l\\\\\\\\\\\\\\l\\\\103609388 This is to certify that the . thesis entitled Marketing Michigan Asparagus: Potentials for Fresh Market Expansion \ presented by Clyde Bruce Taylor has been accepted towards fulfillment of the requirements for M.S. Agricultural Economics degree in flew if} A; Major pré flssor Date July 24, 1979 0-7639 OVERDUE FINES ARE 25¢ PER DAY PER ITEM MSU rm rWOED ~L' “a. {3' EP—l-v-fiba. W5” w r ‘r k l f, Return to book drop to remove this checkout from your record. 120108 % r 01$? MARKETING MICHIGAN ASPARAGUS: POTENTIALS FOR FRESH MARKET EXPANSION By Clyde Bruce Taylor A THESIS Submitted to Michigan State University in partial fulfillment of the requirements for the degree of MASTER OF SCIENCE Department of Agricultural Economics 1979 ABSTRACT MARKETING MICHIGAN ASPARAGUS: POTENTIALS FOR FRESH MARKET EXPANSION By Clyde Bruce Taylor Current strong grower prices for processing asparagus have resulted from national supplies decreasing more rapidly than demand. In the future, U.S. asparagus production will probably increase, and processor prices will likely weaken. An analysis was made of the U.S. fresh asparagus market during the time of Michigan's season. The following factors were analyzed regarding Michigan's potential for fresh market expansion: overall market size, market positions of major competing regions, within-season volume distri- bution, prices, transportation costs, trade preferences, potential for marketing snap-harvested asparagus, and Michigan's alternatives for fresh market development. Wholesale produce buyers indicated that a demand exists for additional fresh asparagus supplies during the time of the Michigan season. However, fresh Michigan asparagus is currently either unknown or has a weak trade preference position. By means of a strong marketing program, Michigan's fresh asparagus volume can probably be expanded. This would be desirable for the industry in order to reduce future marketing risks. To my wife, Dona Maria For her patience in suffering through my completion of this project. ii ACKNOWLEDGMENTS The author would like to express special thanks to Dr. Donald Ricks, Professor of Agricultural Economics, Michigan State University, for supervising this study. His professional and practical approach to this research project has been an essential input into this completed study, and has provided me with the most valuable learning experience of my graduate education. Special thanks are due to Don for the personal interest which he took in me and my various endeavors. His subtle criticisms and suggestions for improvement will be incorporated in all of my future professional actiVities. Appreciation is also extended to Drs. John Allen and Tom R. Pierson for their warm personal interest, assistance, and interaction throughout the course of my studies here. Their input and editing have made a valuable improvement in this study. I would also like to offer my sincere gratitude to Dona Maria Gustafsson, now Taylor, for her professional assistance in organizing, editing, and generally completing this project. Her personal support was also an invaluable part of my work. TABLE OF CONTENTS LIST OF TABLES ......................... LIST OF FIGURES INTRODUCTION . CHAPTER I. BACKGROUND INFORMATION 1. THE MICHIGAN ASPARAGUS INDUSTRY ............ THE U.S. ASPARAGUS MARKET ............... 2. 3. PROBLEM AREA ..................... 4. ECONOMIC RELEVANCE OF THE PROBLEM ........... CHAPTER II. OBJECTIVES, HYPOTHESIS, AND METHODOLOGY 1. OBJECTIVES ...................... 2. HYPOTHESIS ...................... 3. METHODOLOGY ...................... CHAPTER III. THE U.S. ASPARAGUS MARKET 1. DEMAND FOR ASPARAGUS IN THE U.S. ........... 1.1. 1.2. Declining U.S. Consumption ........... 1.1.1. Total Consumption ............ 1.1.2.. Per Capita Consumption ......... Factors Affecting Consumption .......... 1.2.1. Price Factor .............. 1.2.2. Changing Tastes and Preferences ..... iv Page ix x xii (OWN 10 10 IO 12 13 15 16 TABLE OF CONTENTS (continued) Pa e 2. ASPARAGUS PRODUCTION IN THE U.S. ........... :8 2.1. Special Features of Asparagus Production , , , , 18 2.2. U.S. Asparagus Industry ............. 20 2.3. Asparagus Production by States ......... 25 2.3.1. California ............... 25 2.3.2. Washington ............... 32 2-3-3- Michigan ................ 35 2.3-4- New Jersey ............... 37 2.3.5. Illinois ................ 40 2.3.6. Other States ,,,,,,,,,,,,,, 41 2-3-7- Summary ................. 42 3. U.S. ASPARAGUS IMPORTS AND EXPORTS ,,,,,,,,,, 43 3.1. General ..................... 43 3.2- EXPOFtS ..................... 43 3-3- Imports ..................... 46 CHAPTER IV. FINDINGS FROM THE STUDY OF THE FRESH ASPARAGUS MARKET 1. THE U.S. FRESH ASPARAGUS MARKET ,,,,,,,,,,,, 4g 1.1. Size of the Market ,,,,,,,,,,,,,,, 4g 1.2. Major Market Regions for Fresh Asparagus . , , , 50 2. MARKET POSITIONS OF THE MAJOR ASPARAGUS PRODUCING STATES 51 2.1. Market Shares .................. 51 2.2- Seasons ..................... 54 2.3. Distribution of Fresh Asparagus Volume During the Year ................. 54 3. FRESH ASPARAGUS PRICES AND SELECTED TRANSPORTATION COSTS 55 TABLE OF CONTENTS (continued) 4. FINDINGS OF THE INTERVIEWS WITH PRODUCE BUYERS 4.1. Trade Preference Positions of the Major Asparagus Producing States ........ 4.1.1. California ............... 4.1.2. Washington ............... 4.1.3. New Jersey ............... 4.1.4. Michigan ................ 4.2. Marketing Channels for Fresh Asparagus ..... 4.3. Important Characteristics of Fresh Asparagus Packs ................. 4.3.1. Product Freshness ............ 4.3.2. Packing ................. 4.3.2.1. Product Protection ...... 4.3.2.2. Package Sizes ......... 4.3.2.3. Packaging Materials ...... 4.3.3. Sizing and Grading ........... 4.4. Factors Important in Increasing the Market Demand for Fresh Michigan Asparagus ....... 4.4.1. Product Quality ............. 4.4.2. Consistent Supplies ........... 4.4.3. Promotional Considerations ....... 4.5. Buyers Reactions to Alternative Packs for Michigan Asparagus ............. 4.5.1. Field Run Versus Oriented, Graded Pack 4.5.2. Snap-Harvested Asparagus ........ 5. NEW JERSEY MARKETING STUDY . . . ; .......... vi Page 59 59 59 6O 6O 61 62 62 66 66 68 69 7O 71 71 72 73 74 74 75 76 TABLE OF CONTENTS (continued) Page CHAPTER V. ANALYSIS, CONCLUSIONS, AND RECOMMENDATIONS 1. ANALYSIS OF THE U.S. ASPARAGUS MARKET ,,,,,,,,, 78 2. DEVELOPING THE MARKET FOR FRESH MICHIGAN ASPARAGUS , , 35 2.1. Michigan's Competitive Position in the Fresh Asparagus Market ............. 85 2.1.1. Factors Favorable to Increasing Michigan's Fresh Asparagus Volume , , , , 85 2.1.2. Barriers to Increasing the Demand for Fresh Michigan Asparagus ...... 88 2.1.3. Summary ................. 89 2.2. Marketing Fresh Michigan Asparagus--The Product , 89 2.2.1. Snap-Harvested Asparagus ........ 89 2.2.2. Methods of Marketing the Product . . . . 91 2.2.2.1. Standard Pack for Snapped Asparagus ....... 91 2.2.2.2. Consumer Packaged Snap-Harvested Michigan Asparagus ...... 91 2.2.3. High Quality Product .......... 94 2.3. Prices for Fresh Michigan Asparagus ....... 96 2.4. Promotion .................... 101 2.5. Potential Market Areas ............. 102 2.6. Volume and Market Impact ............ 104 CHAPTER VI. SUMMARY ...................... 108 APPENDICES A. Michigan Asparagus Production, 1965-1978 ....... 114 B. U.S. Wholesale Price Indexes for Canned Asparagus and Other Commodities, 1960-1975 ........... 115 vii TABLE OF CONTENTS (continued) Page APPENDICES (continued) C. U.S. Consumer Price Indexes for Fresh Asparagus and Other Commodities, 1960-1975 ........... 116 D. Buyers Interviewed .................. 117 E. California Asparagus Shipments ............ 118 BIBLIOGRAPHY .......................... 119 viii LIST OF TABLES Table Number 1. 10. 11. Total U.S. Asparagus Consumption, Five-Year Averages, 1945-74, Annual 1965-77 ..... Annual Consumption of Asparagus in the U.S., Three Year Period Averages, 1965-67 and 1975-77 . . . . U.S. Per Capita Consumption of Fresh, Canned, and Frozen Asparagus, 1957—1976 ........... U.S. Asparagus Production and Acreage by States. 1960-63 and 1975-78 ................. U.S. Asparagus Production, Total, Fresh, and Processing, Annual, by States, 1971-77 ....... U.S. Exports of Asparagus, 1960-1977 ........ U.S. Asparagus Imports by Types and Major Sources, 1965 to 1977 (Million Pounds) ............ Fresh Market Asparagus Volume, U.S. and Canada, 1975-77 (Million Pounds) .............. Unloads of Fresh Asparagus in 41 U.S. and 5 Canadian Cities, 1975-1977, Carlot Equivalents Selected Transportation Costs ............ Delivered Prices for Fresh Asparagus ........ ix Page 11 12 14 23 24 45 47 50 52 57 58 LIST OF FIGURES Figure Number 1. U1 \OCDNOS 10. 11. 12. 13. 14. 15. 16. U.S. Per Capita Consumption of Asparagus. 1960-1976 .................. U.S. Asparagus Production, By Period Averages, 1945-1978 ........................ U.S. Asparagus Production--Total, Fresh, and Processed. 1960-1978 .................. California Asparagus Production, 1960-1978 ....... Trends in California Asparagus Acreage and Production ....................... Washington Asparagus Production, 1960-1978 ....... Michigan Asparagus Production, 1960-1978 ........ New Jersey Asparagus Production, 1960-1978 ....... Illinois Asparagus Production, 1960-1978 ........ Asparagus Production in Other States, 1960 to 1978 U.S. Asparagus--Total Imports and Exports, 1960-1977 ........................ Normal Shipping Seasons for Fresh Asparagus ....... Percentage of Total U.S. Asparagus Unloads. by Months (Average 1975-1977) .............. Weekly Fresh Asparagus Supplies, April 3 to June 6, 1978. Marketing Channels for Fresh Asparagus ......... Quality Rating of Fresh Asparagus at Various Temperatures .................. Page 20 22 26 31 32 35 37 4O 42 44 53 55 56 63 64 17. 18. 19. 20. LIST OF FIGURES (continued) Contraction of Demand in Response to Higher Prices .................... Falling Demand Schedule for Asparagus ......... Changing Market Situation for Asparagus ........ Potential Market Areas for Fresh Michigan Asparagus xi Page 79 81 82 103 INTRODUCTION This study focuses on the market situation of the Michigan asparagus industry. Information and data relating to the trends of supply and demand in the U.S. asparagus market in general are presented and analyzed in terms of the potential economic impact on the Michigan asparagus industry in the future. The main objective of this study is to examine the fresh asparagus market in the U.S., and to analyze the feasibility of increasing the proportion of Michigan's asparagus production which can be marketed as fresh product. The first chapter provides a general background for the study, identifies the problem which is central to this study, and includes a discussion of the economic relevance of this problem. Chapter II details the specific objectives, the major hypothesis, and covers the methodology used in the research. The situation in the U.S. asparagus market in general is addressed in Chapter III. In Chapter IV, the findings from the study of the fresh asparagus market in the U.S. are presented. The findings are based primarily on interviews conducted with wholesale produce buyers in several major midwestern cities. Chapter V consists of the analysis, conclusions, and recommendations drawn from the study. This chapter is divided into two parts. The first is an economic analysis of the U.S. asparagus market in general. The second part is concerned with the development of the market for fresh Michigan asparagus. Chapter VI summarizes the overall thesis study. xii CHAPTER I. BACKGROUND INFORMATION 1. THE MICHIGAN ASPARAGUS INDUSTRY Asparagus is a major crop within the Michigan vegetable industry. In terms of acreage, asparagus ranks as the third most important vegetable crop in the state (behind cucumbers and snap beans) with 17,300 acres harvested in 1977. The production of aSparagus in Michigan was undertaken by some 1,200 growers, with total production amounting to more than 19 million pounds in 1977, and valued at $8,345,000 at the farm level. Production increased to 22.5 million pounds in 1978 (a 18 percent increase from 1977), and the value of the crop increased to .512,660,000 (up 52 percent). Asparagus production can be characterized as a rapid growth industry in Michigan, yielding increasing returns to growers and processors. Acreage planted to asparagus has increased steadily from an average of 4,100 acres during the period 1945-49 to an average of 17,480 acres for the period 1974-78. Average production increased during this time from 12.6 million pounds for 1945-49 to 20.8 million pounds for 1974-78. The expansion of this industry within the last seven years has been particularly pronounced, in terms of the total value of production (Appendix A). The Michigan asparagus crop is utilized almost entirely by processors, with a consistent average of 92 percent of the production of asparagus in the state so utilized from 1960 to 1978.1 Canned asparagus is the primary processing use, although freezing is becoming increasingly important. During the period 1973-78, an average Of 67 percent of the total Michigan crop was utilized as canned product, and 25 percent was frozen.2 2. THE U.S. ASPARAGUS MARKET The quantity of asparagus produced in Michigan constitutes only a small percentage of total U.S. asparagus production, and hence the market conditions of the Michigan industry are determined largely by the production and marketing in other asparagus producing states. During the four-year period 1975-78, annual total U.S. asparagus production averaged 210.4 million pounds, of which California accounted for 50 percent, Washington for 30 percent, and Michigan for 9.4 percent. Michigan accounted for an average of 14 percent of total U.S. production for processing use during this period. Thus, it is necessary to consider the situation in the entire U.S. asparagus market, in order to analyze the marketing situation of the Michigan asparagus industry. The quantity of asparagus produced and consumed in the U.S. has declined dramatically since 1960. Total U.S. production decreased by 158 million pounds between 1960 and 1977, a 42 percent decline from the 376 million pounds produced in 1960. Total U.S. consumption of asparagus in all forms declined by 18 percent during this same period. The production of asparagus for processing use declined substantially more 1Michigan Agricultural Cooperative Marketing Association, 1977 Asparagus Crop Statistics and Marketing Analysis, March, 1977. 2 U.S.D.A., Processed Report, Benton Harbor, 1978. rapidly than did the production of fresh asparagus in the U.S. since 1960. Likewise, total U.S. consumption of processed asparagus has decreased more rapidly than has fresh consumption since 1965. It appears that the total U.S. demand for asparagus is contracting, particularly the demand for processed asparagus. 3. PROBLEM AREA There is a strong possibility that the market for processed asparagus in the U.S. could become weaker in the future. Although asparagus producers in Michigan have experienced a strong demand for processing asparagus in recent years, this is due largely to the fact that the production of asparagus in the U.S. as a whole has declined sharply for the past 15 years. This rapid decline in total U.S. production appears to have been a major factor in maintaining a strong grower price for processing asparagus. Evidence suggests that, in the near future, U.S. asparagus production will probably increase. The expected effect of such a change in U.S. asparagus production, given current market conditions, would be to considerably weaken the grower price situation for processing asparagus. The high degree of reliance on the processing market, therefore, poses a substantial marketing risk for the Michigan asparagus industry. The industry currently lacks a substantial fresh market alternative capable of absorbing substantial supplies of Michigan asparagus at profitable prices. 4. ECONOMIC RELEVANCE OF THE PROBLEM If the Michigan asparagus industry is to continue its growth trend, there must be sufficient markets to absorb the future production. Since there is a high probability that the processing market may not continue to provide a strong and steady market for Michigan asparagus in the future, the development of the fresh market for Michigan asparagus may be necessary in order to secure a sufficient market for future supplies. Increasing the proportion of the Michigan asparagus crop which is utilized as fresh product would reduce the degree of marketing risk to producers, in that supplies of asparagus could be channeled into a viable alternative market in the event of a reduction in demand for processing asparagus. California, the asparagus industry leader, has historically maintained both its fresh and processing asparagus markets, balancing production between these two markets so as to achieve optimum market stability and returns. Expansion of the market for fresh Michigan asparagus would contribute to sectors of the Michigan economy other than agricultural production. The support industries providing packaging materials and transportation in particular would benefit from increased fresh asparagus sales, and employment in both the agricultural and non-agricultural sectors could also be increased as a result. From the viewpoint of the consumer, the development of Michigan's fresh asparagus industry has several potential economic advantages. The distance from asparagus production areas in Michigan to several major population zones is considerable less than the distance from the western states (California and Washington) to these markets. This could reduce the energy requirements for distribution to some extent, contributing to overall national energy goals. The importance of the energy factor will increase in the future. The reduced cost of distribution for Michigan asparagus may be passed on to consumers in the form of lower food prices for the product. An additional consumer benefit could potentially be realized in the form of fresher produce. The shorter distance to some markets would allow Michigan asparagus to reach consumers several days fresher than product transported from the western states, giving consumers, potentially, a higher quality food product. CHAPTER II. OBJECTIVES. HYPOTHESIS. AND METHODOLOGY 1. OBJECTIVES OF THE STUDY The specific objectives of this study are as follows: A. Analyze Michigan's competitive position in the fresh asparagus market. B. Analyze the alternative ways by which Michigan shippers might best increase the volume of asparagus marketed via the fresh market, and make appropriate recommendations. C. Analyze the potential economic impact of the long-term trends in supply and demand affecting the U.S. asparagus market on the Michigan asparagus industry in the future. 0. Clarify and analyze the marketing channels for fresh asparagus. E. Determine the image which the major fresh asparagus supply regions have among produce buyers in the Midwest. F. Determine the market positions of major asparagus production areas in the U.S., including the seasons in each area and the volume of fresh asparagus which each area supplies to the U.S. market. G. Determine the transportation costs for shipping fresh asparagus from those major areas into Midwestern markets. H. Evaluate the market acceptance of snap-harvested, all-green asparagus, and of non-oriented (jumble) packed asparagus from Michigan. I. Identify the characteristics of fresh asparagus packs which are important to wholesale produce buyers. J. Provide data on fresh asparagus prices received by shippers. 2. HYPOTHESIS 1. There exists a segment of the U.S. fresh asparagus market in which Michigan producers can expand the volume of asparagus which they market as fresh product. 2. Michigan shippers can market fresh asparagus in a snapped, all- green form. 3. Michigan shippers cannot market a non-oriented fresh asparagus pack. 4. Fresh Michigan asparagus has some potential advantage over competing asparagus which will allow Michigan shippers to effectively compete in fresh markets in the Great Lakes region. 3. METHODOLOGY Information gathered in interviews with wholesale produce buyers constitutes the principal source of data for this study. Interviews with various other professionals in the product industry, and statistical sources were used in obtaining certain background data. 1. Statistical Data Statistical sources were used to provide the data necessary to meet the following specific objectives: to analyze the potential economic impact of the long-term trends in supply and demand affecting the U.S. asparagus market on the Michigan asparagus industry in the future (Objective A); to provide data on fresh asparagus prices (Objective 1); and partially to determine the market positions of the major asparagus producing regions (Objective 0). The statistical sources which were used in meeting these objectives are the following: U.S.D.A. Fresh Fruit and Vegetable Unloads in 41 U.S. and 5 Canadian Cities; U.S.D.A. Annual Vegetable Summary; the report Marketing Asparagus from California, by the California Department of Agriculture; and The Asparagus Report of the U.S. International Trade Commission. 2. Buyer Interviews The following specific objectives were accomplished using information obtained in interviews with wholesale produce buyers: identify the marketing channels for fresh asparagus (Objective J); determine the image of the major fresh asparagus producing states among produce buyers in the Midwest (Objective E); identify the important characteristics of fresh asparagus packs (Objective G); and evaluate the market acceptance of all-green and/or jumble packed asparagus (Objective H). The market areas covered in this study include: Chicago, Illinois; Detroit, Michigan; Cleveland, Ohio; St. Louis, Missouri; Kansas City, Missouri; and Minneapolis-St. Paul, Minnesota. The term "market area" refers to the geographical area serviced by wholesale produce operations located in these urban centers or their environs. These market areas represent major population and commercial centers located within relatively close proximity to Michigan. Grand Rapids, Michigan was included in this study, because two of the major retail food chains in Michigan have headquarters in that city. The sample set for this study consisted of the produce buyers for those firms which handle a substantial proportion of the total quantity of fresh asparagus shipments entering their particular market area. This criteria for selecting buyers to be interviewed was used because the wholesale marketing of a specialty produce item like asparagus is concentrated, with a few produce wholesalers (includes chain store wholesalers) handling a large proportion of the vOIume of fresh asparagus in a particular market area. For this reason, it was possible to take a sample of only a few buyers in each urban area and yet obtain a high degree of coverage of that area. In the cities of Chicago and Detroit, the sample included buyers whose firms account for at least 65 percent of the total fresh asparagus volume marketed in those cities. For the other cities, coverage of at least 40 percent was achieved. The list of specific firms in each market area whose produce buyers will be interviewed for this study appears in Appendix D. 3. Other Data Sources For the purpose of fulfilling the specific objective of determining the transportation costs for shipping fresh asparagus into Midwestern market areas (Objective F), price quotations were solicited from major refrigerative trucking companies which service these markets. At least two quotations were obtained for each route. Transportation costs were obtained for shipments from California, Washington and Michigan to the following cities: Detroit, Michigan; Chicago, Illinois; Minneapolis- St. Paul, Minnesota; and Kansas City, Missouri. Informal interviews with various professionals involved in produce marketing, such as produce shippers, Federal-State Market News represen- tatives, and post-harvest physiologists contributed to a minor degree to several of the objectives. CHAPTER III. THE U.S. ASPARAGUS MARKET The purpose of this chapter is to examine the situation in the U.S. asparagus market. Information and data are presented on the trends in the demand for asparagus in the U.S. and the important causal factors involved. U.S. asparagus production is studied first from the overall perspective of the trends in total U.S. asparagus production, and followed by a brief description of production trends, relevant causal factors, and possible future trends for the individual asparagus producing states. Data is then presented on historical trends in U.S. asparagus imports and exports. 1. DEMAND FOR ASPARAGUS IN THE U.S. 1.1. Declining U.S. Consumption 1.1.1. Total Consumption The total quantity of asparagus consumed in the U.S. in all forms generally increased from 1950 to 1965, but has since declined. Total consumption reached a peak during 1960-64 at an average annual amount of 277.6 million pounds. By 1973-77, this average annual figure had declined to 226.3 million pounds, which is 51.3 million pounds (18 percent) below the 1960-64 average figure (Table 1). In recent years, the consumption of asparagus in canned or frozen form in the U.S. has declined much more rapidly, on the average, than 10 11 TABLE 1. Total U.S. Asparagus Consumption, Five-Year Averages, 1945-74, Annual 1965-77 (In millions of pounds) Total Fresh Frozen Canned consumptionl 5-year average: 1945-49 121.1 19.2 113.0 253.3 1950-54 106.1 24.7 114.7 245.5 1955-59 116.0 30.2 128.2 274.4 1960-64 104.2 33.9 139.5 277.6 1965-69 84.7 31.2 146.1 262.0 1970-74 85.7 26.7 135.4 247.9 Annual: 1965 96.6 30.2 148.5 275.3 1966 79.9 30.8 147.2 257.9 1967 78.4 32.7 140.0 251.1 1968 87.0 33.0 146.5 266.5 1969 81.9 29.8 148.3 260.0 1970 92.6 31.3 149.4 273.3 1971 82.3 28.5 137.7 248.5 1972 90.3 25.9 133.4 249.6 1973 82 8 26.4 149.1 258.3 1974 80 6 23.1 117.6 221.3 1975 84.8 21.9 122.2 228.9 1976 89.7 25.7 118.9 234.3 1977 68.6 24.1 96.3 189 1The frozen and canned components of the combined consumption data shown contain different amounts of raw product per pound; therefore, the fresh-weight equivalent of each combined consumption total shown would vary as the relative proportions of its three components vary. Source: Data to 1974 from Asparagus Report, U.S. International Trade Commission. For 1975-77, Production Data from Annual Vegetable Report, USDA. Import-Export Data from U.S. Department of Commerce, Bureau of the Census. Carry-in Stocks for Frozen from Monthly Cold Storage Report, Statistical Reporting Service, Agricultural Estimates Division, USDA. Carry-in Stocks for Canned from National Canners Association Statistics. 12 has fresh consumption. Total U.S. consumption of canned and frozen asparagus averaged 176 million pounds annually during the three year period 1965-67; by 1975-77, this figure had declined to 136 million pounds, a decline of 40 million pounds (23 percent) between these period averages. Fresh asparagus consumption declined by only 4 million pounds (5 percent) between these same period averages, from 85 million pounds for 1965-67 to 81 million pounds for 1975-77 (Table 2). TABLE 2. Annual Consumption of Asparagus in the U.S., Three-Year Period Averages, 1965-67 and 1975-77 Consumption (million lbs.) Change Form Total 1965-67 1975-77 (million lbs.) Percent Frozen 31 24 - 7 22 Canned 145 112 -33 23 Total Processed 176 136 -40 -23 Fresh 85 81 - 4 5 Total Consumption 261 217 -44 -17 Source: Table 1, this report. 1.1.2. U.S. Per Capita Consumption of Asparagus U.S. per capita consumption of asparagus has declined steadily during the last three decades, from an annual average of 2.15 pounds per person in 1945-49 to a 1.31 pound annual average for 1973-76 (39 percent decline). Per capita consumption has decreased steadily since 1960 (Figure 1). Per capita consumption declined by a total of 0.38 pounds per person between the average of 1.61 pounds for the three year period 1965-67 and the average for 1974-76 of 1.23 pounds (Table 3). Of this total decline, 53 percent was accounted for by the decline in consumption of canned 13 asparagus, 29 percent by the decline in consumption of frozen asparagus, and 18 percent by the decline in the consumption of fresh asparagus. FIGURE 1. U.S. Per Capita Consumption of Asparagus, 1960-1976 2.0 -*~ 1.8 1.6 1.4 1.2 l 0 re- P t- 1960 62 64 66 68 7O 72 74 76 78 80 l r Source: Table 3, this report. 1.2. Factors Affecting Consumption Economic theory and a general knowledge of the asparagus market suggests that important factors affecting U.S. asparagus consumption would include asparagus prices, consumer tastes and preferences, volume of asparagus supplied to U.S. markets, and prices of alternative vegetable products. An earlier study of the national asparagus market situation found that the relatively high price of asparagus in recent years has been one of the most important factors affecting the decline 1 in U.S. asparagus consumption. That study also stated that changing 1U.S. International Trade Commission, Asparagus Report, Washington, D.C. USITC Publication 755, 1976. TABLE 3. 14 U.S. Per Capita Consumption of Fresh Canned, and Frozen Asparagus, 1957-1976 Year Fresh Canned Frozen Total Pounds, fresh equivalent basis 1957 .80 1.00 .31 2.11 1958 .80 .98 .29 2.07 1959 .70 .97 .38 2.05 1960 .70 .88 .40 1.98 1961 .60 .92 .30 1.82 1962 .60 .96 .34 1.90 1963 .60 .83 .30 1.73 1964 .50 .88 .33 1.71 1965 .60 .90 .28 1.78 1966 .40 .83 .30 1.53 1967 .40 .80 .32 1.52 1968 .50 .87 .30 1.67 1969 .40 .83 .28 1.51 1970 .50 .81 .28 ‘1.59 1971 .50 .73 .24 1.47 1972 .50 .70 .19 1.38 1973 .50 .84 .21 1.55 1974 .40 .62 .19 1.21 1975a .40 .64 .17 1.21 1976b .40 .67 .20 1.27 Source: Compiled from the Vegetable Situation, August 1977, issued by the Economic Research Service, U.S. Department of Agriculture, Washington, D.C. aRevised. bPreliminary. 15 consumer tastes and preferences have probably been another significant factor contributing to this decline. In this subsection, the effect on U.S. asparagus consumption of asparagus prices and of changing consumer tastes and preferences are investigated. 1.2.1. Price Factor Asparagus prices have increased rapidly since 1965, both in absolute terms and relative to other vegetable products. Asparagus has become one of the most expensive vegetables in the market in recent years. Between 1965 and 1974, the wholesale price index for all processed fruits and vegetables increased at an average annual rate of 5.56 percent; for all canned vegetables and juices, this rate was 5.73 percent; but for canned asparagus, the rate was 7.66 percentd‘ The consumer price index for fresh asparagus increased at an average annual rate of 6.15 percent from 1965 to 1974, while the index for all fresh fruits and vegetables increased at a rate of 5.85 percent. During the period from 1965 to 1974, the wholesale and consumer price indexes for all goods (inflation) increased at an average annual rate of 5.43 percent. From 1945 to 1959, asparagus prices at the grower level increased at an average annual rate of 1.5 percent, while the wholesale and consumer price indexes increased at a rate of 2 percent. Per capita consumption of asparagus declined in total by 0.13 pounds per person (6 percent decline) during this period. Between 1960 and 1974, grower prices increased at an average annual rate of 6.1 percent, while the wholesale and consumer price indexes increased at a rate of 4.15 percent. The 1U.S. Bureau of Labor Statistics, Wholesale and Consumer Price Indexes, which appear in Appendices A and B. 16 total decline in per capita consumption of asparagus amounted to 0.77 pounds per person, or a total decline of 39 percent during this period. This data suggests that increasing asparagus prices have been a significant factor contributing to the decline in U.S. consumption since 1964. 1.2.2. Changing Tastes and Preferences There is also evidence which suggests that the basic tastes and preferences of the U.S. population may be shifting away from asparagus. During the period 1945 to 1959, U.S. asparagus production (supplies) increased, and asparagus prices actually declined in real terms. Yet per capita consumption of asparagus declined also, though only slightly, during this time. This indicates that the consumer demand (tastes and preferences) for asparagus in the U.S. was declining during this period. Since 1960 the quantity of asparagus consumed per capita in the U.S. has declined sharply. The longer asparagus consumption remains at these lower levels, the more established this pattern may become; basic consumer tastes and preferences may change, as fewer new consumers are attracted to the commodity and previous consumers form other product preferences. A study of consumer preferences for certain vegetables found that the younger age categories in the U.S. population have the lowest preference for asparagus, while the oldest age categories have the highest preference.1 Over time, the expected effect will be reduced consumer demand for asparagus, unless some major change occurs to reverse this trend. Consumer tastes and preferences, therefore, may shift away from asparagus at a more rapid rate in the future. 1U.S.D.A. Consumers' Preferences, Uses and Buying Practices for Selected Vegetables, A Nationwide Survey, USDA Marketing Research Report #1019, 1974. 17 Changes are occuring at the retail level which may tend to further reduce consumer demand for asparagus. This is particularly true in the case of canned asparagus. Retail sales of this product have declined in recent years, corresponding to the high price of the product. When the movement of a canned item declines substantially over a period of years, retailers may give the item a larger mark-up. This accentuates increases in the wholesale price of the product, increasing consumer prices, and further reducing sales. Retailers also will be likely to reduce the amount of space on the shelves which is allocated to asparagus, and may relocate the product to less favorable locations in the store. Generally, as demand decreases, the product receives less promotional effort from the retailer. As the price of canned asparagus remains at relatively high levels over a period of years, the segment of the population which purchases this product is likely to become smaller. It has been hypothesized by industry sources that this situation is occurring, leading to a more limited and price inelastic retail demand for canned asparagus. Persons familiar with the food canning industry have suggested that canned asparagus is no longer allocated promotional resources by these manufacturers as the demand for this item is not considered to be sufficiently responsive to promotional efforts. Further, these sources suggest that food manufacturers may be tending to increase their mark-up on the wholesale price of this commodity, which may increase the consumer price and further reduce the retail demand for canned asparagus. All of these factors have important added effects of reducing consumer demand for asparagus, both presently and in the future. 18 An additional consideration in evaluating future consumer demand for asparagus is the quality of the asparagus "pack" in recent years. The short supplies for asparagus have motivated some processors to pack asparagus of substandard quality. Consumer reaction to tough, stringy asparagus at very high prices can be expected to be damaging to future consumer demand. While the decline in asparagus consumption in the past has been in part the result of increasing asparagus prices, the factor of changing consumer tastes and preferences relative to asparagus will likely become increasingly important in the future. The significance of this to the U.S. asparagus industry is that the trend of reduced consumer demand due to changes in tastes and preferences is difficult to reverse, either to expand demand or to prevent demand from declining further. This poses a major obstacle to expanding consumer demand for asparagus if supplies were to increase again in the future. 2. ASPARAGUS PRODUCTION IN THE U.S. 2.1. Special Features of Asparagus Production As a prerequisite to understanding certain aspects of the asparagus industry, it is necessary to know some general features of asparagus production. Asparagus is a deep-rooted perennial plant, annually producing edible shoots (spears) from the root system (crown). In order to establish an asparagus field, one to two years of advance preparation is frequently necessary to get the field in condition. Commercial fields are typically planted with crowns that have developed for one year from seeding in a nursery field. From the time these first-year crowns are planted, it generally takes two to three years before the first commercial crop is harvested. The first harvest is typically light, with full 19 production reached in two to three harvest seasons. Depending upon the growing area, most commercial asparagus fields will produce for 8-15 years. During the last several years in production, the yields from an asparagus field are generally much lower than for younger fields. A substantial investment is involved in establishing an asparagus field, consisting of direct costs, opportunity costs for the land which does not produce a crop for several years, and capital costs. To producers, asparagus production poses a marketing risk in the commitment to a single crop for a number of years (compared to annual crops). Thus, it would be expected that asparagus production will tend to respond in a cyclical manner over a longer time period to market conditions, as do most perennial crops. Producers will tend to retain asparagus fields despite some poor price years. Asparagus is harvested by cut harvesting, where the spears are cut with a knife below the surface of the soil, or by snapping the spears off above the ground. Michigan is the only state which uses the snap- harvest method. Snap-harvesting results in substantially lower yields per acre than the cut-harvesting method. This is due to the fact that the snap-harvest method produces an entirely edible product, as the fibrous, inedible butt of the asparagus spear is left in the field. The butt section of the asparagus spear accounts for 30-40 percent of the weight of the cut harvested spear. This consideration is important when comparing data between states, particularly prices. However, the Michigan data which appears in this study is not adjusted for this factor, but rather appears here in the form in which it is given in all statistical sources cited. 20 The snap method of harvest requires substantially less labor than does the cut harvest. Further labor savings are achieved by the use of mechanical harvest aids, which carry pickers through the field as they harvest. The use of non-selective mechanical harvesters is another substantial step in saving harvest labor, but involves a considerable reduction in yields per acre. 2.2. U.S. Asparagus Production Total asparagus production in the U.S. generally increased from 1950 to 1960, but has since declined. Annual U.S. production averaged 312.1 million pounds during the period 1950-54; this figure had increased to 369 million pounds by 1960-64 (Figure 2). Since 1960, production has declined dramatically. FIGURE 2. U.S. Asparagus Production, By Period Averages, 1945-1978 Production (Million Pounds) 400 .. 350 4 300 -- 250 " ZOO -- 150 -r IOO 1945-49 1950-54 1955-59 1960-64 1965-69 1970-74 1975-78 Source: U.S.D.A. Statistics. 21 From an average annual production of 372 million pounds during the period 1960-63, total U.S. asparagus production decreased to only 210 million pounds for the period 1975-78, a decline of 162 million pounds (44 percent) from this earlier period average. The decline in the production of asparagus for processing accounted for 131 million pounds (81 percent) of this tOtal figure, while the reduction in fresh production accounted for 31 million pounds (19 percent). (See Figure 3.) Asparagus is produced primarily in the states of California, Washington, Michigan, New Jersey, and Illinois. Since 1960, the relative importance of the asparagus producing states has changed substantially. Asparagus production in California and New Jersey has declined by almost 50 percent and 96 percent respectively. The only states that have increased asparagus production since 1960 are Washington and Michigan. The situation is illustrated by the following table, which shows the relative importance of the asparagus producing states in 1960-63 and in 1975-78 (Table 4). Asparagus production since 1971 is shown in Table 5. Factors contributing to the trends in each state will be explained in detail in the following section. 22 FIGURE 3. U.S. Asparagus Production-- Total, Fresh, and Processed, 1960-1978 Million Pounds 400 4F 1 300 —- Total 200 .1 Production Processed 100 4b Fresh __.l_ JJJ WIT—TfiTIT 1960 62 64 66 68 7O 72 74 76 78 Source: Compiled from U.S.D.A., Vegetable-Fresh Market Summary. 23 TABLE 4. U.S. Asparagus Production and Acreage by States, 1960-63 and 1975-78 1975-78 State Harvested Production % of U.S. Acreage (Mil. lbs.) Production California 32,600 105.7 50.2 Washington 20,400 63.3 30.0 Michigan 17,600 19.8 9.4 Other1 11,400 11.7 5.5 Illinois 5,200 5.7 2.7 New Jersey 3,000 4.1 1.9 Total U.S. 90.200 210.4 100.0 1960-63 State Harvested Production % of U.S. Acreage (Mil. lbs.) Production California 68,000 198.3 53.1 Washington 15,400 47.1 12.6 Michigan 10,900 16.3 4.3 Other1 15,000 23.5 6.2 Illinois 9.900 16.7 4.5 New Jersey 29,400 71.3 19.0 Total U.S. 148.600 373.2 100.0 1Includes for fresh market: For processing includes: Virginia, and Oregon. Indiana, Iowa, Maryland, and Massachusetts. Indiana, Delaware, Iowa, Maryland, Minnesota, Source: U.S.D.A. Annual Vegetable Summary. 24 TABLE 5. U.S. Asparagus Production, Total, Fresh, and Processing, Annual, by States, 1971-77 Total Production Total Calif. Wash. Mich. N.J. Ill. Other U.S. 1971 137.6 65.9 18.9 23.8 12.4 20.5 279.1 1972 155.4 61.3 21.8 17.9 14.1 18.6 289.1 1973 126.0 64.3 '24.6 12.5 10.4 16.7 254.5 1974 127.9 70.1 25.5 8.8 8.6 19.5 260.4 1975 107.0 56.7 19.6 6.4 9.5 14.9 214.1 1976 125.4 65.3 18.0 4.3 4.7 12.5 230.2 1977 112.1 66.7 19.0 3.2 5.0 12.1 218.1 1978 78.4 64.0 22.5 2.7 3.8 8.1 179.5 Production for Processing Use 1971 78.1 57.3 17.8 13.6 11.5 17.5 195.8 1972 85.1 54.2 20.3 8.7 13.1 15.6 196.9 1973 60.0 56.6 22.9 5.2 9.3 14.5 168.5 1974 67.1 59.0 24.1 2.4 7.7 17.7 178.0 1975 41.3 45.6 17.5 .7 8.6 13.7 127.7 1976 52.9 53.6 16.0 I] 4.0 11.8 138.3 1977 56.0 57.8 17.7 1] 4.1 11.1 146.7 1978 25.5 55.4 21.0 1] 3.2 7.5 112.6 Fresh Production 1971 59.5 8.6 1.1 10.2 .9 3.0 83.3 1972 70.4 7.1 1.5 9.2 1.0 3.0 92.2 1973 66.0 7.1 1.7 7.3 1.1 2.2 86.0 1974 60.8 11.1 1.4 6.4 .9 1.8 82.4 1975 65.7 9.6 2.1 5.7 .9 1.2 87.4 1976 72.5 11.7 2.0 4.3 .7 .7 91.9 1977 56.1 8.9 1.3 3.2 .9 1.0 71.4 1978 52.9 8.6 1.5 2.7 .6 .6 66.9 l-/No processing production. Source: U.S.D.A., Annual Vegetable Summary, 1978. 25 2.3. Asparagus Production by States 2.3.1. California California is the most important state in the U.S. asparagus industry, consistently producing approximately 50 percent of total U.S. asparagus production since 1945. From 1950 to 1963, total asparagus production in California generally increased, reaching a peak of 204.3 million pounds in 1963. Since then, production has declined sharply, falling to only 112.1 million pounds by 1977 (a 45 percent decline). Production of asparagus for processing use averaged 135.3 million pounds annually during the period 1960-64; for 1975-78, this figure was only 43.9 million pounds. Fresh market production has remained essentially stable during this period, from an annual average of 60.2 million pounds for 1960-64 to 61.8 million pounds for 1975-78 (Figure 4). California has dramatically increased the proportion of its total crop which is utilized as fresh product, from 31 percent of average annual production for the period 1960-64 to 58 percent for 1975-78. California's share of total U.S. fresh production increased from an average of 56 percent of annual fresh production for 1960-64 to 78 percent of the 1975-78 average. The percentage of annual U.S. production for processing accounted for by California declined from an average of 52 percent during 1960-64 to 34 percent for 1975-78. Asparagus acreage has declined substantially in California, from the peak of 73,500 acres in 1960 to 28,000 acres in 1978 (62 percent decline). Reported yields in California apparently tend to fluctuate quite widely from year to year due to weather factors and discrepancies in the crop statistics. From 1975 and 1978, yields averaged 2,800 pounds per acre across the state; but 1976 and 1977 yields both averaged 3,700 pounds 26 FIGURE 4. California Asparagus Production, 1960-1978 Million Pounds Total Production Fresh Processed J _l_ l l l i L i l l _L l L L T I I I I l I I I I T T T 1960 62 64 66 $3 70 72 74 76 78 Source: U.S.D.A., Annual Vegetable Summary. 27 per acre. The average yield for the period 1970-78 was 3,128 pounds per acre. The effect of this variation is very significant on California and hence on U.S. annual asparagus production. In any year, California production can vary by as much as 18 percent from this average, which amounts to approximately a 9 percent variation in total U.S. production. The evidence gathered in the course of this study indicates that there are four. factors primarily responsible for the decline in California's asparagus production: inadequate labor availability, the high cost of labor, high opportunity costs for asparagus land, and inadequate grower prices for asparagus. Agricultural labor became a major problem for California growers following the termination in 1964 of the Bracero program, which allowed Mexican nationals to perform agricultural labor in the U.S. Labor intensive crops such as asparagus (white asparagus particularly) were strongly affected by this. White asparagus production in California declined from 80.3 million pounds in 1963 to 12 million pounds by 1967. The quantity of white asparagus produced in California after 1971 was no longer significant.1 Rising labor costs and increasing labor difficulties continue to pose problems for California asparagus producers. Governmental regulations relating to agricultural labor, in terms of wages, fringe benefits, and housing, and a rising tide of unionization of agricultural labor, have rapidly increased the real costs of harvest and production labor. Industry sources in California stated that labor costs and difficulties are the major factors which have caused the decline in asparagus production in that state since 1964. 1U.S. International Trade Commission, Data from Asparagus Report, Table 6, 1974. 28 Opportunity costs for land have risen rapidly in the last 25 years in California. Land development (urbanization) has been a significant source of upward pressure on the value of agricultural land; but of perhaps greater significance is the range of profitable alternative crops for the California agribusinessman. Particularly considering the invest- ment of capital which is required to establish an asparagus field (4-5 years before full production) at the current high capital costs, and the commitment to a single vegetable crop for a period of 8-15 years, asparagus may not be the most profitable choice of crops in California. According to limited industry contacts, other crops, such as corn, beans, and alfalfa hay have replaced asparagus to a large extent. These crops are highly profitable when raised on the irrigated crop lands of California, and they require only a small fraction of the labor which is required to produce asparagus. Grower prices for California asparagus have increased at an average annual rate of 5.26 percent for processing and 6.17 percent for fresh from 1960-62 to 1974-76. This is only slightly above the average rate of increase for wholesale and consumer prices in the U.S., which rose at an annual rate of 4.15 percent during this same period. Although California's asparagus production has been steadily declining since 1963, there is a high probability that production will level off and perhaps begin to increase in the future. Currently, two factors in combination favor an increase in California asparagus produc- tion. The first is the development of a superior new asparagus variety in that state. In addition, the grower prices for asparagus have risen dramatically during the last two years. 29 A substantial stimulus to increased asparagus production in California is provided by the grower price situation in the past two years. Prices increased from 1976 to 1977 by 20.2 percent for asparagus for processing, and by 24 percent for fresh. From 1977 to 1978, the increase was another 15 percent for processing, and another 7.7 percent for fresh. Researchers at the University of California at Riverside have developed a new hybrid asparagus variety, called U.C. 157, which has passed the development stage and is becoming commercially available in some California districts. This new variety has demonstrated an increase in yields of 40-100 percent over current varieties in actual field tests, and the variety begins to produce within 2 years of planting, compared to 3-4 years with the old varieties. Approximately one percent of California's asparagus acreage in 1977 was planted with U.C. 157, and it is projected that within ten years, all California acreage could be converted to this variety.1 This variety has the potential of substantially reducing asparagus production costs in California, providing higher yields and with less production lead time. U.C. 157 may increase the profitability of asparagus production in California sufficiently to halt the declining trend of the past 18 years, and could potentially lead to an increase in asparagus acreage in that state. Should the California asparagus industry find that U.C. 157 is sufficiently profitable to produce, the result could be to either (1) slow the current rate of decline in California's asparagus acreage, (2) stabilize acreage at the current level, or (3) increase asparagus 1"Hybrid Cultivars May Help Revive Asparagus Industry in California," article from The Packer newspaper, May 20, 1978, p. 268. 3O acreage in that state. As U.C. 157 produces substantially larger yields per acre than the current varieties, the effect of such a shift in California's asparagus acreage trends would be to substantially increase total asparagus production in that state. Some projections of potential future trends in California asparagus acreage and production are shown in the following figure (Figure 5). Three alternative projections are shown. A1 illustrates the current declining trend in California asparagus acreage, with total production based on current yields projected by A2, Projections B1 and B2 assume that (1) asparagus acreage remains at approximately the current level of 31,000 acres, but that (2) all acreage is gradually converted to the new variety, U.C. 157. This would result in a steady increase in California asparagus production, illustrated by 82. Finally, the projections labeled C illustrate the potential effect of increasing the acreage planted to asparagus, with all new acreage being U.C. 157 and all existing acreage being gradually replaced by this variety. In these projections, it was assumed that U.C. 157 will increase yields per acre by 40 percent over current varieties (to 4,379 pounds/acre). The potential effect of these changes in California's asparagus industry would be to substantially increase the quantity of asparagus supplied to U.S. markets. The increase in California production which is represented by B could increase total U.S. asparagus production by 2 approximately 15 million pounds over the current level by 1990. Production projection C implies a potential for California asparagus 2 production to increase by 40 million pounds from the current (1975-78) average by 1990. This represents a potential increase in total U.S. asparagus production of 19 percent by 1990. Perhaps even more 31 uopumnoea .covuozuoea mcpucoammeeou “ma .u.: .mmmmeuc_ «amoeba umpummoea :owpuzuoea emaumwoca acmccoammeeoo om mm mm cw wxwfi ex ex r q NmH .o.: .mmmmcom Pm>mb nouomnoea .ucmeu cowuuzuoeg peaceau .zcm553m mpnmuumo> peacc< .<.o.m.= “8683; cmuumwoen .ucmep manoeum acmeezo cm P we we r 1 co mo oomfi b P OVLYIIIIII on..~ om.. cor. owe: mm Dec; coca. ..\ cm~.- fiancee; eo.__czv cowuoavoca p _ d l— a. .co_uu=uoca use mmamgu< mammcmam< mwceocw_mu cm » 1 cowuuavoca q muzmtp .m mm:o_u moamcu< d. 4 l -ooo.o~ e ooo.om tooo.OM rooo.oe .ooo.om fooo.oe mooo.o~ mmcu< kumm>ecz ”moezom 32 significant is the implication that the substantial decline in total U.S. asparagus supplies which has been caused in the past largely by the decline in California production, may not continue into the future. The economic effect of this is discussed in a later section (Section 4). 2.3.2. Washington Asparagus production in Washington steadily increased from an annual average of 47.2 million pounds during 1960-64 to 63.1 million pounds in 1970-74. Since then, average total production has leveled off; the annual average for 1975-78 amounted to 63.3 million pounds (Figure 6). FIGURE 6. Washington Asparagus Production, 1960-1978. Million Pounds 80-* Total 70 7b Production 60 - Processed 50 A». 4 40 l r I 30 4 Source: U.S.D.A., Annual Vegetable Summary. 33 Washington is the second most important asparagus producing state in the U.S., and has surpassed California in the production of asparagus for processing since 1977. Washington's crop is utilized primarily by processors, with an average of 84 percent of the crop so utilized during 1975-78. During this same period Washington accounted for 40 percent of U.S. production of processing asparagus, and for 9.2 percent of fresh production. Asparagus acreage in that state rose steadily from about 15,000 acres in 1963, peaked at 23,400 acres in 1974, and has since leveled off at about 20,200 acres. Yields have increased gradually,from an average annual amount of 2,800 pounds per acre during 1960-63, to 3,150 during 1975-78.1 The expansion of the asparagus industry in Washington parallels the expansion of irrigated acreage of farm land in that state. Major irrigation projects in the Columbia basin have led to expansion of the Washington agricultural industry in general, allowing for the production of irrigated crops in Eastern Washington where wheat was previously the major crop. The production of asparagus in Washington appears to be quite sensitive to the prices of alternative crops. In 1974 for example, wheat prices rose substantially; 2,400 acres of asparagus (10 percent of 1974 acreage) were taken out of production despite steady asparagus prices, and much of this was planted to wheat. Asparagus prices in Washington have increased between 1960-63 and 1974-76 at an average annual rate of 5.59 percent for processed, and 6.05 percent for fresh.2 1U.S.D.A., Annual Vegetable Summary. 2151a. 34 There exists a strong potential for increased asparagus production in Washington in the near future, according to industry experts in that state. The market situation for two of the major alternative crops in eastern Washington, wheat and sugar beets, has deteriorated substantially in recent years, giving impetus to growers to expand acreage of asparagus. Wheat prices have declined sharply since 1975, and the major sugar refineries in Washington are planning to discontinue operations as of 1978. This development is occurring at a time when the asparagus price situation is particularly encouraging. Since 1976, grower prices have increased at an average annual rate of 15 percent for processed and 21 percent for fresh. Further encouragement to increased asparagus production is provided by the recent development of a selective mechanical harvester in Washington, which, according to these same industry sources, is econom- ically feasible and will soon be commercially available. Mechanical harvesting of asparagus reduces the amount of labor required and thus the cost of harvest. This development could potentially provide a major stimulus to increased asparagus production in Washington, mainly in the production of asparagus for processing use. Although asparagus production in Washington has leveled off in recent years, these factors could well lead to an increase in production in the future. As Washington accounts for approximately 30 percent of total U.S. asparagus production at the present time, such an increase could potentially add significantly to overall U.S. asparagus supplies in the future. Asparagus production in that state is utilized primarily (84 percent) by processors, which implies that an increase in Washing- ton's production would probably be supplied to processed asparagus markets. 2.3.4. Michigan Asparagus production in Michigan has increased slightly, on the average, since 1960 (Figure 7). During the period 1960-63, Michigan production averaged 16.3 million pounds annually, from an average state- wide acreage of 10,900 acres. For 1975-78, these figures were 19.8 million pounds produced (21 percent total increase) on an average of 17,600 acres (61 percent total increase). Yields averaged 1,800 pounds per acre from 1960 to 1974; but for 1975 to 1978, the average annual yield was only 1,100 pounds per acre. Michigan fields have experienced declining yields after 8-10 years of production, as opposed to the typical 12-15 year production in the past. FIGURE 7. Michigan Asparagus Production, 1960-1978 Million Pounds 30 4' 25 A. Total 20 -- Processed 1 1 15 — 10 r: 5 j; u 4i i t i i i i i’ i 7t L ‘*“* f 1960 62 64 66 68 7O 72 74 76 78 Source: U.S.D.A., Annual Vegetable Summary. 36 Several factors have contributed to the expansion of the Michigan asparagus industry since 1960. Grower prices for processing asparagus have increased at an average annual rate of 5.59 percent from 1960-62 to 1974-76. As U.S. consumer and wholesale prices increased at the average annual rate of 4.15 percent during the same period, Michigan grower prices have increased in real terms. Asparagus produces well on sandy soils which are not well suited to the production of other Michigan crops (low opportunity value for land). The early season for this crop, coming at a time earlier than most other fruit and vegetable crops, allows producers to diversify operations across the year. The asparagus industry in Michigan has not been subjected to as strong land development or labor pressures, which have been a major factor in declining asparagus production in other states such as California and New Jersey. There exists a strong future potential in Michigan for increased asparagus production. Michigan grower prices have increased dramatically for asparagus for processing in the past two years, up 35 percent from 1976 to 1977 and up another 29 percent from 1977 to 1978. This has provided a strong impetus to increased asparagus production, as can be seen from the tremendous increase in new plantings in that state. Industry sources estimate that sufficient seed to establish roughly 8,000-10,000 additional acres of asparagus was planted in 1978, but horticultural factors reduced the amount of acreage successfully established to approximately 2,000-3,000 acres. It is estimated that an even larger acreage may be planted in 1979. This strong interest in increasing asparagus production indicates that there exists a high probability that Michigan asparagus production will likely increase in the near future. 37 2.3.5. New Jersey Prior to 1963, New Jersey ranked second in asparagus production among states, with a total of 71.2 million pounds produced in that year. Production then began to decline, and after 1968 plummeted rapidly; by 1976 production was only 4.3 million pounds, a 95 percent decline (Figure 8). New Jersey accounted for 19 percent of total U.S. production in 1960-64, with 16 percent of the U.S. processing production, and 26 percent of U.S. fresh production; by 1975-78, the figures were 1.9 percent of total, 0 percent of processing, and 4 percent of fresh. Acreage in that state totaled 30,700 acres in 1960; by 1978, it was down to only 1,900 acres. FIGURE 8. New Jersey Asparagus Production, 1960-1978. Million Pou‘ds 70* 60+ Total SOT a»- r ‘ 40'1- ¥ \\ IA 1" i Processed V \\ 3o- \ \ \\ 204- Fresh \ \\ ‘\ 10* \\ PT‘OJECted u.‘ ‘,,, ‘~_ - - ‘ -C’ 'L—‘T’Fi iii‘riiifiiaz’T—‘T—T i 196 62 64 66 68 7O 72 74 76 78 Source: U.S.D.A., Annual Vegetable Summary. 38 The demise of the asparagus industry in New Jersey is the result of two major trends. The first began in the early 19605, and was caused primarily by labor problems and high opportunity costs for land. The labor problems are related to restriction of the importation of foreign agricultural labor. New Jersey growers had historically relied upon Puerto Rican laborers to harvest asparagus. The resulting labor short- ages and large increase in wages put pressure on labor intensive crops such as asparagus. In addition, governmental restrictions, particularly in housing, with respect to the treatment of agricultural labor caused growers to view the use of migrant labor as too costly. At the same time, the Opportunity cost of asparagus lands rose dramatically. Intense land development for urbanization purposes exerted an upward pressure on land values. The increasing profitability of alternative crops, such as soybeans, during that period contributed to a steady decline in aspara- gus acreage. After 1968, plant disease became significant in the decline of the asparagus industry. Fuserium rot became a severe problem in New Jersey fields following a period of above average rainfall during the late 19605 and early 19705 (the disease is aggravated by damp field conditions). This disease is now a major obstacle to asparagus produc- tion in New Jersey, as infected fields remain unsuitable for asparagus production. Results of these trends on asparagus production can be seen in Figure 8. It is unlikely that New Jersey asparagus production will increase to an appreciable extent in the near future. Although a new asparagus variety has been developed in New Jersey which is greatly resistant to fuserium rot, it will be a number of years before the variety is 39 commercially available. Horticulturalists at Rutgers University predict that asparagus acreage could increase with this new variety to a level of 10,000-15,000 acres, producing for the fresh market.1 Economically, it seems unrealistic to predict such an increase. There are several limitations which will have a strong negative bearing on the ability of New Jersey producers to expand asparagus production. Several major factors which were largely responsible for the decline in asparagus production in that state, such as labor and land development pressures, remain as major obstacles to any significant expansion. It appears that New Jersey asparagus production is not likely to expand substantially within at least the next decade. A more moderate increase to 8,000 acres is shown in Figure 8, in a projection which is based on pre-fuserium yields. The effect on total U.S. production would be minor. There appear to be two major reasons which support the contention that such an increase in New Jersey asparagus production would be utilized by the fresh market. At the present time, the quantity of asparagus grown in that state is minor relative to national production, and all of it is utilized in fresh form. Asparagus processors have discontinued operations in that state. Industry sources believe that it is unlikely that the asparagus processing industry will revive in New Jersey in the foreseeable future. Another reason, according to industry sources, is that the demand for fresh asparagus from New Jersey is sufficient to absorb such an increase in production. 1"Cloning Technique Could Revive New Jersey Asparagus Volume," The Packer, May 13, 1978. p. 6A. 40 2.3.6. Illinois Asparagus production in Illinois has steadily declined since 1960. In 1960-63, total production averaged 16.7 million pounds (about equal to Michigan in that period); by 1975-78, total production amounted to only 5.7 million pounds. In 1978, production totaled onlyfi3.2 million pounds (Figure 9). Acreage fell from 10,200 acres in 1961 to 4,200 acres in 1978. Industry sources predict that asparagus production in Illinois will continue this declining trend. FIGURE 9. Illinois Asparagus Production, 1960-1978 Million Pounds 304) 25—- 204 15- Total Production 10.:— JJ.#1_J 1_JJJJ_J TTfiT 1 TT 1960 62 64 66 68 7o 72 74 76 7a 4)- Source: U.S.D.A., Annual Vegetable Summary. 41 Industry sources cited two sets of factors which have affected the decline in asparagus production in Illinois. The soils in that state apparently are not well suited to asparagus production, and fields tend to decline in yiélds per acre rather early. Another factor is the profitability of alternative crops such as corn and soybeans. 2.3.7. Other States1 Production of asparagus in all other states combined has declined substantially from a peak of 26 million pounds in 1968 to 8.1 million pounds in 1978 (a 69 percent decline). The data for these states is not highly accurate due to the nature of crop reporting on minor crOps. However, the data is of sufficient accuracy to illustrate the overall decline in these states (Figure 10). These other states will be most likely to continue this past trend of declining asparagus production. The minor nature of the crop in these states means that the substantial levels of support (horticultural and marketing research and development), which sustain production in the major asparagus producing states, would probably not be available. The exception is Oregon, due to the similarity with Washington producing areas. Overall, the most likely scenario for the near futdre is one of continuing decline in combined production. 1Includes Fresh market: Indiana, Iowa, Maryland Processing: Indiana, Delaware, Iowa, Maryland, Minnesota, Oregon, and Virginia. 42 FIGURE 10. Asparagus Production in Other States,* 1960 to 1978 Million Pounds 30 4. 25 j 20 a I 15 J Total 10 a Production I 5.“ Processed Fresh 1 1 I Ll L LLLLLLL L L FT? I I Ij I_I I I I fi 1960 62 64 66 68 7O 72 74 76 78 L L L I I I "F t *Includes: Fresh Market: Indiana, Iowa, Maryland, and Massachusetts. Processing: Indiana, Delaware, Iowa, Maryland, Minnesota, Oregon Virginia. Source: U.S.D.A., Annual Vegetable Summary. 2.3.8. Summary Although U.S. asparagus production has declined steadily from 1963 to 1978, there appears to be a strong potential for production to level off and possibly increase in the future. Factors appear to be favorable to expanding asparagus acreage in California, Washington, and Michigan, which together account for 90 percent of U.S. asparagus production. 43 3. U.S. ASPARAGUS IMPORTS AND EXPORTS 3.1. General During the last 13 years, the quantities of asparagus imported and exported by the U.S. have changed substantially. During the period from 1960-64, U.S. exports of asparagus averaged 61.9 million pounds, which was approximately 17 percent of total U.S. production. From 1965 until 1971, the export volume declined rapidly. Since 1971, U.S. asparagus exports have leveled off at approximately 13.9 million pounds (1973-77 average), which accounts for approximately 6 percent of U.S. production. Imports of asparagus into the U.S. began to reach significant levels by 1965. Total asparagus imports increased fairly rapidly until 1973, and have since declined. Presently, U.S. imports approximately equal U.S. exports of asparagus (Figure 11). As U.S. exports of asparagus have decreased while imports into the U.S. have increased, the net effect is an increase in U.S. asparagus supplies. 3.2. Exports The majority oflJ.S. asparagus exports before 1968 were of canned white asparagus, and hence, the rapid decline of U.S. exports of canned asparagus parallel the decline of the white asparagus industry in California. Taiwan increased production of canned white asparagus in the last 19605, replacing the U.S. as the major supplier of this product to world markets. Since 1970, U.S. exports are believed to be entirely green asparagus. Fresh asparagus exports have increased substantially Since 1965 (Table 6). In most years, about 90 percent of fresh exports have gone to Canada. Trade sources indicate that in some years a 44 FIGURE 11. U.S. Asparagus--Total Imports and Exports, 1960-1977 Million Pounds 70 4- 6O . 50 4 4o- 30 - 20 - ,‘ hnports 10 q_ I Exports 41111.41 111111144 TTIV Fr! 1960 62 64 66 68 7O 72 74 76 Source: Statistics from U.S. Department of Commerce, Bureau of Labor Statistics. substantial share of the U.S. asparagus entering Canada in the fresh form has been utilized by processors in that country to extend their production season.1 However, Canada is a significant market for U.S. produced fresh market asparagus, particularly with the increase in per capita vegetable consumption in recent years. Also, the availability of jet transportation has Opened new European markets for fresh U.S. asparagus. Europe will probably remain a minor market for fresh U.S. asparagus, however. This market receives fresh asparagus from the U.S. primarily during the period from January through March, before 1U.S. International Trade Commission Asparagus Report, 1974. 45 TABLE 6. U.S. Exports of Asparagus, 1960-1977 (Million Pounds) Year Canned Fresh Total 1960 51.2 5.2* 56.4 1961 44.3 5.2* 49.5 1962 64.1 5.2* 69.3 1963 62.2 5.2* 67.4 1964 61.7 5.2* 66.9 1965 46.4 6.8 53.2 1966 29.0 6.7 35.7 1967 18.9 5.8 24.7 1968 15.7 6.9 22.6 1969 11.5 6.9 17.4 1970 7.5 6.8 14.3 1971 4.5 7.2 11.7 1972 3.8 10.1 13.9 1973 4.1 10.5 14.6 1974 5.1 10.9 16.0 1975 2.9 10.9 13.8 1976 2.7 10.3 13.0 1977 2.4 9.7 12.1 *Average for 1960-64. Exports of frozen asparagus, if any, are minor. Source: Export data from official statistics of the U.S. Department of Commerce. 46 European asparagus begins to come into those markets. Export markets are not expected to provide a significant demand for U.S. produced asparagus in the near future. 3.3. Imports U.S. imports of asparagus come almost entirely from two sources: Taiwan (which supplies only canned white asparagus) and Mexico. Taiwan became an important supplier beginning in 1969, filling the domestic demand for white asparagus. Mexico has become a more important source of asparagus imports in recent years, supplying fresh, frozen, and canned (green and white) asparagus to the U.S. (Table 7). The quantity of asparagus imported into the U.S., in all forms, has averaged approximately 6.7 percent of U.S. asparagus consumption in recent years. To a large extent, the processing of asparagus in Mexico is carried out either directly by major U.S. food processors or through an agreement with these U.S. processors. The processed asparagus from Mexico is marketed in the U.S. almost entirely by two U.S. food proces- sors.1 Imports of processed asparagus from Mexico, which posed a threat to U.S. asparagus producers due to the lower production costs (land and labor) in Mexico, have declined in recent years. Limited industry contacts suggest that increasing labor costs and higher opportunity values for land in Mexico have had an effect on this decline. The bulk of the imports of fresh asparagus (which come entirely from Mexico) enter the U.S. in February and March, although light shipments cOntinue into early May. As fresh Mexican asparagus enters the U.S. at a time when domestic supplies are very light, imports of 1International Trade Commission Asparagus Report, 1974. 47 TABLE 7. U.S. Asparagus Imports by Types and Major Sources, 1965 to 1977 (Million Pounds) Canned Imports Fresh TOTAL From 1 From Total 2 Import§ Frozen U.S. Taiwan Mexico Imports (Mexico ) Imports IMPORTS 1965 .7 .7 1966 .6 2.3 2.9 1967 2.5 2.0 4.5 1968 .9 2.1 3.0 1969 1.2 1.5 3.7 .1 5.3 1970 2.2 .1 2.5 5.0 .5 8.0 1971 3.3 1.9 5.4 6.8 1.6 13.8 1972 5.4 4.0 9.8 8.2 3.1 21.1 1973 9.0 3.3 12.5 7.3 2.0 21.8 1974 4.2 4.5 8.8 9.1 1.2 19.1 1975 2.3 5.6 8.0 8.3 1.3 17.6 1976 3.1 2.7 6.0 8.1 na 14.1 1977 7.8 2.3 10.5 6.9 na 17.4 1Taiwan canned asparagus is believed to be entirely white asparagus. 2Other extremely minor sources of canned imports account for the difference between total imports and Mexico and Taiwan. :Mexico is the only source of U.S. fresh imports (at any significant level . 4Estimated by the U.S. International Trade Commission from data supplied by industry sources and official statistics of the U.S.D.A. na--data not available. Source: Compiled from official statistics of the U.S. Department of Agriculture and the U.S. Department of Commerce. 48 fresh asparagus tend to supplement domestic production by extending the asparagus season. The quantity of fresh asparagus imported into the U.S. has leveled off since 1972, and has averaged approximately 11 percent of total U.S. fresh production in recent years. CHAPTER IV. FINDINGS FROM THE STUDY OF THE U.S. FRESH ASPARAGUS MARKET This chapter presents information and data relating to the marketing of fresh asparagus in the U.S., and provides information needed in order to analyze Michigan's competitive position in the fresh asparagus market and to evaluate alternative means of increasing the volume of fresh asparagus marketed from that state. Central to this chapter are the findings from the interviews with produce buyers. The chapter also develops background information about the entire U.S. fresh asparagus market; volumes shipped, seasons, major market regions for fresh asparagus, market shares of the major asparagus producing states, and selected transportation cost and fresh asparagus price data. This chapter also includes a summary of a fresh asparagus marketing study conducted in New Jersey. 1. THE U.S. FRESH ASPARAGUS MARKET 1.1. Size of the Market The U.S. market absorbed an estimated average of 76.5 million pounds of fresh asparagus per year from 1975-78. This estimate is based on the quantity of fresh asparagus shipments reported by the USDA Agricultural Marketing Service, modified by information gathered from industry experts in the major asparagus producing states, and adjusted for imports and exports on the basis of data from the U.S. Department of 49 50 Commerce. Of this total, an average of 8.6 million pounds per year consisted of imports from Mexico. The Canadian market absorbed an estimated 6 million pounds per year during the same period.1 The following table shows the estimated fresh market volume on a yearly basis (Table 8). TABLE 8. Fresh Market Asparagus Volume, U.S. and Canada, 1975-77 (Million Pounds) 1975 1976 1977 1978 U.S. 84.6 89.5 68.6 63.3 Canada2 6.5 6.1 5.4 N/A Total 91.1 95.6 74.0 2 Based on Unload Data for five Canadian cities, adjusted. Source: U.S.D.A., Annual Vegetable Summary; Import-Export Data from U.S. Department of Commerce. 1.2. Major Market Regions for Fresh Asparagus The data which was used in determining the relative importance of various regions in the U.S. and Canada as market regions for fresh asparagus was from the publication "Fresh Fruit and Vegetable Unloads in 41 U.S. and 5 Canadian Cities," published by the U.S.D.A. This data does not accurately account for the total volume of fresh asparagus moving to markets in the U.S. and Canada since the total volume from the unload data is about 20 percent less than total shipment volume reported. Nevertheless, this data is useful and perhaps of sufficient accuracy in determining the relative importance of different regions. The cities included in each region, and the average volume of fresh asparagus 1Based on Unload Data for 5 Canadian cities, adjusted. Source: USDA Annual Vegetable Summary; Import-Export Data from U.S. Department of Commerce. 51 unloaded in each city, appear in Table 9. In the text which follows, the term percentage of unloads refers to the share of these total three- year average unloads accounted for by the particular market referred to. The east coast constitutes an important market region for fresh asparagus, accounting for 38 percent of U.S. unloads. The cities of New York, Boston, and Philadelphia accounted for 82 percent of total east coast volume. The western region is also a major market area, accounting for 39 percent of U.S. unloads. Midwestern cities accounted for 17 percent of U.S. unloads, with Chicago, Detroit, and Cleveland receiving 60 percent of the volume in this market region. Southern markets received only 5 percent of U.S. unloads. While Canadian unloads of fresh asparagus were minor, it is important to note that 64 percent of this volume was marketed in the cities of Montreal and Toronto alone. Combined. these two cities are as important as the City of Chicago. 2. MARKET POSITIONS OF THE MAJOR ASPARAGUS PRODUCING STATES 2.1. Market Shares California dominates the U.S. fresh asparagus market, supplying an average of 74 percent of the total annual volume during the period 1975-78. Mexico accounts for the next largest share, averaging 10 percent of the total fresh volume during this same period; Washington supplied 6.5 percent, New Jersey 5.2 percent, Michigan 2.2 percent, and all other states combined 2.1 percent (Figure 12). These average market Shares are based on production data from the Annual Vegetable Summary published by the U.S.D.A., adjusted for exports and imports on the basis of data from the U.S. Department of Commerce. 52 TABLE 9. Unloads of Fresh Asparagus in 41 U.S. and 5 Canadian Cities, 1975-1977, Carlot Equivalents . 3-Year Unload City 1975 1976 1977 Average EASTERN Albany, N.Y. 24 23 16 Baltimore, Md. 58 66 63 Boston, Mass. 122 169 148 Buffalo, N.Y. 32 32 17 N.Y.-Newark, N.J. 262 247 238 Philadelphia, Pa. 142 167 165 Pittsburgh, Pa. 24 20 16 Providence, R.I. 9 5 4 TOTAL 73" ’29 6—67— 699 MIDWESTERN Chicago, Ill. 109 118 76 Cincinnati, Ohio 28 31 32 Cleveland, Ohio 46 49 46 Detroit, Mich. 44 49 43 Indianapolis, Ind. 10 6 6 Kansas City, Mo. 25 44 12 Louisville, Ky. 6 5 3 Milwaukee, Wis. 12 10 6 Mpls.-St. Paul, Minn. 9 31 26 St. Louis, Mo. 24 25 27 TOTAL 313 3'68 277 319 SOUTHERN Atlanta, Ga. 6 8 6 IO 14 15 Memphis, Tenn. 17 17 17 Miami, Fla. 38 41 37 New Orleans, La. 3 4 4 Oklahoma City, Okla. 2 3 2 San Antonio, Tex. 6 10 19 TOTAL 783 ‘97 TOO 93 WESTERN Denver, Colo. 42 36 21 Los Angeles, Calif. 268 265 210 Portland, Ore. 44 45 35 Salt Lake City, Utah 30 26 22 S.F.-Oakland, Calif. 312 304 25 Seattle-Tacoma, Wash. 70 81 56 TOTAL 76? 7'57 5'97 706 TOTAL U.S. 1,820 1.936 1.641 1.817 CANADA Montreal, Due. 44 34 31 Ottawa, Ont. 6 7 4 Toronto, Ont. 63 52 33 Vancouver, B.C. 23 26 28 Winnipeg. 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