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The Sales Headquarters
of the Florida Citrus Exchange,
110 Oak Avenue, Tampa, Fla.
FLORIDA CITRUS EXCHANGE
*...... v_.-....:. .
.. :-. :.: .o...
.. ;...... ..- ..
OFFICERS, DIRECTORS AND HEADS
OF DEPARTMENTS, FLORIDA CITRUS EXCHANGE,
C. H. Walker, President and Chairman of the Board Ba----.---Bartow
H. E. Cornell. First Vice-President Winter Haven
W. M. Moseley. Second Vice-President Fort Pierce
J. C. Palmer, Third Vice-President Windermere
L. L. Lowry, Fourth Vice-President Winter Haven
C. C. Commander, General Manager Tampa
,Fred S. Johnston, Sales Manager Tampa
L. D. Aulls, Traffic Manager Tampa
S. L. Looney, Treasurer-Comptroller Tampa
O. M. Felix, Secretary Tampa
Counts Johnson, Attorney Tampa
Sub-Exchange Director Address
Indian River ...--------.H. G. Putnam Oak Hill
Florence W. C. VanClief Winter Haven
Fort Pierce W. M. Moseley Fort Pierce
International-------L. L. Lowry Winter Haven
Lake E. F. DeBusk Gainesville
Lake Region -------Fred T. Henderson Winter Haven
North Pinellas -----.. -- J. W. Smith Brooksville
Orange J. C. Palmer Windermere
Pinellas John S. Taylor, Jr Largo
Plymouth Wm. G. Geier Windermere
Polk D. A. Hunt Lake Wales
Scenic C. H. Walker Avon Park
St. Johns River ..-.- Tom B. Stewart DeLand
West Coast W. W. Raymond Alva
Winter Haven ------. H. E. Cornell Winter Haven
Clark --. R. J. Kepler DeLand
,, .. .*..
... *.: :.... ..:..* .* '.
The season 1939-40 closes with those growers whose cultural meth-
ods produced fruit of high quality, desirable sizes, a high yield per
acre and who had reasonable frost protection showing a fair profit
from their operation. Those with less efficient cultural practices,
higher handling costs or crops which received the brunt of the cold
without adequate protection found their returns correspondingly less.
The freeze which occurred late in January may be said to have saved
the industry from one of the most disappointing marketing periods in
recent years. As it was, some growers suffered the loss of all or nearly
all of their crops. On the other hand, most acreage yielded merchant-
able fruit in volumes sufficient to compensate some of the loss because
of the higher market levels enjoyed following the freeze.
It is significant to observe in this connection that most of the
increased returns from these higher markets will go to cooperative
growers, to grower-shippers who retained title to their fruit and to
speculators who bought heavily from panicky growers in anticipation
of the certain market rise.
Under the circumstances, therefore, the heaviest financial loss
caused by the freeze was suffered by packing and shipping organiza-
tions who budgeted their operations and based their costs upon an
anticipated volume which proved to be substantially short of original
estimates. In addition, field and packing labor, the capital and labor
of firms supplying crate materials and other supplies and carrier sys-
tems lost most heavily. It is impossible and impractical to determine
the loss in dollars and cents. It may be said without fear of exaggera-
tion, however, that the loss to Florida's economy will be felt keenly
through the summer.
Total Shipments Only Twenty Per Cent Off
Official estimates of volume at the beginning of the season indi-
cated a record crop of oranges-33 million boxes, over ten per cent
more than the 1938-39 season. Grapefruit production was set at
17,100,000 compared with the 23,600,000-box production of the pre-
ceding season. Tangerines were estimated at 2,900,000, or 500,000
short of the 1938-39 season.
The freeze itself was reported by the weather bureau to be the
longest duration of fruit and wood damaging temperatures in the
history of its recordings in the Florida fruit belt. Temperatures during
the five worst nights of the freeze were low enough to destroy a large
volume of fruit, defoliate the trees and damage the wood severely ex-
cept in the most protected locations.
The industry emerged from that period with even the most experi-
enced fruit men certain that at best there could be no more than a fifty
per cent movement of the total crop on the trees at the time of the
freeze. Subsequent developments, however, brought to light certain
very favorable factors. The wood damage was not serious even in the
hardest hit sections because of the long continued cold which preceded
the five critical nights. This held the trees in a dormant state and
enabled them to withstand temperatures which otherwise would have
destroyed them completely. While defoliation was general and wide-
spread, recovery has been equally rapid. Subsequent weather conditions
have placed new growth on the trees which stimulated one of the
heaviest blooms ever seen.
No one can say accurately how much fruit was lost because of the
freeze. In spite of the embargo and strict regulations placed upon
fruit shipments by the Control Committee operating under the mar-
keting agreement, in excess of eighty per cent of the fruit originally
estimated to be on the trees in the fall will have been shipped or other-
wise consumed intrastate. The comparative figures as of May 11
Estimate Estimated Percentage
Production before Utilization of Esti-
1938-39 freeze as of mate Uti-
1939-40 May 11 lized
Oranges ...... 30,500,000 33,000,000 23,872,230 72.3
Grapefruit 23,600,000 17,100,000 14,691,904 85.9
Tangerines 3,400,000 2,900,000 2,300,000 79.3
Total 57,500,000 53,000,000 40,864,134 77.1
At existing market levels it is probable that the picking of addi-
tional crops and their subsequent grading for merchantable qualities
will see a utilization of at least an additional 1,500,000 boxes of oranges
and grapefruit after May 11. This will bring the total consumption
well above eighty per cent of the U. S. Department of Agriculture's
The actual citrus'production in Florida for the current season in
spite of the freeze, as indicated by the May 10, 1940, report of the
U. S. D. A., will be half a million boxes more than were produced in
the 1937-38 season. This latter season has been selected as a fair basis
of comparison for several reasons: orange production broke all previous
records; grapefruit and tangerine production was above the previous
five-year average. The comparative production data for the two sea-
Florida Production Production Increase Decrease
Oranges _. 24,000,000 24,400,000 400,000
Grapefruit 15,500,000 14,600,000 900,000
Tangerines 2,300,000 2,300,000
Totals 41,800,000 41,300,000 900,000 400,000
NET INCREASE 500,000
*Indicated production (May 10, 1940 report)
National Increases Continue
Heavy volumes will continue. There are some growers and shippers
in the State who hold to the opinion that because of the freeze Florida
has been relieved of oppressive citrus surpluses at least for the coming
This does not harmonize with the estimates of crop condition re-
leased by the United States Department of Agriculture in its report
dated May 1, 1940. These estimates compared with similar estimates
for the same date last season are detailed in the following table. The
condition of the major varietal classifications of Florida citrus fruits
is shown separately for the first time this year.
May 1, 1940 May 1, 1939
Florida Oranges, all 71% 71%
Early and Midseason Oranges 69%
Valencia Oranges 72%
Florida Grapefruit, all 74% 3 %
Seeded Grapefruit 74%
Seedless Grapefruit 75%
Florida Tangerines 84% 56%
These figures should be regarded merely as an indication of the size
of the crop in prospect. Government officials frankly state that it is
far too early to make a definite crop estimate, the accuracy of which
depends upon other data on factors which cannot as yet be determined.
These include droppage, rate of growth, average size of fruit, late
bloom and weather.
An additional factor should be considered, however, which is not
indicated by crop condition percentages. It is the "trend" of produc-
tion. Since the bearing capacity of a tree increases with its age and
size, a 71 per cent crop condition estimate this year indicates more
fruit in total boxes than the same estimate of condition for the same
date a year ago.
The problem of citrus surpluses is not Florida's alone. Of the cur-
rent orange crop of the nation, Florida produced only about 33 per
cent. It has averaged that percentage for the decade ending with the
1937-38 season. It is quite possible, however, that Florida production
will slip in its share of the national total because Texas has increased
its orange plantings heavily. These young acreages are coming into
bearing and will bring Texas into the orange deal as a substantial factor.
Grapefruit sources also have changed. During the ten-year period
ending with 1937-38, Florida produced nearly seventy per cent of the
total. During the current season, however, Florida accounted for
TOTAL UNITED STATES PRODUCTION
OF ORANGES AND GRAPEFRUIT
FOR THE CROP YEARS 1929-30
35-36 36-37 37-38 38-39 39-40
slightly in excess of 45 per cent of the total American grapefruit pro-
duction. Arizona and California both are entering the grapefruit
deal increasingly each season with far superior quality than they of-
fered several years ago. For example, during the week ending May
18, California and Arizona shipped 225 cars of grapefruit.
The problem of surplus control, therefore, is one of national scope.
Florida could destroy half of her oranges and California has adequate
production to take up the slack. Similarly, in grapefruit Texas could
compensate for any voluntary Florida reduction. A correlation of
supply to demand, therefore, must be considered on a national basis if
it is to prove equitable to all growers and all sections. The full signif-
icance of these production trends may be realized in the following
comparison of production by varieties during the past three seasons
as compared with the previous ten-year average. The detailed facts
are presented in the following table:
UNITED STATES CITRUS PRODUCTION
10 Yr. Avg.
*1939-40 1938-39 1937-38 28-29/37-38
Variety & Section Production Production Production Production
Florida 24,000,000 30,500,000 24,400,000 18,300,000
California 44,480,000 41,152,000 45,914,000 34,715,000
Others 3,312,000 3,811,000 2,144,000 1,229,000
Total Oranges 71,792,000 75,463,000 72,458,000 54,244,000
Florida 15,500,000 23,600,000 14,600,000 12,838,000
Texas 13,200,000 15,670,000 11,800,000 3,538,000
Others 4,875,000 4,444,000 4,693,000 2,547,000
Total Grapefruit 33,575,000 43,714,000 31,093,000 18,913,000
Florida 2,300,000 3,400,000 2,300,000 2,280,000
Production 107,667,000 122,577,000 105,851,000 85,437,000
In the above table it will be noticed that the 1939-40 produc-
tion is 4.9% less than 1938-39, 0.9% more than 1937-38, and
32.3% more than the ten-year average. These percentages apply
to oranges only. The 1939-40 grapefruit production is 23.2% less
than 1938-39. 8% more than 1937-38, and 77.5% over the ten
year overage. The greater portion of this increase of 77.5% took
place in Texas where the increase amounts to 273%. The Florida
increase over the ten-year average is 20.7%. The 1939-40 tan-
gerine production is 32.3% less than 1938-39, the same as pro-
duced in 1937-38, and 0.9% more than the ten-year average.
The total United States citrus production for 1939-40 (excluding
limes and lemons) is only 12.2% less than was produced in 1938-
39; 1.7% more than 1937-38, and 26%o more than the ten-year
*Indicated production (May 10, 1940, report of U.S.D.A.).
Florida Marketing Position Weak
This increasing citrus tonnage has created a new set of conditions
in the marketing of citrus crops which only too frequently are not
understood by growers. The truth of the situation is that the law of
supply and demand cannot be denied. More oranges, grapefruit,
tangerines, limes and lemons are being produced today in pounds per
capital than any other fruit, including apples, grown and sold in North
America. As a result, there are more of these fruits produced than
consumers can or are willing to buy and pay for at levels which will
return profits to growers under existing production, handling and
There are two logical steps which may be taken to meet this situa-
tion. In the first place, immediate relief may be secured by the control
of volumes offered from all producing sections in line with market
demand at the desired price levels. This calls for organization and the
use of control machinery already established and available in the Fed-
eral Department of Agriculture.
The Florida Citrus Exchange recognized this situation at the last
session of the legislature. Its general counsel prepared a state market-
ing agreement patterned to supplement the Federal agreement and had
it introduced as a bill at that session. It was defeated by one vote in the
Senate. Had it become a law, however, it would have become effective
upon the adoption of similar provisions by Texas, Arizona and Cali-
fornia. Such action would have made possible the control of national
tonnage in line with existing demand.
United States Secretary of Agriculture Wallace also recognizes this
national agricultural problem. He recently made statements to the
effect that the government must render additional assistance to coop-
erative endeavor to make possible profitable coordination between com-
peting American sections so that the producers of all sections might
The second step which might be taken is of equal importance: new
uses for citrus must be developed. New methods of reaching the con-
sumer and making fresh fruit more attractive and more convenient for
his use must be found.
The Florida citrus industry is at present not organized so as to
obtain the advantages of volume control. The crop is handled by over
400 competing sales agencies rivaling with each other in grower patron-
age and marketing effort. Cooperatives, grower-shippers and specu-
lators are variously used by individual growers in the industry in at-
tempting to dispose of their increasing crops at a profit. The one
group is played against the others by growers without regard to the
fundamental necessity laid down by the law of supply and demand:
the correlation of supply to existing demand.
Truck Handlers Complicate Sales
The Florida industry also is confronted with problems of distri-
bution which are of comparatively recent innovation. Fifteen years ago
nearly all Florida tonnage was distributed over rail carriers. The in-
troduction of competent schedules and refrigeration facilities on water
carriers increased the tonnage thus handled and diverted the flow of
Florida citrus heavily to the eastern seaboard.
With the development of good roads and improved efficiency in
truck construction, a third carrier came into being. The use of trucks
has grown to the point where 23.5 per cent of the current crop as of
May 16 was carried to market in that manner.
The growth of these carrier systems and the relative tonnage han-
dled by each during the past fifteen years describes a picture of dis-
tribution and marketing changes which will create nei problems of
handling methods for which solution must be found. The following
chart illustrates this detail:
PROPORTIONS OF FLORIDA CITRUS
CROP HANDLED BY THREE
CLASSES OF CARRIERS
25-26 26s- 27-18 28-29 29-30 30-31 31-32 32-33 33-3+ 34-35 35-36 36-37 37- 38-39 39-0
Trucks as carriers may be used advantageously to the grower in
many instances. Only too frequently, however, their owners operate
as fruit handlers, buying from packing houses or direct from the
grower for as little as possible and speeding to the nearest market
where they think they can find a quick turn-over at a profit. TLis
indiscriminate dumping of a large percentage of the Florida crop by
handlers who have no facilities for knowing the true worth of the
fruit has been found to establish market levels at which all other fruit
must be sold. It is argued by some that greater distribution is obtained
in this manner, that many markets today receive fruit in greater quan-
tities than ever before.
That may be true in isolated instances close to the source of pro-
duction. That increased distribution, however, is obtained only at
price levels which pay the grower little if anything for his fruit. They
serve to weaken his returns through the regular methods of distribu-
tion, the capacities of which must be depended upon at all times to
handle the great bulk of the crop.
Much of the fruit sold to trucks is supplied by packing sheds
especially built for the purpose. They represent little investment and
involve little overhead. This is the strong argument to truckers. These
operators point out that they can sell cheap because their operations
cost so little.
This statement is true. The combined investment made by asso-
ciations, grower-shippers and others in packing houses is very appre-
ciable. They face a definite fixed overhead for taxes, insurance, depre-
ciaton and like items. They furnish employment to local people and
form a real asset to community life.
The substantial saving these packing sheds create, however, does
not go to the grower-it is passed along to the truckers in the form
of a lower price for the fruit. This lower price at points of origin
in turn hurts general market levels -h the territory reached by all
The direct acquirement of fruit supplies by major food groups is
a problem to the Florida citrus industry. Approximately eleven per
cent of the total crop is purchased in this manner.
This method of fruit purchases removes just that much buying
power from regular trade channels where buying power and supplies
meet to establish a price.
Certain economies are created by this method of handling sales.
While it is recognized universally that it is necessary to effect every
possible economy in treating with increased production, the small
percentage purchased in this manner may influence the price at which
the large majority of fruit is forced to sell. This in turn causes a
downward trend in all prices as the regular trade must be able to meet
this competition. If they cannot do so they are forced to cease hand-
ling the commodity entirely.
These direct purchases must be coordinated with other marketing
channels in order to prevent this negative price reaction without dis-
turbing the disposition of fruit through these channels.
Canned Grapefruit Competition
The rapid growth of the canning industry in Florida is one of the
major phenomena of the industry, paralleled only in the Hawaiian
pineapple deal. In nine seasons the percentage of the increasing grape-
fruit crop diverted to canneries has risen from nine per cent to an
estimated 57 per cent for the season now ending. It is significant
that these percentages are applied against all grapefruit produced and
utilized through all sources including intrastate commercial and non-
commercial consumption. A chart on an accompanying page illustrates
this canning situation.
The canning industry constitutes a serious threat to the progress
of producer interests. Canneries to a large extent use fruit of sizes
and grades least desired on the fresh fruit market. In many instances
their source of supply is strictly one of salvage from the fresh fruit
industry. The raw material, therefore, is purchased at extremely low
levels. During the current season approximately four million boxes
of oranges were sold to canneries at prices ranging as low as 8c per
box. Grapefruit sales to canneries will be in excess of eight and a half
million boxes at low average returns to the grower, particularly for
juice fruit which is currently quoted at from 12c to 15c per box.
Most of these oranges and much of the grapefruit is not permitted
to move in fresh fruit channels. Yet it is put into cans and sold to
become highly competitive with fresh fruit offerings. The seriousness
of this competition is being brought to our attention constantly. Thou-
sands of consumers, many hotels, restaurants and soda fountain chains
prefer the canned product because of its cheapness, its comparative
uniformity and ease of preparation.
The argument that returns to growers from the small cooperative
canner capacities available to the industry are equal to if not better
than fresh fruit returns is no justification of the procurement of sup-
plies by the remaining eighty to ninety per cent of the industry at
less than production costs.
As a result of these practices sales levels for both canned and fresh
grapefruit are far below what has been demonstrated the consumer can
and will pay for profitable production volumes. It is impossible to
handle surpluses constructively by canning them and placing them into
competition with fresh fruit. Such volumes are not removed as a
source of commodity supply. They remain surpluses.
This situation has reached the point where growers must in some
manner control the canners or at least the general price at which all
fruit is sold to canners, or they in turn will find their properties oper-
ating by and for the canners.
Commodity Campaign Inadequate
The Florida citrus industry since the creation of the Florida Citrus
Commission by the 1934 legislature has attempted to meet some of
the problems created by increased volumes through a commodity ad-
vertising campaign which has averaged about $750,000 per season
since that time. The force of this work has been directed toward the
increase of consumer demand by illustrating the health value and other
desirable features of Florida citrus fruit.
At best this work has been only partially effective. It has not
decreased the differential of sales averages between California oranges
and Florida oranges. Nor has it increased the spread between Florida
grapefruit and Texas grapefruit to any extent. The comparative price
differentials of these varieties and producing sections during the period
of these campaigns are self-explanatory in the following table:
COMPARATIVE SEASON AUCTION AVERAGES
Comparative price averages for all auctions and all sections, Florida
and California oranges and Florida and Texas grapefruit during
the seasons of the Florida citrus commodity campaigns.
Sea- F. Fla. Fla. T la. Fla.
Fla. Calif. Fla. Texas
son Under Over Under Over
1935-36 $3.00 $3.34 .34 $2.57 $2.52 .05
1936-37 3.21 4.07 .86 2.23 2.10 .13
1937-34 2.24 3.12 .88 2.16 2.08 .08
1938-39 2.09 2.82 .73 1.72 1.86 .14
*1939-40 2.28 2.92 .64 2.13 2.02 .11
*As of May 11, 1940
It is not logical to hold the advertising entirely responsible for this
lack of showing. Other factors previously described have been equally
strong in offsetting the good which might have been accomplished
with this general advertising.
For example, the consistent regularity with which California has
maintained superior market levels for greater volumes of oranges than
the Florida industry illustrates conclusively that organization of selling
effort is just as necessary as adequate advertising. California with
nearly eighty per cent of her tonnage under cooperative control and
sold through one sales organization, with 98 per cent of her volume
sold through five sales organizations has been able to distribute her
fruit in such a manner as to cash in on her advertising effort and
return its benefits to the producers.
The comparative figures on Florida and Texas grapefruit are equally
significant. The price levels in either case are inadequate to return
consistent profits to producers. The Texas industry is more poorly
organized than that in Florida. As a result, Florida has maintained a
slight but inconsequential margin in its favor over the Texas product.
Nor has this margin been increased or apparently affected in any way
by the millions of dollars spent on the Florida commodity campaign.
There are two major criticisms, however, which may be made of
the Florida citrus advertising effort. In the first place, it does not
consider sufficiently the necessity for adequate and proper research to
find new uses and new methods of presenting fresh citrus to the con-
sumer conveniently and by methods which would encourage greater
per capital consumption. One of the chief deficiencies in this respect
is the refusal to develop and distribute a juice extractor for hotels,
restaurants and soda fountains suitable for both Florida oranges and
grapefruit. The California machine now used by most of these outlets
is credited by that organization for the disposition of well over 25
per cent of their orange crop. It is undesirable in many respects and
wholly unsuited for Florida fruit.
A second criticism of the campaign is the disposition to advertise
the canned product, particularly grapefruit, concurrently and even
in the same advertisement with the fresh fruit. This at existing price
levels encourages consumption of canned fruit in preference to fresh.
It presents the canned product as being in every way comparable in
health qualities and flavor to the fresh fruit. No less an authority than
Dr. J. A. Killian, food research chemist of New York City retained by
Standard Brands, states that canning processes in all cases cause a loss
of vitamin C. The loss of this unstable vitamin is a minimum of about
25 per cent even in most efficient canning operations.
DIVERSION OF FLORIDA GRAPEFRUIT
CROP TO CANNERIES
Seed and Seedless Combined
FOR CROP YEARS 1931-32 THROUGH 1939-40
3132 32-33 33-39 34-35 35-36 36-3 37-38 38-39 39-0
The Florida Marketing Picture
By way of summary, therefore, the Florida citrus industry is con-
fronted with increasing volumes which can be offset only by parallel
action from all producing sections. Its alternative must be the increase
of consumer demand and methods by which that demand may be
reached. It lacks organized selling effort.
It numbers among its hundreds of "sales agents" dozens of truck
peddlers. It has lost over fifty per cent of its grapefruit tonnage to
canneries at prices averaging below production cost and finds that
pack advertised and sold in direct competition with the fresh fruit
from which it hopes to make a profit.
Only one conclusion may be reached by the logical and unbiased
mind in studying these data: a coordination of selling effort between
the responsible cooperatives, grower-shippers and speculative operators
will be necessary if the industry is to distribute its constantly increas-
ing volumes at a profit to producers.
Against this background of industrial disorganization and costly
self-competition, the Florida Citrus Exchange operated with improved
service to its grower-members through well-managed associations and
associate shippers cooperating fully with the Sales Department. This
industry situation can be met best with most efficient packing and
productive cultural services. This branch of cooperative service to
the grower is of paramount importance: his cultural and packing costs
represent the greatest percentage, exclusive of freight, in his total hand-
ling costs from blossom to market.
Quality Must Be Improved
Proper administration of these necessary expenditures is of utmost
importance as upon them depend production of volumes per acre and
an improvement in the quality of the fruit produced. Better average
quality of Florida fruit must be obtained. This is particularly true of
the early varieties. Much study to improve both external and internal
quality of fruit has been given by many expert horticulturists in Flor-
ida. Much progress along this line has been made. All association pro-
duction departments should confer with Dr. Camp and Mr. DeBusk
and other leaders in this field for facts or procedure which will improve
Cultural treatments to which groves respond rapidly have been
developed and proved. For example, one of our associations in the
Ridge section applied these methods in the culture of practically all of
the tangerine groves signed with the association. These trees in most
cases were budded on lemon root and planted in light soil. The tan-
gerine crop packed by the association from these groves returned
greater volumes per acre and higher averages than any other section in
The relative importance of efficient production and packing prac-
tices from a comparative cost standpoint is visualized in the chart on
page 17 in which the distribution of returns for various varieties of
fruit sold at auction is illustrated. The heavy preponderance of
growing and handling costs as compared with all other expenses,
exclusive of freight, places a heavy responsibility upon association
directors and managers to see that best possible results are achieved.
Nearly all of the grower associations and associated shippers today
operate production services for the members or affiliates. In this man-
ner the small grower-member of an efficiently operated association is
enabled to increase his production of quality fruit with decreased cul-
tivation costs because of the use of cooperatively owned equipment and
cooperatively employed horticultural counsel. In many instances, be-
cause of these services progressively being developed by Exchange asso-
ciations, many small growers today enjoy production costs formerly
possible only to the largest grove operators.
Packing Costs Increase
Packing costs in general increased this season because of the freeze.
Shorter volumes of necessity increase unit costs of handling. In addi-
tion, however, much more work was necessary to pack a box of ac-
ceptable quality: damaged crops which showed substantial percentages
of acceptable fruit had to be picked in their entirety, hauled to the
packing house and graded out. Frequently the pack-out of such crops
was 75 per cent and less of the total. Yet this reduced percentage was
forced to bear the costs of handling the entire crop.
Based upon weighted average costs for oranges packed in standard
boxes for six representative packing houses shipping through the Florida
Citrus Exchange, materials, labor and other direct costs showed slight
increases over last season but remained lower than the 1937-38 season
where volumes were comparable. Indirect and fixed costs, however,
reflected a substantial percentage of increase.
These increases should in no way be considered a reflection upon
the efficiency of the association. They represent the unavoidable
higher unit cost caused by lower volumes and increased handling. Un-
doubtedly next season will see a return to the lower costs previously
enjoyed if no climatic catastrophere again occurs to hamper efficient
The comparative details for the past three seasons are tabulated
on the following page:
CONSOLIDATED STATEMENT OF OPERATIVE COSTS
For Past Three Seasons
Six Large Associations
Based on Oranges-Standard Boxes
Per Box Cost
Estimated Actual Actual
Expense 3/31/40 Season Season
Materials 28.$8c 27.95c 28.95c
Labor 14.74 14.50 15.39
Other Direct Costs ... -.. 2.32 1.87 2.39
Indirect Costs 5.23 3.46 4.49
Fixed 7.06 4.13 $.50
Total 57.93c 52.11c 56.72c
Sales Costs Again Reduced
During the 1939-40 season the Florida Citrus Exchange operated on
the lowest retain in its history-8c on oranges and tangerines and a
sliding scale of from 5c to 8c, depending upon price, for grapefruit.
This reduced retain would have been adequate to handle the expendi-
tures of the organization which were curtailed this season over last.
The freeze, however, upset all budget calculations by restricting
the movement on which retain was assessed. The organization, there-
fore, will have a small operating loss for the season.
The farsighted policy of the Board and executive officers in estab-
lishing a reserve for such contingencies showed itself in good stead.
Sales work was continued without loss of any essential marketing
action and without necessitating an increased retain to cover the cost
of this continued sales service.
Tonnage Increases for Coming Season
This efficient and productive cultural packing and sales service
rendered by the Florida Citrus Exchange system already is attracting
new members for the coming season. These signups are in advance
of the usual period for such affiliations. They will be augmented
somewhat by the activity of association managers who desire to include
selected acreages in their respective districts in order to round out their
volumes and varieties.
Summarized by districts with all associations reporting, these in-
creases of membership and acreage are tabulated below:
District New Members New Acreage Probable Withdrawals Net
Signed Prospective Signed Prospective Addition Gain
No. One 52 38 800 780 1,580 200 1,380
No. Two 44 41 1,347 2,070 3,417 247 3,170
No. Three 32 14 780 375 1,155 85 1,070
No. Four 57 1,473 1,473 187 1,286
Total 185 93 4,400 3,225 7,625' 719 6,906
DISTRIBUTION OF DELIVERED
FLORIDA FRUIT PRICES
Based on All-Auction Averages
FOR SEASONS 1938-39 AND 1939-40
. NM. -Ti, _.. __.. ..-- -....
o fmi-iii-i lii -dH, En _. -...... _.
tests mo d"e nht
FX X 4
SALES AND ADVERTISING
During the season 1939-40 through May 18, the Florida Citrus
Exchange handled the sale by rail, boat and truck of 9,252 cars of
oranges, 5,900 cars of grapefruit and 1,155 cars of tangerines. This
represents a total of 16,307 cars.
Of this volume 6,972 cars, or 56.8 per cent, were distributed to
the largest concentrations of populations in the country through auc-
tions. Private sales accounted for 5,159 cars, or 43.2 per cent. This
total of 11,951 cars represent the fruit actually moved into interstate
commerce by and through the Sales Department. It does not include
sales made locally by associations, sales to canners, government pur-
chases or sales made directly from the tree to speculators.
Exchange Returns Substantial Premiums
In selling fruit any legitimate operator can get the market for the
grades and sizes at the time the fruit is sold. Superior grade and pack,
extra sales service, reputation of brands and trade-marks-in other
words, all factors creating trade confidence-bring a premium above
the market and determine the character of a sales agency.
The only basis on which such comparisons may be made accurately
and in detail are from the public records of auction sales. Based upon
these data, a comparison of Exchange sales averages by varieties and
containers as compared with all competition, reflects just such a pre-
mium over the market. It should be observed that this higher average
return while possibly not appreciable in percentages, represents a
weighted season average and for total volumes, therefore, amounts to
substantial total increases in returns.
Observe in the chart opposite that these premiums range as high as
35c per box as an average premium obtained by the Exchange over
all outside competition in the sale of pineapple oranges. Other com-
parisons reflect similar favorable returns.
In this connection, if it were possible to make similar comparisons
reliably on f.o.b. sales, it is believed that Exchange margins would
show up to even greater advantage. It is generally conceded that the
Florida Citrus Exchange receives the refusal of at least 75 per cent of
the f.o.b. business available to Florida fruit at given prices. Much
of this business is lost to competition because of the refusal of the
Sales Department to confirm sales on cars of members' fruit as long
as there is a possibility of getting even a nickel more.
This situation accounts for the fact that Exchange marks set the
standard for Florida fruit in practically all markets. Exchange quota-
tions, as quickly as learned by competition, are used as a basis from
which prices are cut in attempts to close the business.
EXCHANGE AVERAGE PREMIUMS
BY VARIETIES AND CONTAINERS
SEASON 1939-40 THROUGH MAY 1
(Interior Fruit Only)
All-Auction Average Price Per Box -
.50 41.0o $1.0so 2.00 *2.50 $3.00
- XCH O $2,25
Florida Limes Increase
The Florida Citrus Exchange began handling limes for its grower-
members two years ago. This business increased substantially last
season but will be reduced in volume during the coming summer period
because of freeze damage.
Florida limes are becoming an increasing factor in the citrus deal.
It is probable that eventually they will reach important commercial
proportions. The shipping season begins in May and extends through
the summer to the latter part of October and into November. Dis-
tribution has been general and trade interest substantial.
Dealer Service and Advertising
Wholesale and retail contacts in important markets by our dealer
service men were continued by the Florida Citrus Exchange throughout
the season. This type of work following the freeze became even more
important to acquaint the trade as fully as possible with the depend-
ability of Exchange grades and packs.
A total of twelve men were used on this type of work this season.
This group made approximately 7,500 calls on the key wholesalers
and retailers in 204 cities.
In addition to missionary and sales work, these men installed window
and wall displays and, wherever the outlet justified such action, pro-
vided a demonstration display in which fruit was cut, juiced and sam-
ples passed out to consumers.
The display material used features the Seald-Sweet trade-mark and
consists of one and two-sheet posters, wall posters, clusters, price cards,
display bins, et cetera. It was supplemented by a liberal use of com-
modity material obtained from the Florida Citrus Commission. Used
in conjunction with our own material, it forms an excellent decorative
background to our own and represents a considerable saving to the
The Board of Directors approved a policy looking toward the de-
velopment of district advertising featuring Exchange trade-marks in
conjunction with district or association brands. These campaigns
were operated with funds, two-thirds of which were provided by the
district or association originating the campaign and one-third by the
Florida Citrus Exchange. In every instance the executive officers
approved the details and expenditures of the operation.
In line with this policy the Florida Citrus Exchange participated
in several campaigns for individual districts and associations which
assessed themselves to cover their costs of this individual market
development work. These campaigns included the use of radio, news-
papers, posters and other media in these markets. In all instances the
trade-marks of the Florida Citrus Exchange were included as an integ-
ral feature in the campaigns.
During the past year the Law Department of the Florida Citrus
Exchange, aside from routine matters, has been forced to continue and
increase its service to Exchange affiliations in the legal field. The
entry of government into control of agricultural business and labor
has caused a heavy and increasing volume of work to the organization
in this connection.
Prior to the passage of the 1939 amendments to the Social Security
Act the Law Department had been unceasing in its efforts to have the
cooperative grower exempted from the taxing provisions of the Social
Security Act. This would place him in the same competitive position
as the individual grower who admittedly was exempt.
With the passage of the 1939 amencdmnts to the Social Security
Act, becoming effective January 1, 1940, all grove and packing house
labor, except clerical help and paid officers in the packing house, be-
came exempt. Every effort is now being made to obtain a refund
of all taxes paid to the Federal government and to the State of Florida
during the years prior to January 1, 1940. If such refunds are not
made voluntarily, the Law Department is determined to test the mat-
ter in the courts.
Exchange general counsel joined with counsel representing other
interests in the industry in an effort to obtain a judicial determina-
tion of the validity of the definition of "area of production" under
the Wage and Hours Act. A temporary injunction restraining the
application of the Wage and Hours Act to the Florida citrus industry
was obtained in the lower court. Upon appeal, however, the appellate
court ruled that the lower court did not have before it the responsible
parties (the Administrator of the Wage and Hours Act and the At-
torney General of the United States) who should be enjoined.
A public hearing was held before the Administrator in Washington
early in May, 1940, for the purpose of determining whether the present
definition of "area of production" should be modified. There is justi-
fication for the feeling that the Administrator will try to give the
industry relief from the maximum hours provision of the Wage and
The Law Department has worked closely with the executive offi-
cers of the Florida Citrus Exchange in an effort to obtain reimburse-
ments for the losses suffered by the Exchange, the Growers Loan and
Guaranty Company and the Guaranty Operating Company as a result
of the unwarranted and unprecedented conditions imposed by the
Federal Farm Board at the time it made a loan to Exchange affiliates.
There is now pending in the Congress of the United States a bill de-
signed to grant unto the injured parties, including the Exchange, the
relief to which they are entitled.
A complaint under the Federal Perishable Agricultural Commodi-
ties Act was prosecuted successfully by the Law Department. This
success had a very salutary effect upon the trade in the area where
the complaint was made.
Further refinements in and experiments with the juice vending
machine have required the Law Department to devote considerable
time to the legal matters necessarily involved.
The Florida Citrus Exchange operates its own Traffic Department
to handle routing, diversions, billing, et cetera. This work is directed
by a manager who actively works with other traffic representatives
in the industry. The rate reductions and other improvements in the
handling of citrus traffic obtained through his efforts are, of course,
common to the entire industry The Florida Citrus Exchange, because
it is a growers' organization and the largest operator in the industry,
is forced to assume the lead in much of this work. The not incon-
siderable expense also is included in the general sales retain.
Zoning and Reductions
The chief obstacle hampering free distribution of Florida citrus in
the Southeast prior to the beginning of the present season has been that
Florida's northern zones did not extend to the Ohio River. As a result,
it was prohibitive to divert a rejected car of 200 boxes to the Cincin-
nati auction for a quick sale.
This matter was handled forcibly with the rail carriers who were
finally prevailed upon to establish Zone Seven. This takes in the ter-
ritory between the north border of the former zones and the Ohio
River from Memphis to Ashland, Kentucky. In this zone a 2 per cent
reduction was obtained on the normal rates. It opened a number of
additional markets at the lower 200-box car minimum and the lower
A further rate reduction was obtained for the Memphis territory
from the 15 per cent below normal rates formerly in effect to a present
reduction of 35 per cent.
Direct Line Movement
Some two years ago the Interstate Commerce Commission issued
an order to railroads to develop a plan whereby commodities must be
moved in a reasonably direct line from origin to final destination. They
threatened even to designate direct routes by which commodities must
move from a given origin to a certain destination. This order by
the Commission was made to establish additional economies of opera-
tion for the rail lines.
Apparently, however, no thought was given to the subject from
the standpoint of the distribution of perishables. This angle, of course,
is vital to our industry and presented a considerable problem in the re-
After many postponements the Commission finally instructed that
some action to comply with the order be taken without further delay.
In compliance and after several conferences between carriers and ship-
pers, a plan was adopted providing for presentation to the Commission
by the rail carriers of the explanation for the necessity of latitude in
routing privileges for marketing perishables. The suggestion was
made that out-of-route mileage be allowed up to 33 1/3 per cent for
destinations not exceeding one thousand miles and 50 per cent for
greater destinations. This proposal finally was accepted by the Com-
mission. It has produced satisfactory results and has not curtailed
our distribution in the least.
Western Rate Contingencies
In November, 1939, rail carriers made a reduction of 17c per cwt
to the Pacific Northwest. In the same action a like reduction was
granted Texas with the result that Texas still holds a 16-cent advant-
age over Florida.
In December the Texas industry filed three applications for lower
rates to the East. The first, for a lower all-rail rate to the territory
north of the Ohio River; second, truck-boat-rail through Mobile to
the same territory; third, truck-boat-rail through Mobile to the
southeastern territory which also carried the possibility of distribution
by truck beyond Mobile. The Florida citrus industry opposed these
three applications and finally succeeded in defeating all of them.
At the beginning of the season the GM&N and M&O railroads filed
application to make the reduced water-rail rates through Mobile apply
on grapefruit as well as oranges. This proposal failed. The GM&N,
M&O, Burlington and Wabash then took independent action. This
had the effect of making these rates on grapefruit over their lines apply
the same as on oranges.
The Florida industry has been handicapped badly in selling interior
points in New York, New Jersey, Pennsylvania and Maryland. The
rail rates to these interior points were excessive in comparison with
water-truck rates. As a consequence, carlot sales were very few in
number. The supply for these interior points was handled almost ex-
clusively by truck from shipside.
Florida traffic representatives finally convinced their initial rail
lines of the serious need for lower rail rates to these points. These
initial lines have made application to reduce the rates approximately
14c. The application has passed the Southern Freight Association and
is now before the Freight Association of the northern lines which will
Lower all-rail rates to eastern Canadian points to compete with
water-truck rates finally were secured. This secures for the Florida
citrus industry a reduction of approximately 12c to such destinations.
Florida's reparation case was decided in its favor this season. This
decision was appealed immediately by carriers and decided in Florida's
favor the second time. On the plea by carriers concerning the dis-
covery of error in original cost sheets, carriers then appealed the third
time. Our proof of loss has been put into evidence and the third
appeal argued. No decision has been handed down by the Commission
on this last appeal.
During the past season the Florida Citrus Exchange Traffic De-
partment completed and published, with the cooperation of our Print-
ing Department, a perpetual rate guide. This useful reference was
accomplished without additional help or extra cost to the Exchange.
This method of handling resulted in a saving of approximately $2,000
to the organization.
NEW METHODS AND USES
Since the creation of the Florida Citrus Commission and the adver-
tising fund committed to it, the Florida Citrus Exchange has protested
that a substantial percentage of this money be expended to find new
uses for Florida oranges and grapefruit and new methods of making
these fruits and juices available to the consumer. This included the
development of a juice extractor which would function satisfactorily
and with equal facility on Florida oranges and grapefruit as discussed
elsewhere in this report.
The elimination of Florida surpluses to relief,- by-products and
other sources does not relieve the necessity to get the average consumer
to drink two oranges where before he has used only one. That crop
control is not self-sufficient is being recognized by experts in the
United States Department of Agriculture in the development of their
stamp plan for cotton which is designed primarily to increase con-
In recognition of this merchandising necessity placed upon the Flor.
ida industry by ever increasing volumes, the Florida Citrus Exchange
*Washington Merry-Go-Round, April 29, '40-EXIT TUGWELL THEORY:
Nobody in the Agriculture Department admits it yet, but actually the cotton stamp
plan marks an important departure from the original Tugwell-Wallace theory of
restricting acreage. Instead of growing less cotton and boosting the price, the effort
will be to use more cotton.
What Wallace's experts have been up against is first the fact that Brazil, Argentina
and Peru are cutting in on the curtailed American market. Second, war-born pur-
chases are bound to decline. Thus no amount of acreage reduction'can solve the
problem of surpluses-especially when yield per acre continues to increase. The
only alternative is to put an extra shirt on the backs of about 10,000,000 persons
who live in the domain of King Cotton. In this case cotton can remain king.
The SEALD-SWEET Fountain o' Health
Here is one of the five machines used in the Chicago service and sales test. The
customer's nickel makes the contact, a chilled orange drops from the refrigerated
compartment at the top of the machine, falls in the waiting mechanism which cuts
the fruit in two, extracts the juice from each half, strains it into the cup brought
into position from the holder and pushes the filled cup forward through the small
gate above the cup disposal receptacle. The well-illuminated machinery attracts
the eye and intrigues the customers with,its. premise movements. Automatically self-
cleaning and under constarn.rAfriger&tion, it* capable of serving one customer
every 27 seconds. .* .
:-* '"* 5 .... .
S -** ** 25 *
". ; : :" : :.:. .- ."..'
has been attempting in part to do some of the things which the Florida
Citrus Commission should do for the industry with industry funds.
This work during the past few seasons has included the development
of dried cereal made from oranges in combination with grain flours.
The Exchange spent considerable energy and some money in the de-
velopment and perfection of this product. It is possible that it will
come on the market within a reasonable length of time and provide
an additional outlet permitting diversion of fruit from fresh fruit
channels into non-competitive consumption.
Still acting on this policy, the Florida Citrus Exchange has spent
considerable money and effort in the development of an automatic
fresh orange juice vendor. This machine proposes to dispense in a
clean and sanitary manner a drink of freshly squeezed, pure orange
juice at the price of 5c. Its design makes it acceptable to centers of
consumer pedestrian traffic where convenience of access at the time
of desire becomes a principal appeal in the sale.
Five of the Seald-Sweet vendors have been built by the Ex-Cell-O
Corporation at Detroit. They were placed in the hands of the Auto-
matic Canteen Company of America for use in Chicago. They are
being transferred from location to location to assemble dependable
data upon their acceptance by the consuming public.
These machines are meeting a very favorable reception from the
general public. For example, one large printing concern which operates
on a 24-hour basis requested that one of the machines be placed in the
men's recreation room-a combination pool room and cafeteria. Dur-
ing the three weeks' period to the date of latest information, an average
of 3,500 oranges per week were sold by the machine. So popular has
the vendor become with the employees of the organization that its
officers have requested the installation of an additional machine in the
women's rooms in the building.
These early and admittedly incomplete data from the Chicago
proving grounds are at least an indication that the citrus industry has
no more than scratched the surface of its fruit drink market. It is
hoped that this machine will permit it to share a substantial proportion
of the soft drink market now enjoyed by synthetic concoctions of
And the soft drink field is a tremendous business in the national
market today. The retail value of soft drink sales during the year
1939 is reported to have been in excess of 750 millions of dollars. As-
suming that each of these drinks averages six ounces which is the
volume of the familiar Coca-Cola bottle, this represents the consump-
tion of over 700 million gallons of synthetic drinks. Considering an
effective yield of four gallons of juice per box of fruit, this market
reflects a potential for 175 million boxes of citrus.
It remains for the industry to develop ways and means of tapping
this huge market. The Florida'Citrus -Exchange has taken the lead
in making headway in.t h d diieitibn." : ...
.^ 26 '.. :
.... .' *
.** *. *<.. .* *.
CITRUS SHIPMENTS FROM MAJOR PRODUCING SECTIONS
ORANGES, GRAPEFRUIT AND TANGERINES, IN CARLOTS
As of May 18th
STATE 1939-40 1938-39 % INCREASE % DECREASE
Florida (1) 70,340 92,770 24.2
California (2) __ 34,252 30,552 12.1
Texas (1) ... 23,481 27,199 13.7
Arizona (2) 1,703 1,420 19.9
Others (2) 5. 12 231 77.5
TOTAL ..-..... 129,828 152,172
(1) Rail, Boat and Truck.
(2) Rail only.
CALIFORNIA RAIL SHIPMENTS BY VARIETIES IN CARLOTS
As of May 18
SEASONS ORANGES GRAPEFRUIT TOTALS
1939-40 33,390 862 34,252
1938-39 29,737 815 30,552
Increase 3,653 47 3,700
TEXAS RAIL, BOAT, AND TRUCK SHIPMENTS IN CARLOTS
As of May 18
SEASONS ORANGES GRAPEFRUIT TOTALS
1939-40 5,183 18,298 23,481
1938-39 6,262 20,937 27,199
Decrease 1,079 2,639 3,718
FLORIDA RAIL, BOAT, AND TRUCK SHIPMENTS
CARLOTS BY VARIETIES AS OF MAY 18, ENTIRE STATE AND
Shipper Seasons Oranges Grapefruit Tangerines Totals
Florida Total --..-..-..-... 1939-40 49,460 15,598 5,282 70,340
1938-39 59,990 25,125 7,655 92,770
Decrease 10,530 9,527 2,373 22,430
Exchange -------. --.----. 1939-40 9,252 5,900 1,155 16,307
1938-39 10,797 7,419 1,743 19,959
Decrease 1,545 1,519 588 3,652
Summary of Distribution as of May 18
1939-40 1938-39 DECREASE
Number of States distributed to ................. --- 43 44 1
Number of Canadian Provinces entered ....... 6 5 1
Total number of markets entered ........_........ 284 300 16
Number of new markets entered .-...._...- 71 89 18
Total number of customers sold .---------.... .. 622 696 74
Number new customers sold 207 291 84
GOVERNMENT PURCHASES FOR RELIEF PURPOSES
As of May 18, 1940
Florida Oranges .--....... 2,105 Cars
California Oranges .... 963 Cars
Following is the Florida, California, and Texas auction averages to date as of May
18th, Seasons 1939-40 and 1938-39.
STATE VARIETY AND SECTION 1939-40 1938-39
FLORIDA Interior Oranges Standard Boxes ............ $2.28 $2.02
Interior Oranges Bruce Boxes --..... .. 2.16 1.92
Indian River Oranges Std. Boxes --..-...... 2.76 2.31
Interior Seed Grapefruit Std. Boxes ...... 1.93 1.70
Interior Seed Grapefruit Bruce Boxes ...- 1.63 1.35
I. R. Seed Grapefruit Std. Boxes -........ 2.19 1.77
Interior Seedless Grapefruit Std. Boxes .... 2.05 1.75
Interior Seedless Grapefruit Bruce Boxes 1.77 1.52
I. R. Seedless Grapefruit Std. Boxes ....- 2.59 2.04
*Tangerines All Sections 2.74 2.00
CALIFORNIA Oranges 2.92 2.72
TEXAS Grapefruit (Seedless) 2.03 1.87
*Full Box Basis.
i-' &63 bI
Supplemental Traffic Report
Since this Report went to press, additional progress was
made in the citrus traffic matters discussed on pages 23 and
24 under the sub-heads "Eastern Reductions" and "Refrigera-
The Freight Traffic Managers Committee of the trunk
line association approved the proposal of the Southern Freight
Association for a reduction of present rates to territory in-
cluding interior markets in New York, Pennsylvania, New
Jersey and Maryland. Rail rate reductions to these points
of approximately 14c have been obtained through this action.
The Interstate Commerce Commission again re-affirmed
its findings in the original reparation complaint filed several
years ago. This decision awards Florida shippers reparation
on these rates with interest from the dates the charges were