Outlook on AGRICULTURE Vol 44, No 3, 2015, pp 187–194 doi: 10.5367/oa.2015.0211 187 Enhancing decision support through calculating utility weighted contract prices A potato study in South Africa D.B. Strydom and B. Grové Abstract: Worldwide, table (fresh) and processing potatoes represent major marketing channels. In South Africa, uncertainties influence marketing and production decisions. Producers need to decide on the channel most suited to their needs based on its characteristics. A decision support system (DSS) developed in this study provides producers with relevant price-related information. It evaluates gross production values (GPVs), risk quantifications and utility weighted premiums for both channels. The processing market had the highest GPV in a cumulative distribution function. For South Africa, the processing market had the highest probability of better price based on price and yield risk. Stochastic efficiency with respect to a function (SERF) was used to calculate a utility break-even price, incorporating different risk aversion levels. A utility break-even price of R1,618/ ton creates indifference between the two channels for a neutral risk-averse producer. The DSS provides a valuable tool for producers and processors and may be replicated for other commodities and global markets with similar challenges. Keywords: cumulative distribution function; marketing; decision support system; risk; potatoes; South Africa D.B. Strydom (corresponding author) and B. Grové are with the Department of Agricultural Economics, University of Free State, PO Box 339, Bloemfontein 9300, South Africa. E-mail: dstrydom@ufs.ac.za. In many countries, it is no longer possible simply to plant a potato crop and aim for a general market. Consumers have become more selective and specific in terms of what they demand, meaning that producers must meet strict quality assurance criteria established by a specific end- user or face financial penalties and crop rejection. As a result, the whole growing programme, from choice of variety, seed spacing and agronomic management, right through to storage and packaging, is designed to produce a high-yielding crop that fulfils the quality requirements of the marketing channel. In order to adhere to these standards, the producer must be able to choose the best marketing channel before planting. Whilst specific marketing channels in the potato industries differ from country to country, their generic characteristics are similar. All the largest potato-producing countries in the world have either a fresh produce market (FPM) or a processing market. Authors such as Bunte et al (2009), Guenthner (2012) and Bhajantri (2011) report that the main differences are in terms of their distribution channels. In a global context, the potato market has changed from the fresh produce to the processing market due to changes in consumer demand relating to factors such as consumption of ready-to-eat meals, convenience and perishability. The largest potato producers in the world all have a large processing market component. This includes producers in Asia (146 million tons), Europe (124 million tons) and North America (24 million tons), and more