Tuesday, February 8, 2011

Wheat price betrween farm and market

Wheat movements
England is rather regional in wheat production. But of course consumption of wheat (typically in the form of bread) is not regional. Everybody likes a toasted bagel! So that meant that wheat had to be moved (by horse and cart usually) from areas where production exceeded consumption to areas where they ate more than they grew. I've added surplus and deficit to the map...so red areas exported wheat to areas in deficit. I have looked at wheat price records for 1760-1820 trying to associate surplus/deficit with difference in price. Sure enough, areas with surplus had a lower wheat price than areas with a big deficit. The graph below shows the wheat price for Lincoln and Norfolk (big surplus) and Lancashire and Devon (deficit). As you can see, surplus areas were pretty much always cheaper than deficit areas. Isn't it interesting how correlated the prices are? The gap between them is remarkably consistent. So, it might be reasonable to suppose that this gap is due to the cost of moving the grain from one county to another. If this was the case, then we could work out the distance and from that get the transport costs per unit of distance. We would do this by (our friend!) regression, something like this:

difference in prices between two counties = intercept + beta1*distance

beta 1 would be the transport costs.

(Now, I've linked the word 'regression' here to a Youtube video I've done in case you need a little revision). Take a look!
Remarkable price correlations
Why do we want to know this? Look at Devon. It's wheat cost is very high and it is also furthest from the big wheat producing areas. We have also found that 'distance to market' sign changes around the Devon/Somerset border. It could just be that this is the point where wheat brought in from Norfolk etc is just too expensive because of transport costs. This leaves the local farmers in control of their own market, so distance to market becomes important. Just a thought!

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