Jun 21, 2024

Time to upgrade: Modern solar and storage technology helps apple packers

When was the last time you walked into a grocery store and found the apple island empty (except during COVID)?

The apple industry’s excess supply has made the price on a bin lower than it’s been in many years. This situation puts apple packers in a difficult position — they need to stand out amongst stiff competition to secure stronger prices. Otherwise, they’ll be sitting on bin upon bin of apples at unprofitable levels. 

How do packers stand out in this market? The packers and growers who have upgraded to the latest technology could come out on top. Solar and storage upgrades, along with other modern automation options, can make a huge difference.

Solar panels 

Buyers throughout the supply chain are demanding sustainable practices, and incorporating solar technology into apple production is a smart, cost- effective and practical way to manage utility costs and utilize technology with what Mother Nature has provided. 

Many apple packers and growers are installing solar panels into their businesses. Some businesses are designing cold storage facilities to accommodate solar panels, while others are retrofitting existing storage areas with solar. 

As any packer knows, modern operating plants require massive amounts of electricity. Where such programs are available, packers leverage net metering with their solar panels. When panels generate more power than the company uses, the excess power flows back to the utility grid, and businesses get credits to reduce future electricity bills. 

As an added bonus, various federal and state grants, as well as tax credits and incentives to add solar panels, are options. The U.S. Department of Agriculture recently announced $145M of funding for loan and grant awards, through the Rural Energy for America Program (REAP). 

Those funds are earmarked for agribusinesses to make “energy efficiency improvements and renewable energy investments to lower energy cost, generate new income and strengthen the resiliency of their operations,” according to REAP’s webpage. 

Tax credits may also be used or sold, up to 90 cents on the dollar. Consult your tax advisor on which options are available for your particular situation. 

Storage 

Modern storage solutions allow grocers to sell a fresh apple anytime during the year. And now, controlled atmosphere (CA) storage solutions are more important than ever in the apple industry because of the overproduction of quality fruit. During harvest time, the primary goal is to move the fruit from the intense heat to a cool storage area as soon as possible.

After harvest, the goal remains: keep fruit fresh for impending arrival at a grocery store or distribution channel. Better storage options can make the difference between being proactive or reactive, and certainly give packers a leg up on the competition, minimizing the chances of having to sell inventory at a lower price to preserve quality and storage. 

Automation solutions 

By now, most packers are reaping the benefits of automation, which increases efficiency and quality while leveraging the scarce human labor resources we’ve experienced for several years. Thanks to financing options, modern automation equipment can be obtained based on a company’s credit/tax needs.

How financing can help 

Equipment financing makes innovation and equipment upgrades possible and practical, allowing businesses to acquire the technology needed to better compete in the market. Consider these financing options: 

Enhanced cash flow.

The constant churn of newer and better ways to cultivate, harvest, manage and distribute products brings a common dilemma: how to fund ideas and equipment. With financing, packers can acquire and implement the assets they need now. And the assets can generate revenue as they are paid for over time. 

Credit conservation.

Since the 2020 pandemic, organizations realized what ag leaders have known for decades: liquidity and adaptability are essential to business survival. Equipment financing helps to preserve working capital while remaining nimble, with low or no up-front cash requirements. Financing also comes with the option of monthly, quarterly, semi-annual or annual payment plans. 

Flexibility.

The ability to respond to environmental, market and policy changes — quickly and effectively — is an ever-pressing challenge for apple industry businesses. Financing allows for tailored payment terms that align with budgets and seasonal cash flows. It also enables borrowers to keep pace with technological advances; midterm upgrades and end-of-term options can keep businesses from ever owning obsolete equipment. 

100% financing.

Replacing outdated equipment is a critical need for most agribusiness owners. To truly innovate, new machinery is just one piece of the puzzle — and a considerable investment in itself. A customized financing structure allows borrowers to bundle equipment, software and soft costs such as freight, sales tax, labor, professional fees and other related costs into one payment plan. 

Scalability.

With the flexible freedom of financing, agritech initiatives offer boundless opportunities to scale. Each of the technologies mentioned in this article can reduce costs, increase yields and/or improve efficiencies. They can also be customized to form interdependent systems, further enhancing yield potential, profits and operational efficiencies. 

Choosing the ideal lending team 

Financing can be much more than an immediate, flexible funding alternative. The right financial provider can help borrowers empower assets and fine-tune (or even develop) innovation strategies. Here are some qualifications to look for when choosing a financing provider: 

Knowledge of farming and agriculture assets 

• A proven track record in lease structuring 
• A clear understanding of your business 
• A trusted, reliable source of capital 
• A creative approach to big-picture opportunities. 

— By Justin Woodward,  vice president of equipment finance for Key. Based in Boise, Idaho. Woodward has 25 years of equipment finance experience and can be reached at [email protected].