Badger Beat Investment in Potato Quality: Market Segregation in Wisconsin
that previously were cost prohibitive to produce at scale.
Potato shipper/packers develop premium and semi-premium potato products that were previously cost prohibitive
By Paul Mitchell, University of Wisconsin-Madison Department of Agricultural and Applied Economics, and Nurlan Utesov, Ph.D. graduate student
The Wisconsin fresh potato industry has enjoyed several years of a higher grower return index and higher wholesale prices than Idaho, the Columbia Basin and Colorado’s San Luis Valley, the other major production regions for fall potatoes.
By segregating markets and developing quality fresh potato products that could command higher retail and wholesale prices, packing sheds were able to financially reward growers for producing potatoes better matched to consumer preferences. Our long-term goal is to estimate the social benefits generated by segregating this market using optical sorting technology and the distribution of these benefits among growers, shipper/packers, retailers, and consumers.
BADGER BEAT
In 2006, wholesale prices in the regions were essentially equal, but then the Wisconsin price advantage began to grow, and by 2018, it reached around $1/cwt. (hundredweight) relative to Colorado, $2.75/cwt. relative to the Columbia Basin and $3.50/cwt. relative to Idaho. Understanding the sources of Wisconsin’s comparative advantage has been a focus of research in the University of Wisconsin-Madison Department of Agricultural and Applied Economics, and this article summarizes current work in progress. Various hypotheses have been proposed for the sources of this advantage (e.g., lower shipping costs due to the state’s location and the Wisconsin Healthy Grown program). Based on our current research, we attribute some of this price advantage to early adoption of optical sorting technology in Wisconsin packing sheds combined
with improved coordination among Headline: potato growers and shipper/packers RETAIL SCANNER DATA Investment in Potato Quality: Market Segregation in Wisconsin in the state based on higher average Our primary data source is Nielsen’s wholesale prices from market Subhead: Retail Scanner Data for fresh Potato shipper/packers develop and semi-premium potato products that were previously cost prohibitive segregation facilitated bypremium this sorting potatoes, from 2010 to 2019, sold technology. at selectofretail grocery stores. By Paul Mitchell, University of Wisconsin-Madison Department Agricultural and Applied Economics, and Nurlan Utesov, Ph.D. graduate student Specifically, the data set consists Optical sorting technologies have of weekly prices and volumes for become more widely adopted in the potato products by UPC code U.S. produce lastthis 20time.fresh Kay, the 5 figuresindustry fare placedover withinthe the text (Kay, they don’t have to go so large, and you can play with d generated by point-of-sale systems of course—I mean, that is your title, designer. Hee!) years, including some potato packing from more than 90 retail chains sheds in Wisconsin. across all U.S. markets. Thetechnology Wisconsin potato The hasfresh reduced the industry has enjoyed several years of a higher grower return inde We potatoes into the three higher wholesale prices than Idaho, Columbia Basin andcategorize Colorado’s San Luis Valley, the other major production per unit cost of sorting and the grading regions for fall potatoes. quality levels based on the retail potatoes, thus allowing potato price: 1) Typical potatoes with a price shipper/packers to develop premium Figure 1 plots the wholesale price advantage for Wisconsin potatoes relative to these other regions, from 2006 to 2 continued on pg.point 60 prices. basedsemi-premium on the U.S. Department of Agriculture (USDA) AMS (Agricultural Marketing Service) shipping and potato products 4.00 3.50
Wisconsin Price Advantage ($/cwt)
Figure 1 plots the wholesale price advantage for Wisconsin potatoes relative to these other regions, from 2006 to 2018, based on the U.S. Department of Agriculture (USDA) AMS (Agricultural Marketing Service) shipping point prices.
Colorado
Columbia Basin
Idaho
3.00 2.50 2.00 1.50 1.00 0.50 0.00 2006
2007
2008
2009
2010
2011
2012 2013 2014 2015 2016 2017 2018 Crop Year Figure 1: 1. Average price advantage is illustrated for fresh Wisconsin russet potatoes relative to San Luis V Figure Averagewholesale wholesale price advantage is illustrated for fresh Wisconsin russet potatoes Colorado, the Columbia Basin, and Idaho. relative to San Luis Valley Colorado, the Columbia Basin, and Idaho. BC�T August 59