ANANALYSISOFINTERREGIONAL

COMPETITION

INTHEU.S.SUMMERPOTATOMARKET

by

ERIKALANHOWARD,B.S.

ATHESIS

IN

AGRICULTURALECONOMICS

SubmittedtotheGraduateFaculty

ofTexasTechUniversityin

partialFulfillmentof

theRequirementsfor

theDegreeof

MASTEROFSCIENCE
 /V^ .

ACKNOWLEDGEMENTS

IwishtoexpressmyappreciationtoDr.BobDavis
forhis

friendshipandguidancethroughoutmygraduate
studiesandfor

directingthisresearch.IamalsoindebtedtoDr.
HongY.Lee

andDr.KaryMathisfortheirtimeandassistance.

Finally, I wish to thank my parents for their

support and

encouragement.
 CONTENTS

ACKNO\<JLEDGEMENT S 1

LISTOFTABLESv

LISTOFFIGURESvi

I.INTRODUCTION

ProblemStatem

Objectives

II.REVIEWOFLITERA

III.CONCEPTUALFRAMEW

Assumptions

TwoRegionalSpatia

Summary2

IV.METHODSANDPROCED

DataSources

Demand30
IV
 LISTOFTABLES

1.Baseaveragebimonthlysuppliesbydefinedproductio

region during U.S. summer season, 1974

2. Bimonthly supplies by defined production region dur

U.S.summerseasonafteradjustmentsforindustrytrend

3. Total revenue by state: Actual 1981 revenue an

estimated 54

revenueunderanoptimaldistributionofU.S.summer

potatoes

4. Farm level prices by state: Historical prices and

estimated 56

pricesunderanoptimaldistributionofU.S.summer

potatoes, by indicated months

5. Optimal interregional shipments of U.S. potatoes

13.Quantitydemandedbyconsumptionregiongivenbase

adjustedsupplyconditions,forbimonthlyperiods

14.Changesfrombenchmarkwholesalepricesand
quantities78

demanded,byconsumptionregion:givenanincreasein

Southwestproductionwithbasetransfercosts

15.ActualandoptimalmarketsforTexassummer
potatoes80

inorderofimportance:Basesupplyconditionsand

increasedSouthwestproduction,givenbasetransferco
 LISTOFFIGURES

1.MajorsummerpotatoacreageintheTexasHighPl

counties:Bailey,Castro,DeafSmith,Gaines,Hale

Parmer, Swisher, Yoakum, and An

2.Tworegionmodel;aggregationofsupplyanddemandf

region

3.Tworegionmodel;excesssupplyandexcessdemand

and trade volume line

4. Two region model; fixed supply and downward slopi

functions

1. 5.Regionaldemarcationandmajorconsumptioncenters2

2. 6.Regionaldemarcationandmajorshippingpoints29

3. 7.StatesclassifiedwithintheU.S.summerseasonalca

4. 8.ThetopsevenstatesclassifiedwithintheU.S.fall

seasonalcategorywhichshippotatoesduringthesummer

season

9.Trendsinpotatoproductionforstatesclassified
15.OptimalinterregionalshipmentsofU.S.potatoesdur

AugustSeptemberwithincreasedtransfercosts:

Percentageallocationofbaseregionalsupplies

16.OptimalinterregionalshipmentsofU.S.
potatoesduring73

JuneJulywithincreasedSouthwestproduction:Percenta

allocation of adjusted regional supplies

17.OptimalinterregionalshipmentsofU.S.potatoesdu
74

AugustSeptemberwithincreasedSouthwestproduction:

Percentageallocationofadjustedregionalsupplies
 CHAPTERI

INTRODUCTION

Problem Statement

Potato production and marketing are important compone

Texas

HighPlainsagriculture.WestTexasisamajorsupplierofs

potatoes to many domestic markets. Potatoes are also an imp

source

ofrevenuetoHighPlainsproducers.Largequantitiesofresour

theformofland,labor,andcapitalinvestmentaredevoted
potato

production,withgreatercommitmentspossible.In1983HighPla

farmersharvestedonly9,300acresbutthevalueoftheharvest

$21.6 million (27). Over the past decade the Texas share
summer

potatomarketwas810percentoftotalUnitedStatesproduct
Figure1.MajorsummerpotatoacreageintheTexasHighPlains

bycounties:Bailey,Castro,DeafSmith,Gaines,

Hale,Lamb,Parmer,Swisher,Yoakum,and
Andrews
 marketwiththoseproducedduringthesummer(16).Consequentl

recentyears,theroleoftheU.S.summerproductioninmee
consumer

demand has been declining. The percentage of total annual

production accounted for by the summer production has de

steadily

over the past decade (5 p. 116).

TwoissuesofspecialinteresttotheHighPlainspotatoindus

andallsummerpotatoproducersaretheextenttowhichpres
markets

canbeexpandedandnewonesopenedandwhatchangingeffects
forces

mentionedabovewillhaveontheindustry.Theeconomicsituat
may

bringaboutthegrowthorthedeclineofthepotatoindustryon
High

Plainsandotherlocations.IftheHighPlainspotatoproduc
attempt

toexpandproductiontheywillbeabletodosoonlyifthey

competitiveadvantageoverotherproducingregions.Theymust
 Objectives

Thegeneralobjectiveofthisresearchwastoanalyze
the

competitive position of the Texas High Plains potato

industry

relativetoothermajorsummerpotatoproducingregionsand
determine

themarketpotentialavailabletoTexasHighPlainsproducer
in

view of a changing market environment. The specific object

were

to:

1. 1.Analyzethemarketconditionswhichcurrentlyexist

2. inthesummerpotatoindustry.

2. 2.Determinethedistributionpatternofpotatoesthat

wouldresultinanoptimalmarketwidedistribution
with

theleasttotaltransfercosttotheindustryasa
whole.

3.Determineifpastdistributionpatternsof
Texas

potatoeshaveresultedinthehighestpossiblenet
returns

toTexasproducersincomparisontoreturnsunder
an

optimal distribution.

4. Estimate the effects of increasing

transportation

costsontheoptimaldistributionpatternsofpotatoes
in

the U.S., the wholesale market prices, and the

net

revenues of producers.

5.Estimatetheeffectsofanincreaseinproduction
in

Texas, New Mexico, and Colorado on the

optimal

distribution patterns of potatoes in the U.S.,

the
wholesalemarketprices,andthenetrevenues
of

producers.
 CHAPTERII

REVIEWOFLITERATURE

InordertoanalyzethecompetitivepositionoftheHigh
Plains

potatoindustryrelativetootherproductionregionsan
understanding

of the theory of spatial and price equilibrium a

interregional

competition was needed. Studies dealing specifically wit

spatial

equilibrium and interregional competition problems as wel

as general

informationonvegetablemarketingproblemswerereviewed.

BresslerandKing(4)providedanextensiveexplanationof
the

theoryofmarketswithspatiallydispersedproductionando
price

equilibriuminspatiallyseparatedregions,alwaysassuming
 conditions.Suchsimilaritiesincludedthehomogeneityoft
products

underconsideration,theabsenceofmonopoly,andtheavailabi
of

perfectknowledgeaboutsupply,demand,andpriceconditionsi
all

alternative markets.

HammondandSorensen(7)providedinformationaboutpossible

shippingareasandthedifferentproductionareascompetingi
those

marketsatthetimeTexasproductionofpotatoeswouldbemovin
to

market.Thecentralstatesregionwasselectedasthemajor
potential

marketareaforvegetablesgrowninTexas.Thestudyindicate
that

Colorado would be the major competitor.

Enke,(6)in1951,suggestedthatanoptimalsolutionto
an

equilibrium problem could be obtained by electric analogue.

was a
 Samuelson(15)usedEnke'sframeworktoshowhowthespati

equilibriumproblemcouldbesolvedmathematicallyasamaximi

problem.Hismethodwastouseastandardlinearprogrammingap

theKoopmansHitchcockminimumtransportcostmodel.Samuels
premise

wasthataspatialpriceequilibriumproblemcouldhaveano

solution. He defined that solution as the maximum point o

social

payoff"(NSP).ThisnetsocialpayoffconsistedofNcomponent
=

socialpayoffinregion1plussocialpayoffinregion2plus
social

payoffinregionNminusthesumoftransportcostsbetween
regions.

The social payoff of any region is the algebraic area under

excessdemand curve.

NSP=S.(E.)T..(E..)(1)

S(E.)=areaundertheexcessdemandcurve

E..=amountofexportsfromitojregion
computationalproblemsresulted.Theconceptofmaximizingnet

payoffwasusedandthemodelwasrestatedasaquadraticprogr

algorithm.Inthiscasethepricingandcompetitveequilibri

conditions of pure competition were proxied by substituting

marginal conditions for a monopolist. Long run analyses

specified

by relaxing regional restrictions. One disadvantage was that

algorithim was large and computation was difficu

TramelandSeale(19)definedanewterm"reactiveprogra
as:

Ameansofobtainingtheequilibriumflowsof
a

commodity between areas with given

transportation

cost functions, given demand schedules in each of

the

several areas of consumption and given

supply

schedules in each of the several areas of

 jointequilibriumfortwoormoreproductsweremade.Additio

suggestionsweremadethatproblemsininterregionalcompetiti

analyzed using reactive programming, such as changes in d

supply,

transportationcharges,marketingcosts,andotherbarriersto

BrownandElrod(2&3)analyzedtheinterregionalcompetitio

theGeorgiapeachindustryandtheGeorgiawatermelonindust

relationtotherestoftheU.S.Thespatialequilibriummodel
in

theirstudieshadthefollowingcharacteristics:(1)Producti

specificproducingareasandtimeperiods,(2)demandfunction

each consumption area, and (3) transportation cost func

Shipments

ofcommoditiesfromproducingregionstoconsumingareaswere
as

actualproductionlevels.StandardMetropolitanStatisticalAr

(SMSA)wereindentifiedasconsumingareasandwholesaletermi
 domesticandforeignconsumptionareasandwasusedtoevaluat

interrelationships between export prices in U.S. ports and

freight rates. The criterion used to determine spatial equil

was

the maximum point of net social payoff

Lamkin,Stennis,andFondren(10)formulatedamodeltoreflec

longruncompetitiveequilibriumofthecottonindustryand
determine

the optimal sizes and locations for gins and warehouses in

Southeastern United States given sets of: (1) spatially sepa

raw

materialsupplyareas,andprocessingfacilitiesand(2)exis

warehouses and final demand areas.

Inthemodeldevelopedforthestudy,costminimizationwast

primarygoal.Theobjectivefunctionspecifiedtheginlocatio
and

volumes,lengthoftheginningseason,warehouselocationsa
volumes,
 easternTennessee.Theprogrammingmodelhadtwoimportant

characteristicsthatpertaintothisstudy:(1)theprotectio
local

demandbytransportationcostsand,(2)lessthanperfectlye

demand functions for products that incorporate both local

nonlocal

demand components. The objective function of the model maxim

producerandconsumersurplusesbyachievinganoptimalenterp

selection."Theprogrammingformatisconstructedforeasyte
of

sensitivity of solutions to changes in demand relationsh

transfer

costs input prices ... and technical coefficients." (p.12

Mathia,Bateman,andLaw(12)performedasimilarstudyonswe

potato production and marketing in North Carolina, Georgia

Louisiana.

Tholstrup in 1980 (13) constructed a spatial equilibrium

that

simulated average market conditions in the U.S. peach indus

 centeri,inthejthmonth,inthekth
year.

Pop^^.=ThepopulationoftheSMSAinwhich
the

ithconsumingcenterwas
located.

I..,=Thepercapitapersonalincome
in the

SMSA in which the ith consuming center

was

located.

Q.., = The amount purchased in the ith

consuming

center, in the jth biweekly period in the

kth

year.

B., = The
jthbiweekly
period of
the kth
year.
 JohnS.Perrin(14)researchedthemarketpotentialsoftheT

HighPlainsswineindustry.TwoofPerrin'smajorobjectivesw
to

"determinethemarketsinwhichTexasproducerscanbest
compete...."

and"todeterminethepatternandvolumeofshipmentsoflive
and

porkamongregionsoftheUnitedStatesthatwouldresultin
least

total cost of transportation" (p.4). He divided the U.S.

twentytwoproductionregionsbystates.Thesurplusorshortag

livehogsineachregionwasdeterminedbycomparingtheleve

actual production and slaughter in each region. The surpl

deficit

of slaughter capacity in each region was determined by

difference

inthelevelofconsumptionandslaughterineachregion.Regio

estimatesofproduction,slaughter,andconsumptionwereproje
by

extrapolatinglineartimetrends.Simultaneousleastcostshipm
 interregionaltradeflowsandpricerelationshipsthatexist
purely

competitive market. REACT could select from among twenty dif

combinations of demand and supply relationship

 CHAPTERIII

CONCEPTUALFRAMEWORK

DiscussionsofspatialequilibriumtheorybyBresslerand
(4),

andTomekandRobinson(18)providedvaluableinputin
developingthe

conceptualframeworkinthisstudy.Thesummerpotatomark
wasviewed

aspurelycompetitiveinnaturewithlargenumbersofbuy
and

sellers,ahomogeneousproduct,freeentry,andnobarriers
trade.

Theassumedgoalofproducerswasprofitmaximization,whi
thegoalof

consumerswasutilitymaximizationbyacquiringadesireda
ofthe

commodity (potatoes) at the least possible cost

Giventhespatialnatureofthenumerousproduction(surpl
and
 surplusregionstodeficitregions.Buyerswereassumedtob

indifferentastothesourceofthepotatoes.Thepricesofpro

regionswereassumedtobecloselylinkedtopricesatregion

consumptioncenters,wheretheforcesofsupplyanddemanda
brought

together.Sinceproducersshipahomogeneousproduct,thepri
each

receivesunderpurecompetitionisthemarketequilibriumpri
lessthe

costoftransferringaunitofproducttothemarket.The
interregional

pricedifferentialscannotexceedthecostsofmovingpotatoe
amongthe

variousgeographicalregionsforanextendedperiodoftime.
time

the price difference is greater than the transfer costs, bu

will

purchasecommoditiesinthelowpricedregionandshipthemto

higher priced region, thereby raising prices in the former

lowering
 thesummerpotatomarketbecausethepricewhichprevailsi
producing

regionsvariesfromregiontoregionandismuchlessthantha
large

metropolitanareasthatareconsumption(deficit)regions.Asi

tworegionmodelisrepresentedgraphicallyinfigure2;deman

supply curves for each region are known. If trade is proh

between

thetworegions,theintersectionoftheregionaldemandands

curves determines the price.

Infigure2,thepriceinregiononeisP;inregiontwo
the

prevailingpriceisP.Atanypriceregiontwohasa
greaterquantity

demandedandalesserquantitysuppliedthanregionone.
comparing

thetworegions,regiononehasanexcesssupplyandregion
has

excess demand. If there are no trade barriers or no c

connected with

transportingtheproduct,thentraderswillengageinarbitrag
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 figure2.ThemarketpricewillbeP^andquantitydemandedw
equal

quantitysuppliedatQ^.Theactualallocationofsuppliesand

flowsisstraightforwardsincetransferbetweenthetworegion
be

made without cost.

The information in figure 2 can be used to construct ex

supply

anddemandcurveswhichfurtherexplainwhatwouldoccurint
real

market. The excess demand and excess supply curves would lo

like

those in figure 3. Figure 3 is based on the same demand a

supply

curvesforregionsoneandtwoasfigure2.Theexcesssupply
is

basedonthehorizontaldistancebetweenthesupplyanddema
curves

atpricesabovetheequilibriumpointP.inregionone(poin
minus

pointAinthelefthanddiagram).Excesssupplywillbezero
O

Q.

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 bothregionalmarketswouldbeindenticalatP'.However,i
transfer

costsexist,theamountwhichwouldflowbetweenthetworegi
will

decrease.Notradewouldoccurifthecosttoshipaunitof
potatoes

isgreaterthanthepricedifferentialwhichexistsbetweenthe

regions.Ifatraderengagesinarbitragebybuyingthepotato
in

regiononeatthelowerpriceofP.andsellingtheminregio
twoata

higherpriceofP,thenhemustbewillingtopaythetransfe
costto

movethepotatoesfromoneregiontotheother.Histotalreven
will

bereducedbythecostsoftransportation;therefore,thepric

differential per unit between the two regions must exceed

transfer

costperunitifthetraderistomakeaprofit.Iftheprice
unit

inregiontwoisnotgreaterthanthatinregiononeplusth
wouldbetradedisindicatedbythepointwhichintersectsthe
of

tradelineXY.Thehorizontallineisillustratedbytinfigu
At

atransfercostoftperunit,thetotalamounttransferredwou
Q.

units,

Amajorassumptioninthediscussionofthepreviousexamp
that

thesupplyanddemandcurvesareknownwithcertainty.Actu
there

aremanyproblemsinvolvedinestimatingaccurateregionalsupp
and

demand functions for a commodity. It is necessary to know th

coefficients of the demand and supply equations or to know

actual

predeterminedquantitiessuppliedanddemandedbyeachregion.

example case with predetermined estimates of the quantit

supplied,

whicharenotafunctionofprice,andknowndemandfunctions
o
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 fromregiononetoregiontwo.Thetradevolumeline,XY,
illustrates

theeffectoftransfercostsontheamountshippedbyshowing

quantitiesthatwouldbetransferredateachalternativecost.

example, if transfer costs were t per unit, then only OQ un

would

be shipped from region one to region two. After the trade,

price

perunitinregionsoneandtwowouldbePandP,,respectivel
The

ab'^^

pricedifferencewill
be equal to the
transfer cost of t
per unit.

Summary

Achangeinthepricerelationshipsanddistributionof
potatoes may

occur when either regional demand or regional supply cur

shift, or

transfer costs change. These are important considerations

decidewhatmarketalternativesaremostsuitable,andhowtob
use

theirlimitedresourcesindistributingpotatoes.
 CHAPTERIV

METHODSANDPROCEDURES

Thefollowingmethodsofanalysiswereusedtoaccomplish
the

objectives:Graphicanalysis,leastsquaresmultliple
regression,and

spatial equilbrium analysis.

Data Sources

Thefirstobjectivewasaccomplishedbycollectingandanalyz

dataforJunethroughSeptemberbystateandregionforthey
1974

through1981.UnitedStatesDepartmentofAgriculturesourc
provided

informationonstateandregionalproduction,wholesaleprice

variousStandardMetropolitanStatisticalAreas(SMSAs),fallp

stocks held as of May 1, shipments of fall potatoes during

Southwest

Dallas Ft. Worth (DWF)

Denver (DEN)

Houston (HOU)

San Antonio (SAN)

Kansas City (KANC)

Oklahoma City (OKC)

Midwest

Chicago (CHI)

Cleveland (CLEVE)

Detroit (DET)

Cincinnati (CINN)

Minneapolis (MINN)

St. Louis (STLO)

Wi^st

Seattle (SEA)

San Francisco (SFRAN)

Los Angeles (LA)

East

Boston (BOS)

New York (NYORK)

Buffalo (BUFF)

Philadelphia
(PHIL)

Pittsburgh (PITT

Washington, D.C
(WASH)

Southeast

Atlanta (ATL)

Birmingham (BIRM

Columbia (COL)

New Orlean
(NORL)
 Figure5,
Regional
demarcationand
majorconsumption
centers
Region I

Hereford,.TX (HERE)

Albuquerque, NM (ALBQ)

Walsenburg, CO (WAL)

Region II

Kalmath Falls, OR (KAL)

Yakima, WA (YAK)

Idaho Falls, ID (IDF)

Region III

North Platte, NB (NPL)

DesMoines,IA(DMOI)

KansasCity,KS(KANC)

Springfield,IL(SPRI)

Columbus, OH (COL)

Region IV

Minneapolis, MN (MINN)

Fargo, ND (FARG)
Lansing, MI (LANS)

Region V

Camden, NJ (CAM)

Buffalo, NY
(BUFF)

Harrisburgh,PA
(HAR)

PersqueIsle,ME
(PSI)

Baltimore,MD
(BALT)

Region VI

Knoxville, TN
(KNOX)

Roanoak,VA(ROA)

Raleigh, NC
(RALE)

Birmingham, A
(BIRM)

Region VII
Bakersfield, C
(BAK)

Phoenix, AZ (PHE)

Figure6.Regiona
demarcationand
majorshipping
points
 Beforetheremainingobjectivescouldbeachievedusing

spatial equilibrium analysis three elements were necessa

1. An estimated demand function for each

consumption area.

2. Estimated transfer costs between each

production region and all destinations.

3.Estimatesoffixedsuppliesforeachstate

andproductionregion,includingfall

producingstates.

Demand

Thecomputeralgorithmused
inthisstudyrequiredthat
demand

equationsbespecifiedasa
hundredweight of fresh market US 1# potatoes
in

consumptioncenteri,inthejthmonth,thek
th
 ReactiveProgramming

Oncethepreliminaryestimatesofdemand,supplyandtransfe

costswerecom.pleteaspatialequilibriummodelwasusedto

determinethedistributionpatternwhichwouldresultinan
optimal

leasttransfercostsolutionfortheindustry.Differentmod

conditionsweresimulatedbychangingoneofthesethreeinp
In

the spatial equilibrium model presented in the concep

framework,

importing and exporting regions and the quantities traded w

readilydeterminedbygraphicalanalysis.Theproblembecamem

complex when the analysis was expanded to several regions.

questionofwhichsupplyregionshouldsupplywhichconsumpt

regionwasdifficulttoanswer.Someregionshaveasurpluswh

others have a deficit in supply. If transfer costs were ze

then

the distribution pattern would not be important, but w

positive
Manyvariationsofthetransportationmodelhavebeenapplied

analysisofspatialmarketsandinterregionalcompetition;ye
all

haveusedsimilartechniquesandmadesimilarassumptions.
Reactive

programming,aniterativeapproachwhichgrewoutofthebas

transportation models but is more flexible since it all

choices

pertaining to the form of interregional competition and th

mathematicalformsofsupplyanddemandfunctionsusedinthi

study.Reactiveprogrammingallocatedthesuppliesofthefir

production origin to the consumption point which offered

highest

netprice(wholesalepricelesstransfercost)tothatorigin
if

no other origin existed. The search for other profit

allocations

continueduntilthesupplyofthefirstproductionoriginwas

up.Thesecondoriginallocateditssuppliesinthesamemann
 optimalsolutioninformationwasreportedforproductflows,
shadow

pricesforeachpossibleallocation,finalwholesaleandsuppl

levelprices,quantitiessuppliedanddemanded,andtotal
consumer

outlays and total producer receipts by region.

Theinitialresultsobtainedunderthebasesupplyconditions,

basetransfercosts,andtheestimateddemandequationsserved
a

pointofreference,i.e.,abenchmark,inallsubsequentmode

simulations where transfer costs were increased and producti

from

the Southwest was increased.

 CHAPTER V
RESULTS

Demand Estimates

Ademandfunctionwasestimatedforthetwobimonthlyperi

JuneJulyandAugustSeptemberfor23consumptioncenters.
first

stepwastoformulatealinearmodelwhichwouldinclude
appropriate

effectforeachofthe23centersforwhichtherewas
adequateprice

andquantityinformation.Thiswasaccomplishedbyadding
twentytwo

dummyvariablestothehypothesizedequation.Thedummy
variablesacted

asinterceptshifters;thuseachconsumptioncenterhadth
sameslope

butadifferentinterceptvalue.Theresultwas23differe
demand

functions. For a more thorough discussion of this met

refer to
 9.982D 3.620D 9.901D**
* ,
(4.305)'' (2.220)' (2.695r
kie
+8,113D 2,061D 1,626D.
(2,227)^'' (2,243)^' (2,478)"^^

* = significant at the 10 percent level

** = significant at the 1 percent level

where:

Dj^ = 1 if the consumption center is Los

Angeles,

zero otherwise;

^2 = 1 if the consumption center is

Boston,

zero otherwise;

D^ = 1 if the consumption center is

Chicago,

zero otherwise;

D,=1iftheconsumptioncenterisNew
York,

zero otherwise;
 D|^1iftheconsumptioncenteris
Buffalo,

zero otherwise;

^]^5 = 1 if the consumption center is

Columbia,

zero otherwise;

^]^5 = 1 if the consumption center is

Dallas,

zero otherwise;

^Ij=1iftheconsumptioncenterisHouston,
zero otherwise;

^18 ~ 1 ^^ ^^ consumption center is San

Antonio,

zero otherwise;

Dj^g = 1 if the consumption center is

Pittsburgh,

zero otherwise;

D2Q = 1 if the consumption center is Kansas

City,

zero otherwise;
oftheerrortermsandheteroscedasticity.ADurbinWatson

indicatedthattheerrortermswerepositivelyserially
correlated

overtime.Themodelwhenadjustedtoaccountfortheset
problems

resultedinnoautocorrelation;however,theresultantsi
forthe

estimatedcoefficientswerenotasexpected.Thedemand
functionas

presented above was used in all subsequent analysises

The next step was to disaggregate the single de

equation into

23separatefunctionsintheP=a+bQform.The198
populationand

percapitapersonalincomefiguresforeachconsumption
centerwere

multiplied by their respective coefficients and then add

to the

intercept term to give equations of the desired form

Transportation Costs
 Oncedemandandtransportationcostestimateswerecomplete

thenecessaryinputrequirementsforthespatialequilibriumm

except supply estimates, were available.

Trends in Supplies and Shipments

Summerpotatoeswereproducedcommerciallyin17states
7).

Calfornia leads the United States in production followe

Virginia,

Texas, Minnesota,New Jersey, Colorado, Michigan, Delaware

Alabama,

inthatorder(Appendixtable1).For1974through1981these

statesproduced90percentofthetotalUnitedStatessummerp

crop.Eightfallproducingstatesaremajorcompetitorsdurin

summer months (figure 8). These states carry over fall po

through

thefallandwinterseasonsinordertotakeadvantageofhi
average

springandsummerprices.ThethreeNorthwesternstates,Ida
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 Therewasatremendousvariabilityinshipmentsoffallpotat

foreverystate,exceptMaineandNorthDakota.Fivestates

Wisconsin,NewYork,Washington,Oregon,andNewJerseyallsh

slight declining trend in shipments (figure 10). Idaho show

tremendousincreaseinshipmentsoverthe1974through1981p

(figure10).Thiscorrespondstoadecreaseinfallpotatos
held

inIdahoasofMay1thefollowingyear.Asfigure11indica
the

totalfallpotatostocksheldonMay1ofthefollowingyear

growersandlocaldealershavebeenhighlyunstableoverthe
1981

period.

Theestimatesusedinthebasemodel(table1)werederivedfr

eitherproductionorshipmentdataforeachstateorregion.
later

analyseschangesintheseamountsweremadetosimulatepossi

changes in the industry. These changes involved (1) a simula

 48

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Table1.Baseaveragebimonthlysuppliesbydefinedproduc
region

duringU.S.summerseason,1974
1981.

Production, , Bimonthly Period

OriginJune July August September

(Hundredweigh
t)

Region I 2,039,405 2,099,320

Region II 4,244,710 4,615,290

Region III 507,200 1,703,400

Region IV 947,024 6,206,576

Region V 2,369,141 3,894,759

Region VI 4,362,212 457,518

Region VII 2,239,280 1,547,280

Total 16,708,772 20,553,343

For description of production regions, see

figure 5.

Source: Base supplies consist of the average

19741981 production

for summer producing states and the 1974198

average

shipments during the summer months from fa

producing

states
.
summerseasonafteradjustmentsforindustry
trends.

Southwest
Production
 Production50%
Increase100%
Increase

Origin

AugustSeptember JuneJuly June July^

(Hundredweight
RegionI 3,149,005 3,059,107 3,741,640

RegionII 3,816,910 5,960,880 5,960,880

RegionIII 1,532,700 507,200 507,200

RegionIV 4,790,808 633,594 633,594

RegionVI 118,778 3,741,822 3,741,822

RegionVII 1,574,280 3,239,280 2,239,280

Total 18,093,837 18,328,993 19,011,806

Only Region I supplies are changed in this colum

Source: Base supplies for all regions were adjusted

the e

matedindustrytrendsandsuppliesfromRegion
I were
arbitrarilyincreasedby50and100percent.
 Productionorigin: Percentagedecrease:
NewYork 25
Wisconsin 40
Oregon 20
NewJersey 25
Washington 20
Ohio 20
Virginia 27
Minneasota 27

ThetotaldecreasefortheAugustSeptemberperiodwasabou
2.5

millioncwt,,whichwas12percentofthetotalbenchmark
supplies

forthatperiod.TheadjustedsuppliesfortheJuneJuly
periodwere

increasedby1.6millioncwt.ora9.7percenttotal
increasefrom

thebasesuppliesduringJuneJuly,Thisincreasewastheresu
of

theexpansionofshipmentsfromIdahoduringtheearlysumme

ThechangesmadeinTexas,NewMexico,andColoradosuppli
of

50percent,duringJuneJulytranslateintoa6,1percent
increasein
thetotalbasesupplies.The100percentsupplyincreasefr
these

statesduringthesameperiodamountstoa10,2increase
total

supplies,A50percentincreaseinTexas,Colorado,andN
Mexico

supplies in AugustSeptember amounts to a 5,1 perce

increase in

total supplies.
odel Solutions

Theestimateddemandfunctions,transfercostsandsuppliesw

sedasinputsinareactiveprogrammingmodelwhichwassolve
give

ptimalshippingpatternsfromeachsupplysourcetoeach
consumption

enterforthreeseparatescenarios.Firstabenchmarkwas
established

romthebasemodelalone,thenincreasedtransportationcosts

xaminedandfinallytheeffectsofobservedtrendsinproduct
and

hipmentsforallregionsalongwithincreasedsuppliesfromReg
I

Texas,Colorado,andNewMexico)wereanalyzed.Theanalysisw

arried out for 26 separate production areas and 25 consumpt

centers,

incethereactiveprogrammingmodeltendstolimitthenumber

estinations that receive shipments from each origin the resu

are
 Table3,Totalrevenuebystate:Actual1981revenueand
estimated

revenueunderanoptimaldistributionofU,S.sum
potatoes

Actual Estimated
State revenue1/ revenue2/ Differen

(fdollars).

Alabama 13,787,000 22,240,396 8,453,3

California 34,632,000 47,814,906 13,182,9
Colorado 10,091,000 19,469,178 9,378,1
Illinios 2,546,000 14,038,365 11,492,3
Ind./Ohio 3,488,000 11,117,731 7,629,7
Iowa 1,512,000 6,268,992 4,756,9
15,144,7
Del./Maryland 14,445,000 29,589,767
Michigan 10,244,000 25,078,857 14,834,8
Minneasota 12,353,000 32,038,994 19,685,9
Nebraska 1,408,000 4,755,665 3,347,6
N.Jersey 14,462,000 36,502,838 22,040,8
N.Mexico 6,143,000 13,543,418 7,400,4
N.Carolina 4,512,000 8,951,203 4,439,2

Tennessee 2,734,000 6,182,257 3,448,2

Texas 15,410,000 35,780,369 20,370,3

Virginia 22,388,000 51,683,229 29,295,2
Arizona 10,744,000 13,725,159 2,981,1
 betweentheiractualstaterevenueandtheestimatedbenchm
revenue.

Thesestatesrepresentedthreeofthetopfourproducingstates

thesummer(AppendixTable1).Arizona,Tennessee,NorthCaro
and

Iowahadtheleastdifferencesbetweenactualandbenchmarkrev

Withanoptimaldistributionsolutiontherewouldbea109pe

increase in total producer revenue for the indust

Thebasemodelalsoindicatedthatearliermarketingofpotat

wouldbemoreprofitableforeachoftheseventeenproducingst

sincethebenchmarkfarmlevelnetpriceswerehigherduring
July

thanduringAugustSeptemberforeverystate.Thissituation,
was

alsotrueforhistoricalprices(6),wasexpectedsincethet
United

StatessupplyduringJuneJulywaslessthanduringAugust
September.As
Table 4. Farm level prices by state: Historical prices an

estimatedpricesunderanoptimaldistributionof

U.S.summerpotatoes,byindicatedmonths

3/

St
at
e
19
81
"
^
19
74

19
81
^
Be
nc
hm
ar
k
pr
ic
e"

Price Price June/July August/Sept

(dollarsperhundredweight)
California,andPheonix,Arizona,whicharetheproductionorig

RegionVII,exportpotatoestoNewOrleans,Denver,Houston,
Dallas

locatedintheSouthwestandSoutheastconsumptionareasaswel

San Francisco and Los Angeles in the Western consumption

ProductionoriginsinCaliforniaaresimultaneouslyshippingp
to

those consumption centers and exporting potatoes outside the

Only

theshipmentstotheSouthwestandSoutheastareshownsince

shipments are to consumption centers outside of production R

VII.

TheWesternconsumptionareaalsoreceivespotatoesfromRegion

This figure should not be interpreted to mean that Califo

consumption centers are receiving potatoes from the Northwes

then

exporting them to another consumption area.

Underthebasemodelconditions,productionRegionsIand
not
58

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overlapspartsofthreeconsumptionareas.Theexactcitiesrec

potatoesfromshippingpointsinthisregionwereKansasCity

Louis, Cleveland, Detroit, Pittsburgh, and Atlan

Increased Transportation Costs

Thesecondmodelscenariowasanincreaseinthelevel
of

transportation costs by 50, 75, and 100 percent for all

routes. The

resultsobtainedundera75percentincreaseintransfercost
not

presentedbecausetherewaslittledifferencebetweenthosere
and

theresultswitha50percentincrease.Thechangesinthe
distribution

patterns,asindicatedbythemodel,undertwolevelsofincre

transportation costs, will project industry reactions to tra

cost

changes.Theresultswerecomparedtotheoptimalbenchmarkres

obtained from the first simulation (tables 5 and

 o
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consumption area increased slighty while shipments to the

decreased;(2)RegionIIIexperiencedasmalldecreaseinexpor

RegionVIIexportedlesstotheSoutheastandSouthwestconsu

areas;and(4)withhighertransportationcosts,RegionIImade

shipments to the West and Midwest and increased shipments t

Southwest.

During AugustSeptember the change in distribution patte

more

substantial.Allproductionregionsexportpotatoesasinth

model, but to different consumption areas (figure 15).

differences

fromthebenchmarksolutionwere:(1)ProductionRegionIIr

shipments to the West and Southwest and began exporting t

Southeast;thusreplacingsomeshipmentsfromRegionsIIIand

that consumption area; (2) Region III shifted some of its e

from

theSouthwesttotheEast;(3)RegionIVincreaseditsexpor
65

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 66

Table 7. Reduction in producer revenue with a

base transfer costs, JuneJuly; percentage

from benchmark revenue by region

ProductionIncreaseintransfercostsBenchmark

origin50.0%100.0%RevenueJL/

(percent)(dolla

RegionI4.408.7135,664,898

RegionII8.8917.6568,586,171

RegionIII2.173.649,407,457

RegionIV2.364.1117,457,099

RegionV1.072.42.44,994,325
 RegionVI2.114.5181,189,313

RegionVII5.9411.7038,078,665

Total Percent

Reduction3.91%8.63%$295,377,943

\/Benchmarkrevenueisthenetrevenuetoallproduc
inadefinedproductionregionforJunethrough

September.Theseestimateswereobtainedfromthe

reactiveprogramunderbasesupplyand

transfer cost conditions

 thelargestpercentagedecreaseinrevenueoccurredinRegions
and

VIIbecauseofthelongdistancestomarketsfromthesetwo
production

regions.ProductionRegionsIII,IV,andVIshowedapproximatel

samelevelofchangeinrevenue.Thedecreaseinproducerreve
for

eachoftheseregionswasaround2percentgivena50perce
increase

intransfercosts,andaround4percentwhentransfercosts

increased 100 percent.

During AugustSeptember, the reduction in revenue fo

producers

was4.8percentand9.58percentrespectively,whentran
costswere

increasedby50and100percent(table8).Alargerperce
decrease

inproducerrevenueswouldbeexpectedforthisperiodsin
total

supplyforAugustSeptemberislargerthanforJuneJuly(
2).As

before,thepercentagereductioninrevenuewasthelarges
Table 8. Reduction in producer revenue with an increase

base transfer costs, AugustSeptember: percentage

changefrombenchmarkrevenuebyregion

Production Increase in transfer costs Benchmark

origin 50.0 % 100.0 % revenue

(percent) (dollar

RegionI 4.04 8.36 33,128,0

RegionII 12.15 24.63 63,324,5

RegionIII 1.69 3.75 28,546,9

RegionIV 3.10 6.53 99,923,0

RegionV 1.79 2.33 66,951,6

RegionVI _a / 7,967,7

RegionVII 7.22 14.70 23,461,4

TotalPercent
Reduction 4.80% 9.5 $323,203,4

a/Indicateslessthana.01reduction
Table 9. Wholesale prices by consumption region: Per

changefrombasepricewithanincreaseintransfer

costs,June
September

50percentincreasein
transfercosts

AugustSeptemberJuneJuly

Consumptionprice
percentagechlangeprice
percentagechange

regionbase1/frombasepricebasefrom
baseprice

(dollars)(dollars)

last $18.04 1.00% $19, .75 1.00%

Southwest17.05ay 18,.87

U

s

15.10 6.50 17, .76 3.50

Southeast 17.94 2.40 19, .58

^
 Asthetransfercostswereincreasedthefollowingchangesi

wholesalepriceswereobserved(table9):(1)TheWesthadt
largest

percentagereductioninpricesfollowedbytheMidwest,while

pricesintheSouthwestdidnotchange;(2)pricesintheEast

Southeastcanbeexpectedtoriseinbothtimeperiodssince

regionwouldreceiveasmallerquantity;(3)thepercentagep

increasefortheSoutheastisnotasgreatforJuneJulyasi
for

AugustSeptember because the Southeastern production moves

market

duringthattime;and,(4)consumersintheEastcanbeexpec
to

incur the greatest increase in prices of all five consumpt

areas,

sincethisconsumptionareaisfarfromthemajorproduction
regions.

Totalconsumeroutlaysdecreasedbecauseeachregion
will

experienceeitherchangesinpricesandquantitiesfrom
 Table10.Totalproducerrevenue,totalconsumeroutlay

andtotaltransfercosts

TransferProducerConsummer
Transfer

cost basis revenue outlay

costs

(dollars)

Base
$618,581,348
$674,023,757
$55,442,018

50 Percent

Increase 590,296,375 671,625,024 81,328,013

100 Percent

Increase574,694,000668,056,321105,982,652
percentoverbasesuppliesduringJuneJulyandby50percent

AugustSeptember.Thesuppliesforotherproductionregionswer

adjusted to follow the projected trends in summer productio

shipmentsoffallpotatoesduringthesummerseason.Whenthea

supplieswereincorporatedintothebasemodeltheshippingpa

changed for all production regions except Region V (figures

17).

SincethecitiesintheSouthwestandMidwestaretheclosestm

toproductionRegionI,thesecitiesobtainmuchoftheincr

supplies.RegionIbeganexportingtotheMidwestduringJune
and

totheSoutheastduringAugustSeptember.Adjustmentsforot
regions

wereasfollows:(1)ThepercentageshippedfromRegionIIto
west

coastdecreasedandexportstotheMidwestandSouthwestincre
(2)

RegionVIIincreaseditsexportstoSouthwestcitiesduringJ
July,
73

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Table14.Changesfrombenchmarkwholesalepricesandquan

demanded, by consumption region: given

increase,

inSouthwestproductionwithbasetransfercosts
i/

Consumption Areas

BimonthlySupply jjWestSouthwestEastSouthMidwest
period increase

"(percent)

Quantity demanded

Jun/Jul Level1 ' 8.80 9.51 8.54 9.15 12

Level2 13.36 14,70 10.56 12.50 17
Aug/Sept Level1 8.99 8.31 14.40 13.03 15

Prices

Jun/Jul
Level1
4.09
9.50
8.54
9.15
12.36

Level27.4814.7010.5612.5017.50

Aug/SeptLevel17.555.808.257.135.20
 1/ForbasepricesseeTable11and
footnotes

2/Level1=a50%increaseinSouthwestsuppliesfo
period

Level2=a100%increaseinSouthwestsuppliesfo
period
 facedwithlowerpricesduringJuneJulyandhigherpricesdu

AugustSeptember(table14).TheMidwesthadthelargestincre
in

quantityandthelargestdecreaseinpriceduringJuneJuly,b

experiencedtheleastincreaseinpriceandthelargestdecrea

quantity during AugustSeptember. The highest price increase

largest

quantity decrease, during AugustSeptember, occurred in the

The

West faced the least decrease in prices during JuneJu

Optimal Markets for the Southwest

SincethemarketpotentialsforTexaswereofspecialinterest

thisstudy,acomparisonofhistoricalmarketsforTexasto
optimal

marketsobtainedfromthespatialmodelrevealssomemajo
differences.

The top twelve historical markets were compared to the benc

 Table15.ActualandoptimalmarketsforTexassummerpot

inorderofimportance:Basesupplyconditions
and

increasedSouthwestproduction,givenbase
transfer

costs

II
Actual Optimal markets

Historical Base supplies Increase in supplie

markets

Aug.Sept. JuneJuly

Aug.Sept. June

1. 1.DallasDallasDallasDallasDallas

2. 2.HoustonSanAntonioOklaCitySanAntonioOklaCity

1. 3.DenverOklaCityHouston

2. OklaCitySanAntonio

3. 4.OklaCityAtlantaSanAntonioAtlanta
 Texas;yetChicagowasnotanoptimalmarketforTexasinany
the

modelsimulations,andDenverwasinthetoptwelveonlyonce
Atlanta,

Birmingham,andNewOrleans,rankedlowintermsofactualunlo
but

wererankedhighinallmodelsimulations.St.Louis,Cincinna
and

ClevelandwerethetoprankedMidwesternmarketsforTexasin
model

simulations.CitiesintheWesternandEasternconsumptionregi
do

notappeartobepotentialmarketsforTexasproducerssincet
did

notappearinanyoptimalsolutionandrankedlowaccordingt
their

shadow prices.
 CHAPTERVI

SUMMARYANDCONCLUSIONS

Transportationrepresentsamajorcostofmarketingpotatoes

Totalindustrytransportationcostsandthetransportationc
outlay

of each production region is dependent on the existing ship

patterns. The Southwest production region has experienced

competition from other summer production areas, as some su

producing states have decreased their production and incre

competition from fall producing states as the volume of

potatoes

marketedduringthesummerhasincreased.Theeffectofthisch
on

Texasproducersisnotknownforcertain,butthemarketpotent
for

Texasmaybegreaterifproductionfromtheregionwereincreas

This study explored the spatial distribution system of U

 48contiguousstatesweredividedinto7productionregionsa
five

consumptionregions.Twentyfiveconsumptioncentersandtwen
five

productionoriginswereidentifiedforthestudy.Thedemand
each

regionwasestimatedfrompublisheddataordevelopedasdiscus

earlier.Abasesupplyquantitywasestimatedforeachregiono

basisofhistoricalstateproductionand/orpotatoshipments
during

the summer season. Regional estimates of future supplies we

projectedbyextrapolatinglineartimetrends.In1983Texaspr

2.2millioncwt.ofpotatoesduringthesummerseason.Thiswas

percentofthetotalsummerproduction,onlyCaliforniaprodu
more.

Texas,NewMexico,andColoradotogetherproduced5.1millionc

whichwas30percentoftotalsummerproduction.Productionw

projected at 6.2 million cwt. for the Southwest in one mod

 distributionpatternwasalsodeterminedbyusingprojected
supply

levelsandbasetransfercosts.

Inthefirstmodelsimulationthetotalsupplyofpotatoeswas

16.7millioncwt.duringJuneJulyand20.5millioncwt.durin

AugustSeptember. RegionsII, III,IV, andVII exportedpotat

to

consumptioncentersoutsidetheirrespectiveproductionregio
during

AugustSeptember.DuringJuneJuly,RegionsII,IV,VI,andV
were

netexporters.Thetotalcostofallinterregionalshipmentsf
both

bimonthlyperiodswas$55.4millionandtotalproducerrevenue

$618 million. With an optimal distribution the total net rev

for

allproductionregionswasincreasedby109percentduetol

industry wide transfer costs. The net farm prices for

production

sourcesweremuchhigherunderanoptimaldistributionthanw
 ProductionRegionIshippedpotatoestoSouthwestcitiesonl

underallincreasedtransfercostlevels.Theimportingconsump

regionswereunchangedfromthebasesolutionforeitherti
period.

RegionIIexperiencedthelargestdecreaseinproducerrevenu
when

transfer costs were increased while Region I experienced

least

decrease in revenue. Total producer revenue was $590.2 mill

and

totaltransfercostswere$81.3millionfora50percentincrea
in

transfercosts.Totalrevenuewas$574.6millionandtotal
transfer

costswere$105.9millionfora100percentincreaseintransf

costs.

Thereallocationofavailablesuppliesresultedinadecrease

wholesalepricesinsomeconsumptionareasandincreasesinpri
for
RegionVI'sexportstotheMidwest;(2)RegionIVbeganexporti

theEastduringJuneJulyinresponsetoincreasedimportsfrom

NorthwestandtheSouthwest;(3)RegionIIbeganexportingto

Southeast,and;(4)RegionIIIstoppedexportstotheSouthwest

the East.

Allconsumptionareasreceivedaboutthesamepercentageoft

availablesuppliesastheyreceivedbeforethebasesupplies

adjusted. However, the wholesale prices changed in

consumption

areassincetheyreceiveddifferentquantitiesthanunderbas
supply

conditions.TheMidwest,Southeast,andWestreceivedamuch
larger

quantityofsupplies,duringJuneJuly,thanwhattheyreceive
under

thebasesupplyconditions;consequentlywholesaleprices
decreased

themostinthoseregions.Wholesalepricesdecreasedinall
markets

duringJuneJulybutincreasedduringAugustSeptemberwith
inTexaswithanoptimalindustrywidedistribution.Themodel

indicatedthatincreasedtransportationcostswillnothavea
large

affectonSouthwestshippingpatternsnoronwholesaleprices
the

region,althoughproducerrevenuewilldecreaseasitdidfora

production regions. As transfer costs increase the resu

indicate

that revenue to all production regions will decrease

Thecostoftransportingpotatoeshasincreasedabout10perce

annuallysince1979(29).Ifcostscontinuetoincreaseata

percentcompoundannualrateitwilltakelessthan8yearsf

transportationcoststodouble.Anoilembargoorsomeunforse

change in the industry could cause transportation costs

increase

even faster. Such increases will result in lower producer n

revenue.

CeterisParibus,andthereforesomesmallormarginalproduce
productionintheSouthwestwasincreased.Themodelalsoindic

thatwholesalepricesintheSouthwestwillnotshowlarge
increases

whensupplyfromRegionIisincreased,giventhecurrentindu

trends. In addition to promotional activities, Texas produ

should

directtheirattentiontoincreasedmarketingduringJuneand

firsthalfofJulywheneverpossible,sincethefarmlevelpr
were

higherduringthattime.UndersimulatedmarketconditionsTe
and

NewMexico'smajorfuturecompetitorsinSouthwestmarketswil

California and the Northwest.

Theresultsprojecthowthesummerpotatomarketwillreactt

changingconditionsinsupplyandtransportationcosts.The
scenarios

inthisstudyarethreeillustrationsofthekindsofproblem
that
 onthefeasibilityoflocatingapotatoprocessingplantont
High

Plainsisneeded.

Limitations

The model was sensitive to the demand, supply,

transportation

costinputsandthereliabilityoftheresultsdependsupon

model's ability to represent actual and simulated ma

conditions.

Some of the assumptions inherent in the model may limit

ability to

do this. These assumptions may not hold since other fact

that

affect the actual market which were not taken into accou
The

characteristics of pure competition are not comple

fulfilled.

Potatoesarenotentirelyhomogeneous.Gradingisanevid
of the

qualityvariationwithinthecommodityandbuyersareawa
of this
thesameastherelativedistributionofthetotalvolum
receivedby

eachconsumptionarea.
 LITERATURECITED

(1)Boles,PatrickP.CurrentCostsofOperatingRefriger

Trucks for Hauline Fresh Fruits and Vegetables by Mul

Firms.

Staff paper. National Economics Division. U.S.D.A., Was

D.C,

(December 1979).

(2) Brown, J.D. and J.C. Elrod. "Georgia Peach

Producing

Industry: An Analysis of Interregional Competition."

University of

Georgia, Ag. Experiment Station Research Bulletin No.

24. (December

1967).

(3) Brown, J.D. and J.C. Elrod. "Competitive

Position of the Georgia

Watermelon Producing Industry." University of Georgia,

Experiment

Station Research Bulletin No. 28. (April 1968

(4)Bressler,RaymondandRichardA.King.MarketPrices

InterregionalTrade.NormanWeathersPrintingCo.,Ralei
 (12)Mathia,GeneA.,LannyBateman,andJerryLaw.AnEc

Analysis of Sweet Potato Production and Marketing i

Carolina,

Georgia,andLouisiana.SouthernCooperativeSeriesBulleti
233.

(July 1978).

(13) Neter, John., William Wasserman, and Michael K

Applied

Linear Regression Models. Richard Irwin Inc., Ho

Illinois.,

(1983).

(14)Perrin,J.S.,"SwineMarketingPotentialsoftheT
High

Plains."MasterofScienceThesis,DepartmentofAgricul
Economics,

Texas Tech University, Lubbock Texas., (December 1

(15)Samuelson,PaulA."SpatialPriceEquilibriumandLi

Programming.",AmericanEconomicReview.Vol.42:(1952):2

(16)Takayama,T.,andG.G.Judge."AnInterregionalActi

AnalysisModelfortheAgriculturalSector."AmericanJou
 (25)U.S.DepartmentofAgriculture.CropReporting
Board,

StatisticalReportingService.EstimatedPotato
Stocks.WashingtonD.C,

selected issues (19741981).

(26) U.S. Department of Agriculture. Agricultural

Marketing service

Fruit and Vegetable Truck Rate and Cost Summary.

Washington D.C,

selected issues.

(27)U.S.DepartmentofCommerce.BureauofCensus.
County and City

Data Book. Washington D.C, (1979, 1980, 1981).

(28)U.S.DepartmentofCommerce.SurveyofCurrent
Business.

WashingtonD.C,selectedissues(1979,1980,1981).

(29)Zepp,GlennA.CostsofProducingPotatoesfor
1980 and 1981.

EconomicResearchService,U.S.D.A.,WashingtonD.C.,
 No. 491.

(October 1982).
APPENDI
X
94
Anonlinearrelationshipbetweentransportationcosts

anddistancewouldbeexpected.Transportationcosts
per

unitwouldordinarilyincreaseatadecreasingrate
as

distanceincreases.Twononlinearregressionmodels
were

estimatedusingthesurveydata;however,thelinear
model

fittedthedatabetterthanthenonlinearmodels.
Thetwo

alternative models considered were:

1. (1)Exponentialmodel.Y=a(x)b

2. (2)Squarerootmodel.Y=a+b(x)+c(x^)

Estimationresults

Model Parameterestimates R-square

 Exponential a=3.842*b=0.692* 0.81

Square root a=1.248*b=0.0027*

c=0.048 0.91

*=Highlysignificant;theestimateissignificantly

differentfromzeroatthe.01significance
level,
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