Executive Summary

The red tart cherry, Prunus cerasus, is a perennial tree fruit
related to the plum, peach, apricot, almond, and numerous other
species of the north temperate zone.  It is grown commercially
for its tart and juicy fruit, which is primarily used in baking
and cooking.  Fully ripened tart cherries may be eaten raw, but
are too acid for many palates.  The raw fruit stores poorly and
its shelf life is too short for the fresh-market trade.  

Most tart cherries are grown in four states bordering the Great
Lakes--Michigan, New York, Pennsylvania, and Wisconsin.  These
states produce 85-95 percent of the U.S. crop in most years. 
Michigan is the dominant producer, accounting for 70-80 percent
of U.S. output.  Except in Pennsylvania, tart cherries in these
states are located in areas adjacent to one of the Great Lakes. 
The lakes moderate the spring-time climate, reducing the chances
of killing frosts when the trees are in bloom.

In Pennsylvania, tart cherries are grown on the eastern slopes of
the Blue Ridge Mountains, where good air drainage helps protect
blossoms against frost damage during the critical bloom period.  
Utah, Oregon, and Washington growers also produce tart cherries
commercially. 

The year-to-year variation in tart cherry output is significant,
with U.S. production ranging from 190 million pounds to 396
million pounds between 1985 and 1995.  Since Michigan dominates
the domestic industry, U.S. output rises and falls with
variations in Michigan's output.  A short crop in Michigan means
a short U.S. crop and high prices for all U.S. areas, while a
large Michigan crop leads to low prices in all areas.  Killing
spring freezes in Michigan (or the lack thereof) are the primary
cause of variations in annual crop size.  

Another factor contributing to variations in production, however,
is a tendency for the trees to bear a large crop following years
of low yields.  As with many fruit and nut trees, cherries build
up energy reserves during short-crop years, and tend to produce a
bumper yield during the following year.  

The demand for tart cherries is highly inelastic.  This means
that grower prices rise sharply during years with a small crop,
and fall sharply when there is a large crop.  For example,
farmers received more than 46 cents a pound in 1991, when only
190 million pounds of tart cherries were produced.  This is more
than seven times the 6 cents a pound received in 1987 and 1995,
when output totaled 359 and 396 million pounds, respectively.

Climate, particularly the temperature range in an area, is the
most important factor affecting the geographic distribution of
tart cherry production.  Generally, tart cherry trees do not
thrive in the southern and central states where summers are long
and hot.  Extremely low winter temperatures also may damage tart
cherry fruit buds.  Further, late spring frosts are incompatible
with producing tart cherries, as the blossoms and young fruit are
very susceptible to injury.  Temperatures below 28o F can kill a
high percentage of unprotected blossoms and fledgling fruit.

Locating the orchard in areas with good air drainage helps reduce
the chances of crop failure due to frost.  This is because cold
air settles to lower levels, and orchards occupying sites higher
than the surrounding areas are less likely to be injured by frost
than those at the lowest elevations.  An additional advantage of
locating orchards on higher elevations is that the soil on such
sites is more likely to be well drained. 
  
Large bodies of water also can reduce the chances of crop failure
due to frost.  Orchard sites adjacent to large bodies of water
are less likely to suffer frost damage to the blossoms and fruit
buds than orchards on sites without water nearby.  Large bodies
of water provide a cooling effect during warm spring days, which
slows bud development and delays the bloom period.  In addition,
large bodies of water provide a local warming effect during cold
spring nights, reducing the likelihood of freezing temperatures. 

The greatest potential demand for tart cherry insurance likely
exists in Michigan.  Michigan has the largest acreage planted to
tart cherries of any state in the U.S., and has a relatively high
probability of yield loss due to late spring-time frosts,
especially in the central and southern areas of the state.  

Growers in other states would also likely have an interest in
tart cherry insurance.  This is particularly true of growers in
areas subject to crop loss due to late spring-time frosts.

Because of the marked inverse relationship between Michigan's
production and producer prices in all states, farmers with low
yields may or may not experience lower revenues.  In a similar
vein, tart cherry returns may be quite low during some years when
yields are relatively high because of low market prices.

Because low yields do not always translate into low returns, a
"dollar amount" plan (based on the concept of revenue insurance)
may be appropriate in insuring tart cherries.  With such a
provision, growers would need to demonstrate a revenue loss in
order to collect an insurance indemnity.  Such a plan may reduce
the cost of insurance to producers and still provide income
protection due to yield losses.