As exports of fruits and vegetable have attained a higher profile, issues of market performance will move to the front of the policy debate. The most important factor in the retail-farm margin, is the cost of marketing. As the amount of produce for export increases it will cost more to process, ship, and market these goods to foreign markets. Not surprisingly, both retail and grower prices increase in response to higher exports. Commodities that are not heavily exported, frozen potatoes, for example, show very small changes in the grower price.
Retail prices are comparatively less sensitive to changes in export demand.
While these results suggest that farmers will not receive all of the benefit of higher commodity prices as export demand increases, it should not be taken to imply that marketers are exploiting their farmer-suppliers. In fact, much of the increase in margins may be due to higher marketing costs resulting from a greater volume of produce in the marketing channel. Continued productivity gains in the processing, distribution, and retailing sectors will help farmers receive more of the export-benefit. Although plantings of fruits and vegetables have been prohibited from flexibility contracts under the current Farm Bill, the practice of double cropping of vegetables and program crops will be allowed. Title I, Section 118 of the Federal Agricultural Improvement and Reform Act of 1996 states that double cropping will be permitted in those regions where there is a history of double cropping.