University of California College of Agriculture Agricultural Experiment Station Berkeley, California AN ANALYSIS OF THE PRICES RECEIVED FOR CANNED APRICOTS BY CANNERS IN CALIFORNIA — SEASONS, 1924-25 THROUGH 1935-36 by H. J. Stover June, 1936 Contribution of the Giannini Foundation of Agricultural Economics Mimeographed Report No. 47 AN ANALYSIS OF THE FRICSS RECEIVED FOR CANNED APRICOTS BY CANNERS IN CALIFORNIA SEASONS, 1924-25 THROUGH 1935-36 H. J. Stover^ This report presents the results of an analysis which has been made for the purpose of determining the more important factors which have been responsible for the variations in the annual average f.o.b. prices received for canned apricots by canners in California from 1924-25 through 1935-36 and of measuring the influence of each of these factors upon those prices. Users of this report should clearly recognize the fact that the results presented herein are based entirely upon what happened during the seasons included in the analysis. They do not forecast what will happen in the future. They are designed to serve as a helpful guide in estimating either the probable price at which a given quantity of canned apricots can be sold or the probable quantity that can be sold at a given price, under given conditions. In making such estimates, it is first necessary to determine the probable future positions of the factors which have affected canned-apricot prices in the past, Pack. Carryover. Shipments, and Prices of Canned Apricots in California . — The pack of canned apricots in California in X935 amounted to 3,164,000 cases, on a 2i-can basis (table l). The carryover from the preceding season was 227,000 cases, which, added to the pac^c figure, gave a total supply of 3,391,000 cases available for shipment during the 1935-36 season, Shipments between June 1,1935 and June 1, 1936 amounted to 2,547,000 cases, leaving a carryover into the 1936-37 season of 844,000 cases. The average f.o.b, price received by canners for canned apricots shipped during the 1935-36 season was, according to the reports received, $2,93 per case. Data on packs, carryovers > shipments, and prices of canned apricots for the past twelve seasons, comparable to those given above, are presented in table 1. Relation Between the FtO,B, Prices and Shipments of Canned Apricots . -- One of the more important factors affecting the price at which a product has been sold is the quantity of the product sold at that price. Other factors remaining the same, the larger the quantity sold, the lower must the price be in order to find sufficient buyers for the product. Conversely, the smaller the quantity sold, the higher will be the price. 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 apricots 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. Comparisons of the actual f.o.b, prices of canned apricots with the prices estimated from this curve are made in table 2, The portion of the variation in the actual prices which has not been accounted for by the relationship expressed in figure 1 is given in column 4 of table 2. .V Ass istant Professor of Agricultural Economics, Assistant Agricultural Economist in the Experiment Station, and Assistant Agricultural Economist on the Giannini Foundation, a, A comparison of the prices of canned apricots estimated from shipments of canned apricots with the actual prices is shown graphically in figure 2. Influence of the Levels of Consumer Incomes Upon Canned-Apricot Prices . During recent years, the dominant factor affecting the prices of most products has been the status of general demand conditions. One of the best available indicators of these conditions is an index of national income, excluding agricultural income, compiled and published by the Bureau of Agricultural Economics of the United States Department of Agriculture. The monthly figures for this index from June, 1924 to date are given in table 3 and presented graphically in figure 3. Logically the net effect of a change in the levels of consumer incomes upon the price of a product is directly proportional to the change in incomes. For example, if, during a period when consumer incomes were at levels referred to as 100 per cent, a given quantity of a product sold at a price of $4,00 per unit, one would expect that with the levels of incomes at 70 per cent the same quantity would sell at a price of $2,80 (70 per cent of $4.00) per unit. Departures from this figure would be due to the influence of other factors, some of which might be closely related to changes in the levels of consumer incomes. F'or instance, if the 70 per cent levels of consumer incomes referred to above followed levels of 60 per cent, the effect would probably differ considerably from that resulting if the 70 per cent levels follov/ed levels of 80 per cent. The direction of the change in consumer incomes would, in that case, be an additional, but distinct, factor. The influence of changes in the levels of consumer incomes upon the prices of canned apricots in California is taken into account in the computations given in table 4. In 1934-35, for example, the index of national income, excluding agricultural income, amounted to 72 per cent of the 1924-29 average. According to readings from the curve in figure 1, if shipments of canned apricots had been the sole factor, a price of $4.45 per case for canned apricots would have been expected in that year. The actual price was $3,47 per case. By taking account of the index of income of 72 per cent, an estimate of a price of $3,20 per case is obtained (72 per cent of $4.45 is $3,20). A comparison of the prices of canned apricots estimated from shipments of canned apricots and an index of national income, excluding agricultural income, with the actual prices is shown graphically in figure 4. Effect of the P rices of Ca nned Fruits Competing With Canned Apricots Upon the Prices of Canned Apri cots. --^ To a certain extent, one canned fruit can be sub- stituted for another by the consumer. If the price of canned apricots is high relative to the prices of canned peaches, canned pears, and canned pineapples -- the main competitive canned fruits a certain amount of substitution takes place which reacts upon the prices which can be obtained for a given quantity of canned apricots. An index of the prices of canned fruits competing with canned apricots, designed for use in measuring the influence of this factor upon canned-apricot prices, has been constructed. The methods used in the construction of this index are indicated in table 5. The weighting factors of 8 for peaches, 3 for pears, and 6 for pineapples were determined from estimates of the aggregate values of these products during the 1924-29 period. Adjustments v;ere made in the index for the influence of changes in the levels of consumer incomes, a factor already included in the analysis. The index as used in measuring the effect of the prices of canned fruits competing with canned apricots upon the prices of canned apricots is given in column 9 of table 5. The relation of the index of the prices of competing canned fruits to the prices of canned apricots has been measured by taking the portions of the canned- apricot prices which were unaccounted for by the relationships with shipments of 3. canned apricots and an index of national income, and relating these to the compet- ing-canned-f ruit-price index (table 6 and figure 5), For example, as indicated above, the actual price of canned apricots in 1934-35 was $3.47 per case. An estimate of this price based solely upon shipments of canned apricots ajnounted to $4.45 per case. Account being taken of consumer incomes as an additional factor, the estimate became $3,20 per case. The unexplained portion of the price of $0.27 per case still remaining ($3.47 minus $3,20) was, as shown in table 6 and figure 5, partially accounted for by the prices of competing canned fruits which, in that particular year, were relatively high. A comparison of the prices of canned apricots estinated from shipments of C canned apricots, an index of national income, excluding agricultural income, and an index of the prices of competing canned fruits with the actual prices is shown graphically in figure 6. 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 estimating the probable quantities of canned apricots which might be sold during a given season at various prices and with various assumed deinend conditions. The curves plotted in figure 7 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 would approximate those of the 1935-36 season, an estimate of the price which might be expected for shipments of 2,500,000 cases would be $2.96 per case (see either table 7 or figure 7). Under similar conditions, shipments of 2,000,000 cases might be expected to sell for around $3.30. Consider- ing the problem from the point of view of estimating the quantities of canned apricots which might be sold at a price of , let us say, $3.00 per case, one would, from readings in table 8, or figure 7, estimate that under conditions similar to those of the 1S35-36 season, 2,430,000 cases could be sold. Assuming demand conditions in the neighborhood of those prevailing in 1935-36, an increase in shipments of canned apricots from 2,200,000 cases to 2,400,000 cases, or from 2,400,000 cases to 2,600,000 cases, may be expected to result in lower prices for canned apricots to the extent of approximately 12 cents per case. A rise in the index of national income, excluding agricultural income, from 75 to 80, or from 80 to 85, other things remaining the same, may be expected to result in higher prices for canned apricots of about 19 cents per case. The net effect of the index of competing canned fruit prices is to raise the price of canned apricots approximately 10 cents per case with each increase of 5 per cent in the index, after account is taken of changes in the index of national income. With the index of national income at the 80 per cent level, a rise of 5 per cent in the adjusted index (adjusted for changes in the index of national income) is equivalent to a rise of 4 per cent in the unadjusted index. Digitized by the Internet Archive in 2014 https://archive.org/details/analysisofprices47stov 4. Pack, Carryover, Shipments, and F.O.B. Prices of Canned Apricots, California, 1S24-25 to 1935-36 June through May Pack, 2^ -can basis Carryover from the preceding year Supply availarjle for shipment Shipments Carryover into the following year F.o.b. prices of canned apricots 1 Z 3 4 5 6 thousand cases thousand cases thousand cases thousand cases thousand cases dollars per case 1 , ybo oc c 0 1,951 3iD o . y 1 ^eighted average prices for all grades and sizes of cans, f.o.b. cannery. These figures are based on reports covering the following numbers of cases: 1924- 25 1925- 26 1926- 27 1927- 28 1928- 29 1929- 30 978,054 959,970 1,339,092 1,304,610 1,214,527 1,661,305 1930- 31 1931- 32 1932- 33 1933- 34 1934- 35 1935- 36 1,282,475 1,230,679 1,087,403 915,659 895,653 1,206,125 I. F.o.b, prices (dolla rs per case) 5 4.50 - 4,00 - 3.50 3.00 2,50 2.00 ^31 ""32 K 35 >^3 ± 1.6 l.i 2.0 2.2 2.4 2.6 Shipments (million cases) 2.8 3.0 Fig. 1. — • Relation between the f.o.b. prices and shipments of canned apricots, California, 1924—25 to 1935-36, (Data from table 2.) 6 TABLE 2 Relation Between the F.O.B. Prices and Shipments of Canned Apricots, California, 1924-25 to 1935-36 June through Shipments of canned apricots F.o.b. prices of canned apricots First estimates of f.o.b. prices First price residuals May 1 3 4 thousand dollars dollars dollars cases per case per case per case 1924-25 1,S51 3.91 4.16 -0.25 1925-26 2,388 3.72 3.76 -0.04 1926-27 2,847 3.85 3.44 +0.41 1927-28 2,409 3.97 3.75 +0.22 1928-29 2,789 3.67 3.48 +0.19 1929-30 2,986 3.97 3. 36 +0,61 1930-31 2,597 3 • 3 in t>- LO 10 to 0) a E rH CV} a» CX) CjO cr> co CX) cr» 0 CT> X) O od S^ rH rH rH rH In the o Cm o o 5m cn rH tl 1 1 1 CD XJ rH Ei O O r-^ O O -\~ rH o ■ H c, C\3 X Cd W SU • H 1 OJ rH C\2 0 0 0 CO ee o cd rH C\3 1 — I 1 — 1 rH rH Ih nati come bO •H tura rH II CO CO 03 in 13 O CD 1 •H cr> to -P o c 'C3 U OJ 0 t3 rO CO -H CD ex 1 0 CVJ 0 !0 C\i CT> C— Cv2 C rH rH 0 CTi cr« 0 CO LO CO e'- LO cd e; s o rH o rH un •H CO Cm on C(-t o CO O -p CT5 Cd CD m If) X3 (0 C\3 CO 03 C\3 03 t 0) 1 ■vf CO CQ cvi CO 0 CT> er* CT> o 1 CD rH ^1 rH rH (T> 0 cn CT» '~0 c— C- t>- bD •H CO c: c CO, C\] rH rH rH C u OJ cd •H a< II •rH o o D, cd rH I— 1 •H :rs a P X3 +-' Ui X) +•5 cy> CO +J OJ LO <^ 0 o ■P cd ia\ rH rH rH cr> cr> 00 tr- tn 10 in CO CD •H X •H cd Ji 0) 02 rH rH rH U (U o cd cx (Ji II (X X) > (XJ pH •H a M CO CT> •H rH T3 1 CD C\3 0 03 CO bO 0) 1 ''T fO cr> CO c-~ rH co CT> tO tO cd G (t: C. <2 0 ^\ • CO CD rH t- CO 10 CO t^- CD cd •H o cd CVi rH rH rH u s: o cd fH p 4) (T> II .Q o O CO Du rH •P Cm o -P 0 •H $-1 ^ ^ V) CD CO -P CD P. 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Prices of Canned Apricots and an Index of the Prices of Competing Canned Fruits, 1924-25 to 1935-36 June through May TndpY of prices of competing canned fruits Second price residuals S p P. n n H price residual estimates Third price residuals Fob prices of canned apricots Third estimates of f.o.b. prices 1 2 3 4 5 6 1924-29 := 100 dollars per case dollars per case dollars per case dollars per case dollars per case 1924-25 124 +0.08 +0.46 -0.38 3.91 4.29 1925-26 103 0 +0.06 -0.06 3.72 3.78 1926-27 98 +0.38 -0.04 +0.42 3.85 3.43 1927-28 88 +0.15 -0.23 +0,38 3,97 3 • 5 Q 1928-29 85 -0 . 02 -0.29 +0.27 3.67 3.40 1929-30 99 +0.37 -0.02 +0.39 3.97 3.58 1930-31 87 -0.07 -0.25 +0.18 3 » 32 3.14 1931-32 85 -0.54 -0.29 -0.25 2.64 2.89 1932-33 95 -0.32 -0.10 -0.22 2.23 2.45 1933-34 100 -0.06 0 -0.06 2.37 2.43 1934-35 103 +0.27 +0.06 +0 . 21 3.47 3 . 26 1935-36 94 +0.13 -0.12 +0.25 2.93 2.68 Sources of data: Col. 1: Table 5, col. 9. Col. 2: Table 4, col. 5. Col. 3: Readings from line in figure 5. Col. 4: Col. 2 minus col, 3. Col. 5: Table 2, col. 2. Col. 6: Col, 5 minus col. 4. 15. Second price residuals (dol lar s per case) +0.50 -0.50 110 120 Index of the prices of competing canned fruits (1924-29 oquals 100) Fig, 5.— Relation between the variations in the f .o.b. prices of canned apricots unaccounted for in fig. 4 and an index of the prices ofcompeting canned fruits, 1924-25 to 1935-36. (Data from table 6.) 16» F.o.b. prices 2.00 2.50 3.00 3.50 4.00 4.50 Third estimates of f.o.b, prices Fig, 6, — Relation of f.o.b. prices of canned apricots to estimates of the f.o.b. prices based upon shipments of canned apricots^ an index of national income, excluding agricultural income and an index of the prices of competing canned fruits, 1924-25 to 1935-36. (Data from table 6.) i ■ ■ i »■ ♦ 17. F.o.b. prices (dollars per case) 1— I I _i I ; I ... 1.6 1.8 2.0 2,2 2.4 2.6 2.8 3.0 Shipments (million cases) Fig, 7, -.-F.o.b, prices of canned apricots which might be expected for various quantities of canned apricots with demand conditions similar those during the 1932-33, 1933-34, 1934-35, and 1935-36 seasons. (For readings from this chart, see tables 7 and 8.) TABLE 7 Prices V/hich Might Be Expected for Various Quantites of Canned Apricots with Various Demand Conditions Prices which might be expected with demand conditions similar to these present during the Shipments 1932-33 season 1933-34 season 1934-35 season 1935-36 season million cases GO xiar s per case uoiiars per case uo j-xar s per case Qoiiar s per case 1.8 2.35 2.83 3.38 3.48 1.9 2.29 2,75 2.29 2.39 2.0 2.23 2.66 3.20 3.30 2.1 2.17 2,61 3.12 3.22 2.2 2.12 2.55 3.05 3.15 2.3 2.08 2.50 2.98 3.08 2.4 2,04 2.45 2.92 3.02 2,5 2.00 2.40 2.86 2.96 2.6 1.96 2.36 2.82 2.91 2>7 1.92 2,31 2,76 2.85 2.8 1.88 2,27 2.71 2.80 2.S 1.85 2.23 2.67 2.76 Sources of data: Readings from curve in figure 7. TABLE 8 Quantities of Canned Apricots Which Might Be Sold at Various Prices With Various Demand Conditions Quantities conditions which might be sold witl similar to these presen" "1 demand t during Price season.. 1933-34 season if O'i — oo season 1935-36 season dollars million million million million per case cases cases cases cases 2.60 — 2.10 -- -- £.65 -- 2.04 2.93 — 2.70 -- 1.97 2.83 2.75 1.90 £.73 2,92 2,80 1.83 2.63 2,80 2.85 -- 1.77 2.53 2.70 2.90 1.71 2.43 2.62 2.95 2.52 3.00 2.27 2.43 3.05 2.20 2.34 3.10 2.13 2.27 3.15 2.07 2.20 Sources of data: Readings from curve in figure 7.