Marketing California—Arizona lemons without marketing order shipment controls

Abstract

The California-Arizona lemon industry, after a long history of using fresh market shipment controls, operated during 1985-1986 without using the weekly prorate provisions of its federal marketing order. This article compares the level and variability of weekly shipments and prices for the 1985-1986 crop year with the previous nine years when fresh market prorates were used every week. Fresh market shipments increased during most of 1985-1986 and prices were below the level expected. Weekly shipments and prices were more variable during the year without prorate than during most of the preceding nine years.The California-Arizona citrus industry has a long history of voluntary and government sponsored marketing programs. Lemon packing houses, acting under the leadership of the California Fruit Growers Exchange (now Sunkist Growers, Inc.), voluntarily controlled fresh market shipments of lemons as early as 1925. The effectiveness of the voluntary program was undermined by increasing production and a growing "free rider" problem, leading to industry passage in 1941 of the currently effective federal marketing order for California-Arizona lemons. This marketing order, with amendments, authorizes the Lemon Administrative Committee to recommend weekly allotments of lemons

Marketing Order Suspensions and Fresh Lemon Retail-FOB Margins

“…3 However, if the loss of the marketing order represents a loss of handler control over pricing, then retailers maximize profit where their marginal revenue is equal to the marginal outlay on lemons, or 9 = 1 and <f > = 1. Consistent with Carman and Pick's (1988) observations of the suspension of the marketing or-der in 1985-86, this exercise of buyer power leads to wider retail-FOB margin:…”

“…Without the ability to use the marketing order flow-to-market controls to price discriminate between the price-inelastic fresh market and the price-elastic processing market, lemon sellers allocate more to the fresh market. Carman and Pick's (1988) analysis of the 1985-86 lemon prorate suspension shows that the fresh market price not only falls without the prorate, but also becomes more variable. Although they do not explicitly address the problem of retail-FOB marketing margins, Carman and Pick suggest that an increase in buyer market power without the prorate could lead to a reduction in grower prices without a corresponding fall in the retail price.…”

“…Empirical specification of the demand function closely follows Carman and Pick's (1988) model. This model treats weekly retail price as a function of per capita consumption, lagged real prices, income, grade, and seasonal dummy variables.…”

Effects of marketing order prorate suspensions on California—Arizona navel oranges

“…The USDA or NOAC suspended handler prorates when between 47% to 88% of the annual crop had been marketed during the seasons 1982/1983 to 1988/1989 (Table I) 1983/1984, 1987/1988, 1985/19861986/19871988Large 1982/ 1983 This categorization of seasons will help facilitate a comparison of the estimated suspension effects for alternative quantities of navels shipped during the suspension and crop sizes, which are presented in a later section.…”

Analysis of Strategic Industry Planning and Organizational Opportunities for Mexican Cantaloupe Producers

“…Effective volume controls can raise producer returns by limiting supplies in markets or uses that are more inelastic while diverting supplies to markets or uses with higher elasticity of demand (Neff and Plato, 1995). Empirical findings suggest that volume controls can increase and stabilize farm-level prices (Carman and Pick, 1988;Kinney et al, 1987;Powers, 1990;Shepard, 1986;Thor and Jesse, 1981); thus, these mechanisms may have the potential to enhance Mexican cantaloupe producers' revenues and profits. Not using these tools results in a significant comparative disadvantage for the Mexican industry relative to U.S. fruit, vegetable, and specialty crop producers.…”