|
DE-
* 1A A U
A A
e e. e *s **sm
ABSTRACT
IMPROVING PERFORMANCE OF THE PRODUCTION-DISTRIBUTION SYSTEM
FOR POTATOES IN COLOMBIA
By
Christopher O. Andrew
The primary objective of the research was to identify areas in which
marketing processes influence present and potential productivity increases
for the potato production and distribution system in Colombia. The diag-
nostic analyses investigate problems related to modernizing the produc-
tion process and to improving coordination in the distribution process.
General performance criteria such as potential productivity increases,
reducing seasonal production and price instability, and improved market
coordination evidenced by functional information, grading and standardi-
zation programs, were identified and performance of the potato subsector
was evaluated.
The research was based at the Instituto Colombiano Agropecuario (ICA)
Bogot, Colombia as a portion of an interdisciplinary technical assistance
program under the auspices of the University of Nebraska. The Ford Founda-
tion provided funding for the research.
Primary data sources were potato producers in the departments of Bo-
yac, Cundinamarca and Nario; truckers entering and leaving Bogot and
Cali; processers in Bogot and Cali; and wholesalers, retailers and con-
sumers in Bogot.
An analysis of the production process indicated that the limited
availability of improved seed and information about its use restrict
the producers ability to augment per hectare yields. Credit and purchased
inputs, such as fertilizer and pesticides, do not appear to be restraining
factors for per hectare yield increases. Many producers are motivated
toward the attainment of high yields per unit of seed planted instead
of high yields per hectare,resulting in some practices contrary to
recommendations of the agricultural experiment station at ICA.
Price instability was the major marketing problem for nearly all
potato market participants. Seasonal price instability is due to wet
and dry seasons, frost, and a seed supply shortage for the small
harvest. The greatest amount of storage in the potato marketing system
is at the wholesale level but it is not sufficient, even when combined
with the government facilities, to prevent wide seasonal price fluctua-
tions. Major problems or risks inhibiting storage are potato spoilage,
lack of credit and liquid capital, price instability and the anti-
speculation law.
Spoilage and damage to potatoes in marketing contribute to un-
necessary costs and wide price spreads, particularly at the retail
level. Losses due to quality reductions affect fifteen percent of
total production but often spoiled and damaged potatoes are salvaged
for consumption by low income families.
Modernizing the potato subsector to allow attainment of economic
efficiencies probably will result in some displacement of small firms.
If these displaced individuals can obtain either urban or rural em-
ployment accompanied by improved incomes, they will be a stimulus to
the developing economy. At present, the alternative employment op-
portunities for displaced farmers and food distributors are limited
and should these opportunities increase, improved work skills for this
potential labor force will be needed.
Recommendations to improve the complex and interdependent processes
of potato production and distribution in Colombia are as follows:
1) The role of small producers and distributors in either urban
or rural development must be considered as Colombia pursues programs to
modernize the agricultural sector.
2) Credit policy can be used to stimulate investments in both
improved potato productivity and in improving human resources for future
rural and urban employment. Credit subsidies for potato production with
non-competitive interest rates, however, probably should be reduced.
While the supply of credit for producers at commercial rates should be
unrestricted, credit programs are also needed for distributors.
3) Potato production research and extension specialists along
with agricultural economists must give more emphasis to farm management
and economic problems of producers.
4) A program to reduce seasonality of prices must consider problems
leading to production instability as well as market stabilizers such as
storage. The seed supply problems for the small harvest and for improved
varieties must be reduced if production instability is to be decreased.
Both public and private storage alternatives must be evaluated before
launching a major storage program.
5) Continued emphasis should be given to developing a market
information program with a timely dissemination system that will be
useful to producers and distributors in their market decision making
processes.
6) Vertical coordination in the potato subsector to reduce
excessive handling and losses can be improved by developing an efficient
rural assembly system, encouraging forward purchase and sale agreements,
and improving credit and technical assistance to potato producers and
distributors for improving their marketing practices.
IMPROVING PERFORMANCE OF THE PRODUCTION-DISTRIBUTION SYSTEM
FOR POTATOES IN COLOMBIA
By
Christopher O. Andrew
A THESIS
Submitted to
Michigan State University
in partial fulfillment of the requirements
for the degree of
DOCTOR OF PHILOSOPHY.
Department of Agricultural Economics
1969
PREFACE
A two-year assignment beginning in September 1967, with the Uni-
versity of Nebraska Mission in Colombia provided the opportunity to perform
thesis research. The Nebraska Mission is funded by US/AID, Kellogg Foun-
dation, and Ford Foundation, the latter supporting agricultural economics
and this research endeavor. As primary contractor for the Mid-American
State Universities Association (MASUA), the University of Nebraska Mission
in Colombia directs an interdisciplinary technical assistance team in-
cluding agricultural economists, rural sociologists, agricultural engineers,
extensionists, animal scientists, crop physiologists, and veterinarians.
This team assists the Instituto Colombiano Agropecuario (ICA) and the
National University in efforts to develop a coordinated program of agri-
cultural teaching, research and extension.
A post-prelim instructor program emphasizes the training of Co-
lombian agricultural economists by research demonstration as applied to
pertinent agricultural problems. This research, directed by Nebraska
Mission instructors, also fulfills Ph.D. thesis requirements. Thesis
supervision became possible through a joint agreement between the
Michigan State University guidance committee and the Nebraska Mission
agricultural economists, with the latter providing in-country consultation.
ICA provided physical facilities and in-country transportation as
well as counsel, counterpart assistance, data processing assistance, and
ii
aid in selecting the commodity to be studied and in making the varied and
numerous contacts necessary for successful completion of the study.
Two primary benefits to ICA and Colombia evolve from the research:
1) Specific barriers to innovation and change throughout the potato pro-
duction-distribution system are identified. Recommendations, if adopted,
can foment improvements in the potato production and distribution system.
2) Another benefit accrues to National University students and ICA staff
counterparts associated with the research program. An appreciation and
understanding of agricultural marketing problems has been stimulated. At
least 25 individuals have learned and applied agricultural economic re-
search methods in a specific problem situation which has helped develop
a small cadre of Colombians capable of sustained agricultural marketing
research.
In addition to ICA personnel, individuals from the following
Colombian Institutions were identified with the research by providing
secondary data and valuable counsel: Universidad Nacional, Departamento
Administrativo Nacional de Estadistica, Caja Agraria, Instituto de In-
vestigaciones Tecnoldgicas, Instituto Latinoamericano de Mercadeo Agrico-
la, Instituto de Mercadeo Agropecuario, Asociaci6n Colombiana de Culti-
vadores de Papa, Secretara de Agricultura de Nario, Centro de Estudios
sobre Desarrollo Econmico, Instituto Colombiano de la Reforma Agraria,
Sociedad de Aprovechamiento de los Recursos Naturales de Cundinamarca,
and the Wisconsin Land Tenure Center.
iii
ACKNOWLEDGEMENTS
Appreciation is due to the Instituto Colombiano Agropecuario
and the University of Nebraska Mission in Colombia for contributing
financial support, consultation and human resources to the research
program. Sincere gratitude is also expressed to Dr. Daniel D. Badger,
Dr. Peter E. Hildebrand, Dr. Lauro Lujan, Mr. Rafael Samper A., and
Mr. Eduardo Ramos L. who were working with the above institutions
during the research program.
Special acknowledgement should be given to Dr. Harold M. Riley,
thesis advisor, for his continuing interest in and devotion to the
research. The location problems usually associated with thesis re-
search in a foreign country were avoided by Dr. Rileys personal
guidance on at least eight occasions in Colombia. For the flexi-
bility in planning complete thesis program abroad, recognition is due
to the liberal graduate policies and appreciation for foreign
research programs displayed by the Agricultural Economics Depart-
ment at Michigan State University.
To Dr. Lawrence W. WItt, major professor, sincere gratitude
is expressed for his consultation in Bogot on one occassion and
his suggestions on early drafts of the thesis. Dr. Witt also
provided valuable guidance throughout the author's Masters and.Ph.D.
programs. The guidance of other committee members throgh the
Ph.D. program must be recognized including Dr. James D. Shaffer,
Dr. Robert D. Stevens, and Dr. Everett M. Rogers.
Recognition is due to Dr. James L. Driscoll for untiring
assistance with the computer work and to Maria Cristina Arciniegas
iv
for typing preliminary and final drafts of the thesis.
Finally, loving gratitude is expressed to my family, my parents
and my wife's parents for encouragement and interest. To my wife
Linda, words inadequately express my appreciation. To Jeff, Shane
and Kristi, with whom I shared too limited hours of relaxation and
enjoyment, I remain obligated.
Errors of fact or logic are the responsibility of the author.
v
TABLE OF CONTENTS
Page
PREFACE . . . . ii
ACKNOWLEDGEMENTS . . . . .. iv
LIST OF TABLES . . . . . .
LIST OF FIGURES ................... .. xv
GLOSSARY OF TERMS AND INSTITUTIONS . . ... .xvi
Chapter
I INTRODUCTION . . . ... .1
The Problem ...... . . 1
Geographic Barriers to Economic Integration 2
The Food Demand and Supply Race. . ... 4
Population Migration and Growth.. . 4
Distribution of Income .. . 8
Agricultural Production and Distribution 9
Agricultural Marketing in Development 13
The Potato Subsector in Colombia. . 14
Thesis Plan . .. . . 18
Orientation in General. .. . ..... 18
Objectives . . . .. 19
A Chapter Brief . . ... .21
II THE RESEARCH PLAN . . ........ ... 24
An Approach . . . ... 24
To Define a Food Production-Distribution
System . . . .. .24
The Role of Agricultural Marketing in
Development . . .. .26
Performance Evaluation . . 31
Applying the Approach . . 35
Performance Goals .. . . 35
The Research Hypotheses . 37
The Research Methodology . .. 38
Data Analysis .. . . 46
vi
Chapter Page
III A DESCRIPTION OF THE POTATO PRODUCTION-DISTRIBUTION
SYSTEM . ...... . . 48
Production-Distribution Relationships .. 48
Geography of the Potato Industry . .. 48
Market Channel Flows . . .. 52
Price Movements . . . .. 60
Fluctuation in Prices ........ 60
Interdepartmental Price Differentials 63
Consumer Demand Characteristics . .. 65
Per Capita Consumption .. . ... 65
Purchase and Preparation Habits .... 67
Chip Consunption .... . . 72
Price Change Responses . . 76
Organizational Structure of the Subsector 79
Size of Firm . . . 79
Number of Buyers and Sellers . .. 83
Conditions of Entry . . 85
Institutional Framework ..... ..... 87
Investigation, Extension and Education .. 88
Agricultural Inputs and Credit . .. 89
Price Policy and Storage. . . 90
Producer Organization. . . 92
Summary ... . . .. 93
IV PROBLEMS IN MODERNIZING THE POTATO PRODUCTION PROCESS. 95
Adoption of New Technologies and Yield Results 96
Adoption .. . . . ..... 96
Yields and Before-Harvest Losses . .. 101
The Role of Agricultural Credit. . 109
Farm Credit Statistics .. ... ... ..110
Macro Credit Statistics . .. .113
Potato Farm Management Practices . 118
Decision Making. . . 118
Input Divisibility: :The Mechanization
Problem .. ... ...... .... 125
vil
Chapter Page
Summary: Potato Producers and Technical
Assistance . .... 127
V PROBLEMS IN COORDINATING THE POTATO DISTRIBUTION
PROCESS . . . . .. .. 129
Major Indicators of Coordination ...... 129
Price Instability . . .... 129
Margins and Returns .. . ... 134
Physical Distribution Processes .. 141
Transportation ........... 141
Assembly Functions. ... . 144
Storage ...... . . 146
Losses ....... . 151
Facilitative Exchange Processes ..... 153
Integrationi Agreements and Cooperation 153
Credit Sales and Purchases . . 158
Behavior in Pricing . . .. 163
Communication and Price Information . 165
Grading and Standardization .. . 169
Summary . . . .. 174
VI POLICY CONSIDERATIONS AND PERFORMANCE IN THE POTATO
PRODUCTION-DISTRIBUTION SYSTEM .. . 176
The Supply and Demand Situation for Potatoes 178
Economic and Social. Considerations . 81
Volume of Employment .. . .. 182
Distribution of Income . . .. 185
CreditPolicy . .. . ..... 189
Price and Storage Policies . . 191
Information Responsibilities and Policies ... 93
Research and Development .. . 197
VII SUMMARY, CONCLUSIONS AND RECOMMENDATIONS .... .. 200
General Summary . ... . 200
The Potato Production-Distribution System 201
Problems in Modernizing Production .. .. 204
viii
Chapter Page
Problems in Coordinating Distribution ... .206
Conclusions About Performance of the Potato P-D
System . . . . ... 209
Recommendations . . . . 211
LIST OF REFERENCES . .. . . . 221
Appendices
I Aggregate Farm Size Data and Potato Farms Size Data .... 226
II Total Production, Hectares Planted and Yields Per Hectare
of Potatoes in Colombia Based Upon Caja Agraria Data
and IDEMA Data ... . . . . 229
III Potato Price Statistics in Bogot, Cali and Pasto 237
IV Methods Used to Calculate Employment in Potato Production
and Distribution . . . .. 241
V Caja Agraria Loan Data . . . 244
ix
LIST OF TABLES
Table Page
Number Number
1 Per Capita Income Levels in Colombia, 1960-1967 .. 9
2 Estimated Required Rates of Increase in Food Pro-
ductivity Based on Varied Rates of Growth in GNP
and Population and Different Income Elasticities
of Demand .. . . . .. 10
3 Comparative Farm Size Data for Potato Farms and all
Farms in Colombia. . . . . .16
4 Value of Colombian Potato Production at the Farms
Compared to Rural Income .-. '. .. ... .. 17
5 Distribution of Potato Prducer Interviews by
Selected Departments and Municipios . .. 41
6 Per Capita Potato Production, 1960-1967 ...... 49
7 Distribution of Purchases and Sales by Each Group
of Market Participants . .. .. 56
8 Occupational Characteristics of the Bogot Consumers
Included in the Sample . . .. .. .65
9 Income Per Capita and Purchases Per'Capita in B6got
and Zones of the City . . . .. 66
10 Average Quantity Purchases for Household and Average
Number of Potato Purchases Per Month by Zone of Bo-
got and by Type of Retail Outlets ... .... 69
11 Consumer Attitudes Toward 'Conditions. in Potato
Markets . . . . .. .... 72
12 Consumer Preferences for Potato Chips .. .., 73
13 Retailer Responses About Potato Chip Sales .. .... 74
14 Potato Farm Size Statistics from Survey Data and
Census Data. . . . .. . 79
.15 Average Structural Characteristics of Potato Whole-
salers in Bogot . . ..... ..,. 81
16 Average Structural Characteristics of Potato Re-
tailers in Bogot . . . . .81
17 Average Structural Characteristics of Potato Proc-
essing Firms in Cali and Bogot . .. 82
x
Table Page
Number Number
18 Retailer and Wholesaler Actitudes About Changes
in Number of Firms . . . .. 87
19 Use of Selected Practices by Varied Sizes of
Potato Farms . . . .... ..... 97
20 Use of Improved Seed by Potato Producers in Cun-
dinamarca, Boyac and Nario . ......... 98
21 Information Sources About Adoption of New Practices
in Boyac, Cundinamarca and Nario .. .... 99
22 Availability in Municipios of Modern Inputs for
Potato Producers . . . . 100
23 Per Hectare Potato Yields for Improved and Un-
improved Seed Use Based on Potato Farm Size 103
24 Survey Potato Yields for Boyac, Cundinamarca
and Narifo . . .. .. . .. 104
25 Comparative Potato Yields in the United States and
Colombia and for the Three Largest Producing States
in Each Country . . . . 104
26 ICA Potato Yields by Varieties . .. .... 105
27 Farm Losses for Potatoes Including Land not Harvested
Due to Natural Causes and Losses During Harvest 107
28 Farm Credit Statistics for Potato Producers in
Boyac, Cundinamarca and Nario . .... .111
29 Potato Producer Attitudes About Credit . 112
30 Changes in Caja Agraria Loans from 1960 to 1966 for
Eleven Crops . . . ..... 116
31 Reasons for Adopting Improved Practices in Potato
Production . . . . ... 118
32 Price Variation in Bogot, Cali and Pasto, 1955 -
1968 . . . ......... .. 130
33 Total Product Variation in Cundinamarca, Boyac and
Nario, 1955-1966 . . . . 131
34 Potato Price Variability as Indicated by Potato
Market Participants, for 1967 and 1968 ...... 132
xi
Table Page
Number Number
35 Major Market Problems Specified by Potato
Producers ... . 134
36 Potato Prices per Carga (February 8-21, 1968) 135
37 Price Spreads for Potatoes in the Bogot
Market . . . .... .... .136
38 Causes of Potato Producer Income Losses from
1963 to 1968 .... . .. .... 138
39 Income Problems of Potato Retailers and Whole-
salers. .. . . . ...... ... 139
40 Liquid Capital Sources for Potato Wholesalers
in Bogot . ... . . . 140
41 Ownership of Potatoes in Transit to Bogot . 142
42 Backhauls from Bogot for Potato Truckers .. 142
43 Potato Flows Entering and Leaving Bogot as an
Indication of Backhauling .. . . 143
44 Storage of Potatoes by Potato Producers . .146
45 Producer Reasons for not Storing Potatoes . 147
46 Frequency of Potato Purchases and Average Stocks
in Bogot Retail Outlets . ...... 148
47 Problems IIhibiting Storage by Wholesalers ... 148
48 Producer and Wholesaler Reactions to Governmental
Storage Operations ... . . . 150
49 Vertical Integration in Potato Distribution in
Bogot . . . . 153
50 Producer Sales Agreements . . .. 154
51 Affirmative Responses to Reasons for Purchasing
from Specified Suppliers for Wholesalers and
Retailers .. . .... . . 156
52 Potato Market Participant Reasons for not Partici-
pating in .ormal Purchase and Sale Contracts 157
53 Affirmative Responses to Cooperation by Potato Market
Participants in Production and Distribution ... 158
xii
Table Page
Number Number
54 Cash and Credit Sales by Potato Producers .. 159
55 Credit Purchases and Sales of Potatoes by Retailers
in Bogot . . . . .. 161
56 Reasons Given by Potato Retailers and Wholesalers
for Making Credit Sales. . . ... 162
57 Pricing Behavior of Potato Wholesalers and
Retailers . .. ..... 166
58 Price Information Sources for 14 Commodities
Produced by Colombian Campesinos . .. 167
59 Information Sources for Potato Market Participants. 168
60 Wholesaler and Retailer Purchase and Sale Practices
Regarding Low Quality Potatoes . . ... 171
61 Classification Practices of Potato Market Participants
in Purchases and Sales Including the Percent Using
Each Practice and the Relative Importance of Each
Practice .. . . . 172
62 Demand Projections for Potatoes in Colombia in 1970,
1975 and 1980 . . . . 180
63 Employment in Potato Production and Distribution
in Colombia . . ..... .... 183
64 Changes in Caja Agraria Potato Loans to Potato
Producers'and Changes in Total Production for Nario,
Cundinamarca and Boyac . ........ .189
65 Producer Desires to Participate in a Price Support
Program .............. .. .. 191
I-1 Number and Percentage Distribution of Farms and
Hectares by Various Farm Size Classification 227
I-2 Number and Percentage Distribution of Potato Farms
and Hectares in Potatoes by Various Farm Size Clas-
sifications . .. . . 227
I-3 Distribution of All Farms in Colombia, all Potato
Farms in Colombia and Potato Farms in Cundinamarca,
Boyac and Nario . . . . 228
II-1 Aggregate Potato Production Statistics for Colombia 231
xiii
Table Page
Number Number
II-2 Areas Seeded to Potatoes and Production Obtained
by Departments in Colombia, 1960-1966 . 232
II-3 Potato Yields by Colombian Departments ... 234
11-4 Potato Production by Colombian Departments 235
II-5 Potato Yields by Colombian Departments ... .. 236
III-1 Bogot 'Potato Prices Deflated by the Consumer
Price Index for Workers in Bogot . .... 238
III-2 Cali,Potato Prices Deflated by the Consumer Price
Index for Workers in Cali .. . ..... 239
III-3 Pasto Potato Prices Deflated by the Consumer Price
Index for Workers in Pasto . . ... 240
IV-1 Rate of Employment in Colombia by Sectors of the
Economy . . . . .. ... 243
V-1 Annual Loans by Caja de Crdito Agrario, 1960-
1968 . . . . .. . 245
V-2 Caja Agraria Loans to Agricultural Producers by
Commodities in Colombia . . .... 247
xiv
LIST OF FIGURES
Figure Page
Number Number
1 Map of Colombia Including the Major Market
Centers . ... . . 3
2 Map of Colombia Including the Potato Production
Departments Studied and Their Major Markets 39
3 Map of Bogot Including Major Sectors of the City
Used in the Retailer and Consumer Investigations 45
4 Map of Colombia Including Interdepartmental Potato
Flows in Percentages in 1961 . . ... 51
5 Distribution of Total Potato Production in the Bogot
Market Area . . . ... ... 53
6 Total Potato Production Entering Commercial Channels
in the Bogot Market Area . . .. 54
7 Monthly Potato Prices Deflated by the Consumer Price
Index for Workers in Bogot, Cali and Pasto 61
8 Theory of the Seasonal Potato Cycle in Colombia 62
9 Relationship Between Average Per Capita Potato
Consumption and Per Capita Income Ranges 68
10 Relationship Between Per Capita Income and Percent
of All Food Expenditure Allocated to Potatoes .. 68
11 Hypothetical Demand Curve for Potatoes in Bogot 77
12 Hectares Harvested, Total Production and Yield per
Hectare for Potatoes in Colombia, 1948-1968 102
13 Deflated Average Loan Size and Total Loans by Caja
Agraria to Potato Producers in Boyac, Cundinamarca
and Nario. . . . . .... 115
141 Input Cost Differences Between ICA and Potato Pro-
ducers . . . . ... . 120
15 Hypothetical Potato Production Relationships for
ICA and Potato Producers . . ... 121
xv
GLOSSARY OF TERMS AND INSTITUTIONS
Ao Grande The largest potato harvest in Colombia representing
about 60% of total annual production occurring prima-
rily in June, July and August.
Asociaci6n Colombiana de Cultivadores de Papa (ASCOLPA) The
Association of Colombian Potato Producers,- Emphasizes
assistance to members to increase potato production;
displaying interest in processing and storage problems.
Barrio -One of the districts or suburbs into which a large town or
city is divided.
Bodega Store room or warehouse.
Bulto A measure of weight:
1 bulto = 62.5 kilograms = 137.5 pounds.
Campesino A peasant.
Carga A measure of weight:
1 Carga = 2 bultos = 125 kilograms = 275 pounds.
Carulla The largest supermarket chain in Bogot consisting of eight
retail stores and a central wholesaling warehouse.
Caja de Crdito Agrario Industrial y Minero Caja Agraria A primary
agency administering credit to agricultural producers
including potato producers.
Centavo The hundreth part of a peso.
Centro de Estudios sobre Desarrollo Econdmico (CEDE) The Center for
Economic Development Studies General economic research
and a brief study of potato markets in Bogot; presently'
doing a consumer panel study of food consumption in six
Colombian cities.
Cooperativas Food retail outlets usually patronized by employees of
specific public or private companies or institutions.
Departamento A subdivision of the country similar to states in the
United States. Cundinamarca, Boyac and Narifo are examples
in Colombia.
Departamento Administrativo Nacional de Estadstica (DANE) The National
Department to Administer Statistics Compiles census data
and periodic data on demographic, economic and agricultural
changes.
xvi
Fanegada A measure of land.area:
1 fanegada = 0.64 hectares 1.58 acres.
Gota Late blight in potatoes.
Gran Central A large wholesaling warehouse in the food retailing and
wholesaling center of Bogot where wholesalers rent a stall.
Hectare A measure of land area:
1 hectare = 2.47 acres = 1.56 fanegadas.
Instituto Colombiano Agropecuario (ICA) The Colombian Agricultural
Institute A federal government supported institution
with responsibilities including research, graduate education
and extension in the field of agriculture.
Instituto Colombiano de la Reforma AgParia (INCORA) The Colombian
Agrarian Reform Institute Programs for land settlement
land redistribution and irrigation projects; a limited
number of loans to potato producers.
Instituto de Investigaciones Tecnol6gicas (IIT) The Technical Institute
of Investigations,- Conducts food processing research.
Instituto Latinoamericano de Mercadeo Agricola (ILMA) The Latin American
Marketing Institute FAO supported international project
(phased out in June 1969), which conducted marketing research
and provided .a two year training course in marketing for
students from all Latin American countries.
Instituto de Mercadeo Agropecuario (IDEMA) The Agricultural Marketing
Institute Has responsibility for price, storage, inter-
national trade and other national marketing programs for
agricultural products in Colombia.
Mitaca The smallest potato harvest in Colombia representing about 30%
of total annual production occurring primarily in January
and February.
Municipio An administrative unit or subdividion of a department similar
to a country in the United States.
P-D System A production distribution system.
Papa Potato.
Papa de ao Common potato varieties averaging from 3 to 6 centimeters
in diameter.
Papa criolla A Colombian potato with a dark yellow interior averaging from
2 to 4 centimeters in diameter.
xvii
Peso The monetary unit of exchange which averaged about 16.5 pesos
to one dollar for the research period, (1968).
Pltano Plantain, a fruit similar to the banana.
Plaza A market square or market place where primarily food is sold.
Pueblo A town or village.
Reten A check point operated by the police for trucks hauling agricultural
and industrial products within Colombia.
Sociedad de Aprovechamiento de los Recursos Naturales de Cundinamarca
(SARC) The Society for Profitable Utilization of Resources
in Cundinamarca A departmental development organization
that, among other activities, cooperates with IDEMA in
potato storage.
Tienda A small retail food store usually ranging in size from 200 to
400 square feet and not allowing self service for customers.
Tonelada Is a long ton. All ton measures in this research are long tons.
1 tonelada = 16 bultos
= 8 cargas
= 1,000 kilogramos
= 2,000 libras (500 grams/libra)
= 2,200 pounds (16 oz/pound)
Universidad Nacional The National University in Colombia Campuses
in Bogot, Medellin, and Palmira Federally funded and
trains students in six colleges including Sciences,
Engineering, Arts, Human Sciences, Helth, and Agricultural
Sciences.
Wisconsin Land Tenure Center Phased out in June 1969, conducted a
teaching and research program on socio-economic problems
related to agrarian reform.
Yuca- A root-plant eaten like potatoes commonly called casava in the
United States.
Zorras Manual-or animal-drawn carts used in transporting produce.
xviii
CHAPTER I
INTRODUCTION
The Problem
In attempting to attain economic development, a less-developed
country encounters problems unique to its own cultural, social, politi-
cal and economic conditions. Colombia, along with most Latin American
countries must struggle with at least three major problems which hinder
economic development. These problems include a high rate of population
growth competing with food production-distribution advancements, a rapid
rural-to-urban migration rate causing serious sectoral distortions, and
geographic barriers that inhibit improvements in the transportation and
communication systems.
The potato production-distribution (P-D)1 system, an important
subsector in the food sector of the Colombian economy, includes specific
cultural, social, political and economic problems. While most potato
farms and distribution firms are small and underemployment of labor is
common, neither-in rural nor urban areas are alternative emplyment
opportunities capable of productively utilizing the excess supply of
underemployed and unskilled urban and rural workers. Yet, as Colombia
develops, the potato subsector moves to more commercialization accompanied
1
A glossory, pp. xvi xviii includes the Spanish words and ab-
:breviations, of names of institutions used in the thesis. A production-
distribution system will be referred to as a P-D system.
1
CHAPTER I
INTRODUCTION
The Problem
In attempting to attain economic development, a less-developed
country encounters problems unique to its own cultural, social, politi-
cal and economic conditions. Colombia, along with most Latin American
countries must struggle with at least three major problems which hinder
economic development. These problems include a high rate of population
growth competing with food production-distribution advancements, a rapid
rural-to-urban migration rate causing serious sectoral distortions, and
geographic barriers that inhibit improvements in the transportation and
communication systems.
The potato production-distribution (P-D)1 system, an important
subsector in the food sector of the Colombian economy, includes specific
cultural, social, political and economic problems. While most potato
farms and distribution firms are small and underemployment of labor is
common, neither-in rural nor urban areas are alternative emplyment
opportunities capable of productively utilizing the excess supply of
underemployed and unskilled urban and rural workers. Yet, as Colombia
develops, the potato subsector moves to more commercialization accompanied
1
A glossory, pp. xvi xviii includes the Spanish words and ab-
:breviations, of names of institutions used in the thesis. A production-
distribution system will be referred to as a P-D system.
1
2
by larger, more efficient firms, and displacement of underemployed laborers.
Commercialization, however, is hampered by uncertain and risky economic
conditions while limited labor alternatives stifle economic growth. Thus,
the problems are interdependent, complex and multi-faceted.
Geographic Barriers to Economic Integration
Colombia is the only South American nation bordering on two major
bodies of water: the Caribbean Sea and the Pacific Ocean. Several navi-
gable rivers also span great distances of the country. Tropical forests,
barren desert lands, temperate valleys, wind-swept plateaus, steaming
2
lowlands, and snow-capped mountains all occur within the Republic. Such
diversity can support a variety of economic activities but geographic
diversity also makes it difficult to stimulate social mobility, to improve
communication and transportation, and to facilitate numerous other insti-
tutional adjustments necessary for agricultural and economic growth.
Colombia includes five major market centers, in the cities of Ba-
rranquilla, Bucaramanga, Cali, Medellin and Bogot (Figure 1). These
market centers service five somewhat separated and relatively well
developed economic regions. Other less developed economic regions, such
as the eastern planes (Llanos Orientales) and the Pacific Coast remain to
be developed.
The potato production and distribution system is influenced by these
geographic orientations. Because of inadequate transportation and the
2
Preston E. James, Latin America, Third Edition, Odyssey Press, Inc.,
1959; p. 100.
3
Caribbean Sea
S~ ra --- Major Paved Roads
ranquilla
--- Major Unpaved Roads
S1 Rivers
S\ Mountain Ranges
\ Major Market
SX Centers
Panama
Panama Venezuela
I
l\ m ede In
Pacific Ocea //
Llanos Orientales
Ecuador
Brazil
Figure 1 : Map of Colombia Peru
Including the
Major Market
Centers
4
bulky nature of the commodity, long distance potato flows remain difficult.
Potato producers must cope with frost periods and dry seasons which accentu-
ate and perpetuate seasonal productivity and seasonal price fluctuations.
Though potatoes are not produced in warm climates, they are consumed in
these climates despite inadequate or non-existent storage facilities.
Thus, income and product losses occur between the two major harvest periods,
dictated by frost and dry seasons.
The Food Demand and Supply Race
Success of the agricultural sector in Colombia depends not only
on agricultural reform and development programs, but also upon rates of
population growth and migration, and upon economic growth in the urbah-
industrial sector. A well-coordinated food P-D system, while essential
for rural and urban development in Colombia, must be accompanied by ef-
fective demographic and macro economic programs.
Population Migration and Growth
Estimates of the current annual rate of population growth in Co-
3
lombia range from 3.2 to 3.5%. At this rate Colombia will double its
population in 20 to 22 years. Even if the family planning efforts, now
gaining momentum, are reasonably successful, population growth rates
cannot decline rapidly because 46.7% of the Colombian population is under
3
Robert C. Cook and Jane Lecht, People: An Introduction to the
Study of Population, Population Reference Bureau, Columbia Books, Publish-
ers, Washington D. C., 1968, p. 60.
4
bulky nature of the commodity, long distance potato flows remain difficult.
Potato producers must cope with frost periods and dry seasons which accentu-
ate and perpetuate seasonal productivity and seasonal price fluctuations.
Though potatoes are not produced in warm climates, they are consumed in
these climates despite inadequate or non-existent storage facilities.
Thus, income and product losses occur between the two major harvest periods,
dictated by frost and dry seasons.
The Food Demand and Supply Race
Success of the agricultural sector in Colombia depends not only
on agricultural reform and development programs, but also upon rates of
population growth and migration, and upon economic growth in the urbah-
industrial sector. A well-coordinated food P-D system, while essential
for rural and urban development in Colombia, must be accompanied by ef-
fective demographic and macro economic programs.
Population Migration and Growth
Estimates of the current annual rate of population growth in Co-
3
lombia range from 3.2 to 3.5%. At this rate Colombia will double its
population in 20 to 22 years. Even if the family planning efforts, now
gaining momentum, are reasonably successful, population growth rates
cannot decline rapidly because 46.7% of the Colombian population is under
3
Robert C. Cook and Jane Lecht, People: An Introduction to the
Study of Population, Population Reference Bureau, Columbia Books, Publish-
ers, Washington D. C., 1968, p. 60.
4
15 years of age. These young people, many of whom owe their lives to
reduced infant mortality over the past fifteen years, will soon contribute
significantly to population growth even if they apply family planning
methods.
Nearly one-half of Colombia's 19.8 million people are engaged in
agriculture. As in many Latin American countries, rural-to-urban migration
continues at a relatively rapid pace, challenging present food P-D systems,
income-earning capacities of migrants, and, in turn, the effective consumer
demand for food. Bogot, the capital city with more than 2.1 million in-
habitants in 1968, experienced a rapid average annual population growth
5 6
rate of 6,8% from 1951 to 1964 and 6.1% from 1964 to 1968.
From 1951 to 1964, the average rate of population increase in the
26 departmental capital cities, which accounted for.about one-third of
7
total population, was 7.9%. Since urban population was about half of
total population, one-sixth of the urban population is not accounted for
in the 7.9% rate. The one-sixth unaccounted for probably expanded at a
rate similar to the rural population growth rate which.would be 1.9%
based upon 7.9% urban increase and a 3.5% national population rate of
growth. Thus, the rate of population growth in all urban areas was
about 5.8%.
4
Departamento Administrativo Nacional de Estadstica, "Colombia
Boletn Mensual de Estadstica", Afo XVI, Nmero 194, Bogot D.E., Mayo
20 de 1967, p. 11.
5
U. S. Department of Commerce, Basic Data on the Economy of Colom-
bia, prepared by Herbert A. Lindow, No. OBR 6645, July 1966.
6
DANE, unpublished data, June 1968.
7
DANE, XIII Censo Nacional de Poblaci6n, Resumen General, Julio
15 de 1964.
6
At least two factors contribute to the Colombian rural-to-urban
migration phenomenon. Rural poverty and inadequate social services
cause a "push" complemented by the "pull" of hope for a better life in
the city. Also, during the 1950's and early 1960's, rural violence
8
created a push to urban areas. But, in either case, most migrants
leave a sub-culture of peasantry, lacking modern attitudes and skills
necessary for effective participation in a modern urban socio-economic
system. A sub-culture of peasantry reflects a mutual distrust in
interpersonal relations, lack of innovativeness, fatalism, low aspi-
9
ration levels, a limited world-view, and lack of empathy.
Many individuals migrating from a sub-culture of peasantry trans-
mit a low income and tradition bound socio-economic status to urban areas
which contributes to the culture of poverty, a typology advanced by Oscar
10
Lewis. Urban-oriented economic and social traits such as unemployment
and underemployment, low wages, lack of skills, low educational levels
and feelings of resignation and fatalism here constitute the culture of
11
poverty. Urban poverty traits often involve traditional orientations
8
Mons German Fals Borda, and Eduardo Umafa Luna, La Violencia
en Colombia, Ediciones Tercer Mundo, Bogot, Colombia,1962.
9
Everett M. Rogers, Peasant Modernization: The Impact of Com-
munication, New York, Holt Rinehart.and Winston, 1968.
10
Oscar Lewis, The Children of Snchez, Vintage Books, 1961>
(see the preface where Lewis describes the culture of poverty and
lists over twenty traits).
11
A sub-culture of peasantry and a culture of poverty imply a
homogeneity within these groups that does not exist. The terms are
a theoretical approach to the problem. It is probably true, however,
that many socio-economic traits are relatively common both within and
between the two general distinctions.
7
similar to traditional traits of peasants. Poverty-stricken urban dwellers
either have just migrated or have not achieved socio-economic mobility from
a poverty position of migrant ancestors. Aside from individual deprivation,
these peasantry and poverty traits significantly restrain the effective
demand for agricultural products.
Thus, while mobility alters cultural orientations, numerous tra-
ditional characteristics are retained, reinforcing a culture of poverty
and a lagging consumption sector. Bonilla presents this issue in the
following manner:
It may turn out that insofar as mobility is oriented
toward occupation or social groups whose status and style
are importantly rooted in traditional values,.. mobility
far from impelling change serves to reinforce tradition...
The city grows irrationally because life in the rural areas
is intolerable; the faster the city grows, the less urban
it becomes.1
Regardless of the cause of persistance of acute poverty, the low
level of income and productivity of three-fourths of Colombia's population,
contributes little to agricultural and general economic development because
13
of a limited effective demand.
Agricultural producers, except where export potentials are high,
will always be dependent upon the effective demand of domestic consumers
12
Frank Bonilla, "The Urban Worker", in Continuity and Change in
Latin America, edited by John J. Johnson, Stanford University Press,
Stanford, California, 1964, p. 190 & 188.
13
"If half or more of the population economically do not exist, or
are unemployed, and if only, say, 20 percent of the remainder can exert
a really effective demand for goods, the market is considerably smaller
than appears at first sight" Lauchlin Currie, Accelerating Development,
The Necessity and the Means, McGraw Hill, 1966, p. 45.
8
which will not be enhanced by driving rural peasants to urban poverty. An
essential aspect of economic development is the distribution of consumer
purchasing power, which is affected by rates of population growth and
migration.
Distribution of Income
Income distribution critically affects the effective demand for
food, and the levels of nutrition. All of the potential food production
and distribution system improvements within the grasp of Colombian insti-
tutions cannot solve consumption and nutrition inadequacies when income
distribution remains highly skewed.
The average per capita income in Colombia was $254 dollars in 1967.
The rural income per capita was $167 dollars while urban per capita income
was $352 dollars. Table 1 indicates that rural incomes, although about
50% of urban incomes, are increasing more rapidly. This phenomenon can
be explained by the rural-to-urban migration of low income families. Even
though these low income, unskilled migrants may increase their incomes
slightly above the average rural income level by moving, they usually.
do not achieve incomes in excess of the urban average. Thus, urban
income growth'is stifled somewhat by rural-to-urban migration.
Exact data on distribution of income within the urban and rural
sectors are not available. Distribution of farms and farm land, in-
directly explains the income earning base for rural people (Appendix
I, Table I-1). Only 4.5% of the farm land (less than 5 hectares per
farm) is owned by 62.6% of the Colombian farmers, while 3.5% of the
farmers own 66% of the land (100 hectares or more per farm). Distribution
of urban incomes is closely related to the employment-unemployment
Table 1 : Per Capita Income Levels in Colombia, 1960-1967
Per Capita
Incomea 1960 1961 1962 1963 1964 1965 1966 1967
National 234 238 242 242 248 243 263 254
Urban 338 335 331 331 336 330 345 352
Rural 145 153 163 162 167 162 165 167
Index of
Growth
National 99.1 101.2 102.9 102.9 105.5 103.4 107.6 108.0
Urban 100.4 99.5 98.3 98.3 99.8 98.0 102.5 104.6
Rural 97.3 103.3 110.0 109.4 112.9 109.4 111.4 112.8
a
In US dollars
b
An index of change (base is 1960-1961 = 100)
Source: U. N. Economic Survey of Latin America 1965 Economic
Commission for Latin Amrica, New York, 1967, p. 201; Los Problemas del
Crdito Agropecuario y el Desarrollo Econmico en Colombia, trabajo pre-
sentado al Seminario Latino Americano sobre Crdito Rural en el Salvador,
Octubre 1968, Cuadro No. 2; and Departamento Administrativo Nacional de
Estadstica, "Boletin Mensual de Estadistica", Bogot, Colombia S.A.
situation. Only 74% of the urban workers were employed more than six
months per year in 1964 and the rate of annual unemployment was about
21% (Appendix IV, Table IV-1).
Agricultural Production and Distribution
Population growth rates, migration trends and changes in per
capita incomes place specific requirements upon the agricultural sector.
Growth rates in agricultural production and in development of food
10
distribution facilities must accelerate rapidly to keep pace with demographic
changes.
A simple exercise gives an indication of needed productivity changes
14
within the Colombian agricultural sector. The equation D= Pr + Ei (N) is
applied where D= rate of increase in effective demand, P = the rate of
annual population growth, Ei = the income elasticity and N the rate of in-
crease in per capita income. This equation will yield a,general guide to
production requirements.
Table 2 indicates a range of possibilities because (1) the figures
Table 2 : Estimated Required Rates of Increase in Food Productivity
Based on Varied Rates of Growth in GNP and Population and
Different Income Elasticities of Demand
GNP
Growth Rate 4.5 5.5 6.5
Population
Growth Rate
(Pr) 3.0 3.5 4.0 3.0 3.5 -4.0 3.0 3.5 4.0
GNP/Capita
Growth Rate 1.5 1.0 0.5 2.5 2.0 1.5 3.5 3.0 2.5
(N)
Required Rate of Increase in Food Production
Income .4 3.6 3.9 4.2 4.0 4.3 4.6 4.4 4.7 5.0
Elasticity
of Demand .6 3.9 4.1 4.3 4.5 4.7 4.9 5.1 5.3 5.5
(Ei) .8 4.2 4.3 4.4 5.0 5.1 5.2 5.8 5.9 6.0
a
For ease of computations this assumes that GNP/capita = GNP + Po-
pulation, even though an exponential factor shoula be included for
explicit accuracy. These computed rates are, however, reasonably
accurate.
14
For a more detailed discussion of food requirements for developing.
countries, see Robert D. Stevens, "Rates of Growth in Food Requirements During
EConomic Development" Journal of Farm Economics, Dec. 1965, Vol. 47, No. 5,
pp. 1208-1212.
11
for rates of growth and income elasticity are not firmly agreed upon by
social scientists and growth specialists; and (2) given the ranges, we
can speculate about demand requirements under varied conditions.
The annual rate of growth required in agriculture production
ranges from about 4.1% to 4.7%, assuming the present population growth
rate to be 3.5%,an income elasticity of demand for food at 0.6,and
15
the GNP growth rate at 4.5% to 5.5%. Given the present population
age distribution, a 4% population growth rate remains conceivable,
andwhen combined with an optimistic GNP growth rate of 6.5% and a
0.6 income elasticity, the required rate of growth in agricultural
production is 5.5% per year. Some crop production specialists in
Colombia feel that a 7% growth rate in food production is within the
16
technical capacity of adapted varieties and land potentials. Without
expanding areas planted to potatoes, the annual rate of increase in
production could probably exceed 7%. Most of these increases would
result from planting improved varieties and application of improved
seeding practices.
Food production potentials surpassing present growth rates have
been possible in Colombia for several years. Why have these potentials
not been accomplished? One explanation is that the food distribution
system must be rationalized in order to meet both consumer and producer
needs. Even if higher rates of production were attained, the impact on
15
The real rate of growth in 1968 was 5.5% and in 1967 it was
4.0%. See USDA-ERS, The Agricultural Situation in the Western Hemi-
sphere, ERS-Foreign 261, Washington D.C., April 21, 1969, pp. 11-12.
16
Comment by U.S. Grant, (Rockefeller Foundation) in a Seminar
on the Colombian Agricultural Economy, Bogot, Colombia, July 23, 1968.
12
the food situation in Colombia would be slight unless the product marketing
17
system were improved. Similarly, producers seeking to modernize their
farm enterprises demand numerous inputs from the non-agricultural sector
for which the distribution systems often are inadequate or non-existent.
Distribution requirements for an expanding agricultural production
sector exceed the production growth rate. Concerning product markets,
for example, a Colombian campesino family (small peasant farmer) pro-
ducing 40 bultos (62.5 kilograms or 137.5 pounds) of potatoes may, with
his family consume 30 bultos and market 10 bultos. Should he increase
his potato production by 10 bultos (a 25% increase) and continue to
consume 30 bultos, his potatoes sent to market will increase by 100%.
Augmenting production by 25% without expanding land use also
requires improved practices and probably more purchased inputs which
solicit significant increases in service market activities. Some, but
not all, product and service market facilities overlap. Simply aug-
menting potato production by 25% and marketing this produce would
require increases in social overhead facilities, service market
facilities and product market facilities of significantly greater magni-
tude than the production increase itself.
Percentage increases in potatoes marketed by individual farms
cannot be translated directly to market facility growth requirements
because of aggregation and adjustment problems. The problem also may
be illustrated by changes in the food demand structure. If the urban
17
See Martin Kriesberg, "Marketing, Middlemen, and Mirales",
International Agricultural Development Service, A paper prepared
for presentation at the St. Joseph's Academy of Food Marketing,
Philadelphia, May 27, 1968.
13
population growth rate is 6% and per capita income increases at 2% with
the income elasticity of demand for food equal to 0.6 the increase in
demand for market services would be 7.2%. So demand for market services
increases more rapidly than total demand for food previously estimated
at 4.7% per year in Table 2 when per capita income increases at 2%
annually.
It is probably fair to say that distribution of food and farm
inputs presently lags behind physical production potentials. Reducing
this barrier to improved food production and distribution, while ex-
18
tremely important, will be a difficult task for the Colombian government.
Agricultural Marketing in Development
A well coordinated P-D system for food, while not capable of
solving population migration problems, unemployment and underemployment
problems, and income size and distribution problems, can contribute to
balanced rural and urban growth and lessen the impact of these problems.
A national market strategy proposed by W.W. Rostow suggests that agri-
cultural and industrial growth can be self-reinforcing. His strategy
involves an interdependent set of activities to be performed simul-
taneously:
1. A build-up of agricultural productivity,
2. A revolution in the marketing of agricultural products,
18
See Herman Felstehausen, Local Government and Rural Service
Barriers to Economic Development in Colombia, the Land Tenure Center,
68LTC 10, June 1968.
14
3. A shift of industry to the production of simple agricultural
equipment and inexpensive consumer goods for the mass market,
4. A revolution in marketing methods for inexpensive manufactured
19
goods, especially in rural areas.
This overview of the market system as a coordination mechanism
for balanced economic growth, implies a need for solving specific problems.
These problems become evident by evaluating market coordination techniques
and market performance criteria which are unique to each socio-economic
system.
To evaluate market coordination and market performance in the potato
P-D system requires an understanding of attitudes, beliefs and values con-
cerning expectations for the system. Evaluation and reform processes are
determined in part by the system under study. The criteria,,such as
efficiency, yields, losses, product quality, employment, progressiveness,
product distribution and income distribution suggest how the P-D system
is coordinated. Based upon this evaluation, specific problem areas can
be:identified and recommendations specified for developing a market system
capable of coordinating an economic growth process in both rural and urban
areas.
The Potato Subsector in Colombia
For several centuries the geography of potato production and con-
sumption has followed the ecological adaptations of people native to
19
Walter W. Rostow, View from the Seventh Floor, New York: Harper
and Row, 1964, pp. 135 & 136.
15
20
South America and Colombia. Potatoes originated in the New World, and
the first recorded observation of their production occurred during the
Spanish conquest of Perd in 1532. The potato was probably domesticated
before the Inca empire began but the exact date is not known. Pedro de
Cieza de Len in Cr6nica del Per, 1538, describes the potato and its
preparation in the areas around Quito, Ecuador, and Pasto and Popayn
in Colombia. From South America, the potato was sent to Spain in 1570,
to England in 1596, and later to all temperate production regions of
the world to become an important food crop, as it had been for the
Incas and their forefathers.
As early as the sixteenth and seventeenth centuries, potatoes
were frozen, dried and preserved by Indians in the Peruvian Andes.
During the evenings, potatoes were placed in large, shallow earthen
basins filled with water. The potatoes froze during the night and
were removed from the basin and permitted to thaw the following
morning. The Indians then walked on the potatoes with bare feet
without breaking the potato skins, thereby forcing all of the moisture
out of the soft tubers. Finally, the tubers were dried in the sun,
resulting in a dehydrated potato capable of reconstitution with water.
Thus, spoilage and surplus problems were reduced by preservation and
a stable food supply during off-seasons and years of inadequate harvest
became a reality.
20
The following brief history of potatoes is summarized from
Hawkes, J.G. "Cinco Conferencias Sobre el Mejoramiento de la Papa",
Boletin Tcnico No. 1, Ministerio de Agricultura y Cria, Direccin
de Agricultura, Instituto Nacional de Agricultura, Maracay, Venezuela,
Junio 1951, p. 53.
16
Today more sophisticated preservation techniques are available to
reduce loss problems, but these techniques remain virtually unexploited
in Colombia. Seasonal production patterns continue to influence the
Colombian potato subsector.
Farms growing potatoes, in general, are smaller than the average
farm size in Colombia (Table 3). Approximately 108,000 producers or
8.3% of all farms 'were engaged in potato production in 1960. Appendix
I contains detailed farm size classifications for all farms in Colombia
and potato farms in particular.
Table 3 : Comparative Farm Size Data for Potato Farms and
all Farms in Colombia
Less than More than 100
1 hectare hectare
Potato Farms: (percent)
Proportion of Farms 70.8 0.01
Land Area 25.6 1.5
All Farms:
Proportion of Farms 24.7 3.5
Land Area 0.5 66.0
Potato Farms as a Proportion of
all Farms:
Proportion of Farms 25.7
Land Area 23.9
Source: Appendix I
17
It is impossible to present the aggregate income value of Colombian
potato production with precision. Table 4 presents ranges based upon the
varied aggregate production estimates found in Appendix II, Table II-1.
The lower estimate in terms of measured national income is probably more.
accurate because it represents more closely sales through commercial
channels. Thus, from 1960 through 1965, the commercial value of the pota-
to subsector represented about 2.4% of rural income while the value of
total potato production averaged about 4.2%. These estimates do not
include the 1964 values because it was an abnormal year with very high
prices before a very large harvest and only unweighted average prices
are available to determine the value of production estimates.
Tabla 4 : Value of Colombian Potato Production at the Farms
Compared to Rural Income (in million of dollars)
Farm Value of Value of potato
Potato Production Rural production as %
Income of rural income
Commercial All Commercial All
Sales Production Sales Production
1960 33.1 49.9 1,203.6 2.8 4.1
1961 33.5 71.7 1,300.0 2.6 5.5
1962 27.7 44.7 1,411.3 2.0 3.2
1963 41.6 76.3 1,434.0 2.9 5.3
1964 73.8 141.0 li519.2 4.9 9.3
1965 28.2 45.5 1,.532.4 1.8 3.0
Source: Value from Appendix II, Table II-1 converted to dollars
by using the exchange rate presented in Revista del Ban-
co de la Repblica, Bogot, Colombia, Febrero, 1968,
p. 300.
b
U.N. Economic Survey of Latin America 1965, United
Nations, New York 1967, p. 201.
18
The potato subsector includes many stages of growth and develop-
ment. Numerous producers grow potatoes without any source of animal or
tractor power, some use animal power, and some farms are large, mechanized,
modern firms. Transportation varies from mule or donkey over narrow trails
to boats on the rivers and trucks on modern highways. Most markets are
primitive and price bargaining is common, but a limited number of super-
markets are by-passing the traditional markets by purchase agrements. Both
rural poverty and modern farms are evident in the potato subsector. Potato
consumption per capita varies from near zero in the warm coastal regions
to over 100 kilograms in the potato production areas located in cool
mountain regions.
Like many agricultural subsectors in developing countries, the
potato subsector in Colombia requires careful stimulation by the govern-
ment because of the number of low income and underemployed individuals
involved. The time for concern now is upon the Colombian government
because most of necessary tools for technical modernization of the sub-
sector are rapidly becoming available. An approach to modernization must
account for both economic and social problems in the potato subsector,
the agricultural sector and the Colombian economy.
Thesis Plan
Orientation in General
The lack of descriptive material about the P-D system for most
products in Colombia, and particularly potatoes, requires that this
research report first describe and analyze the production and distri-
bution system for potatoes in an attempt to identify.the primary
18
The potato subsector includes many stages of growth and develop-
ment. Numerous producers grow potatoes without any source of animal or
tractor power, some use animal power, and some farms are large, mechanized,
modern firms. Transportation varies from mule or donkey over narrow trails
to boats on the rivers and trucks on modern highways. Most markets are
primitive and price bargaining is common, but a limited number of super-
markets are by-passing the traditional markets by purchase agrements. Both
rural poverty and modern farms are evident in the potato subsector. Potato
consumption per capita varies from near zero in the warm coastal regions
to over 100 kilograms in the potato production areas located in cool
mountain regions.
Like many agricultural subsectors in developing countries, the
potato subsector in Colombia requires careful stimulation by the govern-
ment because of the number of low income and underemployed individuals
involved. The time for concern now is upon the Colombian government
because most of necessary tools for technical modernization of the sub-
sector are rapidly becoming available. An approach to modernization must
account for both economic and social problems in the potato subsector,
the agricultural sector and the Colombian economy.
Thesis Plan
Orientation in General
The lack of descriptive material about the P-D system for most
products in Colombia, and particularly potatoes, requires that this
research report first describe and analyze the production and distri-
bution system for potatoes in an attempt to identify.the primary
19
interdependent factors influencing coordination and performance. The potato
P-D system influences not only the agricultural economy but also the national
economy. Hence, the research analysis and recommendations consider both
micro and macro economic factors that affect potato production and distribu-
tion as well as how the P-D system for potatoes contributes to and/or in-
hibits growth within the agricultural sector and the national.economy.
The research results and recommendations should be usable by
both research and action agencies and should provide an understanding of
the potato P-D system upon which further research can be initiated. The
analysis also contributes to a small, but expanding, body of marketing
research in the Colombian agricultural sector. Finally, it is hoped that
the research will contribute to a better understanding of the role of
agricultural marketing in both agricultural economic development and
general economic and social development.
Objectives
Several general objectives of the research, while difficult to
fulfill, provide important guidelines to useful market research programs.
Of primary interest, is the role of agricultural marketing systems in
economic development. One research project cannot specify this role,
but a contribution can be made, by understanding how market coordination
21
influences the P-D system for potatoes in Colombia. The role varies
21
This research will complement a larger body of research on this
topic. The Michigan State University, Agency for International Development-
Latin America Food Marketing Study (LAFS) and the related Latin American
Market Planning Center (LAMP) are extensive research and planning programs
which assess the role of agricultural marketing in economic development and
investigate Rostow's national market strategy. Direction for the project,
with research completed in Puerto Rico, Northeast Brazil and Bolivia and
research underway in the Cauca Valley of Colombia, comes from Dr. Harold
M. Riley and Dr. Donald Taylor at MSU.
20
among countries and will only be specified by evaluating specific product
industries.
A second objective of the research is to identify general per-
formance criteria or goals and then evaluate performance in the potato
P-D system. Performance goals, while displaying some common character-
istics, differ between and within economies, sectors and subsectors.
Thus, the analysis identifies conflicting goals and the research and
recommendations illustrate alternative solutions.
Specific and operational objectives of the thesis are:
1. To describe the existing potato P-D system including the
adoption of improved production practices, and coordination
processes in distribution.
2. To conduct a diagnostic investigation of interdependent
problems in modernizing the production process and im-
proving coordination in the P-D system.
3. To identify alternative means of improving this P-D system
while considering both economic and social goals for develop-
ment. Two sub-objectives are impliedg a) to identify those
problems directly related to growth and development within
firms, and b) to identify alternative macro economic and
institutional policies related to growth and development in
the potato subsector.
4. To recommend methods for improving the performance of the
potato P-D system as a part of agricultural and economic
development in Colombia.
The analysis to fulfill these objectives required the use of
primary data collected by field interviews and organization of secondary
21
data. The field interview process was directed to every level of product
market participation from producers to consumers. The primary market
areas studied were Bogot, and Cali and producers in Boyac, Cundinamarca
and Nario.
Secondary data collection involved a difficult task of locating
relevant data and determining why major discrepancies between sources
occur in order to specify the data sources for use. Depth interviews
with the data collection agencies helped solve this problem and provided
information necessary to describe the major institutions associated with
the potato subsector.
Further in-depth study involved members of the potato production
program and the agricultural engineering program at the Instituto Colom-
biano Agropecuario (ICA). This research helped specify the technical
production problems involved in modernizing the potato production, storage,
transportation and processing functions. Numerous individuals were called
upon for ideas about future policies and programs to improve performance
of the potato P-D system.
A Chapter Brief
The first part of the thesis, including Chapters I and II, gives
a brief overview of the Colombian economy, a sketch of the potato marketing
situation, a general market research philosophy and the research methodology
because geographic and demographic conditions significantly influence agri-
cultural production and distribution in Colombia, a brief description of
these factors has been included in the first chapter. General rate of
growth requirements for agricultural production and distribution are also
included which provide the macro economic setting within which the potato
22
P-D system operates.
In Chapter II a market system is defined. The relevant perform-
ance goals are specified and serve to orient the analysis and presentation
that follow. Finally, the presentation of the research methodology applied in
the field investigations discusses how sampling and interview techniques
were adapted to an area of research where secondary data and experience
were either nonexistent or conflicting.
The structural and functional aspects of the potato P-D system
are described in Chapter III. General production and distribution relation-
ships including regional production, market channel flows and price move-
ments are presented. The consumer assumes an early position of importance
because ultimate use and acceptance by consumers dictates success or
failure for producers and distributors. A description of the organizational
structure of the potato subsector and the institutions that influence
change in the subsector complete the chapter.
Chapter IV discusses adoption of improved practices, potato yield
results and management decisions of potato producers as major indicators
of institutional success in augmenting growth and development in the potato
subsector. The chapter presents the role of credit institutions and
technical assistance institutions in modernizing the potato production
process.
As a counterpart to Chapter IV, Chapter V discusses coordination
of the potato distribution process. Price instability provides the central
problem for potato market participants. Both physical and facilitative
coordination processes are described and diagnosed to determine their
ability to reduce price fluctuations.
The final part of the thesis, including Chapters VI and VII,
23
presents and evaluates policy alternatives for improved performance in
the potato P-D system. Discussions of the future for the potato sub-
sector, and economic and social problems related to the subsector
are congruent with the major performance goals presented in Chapter
II. Given these goals and the macro economic considerations, discus-
sions of credit policies, price and storage policies, information
system policies, and research and development alternatives illustrate
possible future performance goals for potato production and distribu-
tion processes.
A general summary and conclusions appear in Chapter VII.
Recommendations for market reform programs attempt to select specific
lines of action that will fulfill competing policy and performance
desires.
CHAPTER II
THE RESEARCH PLAN
An Approach
Numerous conceptualizations of agricultural market systems appear
in the literature, some very specific and limiting, others more function-
al and encompassing. The broad approach explained below serves as a
general guide to this research effort.
To Define a Food Production-Distribution System
A food P-D system, in its broadest sence, extends from within the
farm enterprise to encompass input procurement and information seeking,
and to and beyond consumer purchase including consumer satisfaction and
welfare. More specifically, in discussing the Latin American Marketing
Project, Riley views "the agricultural production-marketing system as a
set of vertically related, interdependent activities which relate con-
22
sumers, retailers, wholesalers, processors, assemblers, and farmers.
A food production-distribution system is defined to include the
physical production system, the physical distribution system and the
22
Harold M. Riley, "The Changing System of Agricultural Pro-
duction and Marketing", in The Role of Food Marketing in the Economic
Development in Puerto Rico, Seminar Summary, Edited by Robert W. Nason,
Published by the Latin American Studies Center, Michigan State Uni-
versity, East Lansing, Michigan, 1966, p. 53.
24
CHAPTER II
THE RESEARCH PLAN
An Approach
Numerous conceptualizations of agricultural market systems appear
in the literature, some very specific and limiting, others more function-
al and encompassing. The broad approach explained below serves as a
general guide to this research effort.
To Define a Food Production-Distribution System
A food P-D system, in its broadest sence, extends from within the
farm enterprise to encompass input procurement and information seeking,
and to and beyond consumer purchase including consumer satisfaction and
welfare. More specifically, in discussing the Latin American Marketing
Project, Riley views "the agricultural production-marketing system as a
set of vertically related, interdependent activities which relate con-
22
sumers, retailers, wholesalers, processors, assemblers, and farmers.
A food production-distribution system is defined to include the
physical production system, the physical distribution system and the
22
Harold M. Riley, "The Changing System of Agricultural Pro-
duction and Marketing", in The Role of Food Marketing in the Economic
Development in Puerto Rico, Seminar Summary, Edited by Robert W. Nason,
Published by the Latin American Studies Center, Michigan State Uni-
versity, East Lansing, Michigan, 1966, p. 53.
24
CHAPTER II
THE RESEARCH PLAN
An Approach
Numerous conceptualizations of agricultural market systems appear
in the literature, some very specific and limiting, others more function-
al and encompassing. The broad approach explained below serves as a
general guide to this research effort.
To Define a Food Production-Distribution System
A food P-D system, in its broadest sence, extends from within the
farm enterprise to encompass input procurement and information seeking,
and to and beyond consumer purchase including consumer satisfaction and
welfare. More specifically, in discussing the Latin American Marketing
Project, Riley views "the agricultural production-marketing system as a
set of vertically related, interdependent activities which relate con-
22
sumers, retailers, wholesalers, processors, assemblers, and farmers.
A food production-distribution system is defined to include the
physical production system, the physical distribution system and the
22
Harold M. Riley, "The Changing System of Agricultural Pro-
duction and Marketing", in The Role of Food Marketing in the Economic
Development in Puerto Rico, Seminar Summary, Edited by Robert W. Nason,
Published by the Latin American Studies Center, Michigan State Uni-
versity, East Lansing, Michigan, 1966, p. 53.
24
25
23
exchange system. The physical production system includes those physical
facilities, firms and institutions such as farms and food processors that
create or physically transform a product. A physical distribution system
includes those physical facilities, firms and institutions involved in
physical movement of products through time and space. Finally, coordina-
tion of the production-distribution process is accomplished by the ex-
change system. The exchange system includes those market activities
that unite buyers and sellers to accomplish the processes of bargaining
and exchange of commodities.
Market coordination includes the dynamic processes that interact
within the exchange system. The set of institutions forming the ex-
change system must determine who will produce, what products will be
produced, what resources will be used, where products will be produced,
24
and who will consume them. Market coordination then facilitates the
dynamic processes by which producers, distributors and consumers interact
through information exchanges, establishing conditions of exchange, and
25
finally the legal and physical exchange of products. Thus, there are
two important flows occurring within the food P-D system. Farace explains
this issue by saying:
23
C.S. Slater and Harold M. Riley, et.al., Food Marketing in the
Economic Development of Puerto Rico, Research Report No. 1, Latin American
Studies Center:, Michigan State University, 1969, pp. 11 & 12.
24
Ibid.
25
Kelly M. Harrison, Agricultural Market Coordination in the Economic
Development of Puerto Rico, (unpublished Ph.D. dissertation,Michigan State
University, 1966), p 68.
26
It appears that the major role of communication is to aid in
facilitating coordination of the production and consumption
sectors of the economy. Along with flows in goods and services,
or labor, capital, raw materials and supplies, there exists a
concomitant flow of communications about these things and their
inter-relationships.26
Underlying these two flows are the interrelationships between prices
and economic incentives. Price is not simply an information mechanism;
it is also an indicator of potential profits which in turn stimulate
economic activity.
The Role of Agricultural Marketing in Development
Only within the past decade has attention been given to the role
27
of marketing in economic development. Neglect of marketing in the
growth process by development economists and policy planners, according
28
to Holton, stems from several reasons. First, the distribution process
tends to yield intangible marketing services in contrast to production of
physical goods which are more easily equated with an improved real level
of living. A second reason, associated with the first, is that less
developed countries have difficulty in evaluating contributions made by
26
R. Vincent Farace, "Communication Behavior and the Latin American
Food Marketing Process: Some Preliminary Findings", in The Role of Food
Marketing in the Economic Development of Puerto Rico, Seminar Summary,
Edited by Robert N. Nason, Published by the Latin American Studies Center,
Michigan State University, East Lansing, Michigan, 1966, p. 77.
27
For a very conprehensive review of literature including theories
of economic growth, the role of agricultural marketing in development,
and the national market see Kelly Max Harrinson, Op.cit., pp. 14-33.
28
Richard H. Holton, "Marketing Structure and Economic Develop-
ment", Ouarterly Journal of Economics, Vol. 67, August 1953, pp. 344-
361.
27
the distribution sector to employment and net income. Third, inefficient
market systems in less developed countries provide employment for the
otherwise unemployed participants. And finally, economists have been
predisposed to ignore the dynamic role of an improved distribution
system in increasing real incomes.
In discussing the role of agriculture in economic development,
Witt reviews the history of economic thought concerning agriculture and
development. He states that after ignoring agriculture for several years
a "more recent view is that agriculture is an intimately interrelated
sector in the development process. It has a role to play, but so do
29
other sectors. A balance of effort is needed, whatever that may be."
At least three divergent positions specify possible roles for
agricultural marketing in economic growth. These positions encompass
the trend in economic development thought from lesser to greater
emphasis on market processes.
Some believe or have assumed that an evolving agricultural market
system follows or passively accompanies production changes in the agri-
cultural economy. That is, the agricultural market system adapts itself
to prevailing institutions and economic trends, but it is not a dynamic
or leading force for agricultural development. As a follower, marketing
provides neither necessary nor sufficient conditions for agricultural
and economic development. Instead, a marketing system results from
economic and instItutional change within agriculture. This approach
29
Lawrence W. Witt, "Role of Agriculture in Economic Development",
Journal of Farm Economics, Vol. 47, No. 1, February 1965, p. 122.
28
upholds a general lack of emphasis on market system analysis and reform
as development tools.
This train of thought frequently accompanies the belief that
industrialization will lead the way to economic development, including
agriculturaldevelopment, and little emphasis, if any, is given to market
mechanisms. While emphasis is given to agriculture as a source of labor,
tax returns, and food, investment emphasis is placed upon the industrial
.30
sector in arguments, such as the "big-push" or "bootstraps". Food
becomes a primary input for economic development but little thought is
given to production and distribution of the food except that the agri-
cultural sector must become commercialized.
Agricultural marketing as a development-fomenting mechanism pro-
vides an opposite approach to the role of the market system. As a fo-
menting system, appropriately instituted market coordination techniques
serve as a leading catalyst to agricultural development and ultimately
urban and industrial development. Based upon a very precise interpre-
tation of this thesis, if a country can develop an adequate market
system to fulfill its own needs, development would follow. Thus, the
market in a fomenting role becomes both a necessary and sufficient
condition for economic development.
The basis for this research program is that agricultural marketing
systems are both facilitating and coordinating mechanisms and are neces-
sary but not sufficient for agricultural development. This is the third
30
See Gerald M. Meier, Leading Issues in Development Economics,
Oxford University Press, 1964, pp. 92, 416, & 431- 440 for discussions
about the "big-push" argument; and Benjamin Higgins, Economic Develop-
ment, W.W. Norton & Co. Inc., New York, 1959, pp. 457-463 concerning
the "bootstrap" thesis.
29
view of the role of agricultural marketing; it both foments and follows
change. In giving credence to this view Rostow emphasizes a critical
position for the market system in bringing about "balanced" growth
31
between the rural and urban sectors in less developed countries.
Without interdependent growth stimuli within the sector it may be
impossible for a market system to either foment or follow agricultural
development. Collins and Holton present this dilemma by stating that,
...automatic transformation of the marketing system may be
impeded if the economies of scale in distribution are much
greater than in production; under these circumstances the
proper kind of distributive sector may not develop until
the new pattern of production has already been established,
but the establishment of this new pattern of production may
in turn be dependent3 n the existance of the right kind of
distributive sector.
Both produce markets and factor markets must be considered in
this process. Factor markets including both public and private input
suppliers significantly affect production and distribution of agri-
cultural products. Recent work by Michigan State University, and a
dissertation by Larson investigates and emphasizes the role of factor
markets.33 The present research does not comprehensively analyze the
31
Walter W. Rostow, op. cit.
32
N.R. Collins and R. H. Holton, "Programming Changes in Marketing
in Planned Economic Development", in Agriculture in Economic Development,
Edited by Carl Eicher and Lawrence Witt, McGraw-Hill Book Company, 1964,
p. 365.
33
C.S. Slater and Harold M. Riley, et.al., Market Processes in
the Recife Area of Northeast Brazil, Research Report No. 2, Latin America
Studies Center, Michigan State University, 1969; and Donald Walter Larson,
Diagnosis of Product and Factor Market Coordination in the Bepu Industry,
(unpublished Ph.D. dissertation, Michigan State University, 1968).
30
factor input markets that affect the potato sector because of the magnitude
of the product market studies. The factor market aspect, nevertheless,
Should not be ignored.
Often both large and small agricultural producers are reluctant to
apply new innovations because of the risk of losing their limited capital
where market outlets remain so tenuous. Even more threatening for the
small producer is the risk of failing to produce enough for a minimun
34
subsistance.
In sumary, the agricultural P-D system is an important aspect
of economic development. Recently Gaitskell has emphasized agriculturels
place with industry in economic development. He argues that,
if agriculture is neglected, the chances of progress are very
heavily restricted, and grave social, political and economic
tensions may occur ... the optimum pattern is not haphazard
investment in industry ... but rather a deliberate complementary
advance of agriculture and industry, with agriculture supplying
food and many raw materials for local processing industries and
industry supplying the inputs for modernizing agriculture plus
the consumer goods to liven up the rural areas.35
And it can be added that this interdependent development process will
only become possible as the market systems between rural and urban
areas become capable of facilitating the increased economic activity.
The problem of development causality can be shifted to one of
development interdependence. And the interdependent growth mechanisms
emcompass agriculture and industry with the market system linking the
two. Interdependence has been described by Zetterberg in a simple but
34
Clifton R. Wharton, Jr., "The Economic Meaning of Subsistance ",
Malayan Economic Review, October, 1963.
35
Arthur Gaitskell, "Importance of Agriculture in Economic Develop-
ment", in Economic Development of Tropical Agriculture by W.W. McPhearson,
University of Florida Press, Gainesville, 1968, p. 55.
31
36
significant manner. He asserts that small increments in a single
variable facilitate increments in a second variable, and the resulting
increment in the second variable further creates increments in the
first. This can be a multivariable system. Zetterberg continues by
saying that extremely large increments in one variable probably will
not facilitate large changes in the other variables, The large change,
so often sought, occurs by a series of well instituted small inter-
acting changes. This is the essence of interdependence and the essence
of the agricultural market system as a development mechanism.
Thus, improved and rationally coordinated market systems facili-
tate economic growth by both cause and effect relationships which
parallel and integrate with other growth mechanisms such as increased
agricultural productivity, social change and industrial development.
Performance Evaluation
The research problem is to evaluate the facilitative and coordi-
native capacity of the potato P-D system as a guide to market reform
programs. Shaffer presents a very useful research approach in an
explanation of three distinct research attitudes. For example, a
pure science attitude desires to learn how markets function only for
the purpose of knowing how they work and for developing market theory.
An engineering attitude accepts a problem as given and proceeds to a
solution. A clinical attitude defines the problem before proceeding
to a solution.
36
Hans L. Zetterberg, On Theory and Verification in Sociology,
3rd enlarged edition, the Bedminister Press, 1965, p. 73.
32
A major difference between the clinical attitude, as I am
defining it for our special purpose, and the engineering attitude
is that the clinician does not accept the client's definition of
or diagnoses of the problem. He considers it part of his responsi-
bility to identify symptoms and diagnose the problem. He does not
assume that the client knows or can articulate his problem and
neither does he assume necessarily that the client really wants
the truth and is anxious to act lpon it. Rather than finding a
means to achieve a clearly defined end. he perceives the identifi-
cation of the problem as a major task.
The clinical attitude provides an approach to market research and serves
as a guide for this research project.
Probably, application of the clinical approach to market research
programs in less developed countries is even more important and undoubtedly
more difficult than in more highly developed countries. While the present
effort is not cross-cultural in orientation, one must not forget that the
author is North American, but the subject matter is South America. Thus,
some cross-cultural judgements and conclusions are inevitable because,
even with counsel from a good staff of Colombians, one can not completely
free himself from engrained attitudes of his own culture.
Three cross-cultural research problems must be recognized: 1) Non-
comparability of terminology. Even when words and phrases can be given a
denotative translation, one is frecuently uncertain about the connotation.
To phrase questions correctly or to be correctly understood is difficult
in one's native language and at one's own social and educational level.
But cross-cultural, educational, and social adjustments are necessary
because language is culture-bound and only one of numerous communication
methods. Preparation of varied interview devices for each socio-economic
37
James D. Shaffer, "Some Conceptual Problems in Research on
Market Regulations", in Federal State and Local Laws and Regulations
Affecting Marketing, (NCR-20) No. 5, Regional Res. Bul. No. 168, No.
Dakota State University, September, 1965, p. 10.
33
level at various stages in a market channel requires an understanding of
different culturally-oriented behavior patterns. 2) Non-comparability
in normative evaluations extends the language problem to absorb inter-
pretational problems of communication which differentiate.cultures.
One's interpretations of normative practices again becomes tainted by
the cultural differences between the investigator and the investigated.
Normative problems may or may not be emphasized and may or may not be
important because of cross-cultural differences. A major normative
issue is not how we ask the question but whether the question should
be asked or whether it is the correct question. 3) Non-comparability
in pragmatic evaluations. Pragmatic comparisons, as bases for market
analysis, are even more subject to cross-cultural errors than are
normative issues. This research emphasizes a pragmatic and clinical
approach in evaluating market performance and the facilitative force,
or the lack of it, provided by the potato market system as a stimulus
to the production-distribution process. A major pragmatic issue then
is not how the question is asked or if it is "right" but once the
answer is in, "so what".
Use of the clinical attitude to investigate the P-D system for
potatoes necessitates expression of three basic beliefs. First, the
potato subsector cannot be analyzed by applyingstatic economic as-
sumptions and investigation techniques because it involves complex
38
problems of farm organization and distribution in market channels.
38
Richard G. Wheeler, "Research Orientations in Economic Develop-
ment with Special Reference to Brazil", Agricultural Economics Research,
Vol XIX, No. 3, July 1967, p. 82.
34
The analysis must be dynamic .in order to assess these problems.
Second, any complete and relevant analysis of the potato marketing
system in Colombia must account for the interdependent nature of the system.
It is a system where one function acts, not on the sole basis of its own
structure, but upon structures and performance of each of the other functions
and activites of the system. By observing the interdependency of the system,
one can identify specific barriers to improved market system performance.
Third, marketing research should be interdisciplinary in its orien-
tation. Agricultural economists now recognize the importance of inter-
disciplinary research activity in less developed countries.
The basic dissatisfaction with existing social and economic
conditions and the urge to change the institutional structures
makes the need for an interdisciplinary approach to research
in the social sciences more pressing for Latin America than
for the United States or Europe.39
Anthropologists, sociologists, political scientists, agricultural
economists, agricultural engineers, and potato breeding and disease
specialists all can provide valuable assistance in analyzing the market
system for potatoes in Colombia.
In summary, this research program incorporates two general phi-
losophies: 1) sustained economic growth in Colombia requires several
interdependent development processes including the agricultural marketing
process, and 2) successful marketing reform programs entail purposeful
coordination among all stages of the production-distribution process.
Research efforts must also observe each interdependent stage in the
marketing and development process in order to diagnose adequately marketing
39
Carlos Massad, "Economic Research in Latin America", in Social
Science Research in Latin America, Edited by Charles Wagley, Columbia
University Press, New York and London 1964, p. 216.
35
problems. For this reason, both input markets and product markets
related to the potato subsector are analyzed at each produotion and
distribution stage in the P-D system.
Applying the Approach
Performance Goals
Numerous criteria have been specified for evaluating P-D
systems. Some argue that numbers of buyers and sellers and com-
petitive relationships should be the primary criteria. Others be-'
lieve that P-D systems should be evaluated according to behavior
of the participants along preconceived legal and ethical guidelines.
But all markets display unique structures and means of coordination.
Hence, to evaluate production-distribution characteristics in unique
situations, one must observe political, social and economic goals of
the society and/or commodity group involved. Four general economic
development goals can be specified:40
1. Gross product growth
2. Full employment of labor
3. Rising levels of productivity
4. Less concentrated distribution of income
But these goals are very general and without a series of sub-goals,
detailed investigations cannot be meaningful. This specificity
requires understanding of beliefs and values of economic participants
concerning performance of the economic and agricultural. economic
40
CC.C Slater and Harold M. Riley, et.al., Research Report No.
2, op.cit.
35
problems. For this reason, both input markets and product markets
related to the potato subsector are analyzed at each produotion and
distribution stage in the P-D system.
Applying the Approach
Performance Goals
Numerous criteria have been specified for evaluating P-D
systems. Some argue that numbers of buyers and sellers and com-
petitive relationships should be the primary criteria. Others be-'
lieve that P-D systems should be evaluated according to behavior
of the participants along preconceived legal and ethical guidelines.
But all markets display unique structures and means of coordination.
Hence, to evaluate production-distribution characteristics in unique
situations, one must observe political, social and economic goals of
the society and/or commodity group involved. Four general economic
development goals can be specified:40
1. Gross product growth
2. Full employment of labor
3. Rising levels of productivity
4. Less concentrated distribution of income
But these goals are very general and without a series of sub-goals,
detailed investigations cannot be meaningful. This specificity
requires understanding of beliefs and values of economic participants
concerning performance of the economic and agricultural. economic
40
CC.C Slater and Harold M. Riley, et.al., Research Report No.
2, op.cit.
36
41
systems. "If the perceived goals of the political group in power are
not in harmony With the values and goals of the people, pressures will
42
be brought to bear in an attempt to effectuate a change in leadership"
Performance goals for the Colomabian potato subsector can be
defined as production goals, distribution goals, and P-D system goals.
A. Specific potato production process goals include:
1. Wise resource use within the firm in order to maximize
"something" such as profitS, incomes, yields, leisure
or some combination of these measures.
2. Raising levels of productivity by:
a. Adoption of improved practices and varieties.
b. Use of governaent :supported credit programs.
B. The potato distribution process goals are:
1. Reduction of seasonal price fluctuations by s
a. Developing a storage program.
b. Equalizing and reducing seasonal production.
2. Improved market coordination and consumer satisfaction
by:
a. Better information systems.
b. Better product grading and standardization.
C. Goals of the potato production-distribution system include:
1. Wise resource use within the potato P-D system and as
it relates to the national economy*
41
Jares Duncan Shaffer, "A Working Paper Concerning Publicly
Supported Economic Research in Agricultural Marketing", Economic Research
Service,- U.S. Department of Agriculture, Washington D.C., March 1968, p.30.
42
Harrison, op.cit., p. 60.
37
2. Welfare and income considerations for the potato
subsector participants including per capita income
increases and equitable income distribution.
These goals are not universally accepted by all potato market
participants and policy makers. Some of the goals are conflicting, some
are complementary, but usually policies designed to maximize the chances
of attaining one goal will reduce the chances of attaining other goals.
Where agreement as to goals prevails, often the means to goal attainment
differ because of differing beliefs and values. A further problem occurs
when means are not properly differentiated from goals which causes unwise
resource use and performance results short of potentials. Finally,
economic and political participants may value many of these goals but
disagree about importance of each goal. Thus, performance evaluation
must consider the package of goals and means which best fit desires for
Colombian economic development and development of the potato subsector.
The Research Hypotheses
Several research hypotheses specify further the problems in
modernization and coordination of the P-D system for potatoes in Colom-
bia:
1. The potato P-D system is not achieving the level of output
and coordination of market flows that are possible.
2. Present institutional arrangements are not achieving the
levels of coordination and assistance that are possible and
necessary to accelerate development of the potato subsector.
3. Marketing reforms which reduce risk will stimulate the
adoption of potato production and distribution innovations.
38
4. Most participants in the potato subsector are profit maxi-
mizers and display economic rationality dependent upon
varied degrees of firm size and development.
The test of these hypotheses and related sub-hypotheses will
provide a base from which to prepare recommendations for achieving the
performance goals.
The Research Methodology
If the methods utilized to prepare samples and obtain interviews
seem unsophisticated compared to a market research program in the United
States, it is because of the nonexistence or insufficiency of data con-
cerning the populations to be sampled. Yet this problem does not invali-
date the research because the investigation describes a market -system
heretofore .lacking information necessary for public and private decision
making. Every effort was made to prepare representative, if not complete,
lists of the populations while randomly drawing the samples from these
lists.
Market participants included in the analysis were producers in
Nario, Cundinamarca and BoyacA, truckers entering and leaving Bogot
and Cali, wholesalers in Bogot, processors in Bogot and Cali, retailers
in Bogot and consumers in Bogot.
Producers The departments (equivalent to a state in the United
States) of Narifo, Cundinamarca and Boyac produce from 75% to 80% of
Colombian potatoes. Nario is the most isolated department studied
in that Cali, located will outside the department, is the only major outlet
for potatoes (Figure 2). Potatoes from Narifo move by truck to Cali in
not less than twelve hours.
39
Caribben Sea
Departments included
in the producer sample
Venezuela
Panama
Pacific. Ocean
Cal'
les
Brazil
Ecuador
Figure 2 : Map of Colombia Including Peru
the Potato Production
Departments Studied and
their Major Markets
40
The three departments represent varied production and marketing
problems. Cundinamarca potato producers are favored by the large Bogot
market located within the department. Boyac producers also are rela-
tively near to the Bogot market and have fewer transportation problems
than Narino producers. Probably Nario is the best area for producing
potatoes with respect to supply stability because harvests can be
realized nearly year around. Even so, frost is a problem in certain
areas of Narifo such as Tuquerres. Potato production costs in Narifo
compare very favorably with other potato producing regions in Colombia.
The sample of potato producers was drawn by first selecting muni-
cipios (similar to a county) within each department and then selecting
producers from each municipio. The municipio was used as a cluster
sampling unit in order to save both time and money. The municipios
were selected to represent various population characteristics including
size of farm, distance from markets, and physiographic variations.
No complete list of potato producers was available by municipios.
The Caja Agraria loan agency, INCORA (the land reform agency), ASCOLPA
(the potato producers association), and the departmental secretaries
of agriculture assisted by providing.producer lists including farm
size and areas planted to potatoes from which random samples were taken.
From these producers, a total of 125 interviews were taken. The muni-
cipios and the number of producers interviewed appear in Table 5.
Truckers Trucker interviews were taken at retenes (truck
stops or check points) on major roads leading into Bogot and Cali. In
each case, trucks hauling potatoes were stopped for about five minutes
to collect flow data.
The Cali study was performed during a two week interval in October
41
Table 5 : Distribution of Potato Producer Interviews by
Selected Departments and Municipios
Boyac Cundinamarca Nariflo
Municipio Interviews Municipio Interviews Municipio Interviews
Cacaita 2 Une 10 Pasto 10
Santa Rosa 4 Subachoque 10 Ipiales 16
Beln 6 Pasca 10 Cumbal 6
El Cocuy 8 Carmen de Garupa 8 Others 7
Ventaquemada 6 Ubat 8
Aquitania 5 Madrid 9
Total 31 Total 55 Total 39
Source : ICA Potato Marketing Survey of Producers, 1968
43
1967. Every truck hauling agricultural produce was stopped at each of
the six retenes around Cali on a twenty four hour per day basis. The
six retenes represent approximately 95% of the potato flows in and out
of Cali during the time of the investigation. The remaining trucks did
not pass through the retenes. A total of 1,094 truckers hauling potatoes
were interviewed.
The Bogot investigation occurred within a two week period in Jan-
uary and February 1968. There are eleven retenes on roads entering Bogot
but from a preliminary flow investigation of employees at these retenes,
43
This was part of a larger study performed in 1967 by David
Lloyd Clare, visiting professor, Faculty of Economic Sciences, University
of Valle, Cali.
42
44
four retenes on the major roads entering Bogot were selected. These
four retenes were manned from 3:00 AM to 9:00 PM for one week at the
two northern retenes and the following week at the two southern retenes.
This sampling represents approximately 90% of the flow from the North
and the South for each respective week. The flows through other retenes
were negligible as were the flows from 9:00 PM to 3:00 AM through the
four major retenes. A total of 790 complete interviews were taken and
another 200 incomplete interviews were obtained from truckers who were
passing through the reten for the second time or more.
Wholesalers Wholesaler interviews were taken in February, 1968,
in Bogot. No list of potato wholesalers was available so a census was
taken by walking through the major food wholesaling section. This enumer-
ation identified 92 private wholesalers who either rent or own a bodega
(warehouse). Based on the census a 50% random sample was taken from
each city block containining potato wholesalers. A total of 44 inter-
views were obtained. Another eight wholesalers rent a stall in Feria
Central and approximately 175 potato wholesalers rent stalls in Gran
Central. Two interviews were taken from Feria Central and 16 from Gran
Central, again by a random sample. The potato wholesalers in Gran
Central display relatively homogeneous characteristics so a small sample
was drawn. A total of 62 interviews were obtained from all wholesalers.
Processors Commercial potato processing presently includes
only potato chip production. A total of 13 plants were included in the
interviews in Bogot and another 5 in Cali. Once again, it was difficult
44
From January 25 to February 1, interviews were taken in the
retenes el Norte and Occidente, and from February 1 to February 7, 1968
in retenes Oriente and Del Sur.
43
to obtain a list of processors because numerous potato chip plants
operate out of household garage type facilities. The sample probably
represents about 80% of the chipping plants in the two cities.
Retailers The retailer sample and data collection procedures
for the 114 interviews collected were the most difficult to develop of
any single group of market participants. There were no conplete lists
of food retailers in Bogot from which to draw a sample and unlike the
wholesaling function they are not centrally located. To compound the
problem further not all retailers sell potatoes. Retailers are classi-
fied as supermarkets, cooperatives, tiendas and market plazas. The
following methods were used to prepare the sanple from each classita
fication:
1. Supermarkets: There are 20 supermarkets in Bogot
and 6 appear in the sample. A supermarket was
distinguished from a tienda by the existance of
check out services and self service.
2. Cooperatives: Several incomplete lists of cooperative
food retailers including those of the Federacin Colom-
biana de Cooperativas de Consumo Ltda. and the Super-
intendencia de Cooperativas (both are organizations of
.cooperatives) were used as well as the telephone di-
rectory. Not all cooperatives sell potatoes but a
saaple of 13 of those selling potatoes was drawn from
an estimated 75 to 100 cooperative food retailers.
All of these cooperatives are affiliated with either
a particular private or public institution or group
of laborers.
44
3. Tiendas: The tienda is usually located in a residence
garage or very small building and proprietors Change
location relatively often so even if lists of tiendas
were a;vailable, which they were not, the lists could
not have been current. For these reasons the saimple
was drawn first by selecting barrios at random from
four sections of Bogot (Figure 3) and randomly
selecting city blocks within each' barrio. Interviews
were instructed to prepare a census of tiendas selling
potatoes in each of the selected blocks and to randomly
select one to be interviewed. Blocks from the random
sample of barrios were ordered so that the interviewer
encountering no tiendas in one block could proceed
to another up to a total of 6 blocks. Thus, in
barrios where tiendas were sparse the sample process
included fewer tiendas than in other barrios.
Tienda interviews are difficult to obtain because
in most cases only the owner works in the store. Thus,
due to frequent sales it can take up to four times as
much time to get a tienda interview as an uninterrupted
interview. A total of 69 tienda interviews were com-
pleted.
4. Market Plazas: Eight of the largest market plazas
representing various sectors of Bogot were chosen
for analysis. The interviewers were instructed to
enter the plaza and select 3 or 4 potato stall oper-
ators randomly. The number of interviews per plaza
Sector I Sector II Sector III Sector IV
The North orth Central The Center The South
epz- L
eNOR ATE0 o
e L INsON AO 1 <
DRLU-F
R D f ,1 .. .*. LA
A .RA .L SAL$DZA R
CEL RINCosmeN Z4, S '- t Do
S rNeRMA S : DAND IA S
LAA U7014 S 0So o o -
Consumer Investigation
Figre3 apofBoot Iclun Mjo Sctrsofth CityUsdd ,e Rtaleran
Consumer Investigationa
Source DANEDi
46
dependend upon the plaza size. Only a total of :26
interviews were taken because these retailers appear
to be relatively homogeneous with respect to their
market practices.
Consumers Two methods were used in obtaining the consumer
interviews. Similar to the tienda sample procedure, barrios were
randomly selected from the four sectors of the city from which blocks
were similarly selected and an interview was taken at the house nearest
the northeast corner of the block. A total of 100 interviews were
collected in this manner. Another 97 interviews were obtained from
consumers while they were purchasing potatoes in retail outlets. For
these interviews stores and plazas were selected to represent various
income levels within the city.
Data Analysis
A significant amount of the data analysis was performed on a
desk calculator. Computer programs to perform socio-economic analysis
were neither available at ICA nor the National University. A program
from Michigan State University was adapted to the INCORA IBM 360
computer to provide frequency histograms, means and variances.
Secondary data analysis required determining which set of aggre-
gate statistics best describe the potato subsector. Aggregate statistics
describing potato production vary significantly among sources. This
variation is explained in Appendix II. Caja Agraria and IDEMA data were
used to indicate total production, planted hectares and yields per hectare.
Caja Agraria data include all production for urban consumption, rural con-
sunption and seed, while IDEMA data include only production for commercial
47
sales. DANE data were used to express price movements, ownership of
land, and urban and rural employment.
CHAPTER III
A DESCRIPTION OF THE POTATO
PRODUCTION-DISTRIBUTION SYSTEM
Production-Distribution Relationships
Geography of the Potato Industry
Potato production and consumption in Colombia is concentrated in
the mountain regions. Inter-regional transport of potatoes occurs but
potatoes must compete with several starchy substitutes that are grown
in warm-climate areas. The departments represented in this research
(Boyac, Cundinamarca and Nario) provided 70% to 80% of total:Colombian
45
production from 1955 to 1967.45 About 65% of total production and about
46
50% of total consumption of potatoes occurs in Cundinamarca and Boyac.
Potatoes are an important staple in the diets of many Colombians
along with yuca, pltano, corn and rice. Per capita consumption of
potatoes at 89 pounds47 ranks behind the United States per capita
45
Production data for the 10 largest potato producing departments
appear in Appendix II, Tables II-2 & II-4.
46
The consumption estimate is based upon an estimate of 2.3
million urban inhabitants and a urban per capita consumption in the
two departments of 121kilograms. Rural consumption is 24% of 650,000
tons. This assumes that total production in Colombia is one million
tons, and 83% of all production is for consumption. The estimates are
based on survey data from the ICA Potato Marketing Survey, 1968.
47
Ministerio de Agricultura, Plan Cuatrienal Agropecuario 1967-
1970 para Ocho Productos de Consumo Popular, Serie de Planeamiento No.l,
Bogot,Colombia, Febrero de 1967, p. 9.
48
CHAPTER III
A DESCRIPTION OF THE POTATO
PRODUCTION-DISTRIBUTION SYSTEM
Production-Distribution Relationships
Geography of the Potato Industry
Potato production and consumption in Colombia is concentrated in
the mountain regions. Inter-regional transport of potatoes occurs but
potatoes must compete with several starchy substitutes that are grown
in warm-climate areas. The departments represented in this research
(Boyac, Cundinamarca and Nario) provided 70% to 80% of total:Colombian
45
production from 1955 to 1967.45 About 65% of total production and about
46
50% of total consumption of potatoes occurs in Cundinamarca and Boyac.
Potatoes are an important staple in the diets of many Colombians
along with yuca, pltano, corn and rice. Per capita consumption of
potatoes at 89 pounds47 ranks behind the United States per capita
45
Production data for the 10 largest potato producing departments
appear in Appendix II, Tables II-2 & II-4.
46
The consumption estimate is based upon an estimate of 2.3
million urban inhabitants and a urban per capita consumption in the
two departments of 121kilograms. Rural consumption is 24% of 650,000
tons. This assumes that total production in Colombia is one million
tons, and 83% of all production is for consumption. The estimates are
based on survey data from the ICA Potato Marketing Survey, 1968.
47
Ministerio de Agricultura, Plan Cuatrienal Agropecuario 1967-
1970 para Ocho Productos de Consumo Popular, Serie de Planeamiento No.l,
Bogot,Colombia, Febrero de 1967, p. 9.
48
CHAPTER III
A DESCRIPTION OF THE POTATO
PRODUCTION-DISTRIBUTION SYSTEM
Production-Distribution Relationships
Geography of the Potato Industry
Potato production and consumption in Colombia is concentrated in
the mountain regions. Inter-regional transport of potatoes occurs but
potatoes must compete with several starchy substitutes that are grown
in warm-climate areas. The departments represented in this research
(Boyac, Cundinamarca and Nario) provided 70% to 80% of total:Colombian
45
production from 1955 to 1967.45 About 65% of total production and about
46
50% of total consumption of potatoes occurs in Cundinamarca and Boyac.
Potatoes are an important staple in the diets of many Colombians
along with yuca, pltano, corn and rice. Per capita consumption of
potatoes at 89 pounds47 ranks behind the United States per capita
45
Production data for the 10 largest potato producing departments
appear in Appendix II, Tables II-2 & II-4.
46
The consumption estimate is based upon an estimate of 2.3
million urban inhabitants and a urban per capita consumption in the
two departments of 121kilograms. Rural consumption is 24% of 650,000
tons. This assumes that total production in Colombia is one million
tons, and 83% of all production is for consumption. The estimates are
based on survey data from the ICA Potato Marketing Survey, 1968.
47
Ministerio de Agricultura, Plan Cuatrienal Agropecuario 1967-
1970 para Ocho Productos de Consumo Popular, Serie de Planeamiento No.l,
Bogot,Colombia, Febrero de 1967, p. 9.
48
49
48
potato consumption of 112 pounds. Potato production per capita remained..
relatively stable over the 1960-1967 period (Table 6).. The..IDEMA.-estimates
follow most closely the commonly stated.per capita consumption estimates.
But, based on .a description of .the.varianee between data sources in Ap-
pendix II, the estimates of total production per eapita-by Caja Agraria,
are most realistic because they include rural consumption. When the Caja
Table 6 : Per Capita Potato Production, 1960-1967 (in kilograms)
Year Caja .Agraria IDEMA
1960 64.3 42.5
1961 74.6 34.7
1962 85.6 53.2
1963 61.9 33.8
1964 78.7 49.5
1965 66.6 41.4
1966 61.4 40.8
1967 _49.8 ..41.6
Average 67.8 .42.3
Source : Appendix II, Table II-1
48
USDA-ERS, National Food Situation, NES-127, February 1969, p. 18.
50
Agraria average per capita production statistic is reducd by 17% for
seed, the per capita potato consumption estimate is 56 kilograms or 123
pounds. Per capita consumption varies from near zero in the coastal,
49
warm-climate regions to 121 kilograms (Bogot average) in major pro-
duction and consumption regions.
Even though more potatoes are consumed per capita in the high
potato production departments, these departments export potatoes to
warm-climate, non-potato producing departments. Aggregate interdepart-
mental flow patterns,presented in percentages, from major surplus regions
to deficit regions are presented in Figure 4. The data presented total
100% and only represent interdepartmental flows. Consumption and flows
within departments are not included. This information, while only based
upon the 1961 crop year, is relatively representative. The flow to Ve-
nezuela is probably exaggerated and no information is shown for flows
between Ecuador and Colombia. Since 1961, Narifo has become a more
important supply source for the Cali market, exceeding the flow from
Cundinamarca and Boyac. The remaining flows, particularly to the North
Coast area, have not changed, primarily because transportation barriers
limit movement.
Current data describing inter-country potato flows between Colom-
bia, Venezuela and Ecuador are not available. Venezuela, having a warm
climate encounters problems in maintaining good seed stocks particularly
due to inadequate storage for seed during the dormancy period. Seed and
potatoes for consumption from Santander and Boyada enter Venezuela by way
of Ccuta, Colombia, and San Cristobal, Venezuela. Only part of this
49
ICA Potato Marketing Survey of Consumers in Bogot, 1968.
51
0 ,
hC NN 2 U L.
,' c'a -
,. ', 11
o o .. ,'
,. ,: .-- ,
So Niz e
16
-..."\ ORT I Te 4, ES
\ al '1961
Study of Marketing and Storage Facilities for Grain
and Tuberous Crops in Colombia, A Division of the Weits
Co. Inc. Kansas City, Missouri, August 1965, p. 149.
SPercentages in
52
flow is recorded by import-export authorities at the frontier. The contra-
band flow of potatoes from northern Ecuador through Ipiales and to the
Cali market is also difficult to quantify. Those most able to explain
the contraband activity are also most reluctant to expose their activity
by relating their day-to-day practices.
Market Channel Flows
Producer data in Cundinamarca and Boyac, and the urban data for
the Bogot market were used to develop the aggregate flows presented in
Figure 5. Total production data can be divided into two major categories:
1) those potatoes that do not leave the rural areas and 2) those potatoe
sales for urban consuiption. Of 1000 units of total production at harvest
time, 121 units or 12.1% is lost during harvest due to cutting, another
17.0% is saved for seed and 208 units or 20.8% is consumed in rural
50
areas. Part of the harvest losses are consumed by the producer:s
family and laborers while livestock consume the remainder. Seed losses
amount to 19.4% of the seed supply. Of total potato production, 50.1%
enters commercial channels, 40.2% is consumed in raw form, 2.0% is
processed for chips, and 7.9% is attributable to losses from all levels
within the market system.
Potato flows for the Bogot market are presented in Figure 6. The
data shown for each flow and function are a proportion of 1,000 units.
50
Based upon the same survey 24% was previously mentioned as the
amount of rural consumption because the estimate of total production used
did not include losses at harvest.
53
TO TAL P T ATO P R O.D U C TION
( 1000 )
Losses at Market System
Harvest (- Losses
('121 ) ( 79 )
Seed
(170)
Losses Chi ps
(:38) (20)
Rural Consumption Urban Consumption
( 208 ) ( 402 )
Figure 5 : Distribution of Total Potato Production in the
Bogot Market Area
Source : ICA Potato Marketing Survey, 1968
54
TOTAL POTATO PRODUCTION FOR COMMERCIAL SALES
(1000)
SPRODUCER-
PRODUCERS 920 WHOLESALERS 80
612 175 80
WHOLESALERS 867
S TRADITIONAL 457 /
MoDERN \ LAZA TRUCKER -BUYERS 202
'45
53 / Z
2
CHIPS 38
15 7 133 103 16
PLAZAS
22 /274
LOSSES
151, 35
18
26 32 16
61 15 15 66 823 45 3 2 10 73 94 7 22 8
1 w 20
SUPERMARKETS I COOPERATIVES TIENDAS
177 93 214
145 7 77 121 196 41 195 2
CONSUMERS 784
Figure 6 : Total Potato Production Entering Commercial Channels
in the Bogot Market Area
Source : ICA Potato Marketing Survey, 1968
55
Thus, specific flow figures can be converted readily to a percent of the
total potato production entering commercial channels. For example, the
flow from plazas to tiendas represents 2.2% while tiendas as a group
purchase 21.4% of the commercial flow.
Of total commercial sales from production areas, 8% are by pro-
ducer-wholesalers and 92% by producers. Some small producers do sell
to larger producer-assemblers which represent 13.5% of commercial sales
but this amount is not included in the direct flows. Wholesalers are
divided into three groups as follows: 1) modern wholesalers who wash,
grade and bag in small bags ranging from 5 to 25 pounds in size, 2)
traditional wholesalers who operate a private potato warehouse, but
who seldom grade potatoes and neither wash nor bag potatoes, and 3)
plaza wholesalers who operate a small wholesale stall in the large
wholesale warehouse called Gran Central. Inter-wholesaler.transactions
occur particularly where wholesalers sell to retail plaza outlets that
also perform a wholesale function. This represents 16.4% of retail
plaza dispositions. Wholesaler purchases however, are primarily from
producers and trucker-buyers.
Every group of market participants sells to consumers except
the modern whoiesaler but sales to consumers by producers and trucker-
buyers represet less than one percent of the total. To accompany
Figures 5 and 6 the percentage contribution of each market participant
group to the demand and supply situation for potatoes is presented in
Table 7. The supply sources and purchasers for each group are specified.
When consumer purchases were isolated by supply source, the results
were accurate when cross-checked with the retailer results except for
supermarkets having greater sales than cooperatives. But based upon the
56
Table 7 : Distribution of Purchases and Sales by Each Group
of Market Participants
PRODUCERS
Acquisition Percent Disposition Percent
Other Producers 13.5 Wholesalers 34.6
Seed 17.0
Rural Consumers 20.8
Losses at Harvest 12.1
Trucker-Buyers 10.1
Supermarkets 3.3
Plazas 0.8
Tiendas 0.4
Cooperatives 0.4
Consumers 0.4
Processors 0.1
100.0
WHOLESALERS
Acquisition Percent Disposition Percent
Producers 68.0 Plazas 28.2
Trucker-Buyers 20.3 Tiendas 20.7
Producer-Wholesaler 11.7 Consumers 18.0
Supermarkets 10.7
100.0
Cooperatives 9.5
Seed 6.2
Processing 4.2
Losses 2.5
100.0
TRUCKER-BUYERS
Acquisition Percent Disposition Percent
Producers 100.0 Wholesalers 86.9
Plazas 8.2
Consumers 0.8
Tiendas 3.3
Cooperatives 0.8
100.0
57
(Table 7 : Continued)
CHIP PROCESSORS
Acquisiton Percent Disposition Percent
Traditional Wholesalers 60.9 Tiendas 63.5
Plaza Wholesalers 34.8 Schools 17.9
Producers 4.3 Street Venders 12.6
Supermarkets 4.2
100.0 Restaurants 1.4
Cooperatives 0.4
100.0
PLAZAS
Acquisition Percent Disposition Percent
Traditional Wholesalers 48.5 Consumers 70.9
Plaza Wholesalers 37.6 Losses 12.7
Trucker-Buyers 6.1 Tiendas 7.9
Producers 5.4 Supermarkets 7.3
Modern Wholesaler 2.4 Cooperatives 1.2
100.0 100.0
TIENDAS
Acquisition Percent Disposition Percent
Plaza Wholesalers 44.2 Consumers 91.5
Traditional Wholesalers 34.1 Losses 8.5
Plazas 10.0
Modern Wholesalers 4.7 100.0
Producers 3.9
Trucker-Buyers 3.1
100.0
58
(Table 7 : Continued)
COOPERATIVES
Acquisition Percent Disposition Percent
Traditional Wholesalers 47.3 Consumers 82.5
Modern wholesalers 24.6 Losses 17.5
Plaza wholesalers 14.0
Producers 8.8 100.0
Plazas 3.5
Trucker-Buyers 1.8
100.0
SUPERMARKETS
Acquisition Percent Disposition Percent
Producers 37.4 Consumers 82.2
Modern Wholesalers 34.6 Losses 17.8
Plazas 11.2
Plaza Wholesalers 8.4 100.0
Traditional Wholesalers 8.4
100.0
CONSUMERS
Acquisition Percent Disposition Percent
Tiendas 25.0 Consumption 96.6
Plazas 24.8 Losses 3.4
Supermarkets 18.6
Traditional wholesalers 15.8 100.0
Plaza Wholesalers 5.1
Cooperatives 9.9
Producers 0.8
100.0
Source: ICA Potato Marketing Survey, 1968
59
retailer interviews, cooperatives had both larger weekly sales and a
higher percent of sales attributable to potatoes than supermarkets.
There are two causes for this inconsistency. First, only cooperatives
selling potatoes were included in the retailer sample so the number
of cooperatives in the sample probably was about equal to the total
number of supermarkets, in Bogot, all of which sell potatoes. Second,
the supermarket sample and results did not include Carulla. Probably
Carulla's eight supermarkets represent 75% of all supermarket volume
in Bogot which would raise the weekly sales volume average for all'
51
supermarkets above the average for cooperatives.
The exclusion of Carulla from the flow results biases the
supply flows to supermarkets. Carulla buys directly from producers
when possible and, otherwise, from traditional wholesalers. Carulla
grades, washes and bags potatoes in its own central warehouse. Thus,
if Carulla were included with the other supermarkets, the direct
flow from producers would definitely increase. The change in flow
from traditional wholesalers is unknown; the flows from modern
wholesalers, plaza wholesalers and plazas would be decreased; and
the flow to losses would expand slightly.
51
The supermarket data do not include Carulla, the major super-
market chain in Bogot, because store managers and the warehouse pro-
duce managers of Carulla are not permitted to answer specific questions
or give detailed information without consulting the board of directors.
The board will give only very general information.
60
Price Movements
Fluctuations in Prices Two major harvest periods account for 90%
52
of the annual Colombian potato production. For the entire country, 60%
of total production occurs during the Ao Grande harvest period (June, July
and August) while 30% occurs during the Mitaca harvest period (January and
February). Marginal potato producing zones account for the remaining 10%
of production occurring outside these harvest periods.
As might be expected, potato price fluctuations are common and
significant. Bogot prices varied from 300 to 800 pess per ton from
1963 to mid 1964 and returned to 300 pesos (Figure 7). Although the
pattern is not consistent, cyclical price fluctuations are present. Price
variability and differences between regions also appears to be substantial.
Seasonality of prices due to both economic and ecological or cli-
matic conditions influence potato production. This phenomena is explained
by using Figure 8. The general magnitude of the "price" and "quantity of
seed" curves is not important, but the relative changes occurring between
the curves and their interdependent relationships are important. From
the Aho Grande (AG ) harvest of year one, seed must be saved from four
to six months for planting in order to yield AG2 in year two. Planting
for AG2 occurs about the same time as the Mitaca (M ) harvest. Some
seed loss from AG1 results from spoilage but enough seed is planted to
perpetuate the large annual harvest in the June to September period. Of
the M harvest, however, seed is saved for planting near the time of the
1
AG2 harvest. Once again, seed is lost to spoilage but in addition, seed
52
Comments taken from "Comit de Estudio de la Papa" Coordinador
Fabio Arango Tamayo (unpublished monograph), February 1967.
60
Price Movements
Fluctuations in Prices Two major harvest periods account for 90%
52
of the annual Colombian potato production. For the entire country, 60%
of total production occurs during the Ao Grande harvest period (June, July
and August) while 30% occurs during the Mitaca harvest period (January and
February). Marginal potato producing zones account for the remaining 10%
of production occurring outside these harvest periods.
As might be expected, potato price fluctuations are common and
significant. Bogot prices varied from 300 to 800 pess per ton from
1963 to mid 1964 and returned to 300 pesos (Figure 7). Although the
pattern is not consistent, cyclical price fluctuations are present. Price
variability and differences between regions also appears to be substantial.
Seasonality of prices due to both economic and ecological or cli-
matic conditions influence potato production. This phenomena is explained
by using Figure 8. The general magnitude of the "price" and "quantity of
seed" curves is not important, but the relative changes occurring between
the curves and their interdependent relationships are important. From
the Aho Grande (AG ) harvest of year one, seed must be saved from four
to six months for planting in order to yield AG2 in year two. Planting
for AG2 occurs about the same time as the Mitaca (M ) harvest. Some
seed loss from AG1 results from spoilage but enough seed is planted to
perpetuate the large annual harvest in the June to September period. Of
the M harvest, however, seed is saved for planting near the time of the
1
AG2 harvest. Once again, seed is lost to spoilage but in addition, seed
52
Comments taken from "Comit de Estudio de la Papa" Coordinador
Fabio Arango Tamayo (unpublished monograph), February 1967.
Average Period I Period II Period III
monthly 80
price in
centavos 70
per Kg. ., .
60 '. < .'
50 k II
20 / /
10
Bogot, Cali and Pasto
55 56 57 58 59 60 61 62 63 64 65 66 67 68
Bogot ---Year
Base: July 1954 to June 1955 = 100 Cali -. -.-
Pasto
Figure 7 : Monthly Potato Prices Deflated by the Consumer Price Index for Workers in
Bogot, Cali and Pasto
Source : Departamento Administrativo Nacional de Estadstica
Price 70% of
harvest
30 % of
harvest
\ I 1 I
Quantity Harvest
of seed period
Spoilage
~r--- ^iSpoilage
I -- ---. -_Spoilage
S1 \ Sales for
Sconsumption
AGA M1 G M AG Harvest
1 1 2 2 3 .
period
Seed for Ao Grande
- See for Mitaca
Figure 8 Theory of the Seasonal Potato Cycle in Colombia
63
also enters consumption channels because the low productivity of the M
harvest leaves a short supply and rising prices up to the AG harvest.
2
Thus, the short seed supply, low seeding and low harvest cycle of the
Mitaca is perpetuated. These fluctuations continue and reinforcement
prevails some years due to a dry season or a killing frost that will
affect a Mitaca more often than an Ao Grande and thus aggravate the
seed supply problem.
Interdepartmental Price Differentials Price differentials
between the Bogot, Cali and Pasto markets from 1955 through 1968
indicate changes in pricing patterns. Figure 7 presents three
different periods of relative prices for the three markets. Period
I, January 1955 to September 1958, shows Cali prices highest and Pasto
prices lowest, except for two short periods totaling five months. The
Bogot price was between the Cali and Pasto prices. Period II is a
transition from September 1958 to January 1963, with each city displaying
both higher and lower prices than the other two cities. Bogot and Cali
prices were always close and usually higher than Pasto prices. Again in
Period III from January 1963 to present Pasto prices are always lowest
but, contrary to Period I, Bogot now exceeds Cali.
These changes in interdepartmental price differentials indicate
numerous changes in regional potato markets. During Period I prices in
Cali were high compared to BogotA and Pasto. Cali prices are important
to Narifo because Cali is the major market for Narifo potatoes and,
through the Cali market, price fluctuations from the Bogot region are
felt by Narifo producers. Bogot prices were about 20% greater than
Pasto prices in PeriodI but, in Period III the differential increased
64
to 65%. Cali prices, however, were 50% greater than Pasto prices in Period
I and for Period III are only 30% greater.
Availability of transportation for potatoes has contributed to this
change. During Period I transportation between Pasto and Cali was difficult
and sometimes impossible. The road has been improved but not paved and now
transportation is somewhat less difficult. Roads between Bogot and Cali
have been improved also making the aggregate influence of transportation
on price differentials among the three markets difficult to specify.
The demand and supply structure changed to influence the changing
price relationships among the three markets. While the population in the
Bogot area expanded by 137% between 1951 and 1964, the rate of population
growth in Valle (the department including Cali) for the same period was
63.9%. Information about price changes for substitute crops and changes
in income, if available,.would help explain the changing demand situation,
but it appears that demand for potatoes has increased more rapidly in
Bogot than in Cali. Total production, however, has increased more since
1955 in Nario than in Cundinamarca and Boyac (Appendix II, Tables II-2
& II-4). Based on average total production figures for the 1955-1960 period
compared to the 1961-1965 period, potato production increased by 10.8% in
Cundinamarca and Boyac, and by 69.7% in Nario.
Besides reduced transportation difficulties as one explanation of
increased production in Nario, the rapidly growing credit program of Caja
Agraria for potato producers in Nario was an important factor.
65
Consumer Demand Characteristics
Per Capita Consumption
Of the 197 consumers interviewed in Bogot, 70.6% were housewives,
21.3% were maids, and 8.1% were other members of the family. The city was
divided into four zones for analysis. The distribution of occupational
characteristics for each zone and for the entire sample appear in Table 8.
Table 8 : Occupational Characteristics of the Bogot Consumers
Included in the Sample
a b
Occupation North North Central South Total
(32) Central (71) (42) (197)
(52)
(percent)
Professionals 53.1 21.2 36.7 2.3 28.9
Workers 6.2 28.9 29.6 33.4 25.4
Merchants 15.7 17.3 12.7 23.9 16.7
Small Industry 13.5 5.6 21.4 10.2
Large Industry 15.7 11.5 5.6 7.1 9.1
Self employed 9.3 .7.6 9.8 11.9 9.7
Total 100.0 100.0 100.0 100.0 100.0
a
Professionals includes government employees and all other white
collar workers. Workers are day laborers, chauffers,carriers, etc.
b
The South was somewhat under-represented in the sample which causes
a slight bias toward professionals in the total results.
Source: ICA Potato Marketing Survey of Consumers, 1968
65
Consumer Demand Characteristics
Per Capita Consumption
Of the 197 consumers interviewed in Bogot, 70.6% were housewives,
21.3% were maids, and 8.1% were other members of the family. The city was
divided into four zones for analysis. The distribution of occupational
characteristics for each zone and for the entire sample appear in Table 8.
Table 8 : Occupational Characteristics of the Bogot Consumers
Included in the Sample
a b
Occupation North North Central South Total
(32) Central (71) (42) (197)
(52)
(percent)
Professionals 53.1 21.2 36.7 2.3 28.9
Workers 6.2 28.9 29.6 33.4 25.4
Merchants 15.7 17.3 12.7 23.9 16.7
Small Industry 13.5 5.6 21.4 10.2
Large Industry 15.7 11.5 5.6 7.1 9.1
Self employed 9.3 .7.6 9.8 11.9 9.7
Total 100.0 100.0 100.0 100.0 100.0
a
Professionals includes government employees and all other white
collar workers. Workers are day laborers, chauffers,carriers, etc.
b
The South was somewhat under-represented in the sample which causes
a slight bias toward professionals in the total results.
Source: ICA Potato Marketing Survey of Consumers, 1968
66
Potato consumption per capita in Bogot ranks above estimates for
Colombia due to the production concentration in Cundinamarca and Boyac.
Per capita consumption in Bogot is 121 kilograms per year compared to
about 56 kilograms for all of Colombia. Data including per capita income
and per capita potato purchases by zones of Bogot are presented in Table
9. For all consumers interviewed, 5% of the total food expenditures are
for potatoes while 53% of total income was spent on food, Tubers and
plantains, including potatoes, represent 35% of-the total calories and
53
20% of the total cost of present Colombian diets.
Table 9 : Income Per Capita and Potato Purchases Per Capita in
Bogot and Zones of the City
Zone Per Capita a Per Capita
Income (Pesos) Potato Purchases
(kgs)
Bogot (combined
sector data) 8036 121
North 10346 119
North Central 8068 122
Central 8926 125
South 4752 112
a
About 16.5 pesos were equal to one dollar for the research
period.
Source: ICA Potato Marketing Survey of Consumers, 1968
53
Cecilia A. Florencia, The Efficiency of Food Expenditure Among
Certain Working-Class families in Colombia, (Ph.D. Thesis, Michigan State
University, Department of Foods and Nutrition, 1967) pp. 63 & 69.
67
The relationship between per capita income and per capita potato
consumption (Figure 9) indicates that as incomes rise to about 14,000
pesos, consumption will rise and then fall as income rises beyond
14,000 pesos. The rise in per capita purchases of potatoes as incomes
rise indicates a preference for potatoes compared to lower cost close
substitutes. But as income continues to rise beyond 14,000 pesos per
capita,consumption declines and consumers prefer to substitute animal
products, fruits and vegetables for part of the potatoes. Consumers,
however, desire potatoes in their diets, even though potato expenditures
as a percent of total food expenditures decline as per capita income
increases (Figure 10). When annual per capita income increases by
1000 pesos, the percent of food expenditures on potatoes declines
by 0.4 or nearly one half of a percentage point. At the average per
capita income of 8000 pesos, based upon the consumer sample,5.1% of
all food expenditures are for potatoes.
Purchase and Preparation Habits
Tiendas and plazas each include about 25% of potato sales to
consumers, cooperatives and supermarkets 28%, wholesalers 21%,
and producers 1%. As could be anticipated, consumers in higher
income areas of Bogot and consumers purchasing at supermarkets and
cooperatives buy potatoes least frequently (Table 10). The distribu-
tion of tiendas throughout the city within not more than two or three
blocks from most consumers probably accounts for the high number of
purchases and the low average size of purchases. These tiendas often
service the lower income relatively immobile consumers lacking personal
transportation. When consumers were questioned about why they purchased
68
o
4J
0
$ 4 150"
4>
fi a
1501 e
r -H 0
U!
125
P4 w
i u 100"
S0-40 40-80 80-120 120-160 160-200
Annual Per Capita
Income (100's pesos)
Figure 9 : Relationship Between Average Per Capita Potato
Consumption and Per Capita Income Ranges
Source : ICA Potato Marketing Survey of 197 Consumers, 1968
20-
18. b = -.04
S16- y = 5.1
m < 14.
41 x = 8000
o
0 p4 12- *
fZ4O
o
0o ** 0
0 *1 ** *
im 0. .. . .. .* **
4 ** ****
S. ;, ,,. ** .
20 40 60 80 100 120 140 160 180 200
Per Capita Income
(100's pesos)
Figure 10 : Relationship Between Per Capita Income and Percent
of All Food Expenditures Allocated to Potatoes
Source : ICA Potato Marketing Survey of 197 Consumers, 1968
|
RSS
HIDE
