University of California College of Agriculture Agricultural Experiment Station Berkeley, California An Analysis of the Prices Received for Canned Asparagus by Canners in California -- Seasons, 1925-26 Through 1934-35 by H. J. Stover March, 1935 Contribution from the Giannini Foundation of Agricultural Economics • Mimeographed Report No. 40 Digitized by the Internet Archive in 2014 https://archive.org/details/analysisofprices40stov An Analysis of the Prices Received for Canned Asparagus by Canners in California Seasons, 1925-26 Through 1934-35 H. J. Stover\i^' In response to a need for some basis for estimating the probable quanti- ties of canned asparagus 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 vari- ations in the annual average f.o.b. prices received for canned asparagus by canners in California from 1925-26 to 1934-35 and to measure the influence of each of these factors upon those prices. The results presented herein consti- tute 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 asparagus 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-asparagus prices in the past. Relation Between the F.O.B. Prices and Shipments of Canned A sparagus . The historical picture of canned-asparagus packs, carryovers , supplies avail- able for shipment, shipments, and f.o.b. prices received by canners since 1925 is presented in table 1. In 1934 the P>^ jaa^ounted to 1,914,000 cases. The carryover from the 1933-34 seasojn was Jggg /OQ Q cases, which added to the pack figure , ^ga.va a total supply of ^i4^rjdBQ cases available for shipment during the 193S<-34v season. Shipments^ j _am 3 ounted to 1,980,000 cases, leaving 8 carryover into the 1935-36 season 009 cases. The average f.o.b. price received by canners for the canned asparagus sold during the 1934-35 season was $4,49 per case — an increase of 23 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 asparagus given in column 4 of table 1. The average* 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 asparagus with the prices estimated from this curve are made in table 2. The portion of the variation in canned- asparagus prices which has not been accounted for by the relationship expressed in figure 1 is given in column 4 of table 2. Ny/ Assistant Professor of Agricultural Economics, Assistant Agricultural Economist in the Experiment Station, and Assistant Agricultural Economist on the Giannini Foundation. 2. Relation Between the Variations in Cann ed- Asparagus Prices Unexplaine d by t he Relationship with Shipments, and Measur e_s i of General Demand Condition s. - - 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 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 . A monthly index of the incomes of urban consumers has been compiled by the Eureau of Agricultural Economics of the United States Department of Agri- culture for the fifteen years 1919-1933 inclusive. In this index, weight was given to industrial workers ' income, to trade, to service industries, to public utilities, to government, and to interest and dividends. Compilation of the index was discontinued in December, 1933. Monthly data for the period since January, 1922 are presented in figure 2. As indicated in figure 2, there has been a fairly high degree of corre- lation between the index of urban-consumer income and an index of industrial production compiled by the Federal Reserve Board during the period for which both indexes are available. The relationship of the two index series seems to indicate that, in general, urban-consumer income is largely dependent upon the level of industrial production a few months earlier. This relationship becomes very useful in estimating consumer income in advance, as must be done in a determination of the probable prices at which a given quantity of a product can be sold during a coming season. The unexplained price-variations in column 4 of table 2 are plotted against both the index of urban-consumer income and the index of industrial production 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 asparagus during the ten years included in the analysis. The variations in canned-asparagus prices which have not been accounted for either by variations in shipments or by vari- ations in consumer income, as measured by the index numbers, are given in columns 6 and 7 of table 3. Trend of Demand as a Factor Affecting the Prices of Canned Asparagus . -- There is evidence present in the data which indicates that prior to about 1929 the demand for canned asparagus in the United States was growing at a fairly rapid rate. In accounting for the variations in the prices of canned asparagus which are not explained by variations in supplies and in consumer incomes, this factor needs to be considered. The degree to which the upward trend in the demand for canned asparagus has affected the prices of canned asparagus is indicated in figure 4. The data are presented in table 4. Variations in canned-asparagus prices which have not been accounted for by any of the three factors included in the analysis are given in columns 4 and 5. v':;; : i'»:...v ■i : ' ' ;<-. \ ! . 3. Comparison of the Estimated With the Actual Prices of Canned Asparagus . - - A summary of the variations in canned-asparagus prices which have been accounted for by each of the several factors taken into consideration is presented in table 5. Estimates of the prices based on their relationship to shipments, index of urban-consumer incomes, and trend of demand are given in column 5. Estimates based on shipments, index of industrial production, and trend of demand are in column 6. The actual prices are given in column 7. A comparison of the several estimated prices of canned asparagus 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 estimating the probable quantities of canned asparagus which might be sold during a given season at various prices and with various assumed demand condi- tions . The curves plotted in figure 6 and the readings from these curves, given in tables 6 and 7, 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 1934-35 season, an estimate of the price which might be expected for shipments of 2,500,000 cases would be $3.90 (see either table 6 or figure 6). Under similar conditions, shipments of 2,000,000 cases might be expected to sell for around $4.46. Considering the problem from the point of view of estimating the quanti- ties of canned asparagus which might be sold at a price of, let us say, $4.75 per case, one would, from readings in table 7 or figure 6, estimate that under conditions similar to those of the 1934-35 season, 1,800,000 cases could be sold. TABLE 1 4. Pack, Carryover, Shipments, and F.O.B. Prices of Canned Asparagus, California 4 1925-1935 (years beginning March l) Carryover Supply Carryover F.O.B. Year from pre- avail- into the prices re- begin- Pack ceding able for Shipments following ceived by ning year shipment year canners March 1 ■ 1 2 3 4 5 6 000 000 000 000 000 dollars cases cases cases cases ca.se s per case 1925 1,745 170 1,915 1,664 251 6.16 1926 2,236 251 2,467 2,080 407 5.84 1927 2,190 407 2,597 2,195 402 5.57 IS 28 2 , 338 402 2,740 2,471 269 5.78 1929 2,673 269 2,942 2,691 323 5.84 1930 2, 663 323 2,986 2,028 958 5.79 1931 1,747 958 2,705 1,646 1,059 5.69 19 32 1,313 1,059 2 , 372 1,918 454 4.24 19 33 2,135 454 2, 589 2-T-4&8 141 X1U 3.65 1934 1,914 1,980 9* A/o 4,49 1935 <A IO 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, swell allowance, and label allowance a.re included. F.O.B. prices (dollars per case) 6.50 5.00 4.50 4.00 3.50 25 • 31 \ 26 \ 30 * 28 .27 — • 34 i 9 32 1 t i • 33 I 1 1 1600 1800 2000 2200 2400 2600 2800 Shipments (000 cases) Figure 1 Relation Between the F.O.B. Frices and Shipments of Canned Asparagus, California, 1925-1934 (years beginning March l) (Data from table 2) TABLE 2 Relation Between the F.O.B. Prices and Shipments of Canned Asparagus, California, 1925-1924 (years beginning March l) Year F. 0. B. begin- Shipments prices of Price Price ning of canned canned estimates residuals March 1 asparagus asparagus (fie. 1) (fie. 1) 1 2 3 4 000 dollars dollars dollars cases per case per case per case 1925 1,664 6.16 6.55 -0.39 1926 2,080 5.84 5.64 +0.20 ,1927 2,195 5.57 5.44 +0.13 1928 2,471 5.78 5.03 +0.75 1129 2,691 5.84 4.75 + 1.09 1930 2,028 5.79 5.73 +0.06 1931 1,646 5.69 6.60 -0.91 1932 1,918 4.24 5.94 -1.70 1933 2,313 3.65 5.26 -1.61 1934 1,980 4.49 5.82 -1 . 33 Sources of date. : 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. " » i. 7. Index (1923-25=100) Jan. Jan. Jan. Jan. Jan. Jan. Jan. 1922 1924 1926 1928 1930 1932 1934 Years beginning January 1.* Figure 2 Monthly Index Numbers of Urban-Consumer Income sf and of Industrial Production^ lagged five months), United States . 1922-1934. (1923-25=100) * Index of industrial production lagged five months, i.e., August, 1921 corresponds with Janu::.ry, 19^2, etc. t Unpublished index compiled by the Bureau of Agricultural Economics of the United States Department of Agriculture, Compilation discontinued December, 1933. f Federal Reserve Board Index of Industrial Production (adjusted for seasonal variation), published monthly in the Federal Reserve Bulletin. 7 Price residuals ( dol lars per case) +1.00 +0. 50 -0.50 - -1.00 - -1.50 - *.© 32 28 6 )0 30 26 26 * 0 * 0 27 27 * 25 0 25 Jl "> 31 34 29 0 -2.00 70 80 90 100 110 120 Indexes of Urban-Consumer Incomes and of Industrial Production (1923-25=100) 0 Price residuals plotted against index of urban-consumer income. * Price residuals plotted against index of industrial production. Figure 3 Relation Between the Unexplained Price Variations in Figure 1 and Indexes of Urban-Consumer Incomes and of Industrial Produc- tion, 1925-1934 (Data from table 3) 9. TABLE 3 Relation Between the Unexplained Frice Variations in Table 1 and Indexes of Urban-Consumer Incomes and of Industrial Production 1925-1934 Index of Year urban- Index of Frice Price begin- ning March 1* consumer incomes (1923-25 = 100) industrial production (1923-25 - 100) Price residuals (fig. 1) residual estimates! (fig. 3) residual estimates! (fig. 3) P r i c e residuals"'" (fig. 3) Frice jfc residuals (fig. 3) 1 2 3 4 5 6 7 dollars dollars dollars dollars dollars per case per case per case per case p e r c a s e 1925 104 . 9 101.5 -0.39 +0.27 +0.09 -0.66 -0.48 1926 109.6 107.2 +0,20 +0.53 +0.40 -0.33 -0.20 1927 109.8 107.8 +0. 13 +0.55 +0.43 -0.42 -0.30 1928 113.2 107.0 , +0.75 +0.73 +0.39 +0.02 +0.36 1929 117.0 120.2 + 1.09 +0.95 + 1.13 +0.14 -0.04 1930 103.5 102 . 1 +0.06 +0.20 +0.11 -0.14 -0.05 1931 87.2 84.0 -0.91 -0.72 -0.90 -0.19 -0.01 1932 67.1 66.2 -1.70 -1.84 -1-.90 +0.14 +0.20 1933 74.8 -1.61 -1.42 -0.19 1934 78.3 -1.33 -1.22 i -0.11 * For index of industrial production, year ending September 30. T Based on relation to index of urban-consumer income. T" Based on relation to index of industrial production. Sources of data: Col. 1: Unpublished index compiled by the Bureau of Agricultural Economics of the United States Department of Agriculture. Compilation discontinued December, 1933. Col. 2: Federal Reserve Board Index of Industrial Production (ad- justed for seasonal variation), published monthly in the Federal Reserve Bulletin. Col, 3: Table 2, col. 4. Cols. 4 and 5: Readings from the curve in fig. 3. Col. 6: Col. 3 minus col. 4. Col. 7: Col. 3 minus col. 5, Price residuals (dollars per case) +0.50 0 -0.50 * 0 0 * * ^ — * * 9 $ *■ * 9 /' 1 1 . i I.-. .t . i ,i , i 1 1 ! 1 1925 1930 1935 Year beginning March 1. Figure 4 Relation Between the Unexplained Price Variations in Figure 2 and Trend of Demand, 1925-1934 (Data from table 4) ® * Based on relation to index of urban-consumer income i Based on relation to index of industrial production. 11. TABLE 4 Relation Between the Unexplained Frice Variations in Table 2 and Trend of Demand, 1925-1934 Year begin- Trend of Price Frice Frice Frice ning d enand residuals* residu ls"t residuals* residuals 1" March 1 factor (fig. 3) (fig. 3) Villi! i 1 I,, (fig. 4) • (fig. 4) 1 2 3 4 5 dollars dollars dol lar s dollBr s dol lars per case per case per case per case per case 1925 -0. 56 -0.66 -0.48 -0.10 +0.08 19c6 -0.30 — U . vJ«J -0.20 -0.03 +C.10 1927 -0.15 -0.42 -0 . 30 -0.27 -0.15 •1928 -0.05 +0.02 +0.36 +0.07 +0.41 1 9 c 9 0 +0.14 -0 . 04 +0.14 -0.04 1930 0 -0.14 -0.05 -0.14 -0.05 1931 0 -0.19 -0.01 -0.19 -0.01 1932 0 +0.14 +0.20 +0.14 +0.20 1933 . 0 -0.19 -0.19 1934 0 -0.11 -0.11 * Based on relation to index of urban-consumer income. | Based on relation to index of industrial production. Sources of data: Col. 1: Readings from curve in fig. 4. Cols. 2 and 3: Table 3, cols. 6 and 7. Col. 4: Col. 2 minus col, 1. Col. 5: Col. 3 minus col. 1. Estimated f.o.b. prices 3.50 4.00 4.50 5.00 5.50 6.00 Actual f.o.b. prices (dollars per case). Figure 5. Comparison of Prices Estimated from Relationships Between Actual Prices and Important Factors Affecting Them with Actual F.O.B. Prices of Canned Asparagus, 1925-1934. (Data from table 5) TABLE 5 Comparison of Prices Estimated from Relationships Between Actual Frices and Important Factors Affecting Them with Actual F.O.B. Frices of Canned Asparagus, 1925-1934 Year Fr ice P r i c e be gin- Price residual resi dual Trend of E s t iraat e d Est] pat e d Act ual nine estimates * estimates e stimates! demand f . o . b . f .o.b. -t f .o.b. March 1 (fie. 1) (fig. 3) (fiK. 3) factor prices * prices prices 1 2 3 4 5 6 7 dollars dollars dollars dollars dollars dollars dollars per case per case per case per case per case por case per case 1925 6.55 +0.27 +0.09 -0.56 6,26 6.08 6.16 1926 5.64 *0.53 +0.40 -0.30 5.87 5.74 5.84 1927 5.44 +0.55 +0.43 -0.15 5.84 5.72 5.57 1928 5.03 +0.73 +0.39 -0.05 5.71 5.37 5.78 1929 4.75 +0.95 + 1.13 0 5.70 5.88 5.84 1930 5.73 +0.20 +0.11 0 5.93 5.84 5.79 1931 6.60 -0.72 -0.90 0 5.88 5.70 5.69 1932 5.94 -1.84 -1.90 0 4.10 4.04 4.24 1933 5.26 -1.42 0 3.84 3.65 1934 5.82 -1.22 0 I 1 4.60 4.49 * Based on relation to index of urban-consumer income, f Based on relation to index of industrial production. Sources of data: Col. 1: Table 2, col, 3. Cols. 2 and 3: Table 3, cols. 4 and 5. Col. 4: Table 4, col. 1. Col. 5: Col. 1 plus col* 2 plus col. 4. Col. 6: Col. 1 plus col. 3 plus col. 4. Col. 7: Table 1, col. 6. F.o.b. prices 14. (dollars per case) 1.6 1.8 2.0 2.2 2.4 2.6 2.8 Shipments (000,000 cases) Figure 6 Prices Which Might be Expected for Various Quantities of Canned Asparagus with Demand Conditions Similar to those during the 1931-32, 1932-33, 1933-34, and 1934-35 Seasons. (For readings from this chart, see tables 6 and 7.) TABLE 6 Prices Which Might be Expected for Various Quantities of Canned Asparagus with Various Demand Conditions Prices (dollars per case) which might be expected with demand conditions Sh i D'ie nt s similar to those present during the ( POO r»qqPQ] "1 Q^l -^P X J >J ~ >J«J X J 0\J — v-) 1 * X J4 JJ CPS} O o C CL o Oil Q p P C3 Pi 10 o-o vJIl 1 , 600 o • ox A 7 A A r in «3 • XU 1 , 700 5.58 4.57 4.47 4.92 1 , 800 R ^7 ji f A AC\ A 7R 1 , 900 5.18 4.24 4,15 4.60 2 , 000 5.00 4.10 4.01 4.46 £,100 4.85 3.97 3.88 4.33 2 , 200 4.70 3.85 3.76 4.22 2 , 300 4.56 3.73 3.65 4.10 2,400 4.43 3.63 3.55 4.00 2,500 4.31 3.53 3.45 3.90 2 , 600 4.20 3.44 3.36 3.81 2,700 4.10 3.36 3.28 3.73 Source of data.: Readings from curves in fig. 6. TABLE 7 Quantities of Canned Asparagus Which Might be Sold at Various Prices with Various Demand Conditions Quantities (000 cases) which might be f.O.B. prices sold with demand conditions similar ( dollars to those present during the per case) 1931-32 1S32-33 1933-34 1934-35 season season season season 4.00 2,075 2,010 2,400 4.10 2,700 2,000 1,935 2,300 4.20 2,600 1,925 1,865 2,210 4.30 2,510 1,860 1,800 2,125 4.40 2,425 1,800 1,735 2,045 4.50 2,345 1,740 ' 1,680 1,970 4.60 2,270 1,685 1,625 1,900 4.70 2,200 ' 1,630 1,830 4.80 2,130 1,765 4.90 2,065 1,710 5.00 2,000 1,650 Source of data: Readings from curves in fig. 6. / I i i