|Abstract or Summary
- 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
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.