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 Introduction
 Contributions of computerized...
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 Conclusions
 Tables
 References
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Title: potential for computerized marketing of fresh fruits and vegetables
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Title: potential for computerized marketing of fresh fruits and vegetables
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Publication Date: 1984
Copyright Date: 1984
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Table of Contents
    Front Cover
        Front Cover
    Title Page
        Title Page
    Table of Contents
        Table of Contents 1
    Introduction
        Page 1
    Contributions of computerized marketing
        Page 2
        Page 3
        Page 4
        Page 5
        Page 6
        Page 7
        Page 8
    Problems associated with implementation of a computerized exchange
        Page 9
    Conclusions
        Page 10
        Page 11
    Tables
        Page 12
        Page 13
        Page 14
        Page 15
        Page 16
        Page 17
        Page 18
        Page 19
        Page 20
        Page 21
    References
        Page 22
        Page 23
    Back Cover
        Page 24
Full Text
I Li V
icember 1984 Bulletin 843






The Potential uterized
Mai e ih 613RA
Fresh Frui afrf VYegta bIs

John J. VanSickle, J ri4G ad James Eperson





















Agricultural Experiment Stations
Institute of Food and Agricultural Sciences
University of Florida, Gainesville
F. A. Wood, Dean for Research






















The Potential for Computerized Marketing of
Fresh Fruits and Vegetables

John J. VanSickle, John Adrian, and
James Epperson






























Authors

John J. VanSickle is an assistant professor of Food and
Resource Economics at the University of Florida. John Adrian
is an associate professor of Agricultural Economics at Auburn
University. James Epperson is an associate professor of
Agricultural Economics at the University of Georgia.









CONTENTS

Page


Introduction . . . . . . . . ... . 1


Contributions of Computerized Marketing . . . . 2
Improved Operational Efficiency . . . . . 3
Other Benefits . . . . . . . . . 7


Problems Associated with Implementation of a
Computerized Exchange . . . . . . . 9

Conclusions . . . . . . . . .. . 10

Tables . . . . . . . . ... . . . 12

References . . . . . . . . ... . . 22









The Potential for Computerized Marketing of
Fresh Fruits and Vegetables


Introduction


Viability of a marketing system can be judged by its abi-
lity to reflect and satisfy the needs of participants. As
factors influencing the market or efficiency of operation of
the market change, care must be taken to adequately evaluate
the impacts of these changes. An evaluation of a computerized
marketing system for fruits and vegetables is no exception.

Economic efficiency in a free market system is often mea-
sured by how well the system approximates the conditions of
perfect competition. Evaluations of economic efficiency have
been used to identify desirable areas of market improvement and
determine how innovative techniques may impact on markets.
Henderson and Holder discussed economic efficiency benefits
accruing from establishment of an electronic market system for
commodities in general with respect to: improved market infor-
mation, improved marketing efficiency, greater pricing effi-
ciency, increased competition, higher prices, and more equit-
able market access.

Ward outlined the evolutionary process that must occur
before a successful electronic marketing system can be imple-
mented. First, technology must exist to facilitate the types
of transactions required in the marketing function. Second,
the electronic marketing system must prove economically feas-
ible. Finally, participants must accept and adjust to the elec-
tronic marketing system.

Technology currently exists for a computerized marketing
system in fresh fruits and vegetables. The processes involved
in computerized marketing include the following: 1) describing
the product using standardized terminology known to buyers and
sellers, 2) transmitting the product description to buyers, and
3) completing the sale with buyers making acceptable bids to
product sellers.

Computerized marketing implies a host computer with
remote-access information storage, retrieval, and processing
capabilities that facilitate trading. Software systems may
include functions for the price discovery process, transaction
support documents, accounting support, marketing information,
and decision aids. Computerized market systems will evolve and
change as better communication and computer hardware and soft-
ware systems are developed to facilitate these processes and
functions.

Economic feasibility depends on the effect of the compu-
terized market system on the operational and pricing efficiency



1









of the market. Operational efficiency is associated with the
costs of assembly, negotiating the transaction, and transporta-
tion. Pricing efficiency refers to the coordinative activities
of the market system. Accurate information and effective com-
munication are important in contributing to pricing efficiency.

The purpose of this bulletin is to assess economic feasi-
bility of a computerized market system for fresh fruits and
vegetables. The procedure for determining economic feasibility
involves evaluating the operational cost of a computerized
market system and then assessing the impact of the system on
pricing efficiency. The first step in the procedure is com-
pleted in this analysis by relating current technology for a
computerized marketing system for fresh fruits and vegetables
to the costs of operating the system. These costs are compared
to the grower selling costs for present marketing methods, to
determine potential operational efficiency gains from computer-
ized marketing. Other potential benefits that may contribute
to operational and pricing efficiency are then discussed, with
emphasis given to potential benefits in fresh fruit and veget-
able marketing.

Finally, if a computerized marketing system is determined
to be economically feasible, other problems will need to be
addressed before successful implementation can be realized.
These potential problems and key elements for overcoming these
problems are discussed in the final section of this bulletin.


Contributions of Computerized Marketing


Computerized marketing involves the use of computer tech-
nology in negotiating the sale of a product. Most fresh fruits
and vegetables are currently traded using an electronic medium,
the telephone. Fresh fruits and vegetables are harvested and
transported to a grading and packing facility. A produce
dealer then generally handles the selling function by 1) iden-
tifying a potential buyer, 2) negotiating the financial terms
and product specification of the sale, and/or 3) arranging the
time and mode of transportation for delivery of the product.
Because of the highly perishable nature of fresh fruits and
vegetables, terms of sale generally have been negotiated over
the telephone to facilitate quick sale and distribution.

Computerized marketing offers several benefits which con-
tribute to its attractiveness as a marketing medium for fresh
fruits and vegetables. Benefits accrue to enhanced marketing
efficiency, with contributions being made in both the opera-
tional and pricing efficiency areas.







2









Improved Operational Efficiency

The costs of assembly, negotiating the transaction, and
transportation affect the operational efficiency of a market
system. In this analysis assembly costs are assumed to vary
little by marketing method. This is a valid assumption for
produce that is sold over the telephone, since no assembly is
required in selling this produce beyond the normal grading and
packing requirements. Produce that is typically sold through
terminal markets may save some costs in assembly, since comput-
erized marketing would reduce the need for this produce being
handled between shipping point and retail markets. The impact
of computerized marketing on operational efficiency associated
with assembly costs will not be measured, but it should be
noted that assembly costs should decrease if any impact occurs.

The cost of negotiating the transaction on a computerized
market system can be compared directly to the fees currently
charged by produce dealers for selling the product. A cost
analysis of a computerized market system provides a measure of
the cost for negotiating the transactions. If the cost for
negotiating the sale is lower for the computerized system, a
potential improvement in marketing efficiency exists in negoti-
ating the sale.

A computerized market system that handles a sufficient
volume of produce could also be used by truckers in identifying
potential loads that fit their schedule and rig. Increased
information on availability and flows of produce could save
truckers time and mileage. The transportation cost for produce
could therefore be lowered. Improvement in operational effici-
ency via transportation costs is not measured, however, except
to note that no less in operational efficiency in transporta-
tion costs should be realized from computerized marketing.

The result of these assumptions is that if the cost of
negotiating the sale is less with computerized marketing than
with current conventional marketing methods, computerized mar-
keting will enhance operational efficiency in the system.
Other marketing efficiencies may be created by implementing
computerized marketing but if gains in efficiency exist in the
cost of negotiating the sale, then computerized marketing
should improve the overall operational efficiency in the mar-
keting process.

Costs of negotiating a transaction via computerized mar-
keting can be measured by assessing operation requirements for
the system and associating costs to these items. Table 1 iden-
tifies the assumed potential volumes and producer level values
of commodities selected for analysis in a computerized market-
ing system. The analysis will determine the potential effect
of computerized marketing on marketing efficiency with 10, 30,
and 100 percent of this potential volume. Volume and value
data are three-year averages for the years 1979-81. Container



3









net weights, developed by the Agricultural Marketing Service of
the USDA, were used to convert the original data to data
depicted in Table 1. States and regions relevant to this study
are also defined in Table 1.

An analysis of the Southeast as a subset of the East was
done in order to assess the impact on efficiency for a system
designed to operate on a limited scale. A system operating
only in the Southeast would have a small impact on volumes
traded for tomatoes and watermelons (15 and 5 percent, respec-
tively), but would reduce volumes for snap beans 30 percent and
for sweet corn and cabbage 45 percent each. A system designed
to operate in the East could have produce available for the
entire year. It may be easier, however, to implement a system
in only the Southeast if buyers use the system on a seasonal
basis. A cost analysis for both regions measures the potential
gains for a system designed for each, and a feasibility study
for. determining the projected use in each region and the capi-
tal constraints for organizing a computerized market system
will determine the region the system should be developed for.
Computer connect time for a computerized exchange is
dependent on the number of lots traded through the system.
Other factors such as market monitoring can affect the amount
of connect time used. However, given the proper incentives
which are a part of the trading format, these other factors may
be controlled, thus minimizing their impact on connect time.
Table 2 shows the amount of connect time required by commodity
and region if all lots in Table 1 are traded on the computer-
ized market system. Each buyer and seller requires three
minutes of connect time per lot (Helmreich, et al.). Thus,
each lot traded consumes six minutes of connect time. If fewer
than all lots are traded on the computerized exchange, then the
total connect time would be whatever fraction is traded on the
exchange multiplied by the connect time recorded in Table 2.

Table 3 depicts the three components of computer cost for
a computerized exchange for selected commodities singularly and
collectively by regions, assuming all available commodities are
traded on the exchange. Cost estimates reflected in Table 3
are those for a time-sharing computer system, which has been
shown to be the least costly approach with the greatest flexi-
bility for growth (Helmreich, et al.). Computer time-sharing
companies may be quite large, encompassing a worldwide computer
network. The hourly computer connect charge of $27.50, as
reflected in Table 3, was obtained from an agricultural market-
ing company that utilizes a major computer time-sharing com-
pany.

Computer transactions costs (Table 3) were derived using
the hourly charge for computer connect time and annual hours of
connect time from Table 2. Monitoring costs and programming
expense were obtained by extrapolating from estimates contained
in Helmreich, et al.




4









Overhead expenses for a computerized exchange, for select-
ed commodities separately or as a group by region, are present-
ed in Table 4. These expenses, in large part, depend on volume
traded through the system. This can be seen by comparing the
expenses for one commodity with another, one commodity with all
commodities as a group, and one region with the other. Esti-
mates were derived from actual expenses incurred by a major
marketing organization operating a telephone exchange for agri-
cultural commodities in Georgia (Helmreich, et al.).

Table 5 presents the total computer marketing costs for
selected commodities in a single commodity framework, assuming
all of each commodity is traded on the exchange. These esti-
mates are derived from the previous supporting tables. Cost
per lot is computed based on the number of lots, depicted in
Table 2. Unit costs, other than cost per lot, shown in table 5
differ by commodity and are in units for which prices are com-
monly reported. These units were obtained according to the
weight of each lot by commodity and state of origin.

By comparing unit costs among commodities and between
regions in Table 5, it can be seen that unit costs vary
inversely with volume traded. Thus, a computerized market for
tomatoes in the Southeast would be far less expensive per lot
traded than one for snapbeans. In the same way, a computerized
market for tomatoes in the East would be less expensive than
for the Southeast. Table 5, then, reflects the fundamental
advantage derived from economies of size. Costs which partial-
ly vary or do not vary with volume traded are spread over addi-
tional lots traded; thus, when greater volumes are traded,
lower unit costs are implied.

The advantage of economies of size, reflected in Table 5,
are even more pronounced in a multicommodity framework, shown
in Table 6. Table 6 shows the total and unit costs of market-
ing all of the selected commodities through a common computer-
ized exchange. Again, the advantage of increasing volume is
demonstrated by comparing unit costs by region. By treating
each lot the same regardless of commodity, unit cost per lot
becomes uniform for all commodities traded through the multi-
commodity system. The appropriate calculations to this end are
demonstrated in the source for Table 6. Through comparison of
Tables 5 and 6, it can be seen that unit costs in a multicom-
modity framework are lower for tomatoes and watermelons and
substantially lower for sweet corn, snapbeans, and cabbage.
Thus, based on the results of the cost analysis, a multicommod-
ity computerized exchange is lower in operating cost per unit
than a single commodity exchange. Moreover, as the geographic
region relevant to commodities marketed through the exchange
expands, the benefits due to economies of size are greater.

Tables 7 and 8 show the comparison of unit computerized
marketing costs with various levels of volume traded. Table 7
shows the unit costs for single commodity computerized trading



5









systems at 10, 30, and 100 percent of the available volume for
each commodity traded on the system. The only cost that was
allowed to vary in the different levels traded was the transac-
tions component of computer cost (Table 3). The transactions
cost was reduced for each commodity and region by the reduction
in volume traded. The monitoring and programming components of
computer cost (Table 3) and overhead expenses (Table 4) were
held constant over all levels to allow the systems to be
designed such that each system would handle all of each avail-
able commodity. The result of holding these cost components
constant is that the estimated computerized marketing costs
should measure upper bounds for unit costs at each level
traded. A system designed to handle less than all of each
available commodity may have lower monitoring and programming
computer costs and lower overhead expenses.

Table 8 shows the unit costs for a multicommodity comput-
erized trading system with 10, 30, and 100 percent of the
potential volume for each commodity traded on the system.
Again, the only cost that was allowed to vary for each commod-
ity was the transaction component cost. It was assumed that
all other costs were constant and that these costs were allo-
cated based on the potential number of lots that could be
traded on the system, rather than actual number of lots traded.
This assumption allows an assessment of the feasibility of a
multicommodity computerized trading system with various levels
of the commodities traded. For example, a multicommodity com-
puterized trading system for the East where 10 percent of the
available tomatoes and 30 percent of the available watermelons
were traded on the system would have unit costs of 7.74 cents
per carton for tomatoes and 9.65 cents per hundredweight for
watermelons.

The advantages of economies of size, reflected in Tables 5
and 6, are again reflected in Tables 7 and 8. The advantage of
volume is clearly demonstrated by examining the unit costs for
each commodity in the single and multicommodity frameworks at
the 10, 30, and 100 percent levels of volume traded.

Table 9 shows the comparison of unit computerized market-
ing cost, where 100 percent of each available commodity is
traded with conventional costs for selling selected commodities
in surveys conducted by Brooke in 1979 and Taylor in 1981.
Cost figures for Brooke and for Taylor represent:

the packinghouse, market, sales organization or
dealer's charge for performing the sales service for
the crop when deducted from the producer's price.
The cost does not include charges for unloading,
grading, packing, etc. [Brooke, p. vii].

The comparison in Table 9 shows the potential improvement in
marketing efficiency that could result from adoption of a com-
puterized marketing system. Tomato selling costs can be lower-



6









ed as much as 22.31 cents per carton, and selling costs for
other commodities could be lowered as follows: watermelons,
28.43 cents per hundredweight; sweet corn, 19.35 cents per
crate; snap beans, 25.86 cents per bushel; and cabbage, 28.32
cents per 50-pound bag. These figures represent potential
savings in selling costs of more than 90 percent for each com-
modity.

A comparing of Table 9 with Tables 7 and 8 shows that
improvements in marketing efficiency exist for all levels of
volume traded (10, 30, and 100 percent) in both the single and
multicommodity computerized system for tomatoes, snap beans,
and cabbage, regardless of whether the system is designed for
the Southeast or East. Single commodity computerized systems
with only 10 percent of the available watermelons and sweet
corn are more costly, however, than the survey results reported
by Brooke for watermelons and by both Brooke and Taylor for
sweet corn. The results show tomatoes to have the least sensi-
tivity to levels of volume traded (unit costs increase the
least in absolute value as the level of volume changes), while
watermelons are the most sensitive to levels of volume traded.


Other Benefits

In addition to improvements in operational efficiency,
other benefits can accrue from utilization of computerized
marketing. Following the points enumerated by Henderson and
Holder for electronic marketing in general, benefits can be
defined in the following areas: improved market information,
greater pricing efficiency, increased competition, higher grow-
er prices, and more equitable access. While the quantitative
effects of these benefits on marketing efficiency have not been
measured, the potential qualitative effects are discussed.

Improved market information. Availability of a sufficient
amount of quality information is an important factor contribut-
ing to efficiency in any market. While traditional markets for
fruits and vegetables sometimes function with a potential
imbalance in information, computerized marketing can contribute
to the efficient assembly and dissemination of market data.
Computerized marketing allows buyers and sellers to instantly
search for eligible counterparts and to monitor markets through
time. Also, spatial differences can be isolated and evalu-
ated. In addition to current market conditions, a computerized
marketing system provides the mechanism for securing informa-
tion services or developing and maintaining an up-to-date data
base for decision-making. USDA and other reports on produc-
tion, current market supplies, and prices can be made a part of
the computerized system to aid in decision making processes of
producers and buyers.

Greater pricing efficiency. Computerized marketing allows
produce availability and needs to be disseminated over a broad




7









area on a timely basis. Accuracy in the data concerning
current market conditions may be improved, since information is
generated from actual transactions. Computerized marketing
allows many buyers and sellers at remote locations to interact
on commodities which may yet be unassembled or unharvested.
This requires effective communication of accurate lot descrip-
tions and related information between interacting parties.

Improved pricing efficiency is closely related to avail-
ability of timely, and high quality, information. Improvement
in the competitive structure of the market and overall coordi-
nation depends to a great extent on this relationship. With
viable and acceptable grading standards, information availabil-
ity will contribute to improved pricing efficiency through
appropriate signals being provided in the market. Given that
most produce can be electronically traded, both time and space
dimensions of produce availability can be acquired instantane-
ously.

Improved information may also contribute to improved mar-
ket assessment and pricing efficiency, and thus, to enhanced
competitive structure in the marketplace. Electronic marketing
offers the potential for exposing produce to more buyers over a
wider area and creates an environment which is conducive to
competitive bidding. In the first case, since buyers, sellers,
and products do not have to be in close proximity, more buyers
can bid and consummate sales. Also, since bidding may be done
anonymously, there may be a tendency for improved competitive-
ness. The method of bidding chosen for the system may also
affect competitiveness.

Higher grower prices. With a potential for increased
competition using computerized marketing, a potential for high-
er grower prices would also be expected. Related analyses sub-
stantiate this relationship in several instances. Electronic
trading resulted in a $3 per hundredweight increase for feeder
cattle in Texas, about a $10 per hundredweight increase for
lambs in Virginia, and a $1 per hundredweight increase for hogs
in Ohio (Hendersen and Holder). Epperson and Moon noted a
similar relationship in Georgia for feeder cattle with a dif-
ferential of about $4 per hundredweight between sale barn and
teleauction transactions. Sullivan and Tinton isolated price
differentials of $7.62 per hundredweight between board sale and
auction markets sales in Alabama. Caution must be exercised in
attributing all of the differential to differences in marketing
method, since a portion of the price difference may result from
additional functions performed by sellers.

More equitable access. Access can be improved through
availability and use of improved information for buyers and
sellers; for example, what is available, in what quantity and
quality, where, price, when, and other desirable data. Equit-
able access facilitates competitive pricing and also increases
pricing accuracy, in that prices accurately reflect the time,




8









form, and space utility of the commodity to buyers. Pooling
arrangements by sellers, where produce is comingled by several
producers for selling purposes, or "paper pooling" by buyers,
where produce from several producers is comingled only in the
computer for buying purposes, may enhance opportunities for
market access. With computerized marketing, greater potential
exists for moving lower but acceptable grade produce, since the
search process for finding buyers of low grade produce could be
made easier.


Problems Associated with Implementation
of a Computerized Exchange


Benefits from implementing a computerized electronic mar-
ket system in fresh fruits and vegetables can be many. There
are, however, both private and social costs associated with its
implementation. The private costs are the investments associ-
ated with developing and initiating the system. Development
costs can be high, computer hardware must be purchased, leased,
and/or time shared, and software must be developed to handle
the required transactions and reporting. Initiation costs
include education that can be a large, time-consuming task.
Potential users must be made aware of the procedures and bene-
fits of the computerized system. Successful implementation of
computerized marketing requires a large number of users, and
improvements in marketing efficiency may not be evident in the
initial period of operation, or even later, if proper education
for potential users is not part of the system.

The social cost of computerized marketing may be even more
difficult to overcome. Displacement costs will be realized in
some marketing institutions. Capital invested in both human
skills and physical facilities may become outdated, and econo-
mic hardship may be realized for a few. Those affected by this
hardship will be the most vocal in opposition to the system.
Education will need to play a vital role in countering this
opposition.

Investment in new skills and equipment will be required
for those who take advantage of the computerized system. The
amount of investment by individual parties will depend on the
type of hardware used and software developed. The system can
be developed so that it is "user friendly," meaning that the
computer is programmed to ask simple, easy-to-understand, and
easy-to-answer questions, so that extensive training is not
required by the users of the system. This can be a key element
to gaining sufficient levels of user acceptance and usage.

Other problems that will be encountered in the development
and implementation of the system can also be overcome. The
products that are traded on the system must be adequately
described to help buyers make accurate trading decisions. Most



9









fresh fruits and vegetables are currently traded with verbal
descriptions on the telephone. These verbal descriptions
include USDA grade and size information, as well as other
factors that influence marketing decisions (e.g., variety and
post-harvest handling procedures). Trading grades will need to
be established to reflect these verbal product descriptions
currently used. While this may appear to be an enormous task,
other computerized marketing systems have shown this versati-
lity. For example, Telcot is a computerized market that suc-
cessfully describes and trades more than 3,000 different
classes of cotton. Other systems have been developed for live-
stock that have normally been traded on visual inspection.

Buyers and sellers will also have to adjust to a more
impersonal system. Some claim that a certain "feel" for the
market will be lost when voice contact is discontinued; how-
ever, a well-used computerized market should provide a more
thorough and more accurate picture of market conditions because
of more complete, timely, and accurate information.

Finally, time must be allocated during implementation of
the system to allow the system and users to adjust to new trad-
ing techniques and to allow users to gain trust in the sys-
tem. Reliability must be built into the system with backup
procedures and computers so that the system can "earn" the
trust of the users. Performance guarantees will need to be
established to assure participants that the system will honor
trades that have been negotiated.


Conclusions


Electronic marketing has received much attention in recent
years as a means for improving economic efficiency in marketing
several agricultural products. Cattle, lambs, hogs, and cotton
are a few of the commodities that have used computerized mar-
keting. The purpose of this analysis is to evaluate the poten-
tial for a computerized marketing system for selected fresh
produce items in the eastern United States.

Analyses indicate a potential for computerized marketing
of fruits and vegetables given appropriate conditions. As
enumerated, ingredients for a successful system seem to exist:
1) appropriate and sufficient technologies are available and
indications are that further improvements are forthcoming, 2)
cost comparisons between a computerized marketing system and
the traditional marketing system tend to favor the innovation,
and 3) other benefits such as improved market balance and com-
petitiveness, pricing efficiency, and higher potential prices
to farmers favor the system.

Economic functions are not eliminated with computerized
marketing. Produce is still assembled, shipped, processed,



10









stored, etc. However, computerized marketing will affect the
nature and extent of the functions and possibly the partici-
pants and institutions involved. Individuals or groups who
have traditionally benefited from superior knowledge will like-
ly suffer from such a system. Notwithstanding, those among
these individuals who view this approach as an opportunity
rather than an obstacle could benefit. Producers and consumers
are the potential beneficiaries of the system exhibiting great-
er efficiency.

While computerized marketing offers much potential, it is
not without problems. Primary among these is the fact that
implementation may be difficult, because it involves change.
Current participants in the system may resist this change,
because it involves risks. However, a comprehensive education-
al program aimed at illuminating requirements and merits of
computerized marketing could reduce this reluctance. Two other
problems which could affect viability of the system are avail-
ability of a system of acceptable grading standards and gener-
ation of sufficient volume to justify the system. Current
economic conditions, in terms of the need for efficient mar-
keting and the continuing downward pressure on the price of
technological advances, add impetus to adoption of computerized
marketing alternatives.




































11












Table 1. Production and value of selected vegetables by state and region.

Tomatoes Watermelons Sweet Corn
Number of Value per Value per Number of Value per Value per Number of Value per Value per
State and Region lotsa loth 30 lb carton lots lot cwtb lotsa lotb 42 lb crateb

-----(dollars)---- ------(dollars)----. -----(dollars)----

Florida 28,829 8,359 6.60 18,665 2,349 5.87 15,025 3,629 4.76
Alabama 1,250 12,809 10.67 2,140 2,460 6.15 534 3,009 3.95
Georgia 494 7,941 6.62 6,822 1,663 4.16 -
South Carolina 3,314 5,802 4.84 2,890 1,409 3.52 -
North Carolina 747 6,782 5.65 1,262 1,561 3.91 859 3,166 4.16
Tennessee 1,197 8,165 6.80 -- -
Southeast 35,831 8,238 6.57 31,780 2,092 5.23 16,419 3,585 4.71

New Jersey 1,631 9,160 7.64 2,259 3,723 4.89
Maryland 669 5,338 4.44 1,090 2,157 5.39 -
Massachusetts 372 7,855 6.54 2,206 3,193 4.19
New York 1,147 9,752 8.12 4,806 3,068 4.03
Pennsylvania 1,425 5,782 4.82 2,491 3,686 4.84
Virginia 1,058 7,907 6.59 619 3,213 4.22
Delaware -- 778 2,153 5.38 -
Connecticut 1,000 3,004 3.94
East 42,133 8,176 6.56 33,648 2,096 5.24 29,800 3,464 4.55


(Continued on next page)








Table 1. (Continued)

Snap Beans Cabbage

e ad Number of Value per Value per Number of Value per Value per
State and Region lots lotb 30 lb bushel lots loth 50 lb sackb

-----(dollars)------- -----(dollars)-----
Florida 3,644 9,489 8.90 10,000 3,380 4.22
Alabama 100 13,880 13.01 -- --
Georgia 591 8,764 8.22 910 3,034 3.80
South Carolina 294 7,234 6.78 148 3,195 3.99
North Carolina 628 8,119 7.61 2,542 2,357 2.95
Tennessee 209 9,180 8.61 265 3,813 4.75
Southeast 5,463 9,205 8.63 13,865 3,176 3.97

New Jersey 669 7,910 7.42 2,040 3,196 3.99
Maryland 181 6,003 5.63 302 2,614 3.26
Massachusetts -- 448 2,667 3.33
New York 759 9,620 9.02 6,658 2,920 3.65
Pennsylvania 456 7,770 7.28 1,235 3,159 3.94
Virginia 319 8,034 7.53 1,075 2,778 3.47
Delaware -- -- -- --
Connecticut -
East 7,850 8,926 8.37 25,620 3,078 3.85


aA lot is defined as a truckload. A lot of tomatoes contains 36,000 pounds except for lots
originating in Florida which contain 38,000 pounds. Lots of watermelons and cabbage contain 40,000
pounds each, while sweet corn and snap beans are in lots of 32,000 pounds. Quantities produced
represented in lots are three-year averages for 1979-1981.

bValues are weighted three-year averages for 1979-1981.

SOURCE: Calculations, Agricultural Statistics, and Table of Container New Weights, effective
November 1, 1978, AMS, USDA.










Table 2. Number of lots and annual hours of computer connect time for
simulated computerized exchanges by commodity and region.

Southeast East

Lotsa Connect time Lotsa Connect time

--no.-- annual hours --no.-- annual hours


Tomatoes 35,831 3,583 42,133 4,213
Watermelons 31,780 3,178 33,648 3,365
Sweet Corn 16,419 1,642 29,800 2,980
Snap Beans 5,463 546 7,850 785
Cabbage 13,865 1,387 25,620 2,562
Total 103,358 10,336 139,051 13,905


aLots are defined as trading units where each unit constitutes a
truckload (Table 1).

bTotal annual hours of computer connect time are derived on the basis
that 3 minutes of connect time are needed by a buyer and a seller for each lot
traded; thus, 6 minutes are needed per lot (Helmreich, et al.),







































14









Table 3. Projected annual computer marketing costs for single and multi-
commodity computerized exchanges by region and commodity with 100
percent of available volume traded on the exchange.

Region Computer Cost

by commodity Transactionsa Monitoringb Programmingc Total

------------------------dollars---------------------------
Southeast
Tomatoes 98,537 41,250 42,059 181,846
(6 hrs/day)
Watermelons 87,396 34,375 42,059 163,830
(5 hrs/day)
Sweet Corn 45,153 27,500 42,059 114.712
(4 hrs/day)
Snap Beans 15,024 13,750 22,059 50,833
(2 hrs/day)
Cabbage 38,130 20,625 42,059 100,814
(3 hrs/day)
Total 284,240 89,375 42,059 415,674
(13hrs/day)

East
Tomatoes 115,870 41,250 42,059 199,179
(6 hrs/day)
Watermelons 92,537 34,375 42,059 168,971
(5 hrs/day)
Sweet Corn 81,955 34,375 42,059 158,389
(5 hrs/day)
Snap Beans 21,593 20,625 22,059 64,277
3 hrs/day)
Cabbage 70,460 34,375 42,059 146,894
(5 hrs/day)
Total 382,415 116,875 42,059 541,349
(17hrs/day)


a@ $27.50 per hour of connect time per terminal.

b@ $27.50 per hour and 250 days per year.

lIncludes a $60,000 annualized initial investment in software development
plus $25,000 per year for software maintenance and evolution.

SOURCE: Calculations and Helmreich et al.


















15












Table 4. Projected annual overhead expenses for single and multicommodity computerized exchanges by region and
commodity.

Region Personnel Building Renta Printing and Total
and commodity Manager Fieldmen Secretaries and Utilities Operating Supplies Telephone Cost

-----(number / dollar expense)------- --------(dollar expense)------------

Southeast
Tomatoes 1 / 30,000 5 / 120,000 1 / 12,000 6,286 67,427 56,853 292,566
Watermelons 1 / 30,000 5 / 120,000 1 / 12,000 6,286 60,070 51,192 279,548
Sweet Corn 1 / 30,000 4 / 96,000 1 / 12,000 5,714 32,054 29,227 204,995
Snap Beans b 3 / 72,000 1 / 12,000 2,857 11,304 10,404 108,565
Cabbage 1 / 30,000 3 / 72,000 1 / 12,000 5,714 27,217 24,839 171,770
All Commodities 1 / 40,000 13 / 312,000 3 / 36,000 9,355 190,999 173,100 761,454

East
Tomatoes 1 / 30,000 5 / 120,000 1 / 12,000 6,286 78,873 65,661 312,820
Watermelons 1 / 30,000 5 / 120,000 1 / 12,000 6,286 63,465 53,804 285,555
Sweet Corn 1 / 30,000 5 / 120,000 1 / 12,000 6,286 56,477 48,427 273,190
Snap Beans b 4 / 96,000 1 / 12,000 3,758 15,828 14,508 142,094
Cabbage 1 / 30,000 5 / 120,000 1 / 12,000 6,286 48,886 42,586 259,758
All Commodities 1 / 40,000 17 / 408,000 4 / 48,000 12,586 256,969 232,888 998,443


a @ $8 per square foot per year.
b One of the fieldmen would also function as manager.

SOURCE: Extrapolations from Helmreich et al., tables 6 & 7, page 38.









Table 5. Projected annual computer marketing costs by commodity with 100
percent of available volume traded on the exchange in a single
commodity framework by region.


Commodity Southeast East

-------------(dollar expense)---------

Tomatoes:
Overhead 292,566 312,820
Computer Cost 181,846 199,179
Total Cost 474,412 511,999
Cost/lot 13.2403 12.1520
Cost/30 lb carton 0.0106 0.0098

Watermelons:
Overhead 279,548 285,555
Computer Cost 163,830 168,971
Total Cost 443,378 454,426
Cost/lot 13.9515 13.5083
Cost/cwt 0.0349 0.0338

Sweet Corn:
Overhead 204,995 273,190
Computer Cost 114,712 158,389
Total Cost 319,707 431,579
Cost/lot 19.4718 14.4825
Cost/4.5-5 doz
wirebound crate (42 Ib) 0.0256 0.0190

Snap Beans:
Overhead 108,565 142,094
Computer Cost 50,833 64,277
Total Cost 159,398 206,371
Cost/lot 29.1777 26.2893
Cost/bu hamper (30 lb) 0.0274 0.0246

Cabbage
Overhead 171,770 259,758
Computer Cost 100,814 146,894
Total Cost 272,584 406,652
Cost/lot 19.6599 15.8724
Cost/sack (50 lb) 0.0246 0.0198

SOURCE: Calculations from tables 2-4.



















17









Table 6. Projected annual computer marketing costs by commodity with 100
percent of available volume traded on the exchange in a multi-
commodity framework by region.


Commodity Southeast East

---------------dollar expense-------------
Tomatoes:
Overhead 263,972a 302,532
Computer Cost 144,101 164,031
Total Cost 408,073 466,563
Cost/lot 11.3888 11.0736
Cost/30 lb carton 0.0091 0.0089

Watermelons:
Overhead 234,128 241,606
Computer Cost 127,809 130,997
Total Cost 361,937 372,603
Cost/lot 11.3888 11.0736
Cost/cwt 0.0285 0.0277

Sweet Corn:
Overhead 120,961 213,976
Computer Cost 66,032 116,016
Total Cost 186,993 329,992
Cost/lot 11.3888 11.0736
Cost/4.5-5 doz
wirebound crate (42 lb) 0.0149 0.0145

Snap Beans:
Overhead 40,247 56,366
Computer Cost 21,971 30,561
Total Cost 62,218 86,927
Cost/lot 11.3888 11.0735
Cost/bu hamper (30 Ib) 0.0107 0.0104

Cabbage
Overhead 102,146 183,962
Computer Cost 55,761 99,743
Total Cost 157,907 283,705
Cost/lot 11.3888 11.0736
Cost/sack (50 lb) 0.0142 0.0138

"Overhead costs were allocated based on lots traded. For example, 263,972 =
(35,831/103,358) x 761,454; where 263,972 is the overhead cost of marketing
tomatoes from the Southeast, 35,831 is the number of lots of tomatoes from the
Southeast (Table 2), 103,358 is the number of lots of all commodities included
in this multicommodity analysis from the Southeast (table 2), and 761,454 is
the total overhead cost of operating a multicommodity exchange in the
Southeast (Table 4).
SOURCE: Calculations from previous tables.











18









Table 7. Per unit selling costs for selected commodities in a single
commodity computerized marketing system for 10, 30, and 100 percent
levels of volume traded.

Cost per Unit

Commodity and Volume Traded Southeast East

Tomatoes ($/30 lb.)
100% 0.0106 0.0098
30% 0.0302 0.0273
10% 0.0861 0.0774

Watermelons ($/cwt.)
100% 0.0349 0.0338
30% 0.1002 0.0965
10% 0.2869 0.2757

Sweet Corn ($/42 lb.)
100% 0.0256 0.0190
30% 0.0768 0.0549
10% 0.2231 0.1576

Snap Beans ($/30 lb.)
100% 0.0274 0.0246
30% 0.0852 0.0761
10% 0.2505 0.2233

Cabbage ($/50 lb.)
100% 0.0246 0.0198
30% 0.0739 0.0581
10% 0.2147 0.1675

SOURCE: Calculations from previous tables. The calculations were made
similar to those in Table 6, except that overhead cost is for a
single commodity exchange instead of the multicommodity exchange.
Example of calculations is as follows:






























19









Table 8. Per unit selling costs for selected commodities in a multicommodity
computerized marketing system for 10, 30, and 100 percent levels of
volume traded.

Cost per Unit

Commodity and Volume Traded Southeast East

Tomatoes ($/30 lb.)
100% 0.0091 0.0089
30% 0.0252 0.0244
10% 0.0713 0.0685

Watermelons ($/cwt.)
100% 0.0285 0.0277
30% 0.0789 0.0762
10% 0.2229 0.2149

Sweet Corn ($/42 lb.)
100% 0.0149 0.0145
30% 0.0414 0.0400
10% 0.1170 0.1128

Snap Beans ($/30 lb.)
100% 0.0107 0.0104
30% 0.0296 0.0286
10% 0.0836 0.0807

Cabbage ($/50 lb.)
100% 0.0142 0.0138
30% 0.0394 0.0381
10% 0.1114 0.1075

SOURCE: Calculations from previous tables.
































20









Table 9. Per unit selling costs for selected commodities in a single and
multicommodity electronic market with 100 percent of available
volume traded and in survey data for current selling methods.


Commodity

Marketing Sweet Snap
Method Tomatoes Watermelons Corn Beans Cabbage

($/CTN.) ($/CWT.) ($/CRT.) ($/BU.) ($/50 #)
Electronic Marketing

Single Commodity
SE 0.0106 0.0349 0.0256 0.0274 0.0246
E 0.0098 0.0338 0.0190 0.0246 0.0198

Multiconmodity
SE 0.0091 0.0285 0.0149 0.0107 0.0142
E 0.0089 0.0277 0.0145 0.0104 0.0138

1979 Brooke Survey
Average 0.152 0.233 0.149 0.255 0.248

1981 Taylor Survey
Average 0.232 0.312 0.208 0.269 0.297

SOURCE: Previous tables; Brooke, D.L.; and Taylor, Timothy G.







































21









References


Brooke, D. L. March 1980. Costs and Returns from Vegetable
Crops in Florida, Season 1978-79 with Comparisons. Econ.
Inf. Rept. 127, IFAS, Univ. of Florida.

Epperson, James E., and Leonard C. Moon. June 1978. The
Potential for Improved Economic Efficiency in the Fresh
Fruit and Vegetable Market Via Computer Technology. Jour-
nal of Food Distribution Research, Vol. IX, No. 2, pp. 2-
8.

Helmreich, Dennis P., and James E. Epperson. March 1982.
Settings for an Agricultural Multicommodity Computerized
Exchange. Ga. Agr. Exp. Sta. Res. Bul. 273.

Henderson, Dennis R., and David L. Holder. July 1982. "Les-
sons Learned in Electronic Marketing." Ohio St. Univ. Agr.
Ec. Rep. No. ESO -934; paper presented at Electric Market-
ing Conference; Atlanta, Georgia; August 23-24.

Sullivan, Gregory M., and Daniel A. Linton. June 1981. Econo-
mic Evaluation of an Alternative Marketing System for
Feeder Cattle in Alabama. Ala. Agr. Exp. Sta. Circular
253.

Taylor, Timothy G. June 1982. Costs and Returns from Veget-
able Crops in Florida, Season 1980-81 with Comparisons.
Econ. Inf. Rept. 159, IFAS, Univ. of Florida.

Ward, Clement E. 1982. "How Video and Electronic-Assisted
Systems Operate." Paper presented at Electronic Marketing
Conference; Atlanta, Georgia; August 23-24.


























22














































This public document was promulgated at an annual cost of
$695, or 35 cents a copy, to provide information on the feasibili-
ty of electronic marketing of fresh fruits and vegetables.



All programs and related activities sponsored or assisted by the Florida
Agricultural Experiment Stations are open to all persons regardless of race,
color, national origin, age, sex, or handicap.



ISSN 0096-607X





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