EMPIRICAL ANALYSIS OF THE FRESH TREE FRUIT MARKET

YUNFEI ZHAO

This dissertation is composed of three studies. First, fresh tree fruit demand at the farm gate is modeled to estimate price elasticities and export elasticities. Second, fresh fruit demand is estimated for the consumer using micro-level data, improving understanding of consumer behavior on purchases of conventional and organic fruit. Third, production forecasts of apples are evaluated, price reactions are examined, and storage demand is estimated. The first study models demand for fresh fruit (apples, cherries, pears, and peaches/nectarines) during the years 1970-2008 at the farm gate level, based on a multiple-output-multiple-input translog cost function, treating domestic and international quantities as outputs. Data are annual at the national level for the United States. The results indicate that demand for cherries, pears, and peaches/nectarines is most sensitive to apple price and apple exports. Moreover, apple demand is less sensitive to price and export of other fruits. Seasonality and regional effects, as well as market share, help explain asymmetrical measures of economic responsiveness. The second study estimates an almost ideal demand system for fresh fruit (apple, cherry, pear, other fruit, and organic fruit) using household scanner data in 2005. Findings indicate that cherry, pear, and organic fruit have larger own-price elasticities than apple and other fruit. The results show that as the price of organic fruit decreases, then the demand for cherries and other fruit decreases and the demand for apples actually increases. Furthermore, we compare two competing estimators (maximum likelihood and expectation maximization) using Monte Carlo simulations The final study evaluates USDA production forecast of apples and price reactions in period years 1998-2010, as well as models storage demand relations in years 1980-2010. Forecasts of the apple market reports are found to be rational and efficient. The price response to production forecast is found to be significant, according to both a constant mean return model and a generalized randomized complete block model. The estimated results from storage demand show that crop size has a positive impact on storage demand; storage cost and interest rate have a negative impact on storage demand.

EMPIRICAL ANALYSIS OF THE FRESH TREE FRUIT MARKET

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