University of California College of Agriculture Agricultural Experiment Station Berkeley, California AN ANALYSIS OF THE PRICES RECEIVED FOR CANNED PEACHES BY CANNERS IN CALIFORNIA — SEASONS, 1922-23 THROUGH 1934 by H. J. Stover June, 1935 Contribution from the Giannini Foundation of Agricultural Economics Mimeographed Report No. 42 Digitized by the Internet Archive in 2014 https://archive.org/details/analysisofprLces42stov kU ANALYSIS OF THE PRICES RECEIVED FOR CANNED PEACHES BY CANNERS IK CALIFORNIA — SEASONS, 1922-23 THROUGH 1934-35 H. J. Stover ^ In response to a need for some basis for estimating the probable quantities of canned peaches which might be sold during a given season at various prices and with various assumed demand conditions, an analysis was made to determine the more important factors which have been responsible for the variations in the annual average f.o.b. prices received for canned peaches by canners in California from 1922-23 to 1934-35 and to measure the influence of each of these factors upon those prices. The results presented herein constitute a report of that analysis. Users of this report should clearly recognize the fact that the analysis explains only what has occurred in the past. It does not forecast what will happen in the future. The analysis is designed merely to serve as a helpful guide in estimating either the probable price at which a given quantity of canned peaches can be sold or the probable quantity that can be sold at a given price, under given conditions. In making these estimates, it is first necessary to determine the probable future positions of the factors which have affected canned-peach prices in the past. Relation Between the F.O.B. Prices and Shipments of Canned Peaches ,-- The historical picture of canned-peach packs, carryovers, supplies available for shipment, shipments, and f.o.b. prices received by canners since 1922 is presented in table 1. In 1934 the pack amounted to 8,598,000 cases, on a 2t-can basis. The carryover from the 1933-34 season was 2,390,000 cases, which, added to the pack figure, gave a total supply of 10,988,000 cases available for shipment dur- ing the 1934-35 season. Shipments amounted to 9,132,000 cases, leaving a carry- over into the 1935-36 season of 1,856,000 cases. The average f.o.b. price re- ceived by canners for the canned peaches sold during the 1934-35 season was $2.69 per case -- an increase of 16 per cent over the price received the preceding year. In figure 1 the f.o.b. prices received by canners given in column 6 of table 1 are plotted against the shipments of canned peaches given in column 4 of table 1, The average net relationship between these two factors (meaning the relationship which would be expected after relationships with other factors have been taken into account) is indicated by the curve in this chart. Compari- sons of the actual f.o.b. prices of canned peaches with the prices estimated from this curve are made in table 2. The portion of the variation in canned peach prices which has not been accounted for by the relationship expressed in figure 1 is given in column 4 of table 2. Relation Between the Variations in Canned-Peach Prices Unexplained by the Relationship v;ith Shipments and General Demand Conditions .-- One of the most important factors affecting the price at which a given quantity of any product can be sold during a given season is the condition of consumer demand for the ,3>^ Assistant Professor of Agricultural Economics, Assistant Agricultural Economist in the Experiment Station, and Assistant Agricultural Economist on the Giannini Foundation, 2. product at that time. Of the many factors which determine the status of this demand, there is one which is of paramount importance. That factor is consumer income. The higher the level of consumer incomes, the higher may one expect the prices to be at which a given quantity of a product can be sold. R monthly index of urban-consumer income in the United States has been compiled recently by the Agricultural -Industrial Relations Section of the Agri- cultural Adjustment Administration. In this index, weight was given to indus- trial workers' income, to trade, to service industries, to public utilities, to government, and to interest and dividends. The index, as now compiled, is a substitute for the index of the incomes of urban consumers which was constructed by the Bureau of Agricultural Economics of the United States Department of Agri- culture and discontinued in December, 1933. Monthly data for the period since January, 1922 are presented in figure 2. The unexplained variations in canned -peach prices given in column 4 of table 2 are plotted against the index of urban-consumer income in figure 3. The data are presented in tabular form in table 3, The slope of the line in figure 3 indicates the degree to which changes in consumer incomes have influenced the prices of canned peaches during the thirteen years included in the analysis. The variations in canned peach prices which have not been accounted for either by variations in shipments or by varia- tions in consumer income, as measured by the index numbers, are given in column 4 of table 3, Influence of the Prices of Com.peting Canned Fruits Upon the Prices Received for Canned Peaches .-- Second in importance to consur^er income as a factor in determining the status of demand for canned peaches is the comparative level of the prices of canned fruits which compete with peaches. Vi/ith general demand conditions the sam.e, one might well expect higher prices for canned peaches dur- ing a season in which canned pears, apricots, and pineapples (the main fruits competing with peaches) are high in price than during a season in which these fruits are relatively cheap. Likewise, when other canned fruits are relatively low in price, one would expect the substitution of these products for canned peaches to act as a depressing agent upon the price of the latter. An approximate measure of competing canned fruit prices which has been used in this analysis was developed by the author. Limitations of time and in data did not permit the development of a more refined indicator of this factor at this time. The material presented in table 4 indicates the method used in constructing what has been termed "an index of competing canned fruit prices." In brief, annual opening prices of canned pears, canned apricots, and canned pineapple were reduced to an approximately comparable level by expressing each series as a percentage of its 1924-1929 average. Simple averages of these per- centages were then calculated, giving the values shown in column 7 of table 4. Since the index of urban-consumer income had been used in the analysis as a measure of general demand conditions, it was necessary to remove the influence of this factor from the measure of competing canned fruit prices. This was done by dividing the figures given in column 7 of table 4 by the index of urban- consumer income given in column 8 of that table. The resultant index of competing canned fruit prices is given in column 9 of table 7. 3. The effect of competing canned fruit prices upon the price of canned peaches is indicated in figure 4. In this chart the unexplained price varia- tions in column 4 of table 3 are plotted against the index of competing canned fruit prices. The data are presented in tabular form in table 5. The slope of the line in figure 4 indicates the degree to which changes in competing canned fruit prices ha.ve influenced the prices of canned peaches during the thirteen years included in the analysis. The variations in canned peach prices which have not been accounted for by variations in shipments, by variations in consumer income, or by variations in competing canned fruit prices (as each of these factors has been measured), are given in column 4 of table 5. Comparison of the Estimated with the Actual Prices of Canned Peaches . — A summary of the variations in canned-peach prices which have been accounted for by each of the several factors taken into consideration is presented in table 6. Estimates af the prices based on their relationship to shipments, index of urban- consumer incomes, and index of corepeting canned fruit prices are given in column 4, The actual prices are given in column 5, A comparison of the several estimated prices of canned peaches with the actual prices is shown graphically in figure 5„ Use of the Results of this Analysis .-- As indicated earlier in this report, this analysis has been made for the purpose of providing some basis for estimat- ing the probable quantities of canned peaches which might be sold during a given season at various prices and with various assumed ctemand conditions. The curves plotted in figure 6 and the readings from these curves, given in tables 7 and 8, are presented for the purpose of illustrating the proper use of the results of this analysis. If, for example, one should assume that during a particular season demand conditions vi/ould approximate those of the 1924-35 season, an estimate of the price which might be expected for shipments of 8,000,000 cases would be $2,81 (see either table 7 or figure 6), Under similar conditions, shipments of 10,000,000 cases might be expected to sell for around $2.61, Considering the problem from the point of viev/ of estimating the quanti- ties of canned peaches which might be sold at a price of, let us say, $2.70 per case, one would, from readings in table 8 or figure 6, estimate that under condi- tions similar to those of the 1934-35 season, 9,000,000 cases could be sold. 4. TABLS 1 Pack, Carryover, Shipments, and F.O.B. Prices of Canned Peaches, California, 1922-1935 Year Pack , Carryover Supply Carryover F.Ocb, prices begin- 2f -can from the available into the received by ning basis preceding for ship- Shipments f ollovi/ing canners June 1 year ment year 1 2 3 4 5 6 thousand thousand thousand thousand thousand dollars per cases cases cases cases cases case 1922 8,784 326 9,110 7,001 2,109 4.25 1923 7,158 2,109 9,267 7,692 1,575 3.67 1924 6,141 1,575 7,716 6,918 798 4.21 1925 10,143 798 10,941 10,367 574 3.78 1926 14,059 574 14,633 10,727 3,906 3.66 1927 10,813 3,906 14,719 13,203 1,516 3.17 1928 14,596 1,516 16,112 12,963 3,149 3.21 1929 8,100 3,149 11,249 9,572 1,677 4.08 1930 13,294 1,677 14,971 11,020 3,951 2.88 1931 8,421 3,951 12,372 7,527 4,845 2.55 1932 6,438 4,845 11,283 9,922 1,361 1.97 1933 10,309 1,361 11,670 9 ,280 2,390 2.31 1934 8,598 2,390 10,988 ^^132 1,856 2.69 1935 1,856 1 Sources of data; Cols. 1, 2, 4, and 5: Compiled by the Canners League of California. Col. 3: Col. 1 plus col. 2. Col, 6: Compiled from records of canners. Prices are weighted - average prices for all grades and sizes of cans, f.o.b. cannery. Regu- lar brokerage, cash discount, sv./ell allowance, and label allowance are included. ■ - f I -J 5. F.o.b» prices (dollars per case) 4.50 - 4.00 - -.50 i.OO - .50 2.00 - 1,50 10 11 12 15 Shipments ( million cases) Fig, 1. — Relation between the f.o,b, prices and shipments of canned peaches, California, 1922-1934 (years beginning June l), (Data from table 1.) 6. TABLE 2 Relation Between the F.O.B. Prices and Shipments cf Canned Peaches, California, 1^22-1534 Year begin- • Shipments F.o.b, priC'.'s • Price P rice ning of canned of canned e stimat e s residua. Is June 1 peaches p caches (fip. 1) (fis, 1) 1 o d O A thousand dollars per dollars dollars cases case per case per case 1922 7,001 4 . 25 4 . 03 +0.22 1923 7,692 3.67 3.90 -0.23 1924 6,918 4.21 4.04 +0.17 1925 10,367 3.78 3.53 +0.25 19 26 10,727 3.66 3.50 +0.16 1927 13,203 3.17 3.26 -0.09 19 28 12,963 3.21 3.28 -0.07 1929 9,572 4.08 3.63 +0,45 19 30 11,020 2.88 3.46 -0.58 19 31 7,527 2. 55 3.9rJ -1.37 1932 9 , 922 1,97 3.58 -1.61 19 33 9,280 2.31 3,67 -1. 36 1934 9,132 2.69 3.6;^ -1.00 Sources of data: Col. 1: Table 1, ccl, 4. Col. 2: Table 1, col. 6. Col. 3: Readings from curve in fig. 1. Col. 4: Cci, 2 minus col, 3. 7. Index (1924-29=100) Jan. Jan. Jan. Jan. Jan. Jan. 1922 1924 1926 1928 . . 1930 1932 1934 Fig. 2. — Monthly index of urban-conGumer income, United States, 1922-1935. (1924-29=100.) (Data from Agricultural-Industrial Relations Section of the Agricultural Adjustment Administration. ) 8. Price residuals (dollars per case) +0. 50 - 29 . y 25 / •24 26^ / 0 - / • 27 • 28 23 . / -0.50 X • 30 -1.00 •34 y 33y^ . 31 -1,50 "■ 32 1 1 t 1 L ,, 1 60 70 80 90 100 110 Index of urb.an- consumer (1924-29 rr 100) income Fig. 3, — Relation betvyeen the unexplained price va.rici.tions in fig. 1 and an index of urban -consumer income, 1922-1934. (Data from table 3. ) 9. TABLE 3 Relation Between the Unexplained Price Veiriations in Table 1 and an Index of Urban-Consumer Income, 1922-1934 Year Index of Price begin- urban - Price res idual Price ning: consumer residuals e st imate s residuals June 1 income (fiK. l) (fig. 3) {fifr, 3) 1 2 3 4 1924-29=100 dollars dollars dollars per case per case per case 19^2 85.4 +0.22 -0.62 +0.84 1923 92.8 -0,23 -0.31 +0.08 1924 89.8 +0.17 -0.44 +0.61 1925 98.8 +0.25 -0.05 +0.30 1926 101.8 +0.16 +0.08 +0.08 1927 101.4 -0.09 +0.06 -0.15 1928 105.8 -0.07 +0,25 -0.32 1929 107.7 +0.45 +0. 33 +0.12 1930 94.6 -0.58 -0o23 -0.35 1931 78.4 -1.37 -0.92 -0.45 1932 62.2 -1.61 -1.61 0 1933 67.6 -1.36 -1.38 +0.02 1934 72.2 * -1.00 -1.18 +0.18 * Preliminary estimate. Sources of data: Col. 1: Unpublished index compiled by the Agricultural- Industrial Relations Section of the Agricultural Adjustment Administration. Col. 2: Table 2, col. 4. Col. 3: Readings from the curve in fig. 3, • Col. 4: Col. 2 minus col. 3. 10. TABLE 4 Method of Construction of an Index of the Prices of Canned Fruits Competing with Canned Peaches, 1922-1934 Opening prices Index of opening prices Index Year (dollars per dozen cans) (1924-29=100) Index of com- begin- Pine- Pine- of peting ning Pears , Apricots , apples , Pears , Apricots , apples, Combined urban - canned June 1 No. 2i No. 2^ No. 2i No. 2^ No. 2^ No. 2^ index consumer fruit Choice Choice Fancy Choice Choice Fancy income prices 1 2 3 4 5 6 7 8 9 dol- dol- dol- per £er: per per 1924- 1924- lars lars lars cent cent cent cent 29=100 29=100 1922 3.15 2.60 2.75 113.3 107.9 120.1 113.8 85.4 133.2 1923 2.65 2.00 3.00 95.3 83.0 131.0 103.1 92.8 111.1 1924 3.00 2^.45 2.60 107.9 101.7 113.5 107.7 89.8 119.9 1925 3.15 2.25 2.15 113.3 93.4 93.9 100.2 98.8 101.4 1926 2.50 2.45 2.35 89,9 101.7 102.6 98.1 101.8 96.4 1927 2.50 2.45 2.10 89.9 101.7 91.7 94.4 101,4 93.1 1928 2.40 2.30 2.20 86.3 95.4 96.1 92.6 105.8 87.5 1929 3.15 2.55 2.35 113.3 105.8 102.6 107.2 107.7 99.5 1930 2.05 1.90 2.10 73.7 78.8 91.7 81.4 94,6 86.0 1931 1.85 1.65 1,75 66,5 68.5 76.4 70.5 78.4 89.9 1932 1.50 1.30 1.60 54.0 53.9 69.9 59.3 62.2 95.3 1933 1.50 1.50 1.80 54,0 62 , 2 78.6 64.9 67.6 96.0 1934 1.85 2.10 1.80 66.5 87.1 78.6 77.4 72.2* 107.2 * Preliminary estimate. Sources of data: Cols. 1 and 2: Vi/estern Canner and Packer, March 20, 1935, p. 72. Col. 3: V^estern Canner and Packer. March 20, 1935, p. 88. Cols. 4, 5, and 6: Prices in cols. 1, 2 and 3 expressed as percentages of their respective 1924 through 1929 averages. Col, 7: Average of cols. 4, 5, and 6. Col. 8: Table 3, col. 1. Col. 9: Col. 7 expressed as a percentagi of col. 8. Price residuals (dollars per case) +1.00 , — -1.00 1 t i ! _j I I 80 90 ICO 110 120 130 Index of competing canned-fruit prices (1924-29=100) Fig. 4.-- Relation between the unexplained price variations in fig. 2 and an index of competing canned fruit prices, 1922-1934. (Data from table 5.) TABLE 5 Relation Between the Unexplaineci Price Variations in Table 2 and an Index of Competing Canned Fn.iit Prices, 1922-1934 Year Index of Price - begin- competing Price residual Price ning canned fruit residuals estimates residuals June ^ prices , .(fip;. 3) (fiF^. 4) (fig. 4) 1 2 3 4 dollars dollars dollars 1924-29=100 per case per case per case 1922 133.2 +0 . 84 +0.88 -0 . 04 1922 111.1 +0,08 +0.29 -0.21 1924 119.9 +0*61 +0.52 +0.09 1925 101,4 +0.30 +0.03 +0,27 1926 96.4 +0.08 -0.10 +0.18 1927 93.1 -0,15 -0.18 +0.03 1928 87.5 -0.32 -0.32 0 1929 99.5 . +0.12 -0.01 +0.13 1930 86.0 -0.35 -0.37 +0.02 1931 89.9 -0,45 -0,26 -0.19 1932 95.3 0 -0.13 +0.13 1933 96.0 +0 , 02 -0.11 +0.13 1934 107.2 +0.18 +0.19 -0.01 Sources of data: Col. 1: TPble 4, cel. 9.- Col. 2: Table 3, col. 4. Col. 3: Readings from curve in fig, 4. Col. 4: Col, 2 rcinus col. 3. 13. Estimated f.o.b. prices (dollars por Ccise) 4 . 50 1 ^ ' ^ r 4 . 00 " 3.50 - 3.00 - 2.50 - £.00 - 1 . 50 I ! 1 t i I 1.50 2.00 2.50 3.00 3.50 4.00 4.50 Actua^l f.o.b. prices (dollars per case) Fig, 5,-- CoiDparison of prices estimated from relationships between actual prices and important factors affecting them with actual f.o.b. prices of canned peaches, 1922-1934. (Data from table 6.) TABLE 6 Comparison of Prices Estimated from Relationships B:^tween Actual Prices and Important Factors Affecting them v/ith Actual F.O.B. Prices of Canned Peaches, 1922-1934 I C i^X D e ^ 1 n — 1 i 1 o e • r r 1 c e — • F r .1 c e - t'j s 1. 1 ma I. £ a i\ c Luai ning estimates residual residual f . o.b. f .o.b. June 1 V 1 Ig. L) est imat e s e s timates prices prices ..... lO-^. 3) (fig. 4) 1 2 3 4 5 dollars dollars dollars dollars dollars per case per case per case per case per case 1922 4.03 -0.62 +0.88 4 . 29 4 . 25 1923 3.90 -0.31 +0.29 3.88 3,67 1924 4.04 -0^44 +0.52 4.12 4.21 1925 3.53 -0.05 +0.03 3.51 3.78 1926 3.50 +0.08 -0.10 3.48 3,66 1927 3. 26 +0,06 -0.18 3.14 3.17 1928 3.28 +0.25 -0.32 3.21 3.21 1929 3.63 +0.33 -0.01 3.95 4,08 1930 3.46 -0.23 -0.37 2 . 86 2.88 1931 ■X o o -0.92 -0.26 2.74 2.55 1932 3.58 -1,61 -0.13 1,84 1.97 1933 3.67 -1.38 -0.11 - 2.18 2.31 1934 3.69 -1.18 +0. 19 2.70 2.69 Sources of data Col. 1 Col. 2 Col. 3 Col. 4 Col, 5 Table 2, col. 3. Table 3, col. 3, Table 5, col, 3. Col, 1 plus col. 2 plus col. 3, Table 1, col, 6. 15. Fig. 6. — Prices which might be expected for v:-rious quantities of canned peaches with demand conditions similar to those during the 1931-32, 1932-53, 1933-34, and 1934-35 se:isons. (For readings from this chart, see tables 7 and 8.) TABLE 7 Prices Which Might be Expected for Various Quantities of Canned Peaches with Various Demand Conditions Prices wh ich might be expected with demand conditions similar to tho. Be present during the Shipments 1931-32 1932-33 1933-34 1934-35 season season season season million dollars dollars dollars dollars cases per case per case P3r case "oer case 7.0 2.62 2.22 2.54 2.94 7,5 2 . 56 2.17 2.48 2.87 6.0 2.50 2 , 12 2.42 2.81 8.5 2.45 2.08 2.37 2.75 9.0 2.40 2.04 2. 33 2.70 2 . 36 2.00 2.29 2.65 10.0 2 . 52 1.96 2.25 2.61 10.5 2.28 1,93 2 . 22 2.56 11^0 2.25 l.SO 2.18 2.52 11.5 2.22 1.88 2.14 2.48 12.0 2.19 1.85 2.11 2.45 Source of data: Readings from curves in fig. 6. TABLE 8 Quantities of Canned Peaches Which Might be Sold at Various Prices with Various Demand Conditions F.O.B. prices Quantities which night be ;;old with deiuand c ^"^ n diti 0 n ,? similar to those present during th e 1931-52 season 19S2-33 season 1933-34 season 1934-35 season dollars per case 2.00 2.10 2.20 2.30 2. 40 2.^0 C.60 2.70 2.80 2.90 m illion cases 11.8 10.3 9.0 8.0 7.1 million causes 9.5 8.2 7.2 cases 12.2 10.7 9. .4 7.3 millio n cases 12.9 11.3 10,1 9.0 8,1 7.3 Source of data: Readings from curves in fig. 6.