Aug 28, 2007Apple Crop Moderate, Manageable and in Demand
About 175 members of the apple industry gathered in a posh Chicago hotel last week to mull over this year’s outlook for their special fruit.
A major topic of discussion was crop size. A week earlier, USDA released its forecast of crop size, and the estimate made a week later by the U.S. Apple Association was considerably lower. USDA forecast a crop size of 221 million bushels, while USApple found only 212 million bushels.
Almost all the difference of opinion is over the size of the Washington crop, where USDA says there are 128 million bushels and USApple finds only 120 million. The biggest discrepancy outside of Washington is in Michigan, where USDA forecast a crop size of 18 million bushels but USApple found more than that – 20 million bushels.
With either estimate, the expected crop is far from a record. USDA ranks it 18th in size. The industry calls it moderate and manageable.
What has industry analysts giddy, however, is what appears to be a fundamental change in economics.
Welcome Sauer, past president of the Washington Apple Commission and the new vice president of AgroFresh, called it a “classic demand shift,” in which consumers want to consume more of a product and are willing to pay more for it, both at the same time. They paid record prices for apples last year.
Welcome estimated that consumers last year paid $3.29 more for a box of Gala apples than “normal” supply-demand dynamics would have predicted – and that other varieties are witnessing a similar shift.
Tom Hurson, vice president for concentrates at Tree Top, the big grower-owned fruit processing company in Selah, Wash., said there was a “huge increase in fresh demand and fresh prices” that has had a huge effect as well on the processing side of the industry.
Lindsay Buckner, senior vice president for field services at Tree Top, called last year “most dynamic.” Despite packing a large Washington crop of 98.9 million boxes, the increased demand for fresh apples resulted in prices up 43 percent from two years ago – $3 to $7 more a box.
“Fresh demand is pulling fruit up from lower value uses,” he said.
Juice apples are graduating to become peelers, peelers are going in bags, and apples formerly bagged are going into boxes.
What might seem to be a reduction in quality hasn’t deterred customers, but it has surely had an impact on the supply and price of processing apples, he said.
Increasing the packout of a 20-bushel bin of apples from 16 to 17 bushels may not seem big, he said, since it adds about 6 percent to the fresh market. But it reduces the amount going into processing from four bushels to three, a 25 percent reduction.
John Rice, vice president of Rice Fruit in Gardners, Pa., said that a strong price for juice apples – 9 to 10 cents a pound – “eliminates a lot of second grade fresh packed fruit” and keeps quality high in the East, where there is a strong history of growing apples for processing.
James Cranney, vice president of USApple, which sponsored the annual conference, presented the overall look of the 2007 U.S. crop. His overview was filled in with reports from various regions.
While last year’s crop was the third largest ever, at 236 million bushels, prices were the best ever, with fresh market retail prices averaging 32 cents a pound, he said. Carryover stocks going into this season are “minimal.”
The variety mix is “better,” he said, with Red Delicious continuing to fall, reaching 54 million bushels last year, down from 110 million in 1996. Golden Delicious output also is falling, down to 24 million last year compared to 41 million in 1987. Gala, rising in supply since the mid-1990s, was up 13 percent last year at 26 million bushels. Fuji production has flattened, but Granny Smith is still rising and was at 22 million bushels last year, the green apple being in fourth position on the production list by variety.
Cranney also credited the rising demand for apples to “quality improvements,” including the growing use of MCP (Smartfresh) on apples in storage.
By region, apple production in the West dominates the national picture, and Washington dominates the West.
USApple projected a crop of 133 million bushels for the West, with 120 million of that from Washington. California’s crop was projected at 8 million bushels, 95,000 less than USDA’s forecast. USApple and USDA projected the same crop sizes in other Western states – 3 million bushels in Oregon, 1 million in Idaho, 595,000 in Utah, 400,000 in Arizona and 350,000 in Colorado.
Dale Foreman, Washington Apple Commission, said the proportion of Red Delicious was expected to continue to fall, to 32 percent this year, and Gala would rise from 15 percent to 18 percent this year. Alex Ott, with the California Apple Commission, said recent price improvements have led California producers to regraft older trees and plant new varieties.
“We’ve turned the corner,” he said.
In the East, Cranney said, New York’s crop is estimated at 29.5 million bushels, less than USDA’s forecast of 30.7 million. Steve Justis, from the Vermont Apple Marketing Board, said good to excess moisture across the Northeast had resulted in a “decent crop.”
Across the East, production was forecast at less than last year’s crop. USApple predicted 53 million bushels for the 15 Eastern states; USDA predicted 55 million bushels.
The numbers reflect the effect of the Easter freeze, according to Rice Fruit’s Brenda Briggs. It affected states in the Southeast, south of Pennsylvania. USApple and USDA numbers agree in most of those states, projecting Pennsylvania at 10.8 million bushels, up 4 percent from 2006. But West Virginia is down 9 percent, Virginia is down 22 percent, North Carolina is down 67 percent, Georgia is down 76 percent and South Carolina is down 91 percent.
As large as those percentage declines seem, the southern part of the Midwest suffered even more from the April freezes. Tennessee lost 99 percent of its crop and is projected to have only 2,000 bushels statewide. Kentucky is down 88 percent, Missouri down 91 percent, Iowa down 73 percent, Illinois down 81 percent, Ohio down 39 percent and Indiana down 45 percent.
Mike Rothwell, president of BelleHarvest Sales in Belding, Mich., said the Midwest was divided by an east-west line from Columbus and Indianapolis, south of which the crop was slight to none and north of which was normal.
“One picker can pick the whole Tennessee crop in 10 days,” he said.
Ohio, the second largest producer in the Midwest, lost more than two-thirds of its crop. It will stay just above Wisconsin, which was forecast at 1.4 million bushels.
USDA put total production for the Midwest at 23.3 million bushels; USApple said 24.7 million, with Michigan dominating Midwest production.
Don Werden, with the Norfolk Fruit Growers Association in Simcoe, Ontario, gave an assessment of the Canadian crop outlook. Total Canadian apple production is forecast at 24.8 million bushels, a 13 percent increase from 2006. Of that, Ontario production is slated to increase to 10.5 million bushels, up 24 percent from 2006, and British Columbia production is expected to increase to 6.5 million bushels in 2007, up 4 percent. Quebec production is forecast at 5.3 million bushels, up 8 percent from 2006. Nova Scotia production is estimated at 2.4 million bushels, up 6 percent from 2006. New Brunswick production continues to decline and is expected to reach 160,000 bushels, down 10 percent from 2006.
Alessandro Dalpiaz of Assomela, the Italian apple producers’ association, said production in the major Western European apple-growing countries is forecast at 357 million bushels this season, down 6 percent from last year. The information was developed for the annual Prognosfruit conference in Vilnius, Lithuania, Aug. 2-4.
In Eastern Europe, Poland is forecast to produce 63 million bushels, 47 percent less than 2006. Poland accounts for more than two-thirds of Eastern European production.
Leighton Romney, CEO of Paquime, a grower, shipper and importer of apples in Nuevo Casas Grandes in northern Mexico, pegged the Mexican crop at 18.1 million bushels, mostly Red and Golden Delicious but a growing amount of Galas.
Most of the production is in the state of Chihuahua. Mexicans eat about 30 million bushels of apples a year, and the U.S. exports about 10 million bushels to Mexico each year.
There is no official apple crop estimate made in China, but large apple juice concentrate producers do make estimates. Michael Choi, president of Zhonglu America, said the Chinese crop is expected to be 20 percent to 25 percent smaller, at 21.2 million metric tons, down from 26 million in 2006.
That would put this year’s crop at 1.1 billion bushels.