home > all about cherries > cherry industry > page 6
The Tart Cherry Industry - continued
Demand
Domestic U.S. markets account for 80-90 percent of U.S. tart cherry
production, with foreign buyers purchasing the remainder. The United
States sold 17 million pounds of the 93 million pounds of canned
production in 1995 to foreign buyers, and 17 million pounds out of
165 million pounds of frozen product.
Americans use nearly one pound of tart cherries per person per year.
A large proportion of tart cherry consumption is in the form of
cherry-containing products, such as pies and tarts.
Prices
The demand for tart cherries is highly inelastic. This means that
grower prices rise sharply during years with a small crop, and fall
sharply when there is a large crop. For example, farmers
received more than 46 cents a pound in 1991, when only 190 million
pounds of tart cherries were produced. This is more than seven times
the 6 cents a pound received in 1987 and 1995, when U.S. production
totaled 359 and 396 million pounds, respectively.
The apparent reason for the marked variability in prices is that
cherries constitute a relatively small part of the cost of the
manufactured products in which they are consumed. (The tart cherries in a cherry pie are estimated to account for about 9 percent of the total cost of the pie. -Johnson, 1993--)
Therefore, a
change in the farm price results in only a small change in the cost
of final products that contain tart cherries. Consequently, buyers
can bid prices sharply higher during short-crop years in order to
obtain the cherries they need without increasing the cost of the
final product by a significant amount.
On the other hand, prices fall sharply during large-crop years
because there is little demand for cherries other than for use in
manufactured products.
Further, manufacturers and retailers are
reluctant to invest in expanding the demand for cherry-containing
products because a current abundance may be followed by a season of
shortages in which they can not obtain the fruit needed to supply
newly-created demand.
In addition to the size of the current crop, carryover stocks of
frozen and canned cherries from a previous season also affect farm
prices. A large carryover from a previous season depresses grower
prices, while a small carryover strengthens prices.
|
Cherry Products