An economic analysis of the red cherry industry in Michigan with special emphasis upon pricing

196 Pages·08.766 MB·English

by  Boger, Lawrence Leroy

AN ECONOMIC ANALYSIS OP THE RED CHERRY INDUSTRY IN
MICHIGAN WITH SPECIAL EMPHASIS UPON PRICING
By
LAWRENCE LEROY BOGER
A THESIS
Submitted to the School of Graduate Studies of Michigan
State College of Agriculture and Applied Science
in partial fulfillm ent of the requirements
for the degree of
DOCTOR OF PHILOSOPHY
Department of Agricultural Economics
1950
ProQuest Number: 10008701
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ACKNOWLEDGMENTS
The author wishes to express his gratitude to all those who
helped with the completion of this study and the preparation of the
manuscript* Valuable guidance was especially given by Professor
Lawrence W. Witt of the Agricultural Economics Department in the
planning and supervision of the study as well as in the reading of
the manuscript* Also, professor Arthur Mauch gave generously of
his time and critically reviewed the entire study*
Thanks are also due for Dr. C. M* Hardin, Director of the
Michigan Agricultural Experiment Station for his part in initiating
and encouraging the study* Mr* A* J* Rogers, Manager, Cherry
Growers1, Inc*, also contributed materially to the ideas involved
in some sections of this study.
The author wishes to acknowledge the assistance given by
Miss Joan Bengel and Mrs* Betty Cornelius of the secretarial staff
of the Agricultural Economics Department for their assistance in
typing the original manuscript and in the preparation of charts,
and also the assistance given by Mrs* Mildred Howe for her final
typing of the manuscript*
Finally, the author is indebted to his wife, Frances, for her
patience and the sincere encouragement extended to him during all
the stages in the preparation of this piece of work*
Although the contributions by interested people have been
many, the author assumes full responsibility for any errors which
may s till be present in the manuscript*
LAWRENCE LEROX BOGER
TABLE OF CONTENTS
Page
LIST OF TABLES............................................................................................................ iii
LIST OF ILLUSTRATIONS............................................................................................... iv
Chapter
I. INTRODUCTION............................................................................................ 1
II. REVIEW OF LITERATURE........................................................................ 5
Economic analysis of the Cherry Industry
Economic analysis of related industries
Economic policies of related industries
Methods of analysis
Forecasting demand and production
Summary
III. SOURCES OF DATA....................................................................................... 2$
IV. THE RED CHERRY PRODUCTION INDUSTRY ......................... 42
Price and production instability
5~State production and prices
Red cherries and farm; income
Production and price trends
problems associated with growth
Summary
V. FACTORS AFFECTING FARM PRICES OF CHERRIES............................ 57
Measures of supply
Enumeration of factors
Measures of demand
Analysis of factors affecting farm prices
Summary
VI. THE MICHIGAN RED CHERRY PACKING INDUSTRY............................. 77
Alternative methods for expansion
Amount produced and amount packed
Concentration in the industry
Types of pack
Volume of business and risk spreading
Price determination
Product differentiation
Sales agreement
Storage policies
Costs of storage and processing
Summary
i
TABLE OF CONTENTS (Cont'd)
Chapter Page
VII. THE RED CHERRY PACK AND PRICE TRENDS........................................... 10?
Opening and average prices
Price and pack relationships
Prices and container sizes
Stocks in trade channels
Summary
VIII. FACTORS AFFECTING F.O.B. PLANT PRICES OF RED
CHERRIES IN MICHIGAN............................................................................. U4
Selection of supply factors
Marketing costs
Demand Indicators
Indicators used
The dependent variables
Prices of number 2 cans
Prices of number 10 cans
Prices of JO pound tins
Relationships among pack prices
Farm prices related to pack prices
Summary
IX. PROBABLE FUTURE TRENDS IN THE RED CHERRY INDUSTRY. . . . 149
National income and consumption expenditures
Marketing charges
Production trends
Other trends
Advertising program
Use of results of price analysis
X. SUMMARY AND CONCLUSIONS.............................................................• • 15$
APPENDIX A ...................... 164
APPENDIX B ......................................................................................................................... I69
BIBLIOGRAPHY......................................................... 162
ii
LIST OF TABLES
Table Page
I Production of Red Cherries* 5 States, 1951 1948* • 4$
II Total Value of Production of Six Fruits, Michigan,
1956-48.......................................................................................... 51
III Red Cherry Tree Numbers In principal Cherry
Producing States, 1890-1945 * * 5^
IV Per Capita Consumption of Canned and Frozen Cherries,
United States, 1909 to 1948 . 76
V Average Annual f»o«b» Prices of Packed Red Cherries
in Michigan with the Values of the Price Indicators,
1951^48................................................................... 120
iii
LIST OF ILLUSTRATIONS
Figure page
1* Relative Importance of Major Commercial Areas of Red
Cherry Production, United States, Selected periods,
1959 to 1948# . • .................................................................................. 45
21 Red Cherry Production in 5-8bates and prices per Ton
in Michigan, 1951-48.............................................................................. 49
5* Percent of Bearing and Non-Bearing Red Cherry Trees
by Commercial Counties, Michigan, 1948 . # 55
4* personal Consumption and Food and Tobacco Expendi­
tures, United States, 1929-48 ............................................................... 64
5* Indexes of Prices Received by Farmers, Income of
Industrial Workers, Nor>-farm Wholesale Prices,
United States, 1 9 2y-48 ......................................................................... 66
6* Average Relation Between Michigan Red Cherry Farm
Prices and 5**State Production with Consumption Ex­
penditures, United States Farm Prices, and Time
Held Constant, 1955-48, excluding 1944, 19^5 and
1946..................................................................................................................... 70
7« Average Relationship Between Michigan Red Cherry Farm
Prices and United States personal Consumption Expendi­
tures with 5-State production, United States Farm
Prices, and Time Held Constant, 1955-48, excluding 1944,
1945# and 1946................................... 71
8* Average Relationship Between Michigan Red Cherry Farm
Prices and United States Farm Prices with 5—State
Production, United States personal Consumption Ex­
penditures, and Time Held Constant, 1955-48, exclud­
ing 1944, 1945, and 1946..................................................................... 12
9* Average Relationship Between Michigan Red Cherry Farm
Prices and Time with 5—'State Production, United States
Personal Consumption Expenditures, and United States
Farm prices Held Constant, 1955*,#48, excluding 1944,
1945, and 1946* 75
10* Actual and Estimated Red Cherry Farm prices, Michigan,
1955-48 excluding 1944, 1945 and 1946 ....................................... 75
11# Number of plants Packing Red Cherries, Michigan,
1 9 5 1 -4 8 ...............................................................♦ . . . 80
iv
LIST OF ILLUSTRATIONS (Cont*d)
Figure page
12# Percent of Total Pack processed by Five Largest
Packers, Michigan, 1921-48.................................................................... 82
1^* Total Production and Total Pack of Red Cherries,
Michigan, 1921 - 48. . . . . . . . . .......................... 84
14. Total Canned and Frozen Pack of Red Cherries, and
Percent That Frozen Pack is of Canned Pack,
Michigan, 1921 -4 8 . • ................... ..................................• * • 87
15* Average Importance of Red Cherry pack to Total Volume
of Business for 24 plants, Michigan, as of 1948 • • • • 90
16* Number of Red Cherry Packing plants packing Other
Fruit and Vegetable Products, Michigan, 1948 . . • • • « 92
17* Percent of Red Cherries Packed or Distributed Under
the Packer*s Own Brand Name by Number of packers,
Michigan, 1948 * . . * . ................................ • • • • • • • * 97
18# Average Prices of Packed Red Cherries, Michigan,
19^1 - 48# • • • • . ........................................................................ 104
19* Average Relationship Between Opening and Average
f.o.b . Plant prices of Red Cherries in Number 2 Cans,
Michigan, 193>48 106
20* Average Relationship Between Opening and Average
f.o.b# Plant Prices of Red Cherries in Number 10 Can3,
Michigan, 1921-48....................................................................... 107
21. Average Relationship Between f.o.b . Plant Price per
Dozen Number 2 Cans of Red Cherries in Michigan and 5**
State Production with United States personal Con­
sumption Expenditures, United States Marketing Charges,
and Time Held Constant, 1921~^8* excluding 1944,
1942, and 19^6........................................................................................... 122
22* Average Relationship Between f.o.b. plant Price per
Dozen Number 2 Cans of Red Cherries and United States
personal Consumption Expenditures with 5~State Pro­
duction, United States Marketing Charges, and Time
Held Constant, 1921-48, excluding 1944, 1945 and
1946................................................................................................................ 122
22* Average Relationship Between f.o.b. Plant price per
Dozen Number 2 Cans of Red Cherries and United States
Marketing Charges with 5-State Production, United
States Personal Consumption Expenditures, and Time
Held Constant, 1921**48, excluding 1944, 1945 and
1946................................................................................................................ 125
v
LIST OF ILLUSTRATIONS (Cont'd)
Figure Page
24. Average Relationship Between f.o.b . Plant Price per
Dozen Number 2 Cans of Red Cherries and Time with 5-
State Production, United States personal Consumption
Expenditures and Marketing Charges Held Constant,
1951-48, excluding 1944, 1945* and 1946 • • • • * . . . 126
25* Actual and Estimated f.o.b. Plant Prices of Red
Cherries per Dozen Number 2 Cans, Michigan, 1951-48,
excluding Estimated for 1944, 1945# and 1946. • . • ♦ • 127
26. Average Relationship Betweenf.o.b. Plant Price per
i Dozen Number 10 Cans of Red Cherries in Michigan
and 5-State Production with United States Personal
Consumption Expenditures, United States Marketing
Charges, and Time Held Constant, 1951-48, excluding
1944, 1945, and 1946............................................................................ 129
27. Average Relationship Between f.o.b. plant Price per
J Dozen Number 10 Cans of Red Cherries in Michigan
and United States Personal Consumption Expenditures
with 5-State production, United States Marketing
Charges, and Time Held Constant, 1951-48, excluding
1944, 1945,and 1946............................................................................ 150
28. Average Relationship Between f.o.b* Plant Price per
^ Dozen of Number 10 Cans of Red Cherries in Michigan
and United States Marketing Charges with 5-State
production, United States Personal Consumption Ex­
penditures, and Time Held Constant, 1951-48* exclud­
ing 1944, 1945, and 1946...................................................... 151
29- Average Relationship Between f.o.b. Plant price per
£ Dozen Number 10 Cans of Red Cherries in Michigan
and Time with 5-State Production, United States Per­
sonal Consumption Expenditures and United States
Marketing Charges Held Constant, 1951—48, excluding
1944, 1945, and 1946 ............................................................................ 152
50. Actual and Estimated f.o.b . Plant prices of Red
Cherries per ^ Dozen Number 10 Cans, Michigan, 1951—
48, excluding-Estimated for 1944, 1945* and 1946 • . • 155
51. Average Relationship Betweenf.o.b. Plant price per
Pound in 50 Pound Tins of Red Cherries in Michigan
and 5-State Production with United States Personal
Consumption Expenditures, United States Marketing
Charges, and Time Held Constant, 1957-48. . . . . . . . 155
vi
LIST OF ILLUSTRATIONS (Cont*d)
Figure Page
J2m Average Relationship Between f.o.b . plant price per
Pound in JO Pound Tins of Red Cherries in Michigan
and United States personal Consumption Expenditures
with 5“State production, United States Marketing
Charges, and Time Held Constant, 1957 - 1948 • * • • • 15^
55* Average Relationship Between f.o.b . Plant Prices per
Pound in JO Pound Tins of Red Cherries in Michigan
and United States Marketing Charges with 5-State
Production, United States Personal Consumption Ex­
penditures and Time Held Constant, 1957-48* • • • • • 157
54* Average Relationship Between f.o.b . plant prices per
Pound in JO pound Tins of Red Cherries in Michigan
and Time with 5**State Production, United States per­
sonal Consumption Expenditures, and United States
Marketing Charges Held Constant, 1957—1948 . . . • • I58
55* Actual and Estimated f.o.b# Plant Prices per Pound
in JO Pound Tins of Red Cherries, Michigan,
1957 - 58 * .............................................................................................. 159
56. Comparison of Estimated f.o.b . Plant Prices of Red
Cherries in Number 10 Cans Per J Dozen From Origin­
al Analysis and from the Price of Number 2 Cans Per
Dozen with Actual prices, Michigan, 1951-194$ • . . • • l40a
57* Comparison of Estimated f.o.b . Plant Prices of Red
Cherries per Pound in 50 Pound Tins from Original
Analysis and from the Price of Number 2 Cans per
Dozen with Actual Prices, Michigan, 1957-48. . . . . . l4l
J8» Average Relationship Between Michigan Farm Prices
and f.o.b . Plant Prices in Number 2 Cans of Red
Cherries with United States Marketing Charges 'Held
Constant, Michigan, 1955“!948 . . « • • . « . * • • • • l4j
59* Average Relationship Between Michigan Farm Prices
of Red Cherries and United States Marketing Charges
with f.o.b* plant Prices of Number 2 Cans Per Dozen
Held Constant, 1955-1948............................................................. . 145
4o* Actual and Estimated Michigan Farm Prices or Red
Cherries, Michigan, 1955-194$ ............................................. 146
4l. A Comparison of Estimated Farm Prices of Red Cherries
ffom Original Analysis and from the Price of Number 2
Cans and Marketing Charges with Actual Farm Prices,
Michigan, 1955-4$.................................................................................. 147
v ii