Vegetable price improvement through choice of markets

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Virginia Polytechnic Institute


This study was designed to compare the price levels of the Northern and Southern marketing areas and to determine if the returns to Virginia vegetable growers would be increased if more shipments were made to the Southern area. Six crops, snap beans, cabbage, sweet corn, cucumbers, peppers, and tomatoes, were studied during 1954, 1955, and 1956. Eighteen consecutive weeks beginning near the first of June were studied during each year. Price and quantity data were collected from the daily market reports of New York, Baltimore, and Atlanta. Additional data on shipments of the six crops from Virginia were collected from Eastern Virginia vegetable producers.

The prices which Virginia vegetable growers received for their produce in the terminal markets were found to be within a 25 percent range of the weekly terminal market median prices for 74 percent of the shipments where comparisons could be made.

The price level in the Southern market was significantly higher than in the Northern market for snap beans, cucumbers, peppers, and tomatoes. There was no difference between the Northern and Southern market price levels for cabbage and sweet corn at the desired confidence level, but the Southern market price level was found to be higher at the 20 percent confidence level.

The analysis of the two Northern markets indicates that no significant difference existed in the price levels of these markets for any of the crops. This relationship could not be accepted at the desired confidence level for cabbage, peppers, and tomatoes because the price variances were not homogeneous.

After deducting transportation costs from Virginia to the respective markets, the highest net price to Virginia vegetable growers for most crops was available more often from the Southern market than in the Northern market. The study of these net prices in conjunction with the shipments by Virginia growers during the same period indicated that even though higher returns could have been realized from shipments to the Southern marketing area, Virginia growers generally did not take advantage of them.

Some significant relationships between price and quantity arriving on the market were found. However, a few of the relationships did not conform to the traditional inverse relationships of the factors as expressed economic theory. Such results indicate that the data may not have been suitable for this type analysis. Complete data on the price of each unit and the total number of units in the markets should give a more reliable supply and demand relationship.

Although the weekly period proved satisfactory for determining the differences in price levels of the markets, the use of such a period imposes serious limitations on the analysis of price and quantity relationships. If marketing decisions generally are made on the basis of the relative prices of the previous day or two days on the markets, the weekly period may average out many of the pertinent differences.

Even though the demand in the Southern market was usually more elastic than in the Northern market, the price in the Southern market was found to generally be more responsive to a given change in quantity arriving on the market. This responsiveness of price to varying quantities arriving on the market was primarily a function of the difference in the size of the markets. The elasticity of demand of the markets was found to be of secondary importance in determining the responsiveness of price. The greatest difference in price responsiveness between the markets was for peppers. They were much more responsive to changes in the quantity arriving in the Southern market than in the Northern market. The prices of snap beans, cucumbers, and tomatoes are also more responsive to quantity changes in the Southern market. The price of sweet corn was found to be more responsive to additional carlot arrivals in the Northern market. Cabbage was not used in the calculations because the preliminary results did not conform to economic theory.