U.S. Demand for Citrus Beverages

Abstract

In 2017, the US was the second largest citrus producer with 711,000 bearing acreages and a 7.77 million MT production. Despite the US annual orange juice production decreased to 215,000 MT in 2017, per-capita domestic consumption increased to or remained above 41.75 lbs. With record low production levels and record high import levels over the last 17 years, it is important to obtain recent estimates of the US household demand for citrus beverages. This study uses the Almost Ideal Demand System (AIDS) and monthly data for the period of 2004-2018 from The Nielsen Company to estimate demand elasticities for various citrus beverages. Our Marshallian own-price elasticity estimates obtained the expected negative signs and were greater than one in absolute terms indicating that the US demands were price elastic. The Hicksian cross-price elasticity estimates indicated both complementary relationships and substitutability between the selected citrus beverages, while the expenditure elasticities indicated mostly normal goods. The study’s findings contribute with a better understanding of the citrus beverages market structure and provide insight into the consumer demand behavior. The estimated elasticities are useful for analyzing the US consumers’ responsiveness to price changes and for providing insight in agricultural marketing and policy related decisions.