Aug 6, 2012

Fruit loss might lead to market shift

An unusually warm March followed by a round of spring freezes decimated much of the apple and cherry crops in the Midwest and East. Western crops managed to avoid damage, however, and were poised to fill the market gaps. In July, growers, processors and buyers on both ends of the country were adjusting to the new situation.

Apples

Damage in the Midwest and East will lower the size of the overall U.S. apple crop. New York state, the No. 2 producer, might get half its average crop this year, possibly 15 million bushels. No. 3 producer Michigan might get 2.9 million bushels, about 15 percent of its five-year average, according to Diane Smith, interim executive director of the Michigan Apple Committee.

A potential bumper crop in Washington state, the No. 1 producer, might balance out those shortages, however. The estimate is 145 million bushels, which would be Washington’s largest crop ever, Smith said.

How is the industry adjusting?

Riveridge Produce Marketing, an apple packer and marketer based in Sparta, Mich., will probably consolidate its packing efforts this year, concentrating labor and expenses in a couple of facilities. Other packers might focus on rebuilding or expanding in preparation for next year, said Don Armock, owner of Riveridge.

There’s no way to take care of your customers with only 10 percent of a normal crop, Armock said. Riveridge has already told a number of its export customers that it won’t have fruit this season. The company will focus on domestic buyers.

In terms of future sales distribution, 2012 will definitely hurt the Michigan apple industry. There’s no way around that, Armock said.

Riveridge has always sent employees to other production areas to observe – and participate in – their harvests. The company plans to redouble those efforts this year, he said.

By July, Riveridge had no apples left in storage. Prices were too good to try to stretch last season’s supply into fall, and quality would have been an issue anyway, Armock said.

Apples in storage since last season won’t have a major impact on what happens this year, since the vast majority of them are in Washington state, said Mark Seetin, director of regulatory and industry affairs for the U.S. Apple Association.

The areas hardest hit by the weather, in the Midwest and East, were already pretty much sold out of processing apples, which are usually the first to get moved out of storage, he said.

“The chances of stretching out (apple reserves) are probably minimal,” Seetin said. “The industry has a fairly routine method of moving apples, which doesn’t leave a lot for an unexpected chance like this.”

Mike Rothwell, president of BelleHarvest Sales, an apple packer in Belding, Mich., initially hoped his company could supply its customers – mostly grocery stores – until Thanksgiving or so, but there won’t be enough apples for that. BelleHarvest will be able to supply all of its customers for a while, but not for the entire fall, he said.

To make up for the shortfall, BelleHarvest will probably purchase apples from Western suppliers this year, which it hasn’t done in a decade. How much it buys will depend heavily on price, Rothwell said.

Apple buyers in general will lean West this year. On the other hand, if grocery stores can’t fill the shelf space normally dedicated to apples, they’ll probably fill it with other fruits or vegetables, he said.

Rothwell’s concern now is the 2013 crop.

“We don’t want to be away from anybody for any extended period of time,” he said. “We want to have a presence.”

It’s tough to see the devastation in Michigan and New York, but it also represents a “tremendous opportunity” for Washington apple growers, said Todd Fryhover, president of the Washington Apple Commission.

Western shippers always fill in for shortages in the Midwest and East, but retailers are starting out with a West Coast strategy much earlier than usual this year, said Roger Pepperl, marketing director for Stemilt Growers in Wenatchee, Wash.

Washington suppliers will probably focus on domestic markets, since it’s safer to ship fruit domestically than internationally. But export markets will need product, too. Washington’s crop should be large enough to satisfy both markets, but supply will be tight and there will be a greater demand on packing and shipping. There’s only a certain amount of apples you can pack in a day, Fryhover said.

And there’s only a certain amount you can pick in a day. The state might be on the verge of a bumper crop, but will there be enough workers to harvest it?

“Just because it’s there doesn’t mean it’s going to get harvested,” Fryhover said.

Washington asparagus growers had to walk away from some of their acres this spring because there weren’t enough workers to pick everything, Fryhover said.

There will be a fair amount of H-2A workers in Washington in the fall, and there might be more Eastern workers – with no fruit to pick at their usual employers – heading West, Pepperl said.

“We hope that happens,” Pepperl said. “We need all the help we can get.”

In July, however, it was too soon to tell if Eastern workers would head West, Fryhover said.

“We would like to have Eastern workers come out here, but it’s not something we can hang our hat on.”

Tart cherries

The U.S. industry is projected to sell about 70 million pounds of tart cherries this year, roughly a quarter the size of the 2011 crop, said Phil Korson, director of the Cherry Marketing Institute.

Massive shortages in Michigan, typically the top producer of tart cherries, are the main reason for the problem. A good supply in Utah and Washington state will bolster the supply somewhat, but there still won’t be enough tart cherries to go around, Korson said.

The impacts on tart cherry markets could be huge. The U.S. industry will try to satisfy its customers with a limited supply, but food companies will be forced to adjust, Korson said.

Some will buy cherries from other countries, though that also will be a challenge this year. The cherry shortage will be worldwide. Poland, a major supplier, also has a small crop, Korson said.

Some cherry buyers will replace tarts with other fruit products. Products like pie filling might be blended with other fruit. A shortage of culls and sort-outs might lead to a shortage of cherry juice concentrate, Korson said.

Growers, meanwhile, will have to wait another year for a crop – even though they still have to spend money and time taking care of their trees. Processors will have to figure out how to deal with no fruit coming through the door, he said.

This isn’t a normal blip for the tart cherry industry, which is known for fluctuations in crop size. In some ways it’s worse than the disaster of 2002, Korson said, when U.S. producers yielded 62.5 million pounds of tart cherries, according to USDA.

A large inventory from the huge 2001 crop helped the industry cover domestic markets in 2002. In contrast, the disaster of 2012 was preceded by two small-crop years, so there will be no inventory to fall back on, Korson said.

Supplies will be tight for Cherry Republic, said owner Bob Sutherland. Based in Glen Arbor, Mich., Cherry Republic sells tart cherry products out of four Michigan stores and mails them all over the country. Maybe half the company’s tart cherries will come from local sources this year. A quarter will come from Western states and another quarter from Poland, he said.

Despite the shortage, Sutherland isn’t worried about losing customers in the long-term.

“We will be fine,” he said.

Jeff Manning, CMI’s chief marketing officer, was confident that consumer demand for tart cherries would stay strong in the long-term. The industry will continue to market tart cherries and hope the 2013 crop will bring things back to normal, he said.

“This isn’t the only crop that’s ever been hit hard,” Manning said. “Food companies deal with this all the time.”

By Matt Milkovich, Managing Editor