FLORIDA
338
STATE
HORTICULTURAL
LITERATURE CITED
1. Leftwich, Richard H., The Price System and Resource Allocation, Revised edition, Holt, Rinehart and Winston, New York, 1963.
SOCIETY,
1964
2. Spurlock, A. H. and Hamilton, H. G., Costs of Proces sing, Warehousing and Selling Florida Citrus Products, Agri cultural Economics Mimeo Report No. 63-10, Department of Agricultural Economics, Florida Agricultural Experiment Stations, Gainesville, Florida, April, 1963.
PRICES AND FACTORS AFFECTING PRICE BEHAVIOR AT VARIOUS MARKETING SECTORS FOR FLORIDA ORANGES coefficients by a multiple linear regression equa
Wilson B. Riggan*
tion of the following form:
U. S. Health Department Cincinnati, Ohio
(1)
Roy G. Stout* Minute Maid Company Orlando Introduction
that a knowledge of price behavior at the market place is important to growers, processors and retailers because the result of a change in quan
tities offered for sale will affect the net profits of each sector differently (1). A paper presented at the 1963 meeting of this Society was concerned with a detailed analysis of on-tree price of Florida oranges (2). This research has been continued and a study completed on price and quantity relationships at the retail level for fresh oranges, frozen orange concentrate and single strength orange juice. This analysis was based largely on monthly data during the period
The significant factors affecting the price at
each of these marketing sector levels as indica ted by use of this model are summarized in Table 1. The data in Table 1 indicate that the three retail price levels are all affected by the on-tree price of fruit. Another factor affecting fresh oranges was the quantity of fresh oranges
sold at retail.
Both retail price of orange con centrate and the retail price of single strength orange juice is dependent on information from the preceding period.
In other words, the retail
price of concentrate and canned single strength
juice in the short run is dependent to a high degree on price and quantity behavior during the previous month.
1952-1963.
The purpose of this paper is to summarize the results of the concluding research under this project. The major emphasis in this paper will be in presenting and interpreting the short and long run price and income elasticities and the rate of adjustment on quantities purchased, given a change in price or income.
function model was
Consumer Demand Model
The preceding paper indicated that price elasticities are important in studying the ex pected market behavior given changes in price or quantities sold. An important structural re lationship
is
the
establishment
of
changes
in
quantities consumers are willing to buy under
Price Behavior Model
power
B
the different marketing sector levels.
It was demonstrated in the preceding paper
A
=
Solution of the above general model for various sets of independent data and significant tests of the regression coefficients were performed. Only significant variables were retained in the an alysis of the factors affecting orange prices at
used
as
the
varying conditions. Price elasticity is defined as a percentage change; therefore, the transforma
structural equation in estimating the important
tion of data into logarithms allows direct esti
factors affecting the price of oranges at the different market sector levels. Transforming the data to logarithms allowed estimation of the
mation of the price elasticity coefficients in the
Florida Agricultural Experiment Stations Journal Series
models were studied but it was found that they
least squares
solutions.
The
following general
model was utilized in studying consumer demands. It is worthy of noting that several more complex
No. 1998.
♦Both authors were members of the Department of Agri cultural Economics, Florida Agricultural Experiment Sta tions, at the time the research reported herein was done.
add little more to explaining consumer behavior
than the simpler model presented here.
RIGGAN AND STOUT: PRICE BEHAVIOR
(2)
h ■ Bo
Where
Qt
B3It
=
=
log^
e
Qt-1
=
It
=
loge
e
.
=
of
quantity
of
the
loge
of
per
purchased
retail
quantity capita
observed
error
This general model was solved for the retail single
strength juice, utilizing
data collected by the Market Research Corpora
tion of America.
The results of solutions to this
model are presented in Table 2. Price Elasticities
The use of the lagged variable (the quantity for the preceding or t-1 period) allows the esti mation of both short run elasticity.
Since an
and long run price
elasticity of
greater than
one will cause an increase in total dollar sales Table
1
--
Price On-Tree
Price
Significant at Various
All
in
purchased
during
t
time
period
in
t-1
time
period
income
t-1
time
period
given an increase in quantities sold, total sales
from increased quantities of fresh oranges in both the long run and in the short run would increase as indicated by a short run elasticity of 2.47 and a long run elasticity of 3.68. On
the other hand, frozen orange concentrate with a short run elasticity of .43 would show a decrease in total dollar sales given an increase in quan tities sold in short run. In the long run very little change would occur in total dollar sales from frozen orange concentrate since the in dicated elasticity is .97 which is nearly unit elasticity.
Consumers
react
to
price
changes
on
the
Factors Influencing Prices Marketing Sector Levels
Level
of
Bt
price
personnel
demand of fresh oranges, frozen orange concen trate juice and
+
339
Significant Oranges
(1)
Factors
Estimated Production
(2)
Income
(3)
Previous
month's
price
Retail
Fresh
Orange*
(1) (2)
On-tree prices, current Quantity sold at retail
Retail
Price
of
(1) (2)
On-tree price preceding period Quantity of frozen concentrated
Concentrate
juice
during preceding period
sold
(3)
Retail price period
Retail
Price
Strength
of
Single
Juice
for
the preceding
orange
(1) (2)
On-tree price preceding period Quantity of single strength
(3)
Price
sold preceding ceding
*Where the
more
than
coefficients
one
endogenous
were
estimated
concentrate
variable by
is
period
of single
strength
pre
period
contained
two-stage
least
in
the
squares.
equation,
340
FLORIDA Table 2
STATE
HORTICULTURAL
SOCIETY,
1964
— Results of Solution of Consumer Demand Equations
Price Elasticities
Income
Elasticity
Coefficient
Adjustment
of Lagged
Factor
Long
Short
Fresh
-2.H77
Oranges
Frozen
Concentrate
Single
Strength
Orange
Run
Run
Product
-3.686
-
.724
Run
Long
on
Quantity
Run
N.S.
N.S.
R'
Error
• 328
.251
.888
.970
• 367
• 821
.533
.357
.836
-1.837
-1.12H
-2.972
.606
.025
.934
-
Juice
Short
single strength juice differently in the long run
the income quantity relationships may very well
and short run.
be the reason for the negative income coefficient
In the short run the price elas
ticity is inelastic for single strength juice as in
On the other hand, if these negative coefficients
dicated by a .72 elasticity; whereas, it becomes
are representative of the true economic relation
elastic in the long run as indicated by the elas
ships, this would mean the single strength orange
ticity coefficient of 1.83.
juice consumption may continue to decline as in comes increase.
Income Elasticity
Although it is generally considered that in
Length of Time for Adjustment Given A
Change in the Independent Factors
come is an influential factor in determining the demand for most products, this variable was not
The lagged variables used
in the consumer
found to be statistically significant in influencing
demand model,
the demand for fresh oranges. Per capita income
pression of short run and long run elasticity,
in
addition
to
allowing an
ex
changes have been relatively small over the per
also provided an indication of the length of time
iod studied;
required for adjustment in consumption in re
in addition, a slight economic re
cession and a freeze in the Florida citrus indus
sponse to a price change.
try have all counteracted to render the income
adjustment that occurs in a given time period can
Also, the amount of
variable insignificant in considering the demand
be determined. For example, in Table 2 for fresh
for fresh oranges.
Income elasticities of .36 for
oranges the .328 coefficient on adjustment factor
the short run and .82 for the long run were found
.indicates that 32.8 per cent of the adjustment in
to be significant coefficients in studying the de
quantity purchased due to a change in price re
mand for frozen orange concentrate.
mains to occur following the first period (month).
Negative
income elasticities for both the short run and
For frozen orange concentrate 53.3 per cent of
the long run were obtained for single strength
the
orange juice.
price changes and income changes remains to be
From an
economic standpoint a
adjustments
in
quantity
purchased
due to
negative income elasticity indicates an inferior good. That is, as incomes increase less quantities
made at the end of the first period.
are purchased by the consumer. Several reasons
in quantity purchased due to
may be offered as a possible explanation for this
and income takes place following the end of the
negative sign rather than the possibility of single
first period.
strength
orange juice being an
inferior good.
For single
strength orange juice 60.6 per cent of adjustment changes in price
The computed time required for 95 per cent
of the adjustment to be made in consumers' pur
During the earlier part of the period of which data were used in this study, frozen concentrated
chases in response to a price or income change
orange juice replaced canned single strength juice
was
on the purchasing lists of many consumers.
oranges,
In
computed five
to
be
months
four for
months
for
concentrated
fresh orange
addition, the freezes of 1957-58 and December,
juice, and six months for single strength orange
1962, reduced production, thereby limiting quan
juice.
tities marketed.
A combination of these factors
associated with time quantity relationships and
No
economic
interpretation can be made of
the coefficient of the lagged error term shown in
RIGGAN AND STOUT: PRICE BEHAVIOR
Table
3
—
Retail
Field
Box Equivalent Average Data Used
Strength
Juice
Prices in the
for Study*
$6.10
$4.98
Oranges
Concentrate
Single
Per
Projected 1975 Prices
Product Fresh
Price
341
3.62
4.56
3.76
4.51
*1952-1963 Table 2.
The size
of this
coefficient indicates
On-Tree Prices
the amount of correlation between purchases and the observed error in the preceding time period. The inclusion of this variable in the model tends to
give
more
stability
to
the
equation.
The
amount of variation in the quantities purchased explained by the variables included in the model
is fairly high.
This explanation is indicated by
the size of the R2 or multiple coefficient of de termination, also included in Table 2. values
were
.836
for
frozen
These R2
concentrate,
.888
for fresh oranges and .934 for single strength orange juice.
Using the above information from the DARE
Committee, the 1975 on-tree price of oranges in constant dollars was estimated to be 83 cents. This estimate converts to $1.29 per box at 1975 price
by
adjusting
The equations developed in this study were of utilization for 1975. Projected information for 1975 regarding orange production and population
were obtained from the University of Florida's operation DARE Citrus Committee.1 The DARE
1975
population
for
be 180 million boxes at that time. This gives a per capita annual consumption of 67.6 pounds.
Projected 1975
Consumption
(Pounds)
in
The average on-tree price of oranges in con study was $1.76.
This is a 53 per cent reduction
in price on constant dollars and a 27 per cent re duction after adjusting for expected trend in creases in the general price.
The projected retail price in constant dollars per field box equivalent in 1975, for fresh oranges, frozen concentrated orange juice and canned single strength orange juice is compared with the average retail prices for the data used in this study (Table 4). lReport on file in the Department of Agricultural Eco nomics, University of Florida, Gainesville, Florida. 2A trend line for consumer price index was calculated to be:
Y = 122.7 + 2.07X
Where Y = Consumer price index X = Time with 1959 = 0, 1960 = 1, 1958 = 1, etc.
Average Consumption for Data Used in This Study*
Per Cent Increase
(Pounds)
Oranges
1.161
Concentrate
0.438
3.468
165
Single
2.695
0.850
28
0.718
18
5.489
3.851
42
Strength
Juice Total
*1952-1963
the
the
United States to be 239.5 million. Total orange production was projected by the Committee to
Product
trend
Retail Prices
used to estimate prices and consumption by type
projected
expected
stant dollars during the period 1952-1963 of this
Projections for 1975
Committee
for
consumers' price index.2
FLORIDA
342
STATE
HORTICULTURAL
SOCIETY,
1964
The projected retail prices, adjusted for in
canned juice have an elastic demand and orange
creases in the general price level, of fresh or
concentrate has approximately unit elasticity at
anges and frozen orange concentrate and single
retail.
strength orange juice are approximately 80 per
means that reducing prices to move larger vol
Simple interpretation of these coefficients
cent of the average prices for the period 1952-
umes will give greater total dollar sales for fresh
1963.
oranges
Thus, consumers in 1975 may have to pay
20 per cent less per unit for fresh oranges and
and
single
strength
juice
with
little
change in the total dollar sales for orange con
orange products than they paid during the period
centrate.
covered by this study.
greater promotional efforts rather than reducing
Projected consumption, using the 1975 projec
price
This
should
implies
be
the
that
more
activities
profitable
such action
as to
ted prices and income and 1952-1963 averages for
take in moving larger quantities of frozen con
an average four-week period, is shown in Table
centrate
through
4. Fresh oranges show the greatest percentage increase in projected per capita consumption for 1975.
This is due to the greater price elasticity
for fresh oranges. Thus, as prices reduce the consumer responds by buying larger amounts. Summary
retail
markets.
LITERATURE CITED 1. Stout, Roy G. and Riggan, Wilson B., "Price and Income Elasticities: Their Importance to Growers, Processors and Retailers," Proceedings of the Florida State Horticultural Society, Volume 77, 1964. 2. Riggan, Wilson B., "On-Tree Price of Florida Or anges," Proceedings of the Florida State Horticultural So ciety, Volume 76, 1963.
The analysis conducted in this overall project indicates that fresh oranges and single strength
CANNED GRAPEFRUIT SECTIONS AND CANNED CITRUS SALAD, AS AFFECTED IN FINAL DRAINED WEIGHT AND QUALITY
BY VARIATIONS IN RAW FRUIT BRIX DURING THREE PACKING SEASONS Robert D. Carter
Director, Quality Control Cypress Gardens Citrus Products, Inc. Winter Haven Introduction
Canned citrus sections are annually account
tion
of
canned
1,600,000 grapefruit
cases
(equivalent
sections
and
24-No.
canned
2)
citrus
salad, produced by our company in two plants
during three packing seasons, 1960-61; 1961-62; and 1962-63.
The data, relating to the canned
product, is derived from analyses of 16,000 cans,
made and recorded during routine quality control checks and U.S.D.A.—A.M.S. probable and final grading inspections, as a part of continuous in
ing for approximately 20 percent of all grape
spection.
fruit processed in the State of Florida, and are
state inspection analyses on 3,000 individual fruit
a definite factor contributing to profitable returns
loads of seeded varieties of grapefruit used in
to the grapefruit grower.
production, supplied the raw fruit Brix data.
Florida
Department
of
Agriculture
Quality of canned citrus sections is influenced
thru raw fruit by a complex of factors, some of
Processing Methods
which have been investigated (1, 3, 4, 5). The purpose of this paper is to draw attention
The canned sections represented by the data,
to the Brix of the raw fruit as a prime factor
were packed, using commercial procedures com
influencing the quality of canned citrus sections.
mon in the State of Florida at the time of pack
The data presented, covers the total produc
ing (2).
Steam scalding, mechanical peeling, lye