The Economic Impact of Expanded Cranberry Production

January 1, 2008

Introduction

This study is an effort to estimate the economic impact of expanded cranberry production in Michigan. This estimate will look at two scenarios. In the first scenario, cranberry production is expanded by 500 acres. In the second scenario, cranberry production is expanded by 2,500 acres. In the 2,500 acre scenario it is assumed that juice production will expand to process the additional cranberry production.

The analysis will also include the investment necessary to prepare the land for cranberry production for both scenarios. The study will also discuss the market outlook for cranberries. IMPLAN a standard economic impact software package is used to generate the estimates. The annual economic impact of producing 500 additional acres of cranberries is $5.93 million with an additional 75 jobs created. It is estimated that the one-time economic impact of the investment in 500 additional acres is $30.66 million with 216 jobs created during the construction.

The annual economic impact of producing an additional 2,500 acres of cranberries is estimated to be $29.67 million with an additional 383 jobs created. The one-time economic impact during the construction of 2,500 acres of cranberries is $153.28 million with an employment of 1,082.

The economic impacts do not consider further processing, retailing, and other activities, therefore these results should be considered minimum impacts. The actual economic impact is greater than the figures shown in this report.

The market for cranberries is strong. Cranberry prices are increasing as is demand both in the U.S. and foreign markets. Investments in cranberry production will occur. Michigan has the potential to be a location for some of this increased investment but there are other locations that may be the beneficiaries. Other areas include the Maritime Provinces of Canada and Wisconsin.

Market Outlook

The outlook for cranberries is extremely strong. The value of cranberry juice concentrate is in the range of $75 to $80 a gallon, which according to some sources is a high price by historical standards. From 1999 to 2006, the pool price for Ocean Spray growers rose from $14.79 a barrel to $47.69 a barrel, an increase of 222 percent (Ocean Spray). Ocean Spray is the largest handler of cranberries in the U.S., and is a producer owned cooperative. Ocean Spray has a 60 percent market share of the U.S. cranberry juice market, a 70 percent market share of fresh cranberry market, a 70 percent market share of the cranberry sauce market and an 80 percent market share of the dried cranberry market (Ocean Spray). The pool price is the average price members receive for their cranberries and is based on the weighted average of the value of the products that are produced from cranberries.

Tags: economic and market analysis

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