Economic problems of the potato industry
Collazzo, Charles Joseph Jr
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The purposes of the thesis are first to summarize the production, marketing and income problems of the potato producers, and secondly to examine some possible solutions to these problems. All available sources of information have been used to obtain data and expert opinion to make the summary of problems as complete as possible. Most of the important concepts, institutions and methods advanced in the past as aids to farmers in solving their most important problems are discussed and evaluated. In addition, the author proposes an original plan of price protection for farmers designed to overcome the flaws in other schemes. The history and background of the potato are discussed beginning with the discovery of the sweet potato Ipomoea Batatas by Columbus and the discovery of the Irish potato Solanum Tuberosum by other early Spanish explorers. It is the latter species with which this thesis is concerned. Historical, economic and social determinants of importance to the potato industry are traced through the period of increasing consumption, which roughly coincided with the rise of capitalism; and into the period of declining consumption which began around World War I. Part II begins with a discussion of economic factors involved in such problems of production as Who should produce potatoes, what kind of potatoes to produce, and where production should take place. Price fluctuations, income and profits are related to each other as well as to production and consumption. A great effort is made to show how improved product differentiation, grading, and standardization may affect the relatively inelastic demand for potatoes. In addition, the possibilities of demand creation are explored as a means of shifting the demand curve to maximize the industry's income. The conclusion is reached that potatoes must be promoted into a useful yet superior class of goods by developing higher quality standards and increased product services. Potatoes cannot remain as an inferior economic good if the industry is to know anything but decreasing usage, surplus production and low prices for years to come. On the other hand, cost minimization is given emphasis as a major area of difficulty for the potato producer. Storage, transportation, packaging, grading, and handling costs and trends are discussed. The third part of the thesis involves the various methods of solving farm problems. Measure for controlling production are developed and evaluated. Among the techniques of control discussed 214 are acreage allotments, marketing quotas, and withdrawal of land from production. These plans are discussed as general agricultural policies first; then related directly to the potato industry where evidence is available. The various ways of aiding the farmer by manipulation of prices and practices at the marketing level of our economic system are the next area developed. Among the best known methods discussed are commodity loans, marketing orders, marketing agreements, marketing cooperatives, direct purchases by the government, and purchase agreements as well as consumer subsidies. Advantages and disadvantages of each are weighed along with the description of the important features of each plan. So far as evidence is available, the actual experiences of the potato industry with various techniques of farm aid are discussed. The last chapter in Part III is a discussion of parity and other pricing and income devices to solve farm problems. Included among others are the parity scheme sponsored by George Peek, Brannan's plan, the forward price plan of Schultz, and the cost of production plan of Governor Thornton of Colorado. There is in addition an original cost of production plan devised by the author of the thesis. No one plan of agricultural aid can solve the many problems of the farmer. Cooperatives, marketing agreements, commodity loans and other devices to help the farmer help himself must be accompanied by some sort of price protection plan. We advocate a price guarantee based on the individual farmer's cost of production. Each farmer would estimate his cost of production using standard accounting procedures and submit a bid to a government authority to supply a given number of bushels of potatoes at a given cost before planting his crop. The government would accept the lowest cost bids until a volume of potatoes sufficient to satisfy estimated market requirements for the following years was contracted for. No potatoes would be sold directly to the government but farmers whose cost bids were accepted would be protected against price declines which fell below their individual cost of production. Those whose cost of production estimates showed them to be inefficient would be discouraged from planting potatoes at all, first because they would know in advance their costs were too high, and secondly, because they would have no price protection. We advocate this plan because we believe that the farmer cannot control production to maintain a high price level as industry does with many of the products it sells the farmer. While it would be unsatisfactory for the farmersto combine to maintain high prices by cutting production, we do want to give efficient farmers some price protection while they produce adequate quantities of essential foods and raw materials. Profits would not be guaranteed nor would a standard of living be protected as with parity plans. Each farmer would have to strive to be efficient to make a profit and the necessity of controlling and computing costs for this plan would help farmers to be efficient. No farmer would be paid a subsidy unless he sold his crop below the computed cost, so that no audit of farm accounts would be necessary unless a farmer applied for a subsidy. Such a plan would tend to promote the constant adjustment of the factors of production to the most efficient proportions, the shift of production to the most efficient farms or areas, and the most efficient production and marketing practices.
Thesis (M.A.)--Boston University
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