FACTORS THAT AFFECT ED THE AVERA GB PRICE OF CAL IFORNIA CANNED APRICOTS IN 1951-32 H. R. Wellmani/ The pronounced declines in the general price level and in the buying power of consumers during the past year resulted in a substantial decrease in both ship- ments and prices of canned apricots in 1931-32 as compared with 1930-31, Prices of Canned Apricots , As shown in table 1, the average price, f.o.b. cannery, for both domestic and foreign shipments of canned apricots in 1931-32 was ;^2,64 a case, 21 per cent below the 1930-31 price and 28 per cent below the 1928- 29 price. ^/ As compared with 1930-31, prices in the domestic market in 1931-32 were relatively more favorable than prices in the export markets. Chiefly as a re- sult of the decline in the English pound sterling, the average price, f.o.b. Pacific Coast dock, received for canned apricots exported to the United Kingdom in 1931-32 was 29 per cent below the 1930-31 price; whereas the average price received for goods sold in the United States in 1931-32 was only 18 per cent below the 1930-31 price. Shipments of Canned Apr icots. Total shipments of California canned apricots in 1931-32 amounted to 2,037,000 cases, 22 per cent smaller than in 1930-31 and 27 per cent smaller than in 1928-29 (table 2). All of this decline was in domestic shipments, which amounted to 1,567,000 cases in 1931-32 as against 2,183,000 cases in 1930-31, a decrease of 28 per cent. Exports were about 14 per cent larger in 1931-32 than in 1930-31. Domestic Situation , If there had been no change in the general price level or in demand conditions in this country between 1930-31 and 1931-32, the smaller volume of domestic shipments this past year would have resulted in a substantially higher price than was received, or at the same price a much larger volume could have been moved. As a matter of fact, however, there was a material decrease in both the general price level and demand conditions. The depressing influence of these factors upon the price of canned apricots was considerably greater than the lifting influence of the small shipments. From 1921 to 1929 there was virtually no change in the general level of prices in this country. During those nine years money maintained a uniform value, and prices of a commodity were an accurate measure of their value. Since 1929, however, there has been a pronounced decline in the general price level and, therefore, an equiva- lent increase in the value of money. While it is not possible, with the data now available, to obtain a precise measure of the decline in the general price level, a rough approximation may be obtained from the indexes given in columns 1 and 2, table 3, For the year June, 1931 to May, 1932 the index of wholesale prices of all \/ Extension Specialist in Agricultural Economics and Associate on the Giannini Foundation of Agricultural Economics, Z/ F.o.b. prices per case are weighted average prices for all grades and sizes of cans. Regular brokerage, cash discount, swell allowance and label allowance are included. Special or other trade discounts and prepaid items such as prepaid freight are not included. Prices which canners received for No, Z\ Choice apricots (unpeeled halves) in both 1930-31 and 1931-32 were approximately 14 per cent higher than the average price of all grades and sizes of cans. Thus the average price received for No, Z\ Choice apricots in 1931-32 was about ^1.50 per dozen cans. T TT -2- commodities will probably average around 100, while the index of general prices will probably average around 142. As compared with 1928-S9 the former index will show a decline of about 30 per cent, while the latter will show a decline of about 20 per cent. The actual decline in the general price level has probably been between 20 and 30 per cent, perhaps around 25 per cent. vVith the general price level in 1931- 32 about 75 per cent as high as in 1928-29 and about 87 per cent as high as in 1930- 31, the |2.71 a case which canners received for domestic shipments in 1931-32 v/ould be equivalent to about |3,60 a case in terms of the value of money in 1928-29 and to about if3.10 a case in terms of the value of money in 1930-31. In April, 1932 the index of wholesale prices of all commodities was 4 per cent below the 1931-32 aver- age, while the index of general prices vms 5 per cent below. The buying power of consumers, which decreased greatly between 1928-29 and 1930-31, was further reduced in 1931-32. During 1931-32 the Federal Reserve Board Index of Factory Employment averaged around 70 as against 80 in 1930-31 and 100 in 1928-29 (table 3, column 3). In April, 1932 the index of factory employment was at 64. The buying power of people engaged in agriculture experienced an even greater reduction than factory workers. Prices of farm products in 1931-32 were 54 per cent lower than in 1929, while the gross income from agricultural production in 1931 v^ras 42 per cent below that of 1929. ^/ Net farm income unquestionably declined propor- tionately more than gross farm income. Taken as a group farm people had very little money to spend in 1931-32, and undoubtedly their purchases of somi-luxury products such as canned fruits were greatly curtailed. The total volume of fruit marketed in the United States in 1931-32 was larger than in any recent year with the single exception of 1926-27. The index of fruit production in 1931-32 was 124 as against 109 in 1930-31 and 115 in 1928-29 (table 3, column 4), The increases in production in 1931-32 as compared v/ith 1930-31 were largely in fresh peaches, fresh apples, and dried apricots. The combined pack of canned peaches, cherries, pears, and pineapples v;as slightly smaller. The larger total fruit production in 1931-32 as compared with 1930-31 does not fully reflect the increased competition to canned apricots, however, because of the largo amount of home canning and the relatively low prices of other canned fruits. The available information indicates that the quantity of fruit canned in the home in 1931 was con- siderably larger than in other recent years. In many instances home canned fruit was substituted for commercially canned fruits. The combined effect of the declines in the general price level and the buy- ing power of consumers and the increases in total fruit production and home canning upon the prices of canned apricots, peaches, pears, and pineapples is shown in table 4. Between 1930-31 and 1931-32 the decline in the price quotations of canned apri- cots was relatively greater than the decline of canned peach or canned pear prices, but relatively smaller than the decline of canned pineapple prices. Relation Between F.O.B. Pric es^ and Shipm ents . In figure 1 the annual domestic shipments of canned apricots are measured along the horizontal scale, the annual f.o.b. prices received along the vertical scale. The diagonal line repre- sents the average relation that has existed between domestic shipments and prices during the past nine years, adjusted to the situation in 1931-32, This past year domestic shipments amounted to 1,567,000 cases, the average f.o.b. price was |2,71 3/ U. 3. Dept. of Agriculture. Yearbook of Agriculture. 1932. Page 201. -3- a case. If the average f.o.b. price had been ^2,50 a case instead of $2.71 a case and all other conditions had remained the same, it is probable that domestic ship- ments would have been around 1,840,000 cases instead of 1,567,000 cases. On the other hand, if the f.o.b. price had averaged $2.90 a case, domestic shipments would probably have been reduced to about 1,310,000 cases. In figure 2 the diagonal line shows the average relation that has existed between total shipments (including both domestic shipments and exports) and average f.o.b. prices of all canned apricots during the past nine years, adjusted to the situation in 1931-32, Export Situation ; Total exports of canned apricots from the United States in 1931-32 were 14 per cent higher than in 1930-31, but 21 per cent lower than in 1928-29. The United Kingdom, which has always been our most important market for canned apricots, took 86 per cent of our total exports in 1931-32, as against 81 per cent in 1930-31, whereas Canada took only 0.6 per cent last year as against 3.9 per cent the year before. In August, 1931 the Canadian general import duty on canned fruits was raised to 5 cents a pound, which rate practically prohibits us from ex- porting to that country. Table 6 shows the United Kingdom imports of canned apricots and all canned fruits. Imports of canned apricots from the United States were 21 per cent larger in 1931-32 than in 1930-31, but imports from Australia were 21 per cent smaller. Combined imports last year amounted to 476,000 cases as against 424,000 cases the year before, an increase of 12 per cent. Average prices which California canners received for canned apricots, however, were 29 per cent lower. In addition to the increase in imports of canned apricots the lower price in 1931-32 is accounted for by the increased competition of other canned fruits, the decrease in the buying power of consumers, a small decline in the general price level, and the break in the exchange rate. The combined effect of these four factors is reflected in the index of prices of canned fruits, table 7, column 1, which was at 70,0 in 1931-32, as against 90.2 in 1930-31, a decrease of 22 per cent. Total imports of canned fruits into the United Kingdom in 1931-32 amounted to 7,590,000 cases, about 9 per cent larger than in 1930-31, (table 6, column 4). The buying power of consumers in England was lower in 1931-32 than in 1930- 31, Among insured persons the percentage of unemployment averaged 21,7 per cent in 1931-32 as against 19.6 per cent in 1930-31, an increase of 11 per cent (table 7, column 3), The index of wholesale prices in England, measured in pounds sterling, was only 5 per cent lower in 1931-32 than in 1930-31 (table 7, column 2). In September, 1931 England went off the gold basis with the resulting decline in the value of the pound sterling in terms of United States dollars (table 7, column 4). The average exchange rate in 1931-32 was 20 per cent below par. In May, 1932 the exchange rate was 24 per cent below par. The decline in the value of the pound sterling resulted in an increase in the price, measured in English currency, of California canned fruits to English consumers which tended to reduce consumption, and a decrease in the price, measured in United States currency, to California canners. -4- Figure 1, Average Relation Between F.O.B. Prices and Domestic Shipments of Canned Apricots, Adjusted to the Situation in 1931-32 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 2.0 Domestic shipments - million cases Figure 2. Average Relation Between F.O.B. Prices and Total (Domestic and Foreign) Shipments of Canned Apricots. Ad.justed to the Situation in 1931-52 3.60 -