X. POST-FARM BUDGETS AND ANALYSIS

Post farm activities of agricultural systems are economic functions-transportation and handling, storage, processing, and sales-that link farmers with consumers in domestic or international markets. Because the competitiveness of production agriculture can be measured only at the point of consumption, postfarm activities are an essential influence on private and social profitability. Sometimes postfarm costs are more important than farm production costs in the determination of the final consumer price and system efficiency.

Budgets for postfarm activities are critical also to understanding the price formation process. Accurate measurement of marketing costs and returns provides insights into the competitiveness of various stages of marketing. Analysis of postfarm budgets can suggest ways that governments might narrow margins, thus raising farm-gate prices relative to consumer market prices. Evaluation of postfarm activities is important also in understanding the reasons for use of particular policy instruments. Agricultural price policy objectives usually are pursued indirectly through the determination of price at some point away from the farm, such as at a consumer market or a storage facility. These prices are then transmitted back to the farm through the marketing system, with each stage of the marketing process commanding some portion of the policy price.

This chapter discusses procedures for the construction of postfarm budgets. Postfarm data gathering follows a process similar to that used in farm budget preparation. Descriptive analyses of marketing chains precede the selection of representative firms. Because of the large number of activities, some elements of the marketing system will receive less attention than others. The dearth of secondary data for budget preparation implies a heavier reliance on primary surveys than with farm budget preparation.