THE BENCHMARK SYSTEM - SOME GRAPHS AND COMMENTS
We have in the Analysis of Historical Data compared average unit prices between the 3 major markets (i.e. average price / edible kg and average price/carcase kg). The general findings were that Dar has the highest unit prices, with Moshi second and Arusha close behind.
We also saw that for the higher grades, the Arusha and Moshi unit prices are very close to those of Dar, whereas for the lower grades the Dar prices are usually much higher than Moshi, which in turn is higher than Arusha.
Note that for the historical analysis graphs, all data points are based on actual values or the averaging of average values.
I have proposed in the section on Information Presentation above that instead of producing tables which give average price per kilo for the various grade-sex combinations, then we produce a table with real average prices for benchmark animals. I propose this for 2 reasons:
- for all 3 markets, the price vs. weight relationship is rarely exactly linear; therefore from a theoretical and practical viewpoint, to present average price/kg to cover a range of animal weights is not accurate; it also of course implies that the relationship IS linear.
- the presentation of typical animals with average prices is easier to understand by market traders who are certainly intelligent, but many of whom are not particularly mathematical or statistical.
- the presentation method is very easy to compare without calculation to one's own personal experience of animals and prices (unless of course the benchmarks selected are non-typical); thus if our information is accurate it will be recognised as such relatively easily (and the converse applies).
The graphs MIS9201.htm through MIS9207.htm inclusive and MIS9211.htm through MIS9218.htm inclusive show average benchmark prices corresponding to real data for the 3 markets 1989 through 1994. For each sex and market, the shape will be the same over the same period, but the values will be higher or lower depending on the weight and grade used. These graphs are composed in the following way:
- for each market day, the data points for each sex are analysed to get a best fit straight line on graph of the log(price obtained) vs. log(animal edible weight). This is done using mathematical formulae and also discounting up to 33% data points which are outside the envelope of +/- 2.5 standard deviations (to discount stray or erroneous measurements).
- if for this market-day and each of the 3 sexes, the value of the slope of this best fit straight line is between 0.5 and 3.0, then the slope value (B) and the y intercept value (K) are used in a formula to calculate the price for the 7 benchmark weights and grades which I chose from averaging historical data.
- thus for every market day there may be 0, 7, 14 or 21 values of benchmark prices corresponding to the 21 benchmark weights and grades.
- each of the graphs above chooses only 2 of these 21 benchmark prices and shows them for 2 or all 3 of the 3 major markets.
The graphs themselves show what we are getting used to seeing:
- mis9201 to mis9003 - for the top steer benchmark - 350 kg grade 0 - show that prices between the 3 markets are in general very close to each other.
- mis9204 to mis9207 - for the lowest steer benchmark - 160 kg grade 4 - show that Dar is rather higher than Moshi which in turn is higher than Arusha. Note that when comparing Arusha in particular with the real data points it appears that the theoretical curve fit understates the prices at low weights and grades for high B values. I recognise as a legitimate weakness of the log-log approach, but am totally convinced that the benefits of the approach easily outweigh this weakness, which only shows at this kind of benchmark.
- mis9211 to 9214 - for steer 275 kg grade 1 - show that Dar and Moshi are pretty much on par, but with a Dar bulge upwards in August 1994 due to the rail disruption mentioned above; Moshi is generally a bit above Arusha, but with a significant bulge upwards during the period December 1993 through May 1994 (reason unknown).
- mis9215 through mis9218 - for steer 240 kg grade 2 - shows similar behaviour to the 275 kg graphs above, but with Dar prices spacing out above Moshi and Arusha numbers.