A DEMAND ANALYSIS OF CITRUS BEVERAGES IN THE UNITED STATES
Abstract: The U.S. was the second significant producer of fresh and processed citrus with 711,000 bearing acreages and 7.77 million metric tons of production in 2017 (NASS-USDA, 2018). Over 70% of the oranges produced in the U.S. are processed, while the remaining is sold as fresh fruits. The U.S. annual orange juice production decreased to 215,000 metric tons in 2017 due to fewer oranges available for processing (ERS-USDA). Per-capita domestic consumption of orange juice totaled 41.75 pounds (ERS-USDA, 2018). Given that orange juice is the most consumed citrus juice in the U.S., followed by grapefruit juice in second place it is important to empirically estimate the U.S. household demand for citrus beverages. An effective approach is the estimation of household elasticities of demand. This study estimates an Almost Ideal Demand System (AIDS) using AC-Nielsen monthly data for the period of 2004-2018. The parameter estimates of the AIDS model were employed to estimate the elasticities of demand for orange juice, grapefruit juice, orange juice drink, orange juice blend drink, orange juice blend, grapefruit juice cocktail, grapefruit juice blend. Our results revealed that all Marshallian own-price elasticities had the expected negative signs and in absolute terms were greater than one indicating that the U.S. demand for the given citrus beverages were price-elastic. The Hicksian cross-price elasticities revealed both complementary relationships and substitutability between the selected citrus beverages types. The expenditure elasticities indicated that the selected citrus beverages are mostly normal goods.
Sona Grigoryan* and Jose A. Lopez
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