Potato prices as affected by demand and yearly production

Abstract

With increased potato production in the past decade, actual price for potatoes given to growers has changed little, which means that inflation-adjusted price has decreased. Since production is the result of acres harvested and yield per acre, these two parameters to price are key to understanding price fluctuation. To quantify the relation between potato price and production, acreage and yield, NASS data from 1980 to 2002 were analyzed using linear regressions. Pricing and production showed an inverse, linear relationship, which is divided into two periods. Between 1980 and 1988, the price of potatoes (US$/cwt1) increased by $ 1.00 with a decrease in production of 15.6 million cwt, and between 1993 and 2002 with a decrease in production of 35.7 million cwt. Prices have become less responsive to changes in production. Harvested acres account for about onethird of the annual variation in prices, while yield per acre accounts for about one-half of the variability in prices. It appears that there was an increase in demand for potatoes from 1989 to 1992 that divides the two periods. There also was an increase in the percentage of the crop being used in the frozen and fry market, and a decrease in the percentage of the crop being used in the table or fresh market during this time period. This market change could explain the difference between 1980-1988 and 1993-2002 relationships.