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Estimation of Demand and Market Allocation Relationships for Processing Tomatoes1


An econometric model of F. O. B. demand and processor supply relations was formulated for canned tomatoes, (Lycopcrsicon esculentum Mill.) juice, catsup and chili sauce, puree, and paste in the U.S. for the years 1954–1977. A system of demand, domestic market allocation, and carryout stock equations was estimated using 3 stage least squares regression for each of the 5 products. Product prices were observed to respond significantly to such demand factors as domestic sales, disposable income, competing vegetables, and selected other variables such as a trend factor, a variable to account for stocks of concentrated products in the hands of distributors, and others. Prices and income were deflated and quantities were in per capita terms to account for inflation and population. Available supplies and price changes strongly affected processors9 allocations of products to the domestic market. The signs of the estimated coefficients associated with the demand and allocation shift variables agreed with theoretical expectations and their magnitudes were generally significant statistically. A reduced-form solution to the structural model was calculated to show the effects of predetermined variables on product prices and domestic allocation.