CONTROL OF ORANGE SUPPLY IN MEXICO AS A MECHANISM TO CONTROL PRICE VOLATILITY

Abstract

Orange (Citrus sinensis L.) producers in Mexico face the problem of low prices, which affects their profit level, from January to May. In order to determine a supply control measure that could reduce the extreme price variability, a spatial and inter-temporal equilibrium model of the orange market was formulated in the 2014-2016 period under three scenarios: 1) storing production, 2) desynchronizing production and 3) shipping production to industry. Results indicate that the implementation of storage policies and the purchase of oranges by the industry in the months of most massive production would decrease the producer profits by 81 and 115 million Mexican pesos, respectively. In comparison, desynchronization of production would increase profits by 32 million Mexican pesos. A 29 % reduction in supply in March and increases by 0.2, 16, and 28 % in January, February and April, respectively, as a policy of production shift, would increase the average monthly profit by 11.75 Mexican pesos per ton. Producer organization is recommended to achieve the ordering of the market through the planning of production over time to obtain higher incomes and stability in the price of the fruit.