01/09/06 Cherry pricing model

There is no question the Northwest cherry business is booming. But one aspect of the market & understanding wholesale price fluctuations in sweet cherries & has been a hard area to grasp. That is why a group of researchers from Washington State University's International Marketing Program for Agricultural Commodities and Trade pursued the idea of a straightforward pricing model. MARSH: The basis of where we started & the cherry industry was interested in what causes price variation. Also one of the larger banks in the U.S. who has growers heavily invested in cherries were wondering in terms of how to manage their risks, if they know better how price varies, they can manage their risks better. Dr. Thomas Marsh of the I.M.P.A.C.T. Center says the factoring of the amount of cherries produced in a five state region including Washington, Oregon, and Idaho, and the amount supplied to both domestic and international markets helped simplify matters. MARSH: What we found out in looking at this is that we could explain about sixty to seventy-eight per cent of the variation in cherry prices using measures of domestic production, domestic consumption, and international exports. One of the key discoveries through this model, but one already known from a trade standpoint, is the value of international markets in the pricing of cherries. Another discovery is the pricing information provides a fairly accurate forecast one year out.