Econometric analysis of the market for California early potatoes
Author AffiliationsPinhas Zusman was Instructor, Agricultural Economics, Hebrew University, Israel; Assistant Research Agricultural Economist II, University of California, Berkeley, to July 10, 1961.
Hilgardia 33(11):539-668. DOI:10.3733/hilg.v33n11p539. December 1962.
The market position of California early potatoes is influenced by a variety of factors. Most prominent among these are the demand conditions during the early season, the supply response of early crop producers in other states, and the carry-over of preceding year late potatoes into the early market.
The quantitative analysis of the market for California early potatoes was accomplished in three phases. An econometric model of the potato market consisting of fourteen equations in fourteen endogenous and fifteen exogenous variables was developed and estimated in the first phase. The sample period consisted of the years 1930 through 1958 excluding the years 1942 through 1950.
In the second phase, an analysis of the market static and dynamic characteristics was undertaken. The static analysis was essentially a comparative one. In this analysis the short run and long run effects of variation in exogenous variables were derived and expressed as systems of multipliers.
The analysis of the market dynamics was concerned mainly with the system stability and its time path under ever-changing environmental conditions. It was found that deterministically the system is stable with a relatively high dampening factor. The large observed fluctuations of prices and quantities are, therefore, due to exogenous shocks. When various sources of exogenous shocks were analyzed, it was found that random disturbances were of prime importance while erratic variation in exogenous variables was only secondary in generating the observed fluctuations.
The analysis of the system time path under ever-changing exogenous variables led to the conclusion that the rate of adjustment of the potato industry to changing conditions is relatively high, and the actual rates of change in exogenous variables generate only slight discrepancies between the system’s time path and its equilibrium values.
In the third phase, an attempt was made to use the estimated model in formulating optimum production policies for a collusion of California potato growers. When a “shortsighted” policy, based on a planning horizon of one year, was considered, it was found that such a policy leads eventually to a “stationary” optimum policy, but increases the instability of the system. The long run optimum policy problem was solved only for the special case of a “stationary” optimum policy. A general conclusion suggested by the analysis is that California growers could have benefited by some reduction of output.
Finally, a general method for long-run forecasts was developed and applied in predicting future trends of the potato market.
Adelman I., Adelman F. L. The Dynamic Properties of the Klein-Goldberger Model. Econometrica. 1959. 27(4):596-625. DOI: 10.2307/1909353 [CrossRef]
Allen R. G. D. Mathematical Economics. 1956. London: Macmillan Co. DOI: 10.2307/1882736 [CrossRef]
Arrow K., Harris T., Marschak J. Optimal Inventory Policy. Econometrica. 1951. 19(3):250-72. DOI: 10.1287/opre.188.8.131.5285 [CrossRef]
Barger H., Klein L. R. A Quarterly Model for the U. S. Economy. Journal of the American Statistical Association. 1954. 49(267):413-37.
Baumol W. J. Economic Dynamics. 1959. 2d ed. New York: Macmillan Co. DOI: 10.2307/2551784 [CrossRef]
Bean L. H. The Farmers’ Response to Price. Journal of Farm Economics. 1929. 11(3):368-85.
Bean L. H. Potato Prices and Acreage Stability 1930. reprint from The Proceedings of the 7th Annual Meeting of the Potato Association of America
Bellman R. Dynamic Programming. 1957. Princeton: Princeton University Press. DOI: 10.1126/science.153.3731.34 [CrossRef]
Bemis K. P. Increasing Potato Use Through Sales Promotion. American Potato Journal. 1955. 32(Jan.):23-29. DOI: 10.1007/BF02860568 [CrossRef]
Bemis K. P. Facts and Fancies in the Potato Industry Future. Fruit and Vegetable Review. 1956. 18(Apr.):16-17.
Benedict M. R., Stine O. C. The Agricultural Commodity Programs. Two Decades of Experience. 1956. New York: The Twentieth Century Fund.
Black J. D. Elasticities of Supply of Farm Products. Journal of Farm Economics. 1924. 6(2):145-55. DOI: 10.2307/1229807 [CrossRef]
Brennan M. J. A Model of Seasonal Inventories. Econometrica. 1959. 27(2):228-44. DOI: 10.2307/1909444 [CrossRef]
Butz E. L. The Potato Problem. National Potato Council News. 1955. 2(Aug.):5-7.
California Crop and Livestock Service. California Field Crops Statistics, 1866-1946 1947. Sacramento,. Also supplements for 1958
California Crop and Livestock Service. California Field Crops Statistics, 1944-1957 1958. Sacramento,. (Processed.)
Carlson Sune. A Study in the Pure Theory of Production. 1956. New York: Kelley &; Millman, Inc.
Chamberlin E. H. The Theory of Monopolistic Competition, a Reorientation of the Theory of Value. 1958. 7th ed. Cambridge: Harvard University Press.
Cohen R. L. Factors Affecting the Price of Potatoes in Great Britain. 1930. University of Cambridge, Dept. of Agr., Farm Economics Branch. Report No. 15. Cambridge, England, July
Cook A. C. Price Factors. Kern County Potato Growers Association 11th Annual Convention 1955. Bakersfield, California, March
Dalrymple D. G. Predicting August Potato Prices at Planting Time. 1959. University of Connecticut, Dept. of Agr. Econ. and Farm Mgmt. Progr. Rep. 29. Storrs
Dvoretzky A., Kiefer J., Wolfowitz J. The Inventory Problem: I. Case of Known Distributions of Demand. Econometrica. 1952. 20(2):187-222. DOI: 10.2307/1907847 [CrossRef]
Eisenberg I. Trading of Potatoes on the Mercantile Exchange. Kern County Potato Growers Association 11th Annual Convention 1955. Bakersfield, Calif. March
Ezekiel M. The Cobweb Theorem. Quarterly Journal of Economics. 1938. 52(2):255-80. DOI: 10.2307/1881734 [CrossRef]
Farrell Kenneth R. California Early Potatoes; Statistical Report. 1958. Berkeley: Calif. Agr. Ext. Serv. (Processed.)
Fisher M. R. A Sector Model: The Poultry Industry of the U.S.A. Econometrica. 1958. 26(1):37-66. DOI: 10.2307/1907383 [CrossRef]
Fox K. A. The Analysis of Demand for Farm Products 1953. U. S. Bur. of Agr. Econ. Tech. Bul. 1081. Washington DOI: 10.2307/1924877 [CrossRef]
Frisch R. On the Notion of Equilibrium and Disequilibrium. Review of Economic Studies. 1936. 3(2):100-06. DOI: 10.2307/2967500 [CrossRef]
Frisch R. Propagation Problems and Impulse Problems in Dynamic Economics. Economic Essays in Honour of G. Cassel. 1933. London: George Allen &; Unwin, Ltd. DOI: 10.1017/CBO9781139170116.032 [CrossRef]
Girshik M. A., Haavelmo T. Statistical Analysis of Demand for Food. Econometrica. 1947. 15(2):79-110. DOI: 10.2307/1907066 [CrossRef]
Goldberger A. S. Impact Multipliers and Dynamic Properties of the Klein-Goldberger Model. 1959. Amsterdam: North-Holland Publ. Co.
Gray Roger W., Sorenson Vernon L., Cochrane Willard W. An Economic Analysis of the Impact of Government Programs on the Potato Industry of the United States. North Central Regional Publ. 42 and Minnesota Agr. Exp. Sta. Tech. Bul. 1954. 211: St. Paul
Hartkemeier H. P. The Supply Function for Agricultural Commodities. The University of Missouri Studies. 1932. 7(4):
Hawkins A. Highlights of a Half-Century in Potato Production. American Potato Journal. 1957. 34(Jan.):25-29. DOI: 10.1007/BF02854862 [CrossRef]
Hee Olman. The Effect of Price on Acreage and Yield of Potatoes. Agricultural Economics Research. 1958. 10(4):131-140.
Hicks J. R. Value and Capital. 1939. Oxford: Clarendon Press. DOI: 10.1093/0198772866.003.0013 [CrossRef]
Hildreth C., Jarrett F. G. A Statistical Study of Livestock Production and Marketing. Cowles Comm. for Res. in Econ. Mono. 15. 1955. New York: John Wiley and Sons. DOI: 10.1097/00010694-195510000-00018 [CrossRef]
Hood William C., Koopmans T. C. Studies in Econometric Methods. (Cowles Comm. for Res. in Econ. Mono. 14). 1953. New York: John Wiley and Sons.
Kaldor N. Speculation and Economic Stability. Review of Economic Studies. 1939. 7(1):1-27. DOI: 10.2307/2967593 [CrossRef]
King B. H., Reed D. W. Some Quick Highlights on Marketing Maine Potatoes 1941. U. S. Farm Credit Admin. Spec. Rep. 91. Washington, December,. (Processed.)
Klein L. R., Goldberger A. S. An Econometric Model of the United States, 1929-1952. 1955. Amsterdam: North-Holland Publ. Co.
Lange O. The Theory of the Multiplier. Econometrica. 1943. 11(3 and 4):227-45. DOI: 10.2307/1905676 [CrossRef]
Lee Ivan M. California Early Potatoes: Situation and Outlook. Calif. Agr. Exp. Sta. Cir. 390 1948. Berkeley, 1948
Mann H. B., Wald A. On the Statistical Treatment of Linear Stochastic Difference Equations. Econometrica. 1943. 11(3 and 4):173-220. DOI: 10.2307/1905674 [CrossRef]
Marschak J., Hood William C., Koopmans T. C. Economic Measurements for Policy and Prediction. Studies in Econometric Methods. 1953. New York: John Wiley and Sons. (Cowles Comm. for Res. in Econ. Mono. 14).: DOI: 10.1007/978-94-010-9280-7_17 [CrossRef]
Marschak J., Koopmans T. C. Statistical Inference in Economics: An Introduction. Statistical Inference in Dynamic Economic Models. 1950. New York: John Wiley and Sons. (Cowles Comm. for Res. in Econ. Mono. 10.):
Martin J. H., Leonard W. H. Principles of Field Crop Production. 1951. New York: Macmillan Co.
McCorkle Chester O. Jr., Mundlak Yair. Statistical Analysis of Supply Response in Late Spring Potatoes in California. Hilgardia. 1956. 24(16): DOI: 10.3733/hilg.v24n16p455 [CrossRef]
Mehren G. L. The Potato Industry. Kern County Potato Growers Association 11th Annual Convention 1955. Bakersfield, Calif., March
Metzler L. A. The Nature and Stability of Inventory Cycles. Review of Economic Statistics. 1941. 23(3):113-29. DOI: 10.2307/1927555 [CrossRef]
Mood A. M. Introduction to the Theory of Statistics. 1950. 1st ed. New York: McGraw-Hill Book Co.
Murdock D. C. Linear Algebra for Undergraduates. 1957. New York: John Wiley and Sons.
National Potato Council. The Demand and Utilization of Potatoes. National Potato Council News. 1957. 4(Jan.):14-15.
Nerlove Marc. Distributed Lags and Estimation of Long Run Supply and Demand Elasticities: Theoretical Considerations. Journal of Farm Economics. 1958. 40(2):301-11. DOI: 10.2307/1234920 [CrossRef]
Nerlove Marc. The Dynamics of Supply: Estimation of Farmers’ Response to Price. 1958. Baltimore: Johns Hopkins Press.
Nerlove Marc, Addison W. Statistical Estimation of Long Run Elasticities of Supply and Demand. Journal of Farm Economics. 1958. 40(4):861-80. DOI: 10.2307/1234772 [CrossRef]
Pubols B. H., Klaman S. B. Farmers’ Response to Price in the Production of Potatoes, 1922-1941 1945. U. S. Bur. of Agr. Econ. Washington,. (Processed.)
Pusateri F. P. Can Efficiency, Supply-Demand Facts and Cooperation Create a Stable Potato Economy?. Potato Growers Association of California and Arizona, Inc., 1960 Yearbook 1960. Bakersfield, Calif
Pusateri F. P. Potato Growing in California. Kern County Potato Growers Association 12th Annual Convention 1956. Bakersfield, Calif., March DOI: 10.1007/BF02888322 [CrossRef]
Pusateri F. P. What Factors Influence the Price of Potatoes. Kern County Potato Growers Association 1959 Yearbook 1959. Bakersfield, Calif., March DOI: 10.1007/BF02854994 [CrossRef]
Samuelson P. A. Foundations of Economic Analysis. 1947. Cambridge: Harvard University Press.
Samuelson P. A. A Fundamental Multiplier Identity. Econometrica. 1943. 11(3 and 4):221-26. DOI: 10.2307/1905675 [CrossRef]
Samuelson P. A. The Stability of Equilibrium: Comparative Statics and Dynamics. Econometrica. 1941. 9(2):97-120. DOI: 10.2307/1906872 [CrossRef]
Samuelson P. A. The Stability of Equilibrium: Linear and Nonlinear Systems. Econometrica. 1942. 10(1):1-25. DOI: 10.2307/1907018 [CrossRef]
Schultz H. The Theory and Measurement of Demand. 1938. Chicago: The University of Chicago Press.
Scott F. E. An Analysis of the Factors Affecting the Price of California Early Potatoes 1942. ” Unpublished Master’s thesis, Univ. of Calif
Scott F. E., Mumford Herbert W. Jr. Problems in Marketing Potatoes; Preliminary Results of Some Recent Research. 1949. Washington: U. S. Bur. of Agr. Econ. (Processed.)
Shuffett D. Milton. The Demand and Price Structure for Selected Vegetables 1954. U. S. Dept. of Agr. Tech. Bul. 1105. Washington
Slutzky E. The Summation of Random Causes as the Source of Cyclic Processes. Econometrica. 1937. 5(2):105-46. DOI: 10.2307/1907241 [CrossRef]
Sorenson V. L. A Study of the Nature and Costs of Government Programs Affecting Potatoes and Their Impact on Intermarket Relationship. Journal of Farm Economics. 1954. 36(4):1281-84.
Suits D. B. An Econometric Model of the Watermelon Market. Journal of Farm Economics. 1955. 37(2):237-51. DOI: 10.2307/1233923 [CrossRef]
Suits D. B., Koizumi S. The Dynamics of the Onion Market. Journal of Farm Economics. 1956. 38(2):475-84. DOI: 10.2307/1234387 [CrossRef]
Theil H. Economic Forecasts and Policy. (Contributions to Economic Analysis, No. 15.). 1958. Amsterdam: North-Holland Publ. Co.
Tinbergen J. On the Theory of Economic Policy. (Contributions to Economic Analysis, No. 1.). 1952. Amsterdam: North-Holland Publ. Co.
Tinbergen J. Statistical Testing of Business-Cycle Theories. Vol. II: Business Cycles in the United States of America, 1919-1932. 1939. Geneva: League of Nations Econ. Intelligence Serv.
U. S. Agricultural Marketing Service. Agricultural Economics Research. 1958. 10(4):
U. S. Agricultural Marketing Service. Agricultural Prices 1958. monthly reports
U. S. Agricultural Marketing Service. Carlot Unloads of Certain Fruits and Vegetables in 100 U. S. Cities and 5 Canadian Cities 1956.
U. S. Agricultural Marketing Service. Carlot Unloads of Certain Fruits and Vegetables in 66 Cities 1933.
U. S. Agricultural Marketing Service. Farm-Retail Spreads for Food Products 1957. Misc. Publ. 741
U. S. Agricultural Marketing Service. Marketing Kern District Early Long White Potatoes, Summary of 1955 Shipments 1956. Bakersfield, Calif
U. S. Agricultural Marketing Service. Movements, Freight Rates, and Prices of Potatoes; Recent Trends in Nine Major Markets 1953. November,. (Processed.)
U. S. Agricultural Marketing Service. Merchantable Potato Stocks, March 1 monthly reports, 1943-1958
U. S. Agricultural Marketing Service. Potato Marketing Agreements Under Federal Legislation 1954. October,. (Processed.)
U. S. Agricultural Marketing Service. Potato Prices, Monthly and Seasonal Average Prices Received by Farmers, by States and United States, 1909-1952 1954. Stat. Bul. 140
U. S. Agricultural Marketing Service. Potato Report Nos. 1-68 1957. Bakersfield, Calif., daily issues
U. S. Agricultural Marketing Service. Potatoes and Sweetpotatoes; Estimates by States and Seasonal Groups; Acreage, Yield, Production, Price, Value, Farm Disposition, Stocks 1955-1959.
U. S. Agricultural Marketing Service. Potatoes and Sweetpotatoes; Usual Dates for Planting, Harvesting and Marketing by Seasons, in Principal Areas. Agr. Handbook. 1957. 127:
U. S. Agricultural Marketing Service. Supplement for 1954 to the Consumption of Food in the United States, 1909-52. Agr. Handbook. 1955. 62:
U. S. Bureau of Agricultural Economics. Generalized Types of Farming in the United States. Agr. Inf. Bul. 1950. 3:
U. S. Bureau of Agricultural Economics. Potatoes—Acreage, Production, Value, Farm Disposition, January 1 Stocks, 1866-1950, by States. Dept. of Agr. Stat. Bul. 1953. 122:
U. S. Bureau of the Census. Statistical Abstract of the United States 1959, 1959.
U. S. Bureau of Labor Statistics. Retail Prices of Food annual and monthly reports
U. S. Bureau of Labor Statistics. Wholesale Prices and Price Indexes annual reports
U. S. Commodity Exchange Authority. Futures Trading in Potatoes, 1954-55 1955. (Processed.)
U. S. Congress, House. Potato Surpluses and Prevention of Wastage; Hearings Before the Subcommittee on Food Shortages of the Committee of Agriculture 1947. 80th Cong., 1st Sess
U. S. Department of Agriculture. Agricultural Statistics annual issues
U. S. Department of Agriculture. Potato Preferences Among Household Consumers. Misc. Publ. 1948. 667:
U. S. Department of Agriculture. Potatoes—Sweetpotatoes, Revised Estimates, by States, 1949-55; Acreage, Yield, Production, Price and Value, Farm Disposition, and January 1 Stocks. Stat. Bul. 1956. 190: (Processed.)
U. S. Office of Business Economics. Business Statistics, 1959 Edition; a Supplement to the Survey of Current Business 1959.
U. S. Production and Marketing Administration. Irish Potatoes: Price Support and Related Operations, Commodity Credit Corporation and Section 32 Funds 1950. January 1, 1943-December 31, 1949,. (Processed.)
U. S. Production and Marketing Administration. Report of the Administrator of the Production and Marketing Administration 1950 and 1951.
U. S. Production and Marketing Administration. Weekly Summary of Carlot Shipments weekly issues
Wold H. A Study in the Analysis of Stationary Time Series. 1954. 2d ed. Stockholm: Almqvist and Wiksell.
Wold H., Jureen L. Demand Analysis, a Study in Econometrics. 1953. New York: John Wiley and Sons.
Working H. The Theory of Price of Storage. American Economic Review. 1949. 39(6):1254-62.
Wright D. N. Irish Potatoes, Costs and General Hints on Production. 1957. Bakersfield: Calif. Agri. Ext. Serv., March.
Yule G. U. On a Method of Investigating Periodicity in Disturbed Series. (Philosophical Transaction Series A. 1927. 226: London: Royal Society. DOI: 10.1098/rsta.1927.0007 [CrossRef]
Also in this issue:Correction
Why patent publicly supported research discoveries?
Agriculture in the Sacramento-San Joaquin Delta
Subirrigation in the Delta
Farming organic soils of the Delta
Subsurface movement of water and salt in Delta organic soils
Mapping Delta water quality by remote sensing
Salinity in Delta peat soils
Salt tolerance of corn in the Delta
Caprification: A unique relationship between plant and insect
Beneficial bacteria enhance plant growth
Mold toxins: Hazard to animal and human health
New strawberries introduced