chapter 4 n.
Skip this Video
Loading SlideShow in 5 Seconds..
Chapter 4 PowerPoint Presentation
Download Presentation
Chapter 4

Loading in 2 Seconds...

play fullscreen
1 / 21

Chapter 4 - PowerPoint PPT Presentation

  • Uploaded on

Chapter 4. Price Determination: Matching Quantities Supplied and Demanded. Effects of Demand Shifts. Demand Shifts for Food. Domestic demands fairly steady; unexpected shifts unusual Some increase seasonally for certain products Foreign demand more variable, less predictable.

I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
Download Presentation

PowerPoint Slideshow about 'Chapter 4' - jetta

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.

- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
chapter 4

Chapter 4

Price Determination:

Matching Quantities

Supplied and Demanded

demand shifts for food
Demand Shifts for Food
  • Domestic demands fairly steady; unexpected shifts unusual
  • Some increase seasonally for certain products
  • Foreign demand more variable, less predictable
market clearing
Market Clearing
  • Process of the market price adjusting so that all buyers and sellers currently wishing to trade at that price can do so.
  • The more perishable the commodity, the less able sellers are to wait for a better price.
perishable crops
Perishable Crops
  • Demand and supply curves of strawberries at harvest: suppliers’ alternatives extremely limited.
nonperishable crops
Nonperishable Crops
  • Storage alternatives open to suppliers give positive slope to the supply curve.
example of seasonal price pattern for storable commodity
Example of Seasonal PricePattern for Storable Commodity

For Kansas City No. 1 hard red winter wheat, 1995-2004 (DTN Ag Dayta, 2005).

flow commodities livestock and poultry
Flow Commodities:Livestock and Poultry
  • Marketed every week of the year
  • Storage possible but expensive and impractical due to continuous production
  • Expectations regarding short-term price changes may influence producers’ willingness to sell
price as a feedback signal to production
Price as a FeedbackSignal to Production
  • Outlook information: data and projections about market demand, supply, and prices provided by private agencies
  • Producers plan to increase production when anticipating profitable prices, cut production when prices go down
  • Adjustments of amounts supplied are limited by production lag times
cobweb model
Cobweb Model
  • A theoretical description of how prices of a commodity could cycle even if its demand and supply curves are stable
  • Introduces continual disequilibrium, a set of prices that keep changing over time even though basic supply and demand schedules are stable
pricing farm to retail price spread
Pricing:Farm-to-Retail Price Spread
  • The difference between the prices farmers receive and those that consumers pay
  • Also called price spread
  • Compiled and published for numerous farm commodities and the “market basket”
  • Price spread easier to calculate for products with less processing (e.g., eggs)
pricing long term trend of farmer s share
Pricing: Long-term Trendof Farmer’s Share
  • For period 1920-1990, farmer’s share of market basket averaged 40%
  • Today farmer’s share below 20%
factors affecting price spread
Factors Affecting Price Spread
  • Amount of processing needed
  • Amount of commodity supplied to processors
  • Dollars needed to cover costs
  • Costs of marketing
    • Rising as processing costs fall (less automation in food service)
    • Food-marketing bill calculated by USDA
class exercise
Class Exercise
  • Using the agricultural commodity assigned in Chapter 1:
    • Collect five years of monthly price data
    • Graph the data over the entire time period, using one graph spanning one year and five lines representing the five years
    • Establish whether the commodity is perishable or nonperishable
    • Determine what caused price fluctuations