University of California College of Agriculture Agricultural Extension Service Berkeley, California Analysis of the Principal Factors Affecting the Price of Fancy Gravenstein Apples in Sonoma County, California. 1923-1930. E. W. Braun July, 1931 Contribution from the G-iannini Foundation of Agricultural Econoruics UN IV 1. Analysis of the Principal Factors Affecting the Price of Fancy Gravenstein Apples in Sonoma County. 1923-1950 * E. W. Braun The year-to-year variations in the prices paid growers for fancy Gravenstein apples in Sonoma County, California from 1923 to 1930 have been in- fluenced mostly by three factors: (l) the quantity of Gravenstein apples shipned, (2) the competition in eastern markets of apples grown locally, and (3) the general price level. There are, of course, other factors which have affected the prices of Gravenstein apples but their influence has been minor during the years studied. Table 1, which shows the prices paid gro^^rers for Gravenstein apples, commer- cial shipments of Gravenstein apples, the size of the United States apple crops, and the general price level, gives the basic information as to what has taken place with respect to the principal supply and demand conditions appertaining to Gravenstein apples. The price of Gravenstein apples is. the result of the balancing of these demand and supply conditions. The price level of all commodities is the result of the balancing of demand and supply conditions influencing collectively a great number of commodities. The general price level here used reflects the weighted average change in the wholesale price of 550 commodities at their principal markets. The shipments of Gravenstein apples measure the supply offered for market, and the size of the United States apple crop serves as a measure of the competition which these shipments receive from other types of apples. The only factors over which the Gravenstein apple growers have direct control are the quantity and to some extent the quality of Gravensteins offered to the market. The price of Gravenstein apples as shown in figure 1 has fluctuated very violently since 1912. The rise from 1914 to 1921 was a result in part of the rise in the general price level and in part of a succession of short apple crops in the eastern states. Since 1924 there have been violent fluctuations in the price of Gravenstein apples due mainly to violent fluctuations in the quantity shipped and in the size of the United States apple crop as may be noted from figures 2 and 3. For example, in 1925 the price of Gravensteins was unusually high because of unusual- ly small shipments. The United States apple crop was about normal in that year. In 1926, however, normal shipments of Gravensteins brought a low price because the United States crop was large. In figure 4 the shipments of Gravenstein apples are measured along the hori- zontal scale, the average prices along the vertical scale. The diagonal line repre- sents the average relation that has existed between shipments and prices during the 8 years, 1923-1930. From this line it is possible to estimate the prices at which varying quantities of Gravenstein apples could have been sold during those eight years if other conditions had been average. It will be noted that v/ith each change in the volume of shipments of 200,000 boxes there is a change of 20 cents a box in the price. The curve in figure 5 shows the average effect that changes in the size of the United States apple crop has had upon the price paid growers for Gravenstein apples. A crop of apples in the United States of from 175 million bushels to 180 million bushels may be considered as normal. When the United States crop was from * A modification and continuation of a study by Emil Rauchens tein. Factors Affect- ing the Price of Gravenstein Apples at Sebastopol, California Agricultural Experiment Station. Hilgardia 12:325. 1928, 2 Table 1 United States Apple Production, Gravenstein Apple Production in the Sebastopol District, Gravenstein Apple Prices, and the General Price Level of Commodities at Wholesale, July 1st, Gravenstein Gravenstein General Year United States Apple Price of Apple Shipments Price Production Production* Gravens teins Sebastopol Level All Apples Sebastopol to Grower District* July 1st 1 2 3 4 b million thousands dollars bushels of boxes per box cars per cent 1912 235 53 .54 ... ... 1913 145 42 .98 ... 1 O 1 /I doo ( 1 a 40 iy lo OTA OA iyio iy4 yo e. 1 . Dl 1917 167 152 .93 ... ... 1918 170 194 1.43 j.y xy ^ A n L'kC TOO o 1. yo 1 Q OA iy 11 1 1 f— ._i 1 I.... .J 1 -.1. 1912 * Napa included 1915 1920 1925 1930 Figure 3 United States Apple Production Since 1912 Total United States 1912 1915 1920 1925 1930 Figure 4 Influence of Shipments on the Price of Fancy Gravenstein Apples 2.00 1.75 1.50 o 1.25 Ph 1,00 w ^ .75 o .50 .25 00 6 8 10 12 14 Gravenstein Shipments 100,000 boxes 16 Figure 5 Influence of Size of United States Apple Crop on Price of Gravenstein Apples 6. 25 to 30 million bushels below normal the price of Gravenstein apples was around 20 cents a box higher than it would have been if the crop had been normal. On the other hand, when the United States crop was from 25 to 30 million bushels above normal the price of Gravenstein apples was around 25 cents a box lower than it would have been if the crop had been normal, A third factor that has influenced the prices paid growers for Gravenstein apples was the change in the general price level. On the average a change of one per cent in the general price level has resulted in a change of one per cent in the price of Gravenstein apples. Between 1923 and 1929 there were only minor changes in the general price level. In 1930, however, there was a substantial decline; the index of wholesale prices of all commodities on July 1 of that year was 84, as against an average of 100 for the year 1926. As a result of that decline the price paid growers for Gravenstein apples in 1930 was 16 per cent lower than it would have been if the index of general prices had been at 100. From the three factors of Gravenstein apple shipments, size of the United States apple crop, and the general price level, it is possible to explain most of the variations that have occurred in the prices paid growers for Gravenstein apples during the years 1923-1930. This is shown in detail in table 2. For example, in 1927 shipments of Gravenstein apples amounted to 687,000 boxes. From figure 4 it will be found that with other conditions being average, shipment of 687,000 boxes will sell for around |l.33 a box. Other conditions in 1927, however, were not average. The United States apple crop was below normal amounting to only 124 million bushels, and from figure 5 we find that 30 cents a box must be added. The index of general prices in 1927 m'as at 94.1 and therefore 5.9 per cent or 10 cents a box must be subtracted. The result of these calculations is *il.53 a box. The actual price was $1.56 a box. From table 2, column 7 it will be noted that the prices accounted for by the three factors measured agree closely with the actual prices. The greatest difference is 7 cents a box. The above relationships may also be used to assist in determining the quantity of Gravenstein apples which vrill bring the greatest total market return to growers. Such an application to 1930 conditions is illustrated in table 3. The size of the United States apple crop was short, suggesting a price-raising influence. The low level of general prices, however, exerted a price-depressing influence. 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