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 Title Page
 Table of Contents
 Introduction
 Statement of the general probl...
 Alternative adjustments available...
 Summary






Group Title: Agricultural Economics Report - Department of Agricultural Economics, University of Florida - 66-4
Title: Competitive relationships and alternatives in marketing Florida oranges
CITATION PAGE IMAGE ZOOMABLE PAGE TEXT
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Permanent Link: http://ufdc.ufl.edu/UF00071976/00001
 Material Information
Title: Competitive relationships and alternatives in marketing Florida oranges
Physical Description: 37 p., : tables, ; 28 cm.
Language: English
Creator: Chapman, William Fred, 1931-
Godwin, Marshall R.
Manley, William T.
Publisher: University of Florida, Agricultural Experiment Stations
Place of Publication: Gainesville, Fla.
Publication Date: 1965
 Subjects
Genre: government publication (state, provincial, terriorial, dependent)   ( marcgt )
non-fiction   ( marcgt )
 Notes
Funding: Florida Historical Agriculture and Rural Life
General Note: Agricultural Economics Report - Department of Agricultural Economics, University of Florida - 66-4
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Bibliographic ID: UF00071976
Volume ID: VID00001
Source Institution: Marston Science Library, George A. Smathers Libraries, University of Florida
Holding Location: Florida Agricultural Experiment Station, Florida Cooperative Extension Service, Florida Department of Agriculture and Consumer Services, and the Engineering and Industrial Experiment Station; Institute for Food and Agricultural Services (IFAS), University of Florida
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Resource Identifier: oclc - 30080069

Table of Contents
    Copyright
        Copyright
    Front Cover
        Front Cover
    Title Page
        Page i
    Table of Contents
        Page ii
    Introduction
        Page 1
        Page 2
    Statement of the general problem
        Page 3
        Florida orange production
            Page 3
            Page 4
            Page 5
        California orange production
            Page 6
        Production potential
            Page 6
            Page 7
            Page 8
            Page 9
        Utilization trends and population trends
            Page 10
            Page 11
            Page 12
            Page 13
            Page 14
        Position of Florida and California in the fresh orange market
            Page 15
            Page 16
            Page 17
        Marketing periods
            Page 18
            Page 19
            Page 20
            Page 21
    Alternative adjustments available to the Florida orange industry
        Page 22
        The demand situation
            Page 23
            Page 24
            Page 25
        The importance of the sector analysis
            Page 26
        Promotional policy
            Page 27
        Supply allocation policy
            Page 28
            Page 29
        Optimum allocation
            Page 30
            Page 31
            Page 32
    Summary
        Page 33
        Page 34
        Page 35
        Page 36
        Page 37
Full Text





HISTORIC NOTE


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not reflect current scientific knowledge
or recommendations. These texts
represent the historic publishing
record of the Institute for Food and
Agricultural Sciences and should be
used only to trace the historic work of
the Institute and its staff. Current IFAS
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(EDIS)

site maintained by the Florida
Cooperative Extension Service.






Copyright 2005, Board of Trustees, University
of Florida






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Agricultural Economics Report 66-4


December 1965


COMPETITIVE RELATIONSHIPS


AND ALTERNATIVES IN MARKETING


FLORIDA ORANGES



by

W. Fred Chapman, Jr., Marshall R. Godwin

and


William T. Manley









Department of Agricultural Economics
Florida Agricultural Experiment Stations
University of Florida
Gainesville, Florida
in cooperation with
Marketing Economics Division
Economic Research Service
U. S. Department of Agriculture
and
Florida Citrus Commission
Lakeland, Florida

















COMPETITIVE RELATIONSHIPS


AND ALTERNATIVES IN MARKETING FLORIDA ORANGES

by

W. Fred Chapman, Jr., Marshall R. Godwin,
and
William T. Manley
















Agricultural Economics Report No. 66 4


Department of Agricultural Economics
Florida Agricultural Experiment Stations
Gainesville, Florida
in cooperation with
Marketing Economics Division
Economic Research Service
U. S. Department of Agriculture
and
Florida Citrus Commission
Lakeland, Florida













TABLE OF CONTENTS


Page

Introduction------------------------------------------- I

Statement of the General Problem----------------------- 3

Florida Orange Production-------------------- 3
California Orange Production----------------- 6
Production Potential------------------------- 6
Utilization Trends and Population Trends---- 10
Position of Florida and California
in the Fresh Orange Market------------------- 15
Marketing Periods---------------------------- 18

Alternative Adjustments Available
to the Florida Orange Industry-------------------- 22

The Demand Situation------------------------- 23
The Importance of the Sector Analysis-------- 26
Promotional Policy--------------------------- 27
Supply Allocation Policy--------------------- 28
Optimum Allocation--------------------------- 30

Summary----------------------------------------------- 33









COMPETITIVE RELATIONSHIPS
AND ALTERNATIVES IN MARKETING FLORIDA ORANGES

by

W. Fred Chapman, Jr., Marshall R. Godwin,
and
William T. Manley





INTRODUCTION


During the past two decades, technological changes and

innovations have revolutionized the orange industry, especially in

Florida. The introduction of frozen orange concentrate and chilled

orange juice has changed the relative market outlet volumes for Florida

oranges. The amount of Florida fruit moving to fresh market has de-

clined with a corresponding increase in the amount moving through proc-

essing channels. This pattern occurred during a period of rapid

expansion in Florida orange production.

However, the fresh orange market is an important segment of the

Florida orange industry. Cash receipts to Florida growers from the sale

of oranges are in excess of $200 million annually. Although the fresh

orange segment amounts to only approximately 20 percent of the total



Godwin is Marketing Economist, Florida Agricultural Experiment
Stations, University of Florida. Manley is Associate Agricultural Econo-
mist, Florida Agricultural Experiment Stations, University of Florida, and
Agricultural Economist, Marketing Economics Division, Economic Research
Service, U. S. Department of Agriculture. Chapman was formerly Assistant
in Agricultural Economics, Agricultural Experiment Stations, University of
Florida, and Agricultural Economist, Marketing Economics Division, Economic
Research Service, U. S. Department of Agriculture.
1 -







- 2-


market for oranges, it is of sufficient importance to warrant attempts

to maintain or expand its position. To maintain or improve the position

of this market, the industry needs definitive information that describes

the competitive relationships faced in the fresh orange market.

The major source of competition in marketing fresh Florida

oranges is California's orange production. Historically, price compe-

tition between Florida and California fresh oranges has been quite

favorable to the California product. Consumer preference is the only

basis upon which the California product can enter the market with a price

differential over the Florida product. If oranges from the two states

were perfect substitutes, retail prices should be the same. Yet, by

virtue of this preference, the California product commands a higher

price. Thus, consumer preference allows California producers to compete

effectively with Florida producers and to defray cost differences result-

ing in production as well as differences in transportation charges. This

retail price differential has existed for such a long period of time that

it is difficult to determine how much of it arises from consumer prefer-

ence and how much stems from an institutional preference by intermediate

marketing firms.













STATEMENT OF THE GENERAL PROBLEM


Florida Orange Production

Florida orange production is characterized by six major product

differentiations. The first major differentiation is the two distinct

areas of production: the Indian River district, comprised of four counties

along the East Coast, and the Interior district, made up of the remaining

citrus-producing counties in the state. It is an accepted fact at the

production and wholesale levels that fruits produced in the two areas are

differentiated products. This is substantiated by the historical existence

of some price differential for fruit grown in the two areas.

Within each of these producing areas three other major differen-

tiations result from a type-varietal complex. The fruits produced in each
2
area are generally classified as Early, Midseason and Late. The princi-

pal varieties of Early fruit are Hamlin and Parson Brown; Midseason fruit

varieties are Pineapple and Homosassa; and the Late oranges are almost

exclusively Valencias. These major product differentiations are impor-

tant because they establish distinct lines of differences within Florida

orange production. Other differentiations in addition to those cited

above occur also within these delineated segments, such as size of fruit,

grade of fruit and, to a lesser degree, packinghouse or grove brand names.



2Temple oranges are included in the Midseason category.


- 3 -













STATEMENT OF THE GENERAL PROBLEM


Florida Orange Production

Florida orange production is characterized by six major product

differentiations. The first major differentiation is the two distinct

areas of production: the Indian River district, comprised of four counties

along the East Coast, and the Interior district, made up of the remaining

citrus-producing counties in the state. It is an accepted fact at the

production and wholesale levels that fruits produced in the two areas are

differentiated products. This is substantiated by the historical existence

of some price differential for fruit grown in the two areas.

Within each of these producing areas three other major differen-

tiations result from a type-varietal complex. The fruits produced in each
2
area are generally classified as Early, Midseason and Late. The princi-

pal varieties of Early fruit are Hamlin and Parson Brown; Midseason fruit

varieties are Pineapple and Homosassa; and the Late oranges are almost

exclusively Valencias. These major product differentiations are impor-

tant because they establish distinct lines of differences within Florida

orange production. Other differentiations in addition to those cited

above occur also within these delineated segments, such as size of fruit,

grade of fruit and, to a lesser degree, packinghouse or grove brand names.



2Temple oranges are included in the Midseason category.


- 3 -





- 4 -


In the crop seasons 1952-53 through 1963-64, total Florida

production averaged almost 86 million boxes of oranges annually (Table 1).

Production of oranges in the interior district averaged about 76 million

boxes, or approximately 88 percent of the state total, while the Indian

River district produced an annual average of about 10 million boxes.

Early and Midseason fruit accounted for, on the average, about 48 million

boxes compared with about 37 million boxes of Late or Valencia oranges.

Disregarding the effects of the freeze in the 1961-62 season,

production increased in all the major product differentiations in Florida

oranges during the period 1952 through 1964. In the 1952-53 season,

Interior production amounted to almost 63 million boxes, or 87 percent

of the state's total production, while in the 1961-62 season, Interior

production accounted for 102 million boxes, or 90 percent of the total

Florida production. Thus, production in the Interior district increased

both in absolute and relative terms. Production in the Indian River

district declined in relative terms but registered a slight increase in

absolute terms. Production rose from 5.8 million boxes in 1952-53 to

6.0 million boxes in 1961-62. Over this same period Valencia, or Late

oranges, also gained in absolute and relative terms. In the 1952-53

season, Valencia production amounted to almost 30 million boxes, or

41 percent, of Florida production. In the 1961-62 season, Valencia

production accounted for about 56 million boxes, or 50 percent of total

orange production in the state. Early and Midseason fruit increased

from 42 million boxes in 1952-53 to 57 million boxes in 1961-62.






- 5-


Table 1.--Florida orange production, by type and area of production,
1952-53 through 1963-64


Indian River Districta Interior District

Early, Early, Total
Crop Midseason, Late Midseason, Late All
Season and Temple (Valencia) and Temple (Valencia) Oranges
h


--------------------------------(000

1952-53 5,790 3,665

1953-54 5,718 4,084

1954-55 5,853 3,622

1955-56 6,026 3,789

1956-57 6,771 4,086

1957-58 5,277 3,313

1958-59 4,786 3,716

1959-60 5,083 3,968

1960-61 5,852 4,051

1961-62 6,014 5,227

1962-63 6,446 4,301

1963-64 6,428 5,415


12-Year
Average


5,837


4,103


RnBox ----------------


36,510

44,482

46,147

45,474

47,529

47,423

42,314

43,917

45,148

50,886

39,054

21,372


42,521


26,235

37,016

32,778

35,711

34,614

26,487

35,184

38,532

31,649

51,273

24,699

25,085


33,272


72,200

91,300

88,400

91,000

93,000

82,500

86,000

91,500

86,700

113,400

74,500

58,300


85,733


aThe figures for the Indian River district were derived by using
county estimated production. The counties included in the Indian River
district are Volusia, St. Lucie, Indian River, and Brevard.
b
Boxes containing a net weight of 90 pounds each.

Sources: These data were adapted from Florida Agricultural
Statistics, Citrus Summary, 1962-64 Issues, Florida Department of Agri-
culture, Tallahassee, Florida.





- 6 -


California Orange Production

California has three major orange-producing areas: Central,

Southern, and Desert Valley districts. Unlike Florida, no real differ-

entiation is based on area of production. Orange production in California

averaged about 33 million boxes during the twelve-year period 1952-53

through 1963-64 (Table 2). Only two major orange types are produced in

the state, Valencia and the Washington Navel. Valencia production domi-

nates and during 1952-64 annual production averaged about 19 million

boxes compared with slightly over 13 million boxes of Navels.

During this period total California production declined from

46 million boxes in 1952-53 to 31 million boxes in 1963-64. The ratio

of Valencias to Navels has varied within these dates from 55-45 in favor

of Valencias in the 1953-54 season to a 50-50 percentage ratio in 1963-64.


Production Potential

The Florida orange production base has expanded markedly during

the past decade. This expansion has been stimulated by the natural growth

of a dynamic industry and by a production reaction to the advent and

successful marketing of frozen orange concentrate and chilled juice. In

the 1951-52 season, the total bearing acreage in Florida was 324,800 acres.

By the 1961-62 season, the total acreage had increased to 429,800 acres,

an increase of 32 percent. In the 1963-64 season, total bearing acreage

had declined to 351,800 acres as a result of the freeze in 1962.

A citrus tree survey which was conducted in 1961 revealed that

Florida orange groves contained a total of 37.8 million trees. Of this

total, 17.9 million were Early-Midseason and 19.9 million were Valencias.


3Forida Cro and Livestock Reortin Servic, Orlando, Florida.
Florida Crop and Livestock Reporting Service, Orlando, Florida.





- 6 -


California Orange Production

California has three major orange-producing areas: Central,

Southern, and Desert Valley districts. Unlike Florida, no real differ-

entiation is based on area of production. Orange production in California

averaged about 33 million boxes during the twelve-year period 1952-53

through 1963-64 (Table 2). Only two major orange types are produced in

the state, Valencia and the Washington Navel. Valencia production domi-

nates and during 1952-64 annual production averaged about 19 million

boxes compared with slightly over 13 million boxes of Navels.

During this period total California production declined from

46 million boxes in 1952-53 to 31 million boxes in 1963-64. The ratio

of Valencias to Navels has varied within these dates from 55-45 in favor

of Valencias in the 1953-54 season to a 50-50 percentage ratio in 1963-64.


Production Potential

The Florida orange production base has expanded markedly during

the past decade. This expansion has been stimulated by the natural growth

of a dynamic industry and by a production reaction to the advent and

successful marketing of frozen orange concentrate and chilled juice. In

the 1951-52 season, the total bearing acreage in Florida was 324,800 acres.

By the 1961-62 season, the total acreage had increased to 429,800 acres,

an increase of 32 percent. In the 1963-64 season, total bearing acreage

had declined to 351,800 acres as a result of the freeze in 1962.

A citrus tree survey which was conducted in 1961 revealed that

Florida orange groves contained a total of 37.8 million trees. Of this

total, 17.9 million were Early-Midseason and 19.9 million were Valencias.


3Forida Cro and Livestock Reortin Servic, Orlando, Florida.
Florida Crop and Livestock Reporting Service, Orlando, Florida.






- 7 -


Table 2.--California orange production, by type, 1952-53 through
1963-64


Crop Navels and a Total All
Season Miscellaneous Valencia Oranges


-----.--------------- (000


16,630

14,460

15,330

15,170

15,400

9,100

16,900

13,500

9,000

7,600

12,600

15,500ood


1952-53b

1953-54b

1954-55c

1955-56c

1956-57c

1957-58c

1958-59c

1959-60c

1960-61c

1961-62c

1962-63

1963-64d

12-Year
Average


Boxes)-----------------------

29,400 46,030

17,940 32,400

24,090 39,420

23,200 38,370

20,500 35,900

14,100 23,200

23,300 40,200

17,300 30,800

16,000 25,000

13,100 20,700

16,200 28,800

15,500d 31,000


19,219


32,652


includes small quantities of tangerines.
bBoxes containing a net weight of 77 pounds each.

SBoxes containing a net weight of 75 pounds each.

preliminary

Source: Florida Agricultural Statistics, Florida Department of
Agriculture, Tallahassee, Florida.


13,432


I I- I--- -







- 8 -


Also, the 1961 survey revealed that a high proportion of Florida orange

trees were of nonbearing age. These trees, less than four years of age,

were more heavily distributed to the Valencia oranges than to the Early-

Midseason oranges. An additional 5.4 million trees were in the five-to-

nine-year age group. Thus, 17.4 million of 37.8 million trees were nine

years of age or less. The oldest trees in the state, categorized as 25

or more years, averaged 34 years of age. Of the 11.1 million trees in

this category, 5.3 million were Early-Midseason and.58 million were

Valencias.

Based on the assumption that the percentage change in tree numbers

occurring during the 1951-52 through 1960-61 period is typical of the

changes to come in the next ten-year period, the estimated tree numbers

in 1970-71 will be around 46 million. This represents a 19 percent

increase in tree numbers. However, there will be fewer nonbearing trees

in 1970-71 than in 1961 because during the four year period immediately

preceding 1961, there was an unusually heavy setting of trees. There

will be in 1971 an estimated 4.3 million nonbearing trees, 7.7 million

trees fewer than in the nonbearing category in 1961. During the 1951-61

period, frozen orange concentrate and chilled juice emerged as major

outlets for the Florida orange crop. Therefore, production reaction in

the early portion of the period was based on the recognized potential

of the expanded processing market. The tree-setting pattern of the 1950

decade may, therefore, be quite representative of the tree-setting pattern

of the 1960's. Tree-setting may well continue at a fairly rapid rate for

a portion of the period before increased supplies of oranges cause a

reduction in the rate of tree-planting.






-9-


During the period 1961-71, Florida orange production is likely

to increase from three sources. One of these sources arises as present

nonbearing trees attain productive maturity. A second results from

expanded bearing surface. As the trees mature and become larger, the

per-tree bearing surface expands. Thus, an increase can be expected

due to the relationship between the age of the tree and the tree's pro-

ductive capacity. The third source of increased production will result

from new tree-settings. As new tree-settings occur in the 1960's and

reach bearing age, total productive capacity will also increase.

Economists have made a projection of orange acreage in California

to 1970 and 1980. It is estimated that acreage of Valencia oranges will

decline between 1960 and 1970 from 86,438 acres to 74,650 acres, while

Navel orange acreage will increase from 72,595 acres to 78,300 acres.

The projections to 1980 indicate little change in Valencia acreage, but

it is estimated that Navel acreage will increase to 85,700 acres. This

would be approximately a 7,000 acre increase between 1970 and 1980 com-

pared with a projected 6,000 acre increase from 1960 to 1970.

The enlarged production in Florida will be offset to some degree

by a reduction of orange acreage in California. Valencia acreage is

projected to decline 13.6 percent by 1970, but Washington Navel acreage

is projected to increase by 7.9 percent. The net change in acreage for

all California oranges, using these projections, will be 6,083 acres or

about 4.0 percent.



R. C. Rock and R. G. Platt, Economic Trends in the California
Orange Industry, 1961, Agricultural Extension Service, University of
California, November 1961.






- 10 -


Utilization Trends and Population Trends

The amount of Florida oranges utilized in fresh market sales has

declined substantially in the past decade, while the number of oranges

used for processing has increased rapidly. This decline in fresh sales

has occurred during a period of increasing production. Florida Early-

Midseason movement to fresh market has declined from 17 million boxes

in the 1951-52 season to 7.5 million boxes in 1963-64 (Table 3). Valencia

fresh sales declined from about 14 million boxes in the 1951-52 season

to about 5.5 million boxes in 1963-64.

SOver the period 1951-52 through 1963-64, utilization ratios

between fresh and processed Florida oranges were altered substantially.

In the 1951-52 season 39 percent of the crop was utilized in fresh sales

compared with 61 percent used for processing. This emphasis on process-

ing has grown continuously since the early fifties. Of the 112.6 million

boxes produced in the 1961-62 season, 20.9 million boxes or 19 percent

moved through fresh market outlets, while 91.7 million boxes or 81 percent

were used for processing.

California fresh orange sales and processed orange sales have

declined during the past decade at a rather constant rate with respect

to shares. Fresh sales for the period 1951-52 through 1962-63 have ranged

between 64 and 79 percent of total sales, with the exception of the 1957-58

season when fresh sales accounted for 86 percent. In that season Florida

incurred freeze damage and registered a rather severe decline in total

orange production.

Sales of California oranges in the fresh market have declined

from 27 million boxes in the 1951-52 season to 18 million boxes in the






- 11 -


Table 3o--Florida Early-Midseason and Valencia orange utilization,
1951-52 through 1963-64


Orange Type

Season Early-Midseason Valencia All
Season s--------------------
Fresh Fresh Fresh
Sales Processed Sales Processed Sales Processed
------.---------------Thousands of Boxes-------------------------

1951-52 16,991 26,559 13,652 20,948 30,643 47,507

1952-53 15,212 26,838 10,637 19,063 25,849 45,901

1953-54 12,663 35,062 13,283 27,567 25,946 62,629

1954-55 16,320 35,380 10,837 25,313 27,157 60,693

1955-56 14,500 36,700 11,066 28,184 25,566 64,884

1956-57 13,984 39,966 10,132 28,268 24,116 68,234

1957-58 11,993 40,407 6,114 23,436 18,107 63,843

1958-59 10,574 36,176 6,263 32,337 16,837 68,513

1959-60 11,747 36,888 9,018 33,182 20,765 70,070

1960-61 10,411 40,199 6,359 29,041 16,770 69,240

1961-62 11,540 44,935 9,375 46,775 20,915 91,710

1962-63 8,288 36,887 3,392 25,358 11,680 62,245

1963-64 7,377 20,083 5,448 24,752 12,825 44,835

Source: Florida Citrus Fruits, Annual Summary, (1952-1962),
Florida Crop and Livestock Reporting Service, Orlando, Florida; and
Florida Agricultural Statistics, Citrus Summary, 1964 Issue, Florida
Department of Agriculture, Tallahassee, Florida.





- 12 -


1962-63 season (Table 4). Valencia fresh sales have declined from about

19 million boxes in the 1952-53 season to about 9 million boxes in the

1962-63 season, while Navel fresh sales have declined from a high of

almost 15 million boxes in 1952-53 to a low of about 7 million boxes in

1961-62.

The decline in the fresh orange market can be traced primarily

to the successful marketing of frozen orange concentrate. In 1950, per

capital consumption of fresh oranges was about 27 pounds (Table 5). By

1960, it had declined to slightly more than 19 pounds, a decrease of 27

percent. During this same decade, per capital consumption of frozen

orange concentrate increased more than threefold, from 1.52 to 5.61

pounds, in the mid-fifties, chilled juice sales had an influence in the

market distribution of orange products. The 1955 per capital consumption

of chilled juice was .94 pounds and by 1960 had increased to 2.11 pounds.

Another market decline in the 1950 decade was in canned orange products.

In 1950, per capital consumption of these products was 3.37 pounds, but

declined to only 2.13 pounds by 1960, a decrease of 37 percent. The

relative changes in per capital consumption rates that occur over time

between citrus products are due primarily to changing consumer demand.

However, year to year changes in total per capital consumption rates

for citrus are due, in large part, to changes in available supplies.

The fluctuations in market shares between the various sectors of

the orange industry are especially vital in Florida, since a major pro-

portion, approximately 80 percent, of its crop is utilized in the process-

ing market. The impact of technological advances in frozen concentrate

and chilled products on the Florida industry emphasizes the need for study.






- 13 -


Table 4.--California Valencia and Navel orange utilization, 1951-52
through 1963-64


Orange Type

Season Valencia Navel All
Season
Fresh Fresh Fresh
Sales Processed Sales Processed Sales Processed
----------------------Thousands of Boxes------------------------

1951-52 16,895 8,499 10,338 1,783 27,233 10,282

1952-53 19,670 9,300 14,785 1,600 34,455 10,900

1953-54 13,028 4,557 11,945 2,135 24,973 6,692

1954-55 15,000 8,730 12,816 2,071 27,816 10,801

1955-56 14,300 8,550 13,070 1,623 27,370 10,173

1956-57 13,150 7,060 13,280 1,720 26,430 8,780

1957-58 10,978 2,880 8,485 375 19,463 3,255

1958-59 14,600 8,390 14,530 2,080 29,130 10,470

1959-60 10,980 6,060 11,550 1,650 22,530 7,710

1960-61 10,880 4,850 8,250 510 19,130 5,360

1961-62 8,630 4,240 6,660 700 15,290 4,940

1962-63 9,190 6,810 9,000 3,270 18,190 10,080

1963-64 9,540 6,460 12,636 2,314 22,176 8,774

Source: Florida Citrus Fruit, Annual Summary, (1952-1962),
Florida Crop and Livestock Reporting Service, Orlando, Florida; and


Florida Agricultural Statistics, Citrus Summary, 1964
Department of Agriculture, Tallahassee, Florida.


Issue, Florida






- 14 -


Table 5.--Per capital consumption of fresh, canned, chilled and frozen
orange products, United States 1950-1962


Product Classification

Fresh Frozen
Fresh
Year (Farm Canned Chilled Single
Weight) Product Strength
Weight Basis c
-----------------Pounds----------------

1950 26.9 3.37 .. 1.52 5.12

1951 28.8 3.81 .. 2.19 7.22

1952 27.9 3.58 .. 3.53 11.44

1953 27.6 3.13 .. 4.08 12.85

1954 24.5 3.08 .. 4.40 13.93

1955 24.8 2.95 .94 4.94 15.81

1956 22.6 2.42 1.05 4.86 15.48

1957 21.6 2.45 1.72 5.32 16.99

1958 17.6 2.66 1.60 4.32 13.27

1959 19.8 1.91 1.87 5.42 16.64

1960 19.4 2.13 2.11 5.61 17.56

1961 16.2 1.71 1.66 5.26 16.77

1962 15.7 1.93 2.20 5.94 19.46

aChilled fruit juice is produced commercially from fresh fruit in
Florida; does not include reconstituted frozen juices or juice produced
for local sale.
Includes single strength and concentrated juices of all citrus
products.

Concentrated fruit juices converted to single strength on basis
of 3.525 pounds to 1.

Source: Supplement for 1962 to Consumption of Food in the United
States, Agricultural Handbook No. 62, Agricultural Marketing Service, USDA.





- 15 -


There is also need for market evaluation resulting from increased supplies

available for the national market.

California, on the other hand, has had a relatively constant

share of the fresh and processing markets. Further, Western growers are

facing a declining acreage in oranges, primarily from continued urbaniza-

tion in citrus producing areas.

Position of Florida and California in
the Fresh Orange Market

Aggregated over the various product differentiations, Florida and

California oranges are marketed at the same time in the major terminal

market areas east of the Rockies (Table 6). In 41 major markets, Florida

dominates 11 in terms of carlot unloads and California predominates in 30.

However, in several of the larger terminal markets, the shares between

Florida and California are about equal. In Cincinnati, Cleveland, New

York, Philadelphia, Pittsburgh, and Providence, the shares were about

40-60 between California and Florida. In Cincinnati, for alternate seasons

from 1955 through 1961, Florida unloads accounted for an average of 57 per-

cent of the total Florida-California oranges coming into the market. In

Cleveland during this same period, an average of 56 percent of the California-

Florida oranges were from California.

Over these same years, market shares have changed considerably

in several of the markets. For example, Florida shares have increased

in Albany and Columbia, while California shares have increased in Dallas,

Fort Worth, and Denver. The California share increase in these markets

can be attributed partially to decreased Texas orange production. In

these years Texas producers were recouping losses suffered in the exten-

sive freeze damage of 1949 and 1951.





Table 6.--Orange unloads in selected U. S. cities, two-year intervals, 1955-1963.

Calendar Year

Cities 1 1959 1961 196
Fla. Calif. Fla. Calif. Fla. Calif. Fla. Calif, Fla. Calif.

Albany, N. Y. 44 198 181 313 122 279 138 194 56 177
Atlanta, Ga. 955 45 956 38 745 72 725 41 469 48
Baltimore, Md. 1,085 356 961 312 744 433 801 254 376 255
Birmingham, Ala. 48 40 623 27 527 39 389 26 227 37
Boston, Mass. 1,530 1,616 1,146 1,761 802 2,081 755 1,264 356 1,348
Buffalo, N. Y. 103 522 347 502 210 568 186 235 136 274
Chicago, 111. 1,835 2,003 1,577 1,776 1,049 2,347 1,033 1,303 366 1,465
Cincinnati, Ohio 508 347 509 341 354 401 348 195 194 241
Cleveland, Ohio 724 886 714 848 546 960 554 503 249 552
Columbia, S. C. 71 16 454 32 454 28 414 21 253 14
Dallas, Texas 267 277 248 266 0 345 32 188 52 224
Denver, Colo. 150 387 88 494 31 578 23 440 32 462
Detroit, Mich. 820 1,505 667 1,509 419 1,542 531 885 177 899
Ft. Worth, Texas 98 83 45 93 19 108 5 62 28 75
Houston, Texas 0 111 208 255 55 385 25 154 226 151
Indianapolis, Ind. 7 235 306 252 243 372 270 180 134 201
Kansas City, Mo, 175 397 188 442 100 569 107 281 0 322
L. A, Calif. 38 3,731 5 4,320 0 4,626 22 2,913 38 2,880
Louisville, Ky. 62 68 392 66 451 97 289 45 152 37
Memphis, Tenn. 91 37 337 94 229 111 134 66 102 99
Miami, Fla. 0 0 596 15 769 63 498 65 381 61
Milwaukee, Wis. b 65 493 170 518 99 541 145 273 42 293
Minneapolis, Minn. 6 743 132 801 45 878 52 365 100 395
Nashville, Tenn. 73 33 200 16 131 24 101 2 79 24
New Orleans, La. 566 93 524 101 298 112 246 64 236 92
New York, N Y. c 4,994 4,036 5,033 3,978 3,262 5,042 3,250 3,294 2,352 3,774
Philadelphia, Pa. 2,321 1,505 2,230 1,521 1,537 1,805 1,844 1,151 1,150 1,334
Pittsburgh, Pa. 844 1,111 709 1,321 456 1,301 505 768 274 699
Portland, Ore. 53 154 39 548 0 623 32 390 0 317
Providence, R. I. 142 195 205 166 129 195 121 81 39 78






Table 6.--Continued


Calendar Year

Cities 1955 1957 1959 1961 1963
Fla. Calif. Fla. Calif. Fla. Calif. Fla. Calif. Fla. Calif.

St. Louis, Mo. 444 658 362 667 196 722 171 412 93 429
Salt Lake City, U. 1 21 13 423 0 447 13 275 1 219
San Antonio, Texas d 2 85 86 162 27 183 13 84 34 128
San Francisco, Cal. 0 1,550 1 1,648 2 1,752 6 1,141 1 1,296
Seattle, Wash.e 98 707 51 321 3 459 71 520 13 487
Washington, D. C. 523 128 523 167 482 222 398 132 209 145
Wichita, Kansas 0 15 18 122 5 138 12 119 6 75

aData do not include mixed load shipments.

bMinneapolis includes St. Paul, Minnesota.

CNew York includes Newark, N .J.

San Francisco includes Oakland, California.

eSeattle includes Tacoma, Washington.

Source: Fresh Fruit and Vegetable Unloads, by Commodities, States and Months, USDA, AMS-427,428,
492, 493 for 1963, and similar publications.





- 18 -


It must be recognized, however, that these data have limitations

for analyzing shifts within the fresh orange market. Since the data are

aggregated over several types and varieties of oranges as well as inter-

state production areas, shifts can be evaluated only in the most general

fashion. Further, such broad analyses make no allowance for transshipments.

Although an analysis of unloads may yield no appreciable changes within a

given market, substantial changes within orange utilization patterns may

have been present from either Florida or California. For example, a

marked shift could have developed from California Valencias to California

Navels, or there may have been substantial changes among Early, Midseason,

and Late Florida oranges. In the same manner, major production shifts may

have occurred in the Indian River and Interior sections of Florida.


Marketing Periods

The Florida orange production year begins around the first of

October with Early oranges. Early orange marketing is most intense in

November and December and generally continues through February. Midseason

fruit harvest and shipment begins early in November and continues through

March. Heaviest marketing of Midseason fruit runs from December through

February. Temple oranges, often classified as a Midseason fruit, are

harvested from late November through mid-April, with heaviest marketing

in January and February. Late or Valencia orange harvest begins about the

first of February and continues to some degree throughout the summer

months. Heaviest marketing occurs in the months of March through May.

California orange production is more year-round than is Florida's.

California Washington Navel harvest and shipment begins in early-to-mid-

November and continues generally through April. Valencia harvest in






- 19 -


California usually overlaps Navel harvest in early April and continues

through October.

Consequently, California and Florida fruit meet in the market-
-y
place throughout most of the year. During the period 1954-63, May was

the heaviest shipment month for California oranges (Table 7). At this

season, primarily Valencias are available from either state, along with

a negligible amount of Florida Temples. In contrast, December is the

heaviest orange shipment month for Florida. In that month Florida Early,

Midseason, and Temples are available for shipment. August and September

are the lightest months for Florida orange shipments.

California, during the 1954-63 period, shipped an average of more

than 2,000 carrots of oranges each month of the year. Florida shipments,

in contrast, averaged as low as 71 carlots in September and as high as

4,936 in December during these years. Throughout the five months,

November through March, Florida shipped more than 57 percent of its total

annual fresh shipments. California shipped 40 percent of its fresh fruit

during the same five months.

The anticipated production increases in Florida will place larger

amounts of fruit on the national market in two critical periods. The

increased production of the Early, Midseason, and Temple oranges will

face keen competition from California's Washington Navel fruit. The

Navel season, starting in November, will climax in December and January.

During these same two months, based on current production and marketing

schedules, Early Florida fruit still will be strong, the Midseason fruit

will be at peak production, and Temple oranges will peak during January.

Increased supplies of Florida Valencia oranges will be met in the





- 20 -


Table 7.--Carlot shipments, California and Florida oranges, by months,
1954 through 1963


Month
Year and
State Jan. Feb. Mar. Apr. May June
.---.----.-----------------------------------Carlots---------


1954
California
Florida
1955
California
Florida
1956
California
Florida
1957
California
Florida
1958
California
Florida
1959
California
Florida
1960
California
Florida
1961
California
Florida
1962
California
Florida
1963
California
Florida

California
Total
Average

Florida
Total
Average


4,215 4,550 4,238
5,406 5,780 6,659

4,198 4,113 4,757
5,195 5,383 5,249

3,483 4,381 5,448
4,672 4,668 4,994

3,451 3,429 4,408
4,584 4,021 4,601

3,341 3,082 2,875
3,551 3,306 3,062

4,521 4,712 6,103
3,619 3,203 2,441


4,175
4,552


4,164 3,563
4,010 3,680


2,946 2,678
3,118 3,180


5,486 5,630
5,444 4,276

4,746 4,926
4,539 3,803

6,566 7,337
4,279 3,759

4,797 5,633
3,703 3,329


3,206 4,201
2,091 1,552


6,451
2,120


6,060
1,541


3,519 3,620
3,116 2,876


2,624 2,411 3,304
2,755 2,294 2,038


2,512 1,971 2,558 2,039 2,684
4,717 4,320 4,221 3,257 3,271


3,509 2,095 2,241 2,014
1,731 1,460 1,731 1,061


36,351
3,635


41,145
4,114


3,431
651


35,175 38,815 41,235 46,826
3,518 3,882 4,124 4,683


39,331 39,393 31,904
3,933 3,939 3,190


27,096
2,710


4,662
2,136

5,893
2,252

5,553
2,142

5,141
1,888

3,163
332

4,246
548

3,054
859

2,912
965

2,298
1,863

2,889
156


39,811
3,981


13,141
1,314


Source: USDA, AMS, Fruit and Vegetable Division, Market News
Branch, Fresh Fruit and Vegetable Shipments, 1954-63, AMS-41, (Washington,
D. C.)


- ---- --






- 21 -


Table 7.--Extension


July Aug. Sept. Oct. Nov. Dec. Total


3,983
692

5,354
814

4,359
511

4,222
822

2,875
47

4,117
182

2,829
168

2,917
152

2,084
687

2,513
14


3,616
144

4,630
210

4,597
185

3,865
244

2,609
2

3,640
43

2,514
103

2,527
5

2,191
283

2,456
.o..


4,074
87

4,415
80

4,323
96

3,584
248

2,510


3,922
25

2,939
15

2,806
36

2,179
96

1,965
30


3,216
2,896

3,134
2,292

3,463
1,478

2,749
3,134

1,879
765

2,789
1,510

1,919
478

1,987
1,287

1,602
1,558

2,055
1,137


3,654
5,131

1,729
4,549

2,941
5,029

2,588
5,529

2,133
3,040

3,184
3,305

1,538
2,646

1,609
3,205

2,093
4,285

1,966
2,121


4,050
6,455

3,055
6,709

3,629
5,928

3,423
4,536

4,040
4,404

4,069
5,286

3,412
4,388

2,484
4,493

4,187
3,826

4,395
3,334


51,374
45,106

50,950
41,075

56,080
37,741

47,290
36,639

35,914
22,152

53,814
23,823

37,246
26,891

31,205
23,528

28,398
32,384

31,529
13,426


35,253 32,645 32,717 24,793 23,435 36,744 423,800
3,525 3,264 3,272 2,479 2,344 3,674 42,380

4,089 1,219 713 16,535 38,840 49,359 302,765
409 122 71 1,654 3,884 4,936 30,276






- 22 -


marketplace during February, March, and April by some Florida Midseason

and Temple oranges, as well as by California Valencias harvested begin-

ning around the first of April.

As orange supplies increase, there will be a need for a more

thorough knowledge of the market for oranges and orange products. The

allocation among market sectors and geographic markets based upon sounder

perception of the total orange market can refine the efficiency with which

the crops are marketed and consequently enhance the position of the orange

industry.


Alternative Adjustments Available
to the Florida Orange Industry

During the coming decade, per capital orange production will

apparently expand at a fairly rapid rate. The increase in production,

based on projected yields, will definitely occur in Florida. California

production, meanwhile, is expected to maintain a rather constant level.

Therefore, the prime responsibility for merchandising larger orange crops

must rest with Florida producers and marketers. To move effectively

larger crops of oranges, attention must be focused on marketing policies

and alternative adjustments available to the industry. The effective

utilization of alternative adjustments to solve the dilemma of increased

production depends, beyond question, on the accuracy with which the

industry estimates the demand relationships for its products.

Recognizing this adjustment to be the problem, it is necessary to

postulate the demand relationships existing in the orange market and to

examine possible alternative adjustments available to the orange industry,

in order to attain maximum effectiveness in marketing as supply levels

increase.







- 23 -


The Demand Situation

Florida oranges are marketed basically in four forms: (1) fresh

oranges, (2) chilled juice and products, (3) canned juice and products,

and (4) frozen concentrates. For each of these market components, there

exists a schedule of prices that consumers will pay for varying quantities

of the product marketed; hence the demand relationship. Further, within

each major component, for example fresh oranges, there is a different

demand relationship for each distinguishable product. An example would

be the differences in the demand relationships for Indian River and

Interior oranges. In addition to the several individual demand relation-

ships, there may be considerable economic linkage among the entire group

of competing products. That is, the price-quantity or demand relationship

for any one product is influenced by the price level of any product that

competes with it.

Graphically, these postulated component demand relationships can

be depicted as in Figure 1. D1, D2, D and Dq represent, respectively,

chilled juice and products, canned juice and products, fresh oranges, and

frozen concentrates. Given the availability of these component aggregate

relationships, a composite function may be obtained by a summation of the

components, such as shown by DT. This composite is an aggregate demand

relationship over the various sectors and subsectors making up the total

orange market. Not only are these sector relationships affected by the

availability and prices of other orange products, but also by the avail-

ability and prices of other substitute citrus and noncitrus products.

To exploit fully the competitive situation, a detailed delineation

of demand relationships must be formulated to include the various sectors




















































D0 D2


Price


I


Quant i ty

Figure 1.--Hypothetical demand relationships for Florida fresh oranges and processed
orange products.






- 25 -


of the industry. Since there are within each sector discernible product

differentiations, these characteristics must be described. Recognition

of the existing product differentiations within a given sector will allow

any adjustment procedure to be applied with maximum efficiency.

The demand functions for fresh oranges.--Within the Florida fresh

orange sector, differentiating characteristics which must be considered

include areas of consumption, areas of production, varietal-type differences,

sizes, and grades. It appears valid to assume that different consuming

areas have distinct preferences regarding fresh oranges; therefore, levels

of demand and the respective functional relationships are likely to differ

between these areas. The Indian River and Interior districts of production

provide a second differentiation to be considered, since fruits from the

two areas are viewed as differentiated products, at least at the grove

and wholesale levels.

The varietal-type complex requires even further delineation.

Under this category, differences in consumer preference with respect to

Early, Midseason, and Late oranges, as well as within these several

varietal differences, should be considered. Beyond these differentiations

are those resulting from grade and size of the common orange types and

varieties.

Certainly then, the aggregate demand relationship for fresh oranges

is composed of countless differentiations. These differences must be

evaluated in the adjustment to increased supply levels of oranges avail-

able for the market.

The demand functions for processed oranges.--In the processed

sectors there are three basic forms of orange products--chilled, canned,







- 26 -


and frozen concentrates. Differentiations contained within these proc-

essed products must also be taken into account, and these are generally

the same without regard to form. To some degree, Florida processed

orange products maintain an identification as to area of production

within the state. Therefore, processed Indian River and Interior fruit

must be recognized as possibly differentiated products to the degree that

the area of production is identified with the product.

Evident differences also exist in the demand relationship based

upon consuming areas. For example, differences in frozen orange concen-

trate arise from consumer preferences in unlike areas of the market.

In all of the processed products another differentiation results

from brand names, normally classified into three categories: (1) nation-

ally advertised brands, (2) private brands, and (3) packer brands. Within

brands further differences also result from container sizes.

Thus, in developing the aggregate demand relationships for each

of the fresh and processed orange products, the relationship is an average

over the various product differentiations. The more complex the deline-

ation with a particular market sector, the sounder the knowledge for

basing any adjustment to changing supply conditions.


The Importance of the Sector Analysis

The question arises, "What is the importance of the sector demand

relationships?" Knowledge of the component relationships provides the

basis for effective adjustment by the firms within the industry and the

industry itself. Delineating the demand relationships within the market

component or sector further refines facts available for adjustments to





- 27 -


changing levels of total orange output. Consequently, the reliability

of any estimated demand relationships will determine the success of the

adjustment process. These adjustments are discussed here as promotional

policy, supply allocation, and optimum allocation.


Promotional Policy

Basically, promotional activity of any specific form is employed

to effect a change in the demand relationship for oranges. This change,

if successful, is anticipated to initiate shifts in the level and slope

of the demand curve, creating a more favorable demand situation. Hence,

effective promotional activity results in some combination of increasing

the level and changing the elasticity of demand for oranges and orange

products.

At the industry level, where much of the promotional activity

presently originates, two major considerations must be reckoned with.

They are: (1) the allocation of promotional funds among market sectors

and (2) the allocation of promotional funds among geographic market areas.

As supply levels increase, the allocation becomes more important to the

adjustment process.

Recognizing the multi-use characteristics of the orange crop,

the firm, sector or industry must decide wisely the allocation of

promotional funds. To allocate these funds effectively, management must

forecast estimates of the demand relationships for the products involved.

The allocation among sector markets depends upon the promotional

goals. Astute promotion which shifts both the level and slope of the

demand relation will result in higher prices or movement of larger






- 28 -


quantities at the same price. If the demand relation is relatively elastic,

effective promotional activity may yield a greater quantity effect than

price effect. Thus, with increasing supplies, promotional activity could

better assist movement of larger supplies if applied in sectors of the

greatest price elasticity for the demand relation.

However, another consideration in undertaking the allocation of

promotional funds is the substitution among products. Given equal degrees

of elasticity, a greater benefit would be derived if promotional funds

were allocated in the sector with the least degree of economic substi-

tution with respect to other orange products. In other words, to assist

adjustment to larger supplies, the greatest benefit would be derived from

promotional funds if allocated in the sector with the most elastic demand

relation and the least amount of economic substitution.


Supply Allocation Policy

Another alternative available to the orange industry is adjust-

ment in price through allocation of supplies among market outlets.

Currently, on-tree prices are determined within the framework of a

competitive market although the industry market structure departs

noticeably from the competitive model. If the industry were to engage

further in vertical and horizontal integration to such an extent that

a preponderance of the oranges produced were marketed under a central

authority, price policy would assume utmost significance in adjustment

to increasing supply levels.

Any increased supplies could be absorbed by adjustment of products

to the various sectors within the marketing system in the most favorable






- 29 -


fashion, that is, in the sector where increased quantities would have

the least price effects. Industry controlled allocation could seek to

maximize revenue along with increasing supplies.

If the industry were producing in the inelastic segment of the

demand relationship by allocating among the four product markets based

upon the relative elasticities, it could seek to minimize revenue losses.

For example, if the industry were producing in the inelastic portion,

but only one or two of the sector demand functions were inelastic in

nature, revenue losses would tend to be minimized by allocating greater

quantities to the sectors possessing the elastic demands. This follows

since such an allocation would result in a less than proportionate

decline in price. Therefore, the loss incurred would be less than if

equal increments of the increased supplies were applied to the various

market sectors.

If, on the other hand, the industry were producing in the elastic

portion of the demand relationship, greater revenue gains would be found

by allocating increased supplies to the sectors possessing elastic demand

functions. In this case, revenue losses resulting from quantity increases

would be less than a proportionate amount of the actual quantity increase,

and thus, greater revenue.

The structure of the Florida industry is such that these adjust-

ments could be effected easily. The Citrus Exchange, along with similar

sales organizations representing growers' cooperatives, could organize

into a sales agency either through the organizational structure allowed

under the Capper-Volstead Act or under the Marketing Orders and Agreement

Act.






- 30 -


Optimum Allocation

Product adjustment may be looked upon as intermediary steps to

complete an optimum allocation from the revenue standpoint. To maximize

net revenue at the industry level, complete knowledge of two economic

forces, costs and revenue, must be sought. The equation of the marginal

quantities of these two functional relationships will result in a maxi-

mization of net revenue. The unique point of complete maximization

occurs where industry marginal costs are minimized and equated with

industry marginal revenues for the several orange products involved.

From the cost side of the equation, knowledge of the industry

marginal cost function is necessary for each of the four orange product

markets. To minimize marginal costs for the industry, firm costs must

be known at each possible level of production, since cost minimization

requires that the individual member firms' marginal costs be equated.

This process could be accomplished by allocating quotas to the individual

member firms in such a manner as to equate the marginal cost for each

firm to the marginal cost of every other firm for their respective quotas.

If this allocative procedure is followed, industry costs for any given

level of output will be minimized.

The foregoing analysis indicates the ideal situation from the

standpoint of minimizing industry costs. It requires that the firms

within the industry must yield to some central authority the ultimate

decisions relative to rates of output by individual firms. Although

this procedure attains an optimum condition in the industry cost

structure, it is not a necessary requirement for the maximization principle.






- 31 -


As the industry deviates from minimum costs, total net revenue declines.

However, within any given system of output allocation among firms and

any industry cost level, net revenue maximization can be attained by

equation of the marginal cost and revenue functions.

From the revenue side of this equality, full maximization re-

quires complete knowledge of the demand for oranges within sectors of

the industry. For a program of supply management, there must be infor-

mation to guide allocation of supplies among the various market sectors.

A method must be devised to show the marginal revenue for the industry's

entire volume. Availability of the sector demand functions would allow

a summation yielding a composite demand function for all oranges. From

the sector and composite demand relationships, marginal revenue functions

can be derived.

To determine optimum allocation among sectors, industry output

must be allocated to equate sector marginal revenue functions with the

marginal cost functions. In this allocative procedure, it may well be

determined that total industry output may be beyond the amount required

for maximization of revenue. Thus, to attain maximization of net revenue,

in addition to the allocation among market sectors, the need could exist

for limiting total output to less than available supplies. In such an

event, economic abandonment of a portion of present supplies would be a

logical procedure to follow.

In contrast, if available supplies were less than the optimum

output, further expansion of the productive capacity of the industry

would increase revenue. Present supplies under this situation should be






- 32 -


allocated in such a manner as to minimize industry marginal cost under

revenue maximizing conditions.

It is recognized that total knowledge of the cost and revenue

aspects of an industry are rarely secured on a simultaneous basis. Uti-

lization of complete information concerning the demand relationships for

the products of the industry can be a practical intermediate step toward

net revenue maximization. Gross revenue can be maximized without cost

information. From the various sector demand relationships, the industry

demand function for all oranges can be obtained and, subsequently, a

total revenue function can be derived.

These functional relationships can be used to maximize gross

revenue by equating marginal revenue functions for the four sectors. The

point of marginal revenue equation would be the quantity dictated by the

high point on the total revenue function, which also would be, of course,

the point of unit elasticity on the industry demand curve. Maximum

revenue would be received if supplies in each of the sector categories

were allocated so that the quantities of each would yield a marginal

revenue of zero. This is true only if the total supply offerings are

equal to or in excess of the high point on the total revenue function.

On the other hand, if total supplies are less than the quantity

dictated by the peak of the total revenue function, then maximizing

gross revenue would be a process of equating the sector revenues at a

point which would absorb all available supplies. This would, in turn,

allocate quantities and dictate prices among the various market sectors.









SUMMARY


The purpose of this report is to evaluate the competitive

structure of the Florida orange industry and to examine conceptually

alternative adjustments available to the industry. The rapidity with

which innovations and technological advances have altered the competi-

tive market structure existing in the orange industry dictates the

necessity of an assessment of the market situation.

Within the past two decades frozen orange concentrate has

emerged from an expectation in a research laboratory to a dominant force

in the marketing of Florida oranges. This, coupled with increased con-

sumer interest in canned single strength and chilled orange juice, has

substantially changed the orange marketing situation.

Recognizing that the major external competition Florida orange

producers face is that of California producers, this area of competition

must be examined. Florida-California orange price competition has his-

torically been favorable to California. The degree to which this is

attributable to consumer preference rather than an advertiser-created

preference is a necessary ingredient in the formulation of adequate

pricing, product, and promotional policy.

In considering an evaluation of market structure and competition,

it becomes necessary to delineate the variables associated with the pro-

duction and marketing of oranges. Florida orange production, based upon

area and type-varietal complexes, is differentiated by (1) Indian River


- 33 -





- 34 -


versus Interior districts, (2) Early, Midseason, and Late types, and

(3) varietal types within the seasonal progression. During the past

15 years, increases in production have evolved in all major product

differentiations associated with Florida oranges. Other less important

differentiations include size, grade, and brand names.

California production, on the other hand, does not possess such

a varied number of differences. There is no significant difference re-

sulting from the Central, Southern, and Desert Valley districts of pro-

duction. No appreciable differences evolve from varietal complexes since

only Valencias and Navels are produced in California.

Another factor to be considered is the utilization of orange

products from the two states. Presently, approximately 80 percent of

Florida production is utilized in the processing market, while almost

85 percent of the California production is marketed in fresh form.

California has had a relatively constant market share situation with

regard to the fresh and processed markets in the past two decades.

Florida, on the other hand, has experienced substantial declines in

fresh sales, primarily because of the successful marketing of frozen

orange concentrate.

A further complication arises from the overlap in production

periods between Florida and California. The Florida production year

begins in early October and continues through June while California

production is year-round. Anticipated production increases in Florida

will place larger amounts of fruit on the national market in two critical

periods. The Early, Midseason, and Temple increases will face keen

competition from California Navel production, while Florida Valencias






- 35 -


will meet in the marketplace during February, March, and April with

some Florida Midseason and Temple oranges as well as with California

Valencias.

In considering the Florida production expansion and the alter-

natives available to the industry, it becomes necessary to delineate the

consumer demand relationships existing in the market. Florida oranges

are marketed in basically four forms: (1) fresh, (2) chilled, (3) canned,

and (4) frozen concentrate. Each of these market sectors possess separate

price-quantity or demand relationships. Within this family of relation-

ships there exist differences which lead to variations in the effects

upon consumption of changes in price as well as differences in substi-

tution among the several products resulting from price changes.

For fresh oranges there are differences in demand based on areas

of production, varietal-type differences, sizes, and grades. In the

processed sectors of chilled, canned, and frozen concentrates similar

differences in demand occur, and generally are the same without regard

to form. For example, differences in the demand for frozen orange

concentrate can be attributable to consumer preference identified by

such factors as can size and brands.

Therefore, in developing aggregate price-quantity relationships

for each of the fresh and processed orange products, such a relationship

becomes an average over the various differentiations. The more complex

the delineation within a particular market sector, the greater the know-

ledge requirements for adjusting to changing supply conditions. Knowledge

of these relationships provide the basis for effective adjustment by the

firms within the industry and the industry itself.





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The Florida orange industry can utilize effectively several

alternatives as it faces increased orange production. These may be

categorized as adjustments in promotional activity, supply allocation,

and optimum allocation. The success in each of the alternatives depends

upon a thorough knowledge of the demand or price-quantity relationships

for Florida oranges and orange products.

With respect to promotional policy, the Florida orange industry

has basically one goal that of increasing the level of demand or

effecting a change in the demand relationship such that a more favorable

price-quantity relationship exists. The funds for industry promotion

ideally should be allocated among products and among geographic markets

in such a manner as to maximize the returns per dollar spent. To effect-

ively allocate promotional funds to attain this goal, the industry must

have definitive measures of the demand relationships.

The product allocation policy alternative includes some industry

regulation. In effect it is industry adjustment of quantities allocated

in various sectors to attain a more favorable price-quantity relation-

ship as supply increases. The structure of the Florida orange industry

makes such adjustments within the realm of possibility. The Citrus

Exchange, along with similar sales organizations representing growers'

cooperatives, could organize into a sales agency either through the

organizational structure allowed under the Capper-Volstead Act or under

the Marketing Orders.and Agreement Act.

The utopian achievement from the standpoint of industry profit

maximization would include a meshing of product adjustment with a full







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knowledge of industry cost relationships. The informational require-

ments would entail complete knowledge of both demand and cost structures

for the industry. Not only must this aggregate information be available

but also a complete delineation of the various sectors and subsectors of

the industry herein described. With this information, the industry could

equate precisely the addition to industry revenue with the addition to

industry cost resulting from each unit sold, or a complete maximization

of industry profits.




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