By Charley Xia
By analysing the Melbourne wholesale price of pears, Charley Xia explores how understanding historic price data could help growers improve returns.
Following the analysis into apple pricing in the Melbourne Wholesale Fruit, Vegetable and Flower Market (Australian Fruitgrower – Dec 2014/Jan 2015), we examine the trends and patterns in pear prices in the Melbourne Market from January 2008 to November 2014. Weekly Prices for 13kg carton of Williams, Packhams and Bosc pears are collected by Fruit Growers Victoria and passed on to APAL during seasonal months. Here, we look for statistical patterns and regularities by decomposing prices into three components of interest:
- Trend: acts as the anchor that prices fluctuate around.
- Seasonality: is governed by the calendar month, because there are periodic patterns in price premiums and deficits depending on the month.
- Cycle: irregular patterns and cycles that can affect short- to medium-term prices.
The pricing relationship is described by economists as: Price = Trend + Seasonality + Cycle
A word of warning is that the patterns and insights described below are intrinsic to the Melbourne Market, and do not apply to pricing data from any other sources. However, the decomposition of prices into trend, season and cycle is standard in commodity price analysis.
One major characteristic of supplying fresh pears is their short storage life, and hence the availability of Williams, Packhams and Bosc pears are restricted to certain months of the year. Williams pears are generally available in the Melbourne Market from January to May, Packhams from May to January, and Bosc from March to November. The table below highlights the months of the year when each pear variety is in harvest, when price premium or deficits exist during seasonal months, and when the pear variety is unavailable in the Melbourne Market.
The seasonal patterns reveals that Williams attract a price premium for fresh harvests (Jan-Feb), while premiums are paid for Packhams and Bosc late in the season (Dec-Jan for Packhams and Aug-Nov for Bosc).
|Price components of Williams, Packhams and Buerré Bosc pears broken into trend, seasonality and cycle.|
Prices paid for Williams pears fell from $29 per 13kg carton in January 2008 to $18 in May 2014. The trend shows price troughs in January 2009 and January 2013, and a peak realised in April 2010. The seasonal patterns highlight that Williams pears attract a $4.5 price premium in January which is depreciated over the next four months. Cycles show that price irregularities due to factors such as biennial bearing, foreign exchange rates, prices in competitor markets and consumer sentiments generally contribute $3 more or less to Williams’ prices.
Packhams pears were selling at just below $30 per 13kg carton in November 2014, which is very similar to the prices paid in January 2008. The trend shows price troughs in January 2009 and July 2012, and a peak realised in December 2010. The seasonality shows a ‘W’ shape where premiums are paid from December to January due to supply shortages, but fresh harvests in May do not attract a bonus. Cycles generally fall within $5 dollars, which highlights that Packhams have higher price volatility than Williams and Bosc.
Bosc pears attracted a steady price in the 2014 season at approximately $22 per 13 kg carton. There was a price peak in March 2014. Seasonality highlights that supply shortages in late season (Aug-Nov) attract premiums rather than fresh harvests in March. Furthermore, cycles show that Bosc have the least price volatility of the three pear varieties, with external factors contributing only $2 dollars more or less to prices.
What this means for growers?
Pear growers supplying the Melbourne Market and making planting or replanting decisions, may look to price trends and cycles for insights. Do the historical patterns (trend) and price volatility (cycle) look promising for Williams, Packham or Bosc pears? Are the prices sufficient enough to cover production costs and return a profit? If not, then it may be time to consider supplying elsewhere or invest in newer pear varieties.
For pear growers looking for a month of the season to supply their produce to the Melbourne Market, look to the seasonality. For Williams pears it doesn’t make much sense to store until May when price premiums are paid in January and February. There may also be opportunities for Packhams and Bosc pear growers to advertise their fresh harvests in early season and push for price premiums.
About the author
Charley Xia was APAL’s economist. He is now working at ABARES.