I’m starting a rumor. Cherries are the next fad food for sleep-deprived millennials looking to catch some extra Zzz’s. All poorly executed humor aside, not only are these stone-fruits purported to be a sleep aid, they are among the most expensive commodity in the ProduceIQ index.

Cherry trees vs. cherry shrubs

Both the tree and shrub have the same botanical origins; the genus Prunus. Because both the fruit and flower command substantial energy, the plants have been bred to produce either the fruit or the flower. The fruit that grows on a cherry blossom tree is often small and unpalatable, while the commercial cherry shrubs bear minimal-to-no flowers.

When in season these pricey, nutrient-packed, ruby-colored treats can disrupt the availability of shippers from other growing regions. Averaging $3.15/lb, cherries easily clock-in as one of the costliest commodities in the ProduceIQ Index.

Calendar Years: 2015 - 2019
     
Average Price/Pound  $         3.15
     
Standard Deviation  $         0.98
     
Min Price/Pound  $         1.33
     
Max Price/Pound  $         5.82

 

Intra-year variability in cherry pricing has increased since 2012; specifically, price swings of a $1/lb are common.  From 1998 (when USDA began collecting the price data set), through 2005, prices varied an average of $0.56/lb. While overall volume of cherries sold in the U.S. has increased 283% since the start of the data set in 1998; it’s not been a straight line. Since 1998, it’s not uncommon to have double digit gains and declines on year-over-year cherry production. Significant ebbs and flows have been characteristic of the supply for these edible jewels. Of course, this is exacerbated by the winter harvest where the surge straddles the calendar year-end.     

We are at the end of the cherry summer harvest. For the winter harvest ending in 2020, the supply of cherries sold in the U.S. predominantly stemmed from the three U.S. states: Washington, Oregon, and California (Central, San Joaquin Valley). Washington is the mega-producing state as seen on the stacked area chart below.

In Idaho, Spuds aren’t the only thing the state could be famous for. Surprisingly, the place most known for a root vegetable, produces a few cherries during the peak of the Pacific Northwest season. Like Bigfoot and Starbuck’s two tailed siren, cherries prefer the Pacific Northwest and are disproportionately grown in the “Cascadia” geographic region, dominated by Washington state. However, California plays a valiant supporting role in supplying American grocers with cherries. During the winter months, imports bring cherries when there are virtually no domestic producers.

The cherry season is quick, and voluminous; the domestic season commences around week 12 and California peaks at around 80 million pounds per week around week 26. By week 36, otherwise known as first week of September, the domestic cherry season is usually over.

Between 2000 and 2019 cherry volume has grown 172%; with a compounded annual growth rate (“CAGR”) over this period of 5.4%.

At ProduceIQ, we like to look at the price per pound as a function of volume. In doing so, we get a preliminary sense of the quality of demand for a commodity. Of course, there is always noise behind any data series, consequently they can only be used as a guidepost to trends that “lurk” behind the data. Cherries have a Fast-and-Furious harvest (as seen in the Stacked Chart below); this creates a price-volume interaction that is ripe for an economics lesson.

The following chart plots the price per pound of cherries at the volume sold.

We see that at very low volume levels, price varies widely. As expected, the general trend is for price to fall as cherry supply expands. Because the cherry season is so compressed; this happens quickly. Inside the green ellipse we see the textbook definition of perfectly elastic demand. Cherries don’t trade below approximately $1.50/pound, and at the time of peak supply, buyers don’t pay above approx. $2.70/pound. The price range is well defined, consistent, and any deviations are small idiosyncrasies.

In contrast, the purple ellipse, shows another textbook example; one of highly inelastic demand. While economics textbooks usually use vices (i.e. cigarettes, alcohol, etc.) to illustrate inelastic demand, they really ought to consider F.O.B. cherries. When cherries are not in season domestically, consequently supply is low, and buyers will pay the price they must to obtain them. Even in the inelastic demand section of data, we see a clustering between $3.00/lb and $4.20/lb. Above $4.20/lb, buyers are few, as they must have a very strong use case that warrants bidding up the price to these levels.

Interestingly, inside the red ellipse, we see cherries trading $2.00 per pound at volume levels where others are comfortably $1/lb to $2/lb higher. Growers selling inside this red ellipse are either “leaving money on the table,” have contractual agreements to sell at these prices, or sell an inferior product. Unfortunately, USDA data does not allow us to match growing region with price; this would be the next place to look for clues into the transactions occurring inside the red ellipse.

Cherries sold for export command a higher price than domestic trade.

ProduceIQ offers more transparency and visibility into volume, price, and growing region. Hopefully allowing for growers to make better informed decisions when selling. A quickly clearing market is especially important to cherries, as the season is highly compressed and expedient matching needs to happen between buyers and sellers.

 

Basics of Growing Cherries

Cherries require moderation; both winter and summer must not be too severe (hence their success in the Pacific Northwest). Growers will typically need to allow four years between planting and having a commercially viable crop. Gross yields will increase significantly (6x+) between years four and nine, thereafter remaining relatively constant. An average pack-out will consist of 75% of the harvest. The mature orchards must be hand-pruned twice; in January and again in early summer (June).

In this article: Cherries

Author Image
Flavia Garcia, Econometric Analyst, ProduceIQ
Flavia Garcia, Econometric Analyst, ProduceIQ
Flavia is driven to make the ProduceIQ Index a reliable proxy for the industry, and useful in identifying actionable market dynamics. Flavia earned an A.B. in Economics at Barnard College, Columbia University; an M.Sc. in Finance and Econometrics at Queen Mary, University of London; and is currently a PhD student at the Vienna University of Economics and Business.