Determining the distribution of panelist hedonic flavor
category choices can give some indication of a panelist's
motivation. Panelist 11 for example, on the average, gave
slightly higher scores to the juices tasted than the panel
average. However, even though he/she used four hedonic
flavor categories, for all practical purposes only two flavor
categories were used more than once. This panelist scored
almost 3/4 (68%) of all his/her juices as like slightly (6).
Such a flavor category choice distribution suggests that this
panelist is not very motivated and gives most of the juices
a safe 6 (like slightly). At the least such a consistent hedonic
choice indicates that this panelist is not differentiating the
juices to any useful degree. The panel leader can then use
this information to talk to individual panel members to
determine their level of motivation and then decide if they
should continue to be included on future taste panels.
Literature Cited
1. Jones, L. V., D. R. Peryam, and L. L. Thurstone. 1955. Development
of a scale for measuring soldier's food preferences. Food Res. 20:512520.
2. Sensory Evaluation Division, IFT. 1981. Sensory evaluation guide for
testing food and beverage products. Food Technol. 36(11):50-59.
Proc. Fla. State Hort. Soc. 100:55-57. 1987.
PACK OR JUICE? A LOOK AT PACKOUT RATES
Richard Beilock
University of Florida, IFAS
Food and Resource Economics
Gainesville, FL 32611
AND
W. F. WARDOWSKI
Fruit Crops Department, IFAS
700 Experiment Station Road
Lake Alfred, FL 33850
Additional index words. Economics.
Abstract. The determination of minimum packout rates
necessary to favor fresh vs. processed channels is not always
obvious to citrus growers and packers. This paper examines a
means of determining the most profitable decision, and is a
refinement of earlier papers on this subject. The major points
of departure from the earlier papers are that costs incurred
previous to harvest are ignored, and the additional decision
to harvest or not becomes more important as the profit margin
decreases. An example is developed to compare the earlier
paper with this revised method.
Many citrus varieties produced in Florida can be used
for fresh fruit or processed products. Therefore at harvest,
growers are faced with the decision to send their fruit to a
packer, a processor or not harvesting at all. The last alter
native has only rarely been exercised with citrus, though it
is not uncommon with other types of produce. Neverthe
less, for a complete analysis a grower should investigate
the strategy of not harvesting to minimize losses. In this
paper, procedures for harvest decision making are dis
cussed and general formulas are presented. Many growers
sell their fruit to processors or packers prior to harvest.
Implicit in the on-tree price given by a packer is his esti
mate of the packout rate. Therefore, knowledge of how
packout rates influence packer returns would enhance the
grower's ability to negotiate. It should be noted that opti
mal harvesting times are not addressed. Rather, the focus
is on the best disposition for the fruit once the harvest
timing decision has been made.
Florida Agricultural Experiment Station Journal Series No. 8542.
Proc. Fla. State Hort. Soc. 100: 1987.
The Harvest Decision Process
Packer or Processor? Normally most citrus varieties com
mand higher prices when sold as fresh fruit rather than
for use in processing. However, some fruit sent to a packer
inevitably is culled and rerouted to processors. The pro
portion that is packed for fresh consumption is known as
the packout rate. Due to the additional handling and haul
ing costs associated with routing processor-bound fruit
(eliminations) through a packing house, packers cannot de
liver eliminations to processors at as low a cost as for fruit
harvested for processing. Moreover, picking roadsiding,
and hauling costs may be somewhat higher for fruit sent
to packers than to processors. Harvesting is, or should be,
with greater care for fresh fruit than for processing fruit
which is frequently dropped to the ground. Also, fresh
market specialty fruit and grapefruit are occasionally spot
picked for size and/or color requiring costly, but usually
profitable, multiple harvests. Roadsiding, which includes
distribution of containers, requires more time and effort
for fresh fruit than for processing fruit. Hauling by trucks
is limited by weight so that approximately 4% more proces
sing fruit may be put on a load than fresh fruit in wooden
pallet boxes.
Therefore, if the packout rate is too low, higher returns
may be realized from a processor than a packer. In Figure
1 the relationship between packout rates and returns is
depicted. For packout rates above X higher returns can be
earned by harvesting for the packer, while below X higher
returns can be realized from the processor. For packout
rates at or below X the net return per box is $A (i.e., the
net return provided by the processor). As the packout in
creases from X, net returns (from the packer) rise to a
maximum of $B per box. A grower deciding where to send
fruit must determine X and must check that the net return
is positive for the estimated packout rate (determined by
sampling the fruit). If the return to harvesting is negative
the fruit should be left on the tree.
Growing costs should not be included in these calcula
tions. The reason for this is that by harvest time, these
costs are obligated and should have no bearing on the de
cision to harvest and send fruit to the highest profit chan
nel. Growing costs would be included only if it were the
beginning of the season and the grower was deciding
whether to incur growing costs at all or not. Growing costs
55
were included by Grierson (2, 3) in his calculation of
breakeven packout rates. In Figure 1 this corresponds to
the packout rate at D. For packout rates at or above D, all
of the costs of growing, picking, and hauling would be
covered by sending the fruit to the packer. However, for
packout rates between D and X higher returns could have
been earned by taking the fruit to the processor. Even if
the grower were prohibited from directly selling to a pro
cessor (i.e., all processed fruit went through a packing
house) and it was harvest time, tha minimum packout rate
necessary to justify harvsting would be C, not D. (Note that
in Figure 1 the packout rate represented by C is negative.
Therefore, even with a zero packout rate, harvesting
would be justified.)
The calculation of X simply involves equating the net
returns per box from the packer and the processor and
solving for the packout rate:
(1) X*NF + (1 -X)*NE = NP
(2) X = (NP - NE)/(NF - NE)
T
= per box cost of delivering eliminations to
E
= per box price received by packer for elimina
C
= per box price received by grower from pro
processor
tions
cessor
Harvest or Not? If the packout that a grower estimates
from a sampling of its fruit, Xe, is higher than X, sending
the fruit to a packer is preferred to having it go to a proces
sor. The reverse would hold if Xe were less than X. In
either case, however, the best alternative may be not to
harvest at all. The decision rests on if the returns from
harvesting and hauling are positive.
If Xe is greater than X, harvest if:
(3) Xe*NF + (l-Xe)*NE> 0
or, equivalently
(3a) Xe*(F - HP P) + (1 + Xe)*(E - HP - Q - T) > 0
If Xe is less than X, harvest if:
where: NF = net grower return per box from fresh
NE = net grower return per box from eliminations
NP = net grower return per box from processor
(4) NP > 0
or, equivalently
(4a) C - HP > 0.
As would be expected, the minimum packout rate neces
sary for shipment to a packer, rather than a processor, is
higher when the net return of all fruit brought to the
packer is higher, both the fruit that is packed and the elimi
nations (Equation 2).
Assuming that packers pass all returns back to growers
(or that packer costs include a return for services), the
equations may be rewritten as follows:
It should be reemphasized that at harvest-time the decision
to harvest has nothing at all to do with growing costs, as
the costs are sunk. Rather, what matters is if actions taken
from the point of the decision onward are expected to
yield positive returns.
(la) X*(F-HP-P) + (1-X)*(E-HP-Q-T) = C-Hc
(2a) X = (C-Hc-E + HP + Q + T)/(F-P-E + Q + T)
where: X = processor/packer breakeven packout rate
F = FOB price per box for fresh fruit
HP = picking and hauling costs per box for fruit
going to a packer
P = packing cost per box
Q = per box cost to packer of running elimina
tions
An Example
In this section an example is presented. The cost and
price elements are a combination of what could be gleaned
from the literature, discussions with industry participants,
and the author's best guesses (Table 1). We do not assert
that these costs accurately portray the situation for any
grower. Rather, the point of this exercise is to demonstrate
the use of the formulas presented above.
By substituting the cost and price estimates in Table 1
into Equation 2a the minimum packout necessary to send
the fruit to the packer is derived:
(5) X = (7.00 - 1.65 - 7.00 + 1.85 + .50 + .40)/(11.50
- 3.50 - 7.00 + .50 + .40) = .58
If the packout is above (below) 58 percent, the grower can
Table 1. Per Box Cost and Price Elements.2
Element
Symbol
FOB price for fresh fruit
Picking and hauling cost for
fruit going to packer
Picking and hauling cost for
fruit going to processor
Packing cost
Cost of running eliminations
Cost of delivering eliminations
Prices received by packer
Price received by grower from
processor
PACKOUT RATE
Fig. 1. Relationship between packout and grower returns.
56
Amount ($)
F
$11.50
HP
$
Hc
E
$ 1.65
$ 3.50
$
.50
$
.40
$ 7.00
C
$ 7.00
P
Q
T
1.85
zIn arriving at these estimates, the authors consulted industry participants
and the following references: L. Albrigo (personal communication), 1,
and 4.
Proc. Fla. State Hort. Soc. 100: 1987.
realize a higher return by sending his fruit to the packer
(processor). The packout rate of .58 corresponds to the
rate denoted by X in Figure 1.
The question remains, however, of whether one should
harvest or not. Suppose that from a sampling process it
has been determined that the packout rate will be below
.58, and that any harvesting should be geared for a proces
sor. Substituting the cost and price estimates into Equation
4a, the net return from harvesting can be determined:
(6) NP = 7.00- 1.65 = 5.35.
For packout rates between 0 and .58, $5.35 per box can
be earned by harvesting for the processor (corresponds to
level A in Figure 1). Clearly, harvesting is preferable, no
matter what the packout rate.
For packout rates above .58, the cost and price esti
mates must be substituted into Equation 3a. The most ex
treme case would be a packout rate of 1.0. In this case, the
net return per box would be $6.15:
(7) NF = 1.0* (11.50-1.85-3.50) + (1 - 1.0) * (7.00 1.85-.50-.40) = 6.15.
This corresponds to level B in Figure 1.
What If the Decision Were Being Made Prior to Committing
the Growing Costs? If the decision were being made prior to
committing and growing costs, then the costs would have
to be included. Assuming that growing costs are the same
for fruit destined for processor or packer, inclusion of
growing costs would not affect the breakeven packout rate
between processor and packer, X. This is depicted in Fi
gure 1 by the fact that points E and F are directly above
X. However, regardless of the packout rate, the net return
per box would decline by the per box growing cost. That
is, if the growing costs are still avoidable, the returns to
growing AND harvesting are reduced by the cost of the
former. If growing costs were already sunk, then they do
not impact upon the harvesting decision.
What If the Grower Could Not Directly Sell to the Processor?
Using the example, we will briefly turn back to the question
that Grierson addressed: "What would be the breakeven
packout if the grower could only go to the packer?" Assum
ing that this question were being asked after growing costs
were committed, the answer can be found by equating the
lefthand side of Equation 3a to zero and solving for X:
Proc. Fla. State Hort. Soc. 100: 1987.
(8) X* (11.50-1.85-3.50) + (1-X)* (7.00- 1.85 -.50
.40) = 0
or
(8a) X = .2.2.
This corresponds to C in Figure 1. As X is negative, there
is no packout rate low enough to justify not harvesting.
However, Grierson assumed that the decision was being
made prior to committing the growing costs. Assuming
that growing costs are $4.50 per box, the breakeven pack
out rate could be determined as follows:
(9) X * (11.50 - 1.85 - 3.50 - 4.50) + (1 - X) * (7.00 - 1.85
-.50-.40-4.50)= 0
or
(9a) X = .13.
This corresponds to D in Figure 1. For packout rates less
than 13 percent, it would be better not to incure the grow
ing and harvesting costs. But, growers actually can sell di
rectly to processors. In this example, a grower would
realize an $.85 return over both growing and harvesting
costs by sending his fruit to the procssor.
Summary and Conclusion
In this paper formulas have been presented to deter
mine whether citrus should be routed to a packer, proces
sor, or not harvested at all. A crucial aspect of this decision
process is distinguishing between sunk or committed costs
and those that are still avoidable. For example, growing
costs should be included only if these costs have not yet
been incurred. Failure to make this distinction can result
in failure to maximize returns.
References
1. Florida Crop and Livestock Reporting Service. 1986. Citrus summary:
1985. Winter Park.
2. Grierson, W. 1957. The effect of pack-out on grower profits. Proc.
Fla. State Hort. Soc. 70:21-27.
3. Grierson, W. 1970. Managing tangerines for larger returns. Citrus
Ind. 6-12.
4. Hooks, C. 1985. Estimated cost of picking and hauling Florida citrus.
1981-82 season Economic Information Report, #213 Food and Res.
Econ. Dept., University of Florida.
57