Apr 10, 2020Michigan apple growers challenged by chaotic market
The stark impact of trade tariffs and other challenges facing the U.S. apple industry were reflected during the Michigan Processing Apple Growers’ annual meeting held March 12 near Grand Rapids, Michigan.
Michigan Processing Apple Growers’ (MACMA) is a division of the Michigan Agricultural Cooperative Marketing Association. It is a voluntary membership association, which is made up of more than 700 apple grower members. The primary goal of the association is to obtain true market value for apples produced by its members.
Dawn Drake, MACMA’s secretary/manager, outlined the difficulties faced by Michigan and eastern U.S. growers whose markets have experienced an influx of Washington state apples that would likely have been directed to China and other foreign markets if the trade restrictions had not been enacted by the U.S. government.
“We are at a crossroads on whether we are going to be able to stay in business or not,” Drake said in her report to Michigan growers and affiliated businesses. “If we don’t start to get some increased prices, then it’s going to be very difficult for us to continue to carry on.”
In the 2019 price negotiations with processors, “we were able to get a 10% increase in minimum prices. The large Washington crop made it imperative to lock down minimum prices,” Drake said. “We are trying to get back to more stabilized pricing vs. the roller coaster.
“We were able to get better prices because of the short crop (in Michigan),” Drake said. “We estimated the crop to be 25 million bushels, but as we moved the crop we recognized it wasn’t even going to meet 25 million bushels.
“As we looked at the processing market, we had excellent demand,” she said. “There were cheap prices in the East and in Washington. When we recognized the crop in Washington state – and what was going on in the East – it really created a ceiling for us for what we were able to achieve because there were already apples being offered at prices that were cheaper than our processors were willing to pay for apples delivered into Michigan, so it was a challenge.”
Drake said there was little to no processor activity in the East so when growers in North Carolina, and even in New York state – who were accustomed to processors in the Southeast buying their fruit – “they did not go down this year, so those growers were faced with lots of fruit on hand and no home for it.”
One of the brighter spots for the 2019-20 crop was the Michigan cider market, Drake said.
“That really acted as a vacuum this fall, and utilized a lot of juice apples. On the other hand, we had such a beautiful crop, beautiful size, quality – everything, we had enough apples that we had to utilize in the cider market.”
Drake said the single-strength apple juice market continues to decline. “The reason for that is because there are so many choices in the marketplace now, when we look at some of our customers who say that they utilize local grown and have a commitment to our Michigan industry.”
Using one large retail customer as an example, Drake said the retailer had a not-from-concentrate label or “made with fresh-pressed apples.”
“A lot of processors have gotten away from fresh-pressed juice and they utilize foreign apple juice concentrate now,” she said. “As of (February), foreign apple juice concentrate imports were up 29%.
The large Washington crop created downward pressure on pricing, Drake said.
“When we look at the fresh market, we knew going into this year that Washington state had the biggest crop that they probably were ever going to harvest. If we look at fresh movement to date, Washington state comprises 80% of all of the movement. We sit here in Michigan and in the East with our slow fresh market. It’s not uncommon for our fresh houses to be running only two or three days a week.”
Drake said that when marketers saw what was happening in Washington state, “and they recognized what was happening out there themselves, because of the trade situation they didn’t have any choice but to dump all of their fruit into the East.”
“We hear about the Turkey case with cherries, and how the cherry industry filed an anti-dumping case against Turkey, and unfortunately lost. I said that if we could file an anti-dumping case against Washington state for what they did to our market, we’d probably have a pretty strong case.”
Michigan apple shipments were down 22% compared to the previous year, Drake said.
“We saw our prices in Michigan decline to 50% or more, and Washington state growers have seen that, as well,” Drake said. “They are hurting; we do know that. It’s a matter of what are they going to do about it now. We had good conversations with a contact out there. He said that the Washington state industry was going to have to have the biggest market (reduction) that they’ve ever had, meaning that they will have to remove at least 20-25% of their total production out there in order to be profitable.
Washington state price declines were 55% on Honeycrisp, 13% on Gala and 28% on Fuji, Drake said.
“Because of the situation we’re in right now with trade and everything else, we’ve had two trade mitigation rounds take place for apples,” Drake said. “That has been primarily focused on exports and also USDA purchases. What we’ve seen with the USDA purchases are all fresh apples and that’s not helping us in the East at all.”
On a recent trip to Washington, D.C., Drake said, “we talked about a possible third round of trade mitigation and we’re really pushing for direct payments to growers. We had that back in 2008, I believe. What we were trying to impress on the USDA – and even some of our Congressional people – is that you guys need some help. The USDA purchases aren’t working for us and the exports are clearly not working either. I don’t know if that’s going to happen, but that’s what we’re advocating.”
2018 tree fruit survey
The 2028 Census of Agriculture reported the number of farms producing apples in Michigan declined from 825 in 2014 to 775 in 2018. Total acres declined from 35,500 to 34,500. Tree plantings increased to 14.9 million from 11.3 million in 2014.
Acreage reductions were 10-35% for Spy, Jonathan, JonaGold, Golden, Empire, Ida Red, Rome and Macintosh. There was a large reduction in acreage for Red Delicious.
“Most new plantings were Fuji, Honeycrisp and Gala, also including Washington and New York, so we’re going to have plenty of those three varieties,” Drake said.
Intensions for planting for 2019-2023 were to add 3,860 acres, yet removing 1,670, Drake said the report indicated.
Tree fruit commission
The Michigan Tree Fruit Commission is currently in its first year of the second referendum approved by the Michigan tree fruit industry.
“The first five years under the first referendum was extremely successful,” Drake said. “We were able to leverage specialty crop block grant dollars and over $2 million from state government. The total dollar amount we were able to utilize for this first referendum was $6 million. Those dollars were put into our research stations, mainly focused on infrastructure. We were able to secure some great new Extension people and a couple of research projects, as well.”
The commission met in a strategic planning session in January to chart its course going forward to 2025, recognizing the one-time state government allocation will not be part of the budget.
“It really was a great experience as some goals and priorities were established,” Drake said. “It’s really a great program for the growers. We want Michigan to be a place where growers and other researchers want to come to, and maybe we can come up with some great things for the grower community.”