University of California College of Agriculture Agricultural Experiment Station Berkeley, California AN ANALYSIS OF THE PRICES RECEIVED FOR CANNED BARTLETT PEARS BY CANNERS ON THE PACIFIC COAST — SEASONS, 1924-25 THROUGH 1935-36 by J, Stover July, 1936 LIBRARY UNIVERSITY OF CALIFORNIA DAVIS Contribution of the Giannini Foundation of Agricultural Economics Mimeographed Report No. 48 m AN ANALYSIS OF THE PRICES RECEIVED FOR CANNED BARTLETT PEARS BY CANNERS ON THE PACIFIC COAST 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 Bartlett pears by canners on the Pacific Coast 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 pears 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-Bartlett-pear prices in the past. Pack, Carryover, Shipme nts, and Prices of Canned Pears on the Pa cific Coast . -- The pack of canned pears on the Pacific Coast in 1935 amounted to 4,230,000 cases, on a 2^-can basis (table l). The carryover from the preceding season was 884,000 cases, which added to the pack figure, gave a total supply of 5,114,000 cases available for shipment during the 1935-36 season. Shipments between June 1, 1935 and June 1, 1936 amounted to 4,693,000 cases, leaving a carryover into the 1936-37 season of 421,000 cases. The average f.o.b. price received by canners for canned Bartlett pears shipped during the 1935-36 season was, according to the reports received, $2.92 per case. Data on packs, carryovers, shipments, and prices of canned pears for the past twelve seasons, comparable to those given above, are presented in table 1. Relation Between the F.O.B. Prices and Shipment s of Canned Pears .-- 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 pears 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 Eartlett pears 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, 4 « * r > y » i Y * 1 * * 2. A comparison of the prices of canned Bartlett pears estimated from ship- ments of canned pears with the actual prices is shown graphically in figure 2. Influence of the Level s of Consu mer In com es Upon Canned-Bartle t t-Pear 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 ind^x 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. For 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 followed 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 Bartlett pears on the Pacific Coast 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 pears had been the sole factor, a price of $3.69 per case for canned Bartlett pears would have been expected in that year. The actual price was $3.05 per case. By taking account of the index of income of 72 per cent, an estimate of a price of $2.66 per case is obtained (72 per cent of $3.69 is $2.66). A comparison of the prices of canned Bartlett pears estimated from ship- ments of canned pears and an index of national income, excluding agricultural in- come, with the actual prices is shown graphically in figure 4. Effect of the Prices of Canned Fruits Competing with Canned Pears Upon the Prices of Canned Bartlett Pears .-- To a certain extent, one canned fruit can be substituted for another by the consumer. If the price of canned Bartlett pears is high relative to the prices of canned peaches, canned apricots, and canned pine- apples -- 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 pears. An index of the prices of canned fruits competing with canned pears, designed for use in measuring the influence of this factor upon canned-Bartlett- pe ar 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, 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 pears upon the prices of canned Bartlett pears is given in column 9 of table 5. 3. The relation of the index of the prices of competing canned fruits to the prices of canned Bartlett pears has been measured by taking the portions of the canned-Bartlett-pear prices which were unaccounted for by the relationships with shipments of canned pears 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 Bartlett pears in 1934-35 was $3.05 per case. An estimate of this price based solely upon shipments of canned pears amounted to $3.69 per case. Account being taken of consumer incomes as an additional factor, the estimate became $2.66 per case. The unexplained portion of the price of $0.39 per case still remaining ($3.05 minus $2.66) 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 Bartlett pears estimated from ship- ments of canned pears, 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 pears which might be sold during a given season 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 1935-36 season, an estimate of the price which might be expected for shipments of 4,000,000 cases would be $3.16 per case (see either table 7 or figure 7). Under similar conditions, shipments of 4,600,000 cases might be expected to sell for around $2.95 per case. Considering the problem from the point of view of estimating the quantities of canned pears which might be sold at a price of, let us say, $3.00 per case, one would, from readings in table 8 or figure 7, estimate that under conditions similar to those of the 1935-36 season, 4,440,000 cases could be sold. Assuming demand conditions in the neighborhood of those prevailing in 1935-36, an increase in shipments of canned pears from 4,000,000 cases to 4,400,000 cases, or from 4,400,000 cases to 4,800,000 cases, may be expected to result in lower prices for canned Bartlett pears to the extent of approximately 14 cents per case. A rise in the index of national income, excluding agricultural income, from 75 to 80, or from 80 to 85, other things remaining the same, may be expected to result in higher prices for canned Bartlett pears of about 24 cents per case. The net effect of the index of competing canned fruit prices is to raise the price of canned Bartlett pears approximately 12 cents per case with each increase of 5 per cent in the index, after account is taken of changes in the index of national income. With the index of national income at the 80 per cent level, a rise of 5 per cent in the adjusted index (adjusted for changes in the index of national income) is equivalent to a rise of 4 per cent in the unadjusted index. 4. TABLE 1 Pack, Carryover, Shipments, and F.O.B. Prices of Canned Pears, Pacific Coast, 1924-25 to 1936-37 Pack, Carryover Supply Carryover F.o.b. prices June No. 2$ from the available into the of canned through can pre ceding for Shipments following Bartlett May basi s vear shipment year pears 1 2 3 4 5 6 thousand thousand thousand thou sand thousand dollars cases cases cases case s case s per case 1 on/ oc iyc4-cD O 1 (~\Q d, lUo 1 A O 14 to i LO X) tO CD CT> S3 rH S3 cd o O P Cm LO o c\j I CD •H rH Sh Oh CD .C P Cm O X CD X) S3 H ei 08 Mi S3 •H P O Sh P CO S3 o o CO Si cd CD Oh P P CD rH P Sh CC! 03 X) 0 £3 S3 cd O Xi -P •H S3 •H Cm p O CD a, E o o Xi O X P CD CO p •H Sh CO hi) P CO S3 •H 1 Cm CD • H O- C 0 P Sh W ^ . •H CD " t 4 J C£) M Sh a 1 r\' <-Vi CO 00 CD CC CC CTi O O CT> CD Oh B XJ (X rH r— ( — 1 rH rH 1 — 1 X« 0 CD CT II $3 CD 0 S3 rH H J3 S3 P Vh id O 0 t 1 1 CD i— 1 r -a rH 6 ■H 3 0 0 rH O 0 01 01 r~ 0 •H S3 l _J 1 -r* CO 'A Sh •H col 1 _ rH A> f A nA A> tr— C\i 0 S3 CD b(. 1 — u» C_J O O C*- CO to > t v n-i O cd rH 1 C\] rH rH rH rH rH ?M ■ n CD cd 1 cr> 1 1 11 t—J P £ bu Sh rH CI 0 S3 S3 0 •H P P •H w CO W •H Cm CD — J ■HI -J P 1 O H < A > rH 1 — 1 00 O CT5 C?^ "^T 0) CD XJ •H 1 1 1 — 1 O CTj O CO CO ^O CO C — [>- \j X CD Sh W rH rH rH CU S3 E ft Oi 11 rH V* ■H O S3 r-H } O cd O CO CD XI rH cvi '•.^ CD D-i 1 ■v-H ^-Q CO O CD CT> CT> S3 ft , 1 1 I 1 — \ {J* CJ> O C7> cO C~- C~ [> S3 cd CM rH rH rH cd CD CTi 1! 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CD NT Oh (11 UJ a »— 4 r"i Nh UJ •i — 1 i — < O CD o CD C! RH CJ r* 1 •H c* 1 •H * CO CD •* r-i &4 •H CD cri WU r-r , , , J CD CO* •4.' wJ o n •r~i .1-4 fl CO M< r/i f — 1 i-H]C\J • rH m CD * CO CO Pi rH o hn uu •r- 1 V* CO t — <.VJ Vi (ii UJ rXJ d • ** rn *rH i rf\ CP c J r-l CD i:; •* •p™i O CO • rH jL, M fit A-* •rH en Ti j»i w w n— 1 Tj CD CO r* J c! •H A-4 ( — ii ni cu uu . _ j CD •iH CD rH rv UJ O o LO ^» Cj LO CO • • L • • QL CO •rH w « r— 1 rH , J I — 1 O j i — J 0 w LJ O o r ^ A O O XJ O o CD V* J /—• tn r-» r-H LO C\2 13. 14. TABLE 6 Relation Between the F.O.B. Prices of Canned Bartlett Pears and an Index of the Prices of Competing Canned Fruits, 1924-25 to 1935-36 Index of F.o.b. prices of Second Second Third prices Third June competing price price price of canned estimates through canned residuals residual residuals Bartlett of f.o.b. May fruits estimates pears prices L 2 3 4 2. £ 1 OO/I on dollars dollars dollars dollars dollars = 100 per case per case per case per case per case 1924*25 122 +0.34 +0.53 -0.19 5.40 5.59 1925-26 100 +0.78 0 +0.78 5.44 4.66 1926-27 100 -0.17 0 -0.17 4.31 4.48 1927-28 88 -0.30 -0.29 -0.01 4.60 4.61 1928-29 86 -0.19 -0.34 +0.15 4.13 3.98 1929-30 100 +0.21 0 +0.21 4.82 4.61 1930-31 89 -0.19 -0.26 +0.07 3,53 3.46 1931-32 87 -0.50 -0.31 -0.19 2 » 82 3.01 1932-33 97 -0.22 -0.07 -0.15 2.48 2.63 1933-34 103 +0.07 +0,07 0 2.64 2.64 1934-35 107 +0.39 +0.17 +0.22 3.05 2.83 1935-36 96* +0.02 -0.10 +0.12 2.92 2.80 Preliminary estimate. 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 ( do liars per case) *25 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 Bartlett pears unaccounted for in fig. 4 and an index of the prices of competing canned fruits, 1924-25 to 1935-36. (Data from table 6.) 16. F.o.b. prices (dollars per case) 2.50 3.00 3.50 4.00 4.50 5*00 5.50 Third estimates of f.o.b. prices Fig. 6.-- Relation of f.o.b, prices of canned Bartlett pe^rs to estimates of the f.o.b. prices based upon shipments of canned pears, an index of national income, excluding agricultural income, .and an index of the prices of competing canned fruits, 1924-25 to 1935-36. (Date, from table 6.) ■ I ■t I \ i 17. F.o.b. prices ( dollars per case) 5.00 - 4.50 4.00 - 3.50 - 3,00 ~ 2*50 ~ 2,0 2,8 3.2 3.6 4.0 Shipments (million cases) Fig. 7.-- F.o.b. prices of canned Bartlett pears which might be expected for various quantities of canned pears with demand conditions similar to 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 Which Might be Expected for Various Quantities of Canned Pears with Various Demand Conditions Frices which might be expected with demand conditions similar to these present during the Shipments 1932-53 1933-54 1934-55 1935-56 season season season season million dollars dollars dollars dollars cases per case per case per case per case 2.4 3.00 3.62 4.55 4.09 2,6 2.88 2.48 4.18 5.95 2.8 2.77 5.55 4.02 5.78 3.0 2.67 5.24 3.89 5.65 3.2 2.59 5.15 5.76 5.54 3.4 2.52 2.04 3.66 5.45 3.6 2.45 2.96 3.55 5.55 3.8 2.38 2.88 3.45 5.24 4.0 2. 32 2.80 3.36 3.16 4.2 2.26 2.75 3.28 5.09 4.4 2.21 2.67 3.21 5.01 4.6 2.16 2.62 3.14 2.95 Source of data: Readings from curve in figure 7. TABLE 5 Quantities of Canned Pears Which Might be Sold at Various Prices with Various Demand Conditions Quantities which mig ht be sold with demand simixar x.o these present during the Price 1932-33 1933-34 1934-35 1935-36 season season season season dollars million million million million cases cases cases cases 2.90 2.57 3.74 4.77 2.95 2.48 3.63 4.60 3.00 2.40 3.50 4.44 3.05 2.32 3 • o 9 4.90 .4.30 3.10 2,25 3.28 4.74 4.15 3,15 3.17 4.57 4.00 3.20 3.07 4.42 3.88 3.25 2.98 4.29 3.77 3.30 2,89 4.17 3.66 3.35 _ — 2.80 4.04 3.55 3.40 2.72 3 « 9 3 3.45 3.45 2.64 3.61 3.36 Source of data: Reading from curve in figure 7.