according to one source, about 50 percent was produced by 3 firms, and 70 percent was accounted for by 7 firms.3

Two firms in the 1956-57 season, according to information from trade publications, produced 40 percent or more of the 72 million gallons produced in Florida that year.3

Of the remaining firms, most usually produce less than 5 million gallons annually; a number produced 2 million gallons or less.*

Five of the Florida orange concentrating firms are organized as producer cooperatives. In the 1956-57 season, these 5 firms produced an estimated 16 to 17 million gallons of frozen orange concentrate, accounting for almost a fourth of the total production in Florida. Trade estimates indicate that these firms accounted for a somewhat larger part of the 1957-58 production.5

The cooperatives control the marketing of the fruit delivered by their members. Generally, cooperative grower members do not receive payment for fruit delivered to cooperatives until after it is sold in either fresh or processed form. Payments to grower members of cooperatives are made through various kinds of pooling arrangements in which the returns are calculated on the basis of the various growers shares in the proceeds from sales of a fresh fruit pool or a processing pool less, of course, certain expenses incurred by the association."

Somewhat akin to the cooperative principle as a technique for sharing risks, reducing buying costs, and assuring processors of a supply of fruit are the so-called grower participation plans between growers and privately owned or operated porcessing firms.

Under these plans the processor and grower enter a contract whereby the processor agrees to pay the grower a certain percent of the market price for oranges on delivery and the remainder after sale of the finished product. Thus, the grower shares in the profits from sales of the fruit in processed form and also assumes much of the risk associated with price changes.

Profit and risk sharing plans and pooling arrangements are popular in Florida even among non-cooperative-type firms. Several processors in Florida own large acreages of oranges and, in some instances, fruit from these processor-owned groves is included in pooling arrangements or participation plans. It is estimated that in the 1955-56 season 64 percent of the oranges purchased in Florida for concentrating were acquired under so-called no-price arrangements; that is, under various types of participation plans including those of cooperatives and of proprietary handlers, in addition to receipts from groves owned by processors.

The remainder, 36 percent, was sold either under a contract price arrangement of one type or another or under some type of spotpurchase price arrangement.7

This is the reason I said our previous chart did not represent more than 35 or 40 percent of Florida oranges sold for frozen concentrate, Mr. McIntire.

3 William T. Wesson, Possibilities of Futures Trading in Florida, Marketing Research Report No. 156, U. S. Department of Agriculture in cooperation with Florida Experiment Station, p. 13.

Estimates of expected production by firm are presented in Quick Frozen Foods, January 1958 issue, p. 36. Quick Frozen Foods. January 1958, p. 36.

J. K. Samuels and W. F. Hoofnagle, Acquiring Citrus for Concentrating by Processors in Florida, U. S. Department of Agriculture, Miscellaneous Report 173, May 1953.

1 Computed from weekly figures in the Year Book, Season of 1955-56, Florida Canners' Association, pp. 95A and 95C.

Mr. McINTIRE. Thank you.

Mr. WELLS. A grower cooperative recently was organized in Florida to serve as the supply unit of one of the largest processing producers of frozen orange juice concentrate. The fruit furnished by the cooperative is processed for the cooperative's account, and all proceeds above the cost of processing and marketing will be returned to the growers less a fee limited to 7 percent of net sales.

8

In effect, this processor has freed his working capital that was tied up in inventory. Some other processors have similar arrangements. Fragmentary data on profits, as reported by Moody's and as supported by industry trade reports such as Quick Frozen Foods, indicate that the orange concentrating industry has not been a highly profitable one in recent years.

Some companies suffered severe losses last year. Wide variations from year to year in profits of concentrators also are indicated. It is partly for this reason that many concentrators have searched and found means of shifting to producers risks arising from varying prices and margins. The desire to shift economic risk largely accounts for the popularity among concentrators of producer participation plans. The risks and uncertainties in processing are great. Concentrators are faced with a processing season of 6 to 9 months and the necessity of carrying large inventories through much of the year. These require large investments in plant capacity and working capital.

The prospect of an unusually large crop such as that expected early last fall could result in heavy losses on inventories.

On the other hand, a sudden drop in expected production such as that caused by the freezes in December 1957 introduces uncertainties at various levels. The total production of orange concentrate that could be realized from the damaged crop this year could not be estimated accurately. There is always a question concerning how consumer purchases will respond to retail prices higher than those which had prevailed in earlier seasons.

To date I think that the citrus industry has been surprised the way that consumer purchases have been maintained.

An additional uncertainty involves the effects of a freeze, such as the one this year, on production next year and in subsequent years. Under present conditions in Florida, producers bear a large portion of the price risks as well as of the production uncertainties. They enjoy some of the fruits of price increases, as during the current season, but they also bear much of the loss associated with price reductions.

From The Road to Profit, a brochure issued by the Florida Orange Marketers, Inc., in 1957, pp. 7–8. See H. Wayne Bitting, New Developments in the Frozen Food Industry, A Study of Capital Requirements, Marketing Research Report No. 236, U. S. Department of Agriculture, May 1958.

1 Net content of box: California-Arizona, 77 pounds; other States, 90 pounds. 2 Includes small quantities in other States not shown separately.

8 Less than 0.05 million boxes.

Source: USDA, Agricultural Marketing Service, Florida Citrus Fruit, Annual Summary, 1957 (1957 from Crop Production, July 10, 1958, AMS).

TABLE 2.-Consumption of oranges, fresh weight basis, 1945-57 1

1

1 Unpublished data of Agricultural Economics Division, AMS. Factors for converting products to fresh-weight basis are from Conversion Factors and Weights and Measures for Agricultural Commodities and Their Products, Production and Marketing Administration, USDA, May 1952. (Constant factors were used for all years.)

Includes half of blended juice converted to fresh-weight basis.

Preliminary estimates.

TABLE 3.-Average price paid by household consumers for 6-ounce can of frozen concentrated orange juice, by weeks, 1955-56 to 1957-58 seasons

TABLE 4.-Retail price, Florida processors' price, farm value and spreads for 6-ounce can of frozen concentrated orange juice, December 1955-June 1958

1 Bureau of Labor Statistics (mostly nationally advertised brands).

2 Prices of nationally advertised brands, ex-key warehouses, 1st of month, reported in Quick Frozen Foods magazine.

3 Cost to processor for oranges, computed from prices paid as reported by the Florida Canners' Associa tion. Weekly prices were weighted by boxes of oranges used during the week to obtain monthly average prices. 4 Processor prices not available.

TABLE 5.-Consumer purchases of frozen concentrated orange juice and average price paid, October 1956-June 1958

1 The data on household purchases are based on 4-week periods (28 days) during each month in order to permit comparisons between periods of equal length.

2 Preliminary data.

Source: Data obtained by Market Research Corporation of America through a continuing survey of household consumers.