Farm-Level Price Formation for Fresh Sweet Cherries

Abstract

We estimate price formation in the sweet cherry market using an inverse demand system with farm-level price and quantity data from states in the Pacific Northwest and California. Between 0.60 and 0.78 of the variation in annual cherry price is explained by the states’ production, domestic consumption, and exports. Washington and California prices are most responsive to their own quantity. Output flexibilities indicate that Oregon is responsive to a change in quantity supplied to the domestic market. Results also indicate that cherry price is most sensitive to quantity supplied to the export and domestic markets. The Pacific Northwest (PNW)—Washington, Idaho, Oregon, and Utah—and California are leading producers of fresh sweet cherries in the United States and the world. Washington is the largest producer of sweet cherries for the fresh market in the U.S. Cherries are a high-value commodity, and cherry crops from the above states typically command some of the highest prices in the world. 1 However, cherry prices also are very volatile, depending on