THE $ARGAINENG POTENTFSAL IN THE éiiliCHfiGflJ‘é ASPARAGUS ENDUSTR‘? Thesis for tho Dogma cf Ph‘ D. MICHIGAN STATE UNNERSETY Lowe]! D. HHS E963 This is to certify that the thesis entitled THE BARGAINING POTENTIAL IN THE MICHIGAN AS PARAGUS INDUSTRY presented by Lowell D. Hill has been accepted towards fulfillment of the requirements for Ph.D. degree in Agricultural Economics / .f (- LL‘J-(LL) L Major professor \_ / / L II: I" L. \‘L-4 ) I (3', J /r/,d-t1: Date December 9, 1963 0-169 LIBRARY Michigan State University OVERDUE FINES: 25¢ per day per item RETURNDKS LIBRARY MATERIALS: _._________________________. Place in book return to remove charge from circulation records 2.!- is _ . LA, . ,q :=\ ' ‘ ' ~. .1 mini; T- “- f.‘ 37,211”! - Illlllllillllflillil r .m F98 ‘ as?" 4.1% geJULZ'aiw N L. ‘2? <‘ , W “cm? 52 5522 c t) '\,xl ABSTRACT THE BARGAINING POTENTIAL IN THE MICHIGAN ASPARAGUS INDUSTRY by Lowell D. Hill The Michigan asparagus industry has been involved in a series of organization and bargaining attempts through three decades. ‘With the merging of the state association with Michigan Agricultural Cooperative Marketing Association (an affiliate of Farm Bureau) interest in bargaining has been renewed. The purpose of this study is to evaluate the potential that exists in the industry for a bargaining association in particular, and for an organization of growers in general. The approach is one of a problem solving framework in which the existing environment is related to the problem of forming an organization of growers. Three aspects of the environment are assessed in terms of their effect upon the potential for group formation: (1) economic environment. (2) institutional environment, and (3) attitudes of growers and processors in the industry. Statistical analysis of secondary data provided sub- stantiation of the theoretical models of supply and demand. The lack of accurate data prevented the desired degree of Lowell D. Hill refinement in the statistical analysis, but provided esti- mates of elasticity of supply and demand. Due to the cultural characteristics of asparagus, supply is highly inelastic in the short run. Using the length of harvesting season as an intermediate variable in a recursive system. price elasticity of supply was estimated as .l at the mean values of price and quantity over the observation period from 1947 to 1962. Price elasticity of demand was computed as -.15 at the mean values, substantiating a hypothesized inelastic demand curve. Two income elasticities were computed-—one for transitory income changes and one for a permanent income trend. The transitory income elasticity was computed as .0098 using income as deviations from a time trend. An elasticity of permanent income of .4 was obtained from the trend in income. Using cross sectional data the elasticities ranged as high as 1.2 at the $3,000 level. The institutional environment of importance to organization includes the concentration of processing among a few firms, the dispersion of production among many small growers, an oligopsony relationship in purchase of the raw product. and a competitive framework in the sale of the finished product. The attitudes of growers toward organization was explored first in an historical perspective, tracing organizational development from the early 1900's to the present. With this as a background, present beliefs and values were assessed by means of a mail survey of growers. Lowell D. Hill One of the pertinent facts revealed was the lack of dis- satisfaction with current prices being received. Thirty- seven percent of the respondents indicated that they con- sidered present prices to be fair to both grower and processor. The number of growers specifying 15 cents or below as a fair price was approximately equal to the number of growers specifying a price above 15 cents, for the 1963 crop. Considering the historical record of unsuccessful bargaining attempts and current attitudes of respondents towards possible success of bargaining, alternative focal points of organization appeared to offer a better basis for group action at the present time. An exploration of pro- cessor attitudes and their relationship with their growers, indicated a limited opportunity for joint grower-processor actions to further the welfare of the industry. Grower interest was favorable to having an organization which would provide them with a source of information on markets and production techniques. This interest should be exploited as a means for increasing membership for. given the economic and institutional environment in the industry, there exists only a limited potential for successful bargaining for price, at the present time. The potential supply response of Michigan growers. the availability of supply in other areas, the structure of the processing sector, and the general satis- faction of growers with current prices, all indicate the limited support which a bargaining organization could expect. Lowell D. Hill This does not preclude the possibility of building a base for such an organization in the future through improving grower-processor relationships. and gaining grower support by designing the organization to meet the current needs of growers and enlarging the membership base. THE BARGAINING POTENTIAL IN THE MICHIGAN ASPARAGUS INDUSTRY BY Lowell D. Hill A THESIS Submitted to Michigan State University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY Department of Agricultural Economics 1963 PREFACE This study of the Michigan asparagus industry was undertaken with a duality of purpose: (1) to analyze a specific problem whose solution is of immediate concern to members of an industry and may be direchy applied by the interested persons. or (2) to extend existing knowledge and theory and/or develop new theoretical concepts. The unique characteristics of the crop require extensions of the exist- ing theory of economics and application of these principles to the problems of pricing, spatial adjustments, and organization in the industry. At the same time the demands by the industry for problem solutions provide an opportunity for a contribution to this segment of agriculture by a problem solving orientation. While this study is problem oriented, certain theoreti- cal concepts are necessary in defining the problem and in providing a basis for the analysis. These concepts must be developed in sufficient detail to enable their appli- cation to the problems whose analysis has been undertaken. The organization of the material is such as to permit deletion of the theoretical portions without losing the flow of ideas for the lay reader. At the same time these deleted sections must form an integral part of the study for those interestedvin the more theoretical aspects of the problem. ii This analysis of the asparagus industry has relied heavily upon the deductive process, for the paucity of recorded data has provided little basis for inductive reasoningfrom statistical relationships. The statistical analysis has provided supporting evidence for the deductive hypotheses, as has personal observation of various facets of the industry. Utilizing existing theories from several disciplines, low level hypotheses have been deduced and empirically tested insofar as available data would permit. I wish to acknowledge the contribution made to this study by industry personnel--especially those growers and processors who provided me with data and an under- standing of the industry. To Dr. vernon L. Sorenson I owe a debt of gratitude for his professional guidance throughout the study and his patient critiques of many experimental formats and outlines. Dr. Manderscheid, Dr. Pesek, and Dr. Stapleton also made valuable contributions. This research was conducted with the financial support of the Department of Agricultural Economics under supervision of Dr. L. L. Boger. To him I extend a special thanks for his personal encouragement and advice throughout my academic career at Michigan State University. Words cannot encompass the contribution made to this study and my graduate program by Betty Becky and Brent, for without their assistance and support it would not have been possible. iii Much of this study has been dependent upon contributions from many sources but responsibility for errors or deficiencies lies entirely with the author. iv TABLE OF CONTENTS Chapter Page I. THE PROBLEM AND ITS SETTING . . . . . . . . . 1 Objectives of the Study 2 Unique Characteristics of the Asparagus Industry 3 Approach to the Study 4 II. THE GENERAL ENVIRONMENT OF THE INDUSTRY . . . 7 Regional Production Patterns and Shifts 7 Regional Differences in Production Techniques and Farm Organization 9 Marketing Patterns 12 Grower Organizations 15 Consumption Characteristics 16 The General Environment in Bargaining Perspective 18 III. ASPARAGUS PRODUCTION IN MICHIGAN . . . . . . . 20 Organization of the Michigan Industry 20 Intercrop Relationships 20 Historical Development of the .Michigan Industry 23 Cultural Characteristics of Asparagus 28 The Place of Asparagus in the Farm Organization 33 The Harvesting Process in Michigan 34 Production Trends and Prediction 35 Michigan Farm Prices 43 The Theoretical Analysis of Supply 46 Short Run Supply 48 Long Run Supply Analysis 61 Summary and Implications 66 Chapter IV. DEMAND AND MARKET RELATIONSHIPS Description of the Market Organization and Operating Practices in the Michigan Processing Industry The Marketing Channel Consumption Relationships in the Asparagus Industry A Theoretical Analysis of the Market Consumer Demand Predicting Wholesale Prices of Canned Asparagus The Relevant Variables Summary and Implications V. ORGANIZATION WITHIN THE INDUSTRY . . . . . . A History of Organization in the Michigan Asparagus Industry Producer Characteristics And Attitudes Which Influence Group Action Grower Group Benefiting from Organization Effect of Organizational Form on Farm Income Objectives of the Organization The Price Bargaining Objective Advertising Objective Restriction of Supply by the Organization Importance of Asparagus in the Cropping System Grower-Processor Relationships in the Industry Criteria for Selecting a Processor Grower Loyalty to a Specific Processor Grower Processor Organization Grower Estimates of A "Fair Price" vi Page 68 68 68 75 84 88 88 94 94 99 102 102 114 116 119 120 123 124 125 128 129 129 130 133 134 Chapter Page VI. RECOMMENDED ACTIONS FOR THE INDUSTRY . . . . . 137 The Approach to Organization 137 Possible Objectives for a Growers Organization 140 Limitations to Organization 143 Economic Limitations 144 Institutional Limitations 146 Limitations Imposed by Grower Relationships 148 A Possible Basis for Effective Action by a Growers' Organization 150 BIBLIOGRAPHY . . . . . . . . . . . . . . . . . . . . . 155 vii 8. 9. 10. ll. 12. 13. 14. LIST OF TABLES Distribution of asparagus production between fresh and processed markets . . . . . . . Asparagus--frozen pack, United States by region, 1950-61 . . . . . . . . . . . . . . . . . . Farms reporting asparagus production and number of acres by census years . . . . . . . . . Investment necessary to bring one acre of asparagus to bearing age . ... . . . . Acreage changes, 1959-63, as reported by survey reSpondents . . . . . . . . . . . . . . . . Raw product price quotations by nine Michigan processors, 1963, in cents per pound . . . . Regional consumption analysis for 1961 . . Consumption of canned asparagus by income group. Asparagus—-civilian per capita consumption of commercially produced, fresh and processed, United States, 1937-1962 . . . . . . . . . A comparison of estimated Michigan wholesale prices with actual prices May 1, 1954-62, dollars per dozen 300ls . . . . . . . . The relationship between farm size and asparagus acreage, and respondents' belief as to which group benefits from organization Tabulation of responses to the question, fTo what extent will each of the following activities increase farm income?? . . . . . Number of respondents selecting alternate objectives for organization . . . . . . . . Attitudes of respondents toward advertising viii Page 13 14 26 49 63 71 79 85 87 98 118 119 121 124 Table l Page 15. Acreage reduction for a guaranteed price compared to selection of supply control as an organizational objective . . . . . . . 127 16. Criteria for selection of processor . . . . . . 130 17. The relationship of criteria for selecting a processor and the processor selected . . . . 131 18. Grower support required for bargaining success, classified by size of processor to whom sold . . . . . . . . . . . . . . . . . . . . 133 19. Frequency of cultural practices related to level of fair price specified by growers . . 135 ix LIST OF FIGURES Figure Page 1. Distribution of production among states, 1950 and 1963 . . . . . . . . . . . . . . . 8 2. Concentration of asparagus production, cumulative percentages of total United States commercial production by number of states producing . . . . . . . . . . . . 10 3. Comparison of United States and Michigan changes in production of horticultural crops 21 4. Acreage of asparagus and percent of state total, Michigan, by counties, 1959 . . . . 24 5. Acreage of asparagus and percent of state total, Michigan, by counties, 1949 . . . . 25 6. Percent of production by number of producing counties in Michigan: 1929, 1939, 1949 and 1959 . . . . . . . . . . . . . . . . . 27 7. Frequency distribution of 1963 asparagus acreage reported by survey respondents . . 29 8. Acreage and production of processing asparagus in Michigan . . . . . . . . . . . 36 9. Yield of processing asparagus in Michigan, in pound per acre—-1947-1962 . . . . . . . 37 10. Actual and estimated Michigan asparagus production in tons, 1947 - 1963 . . . . . . 42 11. Farm prices for processed asparagus in Michigan, 1947-1962: actual and adjusted to snapped equivalent basis . . . . . . . . . . . . . , 44 12. Actual and estimated farm prices of Michigan asparagus, 1954-62, snapped basis . . . . . 47 13. Total cost curve . . . . . . . . . . . . . . 50 14. Acreage and marginal cost curves . . . . . . . 50 Figure 15. l6. 17. 18. 19. 20. 21. 22. 23. 24. Industry supply curve . . . . . . . . . . . . . Statistical supply curves . . . . . . . . . . . Aggregate acreage response to price changes Long run industry supply curve . . . . . . . . Market regions of the United States . . . . . Determination of market area boundaries by delivered cost equalization . . . . . . . Consumer demand curve . . . . . . . . . . . . . Grower and processor iso-profit curves . . . . Index of gross returns per acre from asparagus, Michigan and average of California, Washington and New Jersey . . . . . . . . . Gross returns per acre from asparagus, Nuchigan and California, 1945-1962 . xi Page 53 58 63 64 80 82 89 163 166 168 LIST OF APPENDICES Appendix Page A. THE EFFECT OF THE SNAPPING TECHNIQUE ON RETURNS TO MICHIGAN GROWERS . . . . . . . . 159 B. THE SURVEY QUESTIONNAIRE . . . . . . . . . . . 170 C. DESCRIPTION’AND SOURCE OF VARIABLES USED IN EQUATIONS 1 THROUGH 9 . . . . . . . . . . . 178 xii CHAPTER I THE PROBLEM AND ITS SETTING The potentialities of a producer oriented organi— zation are usually evaluated within the confines of the theoretical framework unique to the discipline undertaking the analysis. These artificial delineations of a problem are necessary techniques for isolating and analyzing the causal factors which determine the complex interactions of an industry. Such disciplinary categories are too restrictive, however, for a problem-solving approach, attempting to provide directly applicable answers for an industry group. Most problems cannot be entirely encompassed by any one discipline and attempts to so structure them result in a ceteris paribus analysis in which some of the relevant and important variables are excluded from consideration. It is never possible to take into consideration all the variables which are related to a given problem, for any event or situation has an infinite number of characteristics but the effect of many of these character- istics is sufficiently small that no measurable change is evidenced by their exclusion from the analysis. To obtain a workable solution it is only necessary to select a sub- set which includes those variables'whose effects will 1 alter the conclusions to be reached. The difficulty exists in finding that particular combination of variables which meets the above criterion. Objectives of the Study The prdblemsin the Michigan asparagus industry have stimulated discussion and action for a stronger organi- zation of growers as a means for improving the relative position of the growers and also a way to benefit the entire industry. The purpose of this study is to determine the feasibility of organizational activity within the industry and the form which this organization should take. In evaluating the alternatives and the problems to be solved it is necessary to consider the economic environment in which the industry operates, the relationships among growers and between growers and processors, and the characteristics of the institutions involved. The specific objectives of this study are: 1. To evaluate the feasibility of creating and maintaining a produCer organization for the Michigan asparagus industry. 2. To indicate the possible form and purposes of such an organization. 3. To outline some strategies necessary for the success of the organization. 4. To present a methodological technique for evaluating a problem in the context of the entire industry and its internal relationships. Each of these objectives will be met through a total industry approach in a problem solving framework. unique Characteristics of the Asparagus Industry Although industry studies relating to bargaining and group action have been made for other crops, the asparagus industry possesses certain unique characteristics which preclude direct application of the results from these other studies. Since asparagus is the only commercially produced vegetable which is a perennial, its production characteristics and related economic factors are unique among vegetables.\ In comparison with perennial fruit crops, such as apples and cherries, the growth and harvest period, the importance in the farm organization, and the regional production pattern of asparagus, all require a different approach. Whereas fruit crops are usually the primary enterprise in the farm organization, only 49% of the asparagus growers in the producer survey1 conducted as a part of this study, received more than 10% of their income from asparagus. With most producers growing less than four acres, asparagus assumes the role of a crop which provides for a complementary use of labor, land, and management. Its short harvest season practically precludes complete, one crop specialization in Michigan. Labor requirements peak in early spring, prior to demands of most other crops and little labor is needed after July 1. The growth period of asparagus coincides with harvest (all 1Details of the producer survey are discussed in Chapter V and in Appendix B. within a six weeks period) making advance production estimates extremely difficult. The unique characteristics of asparagus also influence the processing sector of the industry, for no other major product competes for labor and plant space during the asparagus season, and procurement methods differ from those of other perennial crops. Interregional move- ments, export trade, and activities of national brand packers would indicate a national perspective for an industry analysis, but the interregional differences in harvesting methods, quality of pack, grade standards, and product form suggest a regional approach to organization. .Approach to the Study While useful comparisons may be made with studies of other crops, the uniqueness necessitates an individual analysis; interpreting principles and generalizations for group action in the light of the botanical, sociological, institutional, and economic characteristics of this particular industry. Using a combination of historical and statistical approaches, the important variables associated with each of these factors will be considered as they interrelate in the Michigan asparagus industry. Much of the material will be presented in an historical setting, for out of the past is formed the present and the future. Chapter II will present a description of the general environment of the industry including the importance of the crop, the trends in production and marketing, and the characteristics of consumers. Chapter III will provide additional descriptive details of production and develop the theory necessary for prediction. Chapter IV will perform a similar function for the marketing sector. It will include a description of the processing firms, an account of the marketing channels commonly used for distribution, and the regional marketing relationships and patterns. The statistical analysis in this study is developed primarily in Chapters III and IV where both structural and predictive equations are specified and discussed. One of the more important determinants of organi- zational relationships in this particular industry is discussed in Chapter V. The Objectives, beliefs, and attitudes of producers have been very influential in the rise and fall of various organizational attempts over the past forty years and will continue to exert an influence on future organizational development. This chapter is developed in two major parts. The first is an historical description of the growth of organizational activities since asparagus was first introduced into Michigan. The second part of Chapter V uses results from a mail survey of growers to analyze attitudes of growers which have been and will continue to be a significant restrictive influence, placing limitations upon the organizational activities which will be initiated, accepted and supported by growers. The final chapter will present the alternative actions and recommendations which have evolved from a simultaneous consideration of the economic, sociological, and institutional factors comprising the industry. CHAPTER II THE GENERAL ENVIRONMENT OF THE INDUSTRY Although the cultivation of asparagus is recorded as far back in history as 200 B.C., large scale commercial production is relatively recent. The rapid expansion of United States acreage from 97,740 acres in 1930 to 160,750 acres in 1959, has precipitated many changes in production and marketing techniques as the industry adjusted to a steadily expanding consumer market. Although this expansion has slowed preceptibly in recent years the industry is still in the process of attaining an equilibrium position within its environment. Regional Production Patterns and Shifts Production shifts continue to change the regional pattern of concentration and, as in many phases of agri— culture, specialization is altering interfarm relationships. While California continues to dominate the market in terms of total volume of production, its position relative to other states has changed in the past decade. Figure 1 compares the percent of the total crop produced by various states in 1950 with their share of total production in 1963. The decrease in California's share of the market has been California New Jersey Washington Illinois Producing State Michigan Delaware 9935. 1950 1963 1950 1963 1950 ; 1963 1950 1963 1950 1963 1950 1963 1950 1963 Figure 1. 101 202 30% 401 50% 60% Percent of total production Distribution of asparagus production among states, 1950 and 1963 Basic source of data: The Almanac, National Canners Association, Washington, D. C. (1950 and 1963) absorbed primarily by Washington and Michigan. Shifts among the other states, while of local significance, have had a negligible influence upon the total industry. Producing areas in the east and midwest have had greater acreage increases than California, resulting in a redistribution of relative production among states. Figure 2 shows the cumulative percent of production plotted against the number of states. The two lines labeled 91ine of equal production in major producing states" and "line of equal production in all states? provide a comparative reference for evaluating the extent to which the present regional distribution pattern differs from that of one where production is distributed equally among states. The relative decline of California in the past decade results in a more equal distribution of the total product among the major producing areas. Even with this decreased concen- tration five states produce nearly 90 percent of all asparagus grown commercially for the fresh and processed markets. Regional Differences in Production Techniques and Farm Organization While asparagus culture is quite similar through- out the temperate zone, considerable regional differences exist in specific production techniques and the farm organization in which the crop is included. The topography of the California region is well suited to production of white, and green tipped asparagus, to large scale operations, and to the use of irrigation. 10 AmonmmH Hmsccdv .U .Q .coumcfizmmz .cofiumwuonmd muoccmo Hmcowumz .omcmEH¢ one "camp meon no o0H50m .mcfiusooum noumum mo Honfidz >n_cowu05ooum Howouofifioo.nounum oouwcb Hmuoe mo oommucoouom o>AHMHSEdU .cowuoaooum mammummmd mo cowumuucoocoo .m ouamflm noumum mcwoaooum mo nonfisz N. : o. a o h o n V n N _ q . . _ q . a . . a a .1 A0 1 I0. I11 monoun Ham ca 1 I c0wuosoouo Assoc mo dawn ION ..on :0? . .. no... ..\ \ l . \\ \ moumun mcwosoouo Honmfi cw e~\ .Luo cowuosooua Hmavo mo mafia moma \R\ I no. 43 -2. 83 x \ 33 ..s\ .. o..m§\. Too \\\ V..\ - .tuna. Too sIIslIIIII-I. all. III."II I.- sIII.l.OI.I .1 .oo. '0 go auaored 'S uoraonpoxa {erorammoo 11 Michigan growers produce only the all green product, in general operate small acreages, and are further dif- ferentiated by their method of harvest. Nearly all of the Michigan production is snapped above the ground resulting in less gross weight but eliminating the necessity of trimming off the fibrous butts prior to processing. .Michigan is the only State where this technique is used extensively. In most regions the spears are cut one or two inches below the ground, although in some localized areas they are cut at the surface--a compromise between the snapping and cutting techniques. New Jersey producers in general are specialized in vegetable crops with fairly large acreages. In contrast, the majority of Michigan growers are diversified into grain and livestock as well as fruits and other vegetables, and tend toward small plots of asparagus where it will complement their land and labor utilization in other enterprises. Much of the Illinois crop is produced under contract or on processor leased land, resulting in highly localized production areas around the processing plants and fairly large acreages. 3 Other regional differences exist in the marketing patterns, the allocation of product between fresh, frozen, and canned markets, and the producer organizational activities. 12 Marketing Patterns The contractual arrangement between grower and processor which exists in Illinois, results in a large proportion of the Illinois production being channeled into processing outlets. The processor is also the major out— let for Michigan--in contrast to New Jersey and Maryland where nearly half of the product is sold fresh, or to Massachusetts where essentially all the crop goes to the fresh market. Table 1 indicates the distribution by state between the fresh and processed markets for the ten year period 1950 through 1959. While state by state detail is not available on frozen pack, the regional analysis in Table 2 shows that the West Coast region accounts for about three fourths of the total frozen asparagus; the midwest only about two percent. The combined pack of Washington and Oregon has averaged about the same total quantity of frozen product as California's, although the total production is only a fraction of the California volume. This indicates that the Washington-Oregon market outlet is primarily in frozen asparagus. The fresh market for the entire United States is divided between California and New Jersey 'primarily on a time differential--California shipping even to East Coast cities until the New Jersey crop comes on the market. washington is the only other State shipping carload lots to points outside their immediate locality, although every producing state supplies fresh product to local markets. The auction system in New Jersey 13 provides even small growers good access to the large chain store buyers. This enables New Jersey growers to compete effectively with the larger farm units of California, for midwestern fresh markets. Table 1. Distribution of asparagus production between fresh and processed markets. Total tonnage and percent in each market by state. 1950- 1959 average. Pro- Fresh cess Total % % tons Michigan 13.9 86.1 7,530 Illinois 18.4 81.6 7,890 Washington 31.2 68.8 17,810 California 33.8 66.2 86,290 Oregon 33.9 66.1 590 Maryland 40.2 59.8 2,390 New Jersey 42.5 57.5 36,220 Massachusetts 100.0 0 1,600 Source of basic data: Agricultural Statistics, united States Department of Agriculture, Washington, D.C. (Annual issue 1952-1962.) The United States export market is primarily for white asparagus. Consequently, although exports run as high as one-fifth of the total United States' pack, this demand is filled almost exclusively by California. In 1960 for example, total United Statesl exports were reported as 2,195,000 standard cases of 24 - #2 cans. California 14 Table 2. Asparagus-—frozen pack, United States and by region, 1950-61.a Region Washing- East and Cali— ton and Year Total Southb MidwestC West fornia Oregon 1 2 3 4 5 6 thousandgpounds, frozen weight 1950 22,309 8,634 784 12,890 5,615 6,904 1951 23,562 10,823 720 12,019 5,028 6,923 1952 25,460 11,284 667 13,509 6,046 7,463 1953 32,945 15,327 478 17,140 8,987 8,153 1954 25,780 11,986 414 13,380 6,472 6,908 1955 28,669 13,492 724 14,453 7,786 6,666 1956 37,674 12,816 2,687 22,171 14,397 7,774 1957e 31,201 10,703 1,312 19,185 10,023 9,162 1958e 24,365 10,080 963 13,323 6,966 6,356 1959 32,739 12,720 861 19,158 10,942 8,216 1960 40,026 14,555 811 24,660 12,660 12,000 1961f 34,028 9,886 650 23,492 13,741 9,750 1962 30,810 8,304 564 21,942 aCommercial pack only. b Includes Alabama, Arkansas, Connecticut, Delaware, Florida, Georgia, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Mississippi, Missouri, New Jersey, New York, Nbrth Carolina, Oklahoma, Pennsylvania, Tennessee, Texas, and Virginia. Nebraska, Oregon, Utah, Washington, cIncludes Illinois, Indiana, Michigan, Minnesota, North Dakota, dIncludes California, eRevised. f Colorado, Ohio,and Wisconsin. and wyoming. Id 3110: National Association of Frozen Food Packers, Food Pack Statistics, 1961 (washington, 1961). Source: Montana, Bain, Beatrice, and Sidney H008, Asparagus—- Processed and Fresh Markets, Economic Statistics for the 1962 Season, California Agricultural Experiment Station, April, 1962, p. 25. Frozen 15 exports from Los Angeles and San Francisco ports only were reported as 1,370,000 actual cases. This would not include California's share of the Canadian market nor California shipments from the East Coast.ports. European markets have traditionally been for white asparagus and California is the only region reporting commercial acreage of this variety. Grower Organizations Growers‘ organizations exist in each of the four major producing regions but their objectives, activities, and strength differ widely and many individual states lack any type of formal organization of their own. until recent years California has operated under a State marketing order which facilitated grower-processor negotiations. This legislation also provided for advertising and promotion contributions, sponsored research, and regulated quantity of production. While a growers' organization still exists, the marketing order has been voted out and the activities of the growers do not include bargaining negotiations. Washington established an organization in 1957 which nego- tiates with processors, prepares grower contracts, and provides market information and other grower services. Processor negotiations in New Jersey are handled by the New Jersey Vegetable Growers Cooperative Association, Inc., which has now merged with the New Jersey Agricultural Marketing Association Cooperative. In addition there is 16 a New Jersey Asparagus Industry Council established by legislation in which promotion, marketing, and research programs are financed by a tax imposed upon growers and processors. The Michigan Asparagus Growers Cooperative Association has merged with the Michigan Agricultural Cooperative Association (an affiliate of Farm Bureau) and present activities consist chiefly of providing marketing information and a liaison between growers and processors for improved grading, and purchasing practices. Each of these four state organizations include some growers from adjacent states, but in general these other areas operate on an individual grower-processor basis without group representation. While part of the differences between organization is a result of basic regional differences in environment and grower needs, much of it must be attri- buted to the exploratory stage of the industry organizations in which the asparagus industry is searching for answers to its complex of problems through trial and error techniques. Consumption Characteristics The preceding description of the industry environment has centered around the production of asparagus. Equally important to an understanding of the industry is the relationship of the finished product to the consumer. Grown originally for its medicinal value, asparagus has always held a unique position among vegetables and many 17 of the industry problems evolve from this uniqueness. Its unusual flavor, an image of a "company dish,” and a high retail price, combine to restrict consumption to a specialized market. A pilot study of consumer motivations toward asparagus emphasized this uniqueness in its findings.1 Three conclusions specified in the study help to illustrate this point. (1) 9Asparagus is 'different' and 'unique' —- and therefore 'controversial.‘? (2) "Asparagus is elegant to the sophisticated, alien to the many." (3) ”Asparagus tends to invite extreme reactions.? As a result of these characteristics, asparagus is purchased by a small number of consumers who form a relatively stable group in terms of composition and characteristics. Consequently per capita consumption has remained fairly constant since 1940. On a fresh weight equivalent, 1939 per capita consumption was 2.13 pounds per person. In 1960 it was 2.15.2 Fluctuations in the intervening years were from a low of 1.86 to a high of 2.66. There has, however, been a definite downward trend in consumption of fresh asparagus and an upward trend of frozen. Consumption of canned asparagus has fluctuated according to total supplies available to processors.3 lR. Gatty and E. Angel, Consumer Metivations Toward Asparagus; A Pilot Study, Department of Agricultural Economics, Rutgers, New Brunswidk, New Jersey, 1961. 2United States Agricultural Marketing Service, The vegetable Situation, October, 1961, p. 21. 3A detailed table of per capita consumption may be found on page 87, Chapter IV. 18 The General Environment in Bargaining_Perspective The environment of the asparagus industry thus consists of the geographical distribution of producing regions, regional differences in production techniques, marketing channels, current grower organizations, and the characteristics of the consumers of the finished product. Asparagus is a specialty crop grown in localized areas and having limited market outlets for final consumption, domestically as well as abroad. Although the spatial concentration of production in four states facilitates interregional organization of the growers and regulation of supplies for short periods of time, thereare other environmental factors which deter such organization. While spatial separation is a rather negligible handicap in itself, it results in other dif- ferences which are more significant. The climatic, topo- graphical, and soil conditions are important differences arising from this spatial separation. Theiresultant variation in production techniques, cultural practices, and product, make a non—comparable basis for regional comparisons of costs and prices. The importance of asparagus in the farm organization results in widely dif- ferent aspirations for the asparagus grower; each region tending to have different objectives and expectations for the crop as well as different value systems concerning organizations. The variation in market outlets also accentuates these differences. 19 The existence of organizations in the other produc- ing areas provides a wider range of experiences from which to evaluate organizational opportunities for the Michigan growers. The failures as well as the successes in other areas can be used in combination with Michigan experience, to develop that form of organization which will best meet the needs of the Michigan industry. The composition of the consuming sector of the industry also contains impli- cations for the organizational potential. The stability of the consuming group, resulting primarily from the uniqueness of asparagus, implies difficulty in increasing consumption over a short period. Little response to price in the short run would be expected due to the necessity for developing a taste among consumers not familiar with the product. The product image of uniqueness limits the acceptability of asparagus as a vegetable to be served other than for special occasions. These relationships will be further elaborated in the ensuing chapters, and substantiated with economic and statistical analyses. CHAPTER III ASPARAGUS PRODUCTION IN MICHIGAN Organization of the Michigan Industry Within the frame of reference provided by the general environment of the industry, the Michigan producers of asparagus have a history, a structure, and an environ- ment which interact with other regions to develop the potential for group formation. The history of Michigan production and the growth potential of the industry is a key factor in explaining the need and opportunity for an industry organization. While the Michigan industry has been growing as indicated in Figure 1, page 8, a further analysis is needed to evaluate the importance of this growth and its effect upon the agricultural economy of the state. Intercrop Relationships One technique for comparing asparagus with other crops is utilized in Figure 3 where asparagus appears as one of the most promising horticultural crops. The vertical axis of Figure 3 records the average Michigan production in the 1957 to 1960 period as a percent of average production in the 1941 to 1960 period. The hori- zontal axis shows similar percentages for the total United States. The diagonal line connects points of equal percentage changes in both United States production and 20 21 ‘ """ 1 U : i 1 I I 5° : + 5 L Sweet E E Cherries : ' -a 3 a : J, 180 : q I 2: : . I ‘3 b E . Asparagus . q l 8 160*— : o 9' E Cucumbers u a ' . D P : . : Tomatoes a’ Grapes . __ 3 140" : les 0 . 4?? a . Straw- 4 :3 Pee.“ Tart berries a P Plume Cfierries ‘ a . A R . SD 120" l O. E . .1 '§ b : Snap beans i U ' . 8 : __; '3 _________________________ | z 10¢ """" 5;: ... i s : J . ' .Peas ‘ co . . vi p . l .13 . . . ' 1 1. E L i 1 l 1 100 120 140 tion: 1957-60 average 2.8; ::::::t of 1941-60 average m a1 Basic source of data: Michigan Agzizziizzl- Statistics, Michigan Departmen: issues) ture, Lansing, Michigan (annus 22 Michigan production. Thus, an observation on this line would indicate that Michigan is producing the same share of the total production in both periods and Michigan and United States production changes have been in equal pro— portion for the two periods under consideration. An observation above the line indicates Michigan production has been increasing more rapidly than the total United States, and is producing a larger share of the total. For observations below the line, the converse is true: Michigan's share in total production has decreased. The line parallel with the vertical axis represents 100 percent for the United States production. It separates the area on the left in which total industry production is declining (i.e., average production is less for the 1957-1960 period than for the 1947—1960 period) from the area on the right in which total United States' production has increased. Green peas and snap beans are the only two crops shown in Figure 3 in which Michigan has appreciably lessened its share of total production. Michigan production of peas declined absolutely as well as relatively while a 15 percent increase in production of snap beans in Michigan was insufficient to keep pace with the growth in the total industry. Sweet cherry production in Michigan during recent years has been 190 percent of the 20-year average, indicating rapid relative growth and suggesting a potential for future development. However, the point representing sweet cherries lies to the left of the 100 23 percent line in Figure 3, indicating that Michigan's greater share is of a nationally declining total. Another factor to consider is the importance of the crop in terms of total acreage--an indication of the influence growth could have upon the statels agricultural economy. State and national production have increased rapidly and Michigan acreage is sufficiently large to be an important contributor in the horticultural crop sector of Michigan agriculture. While Michigan ranks fourth in the production of processed asparagus, it still produces less than 8 percent of the U. S. total. Nflchigan thus possesses a good potential for expansion without unduly influencing the national markets. Historical Development of the Michigan Industry Structurally, the Michigan producing sector is composed of approximately 2,000 farms (2,314 in the 1959 Census of Agriculture) involved in the production of asparagus on an area exceeding 11,000 acres. This repre— sents a large increase in number of farms, number of acres, and average acreage per farm over the 1920 figures. As indicated in Table 3, the number of farms reached a peak around 1954 and has been declining as total acreage continues to increase. The pattern of production distribution is shown in Figure 4 and 5 where it is evident that the major counties are concentrated along Lake Michigan. The acreage increases MICHIGAN Upper figure - acres harvested in 1959 Inner figure - percent of State acreage in 1959 State acreage- 10,890 Counties shaded on basis of percentages D - Less than .17. - 0.17. to 1.07. @ - 1.12 to 10.07. L 33' - Above 10% Figure 4. 24 /"’i . ,. ,m' .... i. F“”’i‘\ .. L J ,‘M w ...J . 11' "29.0"“ '3 "1 [I l iNMX I’M" ’13?!” I ' . : ~"-‘I l. K. u...i'7?5~'L—'”""! “POW {"5" ‘3 1 "Ne. Ln__ . r'”J i i \ .K.‘ WINS“? r5117;- ., ....l . l i-faa‘qu}. -- 1.... , , . '0 VVNm’ l l ‘//"V~- Acreage of asparagus and Michigan by counties, 195 Source of basic data: Agriculture De artmn percent of state total, 9 United States Census of t o' ...-... 25 ..0 J I” ‘6" 'J . ifgowc LL.“- r i iflwwnw .IV'YW'IT ? K i l J— : 'T‘ / ..-... ' (“a ' .'\ L.- --i new . ... a: iuaw m ; lO'lPPNI’J‘nil? e -9... ' r." ‘ ' \.' comm" [ ; .““"""'"‘l 26 K, ,I I W‘s"... .1 ‘nmmuc 1.-.... ...... -° '0’». I \\ 4. .. J . , v 4' 95...? ‘4 'nc"\"‘/ m. J? a 5 («I 7"” If .7? @Ew 1W1 "‘. 3%); M!CH|GAN , .1 l’ 6 {5597-4 ‘5’ ea [$05.53, manna l . ’ ' .‘ “seam! sari»... ; l l (mu?! ad'Toszk.’1a.b'z“!mnmi“ '3 ‘ l i l 4,21 U ' :- ..— ._.... °- . . .J'" PPer figure acres harvested cavugpmvfo‘inmfhflfiifii'bwnm' in 1949 g 22135.32» 5 ' 75:87" "'3? a ' if.“ 4:1...7a.rraar'a‘rwzy 51' Lower figure - percent of State acreage in 1949 . State acreage- 5394 Counties shaded on basis of percentages D - Less than .17. - 0.17. to 1.07. - 1.17. to 10.07. - Above 107. Figure 5. Acreage of asparagus and percent of State total, Michigan, by counties, 1949 Basic source of data: United States Census . 2. "' XJT‘EW‘Q‘VTJ “-' ""75. momma; pram?" .....-i ‘vv— 26 as shown in Table 3 have altered the geographic concentra— tion of production in Michigan. A comparison of FigureS4 and 5 showéthat production has shifted toward western Michigan between 1949 and 1959 with an accompanying increase in concentration. The extent of this increase is better illustrated in Figure 6, where the four lines indicate the proportion of production from a given number of states, for the years 1929, 1939, 1949 and 1959, respectively. Uhlike the national situation depicted in Figure 2, page 10, concentration in the major areas in Michigan has continued to increase during the last decade within the top five counties. Table 3. Farms reporting asparagus production and number of acres by census years. Year No. of Farms No. of Acres Average Acres per Farm 1920 237 256 1.08 1930 1401 1467 1.05 1940 1677 2531 1.51 1950 2180 5394 2.47 1954 2589 8724 3.37 1959 2314 10890 4.71 Source: Census of Agriculture. The steady increase in average acres grown per farm is an indication of increased specialization in pro- duction and a decrease in the number of Fgarden size? beds whose output was formerly delivered to local, fresh market outlets. The decrease in absolute acreage as well as percentage of the total crop around metropolitan areas Percent of Total Production 27 |()O . T #3: ’ ”.’ fl 1’. 90 — ’.’ ’l” I ’1 .. 19gb .,’ x” ./*7 x' 80 - / 1,949 / / x’ . ,1 x' 7()- I , _ [1939 I l c‘ ’I 60 ' l ,’1929 an ’I‘/ I 4 50.. I ,’ I 40- 30-’ 20- IO-‘ 1 11114 l [I I I [11 L 4 6 8 IO I2 l4 l6 I8 20 22 24 26 Number of Counties O l l 2 Figure 6.Percent of Production by Number of Producing Counties in Michigan; 1929, 1939, 1949, and 1959. Source of basic data: United States Census of Agriculture, Department of Commerce, 1929, 1939, ‘A‘A ‘A-A 28 also suggests decreased importance of Michigan asparagus in the fresh markets. The wide range of acreage per farm between counties indicates that there are still many small producers over the State. For example, in 1959, the average acreage in Cass County was 10.6 acres for the 45 producers, while the 49 growers in Kalamazoo County averaged 2.8 acres. A tabling of acreage per farm from the survey data shows a frequency distribution heavily skewed to the left as in Figure 7--a factor of importance in the formation of a grower organization. The feasibility of coordinated action among the growers is diminished due to the large number of growers with small acreages. Their sheer numbers present an obstacle to organization. Also the minor importance of asparagus in the cropping system, as evidenced by the survey results, is not conducive to strong support for organizational activity. Cultural Characteristics of Asparagus A prerequisite for developing an economic and institutional analysis of the asparagus industry is a knowledge of the crop and its characteristics of growth and culture. The genus Asparagus, a member of the Lily family, has at least 150 species found throughout the temperate and tropical regions of the world. Only one of these is cultivated as a food plant. It is a perennial, dioecious herb, 4 to 10 feet tall, with male and female flowers borne on separate plants. The plant develops two kinds of roots--f1eshy and fibrous-~which serve as storage 29 .nuasmom ouwmcc0wumoso ho>u3m “sumo canon mo mousom h h .mucoocommom o>usm a oouuomom somehow mommummwd mood mo sowusnwuumwo hocosvoum .h ousmam nosed 00. no 00 no on ms. Oh no on an on n? O? on on nN ON n. o. n ....... ....... eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeee eeeeeeeeeeeeeeeeeeeeeeeeeeeee ' eeeeeeeeeeeeeeeeeeeeeeeeeee A eeeeeeeeeeeeeeeeeeeeeeeeeeee eeeeeeeeeeeeeeeeeeeeeeeeeeee eeeeeeeeeeeeeeeeeeeeeeeeeeee eeeeeeeeeeeeeeeeeeeeee eeeeeeeeeeeeeeeeeeeeee mam mam mmmmmuom OOOOOOOOOOOOOOOOOOOOOO OOOOOOOOOOOOOOOOOOOOOO OOOOOOOOOOOOOOOOOOOOOO OOOOOOOOOOOOOOOOOOOOOO ..om 000000000000000 000000000000000 mam sexton 00000000000000 OOOOOOOOOOOOOO 00000000000000 .............. .............. .............. .............. OOOOOOOOOOOOOO OOOOOOOOOOOOOO OOOOOOOOOOOOOO eeeeeeeeeeeeee eeeeeeeeeeeeee l eeeeeeeeeeeeee .............. IIIIIIIIIIIIII 00000000000000 OOOOOOOOOOOOOO .............. 1mmmvmmmmlnvh eeeeeee eeeeeeee ........ loo 7 eeeeeee eeeeeeee ........ 00000000 Emma. 00 eeeeeeee oooooooo eeeeeeee ssssssss eeeeeeee eeeeeeee mfifiuOO. OOOOOOOO OOOOOOOO OOOOOOOO OOOOOOOO OOOOOOOO mfifiuON. Han. sauapuodsau go JaqmnN 30 roots and adsorptive roots respectively. As this root system develops, a rootstock or crown is formed con- taining numerous buds. These buds produce the top growth which emerges as a shoot or spear; developing branches, leaves, and flowers if permitted to grow. When the spear is harvested (usually at a length of 4 to 9 inches) additional buds become active with spears emerging frequently during the growing season and requiring daily or twice daily harvesting during favorable weather. While asparagus may be reproduced asexually, the common method is to transplant one year old crowns which have been grown from seed under nursery conditions. The crowns are planted in the spring in trenches 6 to 14 inches deep with soil being gradually filled in by cultivation as the new shoots appear. In the following spring, top growth is disced into the soil or removed before spring growth begins and weeds are controlled during the growing season by cultivation or chemicals. It is generally recommended that harvesting begin in the third year, with a short season to permit late summer storage of food reserves in the crown. Full term harvesting (usually consisting of 6 to 8 weeks) begins in the fourth season after planting. The food reserves accumulated after harvest ends are quite important to the growth the following year. Tiedjensl 1A. Tiedjens, ”Some Physiological Aspects of Asparagus Officinalis,? Proceedings of American Society of Horticultural Science, 1924, 21:129-140. 31 suggests that for a single year's growth, asparagus needs only water and oxygen from the soil. This provides a partial explanation of the controversial results from fertilizer experiments with asparagus. Brown, conducting both laboratory and field experiments stated, "In conclusion, there appears to be some disagreement among investigators as to the fertilizer requirements of asparagus but the evidence indicates a reduced response to applied fertilizer as the plants grow older."1 Fertilizer recommendations have been adjusted downward during the past ten years in contrast to increased applications for most other crops. Present recommendations2 suggest heavier applications of complete fertilizers (500 to 100#) during the first three years in order to establish a good root and storage system. After the plants are well established this is decreased to 40 to 60 pounds of actual nitrogen following the harvest season, with some side dressing in the spring and a complete fertilizer applied as soil tests indicate. Irrigation trials have also produced conflicting results in Michigan and further research is needed prior to recommendations. Other cultural practices consist of weed and insect 1L. D. Brown, VSome Influences of Mineral Nutrition on the Growth and Chemical Composition of Aspagggus Officinalis," (unpublished Ph.D. dissertation, Dept. of Soil Science, Michigan State Uhiv., 1962). 2J. D. Downes and John Carew, Asparagus Production, Fact Sheet for Michigan Agriculture, Cooperative Extension Service, Mdchigan State University, East Lansing, Michigan. 32 control, neither of which present a serious problem for most Michigan growers. Development of new varietal strains of asparagus has been very slow for two reasons. (1) The number of years necessary to adequately test a new variety requires long term testing programs. Since a planting may be expected to continue in production for fifteen to twenty years, a new variety must have longevity as well as high productivity. (2) The lack of purity in existing strains combined with the necessity of cross pollination makes genetic improvement difficult and costly. Since self- pollination is ordinarily impossible with asparagus, development of pure strains has been slow and new varietal crosses are scarce. The original Mary washington and Martha washington varieties developed in 1910 are still widely planted and have been the recommended varieties for many years. A new variety has been developed which is showing considerable promise but has not been in production long enough to be widely accepted. Technology in the sense of varieties, fertilizer use, and mechanization, has changed very little in the last fifty years. The use of chemicals has improved the control of weeds and insects but modern science has added little else to the production techniques of 2,000 years ago. 33 The Place of Asparagus in the Farm Organization The place of asparagus in the farm organization is also an influence in the Michigan asparagus industry. Although adapted to deep fertile soils, much of the processing asparagus is grown on the sandy loams along Lake Michigan, where the tempering effects of the lake create a particu- larly desirable environment of early springs and moderate temperatures. With respect to the location of the asparagus acreage within a given farm, the alternative land use is probably the most important consideration. Fruit crops in this area of Michigan are usually given first priority in allocating the available acreage. On many farms there exist small areas which, for reasons of air drainage, slope, and exposure, are not well suited for fruit trees. It is upon these areas that asparagus is most often found on the diversified farms. This is not true on the larger acreages (over 15 or 20 acres) but it accounts for a large number of the 2,314 farms reported in the 1959 census as growing asparagus for commercial markets. This relationship, combined with the early but short harvest season, gives asparagus a position of high complementarity in many farm organizations. It permits use of land, labor, management, and capital reserves, in a way which detracts little from the application of these factors to other enterprises. 34 The Harvesting Process in Michigan As mentioned previously, the harvesting technique used in Michigan differs from that of most other regions. From 95 to 100 percent of all commercial production in Michigan is harvested by anapping." This consists of bending the stalk until it breaks rather than cutting below the ground. The break will occur just above the fibrous portion, producing a spear of high quality over its entire length and elminiating the need for further trimming at the processing plant. Harvesting is done by hand, utilizing family labor on the small acreages and hired labor on the larger acreages--usually migrant labor available from late season vegetable crops. The only successful mechanization has been the use of Vrigs? on which the worker rides across the field. These may be self-propelled or pulled by a tractor, and carry from three to eleven workers depending primarily upon the size of the field. The spears are placed in boxes which are then deposited at the end of the field and collected by truck for delivery to the processing plant. Although several mechanical harvesters have been designed none have been successful. The problems of selectivity and spear damage have been difficult obstacles to overcome. 35 Production Trends and Prediction Although acreage has increased quite slowly during the past five years, an historical analysis of asparagus production in Michigan indicates a rapid acreage expansion occurring between 1946 and 1956. Figure 8 shows this pattern in harvested acreage along with total production of processed asparagus. The declining average yield re- flected by the relationship of production and acreage is shown more clearly as the solid line in Figure 9. Explanation of this diminished yield lies in an analysis of the rate of acceptance of the snapping technique for harvesting. It was first introduced in the early forties and annually gained wider acceptance. By 1957, nearly all the Michigan crop was being snapped. Since the yield and production data has been reported on a combined cut and snapped basis the tonnage from all acreage has gradually decreased as more of the growers adopted the snapping technique each year. This diminished yield thus reflects a technological change rather than the biological productivity of the Michigan crop. To provide a more comparable series of yield and production data, the percent of the crop harvested by snapping in each year was used to convert production to a snapped equivalent basis. Using experimental test results1 which indicate a ratio of cut to snapped asparagus lUnpublished research conducted by the Michigan State University experimental farm at Sodus, Michigan, in 1957 and supported by grants from the Michigan Asparagus Growers Association and Millburg Growers Exchange. 36 Damn“ Hggd .ousuasoauw< mo ocuauuoaoo cowwcoaz .eouuewueum Heusuasoauw< newwnowx ”sour ounce we eonsom sewing: an mow—wuss: wcHeeeooun mo sowuusvouo one swoon—ea. .m museums. NW3 ONE mm 3 cm 3 1M3 Nm 3 ONE wNpmH F 0.43 33 8s 5 announce: s .03 5 eeuo< inn inn Ina 18H 37 Awesome deans-V .nuwwcoqx .udwesea .eusuusouuw< no unuauueaoc neuacodx ..oaueaueum Hensoasuaum< seaweed: “ease oases we oousom «03-33 ouo< use nausea 5 .aewwnofiz 3 sewage: 95:000.; we 39;, .m ounmflm mom; H was ammfi 5M3 mm 3 mm .3 a ma Q3 “.43 AL T" \/ l 82 I 003 I. oooa \ ...I 003 \ I 88 I CONN ..I ooeN .l ooow .I comm swoon vessels u on oouesnou case» nnnnnnn 33323.0. I coon annouasowuw< newunoqz an couscous no name» mozsom 38 of 1.56:1, from equally productive plots, the yield data was converted to a standard base and plotted as the dotted line in Figure 9. The resultant graph indicates the rela— tive stability of yield which has characterized the asparagus industry in Michigan as well as in other states since 1953. The fluctuations which have occurred are primarily due to variation in weather conditions. One of the important uses of historical data, such as these trends in production and yield, is the estimation of production prior to the harvest period. Growers often make these estimates individually based upon their plans and their evaluation of the season. Processors also utilize their judgment and experience in determining in advance of the season the anticipated production from their supply area. These factors may be further aggre- gated to include the entire state, and statistical techniques used to quantify the relevant variables in determination of production. In equation 1, 90 percent of the annual variation in production is explained by1 changes in acreage and lagged farm price. The values obtained by statistically fitting this equation to the data from 1947-1963 indicate that an in- crease of one acre in the state will result in an increase of .788 tons in total production, on a snapped equivalent 1The use of the term ”explained by" is not intended to imply causation. 39 basis. For a 1964 prediction (since nearly 100 percent of the crop is snapped) the estimated tonnage may be obtained by inserting the 1964 acreage for X1 and 1962 price for X3 and performing the indicated multiplication and addition. Equation 1: X5 = 2644.87 + .788 X1 - 12.847 X3 (5.15)* (9.44)* (3.59)* *Numbers in parentheses are t—values Where: X5 = Annual production of processing asparagus in Michigan adjusted to a snapped equivalent basis. N II 1 Annual acreage of processing asparagus in.Michigan. X3 = Michigan farm price in dollars per ton lagged three years. R2 = .90 = The percent of total variation in production explained by the equation. Degrees of Freedom = 14 Standard error of the estimate = 734.6. The high correlation in this equation using only the two variables, acreage and lagged price, indicates the relative stability of yield when averaged over the entire state. Prediction for an individual grower or even for all growers in a local area, would be less accurate due 1A description of the data and their sources is given in Appendix C. 40 to climatic variations and other variables excluded in this simplified model. Although estimates of harvested acreage are avail- able just prior to the beginning of the season, it would be useful to predict production prior to release of these estimates. Equation 2 uses lagged price and time as the independent variable for estimating acreage. Equation 2: X1 = 1964.36 + 12.793 X3 + 339.936 Xl6 (2.89)* (2.47)* (8.69)* *Numbers in parentheses are t-values Where:l X1 = Annual acreage of processing asparagus in.Michigan. X3 = Michigan farm price in dollars per ton lagged three years. X16 = Time in years: 1947 = 1 R = .94 = The percent of total variation in acreage explained by the equation. Degrees of Freedom = 14 Standard error of the estimate = 596.6. The statistical values obtained by fitting this equation indicate that an increase of $1 per ton in the farm price of asparagus increases harvested acreage by 12.8 acres three years later, the approximate time necessary lAdescription of the data and their sources is given in Appendix C. 41 to bring new acreage into production. The time trend variable shows an annual increase of 340 acres. Despite the fact that 94 percent of the total variation in acreage has been explained, it is important to point out that the time variable is a substitute for one or more unspecified variables which either cannot be identified or, if identified, cannot be measured. If the values of some of these variables should change relative to time, the same structural relationship need not continue between time and acreage, and predictive accuracy would be decreased.1 Using these two equations together for predicting total production would have resulted in fairly accurate estimates during the past ten years. Figure 10 shows actual production, on a snapped equivalent basis, as the solid line and estimated production as the broken line. While an error exists in every estimate, the predicted value falls relatively close in all but three of the past ten years. 1Analysis of residuals from equation 2 indicated that a quadratic function might fit the data better, since expansion during recent years was very slight. The equation used was y .-.- 1733.7 + 4.2 x1 + 902.1 x2 -- 27.9 x5 Where: Y = acreage of asparagus, X1 = lagged price of asparagus in dollars per ton, X2 = time in years where 1947 - 1: the fitting of this equation resulted in an R2 of .99 and a standard error of 255.4. Although the reliability and accuracy of this equation was greater than equation 2 it was not used because large values of X2 would result in a diminishing value for Y, i.e., a long range projection would indicate a decreasing acreage. 42 Assume.“ H355 .aewunoax .9533 3.53323 we nuances: confines: .333qu #993339. same-Low: “ease owes.— me eon—5m $3-ng “soon 5 60303.0».— esmeueaee 53.30.“: van-IE:- ose ~35: .oa ousmwm 393 3” ONE owe.— omrmH amped «m3 on? mwg TVS ..filu t ..ooon c ouosugm one H 28.: ...w issue wages cancerous veuguem . . . .. . a QQ N use A use: ...... .. .. 1. issue wages cones—song veal—Hem .. .. \ 1uoooe s 3.3 us3e>goo oneness . e 3 nouns—es sowuosvoua Hauo< .. \ \x \s. \\ \.... 18% \\ \. ts \\ 1.... ... \ .. .\ \ \\\ .. \ se «0 all. s s \ T809 \.. . AA. \ .. \.. . .. . Tooon Boom III 0000 SNOJ. 43 Additional observations are needed to improve on the estimates as well as to take into account any changes which occur in the relationships in succeeding years. Michigan Farm Prices Production trends and estimation are important factors in determining management decisions which affect farm income in the asparagus industry. Equally important is the price which the production will bring in the process- ing market. United States Department of Agriculture price data shown in Figure 11 involves the same complication as production data, for the introduction of the snapping technique changed the basis on which the price was quoted.1 Assuming a constant price ratio between cut and snapped asparagus, the quoted prices have been converted to a snapped equivalent basis and plotted as the broken line in Figure 11. While the assumption is not entirely valid, the uniform basis provides comparability among the various years. Additional price fluctuations have been introduced due to the technological change requiring a series of adjustments in seeking the new equilibrium level of prices. A problem frequently discussed in the asparagus industry is the inability of processors to establish a raw product price until after harvest has started. One of the 1A detailed analysis of the effects of this change in the price basis on returns to Michigan growers, is given in Appendix A. 44 Assume“ Hesssev .sowwnuax .wuaesua .ou5uanouuw< mo usuauusooo unwan0fiz .oouuawuoum Huusuasowuw< cuwwconz noose oases mo oousom .awaen uso~s>wsvo romance 0» renounce use Heroes «Emu-3mg 33395: a.“ unwound: voeuooouo you «03.:— Eem .HH ouflmflm momH Homa mmma mama mama mama amma moms mama P r r p P L b E cod j c nnnnn wood Audeas>wsve venouaev can use eowum ea Aaesuoev any a eowum Toma \\\/ \..Lroo~ \ / \\\ \ / \ 12M \ \\_ n. \ / r u \ I \ 3a.” \ / .. x I 33 w. \ / |\\ / \\.I / \/ .omm \ _/I /. _\ \ / \ / \ l/ \x /\ room / \ z \ flown / \ { 45 prerequisitesfor price negotiations between grower and processor is a basis for establishing the range of prices for the coming season. In order to statistically quantify the relevant variables, a statistical model was fitted to the data resulting in equation 3. Equation 3: X1 = -l33.0312 — .0034 X2 + 194.6652 X4 + .00026 X5 (0.68)* (1.34)* (4.57)* (0.28)* *thber in parentheses are t-values Where:l X1 = Michigan farm price of asparagus in dollars per ton on a snapped equivalent basis. X2 = Michigan production of processing asparagus in tons. adjusted to a snapped equivalent basis. X4 = Michigan wholesale price. May 1, in dollars per dozen #303.cans. X5 = United States acreage of processing asparagus. R = .85 Degrees of freedom = 8 Standard error of estimate = 11.4 Eighty-five percent of total variation in farm Iprice is explained by this model and there exists a strong (correspondence (r = .90) between Michigan Whilesale prices