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cucumbers sold in South Carolina. The inspec-
tion provision effectively prevents the sale of
culls, and should therefore have a direct impact
on average prices if the marketing of lower
cucumber grades is prevented. However, we
believe the direct impact of preventing the sale
of below-grade cucumbers is relatively minor
for South Carolina producers. Before uniform
grading and inspection most cucumbers that
would be classified as culls are sorted and
dumped. Probably the major price impact of
mandatory inspection is the result of increased
uniformity of pack. Without inspection,
growers who do provide a uniform pack often
do not receive maximum prices because buyers
lack cucumber quality information. This in-
direct inspection impact will influence the price
level primarily by preventing the sale of lots
suspected to contain below-grade cucumbers.
These mixed lots tend to drive buyers out of
the region, thereby penalizing growers provid-
ing uniform lots. The penalty appears as a
break in the market price. Therefore the
primary impact of uniform USDA inspection is
hypothesized to be a higher price level for
South Carolina cucumbers. Inspection will also
affect price variability as a result of the change
in price level, but the adjustment to the vari-
ability mentioned before will also compensate
for this change.

In the following empirical analysis we do not
attempt to separate the impacts of price
posting from those of implementing grading
standards. Instead, the net price impact of the
formation and operaton of the marketing order
is investigated.

Other aspects of the marketing order that
should be considered are grower assessments
and inspection fees. Each grower is charged a
per-bushel fee by the order. The assessments
provide the fμnds necessary to administer and
staff the order and to carry out order provi-
sions such as advertising. The assessments
have a direct impact on net prices. They have
been levied by the Board since 1970 and have
ranged from zero to 5 cents per bushel, the
maximum assessment allowed. The assess-
ment has generally been lower for the fall har-
vest than for the spring harvest. In addition to
paying the grower assessments, growers must
pay for the USDA inspection. As a large pro-
portion of cucumbers were inspected prior to
order formation, this order provision has an
impact only through additional inspection fees.
Any success by the marketing order in increas-
ing grower prices therefore must be adjusted
by the amount of the assessment and the addi-
tional inspection fees.

MODEL

A straightforward before-and-after analysis
is used to estimate the impact of the marketing
order on the price level. The prices of fresh
market cucumbers in South Carolina are
hypothesized to depend on production in South
Carolina, real income, prices of cucumbers
from adjoining states sharing market seasons
with South Carolina, the month within the har-
vest season, and the implementation of the
marketing order.2 That is

(1) PSC = f(PROD, GNP, OP, MO, ORDER)
where

PSC = S.C. cucumber price, by month,
$/cwt

PROD = S.C. production by season, 1000
cwt

GNP = U.S. real gross national product,
$B

OP = other prices, $/cwt; during May-
July OP = North Carolina’s cu-
cumber price and during August-
November OP = Virginia’s cucum-
ber price

MO = 1 if May, 2 if June, 3 if July, 4 if
September, 5 if October, 6 if No-
vember

ORDER = 1 after adoption of the pricing
provision of the order, zero other-
wise.3

The choice of South Carolina production by
season is expected, but the other independent
variables need to be justified. U. S. real gross
national product is used because South Caro-
lina cucumbers flow into the national market
chain and therefore the demand is influenced
by consumers in more than one region of the
country. Prices from neighboring producing re-
gions are used in lieu of national prices because
of the problems of forming an appropriate na-
tional price measure and because prices in
nearby states should better reflect trends that
would affect the entire production region.
North Carolina and Virginia are among South
Carolina’s major competitors during the
spring and fall harvests, respectively. The
month variable is included to capture the
downward trend in prices observed as the har-
vest season draws to a close. This type linear
time trend is discussed by Draper and Smith
(p. 137-8). The formulation of the variable
ORDER is based on the assumption that the
impact of order formation occurs at one point

‘Price flexibility developed by Houck suggests that other quantities instead of other prices should be used as an independent variable. In our application, consis-
tent quantity data were not available for many production regions; therefore, the other price variable is used as a proxy.

‘Various interactions and slope shifts Wereutilized for the season and the ORDER variables, but the formulation in equation 1 was found to reflect best the forma-
tion of the marketing order.

16



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