The peppermint industry : situation and outlook with emphasis on Oregon Public Deposited

http://ir.library.oregonstate.edu/concern/graduate_thesis_or_dissertations/n870zv394

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  • The peppermint industry is the largest commercial herb industry in the United States. Oregon is the largest peppermint producing state with nearly 60 percent of the total United States peppermint oil production. There is a need for economic information about current and future prospects for the national peppermint industry as it relates to Oregon. This study describes: (1) the development of the peppermint industry in the U.S. and Oregon; (2) production practices and relevant cost factors that influence production decisions; (3) market arid demand characteristics exhibited by the peppermint industry; (4) the peppermint industry's supply-demand relationships as they interact to determine peppermint price; and (5) future issues which may have an influence on the peppermint industry. The U.S. peppermint industry has evolved from its early beginnings in Massachusetts to its current status as the world-wide dominant producer of quality peppermint oils. Based on historical behavior patterns, it appears that harvested acreage is a leading indicator of future production trends. Oregon, being the largest peppermint producing state, tends to expand acreages rapidly and reduce acreages slowly. Other production states are more flexible in making acreage adjustments. Cultural practices for peppermint production utilize highly specialized equipment and require extensive technical knowledge. Emerging issues such as rising energy costs, soil and water conservation, disease, and environmental concerns will affect cultural practices in the future. Production costs for the three peppermint producing regions of Oregon were developed and analyzed. Stand establishment, irrigation, fertilization, and harvest constitute a large percentage of total production costs. Also, production costs per pound of oil produced are quite sensitive to changes in yield levels. Additionally, capital investment requirements for production of peppermint are large. The marketing structure of the peppermint industry is composed of four principal elements: producers, buyers, users, and retailers. Between 700 to 900 producers across the U.S. sell peppermint oil to four buyers and five major users. Because of the concentration of buyers, a potential oligopsony exists in the peppermint industry. The demand for peppermint oil is derived demand. Most of the peppermint oil used domestically is consumed as a flavoring for chewing gum and toothpaste. Foreign demand has been steadily increasing over the past 20 years and accounted for 36 percent to 76 percent of the annual total U.S. production during that period. A peppermint price determination model was specified for the U.S. using three-stage least-squares estimation techniques. In this model, supply depends on U.S. yield, U.S. harvested acreages, and changes in stock levels. Each was found to be price inelastic, suggesting that total peppermint oil supply is price inelastic. Both foreign and domestic demand for peppermint oil were estimated as a function of price, income, and other variables. Empirical results suggest both demand curves are price inelastic with domestic demand relatively more price inelastic than foreign demand. The price inelasticity of peppermint supply and demand helps to explain the large variation in peppermint prices during the past 10 years. A marketing order was recently adopted by the spearmint industry. The peppermint industry may be faced with a similar alternative in the future. Factors such as a concentrated production area, a small number of growers, and a price inelastic demand, identified in this study, suggest that a marketing order could be successful for the peppermint industry. These and many other factors must be studied with the cooperation of producers, buyers, and users if a marketing order for peppermint oil is to be adopted.
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