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Cornell Horticultural Business Management a=
nd
Marketing Program
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1
Economic Analysis of the T=
art
Cherry Federal
Marketing Orders
![](3D"slide0193_image008.gif")
![](3D"slide0193_image009.gif")
This is a test
![](3D"master03_image010.gif")
Cornell Horticultural Business Management a=
nd
Marketing Program
2
Writing Team
q=
<=
span
style=3D'font-family:Arial;font-size:75%;font-weight:normal'>qAn issues paper, "Economic Analysis of the Tart Cherry
Federal Marketing
Orders“, was commissioned by the Cherry Industry Administrative Board (CIAB), Per=
ry
Hedin, Executive Director
q=
<=
span
style=3D'font-family:Arial;font-size:75%;font-weight:normal'>qAuthors:
Gerald B. White
Professor Emeritus, Department of Applied Economics an=
d Management, Cornell University, =
Ithaca
NY 14853-7801
q
Kevin Kesecker
Senior Economist, Fruit and Vegetable Programs
Agricultural Marketing Service, USDA, Washington DC . (The views expressed in =
the paper do not represent an of=
ficial
USDA position).
q
<=
span
style=3D'font-family:Arial;font-size:75%;font-weight:normal'>qAdditional Support was provided by:
Curtis Rowley, Cherry Hill Farms,
Inc., Santaquin, UT 84655;
James R. Jensen, President, Cher=
rCo,
Inc., Ludington, MI 49431-0689
q=
=
![](3D"master03_image011.gif")
Cornell Horticultural Business Management a=
nd
Marketing Program
3
Industry Overview
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qWe reviewed farm level statistics and trends for t=
hree periods of the last 35 years ending in 2006:
<=
/span>q1972-1986, the y=
ears
of operation of the first FMO, administered
by the Cherry Administration Board (CAB);
q1987-1996, a per=
iod in
which no FMO was in operat=
ion,
and
q1997-2006, the years of operation of the current <=
/span>FMO, administered by the Cherry Industry Administrative Board (CIAB).
=
Some statistical highlights and comparisons of key=
economic indicators are shown in the following slides:
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Cornell Horticultural Business Management a=
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Marketing Program
4
Six Key Economic Indicators
<=
span
style=3D'font-size:83%;font-weight:normal'>qNominal Values f=
or Farm Level Indicators
<=
span
style=3D'font-size:83%;font-weight:normal'>ŘU.S. Price (processed, cents per pound)
<=
span
style=3D'font-size:83%;font-weight:normal'>ŘValue of U.S. Production (million dollars)
<=
span
style=3D'font-size:83%;font-weight:normal'>ŘValue of U. S. Production per acre (dollars)
=
<=
span
style=3D'font-size:83%;font-weight:normal;visibility:hidden'>Ř
qReal Values for <=
/span>Farm Level Indicators. Nominal prices were adjusted by Prices Received by Farmers, Fruit=
and Nuts Index, 1990‑92=3D100.
<=
span
style=3D'font-size:83%;font-weight:normal'>ŘTo account for the effects of inflation, and
<=
/span>
ŘTo compare the performance of tart cherries with <=
/span>respect to other crops that could be considered as=
alternatives to cherries, either for consumers or =
growers who can consider alternative crops<=
/span>![](3D"master03_image013.gif")
Cornell Horticultural Business Management a=
nd
Marketing Program
5
Key Farm Level Economic Indicators
![](3D"slide0191_image015.gif")
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Cornell Horticultural Business Management a=
nd
Marketing Program
6
Key Farm Level Economic Indicators
![](3D"slide0194_image018.gif")
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Cornell Horticultural Business Management a=
nd
Marketing Program
7
Key Farm Level Economic Indicators
![](3D"slide0192_image021.gif")
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Cornell Horticultural Business Management a=
nd
Marketing Program
8
Key Farm Level Economic Indicators
![](3D"slide0195_image024.gif")
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Cornell Horticultural Business Management a=
nd
Marketing Program
9
Key Farm Level Economic Indicators
![](3D"slide0202_image027.gif")
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Cornell Horticultural Business Management a=
nd
Marketing Program
10
Key Farm Level Economic Indicators
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Cornell Horticultural Business Management a=
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11
Summary
of Key Farm Level Economic =
Indicators
qResults for the years in which either one of the F=
MO’s were in operation were superior to the results whe=
n the FMO was not in operation
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qWhen prices are converted to real values the avera=
ge prices for cherries, the value of production, and =
value of production per acre are higher in the years of =
the second FMO than for the period when no FMO was in =
effect
qAverage nominal values of the three variables are =
higher for 1997 through 2006 period compared to th=
e period of no marketing order
qAverage nominal values for total value of US production
and value of production per acre are higher
for the second FMO than for the first FMO
qReal values for the three estimates are, however, =
higher for the years of the first FMO than for the=
in the 1997-2006 period of the second FMO
![](3D"master03_image032.gif")
Cornell Horticultural Business Management a=
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Marketing Program
12
Conclusions From Analyses =
of
Key Farm Level Economic Indicat=
ors
<=
span
style=3D'font-weight:normal'>qThese
results are not sufficient, however, to assert that the FMO <=
u>caused
the improved economic performance; thus we concluded that
a more rigorous analysis was needed.
<=
span
style=3D'font-weight:normal'>qThe ne=
xt
sections of the report analyze the hypothesis that the tart
cherry industry is better off operating pursuant to the FMO, as <=
/span>measured
by the farm gate value of tart cherries at the grower le=
vel,
than it would be operating without the Order.
![](3D"master03_image033.gif")
Cornell Horticultural Business Management a=
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13
US
Production and Grower Prices
![](3D"slide0197_image035.gif")
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Cornell Horticultural Business Management a=
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Production in the Future? <=
br>
Bearing Acreage Cycle
qIn Figur=
e 1, the
production levels from the mid- to late-1980s to the late-1990s
were extremely high.
qThere we=
re
6,380 non-bearing acres of tart <=
/span>cherries
in Michigan alone indicated in the 2006-07 NASS rotational
survey.
q Considering that US bearing acreage in =
2006
was about 36,000 acres (NASS), the Michigan non-bearing acre=
age
indicates the possibility that production in the next year or
two may enter another increasing cycle.
![](3D"master03_image037.gif")
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Production in the Future? <=
br>
Bearing Acreage Cycle
qAs of 20=
04/2005,
there were 6,740 acres in the US with trees aged 26 + years. &=
#13;
<=
span
style=3D'font-weight:normal;visibility:hidden'>q
qThese
older orchards are candidates for removal due to missing tre=
es
and other factors contributing to reduced productivity.<=
span
style=3D'mso-spacerun:yes'>
<=
span
style=3D'font-weight:normal;visibility:hidden'>q
qThe
extent of removals will depend mainly on the price of cherries =
in
the next few years.
<=
span
style=3D'font-weight:normal;visibility:hidden'>q
![](3D"master03_image038.gif")
Cornell Horticultural Business Management a=
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Marketing Program
16
Authorities Under the FMO
(1997-20= 07)
(1997-20= 07)
qThe supply control elements allow for
1) The
creation of a reserve pool
2)&nb=
sp;Expansion
of domestic sales opportunities by using restricted cherries in the market expansion, n=
ew product and new market program
3)Sa=
le of
restricted cherries into other secondary markets such as exports
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q <=
/span>These
aspects of the order have been used with varying emphasis by handlers in compliance wit=
h the supply control process
<=
/div>
qUse of the generic promotion authority started=
with the 2006 crop and will continue into the futur=
e
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Cornell Horticultural Business Management a=
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17
Models to Estimate the Imp=
act
of the F= MO’s
of the F= MO’s
qTwo econometric models were developed to evaluate =
the impact(s) of the FMO’s on Real Value of Production Per Acre at the grower level.
qWe used regression analysis (a statistical techniq=
ue used to quantify relationships between two economi=
c factors while taking into account the impact of ot=
her factors).
q“Other factors” include
ŘThe existence of a marketing order (“policy
variable”)
ŘAdditions and releases from the reserve pool (“=
policy
variable”)
=
;
ŘReal grower prices
ŘTotal utilization and movement
<=
/span>
ŘCarry-in inventory
![](3D"master03_image040.gif")
Cornell Horticultural Business Management a=
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Major Findings from Regres=
sion =
Analysis
<=
span
style=3D'font-family:Arial;font-size:75%;font-weight:normal'>qOver the 35-year period of 1972-2006, we believe that the tart cherry industry was better off
operating pursuant to the marketing order, as measured by the farm gate value =
of
tart cherries per acre at the grower level, than it would have been if operating without t=
he
Order.
q=
<=
span
style=3D'font-family:Arial;font-size:75%;font-weight:normal'>qResults in the second model indicated that for each million pounds of=
cherries added to the rese=
rve
pool there is an increase in the real value of production per ac=
re by
$3.99.
q=
![](3D"master03_image041.gif")
Cornell Horticultural Business Management a=
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19
Analys=
is of
Apparent Demand
![](3D"slide0198_image043.gif")
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Cornell Horticultural Business Management a=
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20
Analys=
is of
Apparent Demand
![](3D"slide0199_image046.gif")
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Cornell Horticultural Business Management a=
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Analysis of Apparent Demand
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Analys=
is of
Apparent Demand
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Cornell Horticultural Business Management a=
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Marketing Program