University of California College of Agriculture Agricultural Experiment Station Berkeley, California AN ANALYSIS OF THE PRICES RECEIVED FOR CANNED- CLINGSTONE PEACHES 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. 46 Digitized by the Internet Archive in 2014 https://archive.org/details/analysisofprices46stov AN ANALYSIS OF THE PRICES RECEIVED FOR CANNED CLINGSTONE FS ACHES 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 cling- stone peaches by canners in California from 1924-25 through 1935-36, and of measur- ing 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 peaches can be sold or the probable quantity that can be sold at a given price, under given conditions. In making such esti- mates, it is first necessary to determine the probable future positions of the factors which have affected canned-clingstone-peach prices in the past. Pack, Carryover, Shipments, and Prices of Canned Peaches in California . - - The pack of canned peaches (clingstones and freestones) in California in 1935 amounted to 11,216,000 cases, on a 2^-can basis (table l). The carryover from the preceding season was 1,856,000 cases, which, added to the pack figure, gave a total supply of 13,072,000 cases available for shipment during the 1935-36 season. Shipments between June 1, 1935 and June 1, 1936 amounted to 11,030,000 cases, leaving a carryover into the 1936-37 season of 2,042,000 cases. The aver- age f.o.b. price received by canners for canned clingstone peaches shipped during the 1935-36 season was, according to the reports received, $2.54 per case. Data on packs, carryovers, shipments, and prices of canned peaches for the past twelve seasons, comparable to those given above, are presented in table 1. Relation Between the F.0.B» Prices and Shipments of Canned Peaches ,-- 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 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. Comparisons of the actual f.o.b. prices of canned clingstone peaches 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. Assistant Professor of Agricultural Economics, Assistant Agricultural Economist in the Experiment Station, and Assistant Agricultural Economist on the Giannini Foundation. 2. A comparison of the prices of canned clingstone peaches estimated from shipments of canned peaches with the actual prices is shown graphically in figure 2. Influence of the Levels of Consumer Incomes upon Canned-Clingstone -P each 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 avail- able indicators of these conditions is an index of national income, excluding agricultural income, compiled and published by the Bureau of Agricultural Econom- ics 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 $2.60 (70 per cent of $4.00) per unit. Depar- tures 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. For instance, if the 70 per cent levels of consumer incomes referred tc above followed levels of 60 per cent, the effect would probably differ considerably from that resulting if the 70 per cent levels followed levels of 80 per cent. The direction of the change in consumer incomes would, in that case, be an additional but dis- tinct factor. The influence of changes in the levels of consumer incomes upcn the prices of canned clingstone peaches in California is taken into account in the computa- tions 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 peaches had been the sole factor, a price of $3.56 per case for canned clingstone peaches would have been expected in that year. The actual price was $2.69 per case. By taking account of the index of income of 72 per cent, an estimate of a price of $2.56 per case is obtained (72 per cent of $3.56 is $2.56). A comparison of the prices of canned clingstone peaches estimated from shipments of canned peaches and an index of national income, excluding agricul- tural income with the actual prices, is shown graphically in figure 4. Effect of the Prices of Canned Fruits Compe t ing with C anned Peaches Upon the Prices of Canned Clingstone Peaches .-- To a certain extent, one canned fruit can be substituted for another by the consumer. If the price of canned clingstone peaches is high relative to the prices of canned pears, canned apricots, 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 peaches. An index of the prices of canned fruits competing with canned peaches, designed for use in measuring the influence of this factor upon canned-clingstone- peach prices, has been constructed. The methods used in the construction of this index are indicated in table 5. The weighting factors of 3 for pears, 2 for apricots, and 6 for pineapples were determined from estimates of the aggregate values of these products during the 1924-29 period. Adjustments were 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 peaches upon the prices of canned clingstone peaches 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 clingstone peaches has been measured by taking the portions of the canned-clingstone-peach prices which were unaccounted for by the relationships with shipments of canned peaches and an index, of national income, and relating these to the competing-canned-f ruit-price index (table 6 and figure 5). For example, as indicated above, the actual price of canned clingstone peaches in 1934- 35 was $2.69 per case. An estimate of this price based solely upon shipments of canned peaches amounted to $3.56 per case. Account being taken of consumer incomes as an additional factor, the estimate became $2.56 per case. The unex- plained portion of the price of $0.13 per case still remaining ($2.69 minus $2.56) was, as shown in table 6 and figure 5, completely accounted for by the prices of competing canned fruits which, in that particular year, were relatively high. A comparison of the prices of canned clingstone peaches estimated from shipments of canned peaches, 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 peaches which might be sold during a given sea- son at various prices and with various assumed demand 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 1925-36 sea- son, an estimate of the price which might be expected for shipments of 8,000,000 cases would be $2.38 (see either table 7 or figure 7), Under similar conditions, shipments of 12,000,000 cases might be expected to sell for around $2.43. Consid- ering the problem from the point of view of estimating the quantities of canned peaches which might be sold at a price of, let us say, $2.60 per case, one would, from readings in table 8 or figure 7, estimate that under conditions similar to those of the 1934-35 season, 10,500,000 cases could be sold. Assuming demand conditions in the neighborhood of those prevailing in 1935- 36, an increase in shipments of canned peaches from 9,000,000 to 10,000,000, or from 10,000,000 to 11,000,000, may be expected to result in lower prices for canned clingstone peaches to the extent of approximately 14 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 clingstone peaches of about 18 cents per case. The net effect of the index of competing canned fruit prices is to raise the price of canned clingstone peaches approximately 9 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. 4 TABLE 1 Pack, Carryover, Shipments, and F.O.B. Prices of Canned Peaches, California, 1924-25 to 1935-36 June Pack, Carryover Supply Carryover F.o.b. prices through No, 2-| from the available Shipments into the of canned May can preceding for following clingstone basis year shipment year peaches 1 2 (J 4 5 thousand thousand thousand thousand thousand dollars cases cases cases cases cases per case 1924-25 6,141 1,575 7,716 6,918 798 4.21 1925-26 10,143 798 10,941 10,367 574 3.78 1926-27 14,059 574 14,633 10,727 3,906 3.66 1927-28 10,813 3,906 14,719 13,203 1,516 3.17 1928-29 14,596 1,516 16,112 12,963 3,149 3.22 1929-30 8,100 3,149 11,249 9,572 1,677 4.08 1930-31 13,294 1,677 14,971 11,020 3,951 2.88 1931-32 8,421 3,951 12,372 7,527 4,845 2.55 1932-33 6,438 4,845 11,283 9,922 1,361 1.97 1933-34 10,597 1,361 11,958 9,568 2,390 2.31 1934-35 9,175 2,390 11,565 9,709 1,856 2.69 1935-36 11,216 1,856 13,072 11,030 2,042 2.54 Sources of data: Cols. 1, 2, 4, and 5: Compiled by the Canners League of California. Col. 3: Colo Iplus 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. These figures are based on reports covering the following numbers of cases : 1924- 25 1925- 26 1926- 27 1927- 28 1928- 29 1929- 30 3,301,369 4,538,515 5,182,672 7,106,925 7,626,416 6,283,813 1930- 31 1931- 32 1932- 33 1933- 34 1934*35 1935-36 7,493,990 5,092,590 6,683,598 3,388,857 5,935,382 6,008,467 5. F.o.tu prices (dollars per case) 4.50- N 4.00 - 3.50 - 3.00 - 2.50 - 2.00 " I s 1 i i I ! I ~ 6 7 8 9 10 11 12 13 i Shipments (million cases) Fig. 1.— Relation between the f.o.b. prices and shipments of canned peaches, California, 1924-25 to 1935-36. (Data from table 2.) 6. TABLE 2 Relation Between the F.O..B. Prices and Shipments of Canned Peaches, California, 1924-25 to 1935-36 June Shipme nb s F.o.b* prices First First through of canned of canned estimates price Mav peaches clingstone of f.o.b. res iduals peaches .r. avuos .. _ prices 1 2 6 4 thousand dollars dollars dollars cases per case per case per case 1924-25 6,918 4.21 4.21 0 1925-26 10,367 3.78 3.45 +0.33 1926-27 10,727 3.66 3.39 +0.27 1927-28 13,203 3.17 3.05 +0.12 1928-29 12,963 3.22 3.07 +0.15 1929-30 9,572 4.08 3.59 +0.49 1930-31 11,020 2.88 3.35 -0.47 1931-32 7,527 2,55 4.05 -1.50 1932-33 9,922 1.97 3.52 -1.55 1933-34 9,568 2.31 3.59 -1.28 1934-35 9,709 2.69 3.56 -0.87 1935-36 11,030 2.54 3.34 L_ . -0.80 Sources of data; Col, 1: Table 1, col. 4. Col. 2: Table 1, col. 6. Col. 3: Readings from curve in fig. 1. Col. 4: Col. 2 minus col. 3. 7. Fig. 2 # — Relation of f.o.b. prices of canned clingstone peaches to estimates of the f .o#b. prices based upon shipments of canned peaches, ,1924-25 to 1935-36, (Data from table 2.) 8. TABLE 3 Monthly Index of National Income, Excluding Agricultural Income, United States, Juno, 1924 to March, 1936 (Seasonally corrected, 1924-29 equals 100) June through May Juno duly Aug. oepi/« UC b • iMO v • uQ C • Jan. r eo • Hffrs v* McXr • Apr. May Average 1924-25 90 89 90 91 91 92 93 94 94 94 94 95 92 1925-26 96 97 97 97 99 100 100 100 100 101 100 98 99 1926-27 100 99 100 101 102 101 101 102 102 102 102 102 101 1927-28 102 102 102 102 100 100 100 102 102 102 102 102 102 1928-29 104 105 106 106 106 106 106 106 106 106 106 107 106 1929-30 108 108 109 109 109 106 107 105 104 105 104 104 107 1930-31 103 100 97 96 96 93 93 92 91 91 90 88 94 1931-32 87 85 83 81 80 79 78 77 75 72 70 68 78 1932-33 66 64 62 62 63 63 62 63 61 58 58 60 62 1933-34 62 62 64 65 65 67 68 71 72 71 70 72 67 1934-35 69 70 70 69 69 71 72 74 76 74 72 74 72 1935-36 74 72 74 76 74 77 80 79 78 82 79 77* 1936-37 * Preliminary estimate. Sources of data: U. S, Dept. Agr. Bur. Agr. Econ. The Agricultural Situation. Figures for June, 19 24- February, 1936 from April 1, 1936 issue, p. 5.; March, 1936; May 1, 1936, p. 3; April, 1936; June 1, 1936. p. 16. 9. Index (1924-29 = 100) June June June June June June June 1924 1926 1928 1930 1932 1934 1936 Fig, 3. — Monthly index of national income, excluding agricultural income, United States, June, 1924 to March, 1936. (Seasonally corrected, 1924-29 equals 100 ) (Data from table 3.) TABLE 4 Relation Between the F.O.B. Prices of Canned Clingstone Peaches and an Index of National Income, Excluding Agricultural Income, 1924-25 to 1935-36 June F.o.b. prices First Index of Second Second through of canned estimates national income estimates price May clingstone of f.o.b. excluding of f.o.b. residuals peaches prices agricultural prices income i X p c o A t: t; o dollars dollars 1924-29 dol lars dol lars per case per case ~ 100 per case per case 1924-25 4,21 4.21 92 3.87 +0.34 1925-26 3.78 3.45 99 3 .42 +0 . 36 1926-27 3.66 3.39 101 3.4-2 +0.24 1927-28 3.17 3.05 102 3.11 +0.06 1928-29 3,22 3.07 106 3.25 -0.03 1929-30 4.08 3.59 107 3.84 +0.24 1930-31 2.88 3.35 94 3.15 -0.27 1931-32 2.55 4.05 78 3.16 -0.61 1932-33 1.97 3.52 62 2.18 -0.21 1933-34 2.31 3.59 67 2.41 -0.10 1934-35 2.69 3.56 72 2.56 +0.13 1935-36 2.54 3.34 77* 2.57 -0.03 * Preliminary estimate. Sources of data: Col. 1: Table 2, col. 2. Col. 2: Table 2, col. 3. Col. 3: Table 3. Col. 4: Col. 2 multiplied by col. 3. Col. 5: Col. 1 minus col, 4. 11. t F.o.b. prices ^doll ars per case) 2.00 2.50 3.00 3.50 4.00 Second estimates of f.o.b. prices (dollars per case). Fig. 4.-- Relation of f.o.b, prices of canned clinkstone peaches to estimates of the f.o.b. prices based upon shipments of canned peaches and an index of national income, excluding agricultural income 1924-25 to 1935-36, (Data from table 4.) * 9 era < CD 3 C5 o CO ro P CX Co H- n CD *% O CD 3 c+ O ►"+> r+ 3" (D M« 00 o c o c& 05 a o 3 c+ H* 3 C cd a, era CD o to 3 • 3 cd X c+ •a P era CD . i to p < CD *J P > o w> o c 4. o *J (— 1 an CD ro a CO o to •-s Cn o o CD (— 1 o M • CO <£> OJ P Op 3 o (X p • CD p 3 3 ro 3 H« 3 CX 3 CD • 'X5 1 0> o O • UIO •a a O H* *S CD P I— ' H" to 3 CD O 3 CX CD CD to or CX •-"J tx) o P 3 o « C+ »-» CD ro CD O e+ o rf *-$ C/3 (X r— » 'CJ to H* CD O P o CD (X o P 3 3 O 3 O CD CD «< to -i to •a p * H* 3 o ro P o H- K a O CD CD c+ to - 3" CD P •-s P •n CD s= p P o H- CD H- H» h" S» H* 0q O 3* P c+ to O CD o C»OiOJO>3M OOtCOoiMOJffifo^^^ M II VD ;ro I- 1 o I c ro to II I— 1 o 1 o X) c+ 2 3-^ P U C O 3 C CD era 3* Iro cn 10>OiO)(»000(DOI- ' M II ro O 1 O ro ro ►p. i ro P c+ H" < CD to O Hi O CD to O G p O H' 3 3 O 3 P 3 3 CX CX ^ CD *a CD C_i. O- o X c O 1 c+ to CD Hj H- o r+ to 3 CD c era CX H* H« CO H- 3 to era ^ CD C p OJ cn I OJ CX cn •-3 > 00 t- cn tx) pj r c+ y-i CD o f+ o o o c+ o 1 i 1 1 *a • CO 00 3 w i.-3 o c+ <-l- H" o o 3 UJ JV) o Hj • p 3 CD ex 1 — ' P o c+ CO H* 3 CD CD CO p. gq *o H" H* H* 3 H 1 CD o W o 1 — 1 CO cr> • P> cr CD c_n o o 3 r+ H* 3 C CD P 3 C CO H* 3 cm o o sS H* 3 (TO « CD H" aq 3" c+ w o m 3 3 CD a. i 14. TABLE 6 Relation Between the F.O.B. Prices of Canned Clingstone Peaches and an Index of the Prices of Competing Canned Fruits, 1924-25 to 1935-36 Index of F.o.b, prices June pri cos of Second Second Third of canned Ihira through competing price price price clingstone estimates May canned residuals residual residuals peaches of f.o.b. fruits estimates prices 1 2 Z 4 5 6_ dollars dollars dollars dollars = 100 pep case per case por case per case per case 1924-25 JU w w +U , ■'iU -U.Uo 4.21 4.27 1925-26 101 +U , U& ■ n 'za +U . ou- o. 78 3.44 1926-27 98 +0.24 -0.04 +0.28 3.66 3.38 1927-28 93 +0.06 -0.13 +0.19 3.17 2.98 1928-29 88 -0.03 -0.22 +0.19 3.22 3.03 1929-30 95 +0.24 -0.10 +0,34 4.08 3 .,74 1930-31 91 -0.27 -0.17 -0.10 2.88 2.98 1931-32 83 -0.61 -0.32 -0.29 2.55 2.84 1932-33 102 -0.21 +0.03 -0.24 1.97 2.21 1933-34 103 -0,10 +0.05 -0.15 2.31 2.46 1934-35 107 +0.13 +0.13 0 2.69 2.69 1935-36 96 -0.03 -0.07 +0.04 2.54 2.50 Sources of data: Col. 1: Table 5, col. 9. Col. 2: Table 4, col. 5= Col. 3: Readings from line in Col. 41 Col. 2 minus col. 3, Col. 5: Table 2, col, 2. Col, 6: Col, 5 minus col, 4. 15. Second price residuals (dollars per case) +0.50 x25 29 x *26 *24 0 * 28 *32 * 30 -*"34 -0.50 * 31 , , l , , , I i i 80 90 100 110 120 Index of the prices of competing canned fruits (1924-29 equals 100) Fig, 5.— Relation between the variations in. the f.o.b. prices of canned peaches unaccounted for in figure 4 and an index of the prices of competing canned fruits, 1924-25 to 1935-36. (Data from table 6.) V 16. F.o*b. prices (dollars per case) 2.00 2*50 3 f 00 3.50 4.00 4.50 Third estimates of f.o.b. prices Fig. 6.-- Relation of f.o.b. prices of canned clingstone peaches to estimates of the f.o.b. prices based upon shipments of canned peaches, 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 i < I F.o.b. prices (dollars per case) 3.501 .