How to put the ‘market’ in farmers market

For some time now, farmers markets have been expanding and morphing from bucolic, feel-good, Saturday morning excursions into sophisticated means of distributing lots of locally grown food to a wider array of customers.

So perhaps it was inevitable for someone to ask how much of a “market,” in the economists’ sense, they really represent. Is there price competition? Are there ways to encourage more of it?

Jeff Horwich, my colleague at American Public Media (and creator of the experimental radio show “In the Loop” a number of years ago and now co-host for Marketplace Morning Report), took up the challenge in a recently completed master’s thesis at the University of Minnesota. Fortunately, he has boiled it down to a Food Thought Blog post on the university’s Food Industry Center’s website.

First of all, he suggests, in case you were wondering, price does matter increasingly in farmers markets as more people get more of their food there. The markets are becoming less of a “do-good” activity unrelated to the price of carrots.

And, as it turns out, whether prices are competitive depends on the specific product and, interestingly, how many vendors are in the market. By looking at data from five metro areas, including the Twin Cities, Horwich concluded that the minimum price of perishable produce, like lettuce or blueberries, goes down as more farmers enter the market. For less perishable food, like apples or frozen ground beef, that doesn’t seem to be the case.

Why is that? Horwich suggests one reason is simply that sellers of less perishable food can pack up the unsold produce and sell it it another day. A lettuce seller has to get rid of his truckload.

Another possibility, he notes, is that some vendors are essentially colluding with each other to fix prices. In other words, one person’s close-knit community of comrades is an economists’ cartel.

Read the whole post or even the whole paper for details, but suffice it to note that an examination of this sort is one more piece of evidence that the whole farm-to-market, local food movement is moving into economically more sophisticated territory.

“It’s a great reminder that even the simplest-seeming market is vastly more complex than economic theory,” Horwich said.

Rob King, professor in the Department of Applied Economics at the university, has studied farmers markets and associated economic forces for years, and he was Horwich’s advisor.

“One of the things that comes out of this is that farmers markets can be very competitive (with other food stores) in certain seasons. That’s a really interesting phenomenon because there’s this perception that farmers markets are just for high income people,” King said.

For those eager to introduce more price competition into farmers markets, Horwich had some recommendations in his thesis:

–Make it easier for shoppers to compare vendors’ prices, thinking about layout differently or adding regularly updated price boards.

–Make it easier for new vendors to enter the market.

–Encourage vendors to lower prices at mid-day.

–Let vendors know that friendly agreement on pricing is not OK.

–Make markets bigger, consider merging them.

For more on how the local food movement is shifting, see the work we did earlier at Ground Level.