A Demand Analysis of Citrus Beverages in the United States

Document Type

Thesis

Degree Name

Master of Science (MS)

Department

Ag Science and Natural Resources

Date of Award

Fall 2018

Abstract

In 2017, the United States was the second largest producer of fresh and processed citrus with 711,000 bearing acreages and a production of 7.77 million metric tons (National Agricultural Statistics Service-USDA [NASS-USDA], 2018). Over 70% of the oranges produced in the U.S. are processed, while the remaining 30 % is sold as fresh fruits. Despite the U.S. annual orange juice production decreasing to 215,000 metric tons in 2017, per-capita domestic consumption increased to 41.75 pounds or remained at above 41.75 pounds (Economic Research Service-USDA [ERS-USDA], 2018). With record low production levels and record high import levels over the last 17 years, it is important to empirically estimate the U.S. household demand for citrus beverages. An effective approach is the estimation of household elasticities of demand. This study estimates an almost ideal demand system (AIDS) using AC-Nielsen monthly data for the period of 2004-2018. The parameter estimates of the AIDS model were employed to estimate the elasticities of demand for orange juice, grapefruit juice, orange juice drink, orange juice blend drink, orange juice blend, grapefruit juice cocktail, and grapefruit juice blend. Our results revealed that all Marshallian own-price elasticities had the expected negative signs and in absolute terms were greater than 1 indicating that the U.S. demand for the given citrus beverages was price-elastic. The Hicksian cross-price elasticities revealed both complementary relationships and substitutability between the selected citrus beverages types. The expenditure elasticities indicated that the selected citrus beverages are mostly normal goods.The findings of this study improve an understanding of the citrus beverages market structure and provide insight into consumer demand behavior. Particularly, the estimated elasticities will be useful in the measurement of the U.S. consumers responsiveness to the price changes in the citrus beverages market. The findings also can be a foundation for policy-making, market segmentation, and marketing decisions.

Advisor

Jose Antonio Lopez

Subject Categories

Agriculture | Life Sciences

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