r o c e s s i n g p o t a t o

a c r e s r e p r e s e n t e d by th e r e s p o n d e n ts w ere c o n t r a c t e d .

Con­

t r a c t i n g a l s o a c c o u n ts f o r a p p r o x im a te ly 32 p e r c e n t o f t h e
t o t a l a c r e s r e p o r t e d by a l l r e s p o n d e n t s .
5 .2 .4

F u n c tio n s P erfo rm e d on P o t a t o e s by P ro d u c e r s P r i o r
to S a le
T a b le 5-8 shows th e number and p r o p o r t i o n o f gro w ers

p e r f o rm in g v a r i o u s f u n c t i o n s on th e p o t a t o b e f o r e th e p r o ­
d u c t le a v e s th e fa rm , o r th e f a r m e r 's o w n e rsh ip ,

The d e ­

n o m in a to r o r r e l e v a n t p o p u l a t i o n f o r e a c h m a rk e t w i l l b e
t h e t o t a l number t h a t c la im e d to grow any p o t a t o e s f o r e a c h

115
TABLE 5-8

FUNCTIONS PERFORMED ON POTATOES PRIOR
TO FIRST SALES (R esp o n d en ts)
Q u e s tio n No. 5 :

Which o f th e f o l l o w i n g f u n c t i o n s a r e p e r ­
form ed by you o r y o u r f i r m b e f o r e t h e b u y e r
t a k e s t i t l e t o th e p o t a t o e s ?

""TA B LE STO C K

"P R O C E S S IN G

FUNCTION
ABSOL. RELATIVE
PERFORMED BY FREQ.
FREQ.1
PRODUCER
N o.
P ercen t
WASH

80

WAX

0

ABSOL. RELATIVE
FREQ.
FREQ.
N o.
P ercen t

EED
ABSOL r W L A T I V E
FREQ.
FREQ.
No. P e r c e n t

.............. S

7 4.8

0

0

2

5 .6

0

0

0

0

0

GRADE

83

7 7 .6

18

4 7 .4

21

5 8 .3

PACK

84

7 8 .5

0

0

10

2 7 .8

TRANSPORT

40

3 7 .4

12

3 1 .6

2

STORE

57

5 3 .3

18

4 7 .4

17

5.6*
4 7 .2

The r e l a t i v e f r e q u e n c i e s w ere c a l c u l a t e d on th e
b a s i s o f th e r e s p o n d e n ts who c la im e d to s e l l some p o r t i o n
o f t h e i r p o t a t o c ro p i n e a c h m a rk e t: 107 t a b l e s t o c k , 38
p r o c e s s i n g , and 36 s e e d .
m a rk e t.

I n o t h e r w o rd s , r a t h e r th a n 88 p r o d u c e r s who grow

o v e r h a l f o f t h e i r p r o d u c t f o r t h e t a b l e s t o c k m a r k e t, we
w i l l h a v e 107 g ro w ers p r o d u c in g f o r th e t a b l e s t o c k m a rk e t,
38 p r o d u c in g f o r th e p r o c e s s i n g m a rk e t and 36 p r o d u c in g f o r
t h e s e e d m a rk e t.

A l l b u t one o f th e r e s p o n d e n ts checked a t

l e a s t one f u n c t i o n ,

Over t h r e e - f o u r t h s o f a l l r e s p o n d e n ts

p r o d u c in g any t a b l e s t o c k p o t a t o e s r e p o r t e d th e y p e rfo rm e d
th e f u n c t i o n s o f w ash in g (75 p e r c e n t ) , g r a d in g (78 p e r c e n t
and p a c k in g (79 p e r c e n t ) p r i o r to s a l e .

Over h a l f o f t h e s e

grow ers r e p o r t e d t h a t th e y s t o r e t h e i r t a b l e s t o c k p o t a t o e s

116

p r i o r to s a l e and 37 p e r c e n t c la im t o t r a n s p o r t t h e p o t a ­
t o e s from t h e farm .
The p r o c e s s i n g and se e d m a rk e t p o t a t o e s g e n e r a l l y
h a v e few er f u n c t i o n s p e rfo rm e d on them p r i o r to s a l e .

Of

t h e p r o c e s s i n g p o t a t o g r o w e rs , t h e p e r c e n t a g e r e p o r t i n g
g r a d in g and s t o r i n g was 47 p e r c e n t f o r b o t h , ^ w h i l e 58
p e r c e n t and 47 p e r c e n t o f t h e s e e d g ro w e rs p e rfo rm t h e
f u n c t i o n s o f g r a d in g and s t o r i n g , r e s p e c t i v e l y .

Roughly

o n e - q u a r t e r o f t h e se e d p o t a t o e s a r e p ac k ed p r i o r t o s a l e ;
p r o c e s s i n g p o t a t o e s a r e g e n e r a l l y d e l i v e r e d b u lk t o p r o ­
c e s s i n g p l a n t s and c o n s e q u e n t ly a r e n o t p a c k e d .
The p u r p o s e o f t h i s q u e s t i o n was to i d e n t i f y t h e
m eaning o f ''p o t a t o " a t th e p o i n t o f f i r s t s a l e and to
i d e n t i f y th e f n c t i o n s f u n c t i o n s p e rfo rm e d b y t h e p r o d u c e r s .
I t a p p e a r s t h a t m ost t a b l e s t o c k p o t a t o e s a r e w ashed, g r a d e d ,
and p ack ed p r i o r to s a l e and n e a r l y h a l f o f t h e p r o c e s s i n g
m a rk e t p o t a t o e s a r e g r a d e d .

P ric e s fo r "p o ta to e s" a t p o in t

o f f i r s t s a l e may d i f f e r d e p e n d in g on t h e f u n c t i o n s p e r f o r m ­
ed by t h e p r o d u c e r p r i o r to t h a t s a l e .
The p r e c e d in g a t te m p te d to i d e n t i f y t h e sc o p e and n a ­
t u r e o f t h e t r a n s a c t i o n b etw e en g ro w e rs and t h e f i r s t b u y e r
o f M ic h ig an p o t a t o e s .

T h e re a p p e a r to be s u b s t a n t i a l l y d i f ­

f e r e n t m ethods o f s e l l i n g p o t a t o e s b etw een and w i t h i n th e
/i

Reim bursem ent f o r s t o r i n g t h e p o t a t o e s i s o f t e n
in c lu d e d i n t h e c o n t r a c t .

117

p o ta to su b -m ark ets.
On th e b a s i s o f d e l i v e r y and paym ent, t h e t a b l e s t o c k
p r o d u c e r s a p p e a r to r e l y on a g e n ts ( t w o - t h i r d s o f th e r e ­
s p o n d e n ts ) w i t h a p p r o x im a te l y o n e - t h i r d s e l l i n g d i r e c t l y
to t h e r e t a i l o u t l e t .

Seed and p r o c e s s i n g g ro w ers p r i n ­

c i p a l l y s e l l d i r e c t l y to th e b u y er.

Thus, i t a p p e a r s t h a t

t h e a g e n t s / b r o k e r s a r e more h e a v i l y in v o lv e d i n t h e t a b l e s t o c k m a rk e t th a n t h e s e e d and p r o c e s s i n g m a r k e ts .
W ith r e g a r d to t h e p r i c e d i s c o v e r y f u n c t i o n , i t
a p p e a r s t h a t th e t a b l e s t o c k and s e e d g ro w ers a r e more d e ­
c e n t r a l i z e d and i n d i v i d u a l i s t i c t h a n th e p r o c e s s i n g g ro w e rs .
The t a b l e s t o c k and s e e d g ro w ers a p p e a r to r e l y on t h e i r own
resources

( d i r e c t s e l l i n g ) o r t h e r e s o u r c e s o f a g e n t s , w h ile

th e p r o c e s s i n g p o t a t o g ro w ers r e l y more on th e gro up e f f o r t s
o f t h e b a r g a i n i n g a s s o c i a t i o n and c o o p e r a t i v e .
V iew ing t h e p r i c e d i s c o v e r y f u n c t i o n by o r g a n i z a t i o n s ,
i t a p p e a r s t h a t a p p r o x im a te l y o n e - t h i r d o f b o t h t a b l e s t o c k
and p r o c e s s i n g p o t a t o g ro w ers h a n d l e t h e m a jo r p r i c e d i s ­
c o v e ry th e m s e lv e s , w h i l e a p p r o x im a te ly tw o - 'th ir d s r e l y on
s p e c ia liz e d p r ic e d isc o v e ry firm s , i . e . ,
t i v e s and b a r g a i n i n g a s s o c i a t i o n ,

a g e n ts , co o p era­

T hus, th e two m a rk e ts

a re q u ite s im ila r in th is re g a rd ,^
c

O r g a n i z a t i o n a l l y t h e s e f ir m s d i f f e r c o n s i d e r a b l y .
They may h av e s i m i l a r i m p l i c a t i o n s f o r who t h e p r im a r y
u s e r s o f p r i c e d a t a a r e , b u t th e y w i l l have d i f f e r e n t im­
p l i c a t i o n s f o r th e i n f o r m a t i o n c o n t e n t o f r e p o r t e d p r i c e s
and t h e r o l e t h e p r o d u c e r p l a y s i n th e o p e r a t i o n o f
th e se o r g a n iz a tio n s .
See F i g u r e 5 - 1 ,

118

FIGURE 5 -1
Two P ro d u c e r P r i c e D is c o v e ry Methods
1(a):
PRODUCERS
A
B
C
D
E
F

AGENT

Ji

BUYERS
S
T
U
W
Y

1 (b ):
PRODUCERS

A gent

C o o p e r a tiv e

AGENT

BUYERS

F i g u r e 1 ( a ) : Each p r o d u c e r i s c o n n e c te d to t h e a g e n t i n d i ­
v i d u a l l y , and th e d e c i s i o n from th e p r o d u c e r 's s t a n d p o i n t
i s to a c c e p t t h e o f f e r and t u r n o v e r t h e p o t a t o e s , o r w i t h ­
draw and s e l l th r o u g h a n o t h e r a g e n t o r i n d i v i d u a l l y to a
b u y e r . The a g e n t may a s se m b le a l l p o t a t o e s and s e l l to one
b u y e r , o r he may s e l l to any number o f b u y e r s . On t h e o t h e r
h an d , t h e a g e n t may p e r f o rm o n ly a p r i c e d i s c o v e r y and c o ­
o r d i n a t i o n f u n c t i o n and s im p ly n o t i f y t h e p r o d u c e r t o d e l i ­
v e r a s p e c i f i e d amount to a s p e c i f i e d l o c a t i o n a t a s p e c i ­
f i e d tim e . Or, as t h e q u e s t i o n n a i r e d i s c o v e r e d , t h e a g e n t
may p i c k up th e p o t a t o e s a t th e farm . T hus, i t i s c o n s i s ­
t e n t f o r a p r o d u c e r t o r e p o r t s e l l i n g to a b r o k e r and to
d i s c o v e r p r i c e s th ro u g h d i r e c t n e g o t i a t i o n .
F ig u r e 1 ( b ) : The c o o p e r a t i v e n e g o t i a t e s th e c o n t r a c t .
The
p r im a r y d i f f e r e n c e b etw een t h i s r e l a t i o n s h i p and th e a g e n t
above i s t h e o w n e rs h ip . I n t h e c o o p e r a t i v e a r r a n g e m e n t,
t h e p r o d u c e r s h a v e some d e c i s i o n power o v e r a l l o f th e op­
e r a t i o n , n o t s im p ly t h e i r own p o t a t o e s . T h u s, t h e c o o p e r ­
a t i v e a rra n g e m e n t w ould b e more p r o p e r l y c a l l e d a group
n e g o t i a t i o n and g ro w e rs do n o t d e a l i n d i v i d u a l l y w i t h th e
c o o p e ra tiv e .

119

The im p o r ta n c e o f c o n t r a c t p r o d u c t i o n i n M ic h ig an
p o t a t o p r o d u c t i o n and m a r k e tin g i s w i t n e s s e d b y t h e o b s e r ­
v a tio n t h a t resp o n d e n ts c o n tra c te d n e a r ly o n e - th ir d o f a l l
a c r e s , and 72 p e r c e n t o f t h e p r o c e s s i n g p o t a t o a c r e s .

In

a d d i t i o n , 34 o f th e 38 g ro w e rs who p ro d u c e any p o t a t o e s f o r
t h e p r o c e s s i n g m a rk e t c la im to c o n t r a c t a p o r t i o n o f t h e i r
crop.

A lso , f o rm u la p r i c i n g i s v e r y im p o r t a n t i n t h e

M ic h ig an p o t a t o m a rk e t as i l l u s t r a t e d by th e 70 p e r c e n t i n
t h e p r o c e s s i n g m a rk e t and 37 p e r c e n t i n t h e t a b l e s t o c k m ar­
k e t who c la im t h e i r p r i c e i s b a s e d on a fo rm u la .
I t a p p e a r s t h a t a s u b s t a n t i a l p o r t i o n o f M ichigan
p o t a t o e s a r e f u n c t i o n a l l y a l t e r e d p r i o r to s a l e by th e p r o ­
d u c e r s , e . g . , w ashed , g r a d e d and p ac k ed .

Thus, t h e r e i s

d i v e r s i t y i n th e s e l l i n g t r a n s a c t i o n b etw een and w i t h i n m ar­
k e t s i n th e form o f th e p o t a t o t h a t i s t r a d e d .
5 .3

A Com parison o f N on-R espondents and R e sp o n d en ts —
t h e R e s u l t s o f The N on-R espondent I n t e r v i e w s
T elep h o n e i n t e r v i e w s w ere c o n d u c te d on a random sam ple

o f 50. o r 20 p e r c e n t , o f t h e n o n - r e s p o n d e n t p r o d u c e r s to e s ­
t i m a t e t h e e f f e c t o f r e s p o n s e b i a s on th e r e s u l t s o f th e
s u r v e y o f M ichigan p o t a t o p r o d u c e r s .

T h is s e c t i o n w i l l p r e ­

s e n t t h e r e s u l t s o f t h e n o n - r e s p o n d e n t i n t e r v i e w s and com­
p a r e some o f t h e a t t r i b u t e s o f th e n o n - r e s p o n d e n t p o p u l a t i o n
w ith th e resp o n d e n t p o p u la tio n .

H y p o th eses w ere f o r m u la te d

and t e s t e d to d e te r m in e w h e th e r o r n o t th e r e s p o n d e n ts and
n o n - r e s p o n d e n ts w ere from th e same p o p u l a t i o n .

F o r exam ple,

120

i t was h y p o th e s iz e d t h a t t h e e s t i m a t e o f th e p r o p o r t i o n o f
n o n - r e s p o n d e n ts e x h i b i t i n g p a r t i c u l a r a t t r i b u t e s d i f f e r
s i g n i f i c a n t l y b etw een t h e n o n - r e s p o n d e n t gro up and th e
resp on d ent g ro u p . ®
5 .3 .1

S iz e o f N on-R espondent and R esp o n d en t P o t a t o Farms
I t was e x p e c te d t h a t th e n o n - r e s p o n d e n t farm s would

b e s m a l l e r th a n th e r e s p o n d e n t f a r m s , and th e r e s u l t s o f
th e s u r v e y o f n o n - r e s p o n d e n ts c o n firm th e e x p e c t a t i o n .

The

a v e ra g e s i z e o f th e r e s p o n d e n t s farm s was 125 a c r e s w h ile
t h e n o n - r e s p o n d e n ts farm s a v e ra g e d 89 a c r e s p e r farm .

The

n u l l h y p o t h e s i s o f no d i f f e r e n c e i n th e s i z e o f th e farm s
was r e j e c t e d a t th e 5 p e r c e n t l e v e l o f s i g n i f i c a n c e .
The n o n - r e s p o n d e n t farm s w ere e x p e c te d to be s m a l l e r
b e c a u s e we e x p e c t a p r o d u c e r 's i n t e r e s t i n p r i c e d a t a and
i n f o r m a t i o n to b e p o s i t i v e l y r e l a t e d to t h e p o s s i b l e g a in s
a s s o c ia te d w ith a c c u ra te in fo rm a tio n .

T hus, p r o d u c e r s w i t h

few er a c r e s o f p o t a t o e s w ould g a i n l e s s from a c c u r a t e i n ­
f o r m a tio n and d a t a on p o t a t o e s , and t h e r e f o r e ,

th e y would

te n d to e x h i b i t l e s s i n t e r e s t i n p r i c e d a t a and i n f o r m a t i o n .
I n e s s e n c e , t h i s w ould te n d to s u p p o r t Moser and K a lto n (1972) when th e y p o i n t o u t t h a t r e s p o n s e to m a il q u e s ­
t i o n n a i r e s c o r r e l a t e s w i t h th e i n t e r e s t i n th e s u b j e c t .

In

o t h e r w o r d s , th e n o n - r e s p o n d e n ts d id n o t r e t u r n
® Note t h e e s t i m a t e d v a l u e f o r t h e r e s p o n d e n t group i s
th e t r u e v a l u e f o r t h a t group b e c a u s e i t was c a l c u l a t e d from
a 100 p e r c e n t sam ple o f t h a t p o p u l a t i o n . C h a p te r 4 d i s c u s s e s
th e p r o c e d u r e f o r th e n o n - r e s p o n d e n t i n t e r v i e w s .

121

q u e s t i o n n a i r e s b e c a u s e th e y e x p e c t to g a i n l i t t l e

from im­

p ro v em en ts i n p r i c e d a t a and i n f o r m a t i o n and, t h e r e f o r e ,
th e y h a v e l i t t l e

i n t e r e s t in th e s u b je c t.

T a b le s 5-9 and 5-10 b r e a k down th e s i z e o f p o t a t o
farm s by a c r e s p l a n t e d .

A g r e a te r p ro p o rtio n o f n o n -re ­

s p o n d e n t farm s p ro d u c e 10 a c r e s o r l e s s and f o u r a c r e s o r
le ss.

The f o u r a c r e c u t o f f i s assumed to c o r r e s p o n d to

t h e u p p e r l i m i t o f t h e c l a s s VI farm s as d e f i n e d by t h e
B ureau o f C e n s u s .^

I n e s s e n c e , t h i s c u t o f f assumes t h a t

t h e s e p r o d u c e r s do n o t s e l l p o t a t o e s , b u t r a t h e r consume
t h e p o t a t o e s th e m s e lv e s .

Thus, we would n o t e x p e c t t h e s e

p r o d u c e r s to h av e much i n t e r e s t i n p r i c e d a t a and in f o r m a ­
t i o n inasm uch as th e y a r e n o t com m ercial p o t a t o p r o d u c e r s .
I t s h o u ld a l s o b e n o te d t h a t f o u r a c r e s was th e p o i n t a t
w hich b o th r e s p o n d e n t and n o n - r e s p o n d e n t p r o d u c e r s c la im e d
t h a t th e y do n o t s e l l p o t a t o e s .
A p p ro x im a te ly o n e - t h i r d o f t h e n o n - r e s p o n d e n t p r o d u c ­
e r s p l a n t e d 10 a c r e s o r l e s s o f p o t a t o e s i n 1978 w h ile
a p p r o x im a te ly 15 p e r c e n t o f t h e r e s p o n d e n ts f e l l i n t h i s
g ro u p .

In s h o r t , t h i s le n d s f u r t h e r s u p p o r t to th e hypo­

t h e s e s t h a t t h e i n t e r e s t i n t h e s u b j e c t o f p r i c e d a t a and
^ T h is assum es a s e l l i n g p r i c e o f $2 .5 0 cw t. f o r po­
t a t o e s and 250 cw t. p e r a c r e y i e l d . A ls o , i t s h o u ld be
n o te d t h a t th e B ureau o f Census farm c l a s s i f i c a t i o n s a r e
n o t t e c h n i c a l l y r e l e v a n t f o r t h e farm s i n t h i s s tu d y b e ­
c a u se t h i s s tu d y i s c l a s s i f y i n g p r o d u c e r s s o l e l y on th e
b a s is of p o ta to a c re s ,
I n o t h e r w o rd s, th e s u rv e y f a i l e d to
d e te r m in e w h e th e r o r n o t t h e farm s p ro d u ced c r o p s i n a d d i ­
t i o n t o p o t a t o e s . T hus, c l a s s i f y i n g t h e farm s on th e b a s i s
o f t h e ce n su s c l a s s i f i c a t i o n s assumes t h a t t h e farm s a l l
s p e c ia liz e in p o ta to e s .

122
TABLE 5-9

P r o p o r t i o n s o f R e sp o n d en ts and N o n -re s p o n d e n ts
P ro d u c in g 4 A cres o r L ess ( C la s s VI fa rm s)
A cres o f
P o ta to e s
P la n te d

R esp on den t
A b so l.F re q , R e l.F re q .
Number
P ercent

_< 4 a c r e s ^

N on-R espondent
A b s o l.F r e q R e l . F r e q .
Number
P ercent

6

4 .3

5

1 3 .9

> 4 acres

133

9 5 .7

31

8 6 .1

TOTAL

139

1 0 0 .0

36

1 0 0 .0

H ;p =ir

H

p *» e s t i m a t e d p r o p o r t i o n o f n o n - r e s p o n ­
d e n t s p r o d u c in g 4 a c r e s o r l e s s .
KQ:p
n = p r o p o r t i o n o f r e s p o n d e n t s p r o d u c in g
4 acres or le s s .
i s r e j e c t e d a t t h e .05 l e v e l o f s i g n i f i c a n c e .

TABLE 5-10
P r o p o r t i o n s o f R e sp o n d en ts and N o n -re s p o n d e n ts P ro d u c in g
10 A cres o r L ess
A cres o f
P o ta to e s
P la n te d

Rf spo n d e n t
Non-Respon<i e n t
A b s o l.F r e q . R e l . F r e q . A b s o l . F r e q , R e l . F r e q .
Number
Number
P ercent
P ercent

< 10 a c r e s ^

21

1 5 .1

12

3 3 .3

> 10 a c r e s

118

8 4 .9

24

6 6 .7

TOTAL

139

1 0 0 .0

36

1 0 0 .0

HQ:p

H

w here p = e s t i m a t e d p r o p o r t i o n o f n o n ­
r e s p o n d e n ts p r o d u c in g 10 a c r e s o r l e s s ;
HQ:p >tr
ir = p r o p o r t i o n o f r e s p o n d e n t s p r o ­
d u c in g 10 a c r e s o r l e s s .
i s r e j e c t e d a t th e .05 l e v e l .
=

tt,

123

i n f o r m a t i o n i s p a r t i a l l y r e l a t e d to th e number o f a c r e s
p la n te d .

U sing t h e a s s u m p tio n s l i s t e d i n f o o t n o t e 7 r e g a r ­

d in g p r i c e and y i e l d , a 10 a c r e p o t a t o farm would b e c l a s s i ­
f i e d as a Type IV farm w i t h g r o s s s a l e s o f $6250, w h ich i s
a s m a ll o p e r a t i o n b y modern a g r i c u l t u r a l s t a n d a r d s .
5 .3 .2

N o n -re s p o n d e n t and R esp o n d en t P r i c e D is c o v e ry Methods
T a b le 5-11 shows th e p r o p o r t i o n o f r e s p o n d e n ts and

n o n - r e s p o n d e n ts t h a t r e l y on o t h e r f i r m s , o r a c t o r s , f o r th e
p r ic e d isc o v e ry fu n c tio n .

I t was e x p e c te d t h a t t h e p r o p o r ­

t i o n o f n o n - r e s p o n d e n ts who r e l i e d on o t h e r f irm s f o r p r i c e
d is c o v e r y would b e g r e a t e r th a n th e p r o p o r t i o n f o r r e s p o n ­
d e n ts .

I n o t h e r w o r d s , we m ig h t e x p e c t t h a t th e n o n - r e s p o n -

c e n t p o p u l a t i o n i s l e s s a c t i v e i n p r i c e d i s c o v e r y th a n th e
respondent p ro d u c e rs.
On th e b a s i s o f who pays th e g ro w e r, t h e r e i s no e v i ­
d ence o f a s i g n i f i c a n t d i f f e r e n c e i n t h e two s u b - p o p u l a t i o n s .
Thus, we c a n n o t r e j e c t t h e h y p o t h e s i s t h a t t h e r e s p o n d e n ts
and n o n - r e s p o n d e n ts b e lo n g to t h e same p o p u l a t i o n d e f i n e d
by who p e rfo rm s th e p r i c e d i s c o v e r y f u n c t i o n .
An a t t e m p t was a l s o made to d e te r m in e w h e th e r t h e r e
was a d i f f e r e n c e b etw e en th e p r o p o r t i o n s o f r e s p o n d e n t mana­
g e r s and n o n - r e s p o n d e n t m anagers t h a t r e l i e d on group b a r ­
g a i n i n g and i n d i v i d u a l n e g o t i a t i o n s .

T h is h y p o t h e s i s was

n o t t e s t e d b e c a u s e t h e r e w ere to o few o b s e r v a t i o n s i n th e
n o n -resp o n d en t g ro u p -b a rg a in in g c a te g o ry to conduct s i g n i f ­
ic an ce t e s t s .

124
TABLE 5-11
O r g a n i z a t i o n P e rfo rm in g t h e P r i c e D is c o v e ry F u n c tio n
R e sp o n d en ts and N o n -re s p o n d e n ts
F irm
P e rfo rm in g
P ric e
D is c o v e ry

R espot d e n t s
N o n -re s t (ondents
A b s o lu te R e l a t i v e
A b s o lu te R e l a t i v e
F re q u en cy F re q u e n c y F re q u e n c y F re q u e n c y
Number
P ercent
Number
P ercent

P ro d u c e r ^

73

46

12

43

A gen t/C oo p­
e ra tiv e

84

543

16

573

TOTAL

157

100

28

100

C l a s s i f i e d on b a s i s o f Q u e s tio n 4: "From whom do
you r e c e i v e payment f o r t h e m a jo r p o r t i o n o f t h e p o t a t o e s
you s e l l ?
2

3

P ro d u c e r i s p a i d by R e t a i l o r , P r o c e s s o r , o r Grower.
H0 : P “ ir P = e s t i m a t e d p r o p o r t i o n o f n o n - r e s p o n ­
d e n ts t u r n i n g p r i c e d is c o v e r y o v e r to
o th e r firm .
H0 : p > * " = p r o p o r t i o n o f r e s p o n d e n t s t u r n i n g
p r i c e d i s c o v e r y o v e r to o t h e r f i r m .

The r e s p o n d e n ts and n o n - r e s p o n d e n ts w ere a s k e d two
q u e s t i o n s s p e c i f i c a l l y a b o u t USDA p r i c e s .

T a b le 5-12 g i v e s

th e r e s u l t s o f t h e q u e s t i o n a s k i n g p r o d u c e r s w h e th e r th e y
a r e aware o f USDA p r i c e s .

W ell o v e r h a l f o f b o t h g ro u p s i n ­

d i c a t e d th e y a r e aw are o f USDA p r i c e s .
T a b le 5-13 g iv e s t h e r e s u l t s t o th e q u e s t i o n o f
w h e th e r th e p r o d u c e r s fo u n d USDA p r i c e s to be u s e f u l i n d e ­
c i s i o n m aking.

Over h a l f o f th e n o n - r e s p o n d e n t p r o d u c e r s

i n d i c a t e d t h a t t h e s e p r i c e s a r e n o t u s e f u l w h ile a p p r o x i ­
m a te l y o n e - t h i r d o f th e r e s p o n d e n t p r o d u c e r s i n d i c a t e d t h a t
th e se p r ic e s a re n o t u s e fu l.

T hese p r o p o r t i o n s w ere s i g n i f ­

i c a n t l y d i f f e r e n t a t t h e .05 l e v e l .

125
TABLE 5-12

RESPONDENTS AND NON-RESPONDENTS FAMILIARITY
WITH USDA PRICES
Q u e s tio n No.. 20:

R esponse to
q u e s t i o n No. 20

Are you f a m i l a r w ith t h e p o t a t o p r i c e s
t h a t a r e p u b l i s h e d by th e U n ite d S t a t e
D ep a rtm en t o f A g r i c u l t u r e ?
R e sp o n d en ts
Number
P ercent

N on-resjp o n d e n ts
Number
P ercent

YES1

79

71

19

83

NO

32

29

4

17

111

100

23

100

TOTAL

I n s u f f i c i e n t o b s e r v a t i o n s to t e s t f o r s i g n i f i c a n t
d i f f e r e n c e betw een t h e p r o p o r t i o n s o f t h e two g ro u p s d e ­
c l a r i n g f a m i l i a r i t y w i t h USDA p r i c e s .
TABLE 5-13
RESPONDENTS AND NON-RESPONDENTS
FINDING USDA PRICES USEFUL
Q u e s tio n No. 21:
R esponse to
Q u e s tio n No. 21

Do you f e e l t h e s e p r i c e s a r e u s e f u l to
you?
R esp o n d en ts
Number
P ercent
53

66

NO

27

341

TOTAL

802
H :p = it
°

100

8

4 4 .4

10

5 5 .6

<N
OO
i—1

YES

N o n -re s p o n d e n ts
Number
P ercent

100

= e s tim a te d p ro p o rtio n o f n o n -resp o n d e n ts who do n o t f i n d USDA p r i c e s u s e
fu l.
H :p > it 7T = p r o p o r t i o n o f r e s p o n d e n ts who do n o t
a
f i n d USDA p r i c e s u s e f u l .
Hq i s r e j e c t e d a t th e .05 l e v e l o f s i g n i f i c a n c e .
9

p

The number o f r e s p o n s e s to t h i s q u e s t i o n i s l e s s
th a n t h e number o f r e s p o n s e s to q u e s t i o n 20 b e c a u s e th o s e
a n s w e rin g "No" on q u e s t i o n 20 w ere i n s t r u c t e d to ig n o r e
q u e s t i o n 21.

126

I t s h o u ld be n o te d t h a t t h e q u e s t i o n a s k e d s p e c i f i c a l l y
a b o u t d e c i s i o n making and i t i s c o n c e iv a b le t h a t t h e r e ­
s p o n s e s u n d e r s t a t e th e v a l u e o f USDA p r i c e s t o p r o d u c e r s
inasm uch a s p r o d u c e r s may u s e USDA p r i c e s t o ch eck and com­
p a r e w i t h t h e p r i c e s o f f e r e d to them by t h e i r a g e n t s .
in f a c t has been v e r i f i e d in o th e r s tu d ie s
and J e s s e n e t a l . , 1 9 6 2 ).

T h is

( G e r a ld , 1960

However, th e i m p o r t a n t p o i n t i s

th a t a s i g n i f i c a n t l y g r e a t e r p ro p o rtio n of th e n o n -resp o n ­
d e n t p r o d u c e r s s t a t e t h a t USDA p r i c e s a r e n o t u s e f u l to them.
A co m p ariso n o f t h e n o n - r e s p o n d e n t p r o d u c e r s w i t h th e
resp o n d en t p roducers in d ic a t e s s i g n i f i c a n t d if f e r e n c e s b e ­
tw een t h e s e two p o p u l a t i o n s .

T hese d i f f e r e n c e s i n d i c a t e th e

f a l l a c y o f i g n o r i n g n o n - r e s p o n d e n ts to a m a il s u r v e y .
Inasm uch as i t i s g e n e r a l l y assumed t h a t t h e r e s p o n s e
r a t e t o a m a il s u r v e y i n c r e a s e s w i t h th e p o t e n t i a l r e s p o n ­
d e n t s i n t e r e s t i n t h e s u b j e c t m a t t e r o f th e s u r v e y , i t was
h y p o t h e s i z e d t h a t t h e n o n - r e s p o n d e n t farms w ould be s m a l l e r
i n terras o f p o t a t o a c r e a g e th a n th e r e s p o n d e n t f a r m s .

The

r e s u l t s o f th e t e le p h o n e i n t e r v i e w s found e v id e n c e t h a t th e
n o n - r e s p o n d e n t farm s w ere s m a l l e r th a n th e r e s p o n d e n t f a r m s .
I t i s assumed t h a t th e g r e a t e r i n t e r e s t i n th e s u b j e c t ,
p r i c e d a t a and m a rk e t i n f o r m a t i o n i s p o s i t i v e l y r e l a t e d to
t h e e x p e c te d g a i n s a s s o c i a t e d w i t h a c c u r a t e i n f o r m a t i o n , and
t h a t t h e e x p e c te d g a in s a r e r e l a t e d to th e number o f a c r e s
of p o ta to e s.

F o r exam ple, n o n -c o m m e rc ia l p r o d u c e r s sim p ly

h ave l i t t l e u s e f o r m a rk e t i n f o r m a t i o n .

127

A n o th e r i m p o r t a n t f i n d i n g o f t h e s e i n t e r v i e w s i s t h a t
a s i g n i f i c a n t l y g r e a t e r p r o p o r t i o n o f n o n - r e s p o n d e n ts do
n o t f i n d USDA p r i c e s u s e f u l .

Thus, th e n o n - r e s p o n d e n t p r o ­

d u c e rs would m ost l i k e l y e v a l u a t e p r i c e d a t a and i n f o r m a t i o n ,
and t h e s o u r c e s o f t h i s i n f o r m a t i o n d i f f e r e n t l y th a n th e
respondent p ro d u c e rs.
I n o t h e r w o rd s, i t a p p e a r s t h a t th e r e s u l t s o f t h e
m a il q u e s t i o n n a i r e a r e s u b j e c t to r e s p o n s e b i a s inasm uch
as th e r e s p o n d e n ts and n o n - r e s p o n d e n ts a p p e a r to b e lo n g to
d i f f e r e n t p o p u la tio n s.

A lth o u g h i t may be d i f f i c u l t to

a s c e r t a i n th e e x t e n t o f th e b i a s i n th e m a il q u e s t i o n n a i r e ,
we m ig h t i n f e r th e d i r e c t i o n o f t h i s b i a s .

By n o t i n c l u d ­

in g t h e n o n - r e s p o n d e n t p r o d u c e r s , who seem to b e l e s s i n ­
t e r e s t e d i n p r i c e d a t a and i n f o r m a t i o n , t h e m a i l q u e s t i o n ­
n a i r e r e s u l t s may o v e r s t a t e t h e u s e f u l n e s s o f p r i c e d a t a
and i n f o r m a t i o n f o r t h e a v e ra g e p o t a t o p r o d u c e r .
5 .4

Summary
The r e s u l t s o f th e m a i l q u e s t i o n n a i r e i n d i c a t e t h a t

s u b s t a n t i a l d i f f e r e n c e s e x i s t i n th e M ic h ig an p o t a t o i n d u s ­
t r y a t th e p r o d u c e r f i r s t h a n d l e r l e v e l among th e t h r e e
m a r k e ts .

The farm s i n t h e p r o c e s s i n g p o t a t o m a rk e t a r e

s u b s t a n t i a l l y l a r g e r th a n t h e t a b l e s t o c k f a r m s , and th e se e d
farm s a r e th e s m a l l e s t .
A n o th e r im p o r ta n t d i f f e r e n c e b etw e en t h e m a rk e ts i s
t h a t t h e p r i c i n g sy stem i s more d e - c e n t r a l i z e d and i n d i v i d ­
u a l i s t i c i n t h e t a b l e s t o c k and s e e d m a r k e ts , w h erea s group

128

b a r g a i n i n g and c o n t r a c t i n g a t e im p o r t a n t i n t h e p r o c e s s i n g
m arket* f o rm u la p r i c i n g i s i m p o r t a n t i n a l l t h r e e m a r k e ts ,
The r e s u l t s o f t h e n o n - r e s p o n d e n t i n t e r v i e w s i n d i c a t e
t h a t t h e r e s p o n d e n ts and n o n - r e s p o n d e n ts do n o t b e lo n g to
t h e same p o p u l a t i o n .

The n o n - r e s p o n d e n t farm s a r e s m a l l e r ,

and a h i g h e r p r o p o r t i o n o f th e n o n - r e s p o n d e n t p r o d u c e r s do
n o t f i n d USDA p r i c e s to b e u s e f u l .

T h erefo re , th e r e s u l t s

o f th e m a il q u e s t i o n n a i r e c a n n o t b e c o n s i d e r e d r e p r e s e n t a ­
t i v e o f a l l M ich ig an p o t a t o p r o d u c e r s .

However, t h e r e

a p p e a r to be no d i f f e r e n c e s i n th e p r o p o r t i o n o f r e s p o n d e n ts
and n o n - r e s p o n d e n ts t h a t t u r n t h e i r p r i c e d i s c o v e r y f u n c t i o n
o v e r to n o n -p ro d u c in g f i r m s .

The m a j o r i t y o f M ich ig an

p o t a t o g ro w ers r e l y on o t h e r f irm s to p e r f o rm t h e p r i c e d i s ­
c o v e ry f u n c t i o n s .

CHAPTER 6

SOURCES AND USES OF PRICE DATA AND INFORMATION
BY MICHIGAN POTATO PRODUCERS
T h is c h a p t e r w i l l p r e s e n t t h e r e s u l t s o f t h e s u r v e y
q u e s t i o n n a i r e and t h e p e r s o n a l i n t e r v i e w s i n w h ich p r o ­
d u c e r s w ere a s k e d to e v a l u a t e t h e e x i s t i n g p r i c e d a t a
and i n f o r m a t i o n sy ste m .

The f i r s t s e c t i o n o f t h e c h a p t e r

p re s e n ts th e r e s u l t s of th e p i l o t in te rv ie w s w ith produc­
ers.

The second s e c t i o n i n v o l v e s a p r e s e n t a t i o n and d i s ­

c u s s i o n o f th e r e s u l t s o f t h e m a il q u e s t i o n n a i r e t h a t was
s e n t to a l l M ic h ig a n p o t a t o p r o d u c e r s , and th e r e s u l t s o f
t h e c r o s s t a b u l a t i o n s b etw een i n f o r m a t i o n / d a t a and th e
m a rk e t i n w hich th e p o t a t o e s a r e s o l d . ^

T h is s e c t i o n

s p e c i f i c a l l y a d d r e s s e s t h e q u e s t i o n o f w h e th e r t h e r e a r e
d i f f e r e n c e s i n t h e p r i c e d a t a and i n f o r m a t i o n u s e s among
t h e m a r k e ts .

2

N ote t h a t th e p r o d u c e r e v a l u a t i o n s o f t h e p r i c e
d a t a and i n f o r m a t i o n sy stem b a s e d on t h e m a il q u e s t i o n n a i r e
c a n n o t be t r e a t e d a s r e p r e s e n t a t i v e o f a l l M ic h ig a n p r o d u c ­
e r s b e c a u s e o f t h e d i f f e r e n c e s betw een t h e r e s p o n d e n t and
n o n -resp o n d en t p ro d u c ers d is c u s s e d in th e p re v io u s c h a p te r.
A tte m p ts to o b t a i n r e s p o n s e s t o q u e s t i o n s 14, 16, 17 and
18 t o d e te r m in e th e e x t e n t o f r e s p o n s e b i a s f a i l e d inasm uch
a s t h e p r o d u c e r s r e f u s e d t o answ er t h e q u e s t i o n s .
2

S i g n i f i c a n c e t e s t s w ere n o t c o n d u c te d f o r d i f f e r e n c e
b etw een t h e m a r k e ts i n w h ich p r o d u c e r s s e l l b e c a u s e t h e r e ­
sp o n s e s r e p r e s e n t th e t r u e v a l u e o f t h e r e s p o n d e n t p o p u l a ­
t i o n p a r a m e te r .
In o t h e r w ord s, t h e r e s u l t s p r e s e n t e d i n
t h i s c h a p t e r r e p r e s e n t a c e n su s o f th e r e s p o n d e n t p r o d u c e r s .
129

130
6.1

Pilot Interviews - Producers

P i l o t i n t e r v i e w s w ere u n d e r ta k e n w i t h M ic h ig an p o ­
t a t o p r o d u c e r s to a i d i n t h e d ev e lo p m e n t o f t h e m a il
q u e s tio n n a ire .

Six. p o t a t o p r o d u c e r s w ere i n t e r v i e w e d and

fo u r p ro c e ssin g

p o t a t o gro w ers and two t a b l e s t o c k p o t a t o

g ro w e rs .

The f o u r p r o c e s s i n g g ro w e rs s o l d i n b o t h t h e

c h i p p in g and f r o z e n m a rk e ts and i n d i v i d u a l l y and c o l l e c ­
t i v e l y n e g o t i a t e d s a l e s to p r o c e s s o r s .

One t a b l e s t o c k

g ro w er s o l d d i r e c t l y to a r e t a i l c h a in s t o r e and th e o t h e r
s o l d th ro u g h a b r o k e r .
6 .1 .1

P r o c e s s i n g Growers
The p r o c e s s i n g p o t a t o p r o d u c e r s s t r e s s e d th e p roblem s

o f h ig h c a p i t a l o u t l a y s and low r e t u r n s on t h e i r in v e s tm e n t.
I n f a c t , one p r o c e s s p o t a t o grow er e x p l i c i t l y s t a t e d th e
p ro b lem o f f i x e d a s s e t t h e o r y when he s t a t e d t h a t "m ost
grow ers h av e an e s t a b l i s h e d way o f d o in g b u s i n e s s t h a t im­
p l i e s a l e v e l o f i n v e s tm e n t, and th e p r i c e s a r e to o low f o r
t h e grow ers to make a p r o f i t . "
The g row ers seemed v e r y c o g n i z a n t o f t h e i m p l i c a t i o n s
t h a t h i g h p r i c e s i n p e r i o d one w i l l l e a d to h i g h e r o u t p u t
and lo w e r p r i c e s i n p e r i o d two.

In f a c t , a grow er s t a t e d

t h a t h e was p a r t o f th e p ro b lem h i m s e l f i n t h a t he s ig n e d a
c o n t r a c t f o r a p o r t i o n o f h i s c ro p i n 1978 and d e c id e d to
p l a n t a g r e a t e r number o f a c r e s to p l a y t h e m a rk e t.

He

O

I n t e r v i e w was w i t h a p o t a t o grow er i n Montcalm
County on Ju ne 7 , 1978.

131

a l s o n o t e d t h a t num erous o t h e r p r o d u c e r s w ould l i k e l y do
t h e same, w h ich h e p r e d i c t e d w ould r e s u l t i n a l a r g e cro p
in th e F a ll.

T hus, t h e g ro w e rs n o te d t h e i r i n t e r d e p e n d e n c e

and even a r g u e d t h a t th e y n e e d e d n a t i o n a l c o l l e c t i v e b a r ­
g ain in g .

However, th e y seemed h e s i t a n t to a g r e e to s u p p ly

c o n tr o l m easures.

T hese p r o d u c e r s s t r e s s e d c ro p r e p o r t s

and s t o c k e s t i m a t e s as i m p o r t a n t ty p e s o f i n f o r m a t i o n i n
d e c i d i n g on w h e th e r to c o n t r a c t o r n o t .

They a l s o r e l i e d

h e a v i l y on c o n d i t i o n s i n o t h e r p a r t s o f t h e U n ite d S t a t e s
t h a t m ig h t a f f e c t t h e p o t a t o c r o p , i . e . , w e a th e r c o n d i t i o n s
su c h a s f l o o d s t h a t a f f e c t p l a n t i n g and y i e l d s , o r e a r l y
f r o s t s t h a t m ig h t i n f l u e n c e t h e h a r v e s t d a t e .
I n o t h e r w o rd s , t h e s e p r o d u c e r s p r i n c i p a l l y s t r e s s e d
s u p p ly i n f o r m a t i o n i n t h e i r e v a l u a t i o n o f th e m a r k e t.

How­

e v e r , two o f th e p r o d u c e r s d i d s t r e s s th e f a c t t h a t th e y
f e l t p r o c e s s o r s knew more a b o u t t h e g r o w e r s ’ o p e r a t i o n s th a n
t h e g ro w e rs knew a b o u t p r o c e s s o r o p e r a t i o n s .

One o f t h e s e

g ro w ers a rg u e d t h a t g ro w e rs and t h e i r b a r g a i n i n g a s s o c i a ­
t i o n s n e e d i n f o r m a t i o n on t h e volume p r o c e s s e d by t h e f i r m
i n t h e p r e v io u s y e a r , w h at s t o c k s t h e p r o c e s s o r h a s on h a n d ,
4
and w h at h i s p r o j e c t e d s a l e s a r e .
T hese g ro w e rs s t r e s s e d t h e im p o r ta n c e o f th e c o o p e r a ­
t i v e and th e b a r g a i n i n g a s s o c i a t i o n as s o u r c e s o f in f o rm a ­
tio n .

T h is m ig h t b e e x p e c te d inasm uch as t h i s gro u p o f

^ C o n v e r s a tio n w i t h p o t a t o grow er i n M ontcalm County
on Ju n e 7, 1978.

3.32

g ro w e rs s o l d a s u b s t a n t i a l p o r t i o n o f t h e i r c ro p on a p r e ­
s e a s o n c o n t r a c t an d s o l d a p o r t i o n o f t h e i r cro p th r o u g h
th e c o o p e r a t i v e a n d / o r s i g n e d a c o n t r a c t n e g o t i a t e d by th e
b a rg a in in g a s s o c ia tio n .
An i n t e r e s t i n g o b s e r v a t i o n , h ow ever, i s t h a t many
g ro w ers a l s o s e l l some p o r t i o n o f t h e i r cro p on an i n d i v i d ­
u a lly n e g o tia te d c o n tra c t.

F o r ex am p le, one o f t h e s e

g ro w ers s i g n e d c o o p e r a t i v e c o n t r a c t s w i t h f r o z e n f r e n c h
f r i e s and c h i p p in g p r o c e s s o r s w h ich h ad b e e n n e g o t i a t e d
by t h e b a r g a i n i n g a s s o c i a t i o n and th e c o o p e r a t i v e .

He th e n

n e g o t i a t e d i n d i v i d u a l l y w i t h t h e c h i p p in g p r o c e s s o r f o r an
a d d itio n a l p o r tio n o f h is crop.

At th e same tim e , t h i s

g row er s t a t e d t h a t th e c o o p e r a t i v e was h i s '’in f o r m a t i o n
c e n te r."
T h is i l l u s t r a t e s a p ro b lem f a c i n g an o r g a n i z a t i o n su c h
as t h e c o o p e r a t i v e o r th e b a r g a i n i n g a s s o c i a t i o n .

In e f f e c t ,

b e c a u s e o f some o f t h e p r o p e r t i e s o f i n f o r m a t i o n - d i s c u s s e d
i n C h a p te r 2 - th e c o o p e r a t i v e c a n n o t c a p t u r e a l l th e b e n e ­
f i t s o f i n f o r m a t i o n p r o d u c t i o n b e c a u s e i t i s d i f f i c u l t to
e x c lu d e o t h e r u s e r s from t h e b e n e f i t s o f t h a t i n f o r m a t i o n .
The m a g n itu d e o f t h e u s e o f c o o p e r a t i v e l y b a r g a i n e d in f o rm a ­
t i o n i s d i f f i c u l t t o a s s e s s , and t h u s , i t i s l i k e l y t h a t
t h i s s tu d y may u n d e r s t a t e t h e im p o r ta n c e o f c o o p e r a t i v e l y
p ro d u c e d i n f o r m a t i o n in asm u ch as p r o d u c e r s may u s e i t and
n o t g i v e c r e d i t to i t s o r i g i n ,
B ecau se t h i s g ro up o f p r o d u c e r s w e re in v o lv e d i n p r e ­
s e a s o n c o n t r a c t i n g , an a t t e m p t was made t o a s c e r t a i n t h e

133

m a jo r g o a l s so u g h t b y t h e s e p r o d u c e r s I n t h e b a r g a i n i n g
p rocess.

Q u ite s im p ly , t h e overw helm ing r e s p o n s e was t h a t

t h e s e g ro w e rs a t te m p te d to n e g o t i a t e a " c o s t o f p r o d u c t i o n "
p ric e .

T hus, c o s t o f p r o d u c t i o n i n f o r m a t i o n was s t r e s s e d

as b e in g v e r y u s e f u l to t h e s e g ro w e rs .
6 .1 .2

T a b le s to c k Growers
The t a b l e s t o c k g row ers h ave s u b s t a n t i a l l y d i f f e r e n t

p o t a t o o p e r a t i o n s and t h e i r o r i e n t a t i o n to p r o d u c t i o n
and m a r k e tin g d i f f e r e d s u b s t a n t i a l l y from th e p r o c e s s
g ro w e rs .

F irs t,

th e t a b l e s t o c k g ro w ers d i d n o t engage i n

p re-season c o n tra c tin g .

S e c o n d ly , t h e t a b l e s t o c k g ro w ers

i n t e r v i e w e d s o l d i n d i v i d u a l l y , d i r e c t l y to a r e t a i l o u t l e t
o r by m a r k e tin g th e p o t a t o e s th r o u g h a b r o k e r .

I n f a c t , th e

grow er who tu r n e d th e p o t a t o e s o v e r to a b r o k e r h a d no s t o r ­
age f a c i l i t y , and th u s was p u r e l y s u b j e c t to th e g o in g p r i c e
a t h a r v e s t tim e .

H is o n ly c h o ic e i n t h e s h o r t - r u n was to

s t o r e th e p o t a t o e s i n th e g ro u n d , i . e . ,

d elay h a r v e s t f o r a

s h o r t p e r i o d i n hop es o f a h i g h e r p r i c e .
The o t h e r grow er s o l d d i r e c t l y to a r e t a i l s t o r e and
s t r e s s e d t h e im p o rta n c e o f m a i n t a i n i n g t h i s o u t l e t .

He

i n d i v i d u a l l y n e g o t i a t e d w i t h t h e r e t a i l s t o r e and engaged
i n b i d and o f f e r n e g o t i a t i o n s when t h e s t o r e n e e d e d p o t a t o e s .
The g row er a p p e a r e d to keep a b r e a s t o f t h e m a rk e t p r i n c i ­
p a l l y th r o u g h c o n t r a c t s w i t h b r o k e r s , n e i g h b o r s , and th e
m a rk e t r e p o r t s .

However, i t i s d i f f i c u l t to u n d e r s t a n d how

b r o k e r s w i l l c o n t i n u e t o p r o v id e him i n f o r m a t i o n i f h e n e v e r

134

s e l l s th r o u g h them.

T h u s, i t was d i f f i c u l t to a s c e r t a i n how

he n e g o tia te d w ith th e r e t a i l s t o r e .

He d i d c l a im , h ow ever,

t h a t h i s r e l a t i o n s h i p w i t h t h e r e t a i l o u t l e t was i m p o r t a n t
enough to him t h a t i t w ould t a k e a v e r y ex tre m e s i t u a t i o n
f o r him to s e l l to a n o t h e r o u t l e t .
T h is l a s t p o i n t was s t r e s s e d by a l l o f th e p r o d u c e r s
in th e in te rv ie w s .

Namely, s u b s t a n t i a l w e ig h t was a t t a c h e d

by p r o d u c e r s to t h e im p o r ta n c e o f m a i n t a i n i n g a m a rk e t o u t ­
le t.

I n o t h e r w o rd s , p r o d u c e r s showed l o y a l t y to t h e i r

p r e s e n t o u t l e t s b e c a u s e o f th e f e a r o f no o u t l e t f o r t h e i r
p o t a t o e s i n a y e a r o f h eav y p r o d u c t i o n .
I n summary, i t a p p e a r s t h a t t h e r e a r e some b a s i c
s t r u c t u r a l d i f f e r e n c e s b etw een t h e p r o c e s s i n g and t a b l e sto c k m a rk e ts .

T hese d i f f e r e n c e s seem to l e a d to d i f f e r ­

e n t s e t s o f p ro b lem s and s l i g h t l y d i f f e r e n t m ethods ( s t a n ­
d a r d o p e r a t i n g p r o c e d u r e s ) o f o p e r a t i n g t h e farm w h ic h , i n
t u r n , may n e c e s s i t a t e d i f f e r e n t o r g a n i z a t i o n a l and i n f o r ­
m a tio n a l n e e d s .
The p r o c e s s i n g p o t a t o g ro w ers i n t e r v i e w e d s e l l a
m a j o r i t y o f t h e i r c ro p on p r e - s e a s o n c o n t r a c t s .

T h ere

seemed to b e more o f an aw a re n ess on th e p a r t o f t h e s e
g ro w ers o f th e i n te r d e p e n d e n c e o f p o t a t o p r o d u c e r s ,

They

p o i n t e d o u t t h e p ro b lem o f h i g h c o n t r a c t p r i c e l e a d i n g to
i n c r e a s e d p r o d u c t i o n and t h e low p r i c e s t h e f o l l o w i n g y e a r ,
and th e y g e n e r a l i z e d from t h e i r own a c t i o n s to o t h e r p r o ­
d u cers,

I n o t h e r w o rd s, when p o i n t i n g o u t t h a t he was

p l a n t i n g n o n - c o n t r a c t e d a c r e s to ’’p l a y t h e m a r k e t , " a

135

p r o d u c e r acknow ledged o t h e r g ro w e rs w ere m ost l i k e l y d o in g
th e same,

T a b l e s t o c k g r o w e r s , on t h e o t h e r h a n d , d i d n o t

seem to c o n c e rn th e m s e lv e s w i t h t h e a c t i o n s o f o t h e r p r o ­
d u c e rs , and t h e y a p p e a r e d to b e more i n d i v i d u a l i s t i c and
f a t a l i s t i c a b o u t th e m a rk e t and p o t a t o p r i c e s .
The p r o c e s s i n g g ro w e rs r e l i e d q u i t e h e a v i l y on MACMA
and th e c o o p e r a t i v e f o r r e l a y i n g p r i c e and m a rk e t i n f o r ­
m a tio n .

Even th e i n d i v i d u a l n e g o t i a t i o n s r e l i e d on t h i s

i n f o r m a t i o n , and t h e s e p r o d u c e r s d i d n o t f i n d USDA p r i c e s
u s e f u l , inasm uch as th e y h a d a l r e a d y made t h e i r m a r k e tin g
d e c isio n .

T a b le s to c k g ro w ers r e l i e d on th e b r o k e r / a g e n t f o r

p r i c e and m a rk e t in f o r m a ti o n ..

These g ro w ers acknow ledged

r e c e i v i n g USDA r e p o r t s b u t c la im e d th e r e p o r t s w ere to o l a t e
to be o f much v a l u e i n d e c i s i o n m aking and t h a t th e p r i c e s
r e p o r t e d w ere h i g h e r th a n th e p r i c e h e r e c e i v e d f o r h i s
p o ta to e s.
A c o n c e rn e x p r e s s e d by a l l g ro w e rs was s e c u r i n g an
o u tle t fo r th e ir p o ta to e s.

A ll o f th e p ro d u cers p la ced a

premium on t h e a s s u r a n c e o f an o u t l e t when c o n s i d e r i n g
w here to m a rk e t t h e i r p o t a t o e s .

I t seems t h a t a s t r o n g

f e a r was n o t h a v in g an o u t l e t i n a y e a r o f a l a r g e p o t a t o
crop.

A l l p r o d u c e r s a l s o s t r e s s e d th e im p o r ta n c e o f th e

c o s t o f p ro d u c tio n in t h e i r p r ic e n e g o tia tio n s ,
6 .2

M a il Q u e s t i o n n a i r e - A l l R e sp o n d en t P ro d u c e r s
T h is s e c t i o n w i l l p r e s e n t th e r e s u l t s o f th e seco nd

p a r t o f th e s u r v e y q u e s t i o n n a i r e .

The o v e r a l l o b j e c t i v e o f

136

t h e s e c o n d p a r t o f th e q u e s t i o n n a i r e was to e v a l u a t e t h e
e x i s t i n g p r i c e d a t a and i n f o r m a t i o n s y ste m from t h e p e r ­
s p e c t i v e o f p r o d u c e r d e c i s i o n m aking.

To a c h ie v e t h i s , i t

was n e c e s s a r y to i d e n t i f y t h e ty p e s o f i n f o r m a t i o n u s e d by
p r o d u c e r s i n d e c i s i o n m aking, th e d e c i s i o n s t h a t p r o d u c e r s
make t h a t u s e p r i c e d a t a , and th e s o u r c e s o f p r i c e d a t a and
i n f o r m a t i o n u s e d by p r o d u c e r s .

As d i s c u s s e d p r e v i o u s l y th e

r e s p o n d e n ts w ere a s k e d t o r a t e th e u s e f u l n e s s o f v a r i o u s
s o u r c e s and ty p e s o f i n f o r m a t i o n u s i n g a L i k e r t O r d i n a l
S cale.
6 .2 .1

I n f o r m a t i o n Used i n D e c is io n Making
T a b le 6 .1 p r e s e n t s t h e r e s u l t s o f th e p r o d u c e r s '

e v a l u a t i o n o f th e u s e f u l n e s s o f v a r i o u s ty p e s o f i n f o r m a t i o n
u s e d i n d e c i s i o n m aking.

The t a b l e p r e s e n t s th e a b s o l u t e

numbers and th e r e l a t i v e f r e q u e n c i e s o f th o s e r e s p o n d in g
by ea c h c a t e g o r y o f u s e f u l n e s s .

T h ere w ere b e tw e e n 108 and

115 u s a b l e r e s p o n s e s to th e q u e s t i o n .
P o t a t o p r i c e q u o t a t i o n s a p p e a r to be r a t e d th e m ost
u s e f u l , as 47 p e r c e n t o f t h e r e s p o n d e n ts r a t e d p r i c e q u o te s
as v e r y u s e f u l and 83 p e r c e n t r a t e d p r i c e q u o t a t i o n s as
e i t h e r v e r y u s e f u l o r m o d e r a te ly u s e f u l . ^

P o ta to p r ic e

f o r e c a s t s w ere r a t e d as v e r y u s e f u l by 33 p e r c e n t o f t h e
p r o d u c e r s ; 69 p e r c e n t r a t e d p r i c e f o r e c a s t s as v e r y u s e f u l
o r m o d e r a te ly u s e f u l .

Only 16 p e r c e n t o f th e p r o d u c e r s s a i d

p o t a t o f u t u r e s p r i c e s w ere v e r y u s e f u l .
^ See A ppendix I I I f o r a copy o f t h e q u e s t i o n n a i r e .

TABLE 6-1
USEFULNESS OF INFORMATION IN DECISION MAKING BY ALL RESPONDENT POTATO PRODUCERS

Q uestion No. 14:

Various types o f in fo rm a tio n a re a v a i l a b l e to a i d managers i n d e c is io n
making. P le ase i n d i c a t e how u s e f u l the fo llo w in g types o f in fo rm a tio n
a re to you when you make d e c i s i o n s .

TYPES OF INFORMATION
P o tato P r ic e Q uotations
P ric e s o f O ther Crops
P o tato F u tures P ric e s
Reports o f Potato P ric e s
fo r P ast Years
P o tato P ric e F o re ca sts
E stim ates o f P la n tin g
I n te n tio n s
E stim ates o f Acres P la n te d
Harvested and Y ields
Volume o f P o tato Shipments
E stim ates o f
Stocks o f P otatoes
E stim ates o f
Production Costs
T ra n s p o rta tio n Costs
Wage r a t e s
Labor A v a i l a b i l i t y
Demand E stim ates

Very— Moderately
us EFUL
useful
Abs . Rel. Abs.
Rel.
F rq . Frq. F rq .
F rq.
P er­
Per­
i'o. cent
No. cen t
54 47.0
41
35.7
9
8.3
25
23.1
18 15.9
32
28.3

RARELY
USEFUL
\ b s . Rel.
Frq.
P er­
No. cent
11
9.6
44 40.7
41 36.3

DO NOT USE BECAUSE:
NOT USEFUL iNOT AWARE OF IT
Abs. Rel. \b s.
Rel.
Frq. Frq. Frq.
Frq.
P er­
P er­
No. c e n t
No. c en t
5.2
6
3
2.6
27 25.0
3
2 .8
16 14.2
6
5.3

TOTAL1
115
108
113

9
36

8.1
32.7

28
40

25.2
36.4

49
23

44.1
20.9

22
9

19.8
8.2

3
2

2.7
1.8

111
110

27

24.1

34

30.4

31

27.7

19

17.0

1

.9

112

33
16

29.2
14.0

31
43

27.4
37.7

34
36

30.1
31.6

15
18

13.3
15.8

0
1

0 .0
.9

113
114

28

24.6

49

43.0

20

17.5

17

14.9

0

0.0

114

22
19
19
12
28

19.1
16.7
16.7
10.5
25.5

33
36
29
16
38

28.7
31.6
25.4
14.0
34.5

35
34
42
58
24

30.4
29.£
36. £
50. S
2 1 .t

22
21
21
23
16

19.1
18.4
18.4
20.2
14.5

3
4
3
5
4

2.6
3.5
2.6
4 .4
3.6

115
114
114
114
110

The f a i l u r e o f producers to respond to each item r e s u l t s i n t o t a l resp o n se s £ 115

138

T h ese r e s u l t s a p p e a r to b e c o n s i s t e n t w i t h e a r l i e r
s t u d i e s i n w h ich e v id e n c e was fo u n d t h a t p r o d u c e r s s t r e s s e d
c u r r e n t p r i c e s and p r i c e o u t l o o k a s th e m o st f r e q u e n t l y
used in fo rm a tio n .

The m a jo r d i f f e r e n c e b e tw e e n t h e p r e s e n t

s tu d y and th e o t h e r s t u d i e s l i e s i n th e a t t e m p t to m easu re
th e i n t e n s i t y o f f e e l i n g a b o u t t h e u s e f u l n e s s i n th e p r e s e n t
s tu d y a s o p po sed t o t h e f r e q u e n c y o f u s e .
Of t h e n o n - p r i c e ty p e s o f i n f o r m a t i o n , e s t i m a t e s o f
s t o c k s o f p o t a t o e s w ere r a t e d as e i t h e r v e r y u s e f u l o r
m o d e r a te ly u s e f u l by 68 p e r c e n t o f p r o d u c e r s .

A ls o , d e ­

mand e s t i m a t e s ; e s t i m a t e s o f p l a n t i n g i n t e n t i o n s ; and e s t i ­
m ates o f a c r e s p l a n t e d , h a r v e s t e d and y i e l d s ; a l l w ere r a t e d
by o v e r 50 p e r c e n t o f th e r e s p o n d e n ts as v e r y u s e f u l o r
m o d e r a te ly u s e f u l .
I t a p p e a r s t h a t p r o d u c e r s hav e a f a i r l y w e l l - e s t a b ­
l i s h e d model o f th e m a rk e t inasm uch as th e h i g h e s t r a t i n g s
w ere r e s e r v e d f o r p r i c e i n f o r m a t i o n , s u p p ly i n f o r m a t i o n and
demand i n f o r m a t i o n , w h ile o t h e r i n f o r m a t i o n su c h as p r i c e s
o f o t h e r c r o p s and l a b o r a v a i l a b i l i t y w ere r a t e d as much
le ss u se fu l.
6 .2 .2

S o u rc es o f P r i c e D ata
B ecause t h e m a jo r i n t e r e s t was i n p r i c e d a t a , an

open ended q u e s t i o n was a s k e d to f i n d o u t w h ic h s o u r c e s o f
p r i c e d a t a p r o d u c e r s r e l y on i n d e c i s i o n m ak in g ,

The r e ­

s u l t s o f t h i s q u e s t i o n a r e p r e s e n t e d i n T a b le 6 -2 f o r t h e
e n t i r e group o f r e s p o n d e n ts to t h e q u e s t i o n .

TABLE 6-2
PUBLISHED PRICE INFORMATION USED BY RESPONDENTS IN DECISION MAKING

Question No. 15:

Absolute
Numbers

NO.

R e la tiv e P er­
Frequency cent

NewsL e tte rs

USDA

Misc.

Buyers

News­
papers

AO

37

29

17

12

12

4

2

1531

26

24

19

11

8

8

3

1

1002

Farm
Farm
Radio Magazine O rg a n iz atio n

TOTAL

^ Producers were allowed to l i s t th r e e so u rc e s; th u s , t o t a l number exceeds 130.
2

P ercentages a re based on 153 re s p o n se s.

139

Responses

P le a s e l i s t th r e e so u rces o f p u b lish e d p r i c e in fo rm a tio n t h a t
a re th e most h e l p f u l to you i n d e c is io n making.

140

When a l l r e s p o n d e n t s w ere c o n s i d e r e d , i n d u s t r y new s­
l e t t e r s w ere l i s t e d m ost f r e q u e n t l y C26 p e r c e n t ) , f o llo w e d
c l o s e l y by USDA p u b l i c a t i o n s (24 p e r c e n t ) .

The t h i r d m ost

o f t e n l i s t e d s o u r c e was an a g g r e g a t e grou p made up o f a
g
v a r i e t y o f s o u r c e s , b u y e r s w ere l i s t e d by 11 p e r c e n t o f
t h e r e s p o n d e n t s , r a d i o and n ew sp ap er co m p rise d 8 p e r c e n t
o f t h e r e s p o n s e s , and farm m a g azin es and farm o r g a n i z a t i o n s
made up a v e r y s m a ll p r o p o r t i o n o f t h e r e s p o n s e s .
T a b le 6-3 p r e s e n t s t h e r e s u l t s o f t h e q u e s t i o n w hich
a sk e d p r o d u c e r s to e v a l u a t e th e u s e f u l n e s s o f t h e i r s o u r c e s
o f p r i c e i n f o r m a t i o n i n d e c i s i o n m aking.

From t h e s e r e ­

sp o n se s i t does n o t a p p e a r t h a t p r o d u c e r s r a t e t h e i r p r i c e
d ata sources v ery h ig h ly .

The s o u r c e r a t e d m ost f r e q u e n t l y

a s v e r y u s e f u l was t h e p o t a t o b r o k e r / a g e n t c l a s s , w i t h 4 0 .2
p e r c e n t o f t h e p r o d u c e r s r a t i n g them a s v e r y u s e f u l ; i n ­
d u s t r y n e w s l e t t e r s w ere r a t e d v e r y u s e f u l by 31 p e r c e n t o f
t h e p r o d u c e r s , and g o v e rn m e n ta l p u b l i c a t i o n s w e re r a t e d as
v e r y u s e f u l by o n ly 2 4 .5 p e r c e n t o f t h e p r o d u c e r s .
I n t e r e s t i n g l y , o n ly two s o u r c e s w ere r a t e d by a
m a j o r i t y o f r e s p o n d e n t s as v e r y u s e f u l o r m o d e r a te ly u s e f u l ;
a g e n ts and b r o k e r s by 74 p e r c e n t , and i n d u s t r y n e w s l e t t e r s
by 57 p e r c e n t o f t h e r e s p o n d e n t s .

c

G overnm ental p u b l i c a t i o n s ,

The m i s c e l l a n e o u s r e s p o n s e s i n c lu d e d a r a n g e o f
s o u r c e s , m ost o f w h ich w ere n o t e a s i l y i d e n t i f i a b l e as
s o u r c e s , e . g . , " C h ic a g o ," " c o n t r a c t s / ' " l o c a l m a r k e t ;
5 p e r c e n t o f t h e r e s p o n d e n t s d id l i s t t h e f u t u r e s m a rk e r.
I t i s a l s o c o n c e i v a b l e t h a t t h e te rm " p u b l i s h e d p r i c e s " was
m i s l e a d i n g . P r o d u c e r s m ost l i k e l y s t r e s s e d w r i t t e n r e p o r t s
i n t h i s q u e s t i o n . Thus, s u c h s o u r c e s a s b u y e r s , n e i g h b o r s ,
e t c . m ig h t n o t have b ee n c o n s i d e r e d " p u b l i s h e d . "

141

TABLE 6-3
USEFULNESS OF SOURCES OF INFORMATION IN DECISION MAKING
BY ALL RES FONDENT POTATO PRODUCERS
Q uestion No. 17:

Sources of
P ric e
Data
Newsoaper
Magazines
In d u stry
N ew sletters
Radio and TV
S ta te and Fed­
e r a l G ov't Publ.
U n iv e rs ity
P u b lic a tio n s
Neighbors
C ooperatives and
Farmer Organ.
R e ta il S to re s
P otato d e a l e r s ,
b r o k e r s , Ship­
pers , e tc .
P rocessors and
Agents
Bankers and
Lending
In stitu tio n s

P r ic e d a ta and in fo rm a tio n can be s e ­
cured from v a rio u s s o u r c e s . From the
fo llo w in g l i s t , p le a s e i n d i c a t e which
so u rces of p r i c e in fo rm a tio n you fin d to
be most u s e f u l to you in making d e c i s i o n s .
Very M oderately
&ar e ly
Not
1
U seful
U seful
Use f u l U seful
i
!
Abs Rel Abs. Rel. Abs. Rel. Absj. Rel
Frq Fra F r a . F r a . F r c . F r a . Frajl Fra
P e r­
Per­
P e r­
P e r­ T o ta l
No. cent No. cent No. c e n t No. cent No. 1
19 17.9 37 34.9 23 21.7 27 25.5 106
4
3.8 27 26.0 29 27.9 44 42.3 104
31
13

3 1 .C 26
17.5 26

26.0
25.2

15
30

15.0 28
29.1 29

28.0
28.2

100
103

26

24. 5

24

22.6

32

30.2 24

22.5

106

11
25

10.4 '27
23.6 25

25.5
23.6

34
30

32.1 34
28.3 26

32.1
24.5

106
106

17
18

16.2
16.7

30
24

28.6
22.2

31
37

29.5 27
34.3 29

25.7
26.9

105
108

43

40.2

36

33.6

16

15.0 12

11.2

107

13

12.4

26

24.3

30

28.6 36

34.3

105

2

1.9

6

5.7

38

3 5 . S 60

56.6

106

^ The f a i l u r e o f some producers to respond to each,
item r e s u l t s in a t o t a l resp o n se <_ 108.

142

n e i g h b o r s , c o o p e r a t i v e s and fa r m e r o r g a n i z a t i o n s w ere a l l
r a t e d s i m i l a r l y w i t h 45-46 p e r c e n t o f t h e r e s p o n d e n t s
r a t i n g them a s m o d e r a te ly u s e f u l o r v e r y u s e f u l .
I t i s a p p a r e n t from t h e s e d a t a t h a t t h e b r o k e r / a g e n t
c a t e g o r y i s t h e o n ly s o u r c e o f i n f o r m a t i o n w h ic h i s c o n ­
s i d e r e d a t l e a s t m o d e r a te ly u s e f u l b y m ost o f th e r e ­
s p o n d e n ts .

The r e l a t i v e l y low r a t i n g s o f t h e s o u r c e s o f

p r i c e d a t a by t h e r e s p o n d e n ts may be a p s y c h o l o g i c a l e f f e c t
o f p r o d u c e r s blam in g low p r i c e s on t h e i r s o u r c e s o f p r i c e
in fo rm a tio n .

A n o th e r p o s s i b i l i t y , o f c o u r s e , i s t h e r e l ­

a t i v e n e g l e c t o f m a r k e tin g and p r i c i n g i s s u e s on t h e p a r t
o f p r o d u c e r s i n d e c i s i o n making w i t h o n ly p a s s i n g r e f e r ­
en ce to p r i c e q u o t a t i o n s .
6 .2 .3

U s e f u ln e s s o f P r i c e D ata i n D e c is io n Making
T a b le 6 -4 sum m arizes t h e r e s u l t s o f t h e p r o d u c e r s '

e v a l u a t i o n s o f t h e u s e f u l n e s s o f p r i c e d a t a f o r m aking'
s p e c ific d e c isio n s.

I n g e n e r a l , p r o d u c e r s c l a im l i t t l e

v a l u e o f p r i c e d a t a i n d e c i s i o n m aking.

T h ere w ere no

d e c i s i o n s r e c e i v i n g a r a t i n g o f v e r y u s e f u l o r m o d e r a te ly
u s e f u l by h a l f t h e r e s p o n d e n t s .
The " v e r y u s e f u l " r a t i n g was g iv e n t h e m ost f r e ­
q u e n t l y t o t h e d e c i s i o n r e g a r d i n g t o whom t o s e l l t h e i r
p o ta to e s, e .g .,
e tc .

s h i p p e r , d i r e c t to r e t a i l ,

to p r o c e s s o r ,

T w enty-one p e r c e n t o f t h e p r o d u c e r s r a t e d p r i c e d a t a

as very u s e f u l f o r t h i s d e c is io n .

T h irty -s ix p ercen t of

th e producers r a te d p r ic e d a ta as v ery u s e fu l o r

TABLE 6-4

USEFULNESS OF PRICE DATA FOR SPECIFIC DECISIONS BY ALL RESPONDENT PRODUCERS
Question No. 16:

Published or reported p r ic e s might be h e lp fu l in making numerous
d e c isio n s. Please in d ic a te how u se fu l p ric e data and reported
p r ic e s a re to you when you make the following d e c isio n s.
Ver y

LJlas'P 1
Decisions
To Plant or not
to p lan t potatoes
Number of Acres
to Plant
V ariety of
Potatoes to P lan t
When to S e ll
Potatoes (timing
of sa le s )
lo bargain for
Pre-season Con­
trac t
To J o ; n Other Pro­
ducers in S e llin g
and Marketing
The Market in
which to S ell
Potatoes
Geographical Area
in Which to S e ll
Potatoes
Size and Type of
Container to Use
To Whom to S e ll
Potatoes

Abs. Rel.
Frq. F rq .
No. Percent

Mode r a t e ly
Us eful
Abs.
Rel.
F rq.
Frq.
No. Percent

Rarely
Useful
Abs.
Rel.
F rq .
F rq .
Wo. Percent

Not
Useful
Abs. R e l.
Fro. F rq .
No. Jercent

T o ta l1
No.

6

5.5

31

28.2

37

33.6

36

32.7

110

12

11.1

36

33.3

30

27.8

30

27.8

108

10

9.2

31

28.4

30

27.5

38

34.9

109

15

13.8

36

33.0

26

23.9

32

29.4

109

19

17.4

17

15.6

24

22.0

49

45.0

109

5

4.6

18

16.5

33

30.3

53

48.6

109

13

11.9

23

21.1

27

24.8

46

42.2

109

9

8.3

18

16.5

33

30.3

49

45.0

109

3

7.5

29

27.1

32

29.9

38

35.5

109

23

21.5

15

14.0

30

28.0

39

36.4

1

107

1 The f a i l u r e of some producers to respond to each ite m .r e s u l t s in the t o t a l
responses
110.

144

m o d e r a te ly u s e f u l f o r m aking t h i s d e c i s i o n .

The h i g h e s t

combined r a t i n g , v e r y u s e f u l o r m o d e r a te ly u s e f u l , was
g iv e n to th e d e c i s i o n o f when to s e l l p o t a t o e s , i . e . ,
tim in g o f s a l e s

th e

(47 p e r c e n t ) .

I n g e n e r a l , t h e r e s u l t s conform w i t h w hat we would
e x p e c t from economic t h e o r y in asm u ch a s t h e number o f
a c r e s t o p l a n t and when to s e l l a r e s t r e s s e d a s d e c i s i o n s
w hich u s e p r i c e d a t a .

I t s h o u ld b e n o t e d , h ow ever, t h a t

t h e d e c i s i o n on t h e v a r i e t y o f p o t a t o e s t o p l a n t , a l s o
r e c e i v e d a f a i r l y h ig h r a t i n g .

T h is r e s p o n s e i n d i c a t e s

t h e s p e c i a l i z e d n a t u r e o f t h e demand f o r p o t a t o e s .

In

o t h e r w o rd s, t h e v a r i e t y o f p o t a t o p l a n t e d by a p r o ­
d u c e r may l i m i t t h e m a r k e tin g o p t i o n s l a t e r i n t h e y e a r
b e c a u s e some p o t a t o v a r i e t i e s a r e n o t d e s i r a b l e f o r s p e c ­
if ic uses.

T hus, t h i s d e c i s i o n m ig h t be view ed a s r e l a t e d

to t h e d e c i s i o n on t h e c h o i c e o f m a rk e t i n w hich to s e l l
th e p o ta to e s .
6 .2 .4

I n f o r m a t io n and The P r i c i n g D e c is io n
T a b le 6-5 p r e s e n t s t h e r e s u l t s o f t h e q u e s t i o n a s k in g

p r o d u c e r s to r a t e t h e im p o r ta n c e o f v a r i o u s t y p e s o f i n f o r ­
m a tio n when th e y d e c i d e on a s e l l i n g p r i c e .

The m ost f r e ­

q u e n t ,fv e r y i m p o r t a n t " r a t i n g was g iv e n t o t h e p r i c e o t h e r
g ro w e rs h a v e b ee n o f f e r e d , w i t h 43 p e r c e n t o f t h e g ro w e rs
g iv in g t h i s r a t i n g .

T h is was f o llo w e d by 38 p e r c e n t o f t h e

g ro w e rs i n d i c a t i n g t h a t i n f o r m a t i o n on demand was v e r y im­
p o rta n t.

Own c o s t o f p r o d u c t i o n and s u p p ly e s t i m a t e s

TABLE 6-5
TYPES OF INFORMATION IMPORTANT TO POTATO PRODUCERS WHEN DECIDING ON A SELLING PRICE
(ALL RESPONDENT PRODUCERS)

Q u e s tio n N o .18:

How im p o r ta n t a r e t h e f o llo w in g t y p e s o f i n f o r m a t i o n when you
d e c id e t h e p r i c e a t w hich you w i l l s e l l t h e m a jo r p o r t i o n o f
your p o ta to e s?

resp o n ses

M o d e ra te ly
I m p o r ta n t
No. P e r c e n t

Of L i t t l e
Im p o rta n c e
No. P e r c e n t

Of No
Im p o rta n c e
No. P e r c e n t

27

2 5 .7

33

3 1 .4

22

2 1 .0

105

25

2 3 .1

40

3 7 .0

32

2 9 .2

108

38

3 5 .2

11

1 0 .2

13

1 2 .0

108

45

4 1 .3

14

1 2 .8

16

1 4 .7

109

36

3 3 .6

13

1 2 .1

17

1 5 .9

107

30

2 7 .8

23

2 1 .3

20

1 8 .5

108

35

3 2 .4

22

2 0 .4

21

1 9 .4

108

T o t a l No.

i

145

V«iry
Types o f
[mp<;> r ta n t
I n f o r m a tio n
:fo. P e r c e n t
I n f o r m a t io n on n o n ­
p r i c e te rm s o f s a l e
(Volume you can d e ­
l i v e r , tim e o f d e ­
liv e r y , p la c e of
d e liv e ry , e tc .)
23
2 1 .9
The P r e v io u s
Y ears P r i c e
11
1 0 .2
The P r i c e O th e r
Growers h av e b een
o ffered
46
4 2 .6
Supply
E s tim a te s
3 1 .2
34
Demand
E s tim a te s
3 8 .3
41
Your C o st o f
P r o d u c tio n
3 2 .4
35
Your L e v e l o f
2 7 .8
P r o d u c tio n
30

^ The f a i l u r e o f p r o d u c e r s t o re s p o n d t o ea c h ite m r e s u l t s i n t h e t o t a l
< 109.

146

f o llo w e d c l o s e l y w i t h 32 p e r c e n t and 31 p e r c e n t r e s p e c ­
tiv e ly .
Combining t h e v e r y im p o r t a n t and m o d e r a te ly i m p o r ta n t
r e s p o n s e s , t h e p r i c e o t h e r s have b een o f f e r e d r a t e s t h e
h i g h e s t w i t h 78 p e r c e n t .

S upply e s t i m a t e s w ere r a t e d a s

im p o r t a n t by 73 p e r c e n t .

Own c o s t o f p r o d u c t i o n and own

l e v e l o f p r o d u c t i o n w ere e a c h r a t e d a s m o d e r a te ly o r v e r y
i m p o r ta n t by 60 p e r c e n t o f t h e r e s p o n d e n t s .
I t i s i n t e r e s t i n g t o n o t e t h a t t h e p r o d u c e r s gave
s u b s t a n t i a l l y h i g h e r r a t i n g s t o t h e in f o r m a t i o n i n t h i s
q u e s t i o n th a n i n t h e o t h e r q u e s t i o n s .

F iv e o u t o f th e

se v e n ty p e s o f i n f o r m a t i o n w ere r a t e d a s e i t h e r v e r y im­
p o r t a n t o r m o d e r a te ly i m p o r t a n t by more th a n h a l f o f th e
pro du cers.

T h is m ig h t mean t h a t e i t h e r (a) t h e i n f o r m a t i o n

i s a v a i l a b l e and t h e p r o d u c e r s a r e n o t aw are o f i t ;

th e re ­

f o r e , i t i s n o t u s e f u l to them, o r (b) t h e in f o r m a t i o n
th e y f e e l i s i m p o r ta n t i s n o t a v a i l a b l e t o them.
I n summary, M ic h ig a n p o t a t o p r o d u c e r s r a t e d p r i c e
q u o t a t i o n s and p r i c e f o r e c a s t s a s t h e m ost u s e f u l ty p e o f
i n f o r m a t i o n i n d e c i s i o n m aking.

T h is r e s u l t c o r r e s p o n d s

w i t h t h e f i n d i n g s i n o t h e r s t u d i e s t h a t fo u n d c u r r e n t
p r i c e s and p r i c e o u t l o o k t h e m ost f r e q u e n t l y u s e d i n f o r ­
m a tio n .

Of t h e n o n - p r i c e i n f o r m a t i o n , o v er h a l f o f t h e

M ic h ig an p r o d u c e r s r a t e d demand e s t i m a t e s and s u p p ly i n ­
f o r m a tio n a s v e r y u s e f u l o r m o d e r a te ly u s e f u l .
When a s k e d s p e c i f i c a l l y a b o u t t h e u s e f u l n e s s o f
p r i c e d a t a , p r o d u c e r s g e n e r a l l y g ave q u i t e low r a t i n g s . In

147

e v a lu a tin g th e u s e fu ln e s s of v a rio u s sources o f p r ic e d a ta ,
o n ly two s o u r c e s w ere r a t e d v e r y u s e f u l o r m o d e r a te ly u s e ­
f u l by h a l f o f t h e p r o d u c e r s :
in d u stry n e w s le tte rs .

t h e b r o k e r / a g e n t g ro u p and

The USDA p r i c e r e p o r t s and t h e

c o o p e r a t i v e / f a r m e r o r g a n i z a t i o n group f o llo w e d w i t h a r a t ­
in g o f v e r y u s e f u l o r m o d e r a te ly u s e f u l b y a p p r o x im a te l y
46 p e r c e n t o f t h e p r o d u c e r s .
I n a t t e m p t i n g t o i d e n t i f y t h e d e c i s i o n s f o r w h ich
producers fin d p r ic e d a ta u s e f u l,

i t was d i s c o v e r e d t h a t

p r o d u c e r s do n o t r a t e p r i c e d a t a a s v e r y u s e f u l i n making
d e c isio n s.

Not one d e c i s i o n r e c e i v e d a v e r y u s e f u l o r

m o d e r a te ly u s e f u l r a t i n g by 50 p e r c e n t o r more o f th e
g ro w ers.
The d e c i s i o n r e c e i v i n g t h e h i g h e s t r a t i n g was th e
tim in g o f s a l e s , i . e . , when to s e l l .

The n e x t h i g h e s t

r a t i n g was g iv e n to t h e d e c i s i o n on t h e number o f a c r e s to
p la n t.

Only o n e - t h i r d o f th e g ro w ers i n d i c a t e d t h a t p r i c e

d a t a was u s e f u l o r m o d e r a te ly u s e f u l i n making t h e d e c i ­
s i o n s on w hich m a rk e t to s e l l i n , o r w h e th e r o r n o t to
p la n t p o ta to e s.
P r o d u c e r s w ere a l s o a s k e d to r a t e th e im p o r ta n c e o f
v a r i o u s t y p e s o f i n f o r m a t i o n t o them when t h e y w ere d e c i d ­
in g on a s e l l i n g p r i c e .

T hese i n f o r m a t i o n ty p e s w ere g e n ­

e r a l l y g iv e n a h i g h e r r a t i n g th a n t h e q u e s t i o n s d e a l i n g
w ith th e u s e fu ln e s s of v a rio u s ty p es o f in fo rm a tio n .

F iv e

o u t o f se v e n ty p e s o f i n f o r m a t i o n w ere r a t e d v e r y i m p o r ta n t

148

o r m o d e r a te ly i m p o r ta n t by 50 p e r c e n t o r more o f th e
g r o w e rs .

The p r e v i o u s y e a r ’ s p r i c e r e c e i v e d t h e lo w e s t

r a t i n g w i t h o n ly 33 p e r c e n t , r a t i n g i t v e r y i m p o r ta n t
o r m o d e r e a te ly i m p o r t a n t .
T h is a p p e a r s t o b e a somewhat p a r a d o x i c a l r e s u l t .
P ro d u c e r s c la im t h a t p r i c e i n f o r m a t i o n i s t h e m ost u s e f u l
ty p e o f i n f o r m a t i o n t o them i n d e c i s i o n m aking.

Y et when

asked to e v a lu a te i t s u s e fu ln e s s f o r s p e c i f i c d e c is io n s ,
i t was r a t e d q u i t e low and th e s o u r c e s o f t h i s i n f o r m a t i o n
w ere a l s o g iv e n low r a t i n g s .
One m ig h t e x p l a i n t h e s e r e s u l t s by a r g u in g t h a t t h e
h i g h r a t i n g g iv e n to p r i c e q u o te s and p r i c e f o r e c a s t s r e ­
f l e c t s t h e im p o r ta n c e o f p r i c e i n d e t e r m in in g t h e income
to th e p ro d u c tio n o f p o ta to e s .

In a d d itio n , i t i s p o ssib le

t h a t t h e r a t i n g s a r e r e l a t e d to th e r e s p o n d e n t s 1 i n t e r p r e ­
ta tio n of d if f e r e n t q u e stio n s.

Q u e s tio n s #14 and 13 may

have been i n t e r p r e t e d a s h y p o t h e t i c a l q u e s t i o n s , i . e . , w hat
ty p e s o f i n f o r m a t i o n would be u s e f u l o r i m p o r t a n t .

W ith

t h i s i n t e r p r e t a t i o n t h e p r o d u c e r s would n o t b e e v a l u a t i n g
w hat th e y a c t u a l l y u s e b u t r a t h e r w hat th e y would f i n d u s e ­
fu l.

In o t h e r w o rd s, t h e i n f o r m a t i o n may be c o n s i d e r e d im­

p o r t a n t , b u t on t h e b a s i s o f t h e q u e s t i o n n a i r e t h e r e i s no
way t o a s c e r t a i n w h e th e r t h e p r o d u c e r s a c t u a l l y u s e i t . 7
7 The s p e c i f i c w ord in g o f q u e s t i o n s 14, 16, 17 and
18 may h av e l e d to am biguous i n t e r p r e t a t i o n by t h e p r o d u c e r s .
F or exam ple, q u e s t i o n #18 u s e s t h e word i m p o r ta n t r a t h e r
t h a n u s e f u l . T hus, th e a p p a r e n t i n c o n s i s t e n c i e s i n r e s p o n ­
s e s t o t h e s e q u e s t i o n s may r e f l e c t some q u e s t i o n n a i r e am­
b ig u ity .

149

Q u e s tio n s #16 a n d ' 17 a p p e a r e d t o h a v e b e e n answ ered
on th e b a s i s o f w hat t h e p r o d u c e r s a c t u a l l y u s e .

In o th e r

w o rd s, t h e p r o d u c e r s m ost l i k e l y e v a l u a t e d th e p r i c e d a t a
and s o u r c e s o f p r i c e d a t a on t h e b a s i s o f w hat i s c u r r e n t l y
a v a i l a b l e t o them.

The low r a t i n g s may th e n im p ly t h a t th e

p r o d u c e r s do n o t f i n d p r i c e d a t a , n o r t h e i r s o u r c e s , v e r y
u se fu l.

T h is f i n d i n g may b e f u r t h e r s u p p o r te d by t h e h ig h

n on-resp o n se r a t e .

However, t h e r e s u l t s o f t h e q u e s t i o n ­

n a i r e do s u g g e s t t h a t t h e tim in g o f s a l e s and a g r e e i n g on
a s e l l i n g p r i c e a r e two d e c i s i o n s f o r w h ich p r i c e d a t a and
i n f o r m a t i o n a r e fo u n d to be u s e f u l .
6 .3

M a il Q u e s t i o n n a i r e - R esp o n d en t P r o d u c e r s by M arket
T h is s e c t i o n w i l l p r e s e n t t h e r e s u l t s o f c r o s s t a b ­

u l a t i o n s betw een m a rk e t s t r u c t u r e v a r i a b l e s and th e u s e s
and s o u r c e s o f p r i c e d a t a and i n f o r m a t i o n .

T h ese c r o s s

t a b u l a t i o n s i d e n t i f y w h ich s t r u c t u r a l v a r i a b l e s m ost
a c c u r a t e l y p r e d i c t th e i n f o r m a t i o n and d a t a n e e d s and u s e s
o f th e p r o d u c e r s .
6 .3 .1

USDA As A S o urce o f P r i c e D ata by M arket
T a b le s 6-6 and 6-7 g i v e t h e number and p r o p o r t i o n o f

M ic h ig an p o t a t o p r o d u c e r s who s a i d t h a t th e y a r e aw are o f
Q

th e p r i c e s p u b l i s h e d b y USDA

and w h e th e r th e y f e e l th e

Q

p ric e s,

When p r o d u c e r s r e f e r to USDA o r governm ent r e p o r t e d
th e y g e n e r a l l y a r e r e f e r r i n g t o t h e M ark et News

150

USDA p r i c e s a r e u s e f u l t o them.

On t h e b a s i s o f a l l p r o ­

d u c e r s , o v e r t w o - t h i r d s o f t h e p r o d u c e r s a r e aw a re o f
t h e s e p r i c e s and f e e l t h e s e p r i c e s a r e u s e f u l t o them i n
d e c i s i o n m aking.
Looking a t M ic h ig an p o t a t o p r o d u c e r s by t h e m a rk e t
i n w h ich th e y s e l l p o t a t o e s , i t a p p e a r s t h a t t h e p r o c e s s
p o t a t o g ro w e rs f i n d t h e USDA p r i c e s t o be l e s s u s e f u l th a n
t h e t a b l e s t o c k and s e e d g r o w e rs .

W hile a s l i g h t l y h i g h e r

p r o p o r t i o n o f p r o c e s s g ro w e rs c la im aw a re n e ss o f t h e s e
p r i c e r e p o r t s , o v e r h a l f o f t h e s e g ro w e rs sa y t h e s e p r i c e s
a r e n o t u s e f u l to them.

On t h e o t h e r hand, n e a r l y 90

p e r c e n t o f t h e se e d g ro w e rs and 70 p e r c e n t o f t h e t a b l e s t o c k g ro w e rs f e e l t h e s e p r i c e s a r e u s e f u l to them.
I t i s v e r y l i k e l y t h a t d i f f e r e n c e s i n r a t i n g s o f USDA
p r i c e s l i e i n t h e f a c t t h a t p r o c e s s i n g g ro w e rs c o n t r a c t f o r
a m a jo r p o r t i o n o f t h e i r c r o p .

In th a t c a se , th e s h o r t- ru n

m a r k e tin g d e c i s i o n s t h a t w ould u s e USDA p r i c e r e p o r t s a r e
o f much l e s s im p o r ta n c e s i n c e th e m a r k e tin g d e c i s i o n h a s
a l r e a d y b ee n made.

T a b le 6-8 p r e s e n t s t h e r e s u l t s o f t h e

c r o s s t a b u l a t i o n s b etw een t h e p r o p o r t i o n o f t h e p r o d u c e r 's
p o t a t o c ro p s o l d i n a p r e - s e a s o n c o n t r a c t and USDA a s a
so u rce o f p r ic e in fo rm a tio n .

In e a c h breakdow n o f t h e p r o ­

p o r t i o n c o n t r a c t e d , more th a n h a l f o f t h e c o n t r a c t i n g p r o ­
d u c e r s r a t e d USDA p r i c e s a s r a r e l y u s e f u l o r n o t u s e f u l .
B u l l e t i n s . T h ese p r i c e s a r e t h e AMS s e r i e s in t e n d e d p r i n ­
c i p a l l y t o a s s i s t p r o d u c e r s i n making s h o r t - r u n t a c t i c a l
d e c i s i o n s , e . g . , m a r k e tin g d e c i s i o n s .

151
TABLE 6-6
NUMBER AND PROPORTION OF RESPONDENT MICHIGAN
POTATO PRODUCERS FAMILIAR WITH USDA PRICES

Q u e s tio n No, 20:

Are you f a m i l i a r w i t h th e p o t a t o p r i c e s
t h a t a r e p u b l i s h e d by t h e U n ite d S t a t e s
D e p a rtm e n t o f A g r i c u l t u r e ?
¥ es
A b so l. R e l.
F req .
F rea.
No.
P ercent

MARKET

No
A bsol
F req .
No.

R e l.
F req .
P ercent

TOTAL
No.

TABLESTOCK

50

68

23

32

73

PROCESSING

20

7-7

:.6

23

26

9

75

3

25

12

79

71

32

29

SEED
TOTAL(ALL)

111/100

TABLE 6-7
NUMBER AND PROPORTION OF RESPONDENTS
FINDING USDA PRICES USEFUL
Q u e s tio n No. 21:

HARKET

Do you f e e l t h e s e p r i c e s a r e u s e f u l to you?
Yes
A b s o l. R e l.
F re q .
F req .
P ercent
No.

No
A b so l. R e l.
F req .
F re q ,
P ercent
No.

TOTAL
No.

TABLESTOCK

36

69

16

31

52

PROCESSING

9

47

10

53

19

SEED

8

89

1

11

9

53

66

27

34

80/10 0

TOTAL (ALL)

TABLE 6-8

CROSS TABULATIONS BETWEEN CONTRACT PRODUCTION AND USEFULLNESS
OF USDA AS A SOURCE OF PRICE INFORMATION
by M a il S urvey R e sp o n d en ts
P ro p o rtio n
o f F a rm 's
t o t a l c ro p
c o n tra c te d
Zero P e r c e n t

Very u s e f u l M o d e ra te ly u s e f u l
A b so l. R e l.
A bsol , R e l.
F re q . F req .
F r e q . F re q .
No. P e rc e n t
No. P e r c e n t

R a r e ly u s e f u l Not u s e f u l
A b so l. R e l. A b so l. R e l.
F re q . F re q . F re q . F req .
No. P e r c e n t No. P e r c e n t

18

2 6 .5

17

2 5 .0

19

2 8 .0

14

2 0 .6

6

2 0 .0

6

2 0 .0

11

3 6 .7

7

2 3 .3

0% - 49%

18

2 5 .0

18

2 5 .0

21

2 9 .2

15

2 0 .8

50%-100%

6

2 3 .1

5

1 9 .2

9

3 4 .6

6

2 3 .1

0% - 99%

22

2 4 .2

23

2 5 ,3

28

3 0 .8

18

1 9 .8

2

2 8 .6

0

0

2

2 8 .6

3

4 2 .9

1% - 100%

100%

1 Based on t h e 98 r e s p o n s e s , b o t h a n s w e rin g q u e s t i o n s 10 and 17.

TOTAL1
68
1 0 0 .1%
30
1 0 0 .0%
72
1 0 0 .0%
26
1 0 0 .0%
91 "
1 0 0 .1%
7
1 0 0 .1%

153

On t h e o t h e r h a n d , l e s s th a n h a l f o f th e n o n - c o n t r a c t i n g
g ro w ers r a t e d USDA p r i c e s as r a r e l y u s e f u l o r n o t u s e f u l
f o r e a c h g ro u p in g e x c e p t t h e 0-99 p e r c e n t g ro u p .
The p r e c e d i n g i m p l i e s t h a t t h e r e a r e d i f f e r e n c e s i n
th e ty p e o f i n f o r m a t i o n and p r i c e d a t a n e e d e d by p r o d u c e r s
r e l a t e d to t h e m anner i n w hich p r o d u c e r s m a rk e t t h e i r p o ­
ta to e s.

B ecause t h e r e a p p e a r to be b a s i c d i f f e r e n c e s i n

s t r u c t u r e o f t h e i n d u s t r y r e l a t e d to th e m a rk e t i n w hich
t h e p o t a t o e s a r e s o l d , t h i s s e c t i o n w i l l in v o lv e lo o k in g
a t p r i c e d a t a , i n f o r m a t i o n and t h e s o u r c e s o f t h i s i n f o r ­
m a tio n by t h r e e m a r k e ts :
6 .3 .2

t a b l e s t o c k , p r o c e s s i n g and s e e d . .

I n f o r m a t i o n Used i n D e c is io n Making by M arket
As T a b le 6-9 i l l u s t r a t e s ,

t a b l e s t o c k g ro w e rs r a t e d

p r i c e q u o t a t i o n s a s t h e m ost u s e f u l .

The n e x t h i g h e s t

r a t i n g was g iv e n t o p r i c e f o r e c a s t s .

Thus, t h e two m ost

u s e f u l ty p e s o f i n f o r m a t i o n a c c o r d in g to t a b l e s t o c k grow­
e r s a r e b o th p r i c e i n f o r m a t i o n :
fo re c a s ts.

p r i c e q u o t a t i o n s and p r i c e

The p r o c e s s i n g p o t a t o g ro w ers a l s o r a t e d p r i c e

q u o t a t i o n s t h e h i g h e s t o f t h e i n f o r m a t i o n ty p e s l i s t e d .
T hree ty p e s o f i n f o r m a t i o n f o llo w e d v e r y c l o s e l y w i t h
a p p r o x im a te l y t h e same r a t i n g :

1) p o t a t o p r i c e f o r e c a s t s ,

2) e s t i m a t e s o f p l a n t i n g i n t e n t i o n s and 3) e s t i m a t e s o f
sto c k s o f p o ta to e s .
I t i s i n t e r e s t i n g to n o t e t h a t p r o c e s s i n g g row ers
r a t e d n o n - p r i c e i n f o r m a t i o n a lm o s t a s h i g h l y a s th e y r a t e d
th e p r i c e i n f o r m a t i o n , w h i l e t a b l e s t o c k g ro w e rs p l a c e d more

154
TABLE 6-9

AVERAGE. RANKING OF USEFULNESS OF INFORMATION TYPES
IN DECISION MAKING BY ALL MICHIGAN POTATO
PRODUCERS AND BY PRIMARY MARKETi
(M ail S urvey R e sp o n d e n ts)
Types o f
I n f o r m a t io n
P r i c e Q u o ta tio n s
t r i c e s o f O th e r
Crops
P o t a t o F u tu r e s
P ric e s
R e p o rts o f P o t a t o
P r i c e s f o r P a s t Y ears
P o ta to p r ic e
F o re c a sts
E s tim a te s o f P l a n t i n g
In te n tio n s
E s tim a te s o f A cres
P l a n t e d , H a r v e s te d
and Y ie ld s
Volume o f P o t a t o
S hipm ents
E s tim a te s o f S to c k s
o f P o tato e s
E s tim a te s o f P ro ­
d u c t i o n C o sts
T r a n s p o r t a t i o n C o s ts
Wage R a te s
L abor A v a i l a b i l i t y
Demand E s tim a te s

A ll
1 .8 0 9

T a b le sto c k
1 .8 0 0

P ro ces­
sin g
2 .0 0 0

Seed
1 .5 0 0

2 .9 0 7

2 .9 7 8

2 .9 1 3

3 .0 9 1

2 .6 4 6

2 .8 6 6

2 .4 3 5

2 .3 0 8

2 .8 3 8

2 .9 3 4

2.7 3 9

2 .4 1 7

2 .1 0 0

2 .1 3 3

2 .1 3 6

1 .8 4 6

2 .4 0 2

2 .5 9 4

2.1 3 0

2 .0 8 3

2 .3 7 4

2 .3 0 4

2 .3 6 4

1 .9 1 7

2 .5 1 8

2 .5 8 1

2 .5 6 5

2.6 67

2 .2 2 8

2.3 6 6

2 .1 7 4

2 .0 8 3

2 .6 7 4
2 .6 0 5
2.6 4 9
2 .9 3 9
2 .4 6 4

2 .6 1 3
2 .6 5 0
2 .6 5 8
3 .0 0 0
2 .4 5 5

2 .3 9 1
2 .5 0 0
2 .6 5 2
2.8 7 0
2.2 8 6

2 .6 6 7
2 .5 0 0
2 .5 8 3
2 .6 6 7
1.9 1 7

The a v e ra g e number i s b a s e d on a s s ig n m e n t o f num­
b e r 1 to " v e ry u s e f u l , ” 2 t o " m o d e ra te ly u s e f u l , ” 3 to
" r a r e l y u s e f u l , ” and 4 t o " n o t u s e f u l . ” T hese a v e ra g e s
a r e b a s e d on an o r d i n a l s c a l e and do n o t im p ly a m easu re
o f d i s t a n c e . They w i l l a l lo w an o r d i n a l r a n k in g o f t h e
u s e f u l n e s s . The h i g h e s t r a t i n g p o s s i b l e w ould b e 1 . 0 ; th e
lo w e st, 4 .0 .
See C h a p te r 4 f o r a d i s c u s s i o n o f L i k e r t
s c a lin g .

155

em phasis on p r i c e i n f o r m a t i o n .

P ric e f o r e c a s ts , estim a te s

o f p l a n t i n g i n t e n t i o n s and e s t i m a t e s o f s to c k s w ere a l l
g iv e n n e a r l y as h ig h a r a t i n g a3 th e p r i c e q u o t a t i o n s .

T h is

m ig h t b e e x p l a i n e d b y t h e f a c t t h a t p r o c e s s i n g g ro w ers
p l a c e more em phasis on t h e a c t i o n s o f o t h e r p r o d u c e r s , e . g . ,
p l a n t i n g i n t e n t i o n s , b e c a u s e a m a jo r d e c i s i o n w i t h t h e s e
g ro w ers i s t h e d e c i s i o n on w h e th e r to a c c e p t t h e c o n t r a c t
p r i c e o f f e r , and th e p r o p o r t i o n o f t h e i r cro p t h a t th e y
s h o u ld s e l l on a c o n t r a c t .
Seed g ro w ers a l s o r a t e d p r i c e q u o t a t i o n s a s th e m ost
u s e f u l ty p e o f i n f o r m a t i o n f o llo w e d by p r i c e f o r e c a s t s .
Demand e s t i m a t e s and e s t i m a t e s o f a c r e s p l a n t e d , h a r v e s t e d
and y i e l d s f o llo w e d w i t h a p p r o x im a te ly th e same r a t i n g .
I n a d d i t i o n to r e l a t i v e d i f f e r e n c e s i n r a n k o r d e r i n g
among th e g r o u p s , t h e r e a r e a l s o d i f f e r e n c e s i n t h e i n t e n s ­
i t y o f t h e e v a l u a t i o n s o f v a r i o u s in f o r m a t i o n t y p e s .

The

a v e r a g e r a t i n g by p r o c e s s i n g g ro w ers g iv e n to p r i c e q uo­
t a t i o n s was lo w er th a n t h a t g iv e n by s e e d and t a b l e s t o c k
g ro w ers (T a b le 6 - 9 ) .
The lo w e r r a t i n g by p r o c e s s i n g grow ers m ost l i k e l y
r e f l e c t s th e i n f l u e n c e o f p r e - s e a s o n c o n t r a c t i n g .

The

te rm " p r i c e q u o t a t i o n s " im p l ie s p r i c e q u o te s f o r s h o r t - r u n
t a c t i c a l d e c i s i o n m aking, e . g . , d a i l y o r w eek ly q u o t e s .
Thus, s i n c e n e a r l y t h r e e - q u a r t e r s o f th e r e s p o n d in g p r o c e s ­
s i n g g row ers engage i n p r e - s e a s o n c o n t r a c t i n g , i t i s n o t
s u r p r i s i n g t h a t th e y f i n d t h e s e p r i c e q u o te s l e s s u s e f u l
th a n th e t a b l e s t o c k g row ers who a r e more i n t e r e s t e d i n

156

s t a y i n g a b r e a s t o f th e m a rk e t f o r t h e d e c i s i o n to s e l l po ­
t a t o e s from day t o day o r week to week.
Thus th e above f i n d i n g s s u g g e s t t h a t p r o c e s s i n g grow­
e r s p l a c e more v a l u e on in f o r m a t i o n t h a t i s o r i e n t e d to w ard
th e f u t u r e and g iv e s th e p r o d u c e r s more i n s i g h t i n t o th e
b e h a v i o r and a c t i o n s o f o t h e r p r o d u c e r s .

T a b le s to c k g ro w e rs ,

on t h e o t h e r h a n d , s t r e s s u s e o f i n f o r m a t i o n f o r s h o r t - r u n
d e c i s i o n m aking.
I t i s a l s o w o rth n o t i n g t h a t s e e d g ro w ers i n g e n e r a l
gave a h i g h e r r a t i n g to i n f o r m a t i o n ty p e s th a n t h e o t h e r
two p r o d u c e r g r o u p s .

Seed g ro w ers te n d e d t o ch e ck t h e v e r y

u s e f u l o r m o d e r a te ly u s e f u l c a t e g o r i e s i n g r e a t e r p r o p o r t i o n
th e n p r o c e s s and t a b l e s t o c k g ro w e rs .

P o s s i b l y t h i s group

o f g ro w ers i s more a c t i v e i n s e a r c h i n g o u t i n f o r m a t i o n and
makes more o f an a t t e m p t to k ee p a b r e a s t o f th e m a rk e t.
T h u s, i n g e n e r a l t h e s e p r o d u c e r s gave a h i g h e r e v a l u a t i o n
o f th e i n f o r m a t i o n a v a i l a b l e , i . e . ,

th e y f i n d th e in f o r m a ­

t i o n ty p e s l i s t e d to be more u s e f u l th a n t h e o t h e r gro w ers
do.
B ecause s e e d g ro w ers co m p rise su c h a s m a ll p r o p o r t i o n
o f th e p r o d u c e r s and b e c a u s e th e y g e n e r a l l y gave t h e same
r a n k o r d e r i n g o f u s e f u l n e s s o f i n f o r m a t i o n ty p e s as d id
t a b l e s t o c k gro w ers ( d e s p i t e t h e somewhat h i g h e r i n t e n s i t y ) ,
th e f o llo w in g d e c i s i o n f o c u s e s , ,

f o r th e m ost p a r t on d i f ­

f e r e n c e s b etw een t a b l e s t o c k and p r o c e s s i n g g ro w e rs .
Some o t h e r o b s e r v a t i o n s b etw een t h e two m a jo r m a rk e ts
are w arra n te d .

F i r s t , a l th o u g h f u t u r e s p r i c e s ra n k e d q u i t e

157

low by a l l g r o u p s ,

( t e n t h by t a b l e s t o c k g r o w e rs , e i g h t h by

p r o c e s s g ro w ers and s e v e n th by s e e d g ro w e rs) t h e r e seems to
be a d i f f e r e n c e i n th e a v e ra g e i n t e n s i t y o f th e u s e f u l n e s s .
Seed g ro w ers and p r o c e s s i n g g ro w ers gav e f u t u r e s p r i c e s a
s i g n i f i c a n t l y h i g h e r r a t i n g th a n th e t a b l e s t o c k g r o w e rs .
A number o f e x p l a n a t i o n s a r e p o s s i b l e f o r t h e d i f f e r e n c e ,
su c h as p r o c e s s i n g and s e e d g ro w ers b e i n g more h e a v i l y e n ­
gaged i n h e d g in g a c t i v i t i e s , o r b e i n g more h i g h l y e d u c a te d
and th u s u s e th e f u t u r e s m a rk e ts m ore, e t c .

However, i t

a p p e a r s t h a t p r o d u c e r s u s e t h i s m a rk e t to some e x t e n t f o r
p r ic e d isc o v e ry .

In f a c t ,

inasm uch as e a r l i e r s t u d i e s

t h i s may b e p r e c i s e l y t h e c a s e
(H e ifn e r, e t a l . ,

1977; P e l s u e ,

1975) fou nd e v id e n c e t h a t f u t u r e s m a rk e ts a r e u s e d as a r e f ­
e r e n c e i n n e g o t i a t i n g f o r a fo rw a rd c o n t r a c t .

A ls o , s e e d

g ro w ers may h av e l i t t l e e l s e to lo o k f o r an i n d i c a t i o n o f
th e f u t u r e .

Thus, i t a p p e a r s t h a t th e f u t u r e s m a rk e t i s

u se d a s a form o f p r i c e d i s c o v e r y by t h e s e p r o d u c e r s .
Two o t h e r d i f f e r e n c e s w a r r a n t m e n tio n .

F i r s t , pro­

c e s s i n g p o t a t o g row ers and s e e d g row ers g av e a h i g h e r
a v e r a g e r a t i n g to r e p o r t s o f p o t a t o p r i c e s f o r p a s t y e a r s
th a n t a b l e s t o c k g r o w e rs , and p r o c e s s p o t a t o g ro w ers g a v e a
s i g n i f i c a n t l y h i g h e r r a t i n g to e s t i m a t e s o f p r o d u c t i o n
c o s t s th a n t h e o t h e r two g ro u p s o f p r o d u c e r s .
The h i g h e r r a t i n g f o r r e p o r t s o f p r i c e s f o r p r e v io u s
y e a r s may i n d i c a t e th e u s e f u l n e s s o f h i s t o r i c a l d a t a i n th e
n e g o t i a t i o n s f o r th e term s o f t r a d e ,

I n o t h e r w o rd s, th e

b a r g a i n i n g p r o c e s s may in v o l v e t h e u t i l i z a t i o n o f any d a t a

153

a v a i l a b l e i n a r g u in g ones p o s i t i o n .

The t a b l e s t o c k g ro w ers

on th e o t h e r h and seem to view t h e i r p o s i t i o n p r i n c i p a l l y
i n te rm s o f t h e d a i l y o r w ee k ly f l u c t u a t i o n s i n t h e m a rk e t
and th u s may s e e l e s s v a l u e i n h i s t o r i c a l d a t a .
The h i g h e r r a t i n g f o r p r o d u c t i o n c o s t e s t i m a t e s by
p r o c e s s i n g g ro w e rs i l l u s t r a t e s t h e c o n c e rn t h e s e grow ers
h ave f o r th e s u b s t a n t i a l i n v e s tm e n t in v o lv e d i n t h e i r l a r g e r
o p e ra tio n s.

I n a d d i t i o n , p r o c e s s o r s m ig h t im pose more

r i g i d and c o s t l y p r o d u c t i o n p r a c t i c e s to e n s u r e th e p r o ­
c e s s i n g q u a l i t y f o r t h e p o t a t o e s th e y b u y .

As a co n seq u en ce

th e c o s t o f p r o d u c t i o n i s one o f th e b a r g a i n i n g g o a ls
s o u g h t by p r o d u c e r b a r g a i n i n g a s s o c i a t i o n s .
T hus, i n summary, a l l t h r e e g ro u p s o f p r o d u c e r s
s t r e s s e d p r i c e i n f o r m a t i o n as t h e m o st u s e f u l ty p e o f i n ­
f o r m a tio n i n d e c i s i o n m aking.

P ric e q u o ta tio n s re c e iv e d

th e h i g h e s t r a t i n g f o llo w e d by p r i c e f o r e c a s t s .
p r ic e in fo rm a tio n ,

F o llo w in g

th e p r o d u c e r s s t r e s s e d i n f o r m a t i o n r e ­

l a t i n g to s u p p ly and demand c o n d i t i o n s .
T a b l e s t o c k and s e e d g row ers g av e a s l i g h t l y h i g h e r
r a t i n g t o p r i c e q u o t a t i o n s th a n d i d p r o c e s s i n g p o t a t o grow­
ers.

T h is w ould b e e x p e c te d inasm uch as p r o c e s s g row ers

seem t o r e l y l e s s on s h o r t r u n p r i c e d a t a f o r m a r k e tin g
d e c isio n s.
P r o c e s s i n g g ro w ers s t r e s s e d p r i c e i n f o r m a t i o n and
s u p p ly and demand i n f o r m a t i o n a b o u t e q u a l l y .

P o s s i b l y th e

b a r g a i n i n g p r o c e s s i m p l i e s t h e im p o r ta n c e o f numerous ty p e s
o f i n f o r m a t i o n i n a d d i t i o n to p r i c e i n f o r m a t i o n .

A lso ,

159

p r o c e s s i n g g ro w ers g av e a h ig h e r r a t i n g to c o s t o f p r o d u c ­
t i o n e s t i m a t e s th a n d id t h e o t h e r two g ro u p s , and B o th
p r o c e s s i n g and seed g ro w e rs gave a h ig h e r r a t i n g to r e ­
p o r t s o f p r e v io u s y e a r s p r i c e s th a n d id t a b l e s t o c k g ro w e rs .
6 .3 .3

S o u rc es o f P r i c e D ata by M arket
Q u e s tio n 17, a sk ed t h e p r o d u c e r s to r a t e th e u s e ­

f u l n e s s o f d i f f e r e n t s o u r c e s o f p r i c e in f o r m a t i o n by t h e
p r o d u c e r s i n t h e t h r e e m a rk e ts .
T h ere a r e s u b s t a n t i a l d i f f e r e n c e s i n t h e s o u r c e s
o f p r i c e d a t a t h a t p r o d u c e r s i n t h e d i f f e r e n t m a rk e ts
fin d u se fu l.
i.e .,

The p o t a t o d e a l e r , b r o k e r and s h i p p e r ,

a g e n t / b r o k e r , c a te g o r y was r a t e d t h e m ost u s e f u l

by a l l t h r e e g r o u p s , w i t h seed g row ers g iv in g t h i s s o u r c e
th e h ig h e s t r a t i n g .

T a b l e s t o c k g ro w ers and p r o c e s s i n g

g ro w ers gav e t h i s group a p p r o x im a te ly th e same r a t i n g .
The p r o c e s s i n g p o t a t o g row ers e s s e n t i a l l y gave th e
same r a n k in g t o t h r e e s o u r c e s :

(1) a g e n t / b r o k e r ,

(2)

c o o p e r a t i v e s and fa rm e r o r g a n i z a t i o n s and (3) p r o c e s s o r s
and t h e i r a g e n t s .
P r o c e s s i n g grow ers th e n r a t e d i n d u s t r y n e w s l e t t e r s ,
n e ig h b o r s and t h e s t a t e and f e d e r a l governm ent p u b l i c a t i o n s
in th a t o rd er.

T a b le s to c k grow ers on th e o t h e r h an d , gave

n e w sp a p e rs, s t a t e and f e d e r a l governm ent p u b l i c a t i o n s ,
n e i g h b o r s , and i n d u s t r y n e w s l e t t e r s th e same a v e ra g e r a t i n g

160
TABLE 6-10
AVERAGE RANKING OF SOURCES OF PRICE DATA AND
INFORMATION BY ALL PRODUCERS AND BY PRIMARY
MARKET. 1
(M ail S u rv e y R e sp o n d e n ts)
S o u rc e s o f
A ll
P r i c e D ata
P ro d u c e r s
Newspaper
2 .5 4 7
M agazines
3 .1 1 5
In d u s try N e w sle tte r
2 .4 0 0
R adio and T.V.
2.6 8 0
S t a t e and F e d e r a l
Government P u b l i ­
c a tio n s
2 .5 0 9
U n iv e rsity
P u b lic a tio n s
2.8 5 8
N eig h b o rs
2 .5 3 8
C o o p e r a tiv e s and
2 .6 4 8
Farm er O r g a n iz a tio n s
R e ta i l S to re s
2 .7 1 3
P o ta to d e a le r , b r o ­
k e r, sh ip p e r, e tc .
1 .9 7 2
2 .8 4 8
P r o c e s s i n g A gent
fiankers and L end in g
3 .4 7 2
In stitu tio n s

T I F I e - .... P r o c e s ­
sin g
s to c k
2 .8 6 4
2.4 66
3 .2 2 7
3.1 1 3
2 .3 0 4
2.5 2 2
2 .8 7 0
2 .6 2 3

Seed
2.45 5
2.6 36
1 .8 0 0
2 .636

2.479

2 .6 6 7

2 .3 6 4

2.917
2 .5 4 8

2.7 39
2.5 4 5

2 .727
2.455

2.8 2 6
2.56 2

2 .1 2 0
3.2 0 8

2.7 2 7
2.6 3 6

1.986
3 .1 1 4

2 .1 2 0
2 .1 2 5

1.5 4 5
2.7 2 7

3.479

3.41 7

3.5 4 5

The a v e r a g e number i s b a s e d on a s s ig n m e n t o f number
1 t o " v e r y u s e f u l , " 2 to " m o d e ra te ly u s e f u l , " 3 to " r a r e l y
u s e f u l , " and 4 to " n o t u s e f u l . " These a v e ra g e s a r e b a s e d
on an o r d i n a l s c l a e and do n o t im ply a m easure o f d i s t a n c e .
They w i l l a l lo w an o r d i n a l r a n k in g o f th e u s e f u l n e s s .
The
h i g h e s t r a t i n g p o s s i b l e w ould b e 1 .0 ; th e l o w e s t , 4 . 0 . See
C h a p te r 4 f o r a d i s c u s s i o n o f L i k e r t s c a l i n g .

161

f o l l o w i n g th e a g e n t / b r o k e r g ro u p .

Seed g ro w e rs f o llo w e d

th e a g e n t / b r o k e r g ro u p w i t h i n d u s t r y n e w s l e t t e r s .

S ta te

and f e d e r a l governm ent p u b l i c a t i o n s , n e i g h b o r s , and new s­
p a p e r s , f o llo w e d i n t h a t o r d e r .
T hus, as a s o u r c e o f p r i c e d a t a , t h e u l t i m a t e b u y e r
o f th e p o t a t o e s , i . e . ,

t h e p r o c e s s o r i s c o n s i d e r e d as u s e ­

f u l a s o u r c e as th e grow er h a s a v a i l a b l e t o him .

R e la tiv e

to th e p r o c e s s i n g g r o w e rs , t h e t a b l e s t o c k p r o d u c e r s r a t e d
th e f i n a l b u y e r s o f t h e i r p o t a t o e s , i . e . ,

th e r e t a i l s t o r e s ,

s u b s t a n t i a l l y lo w er th a n t h e p r o c e s s g ro w ers r a t e d th e p r o ­
cessors .
The r e s u l t s from t h i s s e c t i o n conform w i t h r e s u l t s
o f o t h e r s t u d i e s i n f i n d i n g t h a t th e a g e n t / b r o k e r gro u p o f
a c t o r s i s a v e r y im p o r t a n t s o u r c e o f p r i c e d a t a and i n f o r ­
m a tio n .

A l l t h r e e g ro u p s o f p r o d u c e r s gave th e a g e n t / b r o k e r

group t h e h i g h e s t r a t i n g .
An im p o r t a n t d i f f e r e n c e b etw e en t h e p r o d u c e r e v a l u a ­
t i o n o f th e s o u r c e s o f p r i c e d a t a i s t h a t governm ent pub­
l i c a t i o n s a r e r a t e d as more u s e f u l t o t a b l e s t o c k and se e d
g ro w ers th a n p r o c e s s g r o w e r s .

T h is i s s u p p o r te d by th e

o b s e r v a t i o n t h a t t a b l e s t o c k and s e e d g row ers r a n k e d t h i s
s o u r c e as th e se co n d m o st u s e f u l w h i l e th e p r o c e s s i n g grow­
e r s r a n k e d t h i s s o u r c e as t h e 6 th m ost u s e f u l .

In a d d itio n ,

th e p r o c e s s p o t a t o g ro w ers gave governm ent p u b l i c a t i o n s a
lo w er r a t i n g th a n t h e g ro w e rs i n th e o t h e r two g r o u p s .
T h is r e s u l t conform s to t h e r e s p o n s e s to th e q u e s t i o n s p e c ­
i f i c a l l y a s k in g p r o d u c e r s i f th e y fo u n d USDA p r i c e s to b e

162

h e l p f u l to them.

(see a b o v e )•

Even th o ug h USDA p r i c e s w ere r a t e d q u i t e h i g h l y

by

th e t a b l e s t o c k and s e e d g r o w e rs , i t s h o u ld b e n o t e d t h a t
th e USDA p r i c e s r a t e d lo w e r th a n th e a g e n t / b r o k e r g ro u p .
T h is m ig h t f u r t h e r s u p p o r t t h e c o n c l u s i o n s o f o t h e r s t u d i e s
t h a t fou n d USDA p r i c e s w ere u se d by p r o d u c e r s more f o r a
check on t h e b e h a v i o r o f t h e i r a g e n t s , i . e . ,

a check to

e n s u r e th e y r e c e i v e d a f a i r p r i c e i n th e p r e v io u s t r a d e .
6 .3 .4

U s e f u ln e s s o f P r i c e D a ta i n D e c is io n Making by M ark et
T a b le 6 -1 1 p r e s e n t s th e r e s u l t s o f t h e q u e s t i o n t h a t

asked p roducers to r a t e th e u s e fu ln e s s o f p r ic e d a ta f o r
s p e c ific d e c isio n s.

The p u r p o s e o f t h i s q u e s t i o n was to

i d e n t i f y d i f f e r e n c e s i n t h e d e c i s i o n s t h a t a r e s t r e s s e d by
p roducers in d i f f e r e n t m a rk e ts .
In g e n e ra lth e av erag e r a tin g s a re
o f th e d e c is io n s

q u i t e low as

none

r e c e i v e d a r a t i n g above th e mean o f 2 . 5 .

I n o t h e r w o rd s, p r o d u c e r s c la im t h a t p r i c e d a t a a r e o f
l i t t l e v a l u e i n m aking t h e s e d e c i s i o n s .
T a b le s to c k g ro w ers l i s t e d th e d e c i s i o n on t h e number
o f a c r e s to p l a n t as th e d e c i s i o n f o r w hich p r i c e d a t a i s
th e m ost u s e f u l .

Timing o f s a l e s , s i z e and ty p e o f con ­

t a i n e r , and t h e d e c i s i o n o f to whom t o s e l l th e p o t a t o e s
w ere a l l g iv e n t h e same d e g r e e o f u s e f u l n e s s .

The t a b l e -

s t o c k g ro w ers gave th e lo w e s t r a t i n g f o r th e u s e o f p r i c e
i n d e c i d i n g w h e th e r t o b a r g a i n f o r p r e - s e a s o n c o n t r a c t s and
w h e th e r to j o i n o t h e r p r o d u c e r s i n s e l l i n g and m a r k e tin g

163

TABLE 6-11

AVERAGE RANKING OF PRICE DATA FOR VARIOUS DECISIONS
BY ALL MICHIGAN POTATO PRODUCERS AND BY PRIMARY
MARKET1 (M ail S urvey R e sp o n d en ts)
..... A l l
D e c is io n
P ro d u c e r s
To p l a n t o r n o t to
2 .9 3 6
p la n t p o ta to e s
Number o f a c r e s o f
2 .7 2 2
p o ta to e s to p la n t
V a rie ty o f p o ta to e s
to p l a n t
2 .8 8 1
When to s e l l p o t a ­
to e s ( tim i n g o f
sa le s)
2 .6 8 8
To b a r g a i n f o r p r e ­
season c o n tra c ts
2.945
to j o i n o t h e r p r o ­
d u c e rs i n s e l l i n g
and m a rk e tin g
3.229
th e m a rk e t i n
which to s e l l
2 .9 7 2
p o ta to e s
The g e o g r a p h i c a l
a r e a i n w hich to
s e l l p o ta to e s
3.1 1 9
Ih e s i z e and ty p e
o f c o n t a i n e r to
use
2.935
to whom to s e l l
p o t a t o e s ( S h ip p e r ,
d i r e c t to r e t a i l ,
to p r o c e s s o r , e t c . )
2 .7 9 4

..T a b le sto c k

P ro ces­
sin g

Seed

2 .9 1 8

2 .9 6 2

3 .0 0 0

2 .7 0 4

2 .6 5 4

3.0 0 0

2 .9 7 2

2.885

2.2 7 3

2 .7 9 2

2 .6 5 4

2 .0 9 1

3.3 7 5

2.1 1 5

2 .0 9 1

3 .3 4 7

2.8 8 5

3 .2 7 3

3.0 5 6

2.88 5

2.636

3 .1 6 7

3 ,1 5 4

2 .7 2 7

2 .786

3.34 6

2 .9 0 1

2 .7 6 1

2.9 6 0

2 .6 3 6

The a v e ra g e number i s b a s e d on a s s ig n m e n t o f number
1 to " v e ry u s e f u l / 1 2 t o " m o d e r a te ly u s e f u l , " 3 to " r a r e l y
u s e f u l , " and 4 t o " n o t u s e f u l . " These a v e r a g e s a r e b a s e d
on an o r d i n a l s c a l e and do n o t im ply a m easu re o f d i s t a n c e .
They w i l l a llo w an o r d i n a l r a n k i n g o f t h e u s e f u l n e s s . The
h i g h e s t r a t i n g p o s s i b l e would b e 1 .0 ; t h e l o w e s t , 4 . 0 . See
C h a p te r 4 f o r a d i s c u s s i o n o f L i k e r t s c a l i n g .

164

p o ta to e s.
P r o c e s s i n g gro w ers gave t h e h i g h e s t r a t i n g f o r th e
u s e o f p r i c e d a t a i n th e d e c i s i o n o f w h e th e r o r n o t to b a r ­
g ain f o r p re -se a s o n c o n tr a c ts .

The d e c i s i o n s on t h e number

o f a c r e s to p l a n t and when to s e l l p o t a t o e s
s a l e s ) f o llo w e d w i t h th e same r a t i n g .

( tim i n g o f

P r o c e s s p o t a t o grow­

e r s th e n r a t e d t h e d e c i s i o n s on t h e v a r i e t y o f p o t a t o e s to
p l a n t , t h e m a rk e t i n w hich to s e l l and w h e th e r o r n o t to
j o i n o t h e r p r o d u c e r s i n s e l l i n g and m a r k e tin g a s d e c i s i o n s
f o r w hich p r i c e d a t a a r e u s e f u l .

The g e o g r a p h i c a l a r e a

w i t h i n w hich t o s e l l p o t a t o e s and th e s i z e and ty p e o f co n ­
t a i n e r s w ere r a t e d t h e lo w e s t by p r o c e s s p o t a t o g ro w e rs .
Seed g ro w ers gave th e h i g h e s t r a t i n g to th e tim in g o f
s a l e s and th e d e c i s i o n to b a r g a i n f o r p r e - s e a s o n c o n t r a c t s .
The v a r i e t y o f p o t a t o e s was g iv e n th e n e x t h i g h e s t r a t i n g
by s e e d g ro w e rs .

The lo w e s t r a t i n g s by s e e d g row ers w ere

g iv e n to t h e s i z e and ty p e o f c o n t a i n e r s to u s e , t h e number
o f a c r e s to p l a n t and w h e th e r t o j o i n o t h e r p r o d u c e r s on
s e l l i n g and m a r k e tin g .
T here a r e s u b s t a n t i a l d i f f e r e n c e s among th e t h r e e
m a rk e ts i n th e d e c i s i o n s f o r w hich p r o d u c e r s u s e p r i c e d a t a .
The p r o c e s s i n g and s e e d g ro w ers s t r e s s e d th e d e c i s i o n on
w h e th e r o r n o t to b a r g a i n f o r p r e - s e a s o n c o n t r a c t s , w h ile
t a b l e s t o c k g ro w ers r a t e t h i s d e c i s i o n v e r y low.

F u rth e r,

th e p r o c e s s i n g g row ers f i n d p r i c e d a t a more u s e f u l f o r th e
d e c i s i o n o f j o i n i n g o t h e r g ro w ers i n m a r k e tin g p o t a t o e s .
Thus, i t a p p e a r s t h a t p r o c e s s g ro w ers a r e more o r i e n t e d to

165

grou p a c t i o n i n m a r k e tin g th a n t h e t a b l e s t o c k g ro w e rs ,
The tim in g o f s a l e s was r a t e d q u i t e h i g h l y by a l l
t h r e e g r o u p s , b u t i t i s p r o b a b l e t h a t t h e r e l e v a n t tim e
fram e i s d i f f e r e n t among t h e g r o u p s .

To p r o c e s s i n g g ro w e rs ,

th e tim in g o f s a l e s m o st l i k e l y means th e c h o ic e o f s i g n i n g
a p r e - p l a n t i n g c o n t r a c t v e r s u s n o t s i g n i n g th e c o n t r a c t
and s e l l i n g t h e p o t a t o e s a t t h e m a rk e t p r i c e a t h a r v e s t
tim e .

T a b le s to c k g ro w e rs m o st l i k e l y s t r e s s t h e tim in g o f

th e s a l e s d u r in g t h e m a r k e tin g s e a s o n , i . e . , w ee k ly o r mon­
t h l y m a r k e tin g d e c i s i o n s a f t e r t h e p o t a t o e s h a v e b e e n h a r ­
v e s te d .
I t s h o u ld a l s o b e n o t e d t h a t p r o c e s s i n g g ro w e rs gave
a lo w e r r a t i n g to th e d e c i s i o n o f to whom to s e l l t h e
p o ta to e s.

T h is m ig h t b e e x p e c te d inasm uch as th e p r o c e s s i n g

grow ers sim p ly h av e fe w e r o p t i o n s , i . e . , o u t l e t s , and a l s o ,
many o f t h e s e g ro w e rs d e a l d i r e c t l y w i t h o n ly one o u t l e t .
A l l g ro w ers r a t e d th e d e c i s i o n on th e number o f a c r e s
to p l a n t q u i t e h i g h l y .

I t a p p e a r s t h a t g ro w ers v ie w t h i s

as an i m p o r t a n t d e c i s i o n f o r w hich th e y u s e p r i c e d a t a .
6 .3 .5

Im fo rm a tio n and t h e P r i c i n g D e c is io n By M arket
T ab le 6-1 2 p r e s e n t s t h e r e s u l t s o f p r o d u c e r e v a l u a ­

t i o n s o f th e im p o rta n c e o f v a r i o u s ty p e s o f in f o r m a t i o n to
them when th e y a r e d e c i d i n g on a s e l l i n g p r i c e f o r t h e i r
p o ta to e s.

T here a r e s u b s t a n t i a l d i f f e r e n c e s among th e

g ro u p s and th e ty p e s o f i n f o r m a t i o n t h a t i s i m p o r t a n t .
A ls o , as was o b s e r v e d i n t h e p r e s e n t a t i o n o f t h e f re q u e n c y

166

TABLE 6-12

AVERAGE RANKING FOR IMPORTANCE OF VARIOUS TYPES
OF INFORMATION IN DECIDING ON A SELLING PRICE
BY ALL MICHIGAN POTATO PRODUCERS AND BY PRI­
MARY MARKET1 (M ail S urvey R e sp o n d e n ts)

xnr

Type o f
In fo rm a tio n
P ro d u c e rs
I n f o r m a t i o n on no np r i c e term s o f s a l e
(Volume you can d e­
l i v e r , tim e o f d e ­
liv e r y , p la c e o f
d e liv e ry , q u a lity
fa c to rs, e tc .)
2 .5 1 4
The p r e v io u s
y e a r 's p r ic e
2 .8 6 1
The p r i c e o t h e r
g ro w ers h a v e b een
o ffered
1.9 1 7
S upply e s t i m t e s
2 .1 1 0
Demand e s t i m a t e s
2.056
Your c o s t o f
p ro d u c tio n
2 .2 5 9
Your l e v e l o f
p ro d u c tio n
2.31 5

"

T a b le sto c k

P ro ces­
sin g

Seed

2.6 43

2 .2 0 0

2.4 0 0

3.097

2 .3 6 0

2 .4 5 5

1 .9 7 3
2 .1 2 3
2.0 9 7

1.9 1 7
2 .2 4 0
2 .2 0 8

1.5 45
1 .7 2 7
1.45 5

2 .333

1.9 6 0

2 .4 5 5

2.417

1 .9 6 0

2 .4 5 5

The a v e ra g e number i s b a s e d on a s s ig n m e n t o f num­
b e r 1 t o " v e ry u s e f u l , " 2 to " m o d e r a te ly u s e f u l , " 3 to
" r a r e l y u s e f u l , " and 4 to " n o t u s e f u l . " T hese a v e r a g e s
a r e b a s e d on an o r d i n a l s c a l e and do n o t im ply a m e asu re
of d ista n c e .
They a llo w an o r d i n a l r a n k i n g o f t h e u s e ­
fu ln e ss.
The h i g h e s t r a t i n g p o s s i b l e w ould b e 1 . 0 ; t h e
lo w est, 4 . 0 .
See C h a p te r 4 f o r a d i s c u s s i o n o f L i k e r t
sc a lin g .

167

and p r o p o r t i o n s o f a l l p r o d u c e r s e a r l i e r ,

th e p ro d u cers

g e n e r a l l y gave h i g h e r r a t i n g s i n t h i s q u e s t i o n th a n i n th e
p r e v io u s q u e s t i o n s .
The p r i c e o t h e r g ro w e rs h av e b ee n o f f e r e d was r a t e d
v e r y h i g h l y b y a l l t h r e e g ro u p s o f p r o d u c e r s .

I t appears

t h a t p r o d u c e r s f e e l t h a t t h e know ledge o f o t h e r p r o d u c e r 's
p r i c e o f f e r s i s v e r y i m p o r t a n t and i n e f f e c t s e t s th e l i m i t
f o r w hat th e y w i l l r e c e i v e th e m s e lv e s .
P r o c e s s i n g and s e e d p o t a t o grow ers gave a s i g n i f i ­
c a n t l y h i g h e r r a t i n g to n o n - p r i c e i n f o r m a t i o n , i . e . ,

term s

o f s a l e and t h e p r e v i o u s y e a r s p r i c e th a n th e t a b l e s t o c k
pro d u cers.

A lso , p r o c e s s i n g gro w ers r a t e d t h e c o s t o f

p r o d u c t i o n h i g h e r th a n th e t a b l e s t o c k g ro w e rs .

T hese r e ­

s u l t s m ig h t b e e x p e c te d g iv e n t h e e x i s t e n c e o f b a r g a i n i n g
f o r p r e - s e a s o n c o n t r a c t s on t h e p a r t o f p r o c e s s i n g p o t a t o
g ro w e rs .

These f a c t o r s a r e g e n e r a l l y s t r e s s e d i n t h e b a r ­

g a in in g p r o c e s s .
P r o c e s s i n g g ro w ers gave a lo w er r a t i n g to i n f o r m a t i o n
on demand th a n th e g row ers i n th e o t h e r two m a r k e ts .

I t is

p o s s i b l e t h a t p r o c e s s i n g g ro w e rs seem f u r t h e r removed from t h e
f i n a l consum er b e c a u s e t h e p o t a t o e s a r e s i g n i f i c a n t l y a l ­
t e r e d by p r o c e s s i n g and, t h e r e f o r e , th e y do n o t f e e l demand
e s t i m a t e s a r e as i m p o r t a n t .
g ro w ers a r e

On th e o t h e r h a n d , t a b l e s t o c k

more aware o f consum er demand b e c a u s e o f th e

im m ed iate im p a c t i t h a s on s p o t m a rk e t p r i c e s .
A n o th e r m a jo r d i f f e r e n c e b etw e en th e m a rk e t gro u p s
i s t h e i r e v a l u a t i o n o f t h e im p o rta n c e o f t h e i r own l e v e l o f

168

p ro d u c tio n .

P r o c e s s i n g g ro w e rs r a t e d t h i s i n f o r m a t i o n s i g ­

n i f i c a n t l y more i m p o r ta n t th a n t h e o t h e r two g r o u p s .
I t i s n o t c l e a r e x a c t l y why p r o c e s s i n g g ro w e rs r a t e d
t h e i r own l e v e l o f p r o d u c t i o n h i g h e r th a n th e o t h e r g r o w e rs .
T hese g ro w e rs sim p ly may h e more aw are o f t h e i n t e r d e p e n ­
d en ce o f p o t a t o p r o d u c e r s and more l i k e l y t o g e n e r a l i z e from
t h e i r own a c t i o n s , i . e . ,
o f o t h e r g ro w e rs .

th e a c re s th e y p l a n t , to th e a c tio n s

I n o t h e r w o rd s, t h e s e p r o d u c e r s may i n f e r

t h a t t h e i r own l e v e l o f p r o d u c t i o n w i l l c o r r e s p o n d w i t h
o t h e r g ro w e rs .

T hus, more a c r e s on h i s own farm i m p l ie s

more a c r e s by o t h e r g ro w e rs and a l a r g e c ro p .
6 .4

Summary
The r e s u l t s o f t h e c r o s s t a b u l a t i o n s among in f o r m a ­

t i o n ty p e s and p r i c e d a t a i n d i c a t e t h a t M ic h ig an p o t a t o p r o ­
d u c e rs f i n d two t y p e s o f i n f o r m a t i o n u s e f u l :
t i o n s and p r i c e f o r e c a s t s .

p r i c e q u o ta ­

T hese p r o d u c e r s , how ever, gave

r e l a t i v e l y low r a t i n g s t o t h e u s e f u l n e s s o f p r i c e d a t a f o r
s p e c if ic d e c isio n s.
T h e re a r e a l s o i m p o r ta n t d i f f e r e n c e s b etw e en t h e d a t a
and in f o r m a t i o n s t r e s s e d by t h e p r im a r y m a rk e t i n w h ic h th e
p roducers s e l l t h e i r p o ta to e s .

T hese d i f f e r e n c e s a p p e a r to

be p r i n c i p a l l y r e l a t e d to th e p r e - s e a s o n c o n t r a c t i n g and
group b a r g a i n i n g i n t h e p r o c e s s i n g p o t a t o m a r k e t.

P ro cess­

in g g ro w e rs s t r e s s t h e u s e o f p r i c e d a t a i n t h e d e c i s i o n o f
w h e th e r to b a r g a i n f o r a p r e - s e a s o n c o n t r a c t .

And th e y f i n d

USDA p r i c e s l e s s u s e f u l th a n th e t a b l e s t o c k and s e e d g ro w e rs .

CHAPTER 7
SOURCES AND USES OF PRICE DATA AND
INFORMATION BY NON-PRODUCERS

The r e s e a r c h d e s ig n in c l u d e d i n t e r v i e w i n g a c r o s s
s e c t i o n o f p r i n c i p a l d e c i s i o n m akers o t h e r th a n p o t a t o
p roducers-

The p u r p o s e o f t h e s e i n t e r v i e w s i n g e n e r a l was

to g a i n a p e r s p e c t i v e o f t h e M ich ig an p o t a t o m a rk e t beyond
t h a t o f th e p r o d u c e r and i n p a r t i c u l a r to i d e n t i f y p r i c e
d a t a and i n f o r m a t i o n n eed s and u s e s o f th e n o n - p r o d u c e r m ar­
k et p a rtic ip a n ts,

i n c l u d i n g p r o c e s s i n g p o t a t o b u y e r s an

a g e n t / b r o k e r , c o o p e r a t i v e m anager and a r e p r e s e n t a t i v e o f
MACMA.

T h is C h a p te r w i l l sum m arize t h e r e s u l t s o f t h e s e

in te rv ie w s.
7•1

P roducer O rg a n iz a tio n In te rv ie w s
The c o o p e r a t i v e r e p r e s e n t e d i n t h i s d i s c u s s i o n i s

p r i n c i p a l l y a p r i c e d i s c o v e r y c o o p e r a t i v e and i t does l i t t l e
h a n d l i n g o f th e p r o d u c t .

In o t h e r w o rd s, t h i s c o o p e r a t i v e

p r i n c i p a l l y i s in v o lv e d i n th e n e g o t i a t i o n o f c o n t r a c t s
w i t h c h i p p in g p r o c e s s o r s and k e e p in g a b r e a s t o f m a rk e t c o n ­
d itio n s .

T h ere a r e a p p r o x im a te ly 20 p r o d u c e r members to

th i s c o o p e ra tiv e .

A ls o , i t was p o i n t e d o u t t h a t th e M ic h i­

gan c h ip p in g p o t a t o m a rk e t i s c h a r a c t e r i z e d by a dom inan t
f i r m , and i t i s t h i s f i r m t h a t th e c o o p e r a t i v e n e g o t i a t e s
169

170

w i t h f o r th e p rim a ry c o n t r a c t .
When q u e r i e d a b o u t p r i c e i n f o r m a t i o n , th e c o o p e r a t i v e
m anager s t r e s s e d t h e im p o rta n c e o f in fo rm e d c o n t a c t s w i t h
d i f f e r e n t r e g i o n s o f t h e c o u n t r y to g e t a " f e e l f o r th e
m a r k e t , " and to k ee p a b r e a s t o f w e a th e r c o n d i t i o n s , e t c .
i n o t h e r r e g i o n s o f th e c o u n t r y .
I n c o n t r a c t n e g o t i a t i o n , t h e m anager s t r e s s e d i n f o r ­
m a tio n r e g a r d i n g a c t i v i t i e s i n o t h e r a r e a s and r e f e r e n c e to
open m a rk e t p r i c e s .

I n .a d d i t i o n , he g e n e ra lly s t r e s s e d th e

c o s t o f p r o d u c t i o n and th e i n f l a t i o n a r y n a t u r e o f farm i n ­
p u t p r i c e s when n e g o t i a t i n g a c o n t r a c t p r i c e .
The b a s i c c o n t r a c t n e g o t i a t i e d i n t h e c h ip m a rk e t
s p e c i f i e s a p r i c e f o r th e F a l l months and th e n i n c r e m e n t a l
i n c r e a s e s ea ch month th r o u g h March to r e f l e c t s t o r a g e c o s t s
and to in d u c e a more o r d e r l y flo w o f p o t a t o e s o v e r tim e .
The c o n t r a c t i s s p e c i f i e d i n h u n d r e d w e ig h t, n o t i n a c r e s as
th e f r o z e n p o t a t o c o n t r a c t i s s p e c i f i e d .

T h ere a r e no

q u a l ity sta n d a rd s w r i tte n e x p l i c i t l y in to th e c o n tr a c t,
b u t t h e c o n t r a c t s p e c i f i e s t h a t t h e p r o c e s s o r r e s e r v e s th e
r i g h t to r e j e c t th e p o t a t o e s a t t h e p r o c e s s i n g p l a n t i f
th e y do n o t m e et c h i p p in g s t a n d a r d s .
MACMA i s t h e Farm B ureau s p o n s o r e d a s s o c i a t i o n t h a t
n e g o t i a t e s c o n t r a c t s f o r v a r i o u s com m odities i n th e p r o c e s ­
s in g s e c to r .

The MACMA r e p r e s e n t a t i v e s t a t e d t h a t th e

a s s o c i a t i o n i s o n ly p e r i p h e r a l l y in v o lv e d i n n e g o t i a t i n g
th e p o t a t o c o n t r a c t i n M ic h ig an w i t h t h e f r o z e n p o t a t o p r o ­
c e s s in g firm .

A grow er com m ittee f o r m a l l y n e g o t i a t e s w i t h

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the. p r o c e s s o r f o r c o n t r a c t te rm s and th e b a s e p r i c e .
P r i n c i p l e i s s u e s in v o lv e d i n n e g o t i a t i n g t h e c o n t r a c t
a r e th e b a s e p r i c e , w hich th e r e p r e s e n t a t i v e c la im e d was t h e
i s s u e m o st d i s c u s s e d , r u l e s r e g a r d i n g th e i n s p e c t i o n o f t h e
p o t a t o e s , and th e premiums a p p l i e d to h i g h q u a l i t y p o t a t o e s .
The g ro w ers a l s o s t r e s s th e c o s t o f p r o d u c t i o n i n t h e n e g o ­
tia tio n pro cess.

T h is g o a l i s d i f f e r e n t th a n th e b a r g a i n i n g

g o a l s f o r o t h e r M ic h ig an c ro p s inasm uch as th e o t h e r commod­
i t y g ro u p s te n d to s t r e s s "w hat t h e m a rk e t w i l l b e a r . "

The

r e p r e s e n t a t i v e p o i n t e d o u t i n f a c t t h a t t h e g ro w e rs h a v e
t r i e d to e s t a b l i s h an indejK t h a t w i l l move t h e c o n t r a c t
p r i c e f o r p o t a t o e s i n r e l a t i o n to th e c o s t o f p r o d u c in g th e
crop.

I n o t h e r w o rd s, t h e g ro w ers a r e a r g u in g f o r a " f o r ­

m ula" p r i c e b a s e d on t h e c o s t o f p r o d u c t i o n .
The i n f o r m a t i o n s o u r c e s u s e d i n t h e n e g o t i a t i o n p r o ­
c e s s w ere t h o s e o f t h e N a t i o n a l P o t a t o B a r g a in in g A s s o c i a ­
tio n .

The r e p r e s e n t a t i v e c la im e d t h a t some o f th e " b e s t "

i n f o r m a t i o n f o r b a r g a i n i n g came from t h i s o r g a n i z a t i o n and
some o f i t s member g ro w e rs t h a t own p r o c e s s i n g f a c i l i t i e s .
These g r o w e r / p r o c e s s o r s p r o v i d e i n f o r m a t i o n on p r o c e s s i n g
y i e l d s , p r o c e s s i n g c o s t s , and f r e n c h f r i e d p r i c e s .

The r e p ­

r e s e n t a t i v e a l s o p o i n t e d o u t t h a t a f r e q u e n t , in fo rm e d e x ­
change o f i n f o r m a t i o n w i t h Id aho g ro w ers was im p o r t a n t b e ­
c a u se th e y a r e s p e c i a l i s t s i n p o t a t o e s and p r o v id e v e r y
v a lu a b le in fo rm a tio n .
S p e c if ic in fo rm a tio n used in n e g o tia tin g in c lu d e s
th e co ld s to r a g e r e p o r t,

t h e Maine f u t u r e s m a rk e t, and

172

p r ic e s in o th e r re g io n s o f th e c o u n try .

A ls o , t h e r e p r e ­

s e n t a t i v e p o i n t e d o u t t h a t t h e open m a rk e t p r i c e h as an i n ­
f l u e n c e on th e c o n t r a c t n e g o t i a t i o n s ,
7•2

Buyer I n t e r v i e w s
An i n t e r v i e w was c o n d u c te d w i t h an a g e n t / b r o k e r .

d e a le r p h y s ic a lly h an d led , i . e . ,

T h is

t r a n s p o r t e d and p a c k e d ,

some o f t h e p o t a t o e s , b u t he p r i n c i p a l l y a r r a n g e d t h e term s
o f th e s a l e f o r m ost o f th e volume h e r e p r e s e n t e d .

In

o t h e r w o rd s , h i s m a jo r f u n c t i o n was " p r i c e d i s c o v e r y " and
b r i n g i n g t o g e t h e r t h e b u y e r and s e l l e r .
The i n f o r m a t i o n ty p e s and t h e s o u r c e s o f in f o r m a t i o n
w ere v e r y s i m i l a r t o o t h e r m a rk e t c o o r d i n a t o r s su c h as th e
c o o p e ra tiv e .

He s t r e s s e d te le p h o n e c o n t a c t s w i t h h i s s o u r ­

ces i n o t h e r r e g i o n s o f t h e U n ite d S t a t e s f o r p r i c e q u o te s
and m a rk e t c o n d i t i o n s .

As t h e o t h e r " i n f o r m a t i o n s p e c i a l ­

i s t s " s t a t e d , h e fo u n d l i t t l e v a l u e i n th e go vern m ent r e ­
p o rtin g of p ric e s .

Of c o u r s e , i t s h o u ld b e n o t e d t h a t

governm ent in v o lv e m e n t i n " c u r r e n t m a rk e t" p r i c e s u r v e l l ia n c e may a p p e a r to t h e i n t e r v i e w e e to b e a c o m p e t i t o r
inasm uch a s d e a l e r s i n e s s e n c e s e l l t h e s e r v i c e o f b e in g
"p lu g g e d " i n t o t h e m a r k e t.
T h is a g e n t d i d sh e d some l i g h t on th e g r o w e r 's a l l e ­
g a t i o n s t h a t t h e p r i c e s r e p o r t e d by th e M a rk e t News B ranch
o f USDA a r e i n a c c u r a t e , nam ely t h a t th e r e p o r t e d p r i c e s
a r e h i g h e r th a n th e p r i c e t h e g ro w er r e c e i v e s .

The M ark et

News B ran ch c o l l e c t s p r i c e d a t a by c o n t a c t i n g m a rk e t

173

p a r t i c i p a n t s i n d i f f e r e n t r e g i o n s o f th e s t a t e ,

The a g e n t

p o i n t e d o u t t h a t d e a l e r s may g i v e i n a c c u r a t e p r i c e q u o te s
to th e r e p o r t e r s .

F o r exam ple, d e a l e r s may r e p o r t h i g h

p r i c e s to th e d a t a c o l l e c t i o n a g e n cy , and th e n r e f e r to
th e se re p o rte d p r ic e s in t h e i r n e g o tia tio n s w ith p o ta to
b u yers.

T hus, i t a p p e a r s t h a t th e p r i c e r e p o r t i n g sy ste m

h a s a d i f f i c u l t t a s k o f overcom ing b i a s e s i n r e p o r t e d
p r ic e s r e l a t e d to th e so u rce c o n ta c te d .
I n t e r v i e w s w ere c o n d u c te d w i t h t h r e e p o t a t o c h ip p r o ­
c e s s o r s and two f r o z e n p o t a t o p r o d u c t p r o c e s s o r s i n M ich­
ig a n .

Two o f t h e c h ip p r o c e s s o r s w ere l o c a t e d i n t h e

D e t r o i t m e t r o p l i t i a n a r e a and one i n th e W e ste rn p a r t o f
th e s t a t e .

I n a d d i t i o n , t h e a f o r e m e n tio n e d d o m in an t c h ip

p r o c e s s i n g f i r m r e f u s e d th e in te rv ie w .^ "

I t a l s o s h o u ld b e

n o t e d t h a t t h e r e i s p r i n c i p a l l y one f r o z e n p o t a t o p r o c e s s o r
i n th e s t a t e t h a t buys M ich ig an p o t a t o e s .

The se c o n d f r o z e n

p r o d u c t p r o c e s s o r i n t e r v i e w e d buys a lm o s t e x c l u s i v e l y from
t h e Red R iv e r V a l l e y p o t a t o e s f o r h i s p a r t i c u l a r p r o c e s s i n g
needs.

T h is p r o c e s s o r was i n t e r v i e w e d h ow ev er, f o r th e i n ­

f o r m a tio n t h a t he c o u ld g iv e on th e p o t a t o i n d u s t r y and t h e
n e e d s o f th e p r o c e s s o r s .
The c h i p p in g p r o c e s s o r s s t r e s s e d t h a t th e y buy p o t a ­
to e s p r i n c i p a l l y from M ic h ig a n .

However, th e y buy p o t a t o e s

from o t h e r r e g i o n s o f t h e U. S. d ep e n d in g on t h e tim e o f th e
^ T his f i r m i s a n a t i o n a l f i r m w h ereas th e c h i p p in g
p r o c e s s o r s t h a t w ere i n t e r v i e w e d w ere l o c a l f i r m s .

174

y ear.

F o r exam ple, i n A p r i l th e y b e g in b u y in g p o t a t o e s i n

F l o r i d a and th e n th r o u g h t h e summer t h e i r p u r c h a s e s move
f u r t h e r N o rth .

By S ep tem b er and O c to b e r, t h e c h i p p e r s a r e

p u r c h a s in g p o t a t o e s i n M ic h ig a n , W isco n sin and N o rth D akota.
From November to A p r i l t h e p u r c h a s e s a r e from s t o r a g e i n
t h e n o r t h e r n s t a t e s , i . e . , M ic h ig a n .
The c h i p p in g p r o c e s s o r s i n t e r v i e w e d c la im e d t h a t th e
p r o d u c e r b a r g a i n i n g a s s o c i a t i o n s e t s th e p r i c e o f t h e p o t a ­
t o e s ; th e y a l s o c la im t h a t t h e p r i c e e s t a b l i s h e d by th e
grow ers and th e dom inant f ir m s s e t s th e b a s e f o r th e r e ­
m a in d er o f th e M ic h ig an c h i p p in g i n d u s t r y .
The c h ip p in g b u y e r s m a i n t a i n e d t h a t two ty p e s o f i n ­
f o r m a tio n w ere v e r y i m p o r t a n t to them.

F irs t,

th e concept

th e y s t r e s s i n p r i c i n g p o t a t o e s i s t h e " d e l i v e r e d p r i c e . "
Second, th e c h i p y i e l d i s v e r y i m p o r t a n t b e c a u s e i t d e t e r ­
m ines t h e c o s t o f t h e p o t a t o e s to t h e p r o c e s s o r .

One p r o ­

c e s s o r s a i d t h a t he pays one d o l l a r p e r h u n d re d w e ig h t more
f o r Red R iv e r V a lle y p o t a t o e s th a n f o r M ich ig an p o t a t o e s
b e c a u s e t h e c h ip y i e l d on Red R iv e r V a lle y p o t a t o e s i s l a r g e
enough to o f f s e t t h e d i f f e r e n c e i n d e l i v e r e d p r i c e f o r th e
unprocessed p o ta to e s .
O th e r ty p e s o f i n f o r m a t i o n u s e f u l to c h ip p r o c e s s o r s
i n c l u d e cro p r e p o r t s .

One p r o c e s s o r s a i d t h a t th e f i n a n c i a l

r e p o r t s o f c h a i n s t o r e s w ere o f u s e i n a s s e s s i n g th e m a rk e t
b e c a u s e c h a in s t o r e s h a v e a good i n d i c a t i o n o f consum er d e ­
mand.

T h is p r o c e s s o r a l s o s a i d t h a t grow er y i e l d s w ere

u s e f u l b e c a u s e th e g ro w er can a c c e p t lo w er p r i c e s w i t h

175

h ig h e r y i e l d s .
A n o th e r p r o c e s s o r s p e c i f i e d t h a t t h e q u a l i t y o f th e
p o ta to , i . e . ,

i t s s p e c i f i c g r a v i t y w hich a f f e c t s c h i p p in g

y i e l d s , th e c o l o r o f th e c h ip i t p r o d u c e s , e t c . , a r e t h e
im p o r t a n t f a c t o r s i n b u y in g p o t a t o e s , n o t th e p r i c e f o r t h e
raw p o t a t o .

I n e s s e n c e , th e q u a l i t y o f t h e p o t a t o a f f e c t s

th e p r o d u c t demand and a f f e c t s c o s t s s i g n i f i c a n t l y , w h ile
th e p r i c e o f t h e p o t a t o i s a s m a ll p o r t i o n o f t o t a l c o s t s
b e c a u s e i t i s o n ly one o f many i n p u t s .

He s t a t e d t h a t

a p p r o x im a te ly 50% o f p o t a t o c h ip c o s t s a r e o t h e r i n g r e d i e n t s
su c h as o i l s u s e d i n p r o c e s s i n g .
In g e n e ra l, th e se p ro c e sso rs bought s u b s t a n t i a l p o r­
t i o n s o f t h e i r p o t a t o e s d i r e c t l y from g ro w e rs , a l th o u g h
th e y a l s o u t i l i z e d b r o k e r s .

I t a p p e a r s t h a t b r o k e r s w ere

p r i n c i p a l l y u se d f o r th e p u r c h a s e o f p o t a t o e s o u t s i d e o f
M ic h ig an d u r in g t h e summer m a r k e tin g s e a s o n .

One p r o c e s s o r

p o i n t e d o u t th e im p o r ta n c e o f th e b r o k e r as an i n f o r m a t i o n
s p e c i a l i s t by s t a t i n g t h a t th e f u n c t i o n s p e rfo rm e d b y b r o ­
k e r s w ere tim e consum ing, b u t n e c e s s a r y .

F u r t h e r , he

p o i n t e d o u t t h a t t h e d om inan t f i r m employs i t s own b r o k e r .
The c o n t r a c t i n th e f r o z e n p o t a t o m a rk e t i s l e s s r i g i d
th a n th e c h i p p in g c o n t r a c t w i t h r e g a r d t o q u a l i t y s p e c i f i ­
c a t i o n s , and t h e p r o c e s s o r ' s a c c e p ta n c e o f th e d e l i v e r e d
p o ta to e s.

The c o n t r a c t e s t a b l i s h e s a b a s e p r i c e and p r e ­

miums f o r h i g h q u a l i t y p o t a t o e s .
The f r o z e n f r e n c h f r i e s p r o c e s s o r s s t r e s s e d c o n c e rn
f o r s o u r c e s o f s u p p ly and c la im e d t h a t d u r in g n e g o t i a t i o n s

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th e y u s e d i n f o r m a t i o n on th e g r o w e r 's c o s t o f p r o d u c t i o n .
A ls o , th e p r o c e s s o r s c la im e d to keep e x t e n s i v e r e c o r d s on
t h e q u a l i t y o f i n d i v i d u a l g r o w e r s ' d e l i v e r e d p o t a t o e s and
t h e s u b s e q u e n t c o s t s to th e p r o c e s s o r .

As i n th e c a s e o f

th e c h i p p in g p r o c e s s o r s , t h e y i e l d o f th e p o t a t o e s was
s t r e s s e d as a f f e c t i n g th e c o s t to th e p r o c e s s o r .
The m a jo r f r o z e n p o t a t o p r o c e s s o r c la im e d to c o n t r a c t
f o r a b o u t 90-95% o f i t s n e e d s .
in a c r e s .

The c o n t r a c t s a r e s p e c i f i e d

In M ic h ig an t h i s p r o c e s s o r c la im e d t o c o n t r a c t

f o r a p p r o x im a te ly 6 ,0 0 0 a c r e s , o r a b o u t 1 .5 m i l l i o n cw t.
per y ear.
7 .3

Summary
The l i m i t e d number o f i n t e r v i e w s w i t h some o f th e

n o n - p r o d u c e r a c t o r s may a llo w f o r some g e n e r a l i z a t i o n s .
F i r s t , t h e p r o d u c e r r e p r e s e n t a t i v e s s t r e s s e d th e " in f o r m a l "
in fo rm a tio n ch a n n els, i . e . ,

t h e i r c o n ta c ts w ith p o ta to

s p e c i a l i s t s th r o u g h o u t th e c o u n t r y .

The MACMA r e p r e s e n t a ­

t i v e d i d i n d i c a t e t h a t t h e r e a r e s u b s t a n t i a l flo w s o f i n f o r ­
m a tio n th r o u g h th e N a t i o n a l P o t a t o B a r g a in in g A s s o c i a t i o n
w h ich would b e a more " f o r m a l" sy ste m th a n th e ones u s e d by
in d e p e n d e n t a g e n t s .
S econd, t h e s e m a rk e t p a r t i c i p a n t s c la im l i t t l e u s e
o f USDA p r i c e r e p o r t s .

I n o t h e r w o rd s, th e y fo u n d t h e s e

r e p o r t s to b e o f l i t t l e v a l u e i n d e c i s i o n m aking.
th e y d i d c la im to u s e t h e crop r e p o r t s o f ESCS:

However,
S ta tis tic s -

su c h as p l a n t i n g i n t e n t i o n s , p r o d u c t i o n e s t i m a t e s ,

177

e s t i m a t e s o f s t o c k s on h a n d , e t c ,
T h ir d , t h e b u y e r s s t r e s s th e im p o r ta n c e o f th e y i e l d s ,
i.e.,

c h i p p in g o r f r e n c h f r y y i e l d s , o f t h e p o t a t o e s b e c a u s e

th e se in flu e n c e t h e i r c o s ts s u b s t a n t i a l l y .

F in a lly , th e re

a p p e a r s to b e d i f f e r e n t s o u r c e s o f d a t a and i n f o r m a t i o n on
p o ta to p r ic e s , c o s ts of p ro d u c tio n , y ie ld s , e t c .

Both th e

b a r g a i n i n g a s s o c i a t i o n and th e p r o c e s s o r s c la im to keep
v e r y d e t a i l e d r e c o r d s on th e p o t a t o i n d u s t r y and th e i n d i ­
v id u a l g ro w ers.

T h u s, t h e s e a r e p o t e n t i a l s o u r c e s o f i n ­

f o r m a tio n and d a t a .

CHAPTER 8

CONCLUSIONS AND IMPLICATIONS
S e v e r a l o b j e c t i v e s w ere s p e c i f i e d a t t h e o u t s e t o f
t h i s stu d y .

S p e c i f i c o b j e c t i v e s w ere (1) t o i d e n t i f y and

d e s c r i b e th e s t r u c t u r e o f t h e M ic h ig an p o t a t o i n d u s t r y a t
th e p r o d u c e r / f i r s t h a n d le r l e v e l ;

(2) to i d e n t i f y t h e p r i c e

d a t a u s e s and n e e d s o f t h e s e p r o d u c e r s and t h e i r s o u r c e s o f
p r i c e d a t a ; ' (3) to d e te r m in e w h e th e r t h e r e i s e v id e n c e o f
a r e l a t i o n s h i p b e tw e e n th e s t r u c t u r e o f th e m a r k e t, i . e . ,
p o t a t o p r o d u c t i o n , m a r k e tin g and p r i c i n g and th e p r o d u c e r
u s e s and s o u r c e s o f p r i c e d a t a and i n f o r m a t i o n ;

(4) to

i d e n t i f y c o n c e p t u a l , o p e r a t i o n a l and m easurem ent p rob lem s
f a c i n g th e p u b l i c d a t a s y s te m f o r M ic h ig a n p o t a t o i n d u s t r y ;
(5) t o e v a l u a t e th e p u b l i c p r i c e d a t a s y ste m i n term s o f
m e e tin g M ic h ig a n p o t a t o p r o d u c e r 's d e c i s i o n n e e d s ; and (6)
to e v a l u a t e th e i n f o r m a t i o n sy ste m fram ew ork a s a t o o l i n
a n a l y z i n g th e p ro b le m s c o n f r o n t i n g th e p u b l i c p r i c e d a t a
and i n f o r m a t i o n s y s te m .

P r e v io u s c h a p t e r s h av e f o c u s e d on

th e f i r s t t h r e e o b j e c t i v e s .

T h is c h a p t e r w i l l a d d r e s s th e

f i n a l th re e o b je c tiv e s .
C h a p te r 1 c o n t a i n e d a d e s c r i p t i o n o f th e p u b l i c p r i c e
d a t a and i n f o r m a t i o n a v a i l a b l e from USDA.

On th e b a s i s o f

th e r e s u l t s o f t h e m a il q u e s t i o n n a i r e and p e r s o n a l i n t e r ­
v ie w s , a number o f c o n c l u s i o n s can be drawn on how t h i s
178

179

sy ste m m e ets t h e n e e d s o f M ic h ig a n p o t a t o p r o d u c e r s .

The

r e m a in d e r o f th e c h a p t e r w i l l d i s c u s s th e i m p l i c a t i o n s o f
t h e f i n d i n g s i n t h i s s tu d y f o r t h e a c t o r s i n t h e M ic h ig an
p o t a t o m a rk e t and th e USDA p r i c e d a t a s y s te m s ,
8 .1

How th e C u r r e n t P u b l i c D ata S ystem M eets t h e Needs o f
M ic h ig an P o t a t o P ro d u c e r s

8 .1 .1

USDA N o n -P ric e D ata
On th e b a s i s o f th e s e l l i n g a r r a n g e m e n ts e x i s t i n g i n

t h e M ic h ig an p o t a t o m a rk e ts and th e p r o d u c e r r a t i n g s o f t h e
v a r i o u s ty p e s o f i n f o r m a t i o n i n d e c i s i o n m ak in g , i t a p p e a r s
t h a t ESCS:

S t a t i s t i c s n o n -p ric e in fo rm a tio n i s q u ite u se ­

f u l to a l l m a rk e t g ro u p s o f M ic h ig an p o t a t o p r o d u c e r s .

The

r e s p o n d e n ts g ave h i g h r a t i n g s to e s t i m a t e s o f p l a n t i n g i n ­
t e n t i o n s , e s t i m a t e s o f a c r e s p l a n t e d , h a r v e s t e d and y i e l d s ,
and e s t i m a t e s o f th e s t o c k s o f p o t a t o e s .
As d i s c u s s e d p r e v i o u s l y , th e i n f o r m a t i o n p r o j e c t i n g
f u r t h e r i n t o t h e f u t u r e a p p e a r s to be more u s e f u l to p r o ­
c e s s i n g g ro w e rs th a n to t a b l e s t o c k g ro w e rs .

P ro c essin g

g ro w ers gave a s i g n i f i c a n t l y h i g h e r r a t i n g t o p l a n t i n g i n ­
t e n t i o n s and f u t u r e p r i c e s th a n t a b l e s t o c k g r o w e rs .

T h is

m ig h t b e e x p e c te d inasm uch as th e p r o c e s s i n g p o t a t o g row ers
a r e q u i t e h e a v i l y eng aged i n p r e - s e a s o n c o n t r a c t i n g , and
t h e r e f o r e , th e y w ould seem to b e n e f i t more from d a t a and i n ­
f o r m a tio n t h a t p r o j e c t f u r t h e r i n t o t h e f u t u r e .

180

A ls o , th e p r o c e s s i n g g ro w ers gave a p p r o x im a te ly th e
same r a t i n g t o p r i c e q u o t a t i o n s , p r i c e f o r e c a s t s and p l a n t ­
in g i n t e n t i o n s .

I n o t h e r w o rd s, e s t i m a t e s o f t h e f u t u r e

s u p p ly c o n d i t i o n s w ere r a t e d n e a r l y as h i g h l y a s p r i c e
q u o t a t i o n s by p r o c e s s i n g p o t a t o g ro w e rs .
On t h e o t h e r h a n d , t a b l e s t o c k g r o w e rs , who g e n e r a l l y
s e l l p o t a t o e s on t h e s p o t c a s h m a rk e t d i r e c t l y from th e
f i e l d o r from s t o r a g e , g a v e h i g h e r r a t i n g s to i n f o r m a t i o n
t h a t i s more s h o r t - r u n i n n a t u r e , e . g . , p r i c e q u o t a t i o n s
and volume o f p o t a t o s h ip m e n ts .
ESCS:

T hus, i t a p p e a r s t h a t th e

S t a t i s t i c s d a t a and i n f o r m a t i o n w hich f o c u s on

lo n g e r r u n d e c i s i o n m aking a r e more u s e f u l to p r o c e s s i n g
g ro w ers th a n t a b l e s t o c k g ro w e rs , w h i l e AMS d a t a and i n f o r ­
m a tio n a p p e a r to b e more u s e f u l to t a b l e s t o c k g r o w e rs .
8.1.2

USDA P r i c e D ata
When q u e r i e d a b o u t USDA p r i c e s , p r o d u c e r s g e n e r a l l y

m e n tio n e d t h e M ark et News R e p o r t s .

T h is m ig h t b e e x p e c te d

b e c a u s e o f th e w ide d i s t r i b u t i o n o f t h e s e p r i c e r e p o r t s and
t h e i r fo c u s upon p r o v i d i n g c u r r e n t p r i c e d a t a and in f o r m a ­
t i o n on th e m a rk e t s i t u a t i o n .

M arket News R e p o rts w ere

i d e n t i f i e d by p r o d u c e r s i n th e p i l o t i n t e r v i e w s and t h e
open ended q u e s t i o n s i n th e q u e s t i o n n a i r e as th e s o u r c e o f
USDA p r i c e s w hich th e y u s e d .
little

d i r e c t u s e o f ESCS:

P ro d u c e r s seem to h a v e made
S t a t i s t i c s p ric e d ata.

T h e re ­

f o r e , t h e e v a l u a t i o n o f t h e USDA p r i c e d a t a f o r p r o d u c e r
u s e s w i l l p r i n c i p a l l y a d d r e s s AMS p r i c e d a t a .

181

I t s h o u ld be n o te d t h a t t h e ESCS:

S t a t i s t i c s p ric e s

a r e v e r y l i k e l y u s e d by p r o d u c e r s , b u t i n an i n d i r e c t way
s i n c e t h e p r i c e f o r e c a s t s th e y u s e g e n e r a l l y a r e th e p r o ­
d u c t o f e c o n o m e tric m odels t h a t u t i l i z e ESCS p r i c e d a t a .
However, u s in g th e i n f o r m a t i o n s y ste m fram ew ork, p r o d u c e r s
would n o t g e n e r a l l y be c o n s i d e r e d a s p r im a r y u s e r s o f
p ric e d ata fo r fo re c a s ts .

In t h a t ca se, th e r e le v a n t s e t

o f u s e r s f o r e v a l u a t i n g th e p r i c e d a t a a r e t h e a n a l y s t s .
A lth o u g h th e p r e s e n t s tu d y em p h asiz es p r o d u c e r u s e s o f
p r i c e d a ta ,, i t i s i m p o r t a n t a l s o t o remember t h a t USDA p r i c e
d a t a may s e r v e u s e s o t h e r th a n t h o s e o f p r o d u c e r s .

In

o t h e r w o rd s, t h e s e p r i c e d a t a sy ste m s may p r o v i d e p r i c e
d a t a w hich w i l l s e r v e th e n ee d s o f th e m a rk e t and n o n -m ar­
k e t a c t o r s i l l u s t r a t e d i n A ppendix I .

The p r e s e n t e v a l u a ­

t i o n o f t h e c u r r e n t p u b l i c p r i c e d a t a sy ste m a d d r e s s e s th e
p r o d u c e r u s e s o f t h e s e p r i c e d a t a and t h e r e f o r e s a y s n o t h ­
in g a b o u t th e n eed s f o r and u s e s o f p u b l i c p r i c e d a t a by
a c t o r s o t h e r th a n p o t a t o f a r m e r s .
One o f t h e m a jo r o b j e c t i v e s o f t h i s s tu d y was to
i d e n t i f y th e d e c i s i o n s f o r w hich p r o d u c e r s u s e p r i c e d a t a
and th e in f o r m a t i o n s o u r c e s th e y u s e to a s c e r t a i n w h e th e r
t h e r e i s e v id e n c e o f o b s o le s c e n c e i n t h e d a t a s y ste m .

In

s p i t e o f t h e g e n e r a l l y a p a t h e t i c r a t i n g s g iv e n to p r i c e
d a t a i n d e c i s i o n m aking, i t a p p e a r s t h a t p r o d u c e r s do u se
p r i c e d a t a i n d e c id in g t h e number o f a c r e s to p l a n t and th e
tim in g o f t h e i r s a l e s .

These two d e c i s i o n s w ould a p p e a r

to c o r r e s p o n d q u i t e c l o s e l y w i t h th e h ig h r a t i n g s g iv e n to

182

p r i c e q u o t a t i o n s and p r i c e f o r e c a s t s .

P ric e fo re c a s ts

w ould b e u s e f u l on d e c i d i n g on th e number o f a c r e s to p l a n t ,
and p r i c e q u o t a t i o n s w ould b e u s e f u l i n d e c i d i n g when to
s e l l p o ta to e s.
The h i g h e s t r a t i n g was g iv e n to th e " a g e n t / b r o k e r "
c a te g o ry o f in fo rm a tio n so u rce .

T h is i s c o n s i s t e n t w i t h

t h e f i n d i n g t h a t p r i c e d a t a a r e i m p o r t a n t i n d e c i d i n g when
to s e l l p o t a t o e s .

B ro k e rs and a g e n t s , by k e e p in g a b r e a s t

o f t h e m a rk e t d a i l y and w eek ly p r o v id e p r i c e q u o te s and
p r i c e o f f e r s t h a t a s s i s t p r o d u c e r s i n d e c i d i n g when to s e l l
p o ta to e s.
G iven th e h i g h r a t i n g s f o r p r i c e q u o t a t i o n s and th e
u s e o f p r i c e d a t a f o r th e d e c i s i o n on when to s e l l p o t a ­
t o e s , i t seems t h a t USDA p r i c e r e p o r t s a r e l e s s u s e f u l i n
p r o d u c e r d e c i s i o n m aking th a n o t h e r s o u r c e s su c h a s th e
a g e n ts and b r o k e r s .

T h is f i n d i n g i s c o n s i s t e n t w i t h o t h e r

s t u d i e s d i s c u s s e d i n C h a p te r 2, t h a t fou nd USDA p r i c e s to o
l a t e t o b e u s e f u l i n d e c i s i o n m aking.
However, i t a l s o s h o u ld b e n o te d a g a in t h a t th e
s t u d i e s re v ie w e d i n C h a p te r 2 fo u n d e v id e n c e t h a t USDA
p r i c e s a r e u s e d by p r o d u c e r s as a check on th e b e h a v i o r o f
a g e n ts and b r o k e r s .

I n o t h e r w o rd s , USDA p r i c e s may s e r v e

th e f u n c t i o n o f m o n it o r i n g th e b e h a v i o r o f th e p o t a t o b u y e r s .
The p r e s e n t s tu d y c a n n o t r e f u t e t h i s u s e o f USDA p r i c e s ,
and i n f a c t i t s h o u ld b e o b s e r v e d t h a t USDA p r i c e r e p o r t s
a r e r a t e d a s th e t h i r d m ost u s e f u l s o u r c e .

T hus, t h i s

m ig h t a l s o b e some i n d i c a t i o n t h a t t h e s e p r i c e r e p o r t s a r e

183

i n f a c t , u s e f u l i n m o n it o r i n g th e b e h a v i o r o f p o t a t o d e a l ­
e r s and b u y e r s .

F u r th e r m o r e , t h i s n o n - d e c i s i o n m aking u s e

o f USDA p r i c e d a t a m ig h t e x p l a i n th e p a ra d o x o f h ig h r a t ­
in g s g iv e n t o p r i c e q u o t a t i o n s and th e low r a t i n g s g iv e n
to t h e u s e o f p r i c e d a t a f o r s p e c i f i c d e c i s i o n s t h a t p r o ­
d u c e rs m u st make.

I n o t h e r w o rd s, p r o d u c e r s may s t r e s s

th e u s e o f USDA p r i c e d a t a to m o n ito r t h e b e h a v i o r o f bu y ­
e r s b u t n o t s p e c i f i c a l l y f o r d e c i s i o n m aking.
The e v a l u a t i o n o f USDA p r i c e d a t a f o r p r o d u c e r
d e c i s i o n making n e c e s s i t a t e s lo o k in g a t th e n eed s o f p r o ­
d u c e rs by t h e m a rk e t i n w h ich th e y s e l l p o t a t o e s .

P ro ces­

s i n g grow er r e s p o n d e n ts as a g r o u p , r a t e d USDA p r i c e s s i g ­
n i f i c a n t l y lo w er th a n t h e t a b l e s t o c k and se e d grow er r e ­
s p o n d e n ts .

T h is r e s u l t was o b t a i n e d i n b o t h th e open ended

q u e s t i o n and th e q u e s t i o n a s k in g p r o d u c e r s to r a t e t h e u s e ­
f u l n e s s o f USDA p r i c e s .
T h ere a p p e a r s to b e e v id e n c e o f two ty p e s o f o b s o l e s ­
cence i n t h i s f i n d i n g .

F irs t,

t h e r e h a s b een a change i n

r e a l i t y t h a t h a s a f f e c t e d t h e r e l e v a n c e o f th e c u r r e n t
p r i c e d a t a sy ste m .

A h ig h p ro p o rtio n of th e p o ta to e s f o r

th e p r o c e s s i n g m a rk e t a r e s o l d on a p r e - s e a s o n c o n t r a c t ,
and p r e - s e a s o n c o n t r a c t i n g d im i n is h e s t h e im p o r ta n c e o f
t im e ly p r i c e d a t a f o r making s h o r t - r u n m a r k e tin g d e c i s i o n s .
In o t h e r w o rd s, once t h e p r o c e s s i n g p o t a t o g ro w ers h ave
s ig n e d a p r e - s e a s o n c o n t r a c t f o r p o t a t o e s , th e m a r k e tin g
d e c i s i o n h a s b ee n made f o r t h a t p o r t i o n o f t h e i r cro p and
USDA (AMS) p r i c e s a r e l e s s u s e f u l to t h e s e g r o w e r s .

184

S econd, t h e p r o c e s s i n g g ro w ers s t r e s s th e u s e o f p r i c e
d a t a f o r s u b s t a n t i a l l y d i f f e r e n t d e c i s i o n s th a n t h e t a b l e s t o c k g r o w e rs .

P r o c e s s i n g g ro w ers g av e a h i g h r a t i n g to

p r i c e d a t a f o r t h e d e c i s i o n on w h e th e r to b a r g a i n f o r p r e ­
season c o n tr a c ts .

T hus, t h e s e g ro w e rs a p p e a r t o d e s i r e

p r i c e d a t a and i n f o r m a t i o n w h ich w i l l a s s i s t them i n m aking
a s u b s t a n t i a l l y d i f f e r e n t d e c i s i o n th a n t h e c u r r e n t p r i c e
d a t a sy ste m i s s e t up to p r o v i d e , i . e . ,

th e d e c is io n o f

w h e th e r th e y s h o u ld j o i n o t h e r p r o d u c e r s i n s e l l i n g and
m a r k e tin g p o t a t o e s .

I n o t h e r w o rd s , t h e s e g ro w e rs seem t o

b e s t r e s s i n g a fo rw a r d p r i c e , i . e . ,

a p r e d i c t i o n o f th e

m a rk e t months i n t o th e f u t u r e to h e l p them d e c id e on a p r e ­
season c o n tr a c t p r ic e .
T hus, i t can b e c o n c lu d e d on t h e b a s i s o f th e r e s u l t s
o f t h i s s tu d y t h a t USDA p r i c e d a t a a r e o f l i m i t e d v a l u e to
p o t a t o p r o d u c e r s i n d e c i s i o n m aking.

ESCS:

S ta tistic s

p r i c e d a t a a r e p u b l i s h e d to o l a t e to b e o f much v a l u e i n
p r o d u c e r d e c i s i o n m aking.

F u r th e r m o r e , p r o d u c e r s do n o t

seem t o b e aware o f t h e s e p r i c e d a t a inasm uch as th e y r e f e r
to AMS m a rk e t r e p o r t s when q u e i r e d a b o u t USDA p r i c e d a t a .
Thus, p o t a t o p r o d u c e r s do n o t seem to b e p r im a r y u s e r s o f
ESCS:

S t a t i s t i c s p ric e d ata.
AMS p r i c e d a t a on t h e o t h e r hand a r e aimed more s p e ­

c i f i c a l l y a t se rv in g producer n eed s.

However, t h e s e p r i c e

d a t a a p p e a r to s u f f e r two shortcom m ings i n m e e tin g t h i s
g o a l.

F i r s t , g iv e n th e o b j e c t i v e o f p r o v i d i n g p r i c e d a t a

to a i d i n th e a l l o c a t i o n o f r e s o u r c e s i n t h e m a r k e tin g o f

185

p o t a t o e s , AMS p r i c e s seem to b e o f l i m i t e d v a l u e .

In

o t h e r w o rd s , p r o d u c e r s c la im t h e s e p r i c e d a t a a r e n o t
a v a i l a b l e i n tim e to a s s i s t i n m aking th e m a r k e tin g d e ­
c isio n .
The f i n d i n g i n t h e p r e s e n t s t u d y , h o w ev er, t h a t o v e r
h a l f o f th e r e s p o n d in g p r o d u c e r s f e e l USDA p r i c e s a r e h e l p ­
f u l to them may p r o v i d e s u p p o r t f o r th e f i n d i n g s i n e a r l i e r
s t u d i e s t h a t p r o d u c e r s u s e USDA p r i c e s as a co m p ariso n
w i t h t h e p r i c e th e y r e c e i v e d i n t h e p r e v i o u s p e r i o d .

T hus,

t h e s e d a t a may i n f l u e n c e th e p r o d u c e r 's c h o ic e o f m a r k e tin g
c h a n n e l, o r s a l e s o u t l e t , i n th e s u b s e q u e n t m a r k e tin g
p e r i o d i n th e e v e n t t h e p r o d u c e r d i s c o v e r s t h e p r i c e he
r e c e i v e d was lo w e r th a n th e r e p o r t e d m a rk e t p r i c e .
Second, p o t a t o p r o d u c e r s g e n e r a l l y g av e a h ig h r a t ­
in g to p r i c e f o r e c a s t s i n d e c i s i o n making and AMS p r i c e
d a t a a r e n o t d e s ig n e d f o r , n o r a r e th e y v e r y u s e f u l i n , t h e
g e n e r a t i o n o f lo n g r u n p o t a t o p r i c e f o r e c a s t s .

These p r i c e

d a t a may b e o f l i m i t e d v a l u e i n s t a t i s t i c a l a n a l y s i s and
f o r e c a s t i n g b e c a u s e o f t h e i r b e in g r e p o r t e d o v e r a r a n g e
of p ric e s, i . e . ,

a h i g h and a low p r i c e .

F u rth e r, th e ir

s h o r t r u n n a t u r e and h ig h s p e c i f i c i t y te n d to make t h i s
s e r i e s a l e s s r e l i a b l e h i s t o r i c a l s e r i e s th a n t h e ESCS:
S t a t i s t i c s p r ic e d a ta .
The r e s u l t s o f th e s tu d y p r o v id e e v id e n c e o f o b s o l e s ­
c e n c e i n th e USDA p r i c e d a t a sy ste m i n s o f a r as p o t a t o p r o ­
d u c e rs n ee d s f o r p r i c e d a t a a r e c o n c e r n e d .

The p ro b lem s

j u s t d i s c u s s e d a r e more p ro n o u n ced i n th e c a s e o f

186

p r o c e s s i n g p o t a t o g row ers who s t r e s s th e u s e o f p r i c e d a t a
f o r d e c id in g w h e th e r o r n o t to b a r g a i n f o r a p r e - s e a s o n
c o n tra c t.
8 .2
8.2.1

Im p lic a tio n s
AMS M arket News
In l i g h t o f th e e v id e n c e t h a t p r o d u c e r s f i n d USDA

p r i c e s to be to o l a t e to b e o f u s e i n d e c i s i o n m aking, th e
AMS p r i c e d a t a s e r i e s m ig h t im prove i t s s e r v i c e by r e d u c in g
th e la g tim e i n d a t a r e p o r t i n g v i a g r e a t e r u s e o f mass
m edia te c h n o lo g y such as r a d i o , t e l e v i s i o n , t e le p h o n e ,
te le ty p e , e tc .
I t i s i n t e r e s t i n g to n o t e t h a t r a d i o and t e l e v i s i o n ,
w hich i s p a r t o f th e M ark et News R e p o rtin g System , w ere
r a t e d l e s s u s e f u l th a n S t a t e and F e d e r a l governm ent p u b l i ­
ca tio n s.

T his s u g g e s ts t h a t p r o d u c e r s c o u ld make more u se

o f t h e s e s o u r c e s o f p r i c e d a t a i n d e c i s i o n m a k in g .

In o th e r

w o rd s , th e p r i c e d a t a may b e a v a i l a b l e b u t th e p r o d u c e r s do
n o t make u s e o f i t .
The AMS p r i c e r e p o r t i n g sy stem i s c o n f r o n te d w i t h
two m a jo r problem s g iv e n th e changes i n a g r i c u l t u r a l p r o ­
d u c t i o n and m a rk e tin g t h a t have o c c u re d i n r e c e n t y e a r s and
t h e c u r r e n t s t r u c t u r e o f th e p o t a t o m a r k e ts .

F i r s t , th e

AMS p r i c e r e p o r t i n g sy ste m i s c o n f r o n te d i n c r e a s i n g l y w i t h
th e m easurem ent p rob lem o f r e p o r t i n g p r i c e s from t h i n m ar­
k e ts.

The i n c r e a s i n g im p o rta n c e o f c o n t r a c t p r i c e s

187

accom panied by open m a rk e t r e p o r t i n g , may i n c r e a s e th e
t h i n m a rk e t p ro b le m .

The p r e s e n t s tu d y fo u n d t h a t a s u b ­

s t a n t i a l p r o p o r t i o n o f M ic h ig an p o t a t o p r i c e s a r e t i e d to
some ty p e o f f o rm u la — b o t h c o n t r a c t p r i c i n g and d e - c e n tr a li z e d in d iv id u a l n e g o tia tio n s .

In creases in e ith e r

d e - c e n t r a l i z e d p r i c i n g o r c o n t r a c t p r i c i n g w i l l a g g r a v a te
th e " t h i n " m a rk e t p ro b lem a s a s m a l l e r p r o p o r t i o n o f th e
t o t a l c ro p w ould be s o l d on th e open m a rk e t and an i n c r e a s ­
in g p r o p o r t i o n o f p o t a t o e s w ould b e t r a d e d on " o t h e r "
p r i c e s a s p o i n t e d o u t by B reim y er ( 1 9 7 6 ) .^
The se c o n d p ro b lem c o n f r o n t i n g AMS i s th e q u e s t i o n
o f s e t t i n g p r i o r i t i e s among com p eting u s e s o f t h e i r p r i c e
d ata.

G iven t h e d i f f e r e n t i a l e v a l u a t i o n o f USDA p r i c e d a t a

by t h e p r o d u c e r s i n th e d i f f e r e n t m a r k e ts , i t a p p e a r s AMS
m ust s p e c i f i c a l l y a d d r e s s th e q u e s t i o n o f w h at p r i c e d a t a
a r e n e e d e d by t h e p r o d u c e r s , i . e . , w h ich o p e r a t i o n a l i z a t i o n
o f th e

p r i c e s h o u ld he m e a s u r e d , . a n d w hat c r i t e r i a

s h o u ld b e u s e d t o d e te r m in e th e u s e s o f p r i c e d a t a to be
serv ed .
I n o t h e r w o rd s , g iv e n t h a t p r o c e s s i n g and t a b l e s t o c k
g ro w e rs n e e d p r i c e d a t a f o r d i f f e r e n t d e c i s i o n s , how s h o u ld
AMS d e te r m in e w h ich u s e s a r e t o b e s e rv e d ?

P r o c e s s i n g grow­

e r s r e p r e s e n t a s m a ll f r a c t i o n o f th e p o t a t o g r o w e r s , y e t
th e y a c c o u n t f o r n e a r l y h a l f o f M ic h ig an p o t a t o p r o d u c t i o n .
^ See C h a p te r 2 f o r r e f e r e n c e s and a d i s c u s s i o n o f
t h e t h i n m a rk e t p ro b le m and t h e p ro b le m o f t r a d i n g on
o th e rs p r i c e s .

188

T h u s, AMS may b e c o n f r o n t e d w i t h d e t e r m in in g w hich i s t h e
r e l e v a n t f a c t o r f o r r e p o r t i n g p r i c e s and s e t t i n g p r i o r i t i e s ;
th e number o f a c t o r s o r t h e volume o f p o t a t o e s .
8.2.2

ESCS:

S ta tistic s

As was p o i n t e d o u t e a r l i e r , ESCS:

S t a t i s t i c s gen­

e r a l l y p r e s e n t s d a t a t h a t a r e more u s e f u l f o r p l a n n i n g
o p e ra tio n s.

The p r i c e d a t a c u r r e n t l y p r o v id e d by t h i s

agency a r e n o t i n t e n d e d to b e u s e d f o r s h o r t - r u n m a r k e tin g
d e c isio n s.

However, chan ges i n th e s t r u c t u r e o f th e p o t a t o

m a rk e ts a f f e c t th e a b i l i t y o f t h i s ag en cy to a c c u r a t e l y
e s t i m a t e and r e p o r t p r i c e s , and ch ang es i n p r o d u c t i o n and
m a r k e tin g p r a c t i c e s may h a v e i m p l i c a t i o n s f o r th e r e l a t i v e
im p o r ta n c e o f ESCS:

S t a t i s t i c s p r i c e d a t a and i n f o r m a t i o n .

I t was p o i n t e d o u t e a r l i e r t h a t p r o d u c e r s may n o t be
p r im a r y , o r d i r e c t , u s e r s o f ESCS:
However, i n g e n e r a l ESCS:

S t a t i s t i c s p ric e d ata.

S t a t i s t i c s d a t a and i n f o r m a t i o n

may become more i m p o r t a n t o v e r tim e to p r o d u c e r s a s i n f o r ­
m a tio n and d a t a f o r making lo n g e r r u n p la n n in g d e c i s i o n s
becomes more i m p o r t a n t .

The p r o c e s s i n g p o t a t o g ro w ers i n

p a r t i c u l a r seem to p l a c e more em ph asis on f o rw a r d p r i c e
in fo rm a tio n .

As m e n tio n e d ab ov e, a lth o u g h t h e s e g ro w ers

r e p r e s e n t a s m a ll p r o p o r t i o n o f th e t o t a l number o f g r o w e r s ,
t h e p r o p o r t i o n o f th e t o t a l c ro p g o in g t o th e p r o c e s s i n g
m a rk e t h as i n c r e a s e d s u b s t a n t i a l l y i n r e c e n t y e a r s .
T h e r e f o r e , fo rw a rd p r i c e i n f o r m a t i o n w i l l i n c r e a s e i n im­
p o rta n c e as a g r e a t e r p ro p o rtio n o f th e p o ta to e s a re s o ld

189

on c o n t r a c t and p o t a t o p r o d u c e r s and t h e i r r e p r e s e n t a t i v e s
demand i n f o r m a t i o n on c u r r e n t and f u t u r e s u p p ly an d demand
co n d itio n s f o r n e g o tia tin g c o n tra c ts .
t h a t ESCS:

T h is s u g g e s t s to o

,

S t a t i s t i c s p r i c e s f o r p r o c e s s i n g u se s h o u ld b e

r e p o r t e d i n c o m b in a tio n w i t h o r f o llo w e d q u i c k l y by a n a l y ­
s i s w hich p r o v i d e s f o rw a r d o r f o r e c a s t p r i c e s w here t h i s
can be done w i t h r e a s o n a b l e r e l i a b i l i t y .
The p r o c e s s i n g p o t a t o g ro w ers a l s o gave a h i g h e r r a t ­
in g to r e p o r t s o f p o t a t o p r i c e s f o r p r e v io u s y e a r s .

Inas­

much as t h e s e p r i c e r e p o r t s w ould b e u s e f u l i n b a r g a i n i n g
f o r c o n t r a c t s , i t seems ESCS:

S t a t i s t i c s av erag e p r i c e s ,

as a h i s t o r i c a l s e r i e s , w ould be u s e f u l to g ro w ers who en­
gage i n p r e - s e a s o n c o n t r a c t i n g .

B ecause p r e - s e a s o n con ­

t r a c t i n g i n f l u e n c e s th e demand f o r p r i c e d a t a and in f o r m a ­
t i o n , th e d a t a s y ste m m ust a d j u s t to m eet t h i s change i n
th e s t r u c t u r e o f m a r k e ts .

I n a d d i t i o n , th e em ergence o f

th e b a r g a i n i n g ag en cy may p r o v id e th e o p p o r t u n i t y f o r a
m u tu a l i n t e r c h a n g e o f i n f o r m a t i o n b etw e en th e g ro up b a r g a i n ­
in g i n s t i t u t i o n and th e p u b l i c d a t a sy s te m .

The g ro u p b a r ­

g a i n i n g agency i s b o t h a " u s e r " o f p u b l i c d a t a and i n f o r ­
m a tio n and a p o t e n t i a l s o u r c e o f d a t a and i n f o r m a t i o n f o r
th e p u b l i c a g e n cy .

The b a r g a i n i n g agency h a s a c c e s s to

s u b s t a n t i a l i n f o r m a t i o n on p r o d u c t i o n , y i e l d s , c o s t s , e t c . ,
t h a t a r e u s e f u l t o ESCS:

S ta tistic s.

I t s h o u ld be remembered t h a t a m a jo r u s e o f ESCS
p r i c e d a t a i s f o r d e r i v i n g an e s t i m a t e o f th e income to
a g ric u ltu re .

Thus, t h e agency a t t e m p t s to e s t i m a t e an

190

a v e ra g e p r i c e f o r p o t a t o e s a t th e farm , o r t h e p o i n t o f
f i r s t s a l e , and i t m ust a d d r e s s th e q u e s t i o n o f a c c u r a t e l y
m e a s u rin g t h e c o n c e p t o f an a v e ra g e p r i c e a t t h e p o i n t o f
f i r s t sa le .
The p r e s e n t s tu d y s u p p o r t s t h e c o n t e n t i o n t h a t th e
s t r u c t u r e o f p o t a t o p r o d u c t i o n and m a r k e tin g i n M ic h ig an
p o s e s i n p o t e n t i a l l y s e i o u s p r i c e d a t a m easurem ent pro b lem
f o r t h e ag en cy .
The p r i n c i p a l i s s u e t h a t n ee d s to b e a d d r e s s e d i s
o p e r a t i o n a l l y d e f i n i n g a homogeneous p r o d u c t a t t h e p o i n t
of f i r s t sa le .

Forw ard i n t e g r a t i o n by p r o d u c e r s h a s r e ­

s u lt e d in a s u b s t a n t i a l p ro p o rtio n o f p o ta to e s b ein g fu n c ­
t i o n a l l y a l t e r e d p r i o r t o s a l e , i . e . , w ash ed , g ra d e d and
p ac k ed .
A lth o u g h i t may b e r e l a t i v e l y e a s y to a l t e r t h e p r i c e
r e p o r t i n g q u e s t i o n n a i r e s to a llo w f o r th e p r o d u c e r s to d e ­
d u c t t h e e s t i m a t e d e x p e n s e s o f p e r f o rm in g t h e s e f u n c t i o n s ,
i t s h o u ld be n o te d t h a t t h e s u b s e q u e n t " d e r i v e d ” p o t a t o
p r i c e may b e a r l i t t l e r e l a t i o n to m a rk e t p r i c e .

In o th e r

w o r d s , t h e s y n t h e t i c " d e r i v e d " p r i c e f o r t h e p o t a t o w ould
sim p ly be a r e s u l t o f su c h b o o k k e e p in g r u l e s a s d e p r e c i a ­
t i o n r a t e s , a l l o c a t i o n s o f e x p e n se s w i t h i n th e f i r m , e t c .
V e r t i c a l i n t e g r a t i o n from th e b u y in g m a r k e t, i . e . ,
sors, r e ta ile r s , e tc .,

p roces­

i n t o th e p r o d u c t i o n s e c t o r r e s u l t s

i n a s i m i l a r p ro b lem .
Q u ite s im p ly , i t a p p e a r s t h a t th e p r i c e f o r a p o t a t o
a t th e farm i s i n c r e a s i n g l y d i f f i c u l t to e s t i m a t e a c c u r a t e l y .

191

Thus, ESCS:

S t a t i s t i c s s h o u ld a d d r e s s th e q u e s t i o n s o f

th e u s e f u l n e s s o f t h e farm g a t e d e f i n i t i o n o f a g r i c u l t u r e .
In o t h e r w o rd s, s h o u ld a g r i c u l t u r e be r e d e f i n e d to i n c l u d e
t h e s e f u n c t i o n s p e rfo rm e d by th e a g r i c u l t u r a l p r o d u c e r s an d ,
th u s c o n s i d e r a l t e r n a t i v e p r i c e r e p o r t i n g l e v e l s w i t h i n th e
v e r t i c a l c h a in from p r o d u c t i o n to co n su m ptio n.

I f th e

farm g a t e d e f i n i t i o n o f a g r i c u l t u r e i s to re m a in , th e n th e
s t a t i s t i c a l agency m u st s p e c i f i c a l l y a d d r e s s th e problem s
o f a c c u r a t e l y d e f i n i n g ( o p e r a t i o n a l i z i n g ) and m e a su rin g th e
v a l u e o f th e n o n - a g r i c u l t u r a l f u n c t i o n s .
I t a l s o s h o u ld be n o te d t h a t ESCS p r i c e d a t a a r e
o f t e n u s e d to f o r e c a s t p r i c e s f o r a g r i c u l t u r a l p r o d u c ts
and t h a t t h e p r e s e n t s tu d y found e v id e n c e t h a t p o t a t o p r o ­
d u c e rs p la c e d a h ig h v a l u e on p r i c e f o r e c a s t s .

Thus, ESCS:

S t a t i s t i c s i s c o n f r o n t e d w i t h th e p rob lem o f i t s p r i c e d a t a
becoming l e s s u s e f u l o v e r tim e f o r f o r e c a s t i n g farm p r i c e s .
In o t h e r w o rd s, w i t h changes i n th e s t r u c t u r e o f p r o d u c t i o n
and m a rk e tin g i n p o t a t o m a r k e ts , a c c u r a t e l y f o r e c a s t i n g a
"farm " p r i c e i s i n c r e a s i n g l y d i f f i c u l t b e c a u s e th e d e f i ­
n i t i o n o f a p o t a t o changes o v er tim e i n b o th q u a l i t y and
fu n c tio n .
8.2.3

I m p l i c a t i o n s f o r a Changing R ole o f P u b l i c P r i c e
R e p o r tin g
The l i t e r a t u r e on th e v a l u e o f i n f o r m a t i o n and th e

j u s t i f i c a t i o n fo r p u b lic p ric e re p o rtin g in d ic a te s th a t
t h e r e may b e a d i f f e r e n t j u s t i f i c a t i o n f o r p u b l i c r e p o r t i n g

192

d ep en d in g on t h e s t r u c t u r e o f th e m a rk e t.

(See C h a p te r 3)

Thus, changes i n m a rk e t s t r u c t u r e may sim p ly r e q u i r e p u b l i c
p r i c e r e p o r t i n g to m eet d i f f e r e n t n e e d s , i . e . ,

th e s o c i a l

and p r i v a t e v a l u e o f p r i c e d a t a may b e r e l a t e d t o t h e s t r u c ­
t u r e o f t h e m a rk e t.
The low r a t i n g g iv e n by p r o c e s s in g p o t a t o g ro w e rs t o
th e d e c i s i o n on to whom to s e l l t h e p o t a t o e s to r a i s e s th e
q u e s t i o n o f th e r o l e o f t h e p u b l i c p r i c e d a t a and in f o r m a ­
t i o n sy ste m .

T hese g ro w ers a p p e a r to h av e few er m a rk e tin g

a lte rn a tiv e s , i . e . ,

t h e r e i s l e s s im p o rta n c e p l a c e d on th e

d e c i s i o n whom to s e l l t h e i r p o t a t o e s t o as compared to th e
d e c i s i o n on when to s e l l .

T here i s o n ly one f r o z e n p o t a t o

b u y e r i n th e s t a t e and a s u b s t a n t i a l p o r t i o n o f ' t h e s t a t e ' s
c h ip p in g p o t a t o e s a l s o go to one f i r m .
t h e s e m a rk e ts h av e few o p t i o n s .

Thus, grow ers i n

They r a t e th e p r o c e s s o r

q u i t e h i g h l y as a s o u r c e o f p r i c e d a t a b e c a u s e i t i s m a in ly
a q u e s t i o n o f when to s e l l , n o t to whom th e y s e l l .
T his ty p e o f a m a rk e t may a l t e r th e r o l e o f th e pub­
l i c d a t a and i n f o r m a t i o n sy ste m i n two w ays.

F irs t, if

p r o d u c e r s have few m a r k e tin g o p t i o n s , i t i s c o n c e iv a b le
t h a t th e o b j e c t i v e o f th e r e p o r t i n g sy stem would be l e s s
u s e f u l i n a l l o c a t i n g p o t a t o e s among a l t e r n a t i v e m a r k e ts .
R a th e r th a n p r i c e r e p o r t i n g f o r th e a l l o c a t i o n among m ar­
k e t s , th e r o l e o f p r i c e r e p o r t i n g may s h i f t to p r e - p l a n t i n g
from p o s t h a r v e s t : d e c i s i o n 'm a k i n g .
Second, p u b l i c r e p o r t i n g may ta k e on more o f an ob­
j e c t i v e o f m o n ito r in g th e p e rfo rm a n c e o f th e l a r g e f i r m s .

193

The em ergence o f l a r g e f ir m s and t h e l i m i t e d s e l l i n g op­
t i o n s i n a g r i c u l t u r a l p r o d u c t m a rk e ts may i n c r e a s e t h e d e­
mand f o r d a t a and in f o r m a t i o n t h a t can b e u s e d to e v a l u a t e
and m o n ito r th e p e rfo rm a n c e o f th e m a rk e t p a r t i c i p a n t s .
T his would be an i m p o r ta n t p u b l i c f u n c t i o n from a p o t a t o
p r o d u c e r and consumer p o i n t o f view .
AMS m ig h t c o n s i d e r d e c r e a s i n g th e f r e q u e n c y o f i t s
p u b lish ed p r ic e r e p o r t s .

G iven t h a t p r o d u c e r s c la im t h e s e

p r i c e d a t a a r e o f l i m i t e d v a l u e i n d e c i s i o n making, th e
d a i l y p r i c e r e p o r t s m ig h t b e te r m i n a t e d w i t h l i t t l e l o s s
to p r o d u c e r s .

Weekly p r i c e r e p o r t s m ig h t be s u f f i c i e n t

f o r th e p r o d u c e r s n ee d s o f com paring t h e i r p r i c e s r e c e i v e d
w ith th e p r i c e s r e c e i v e d by o t h e r g ro w e rs .

T h is m ig h t a l s o

r e d u c e th e t h i n m a rk e t p ro b lem inasm uch as w eek ly r e p o r t s
w ould c o v e r a l a r g e r volume o f p o t a t o e s s o l d th a n d a i l y r e ­
p o rts .
8.2.4

I m p l i c a t i o n s f o r th e Role o f A g r i c u l t u r a l E conom ists
The im p o rta n c e p la c e d on fo rw a rd p r i c e s and p r i c e

f o r e c a s t s by p r o d u c e r s i l l u s t r a t e s th e i m p o r t a n t r o l e t h a t
a n a l y s t s , e . g . , a g r i c u l t u r a l e c o n o m is ts , h av e i n m a i n t a i n ­
in g and im pro ving th e d a t a b a s e .

Inasm uch as a g r i c u l t u r a l

e c o n o m ists engage i n f o r e c a s t i n g commodity p r i c e s , th e y
s h o u ld b e a c t i v e l y in v o lv e d i n im p ro v in g th e ty p e s o f i n ­
f o r m a tio n and d a t a n e c e s s a r y f o r im p ro v in g t h e i r f o r e c a s t ­
in g a c c u r a c y , and im p ro v in g b o th t h e o p e r a t i o n a l i z a t i o n and
th e m easurem ent o f p r i c e d a t a .

In o t h e r w o rd s, a g r i c u l t u r a l

194

e c o n o m is ts n e e d to a d d r e s s b a s i c p r i c e d a t a p ro b lem s i f
th e y a r e t o im prove t h e i r f o r e c a s t i n g a c c u r a c y .

In th is

s e n s e a g r i c u l t u r a l e c o n o m is ts h a v e a r e s p o n s i b i l i t y i n
th e d ev e lo p m e n t and m a in te n a n c e o f t h e a g r i c u l t u r a l d a t a
b ase u n d e rly in g a g r i c u l t u r a l s t a t i s t i c s .

T hus, f o r p u r ­

p o se s o f im p ro v in g a g r i c u l t u r a l d a t a and e v a l u a t i n g th e
d a t a s y s te m , th e a g r i c u l t u r a l e c o n o m is ts s h o u ld b e c o n s i d ­
e r e d p r im a r y u s e r s o f t h e s e d a t a .
8.2.5

I m p l i c a t i o n s f o r M ic h ig an P o t a t o P ro d u c e r s
As p o i n t e d o u t i n C h a p te r 3, th e i n f o r m a t i o n sy stem

fram ew ork s t r e s s e s t h e r o l e o f th e " u s e r 1' o f d a t a i n e v a l ­
u a t i n g an i n f o r m a t i o n and d a t a s y ste m .

T h is s tu d y f o c u s e d

on one s e t o f m a r k e t u s e r s , nam ely , p o t a t o p r o d u c e r s .

In

t h e e v a l u a t i o n o f t h e USDA p r i c e d a t a s y s te m s , i t a p p e a r s
on t h e b a s i s o f t h e r e s u l t s o f t h i s s tu d y t h a t p o t a t o p r o ­
d u c e rs a r e n o t p r im a r y u s e r s o f ESCS:
d ata.

S t a t i s t i c s p ric e

F u r th e r m o r e , M ic h ig a n p o t a t o p r o d u c e r s a p p e a r to

u s e AMS p r i c e d a t a p r i n c i p a l l y to m o n it o r t h e b e h a v i o r o f
th e b u y e r s o f t h e i r p o t a t o e s , i . e . ,

t h e p r o d u c e r s do n o t

seem t o u s e AMS p r i c e d a t a d i r e c t l y i n d e c i s i o n m aking.

It

s h o u ld b e n o t e d t h a t t h i s m o n it o r i n g f u n c t i o n may b e q u i t e
i m p o r t a n t inasm uch as a s u b s t a n t i a l p o r t i o n o f th e g ro w ers
t u r n t h e p r i c e d i s c o v e r y f u n c t i o n o v e r to o t h e r f i r m s , e . g . ,
a g e n ts and b r o k e r s , and g ro w e rs may f e e l t h e n ee d to com­
p a r e r e p o r t e d p r i c e s w i t h th e p r i c e th e y r e c e i v e .

195

A sid e from th e m o n it o r i n g f u n c t i o n , how ever, i t
a p p e a r s t h a t th e c u r r e n t p r i c e d a t a sy ste m s o f USDA a r e
n o t s e t up t o s e r v e th e p r i c e d a t a n e e d s o f M ic h ig a n p o t a ­
to p ro d u c e rs .

In a d d itio n , th e r e s u l t s o f t h i s stu d y

d e m o n s tr a te t h a t p r o d u c e r s do n o t f e e l t h a t e x i s t i n g p r i c e
d a ta nor t h e i r sources a re very u s e fu l.

T hus, t h e s e p r o ­

d u c e rs m ig h t c o n s i d e r some a l t e r n a t i v e m a r k e tin g and
p r ic in g a rra n g e m e n ts.
The t a b l e s t o c k g ro w e rs m ig h t c o n s i d e r th e c r e a t i o n
and o p e r a t i o n o f a c o o p e r a t i v e l y owned s t o r a g e f a c i l i t y ,
and th u s s p r e a d r i s k s o f p r i c e ch an g es o v e r tim e and among
g ro w ers.

T his ty p e o f o r g a n i z a t i o n m ig h t a p p e a l t o g ro w ers

who p l a c e a h i g h v a l u e on p r i c e d a t a f o r th e d e c i s i o n o f
when to s e l l p o t a t o e s , inasm uch as t h e c o o p e r a t i v e c o u ld
r e d u c e th e r i s k s o f l o s s e s due to s h o r t - r u n p r i c e f l u c t u a ­
tio n s .

R e s e a rc h i s n e e d e d to i d e n t i f y t h e b e n e f i t s o f

su c h a c o o p e r a t i v e l y owned o r g a n i z a t i o n and th e f e a s i b i l i t y
o f p ro d u cer su p p o rt.

A lso r e s e a r c h i s n e e d e d on t h e volume

o f p o t a t o e s and th e number o f p r o d u c e r s n e c e s s a r y to d e t e r ­
mine t h e minimum e f f e c t i v e and optimum s i z e o f su c h an
o rg a n iz a tio n .
P r o c e s s i n g p o t a t o g ro w e rs a r e few er i n number and
a p p e a r to be more aw are o f t h e i r i n t e r d e p e n d e n c e .

These

g ro w ers seem to r e l y upon t h e c o o p e r a t i v e and t h e b a r g a i n ­
in g a s s o c i a t i o n f o r t h e g e n e r a t i o n o f a c o n t r a c t p r i c e .
However, b e c a u s e t h e two l e a d i n g p r o c e s s o r s a r e l a r g e
n a t i o n a l f i r m s , i t w ould seem t h a t a c t i o n s to r a i s e p r i c e

196

a t th e. S t a t e l e v e l w i l l m o st l i k e l y f a i l u n l e s s t h e r e a r e
im proved q u a l i t y o r o t h e r c o s t r e d u c i n g c h a n g e s .

A h ig h

p r i c e i n one s t a t e may e n c o u ra g e t h e p r o c e s s o r to p u r c h a s e
p o ta to e s in an o th er s t a t e .

R e s e a rc h i s n ee d e d to d e te r m in e

th e n e c e ssa ry c o n d itio n s f o r s u c c e s s fu l c o l l e c t i v e b a rg a in ­
in g .

A ls o , r u l e s m u st b e w orked o u t r e g a r d i n g r e p r e s e n t a ­

tio n .

I n th e p i l o t i n t e r v i e w s f o r th e c u r r e n t s tu d y ,

p r o d u c e r s c la im e d t h a t th e y n eed n a t i o n a l c o l l e c t i v e b a r ­
g a in in g .

The q u e s t i o n re m a in s to w h at e x t e n t p r o d u c e r s

a r e w i l l i n g to s a c r i f i c e autonomy i n d e c i s i o n making f o r
e i t h e r c o l le c tiv e b a rg a in in g o r c o o p e ra tiv e s a l e s .

N a tio n a l

c o l l e c t i v e b a r g a i n i n g w ould g r e a t l y change t h e n a t u r e o f
p ro d u cer p r ic e in fo rm a tio n n e e d s .
8 .3

The I n f o r m a t i o n System Framework As An A n a l y t i c a l
Approach to S tu d y in g P r i c e D a ta Problem s
One o b j e c t i v e o f t h e s tu d y was to e v a l u a t e t h e u s e *

f u l n e s s o f t h e i n f o r m a t i o n system fram ew ork i n d e f i n i n g th e
p ro blem s c o n f r o n t i n g t h e p o t a t o p r i c e d a t a and i n f o r m a t i o n
sy ste m .

On t h e b a s i s o f t h e p r e s e n t s tu d y , i t a p p e a r s t h a t

th e framework can b e e f f e c t i v e l y u se d i n t h i s way.

By i d e n t ­

i f y i n g th e p r o d u c t i o n and marketing practices existing in Michigan
p o t a t o m a rk e ts and t h e s u b s e q u e n t u s e s o f p r i c e d a t a , th e
p r e s e n t s tu d y fou nd e v id e n c e o f v a r i o u s ty p e s o f o b s o le s c e n c e
i n t h e p u b l i c p r i c e d a t a sy ste m f o r M ic h ig an p o t a t o p r o d u c ­
ers.

The p r i n c i p a l p ro b lem s c o n f r o n t i n g t h e p u b l i c p r i c e

d a t a sy ste m a p p e a r t o be o p e r a t i o n a l and m easu rem en t.

197

Thus, i t was c o n c lu d e d t h a t t h e o p e r a t i n g p r i c e d a t a s y s ­
tems o f USDA do n o t p r e s e n t l y m atch t h a t w e l l t h e n e e d s o f
p o t a t o p r o d u c e r s i n d e c i s i o n m aking.
However, t h e im f o r m a tio n s y ste m fram ew ork may u n d e r ­
s t a t e th e v a lu e o f p u b lic ly r e p o rte d d a ta i f i t n e g le c ts
t h e n o n - d e c i s i o n making u s e s o f t h e p r i c e d a t a .

F o r exam­

p l e , e v id e n c e was fo un d t h a t t h e p u b l i c p r i c e d a t a sy ste m
s e r v e s p r o d u c e r s v i a t h e la g g e d o r f o l l o w up f u n c t i o n o f
m o n it o r i n g th e a c t i o n s o f b u y e r s .

T h erefo re, c o n c e n tra tin g

s o l e l y on th e im m ediate o r c u r r e n t d e c i s i o n making f u n c t i o n
w ould seem t o u n d e r s t a t e t h e v a l u e o f t h e s e p r i c e d a t a to
p o ta to p ro ducers.

A lso i t w ould u n d e r s t a t e th e v a l u e o f

t h e s e p r i c e d a t a i f i t ig n o r e s i n f o r m a t i o n u s e d by d e c i s i o n
m akers b u t p ro d u c e d by a n a l y s t s o u t s i d e t h e p a r t i c u l a r d a t a
and i n f o r m a t i o n s y ste m b e i n g a n a ly z e d , e * g * , p r i c e f o r e ­
c a s te rs , e tc .
The p ro b lem o f d e v e lo p in g s t r i c t econom ic c r i t e r i a
f o r t h e s e t t i n g o f s t a t i s t i c a l p r i o r i t i e s among co m petin g
uses o f p u b lic p r ic e d a ta s t i l l e x i s t s .

In o t h e r w o rd s,

th e p ro b le m o f d e t e r m in in g a m o n e ta ry v a l u e f o r t h e b e n e ­
f i t s and c o s t s o f p u b l i c l y p r o v i d e d p r i c e d a t a and i n f o r ­
m a tio n r e m a in s .

A lth o u g h th e i n f o r m a t i o n sy ste m fra m e ­

work may n o t s o l v e t h i s p ro b le m , i t a llo w s f o r a s y s t e m a t i c
co m p ariso n o f com p etin g demands f o r p r i c e d a t a and i n f o r ­
m a tio n by f o c u s i n g th e r e s e a r c h on t h e u s e r s and u s e s o f
p r i c e d a t a and i n f o r m a t i o n .

T hus, t h i s fram ew ork would

a i d d e c i s i o n m akers i n s e t t i n g s t a t i s t i c a l p r i o r i t i e s .

198

The framework s u g g e s ts v ie w in g d a t a and i n f o r m a t i o n
problem s i n th e c o n t e x t o f c o n c e p t u a l , o p e r a t i o n a l o r
m easurem ent p roblem s f o r any change i n th e w o rld - e i t h e r
^ changes i n th e r e a l i t y r e p r e s e n t e d o r chan ges i n t h e u s e o f
d ata.

I n t h i s s e n s e , th e in f o r m a t i o n sy ste m framework a i d s

i n t h e o r d e r i n g o f complex e v e n ts so a s to a i d i n th e i d e n ­
t i f i c a t i o n and d e f i n i t i o n o f th e s p e c i f i c n a t u r e o f p r o ­
blem s o f d a t a and i n f o r m a t i o n sy s te m s .
On t h e b a s i s o f th e r e s u l t s o f th e p r e s e n t r e s e a r c h ,
i t a p p e a r s t h a t f u r t h e r r e s e a r c h s h o u ld fo c u s on th e m ar­
k e t and n o n -m a rk e t u s e r s o f p u b l i c p r i c e d a t a to i d e n t i f y
t h e i r n e e d s , and to i d e n t i f y changes t h a t s h o u ld be made
i n th e c u r r e n t sy ste m , i . e . ,

d if f e r e n t o p e ra tio n a l d e f in i­

t i o n s o f p r i c e f o r p u b l i c r e p o r t i n g o r changes i n m e a su re ­
ment t e c h n i q u e s .

By f o c u s in g on t h e v a r i o u s a c t o r s t h a t

u se p r i c e d a t a , t h e s e r e s e a r c h e f f o r t s w i l l i d e n t i f y who
w i l l r e c e i v e t h e b e n e f i t s , and who w i l l , b e a r t h e co st's o f
changes i n p u b l i c p r i c e d a t a r e p o r t i n g .
In a d d i t i o n , inasm uch a s th e p r e s e n t s tu d y found
e v id e n c e t h a t th e v a l u e o f p r i c e d a t a i s r e l a t e d t o t h e
s t r u c t u r e o f p r o d u c t i o n and m a r k e tin g , i t a p p e a r s t h a t f u r ­
t h e r r e s e a r c h would b e n e f i t by c o n c e n t r a t i n g on d i f f e r e n c e s
i n th e s t r u c t u r e o f m a r k e ts .

T here may b e more p ro fo u n d

d i f f e r e n c e s i n th e s t r u c t u r e o f a g r i c u l t u r a l m a rk e ts among
com m odities and among d i f f e r e n t g e o g r a p h i c a l r e g i o n s t h a t
w i l l s i g n i f i c a n t l y a f f e c t th e demand f o r p u b l i c p r i c e d a t a ,
and a f f e c t th e p r i c e d a t a c o l l e c t i o n p ro b lem .

F or exam ple,

199

w i t h i n p o t a t o m a r k e ts , s u b s t a n t i a l d i f f e r e n c e s e x i s t b e ­
tween t h e c o o p e r a t i v e s i n th e W estern p o r t i o n o f th e U n ite d
S t a t e s and those in .Michigan. Thus, r e s e a r c h e f f o r t s m ig h t b e
o r i e n t e d to s t u d y i n g th e l a r g e s c a l e o r g a n i z a t i o n s w i t h i n
a commodity m a rk e t.
8 .4

C o n c lu sio n
A lth o u g h th e p r e s e n t s tu d y does n o t answ er a l l th e

q u e s t i o n s and p roblem s c o n f r o n t i n g th e p r i c e d a t a sy ste m
and M ichigan p o t a t o p r o d u c e r s , i t does shed l i g h t on th e
n a t u r e o f t h e p rob lem and s u g g e s ts t h a t s t r u c t u r a l changes
i n p o t a t o m a rk e ts may b e d im i n is h in g th e c u r r e n t r o l e , a n d
i n any c a s e c h a n g in g th e f u t u r e p o t e n t i a l r o l e , o f USDA
p ric e re p o rtin g .

The s tu d y d i d i d e n t i f y th e em ergence o f

d e c i s i o n s f o r w hich th e c u r r e n t p r i c e d a t a sy stem i s n o t
w e l l d e s ig n e d to a d d r e s s , e . g . ,

t h e d e c i s i o n o f w h e th e r o r

n o t to b a r g a i n f o r p r e - s e a s o n c o n t r a c t s .

T h u s, changes i n

th e s t r u c t u r e o f a g r i c u l t u r a l m a rk e ts and p r i c i n g i n s t i t u ­
t i o n s n e c e s s i t a t e a p e r i o d i c r e - e v a l u a t i o n o f th e p r i c e
d a t a and i n f o r m a t i o n sy ste m o b j e c t i v e s , c o n c e p ts , and
o p e ra tin g p ro c e d u re s.
The s tu d y a l s o i d e n t i f i e d th e im p o rta n c e o f p r i c e
q u o t a t i o n s and p r i c e f o r e c a s t i n g to p o t a t o p r o d u c e r s .
These p r o d u c e r s a l s o gave h i g h e r r a t i n g s to s o u r c e s o t h e r
th a n USDA f o r t h e p r i c e d a t a th e y u s e i n d e c i s i o n m aking.
However, USDA d a t a a p p e a r to have s u b s t a n t i a l '’i n d i r e c t "
u s e by p o t a t o p r o d u c e r s ,

200

A lso , t h e n o n - p r o d u c e r a c t o r s seem to f i n d USDA
n o n - p r i c e d a t a and i n f o r m a t i o n u s e f u l , w h ile th e y c la im
l i t t l e u s e o f USDA p r i c e d a t a i n d e c i s i o n m aking.

APPENDIX I

201

APPENDIX I

PRICE DATA USERS/USES

USER

.........

................. USE

"""

Government
o ffic ia ls

Make
p o lic y

D i s t r i b u t i o n : how much p a r t i c i p a n t s make ( f a i r r e t u r n )
A llo c a tio n of sc arce reso u rce s
E q u ilib ra tio n - s ta b le /u n s ta b le A f f e c t s d i s t r i b u t i o n and a l l o c a ­
tio n

P ro d u c e r s

P ro d u c tio n

D i s t r i b u t i o n : how much p r o d u c e r
makes
P la n o p e r a t i o n s
A l l o c a t i o n : ch o o se betw en X, and
X«, th e n how much s h o u ld be
p ro d u c e d

M a rk e tin g
d e c isio n s

Where, when and how to m a rk e t:
A l l o c a t i o n betw een m a rk e ts ( e . g .
ta b le s to c k or p ro c e ssin g )
A l l o c a t i o n b etw e en c h a n n e ls o r
p r i c e d i s c o v e r y m echanisms
A l l o c a t i o n s b etw een f u n c t i o n s to
p e r f o rm b e f o r e s a l e

Buyers
(e .g .,
p ro cesso rs,
a g e n ts, d i s ­
trib u to rs ,
re ta il
c h a in s)

Buying
D e c is io n s

D i s t r i b u t i o n : how much w i l l h e
make
P la n o p e r a t i o n s : how much, w here,
when and how to buy

S e llin g
d ec isio n s

(See P ro d u c e rs - M a rk e tin g d e c i sio n s)

Input
su p p lie rs

Buying
eq u ip m en t

P la n o p e r a t i o n s

R esearch ers

P o lic y
Recommend a tio n s

A n aly ze p e rfo rm a n c e o f A g r i c u l a l se c to r

APPENDIX I I

202

APPENDIX II

PILOT INTERVIEWS:

PRODUCERS

Sample I n t e r v i e w Q u e s tio n s f o r
P ro d u c e r s ( P i l o t I n t e r v i e w s )
INTRODUCTION
I am c o n d u c tin g r e s e a r c h on p o t a t o p r o d u c e r s 1 p r i c e
and i n f o r m a t i o n n e e d s . The r e s p o n s e s you g i v e w i l l h e l p
me to d e v e lo p q u e s t i o n s f o r o t h e r p o t a t o p r o d u c e r s . Your
i d e n t i t y w i l l b e h e l d i n s t r i c t c o n f id e n c e .
STRUCTURAL QUESTIONS
WHICH MARKET?
T a b le sto c k o r P ro c essin g ?
( I f p r o c e s s i n g , w hich
m a r k e t, c h i p , d e h y d r a t e d , f r o z e n ? )
Do you change b a c k and f o r t h b etw een m a rk e ts?
What d e te r m in e s y o u r d e c i s i o n to change?
Who do you s e l l to ?
e r s , ag e n ts? )

( r e t a i l e r s , w h o le s a le rs, pack­

HOW DO YOU SELL?
C o n t r a c t o r c a s h s p o t m a rk e ts ?
I f c o n t r a c t , - how do you d e c id e on th e p r i c e ?
- when i s th e p r i c e you r e c i e v e
known to you? ( b e f o r e p l a n t i n g ,
a t d e liv e ry , a f t e r d e liv e ry ? )
- does th e p r i c e change o v e r th e
p e rio d o f th e c o n tra c t?
Do you s e l l by means o f i n d i v i d u a l n e g o t i a t i o n s ,
group n e g o t i a t i o n , t e r m i n a l m a r k e ts , e t c . ?
When do you g e t p a i d f o r s a l e s ? ( b e f o r e d e l i v e r y ,
a f t e r d e l i v e r y , o r when t h e p o t a t o e s change h a n d s ? )
- w h at i s t h e a v e r a g e tim e r e l a t i v e t o t h e p r o ­
d u c t ch a n g in g h an ds?

203

Do you com bine y o u r p o t a t o e s w i t h o t h e r p r o d u c e r s
f o r s a l e s , e , g , , j o i n t s t o r a g e o r p a c k in g f a c i l i t i e s ?
I f y e s , do you u s e a f o rm u la f o r d i v i d i n g th e
revenues?
QUESTIONS REGARDING USE OF PRICE INFORMATION
DO YOU USE INFORMATION ON PRICES?
What d e c i s i o n s r e q u i r e p r i c e i n f o r m a ti o n ?
Where do you g e t p r i c e in f o r m a t i o n ?
(n e ig h b o rs,
n e w s p a p e rs , m a g a z i n e s 1 g ov ernm en t r e p o r t s , u n i v e r s i t y ? )
Which s o u r c e i s th e m o st a c c u r a t e ?
How many s o u r c e s o f p r i c e i n f o r m a t i o n o r b u y e r s do
you c o n t a c t b e f o r e s e l l i n g y o u r p o t a t o e s ?
(or in case of
c o n t r a c t i n g , b e f o r e you a g r e e on a p r i c e ? )
I f you do n o t u s e p r i c e i n f o r m a t i o n , why n o t ?
What ty p e o f i n f o r m a t i o n i n f l u e n c e s w here you s e l l
p o t a t o e s , how you s e l l p o t a t o e s , when you s e l l p o t a t o e s ?
QUESTIONS REGARDING FUNCTIONS PERFORMED ON PRODUCT
Do you p e r f o r m any f u n c t i o n s on p o t a t o e s b e f o r e you
s e l l them? (wash, g r a d e , wax, p a c k , s t o r e ? )
Do you keep r e c o r d s on th e c o s t s in v o lv e d i n p e r ­
fo rm in g t h e s e s e r v i c e s ?
Would you b e w i l l i n g t o e s t i m a t e t h e s e f o r a g o v e r n ­
m ent agency?
GENERAL AND OPEN ENDED QUESTIONS
What do you f e e l i s t h e m a jo r p ro b lem o r w eakness
w ith re p o r te d p r ic e s ?
What do you f e e l i s t h e m ost i m p o r t a n t r o l e t h a t
p r i c e s p l a y s o r s h o u ld p l a y i n p r o d u c t i o n and m a rk e tin g ?
Are n o n - p r i c e term s o f s a l e i m p o r t a n t i n p o t a t o p r o ­
d u c t i o n and m a r k e tin g ? G ive some e x a m p le s .
What i s t h e m a jo r f a c t o r t h a t you f e e l e x p l a i n s d i f ­
f e r e n c e s i n p o t a t o p r i c e s ? What do you f e e l i s t h e m a jo r
f a c t o r t h a t d e t e r m in e s p o t a t o p r i c e s ?
What a r e t h e m a jo r o r m o st i m p o r t a n t p ro b lem s you
now e n c o u n te r i n p r o d u c in g and m a r k e tin g p o t a t o e s ?

204

What h a s changed t h e m o st, i n y o u r o p i n i o n , i n p o t a t o
m a rk e ts o v e r th e l a s t f i v e o r t e n y e a r s ?
What do you t h i n k t h e m a jo r changes w i l l b e i n th e
n e x t f i v e o r te n y e a r s ?
What do you t h i n k w i l l b e t h e m a jo r problem s c o n f r o n ­
t i n g p o t a t o p r o d u c e r s i n th e f u t u r e ?
What i n f o r m a t i o n would b e t h e m o st h e l p f u l to you i n
p ro d u c in g and m a rk e tin g p o t a t o e s ?

APPENDIX I I I

205

APPENDIX I I I

PRODUCER MAIL QUESTIONNAIRE AND FOLLOW-UP LETTERS
M I C H I G A N STATE UNIVERSITY
M FA RTW ILN T

or ACJUCULTUAAL

e C O N O M ie

E A JT L A M IN G • W1CHICA.N •

«*»M

AGRICULTURE HALL

September 21, 1973

I am very anxious to have the benefit of your help in a
study that I feel can be of great importance to the Mich­
igan potato industry.
Recently, we have become aware of
the fact that some potato producers and representatives
of potato producer organisations are very critical of the
published information that is available on the potato in­
dustry.
We are interested in investigating potato market­
ing and price information in the hopes that we may be able
to recommend specific improvements that will benefit the
entire Michigan potato industry.
Enclosed are approximately 23 questions that will help me
understand what your ^rice information needs are.
For
example, what kinds of price information would be the most
helpful to you in deciding where, when, and to whom to
sell your potatoes? Where do you get the most useful price
information? Are there differences in the type of infor­
mation needed between the tablestock and processing markets?
etc.
While I realize thac your farming operation places very
difficult time demands on you at this time of the year, I
cannot stress enough the importance of your filling out
this questionnaire.
You should also note chat in a trial
test it took, a group of potato producers only 20 minutes
to complete this questionnaire.
It is extremely important to the success of this project
that we receive input from you.
If you do not respond, we
will not have a good representation of the Michigan potato
industry, and our information will be les3 meaningful.
You are encouraged to add whatever additional comments you
wish to the questionnaire, and we assure chat you identity
will be kept confidential.
Once you have completed the
questionnaire, please return it to me in the enclosed,
scamped, self-addres3ed envelope as soon as possible.
Thank you very much for your time and cooperation.
Sincerely,

Marvin L. Klein
Phone:

(517) 355-9653
(517) 394-3647

206

QUESTIONNAIRE DIRECTED TO POTATO PRODUCERS AND POTATO SELLERS

Instructions: The purpose of this questionnaire is to find out what kinds of
information potato growers and sellers need in operating their firms with a
particular emphasis on price information. There arc two parts to the ques­
tionnaire. The answers to ?art One will be used to determine how potatoes arc
sold today. Part Two will be used to determine your information needs. All
Information you provide will be kept confidential, ho Identities of Individuals!
firms or organizations will be revealed in the report derived from this survey.
PLEASE READ EACH QUESTION CAREFULLT BEFORE ANSWERING.

Part One:
(1)

Please classify your operation by cheeking one of the following:
Producer (Produce 505! or more of the volume you
_____ Distributor, Shipper, Wholesaler (Purchase more
you sell— take title to the potatoes)

sell)
than 50* of thevolume

_____ Agent or Broker (Sell 502 or more of your total sales for other
individuals, agencies or firms— you do not take title but
work for
a fee)
_____ Hone of the above (Please briefly describe your operation if you feel
that the categories above are inadequate.)

(2)

Please indicate in which of the following markets your firm (you) sells
potatoes:
_____ Tables took (fresh)

____ 2

of cocal sales

* of total sales

_____ Processed
_____ Frozen (french fries, etc.)

____ 2

of total sales

____ Chipping

_________

%

of total sales

_____ Dehydrated

____ 2 of total sales
V

_____ Seed
Ocher

M

Specify

of total sales

____ 2 of total sales

207.

-

(3)

2-

What Is Che first point of destination beyond your operation for the major
portion of potatoes you sell? (Who receives the potatoes directly from you
or your firm?) NOTE: USE <T) FOR TABLESTOCK, (P) FOR PROCESSING AND (S)
FOR SEED.
_____ Wholesaler, distributor, shipper
_____ Agent or broker
Processor
__ Cooperative or Cooperative Processor
Retail store or chain
_____ Auction
_____ Other

(A)

Specify _ _ _ _ _ _ _ _ _

From whom do you receive paymone for the major portion of the potatoes
you sell: NOTE: USE (T) FOR TABLESTOCK, (P) FOR PROCESSING AND (S) FOR
SEED.
____ Wholesaler, distributor, shipper
_____ Agent or broker
_____ Processor
_____ Cooperative or Cooperative Processor
_____ Retail store or chain
_____ Auction
____ Other

(5)

Specify_____________

Which of the following functions are performed by you or your firm before the
buyer takes title to the potatoes? (Check each function thac your firm performs.)
NOTE: USE (T) FOR TA3LESTCCK, (?) FOR PROCESSING AND (S) FOR SEED.
_____ wash

_____ storage

_____ wax

____ other

specify _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

_____ grade

_____ other

specify ___________________

_____ pack

____ none of the above

transport (fromyour farm to
the buyer's firm)
(6)

Do you Join with ocher producers in scoring, marketing or selling potatoes?
(Belong to an organization, association or agency chat specializes in selling
potatoes or own shares in Jointly owned packing or storage facility, or are
your potatoes pooled with ocher producers’ potatoes for filling buyer or­
ders, etc.?)
_____ Yes (If yes, go to J7)
_ _ _ No

(7)

(If no, go

to >79)

Please briefly describe the major characteristics of this operation.
(What
are the major functions this organization performs? What are the most im­
portant organizational characteristics, etc.?)

208

-3 (8)

Please brief1/ explain hew the costs and returns of this operation are allocated
between the members? (How do you set charged for services performed - flat rate,
rate varying with quantity used? How are the dividends allocated, etc.?)

_____ Do not know
(Co to f?9)
(9)

Which of the following approaches most nearly describes how you become awnrc
of the price for the potatoes you 3ell? NOTE: USE (T) FOR TABLESTOCK, (P)
FOR PROCESSING AND (S) FOR SEED.
_____ Organized Auction or Central Markcc
_ _ _ Direct Sales (Individual negotiation between you and one or more buyers)
_______ Croup Bargaining (Two or more producers and one or more buyers— Includes
formal arrangements such as bargaining associations and cooperatives)
An agent, individual or organization that sells for numerous producers
_____ Ocher

(10)

Specify

.

Which of the following best describes how you know the specific price you
will receive for the major portion of the potatoes you sell? NOTE: USE (T)
FOR TABLESTOCK, (P) FOR PROCESSING AND (S) FOR SEED.
_____ Organized Auction or Central Market (Go to 312)
_____ Formula (the price you receive is established or set by a formula tied
to a reported price or some base price)
(Please answer 311)
_____ Administered (a non-negcetable price i3 announced and you trade at
that price)
(Go to 312)
Other

Specify _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

(11)

Briefly describe the major characteristics of the formula.
(What the base
price is pegged to, the major factors that determine the price received,
the base price as fixed or variable, etc.)

(12)

What proportion of your total production is sold on a pre-season contract? (Note:
A pre-season contract is one that 13 agreed to prior to planting the potatoes.)
_ _ _ _ X of total volume.

(13)

How many buyers on the average do you have contact with before agreeing on
your selling price?
______ Number (tablestock market)
Number (processing market)

209

-4Part Two;
(14)

Information Needs and Uges

Various types of Information are available to aid managers in decision making.
Please indicate how useful the following types of information are to you when
you make decisions. CHECK ONE CATECOKY FOR EACH TYPE OF INFORMATION.
TYPE OF INFORMATION

Very
Useful

Moderately
Useful

Rarely
Useful

I da- not use because
It is notQr I am not
useful
aware of It

Potato price quotations

(15)

_____

_____

_

______

Prices of other crops

_____

_____

_____

______

_______

Potato futures prices

_____

_____

_____

_____

_______

Reports of pocato prices
for past years

_____

______

______

______

Potato price forecasts

_____

_____

_____

_____

_______

Estimates of planting intentions

______

_____

_____

______

_______

Estimates of acres planted,
harvested and yields

_____

_____

_____

_____

_______

Volume of potato shipments

_____

_____

_____

______

_______

Estimates of stocks of potatoes

_____

______

_____

_____

_____

____

_____

______

_____

Estimates of production costs

_____

Transportation costs

_____

_____

_____

Wage rates

_____

_____

_____ _______________

Labor availability

_____

_____

_____

Demand estimates

_____

_____

____________

Ocher (specify)

_____

Ocher (specify)

_____

_____
_____

_____

______

______

_____

_______

_______

______

_ _ _ _ _______

Please list three sources of published price information that are che most
helpful to you in decision making.

______
________
_____

210

-5(16)

Published or reported prices night be helpful in making numerous decisions.
Please indicate how useful price data and reported prices are co you when you
stake the following decisions. CHECK ONE CATEGORY FOR EACH TYPE OF DECISION.
TYPE OF DECISION

Very
Useful

Moderately
Useful

Raraly
Useful

To plant or not to plant potatoes

_____

_____

_____

_____

Number of acres of potatoes to plant

_____

_____

_____

_____

The variety of potatoes co plant

____

______

'

_____

When to sell the potatoes (timing
of sales)

______

To bargain for pre-season contracts

_ _ _

_

_

_____

To join other producers in selling
and marketing potatoes

_____

_____

The market in which to sell potatoes
(tablestock vs. processing)

_____

_____

_____
_____

_____

____

The geographical area in which co
sell potatoes

_____

_____

_____

_____

The sice and type of container to use

_____

_____

_____

_____

____ _____

_____

_____

To whom you will sell the potatoes (ship­
per, direct to retail, co processor, etc.)

(17)

Not
Useful

Ocher (specify)

_ _ _

_____

_____

_____

Other (specify)_______________________

_____

_____

_____

_____

Price data and information can be secured from various sources. From the following
list please indicate which sources of price information you find to be the most use­
ful co you in making decisions. CHECX ONE CATEGORY FOR EACH SOURCE LISTED.
Very
Useful

SOURCE
Newspaper

_____

Magazines

_____

Industry newsletters

(specify below)

_____

Radio and TV
State and federal government
publications
University publications
Neighbors
Cooperatives and farmer organizations
Retail stores
Potato dealers, brokers, shippers, etc.
Processors and agents
Bankers and lending institutions
Other (specify)

_____ ______

Moderately Rarely
Useful
Useful

Noc
Use ftil
______

_____

_____

_ _ _

____

_____

211

-

(18)

How important arc the fallowing types of Information when you decide the price at
which you will sull the major portion of your pocacoes? CHECK ONE CATECORY FOR
EACH TYPE OF INFORMATION.
TYPE OF INFORMATION
Information on non-price
terms of sale (volume you can
deliver, time of delivery,
place of delivery, quality
factors, etc.)
The previous year's prices
The price ocher growers
have been offered

Very
Important

Moderately
Important

Of Little
Importance

Of No
Impovtar.ce

____

_____

_____

____

_____

_

___

• ____

—

_

Supply estimates

____

____

____

_____

Demand estimates

_____

____

____

_____

Your cost of production
Your level of production
Other (specify)

(19)

6-

____
_____

______
____

____

_____

____

Rank the following factors in the order of their importance in determining co whom
you sell your potatoes.
(Write a number In each space with number 1 being tho most
important, number 2 the second most important, and so on.) NOTE:
YOU MAY ADI) ITEMS
OF YOUR CHOICE.
_____ Sold to them lasc year
_____ Trust them
_____ Best price offer
_____ Volume they want
To maintain or hold a market outlet
Ocher (specify) ___________________________________

(20)

Are you familiar with the potato prices that are published by the United States
Department of Agriculture?
Yes
_____ No

(21)

_____

(If yes dnswer 3 21)
(If no go to i?23)

Do you feel these prices are useful to you?
_____ Yes

(If yes go to J23)

_____ No

(If no go co 3 2 2 )

212

-7(22)

Please briefly describe why the prices published by the United States Department
of Agriculture arc not useful to you.

(23)

What do you think shouLd be done with price reporting for It to be more useful
to you? (Briefly list your major needs or concerns.)

(24)

How many acres of pocacoes do you have this year?

_ _ _ _ _ _ acres

(25)

How many acre3 have you averaged per year for Che last 5 years?

(26)

What volume of pocacoes do you sell In an average year?

(27)

In which of the following groups does your age fall?

(23)

_____ 30 years or less

____ 31-40 years

____ 51-60

____ greater than 60 years

_ _ _ _ _ acres

_ _ _ _ _ cvt.

(Check one)
41-50 years

Please feel free co add any additional comments that you might wane co make on
this survey questionnaire, or on che problems you feel are the most important
facing pocaco producers: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

QUESTIONNAIRE COMPLETE.
PLEASE RETURN TO:

THANK YOU "OR YOUR ASSISTANCE.

Marvin L. Klein
Department of Agricultural Economics
Michigan Scate University
East Lansing, Michigan 43324

2 13

MICHIGAN STATE UNIVERSITY
W M H tM K N T 0 ? AGRICULTURAL ECONOMICS

EAST LANSING • MICHIGAN • 4 U 4

AGRICULTURE HALL

October 11, 1973

Dear Michigan P o ta to Producer:
A few weeks ago you re c e iv e d a l e t t e r and a qu estion*
n a i r e as p a r t o f a r e s e a r c h p r o j e c t t h a t i s being conducted
on p r i c e d a ta and in fo rm a tio n in th e Michigan P otato In du s­
t r y , So f a r we have n o t r e c e iv e d a response from you.
This l e t t e r i s to remind you t h a t we s t i l l need ycur
completed q u e s t io n n a ir e . I f you have n o t a lr e a d y responded,
p le a s e r e t u r n the completed q u e s tio n n a ir e in the stamped
s e lf - a d d r e s 3 e d envelope t h a t was s e n t to you w ith the
q u e s tio n n a ir e . I f our l e t t e r s have c ro sse d in the m a il,
p le a s e a c c e p t our s i n c e r e thanks and d is r e g a r d t h i s l e t t e r .
I know t h i s i s a busy time of the y e a r f o r you, b u t
the q u e s tio n n a ir e does n o t take much time to com plete. I t
i s very im p o rtan t to the success o f the r e s e a r c h p r o j e c t
and to the development o f a s tr o n g e r p o ta to in d u s tr y than
we have your re sp o n se .
Thank you f o r your h e lp .
S in c e r e ly ,

Marvin L. K lein
Research A s s i s t a n t

214

MICHIGAN STATE UNIVERSITY
D V A H TM EN T O f AGRICULTURAL ECONOMICS

eA ST lA W ,lf*C * MICHIGAN • M tM

AGRICULTURE I I A l l

November 1, 1978

Dear Michigan P o ta to Producer:
This l e t t e r i s in re f e r e n c e to the P o ta to P ric e Data
and In form ation Study q u e s tio n n a ir e which was m ailed to
you s e v e r a l weeks ago. So f a r we have n o t re c e iv e d a
response from you. I t i s very im p o rta n t f o r the success
o f t h i s re s e a r c h t h a t we have a resp o n se from each Michigan
Potato Producer. P le ase complete the q u e s t io n n a ir e and
r e t u r n i t to me.
In the event t h a t you have l o s t or m is la id th e q ues­
ti o n n a i r e , we a re e n c lo sin g a n o th e r copy and a n o th e r r e t u r n
envelope. I f you have a lre a d y responded and our l e t t e r s
crossed in the m ail, p le a s e a c c e p t our s i n c e r e thanks and
d is r e g a rd t h i s l e t t e r .
We need your h elp f o r a s u c c e s s f u l p r o j e c t . T h e re fo re ,
i f you have n o t been a b le co complete t h e " q u e s tio n n a ir e y e t ;
p le a s e do so and m ail i t to me as soon as p o s s ib l e .
S in c e r e ly ,

Marvin L. K lein
Research A s s i s t a n t
A g r i c u l t u r a l Economics
MLK/sr
Enclosure

APPENDIX IV

2.15

APPENDIX IV

SAMPLE QUESTIONS:

BUYER INTERVIEWS

1. Please describe che major uses of Che pocacoes your
firm buys.
2. Please describe Che functions your firm performs on
Che pocaeoes prior co sale, and che fora of che pocacoes
when your firm buys chem.
3. Whac is che average volume of pocacoes your firms
buys in a year?
4. What ocher farm produces does your firm buy?
3. Pocaeoes represenc whac proportion of your cocal sales?
6. How many planes does your firm operation?

In Michigan?

In che U.S.?
7. Who does your firm buy pocacoes from?
8. Please describe Che relationship berween these planes
for Che purchase of pocacoes, I.e., are these planes oper­
ated independently? Are the purchases of different com­
modities treated independently?
9. What is Che relevant market for your buying operation?
How would you define it?
10. Which external sources of information do you use?
11. Whac type of information do you use when buying pocaeoes?
12. Please describe che price daca that you use when buying
potatoes.
13. How do you decide on the orlce you will pay for pota­
toes?
14. Is there any price that could be reported chat would
help you or reduce your cose of operation?
13. How do you allocate che costs between the operations?
16. Whac type of information would be the most helpful to
you in your operation of buying and selling pocacoes?
17. Would you be willing co pay for chis service?
13. Whac are your major goals in agreeing on a buying
price for potatoes, i.e.. whac concept or price do you
cry co actain, a price that will cover full costs? a price
ehat will cover some portion of the coses of operation',

etc. ?
19. Do you use governaenc reported prices of govemmenc
statistics? If yes, which statistics are che mosc useful
co you? If no, why do you not use chese situations?
20. Whac cype of price Information do you use in agreeing
on a price? (price others offer, market news price, aver­
age price for'a market, producers cost of produccion, your
cost of produccion, demand estimates, five-year average
price, ocher?)
21. Whac are ocher decisions for which you rely on price
daca and information?

216

SAMPLE QUESTIONS:

INTERVIEWS WITH COOPERATIVE AND BAR­
GAINING ASSOCIATIONS

1. Please describe che major functions your organization
performs.
2. In which market does your firm (organization) sell
pocacoes?
3. Whac Is Che average volume thac your firm handles in a
year?
4. Briefly describe your firms buying and selling acciv-'
icies— whac role your firm plays in che marketing of pota­
toes?
3. Briefly describe how you allocate che coses and returns
CO Che services your firm performs.

6 . Does your firm engage in pre-season concracelng?

7. Briefly describe che contracts that you negotiate:
price fixed or does 1c vary? whac is base price tied to?
now are discounts and premiums computed, etc.?
3. Which terms of the contract seem to have the most im­
pact on die price agreed on in the contract?
9. Whac are the major bargaining issues thac are stressed
by your organization? by the buyers?
10. Whac are the price goals thac are stressed by your
organization? i.e., target race of return? a price cover­
ing the cost of produccion? a price co clear the market?,
etc.?
11. What types of Information do you use in bargaining?
12. Which of these do you find to be che most reliable or
accurate for your purposes?
13. What price data do you use? Where do you get this
data? (your own organization? government reports? etc.?
14. Whac type of price daca is the most useful to you in
agreeing on*the terms of sale?
13. Approximately how many producers belong to your organ­
ization?
16. Approximately how many producers regularly market
through your organization?
17. Approximately what percentage of your 3tates produc­
tion of p.ocacoes is handled by your firm?
13. Do your members include producers in ocher states?
19. How would you define che market for pocacoes in
your area?
20. How many different products does your firm handle?
Please describe the relationship of these products for
bargaining and sales activities?
21. Which is che major product?
terms)

(volume terms, dollar

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