Tart cherries far from the pits: Study aims to sustain marketability of industry

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John Hoehn is studying ways to sustain the marketability of tart cherries. (view larger image)

The tart cherry is in the midst of evolving into what’s been coined a “super fruit,” thanks in large part to a bevy of positive health studies. While the transition has spurred the development of many new tart cherry products, it has also prompted some unique marketing challenges.

A Michigan State University (MSU) study is exploring ways to sustain the marketability of this dark red delectable, once used primarily for pie filling. Today the fruit is praised for its antioxidant and anti-inflammatory properties and is especially sought after in healthy forms such as dried snacks and juice concentrate. Demand is strong, but the tart cherry supply can fluctuate dramatically from year to year, mainly because of weather (cherries are particularly susceptible to late spring frosts).

To help better balance supply and demand, U.S. tart cherry growers and processors voted in 1996 to enact a federal marketing order (FMO) to govern the amount of cherries that may be freely marketed. Free sales are calculated based on the basis of a rule for determining the optimum supply volume (OSV). OSV is derived by averaging the sales of the past three years plus 10 percent. The amount determines the volume of tart cherries that can be freely sold in the United States.

Research led by MSU AgBioResearch scientist John Hoehn, professor in the Department of Agricultural, Food and Resource Economics, is examining alternative OSV specifications in an effort to reduce the negative impact that an extreme harvest shortfall has on future supplies.

“There’s a lot of innovation going on with cherries, particularly in the health area,” Hoehn said. “The traditional FMO is focused on the commodity aspect of cherries. Now we’re trying to figure out where this market order comes in within this new industry, how we adjust our protocols, particularly this OSV for managing market stability, and how we make that fit in more with the current reality of the market with so many different products and no longer just one, single commodity.”

Hoehn said the industry is experiencing significant change that began well over a decade ago.

“The cherry industry is just beginning to make a transition from what used to be a fairly distinct product in the United States into a much more intense market,” Hoehn said. “Now there are imported cherries available, and the number of products made from tart cherries has really become much more extensive.”

The research examines the following OSV alternatives:

  1. Delete the extreme shortfall from the equation and replace it with sales from a prior year.
  2. Determine a compromise between the extreme shortfall year and keep it in the OSV calculation. (An example might be adjusting the OSV upwards by an amount equal to 50 percent of the gap between the three-year average rule, with and without the extreme shortfall.)
  3. Implement a market price stabilization rule that anticipates supply requirements to meet market demand.

Hoehn is working with MSU AgBioResearch scientist Steven Miller, director of the Center for Economic Analysis at MSU.

“It’s very interesting when you look at the various cherry market segments and see how sales differ,” Miller said. “Some, like the dried cherries and cherry juice, are in high-growth mode, following health trends. But these are very different from the traditional product line, such as pie filling, that the marketing order was originally designed around.”

The study has major implications for Michigan, which produces about 70 percent of the nation’s tart cherries. An extreme harvest shortfall happens about once every decade, but the effects can last much longer, Miller said.

“In 2002, there was an extreme shortfall due to a spring freeze,” he said. “What you saw was a large increase in imports that has never fully gone away. It was like they had to open a door because they weren’t able to fill all the orders. And now, closing the door has become an issue.”

Hoehn and Miller said they hope the research will continue in the future.

“The industry needs to give some serious thought to how much more information can be shared that would benefit the marketing strategy while not jeopardizing the plans of individual firms,” Hoehn said. “They have this quantity restriction, and they have to have some information about what sales are and what is in reserves. The nature of the federal marketing order does require a certain amount of information sharing.”

In addition to AgBioResearch support, Hoehn’s work is funded by Project GREEEN (Generating Research and Extension to meet Economic and Environmental Needs), Michigan’s plant agriculture initiative at MSU

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