Monster Crops: How Much Is Too Much?

Are growers getting too good for their own good? Technology, better-performing rootstocks and varieties, crop load management practices and advanced production techniques have made growers more efficient and effective. But in a presentation at the International Fruit Tree Association’s 58th annual conference in Halifax, Nova Scotia, one of the nation’s most prominent apple growers called out his industry peers for essentially being short-sighted in producing monster crops instead of thinking of the industry as a whole.

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“The new orchard systems are a game changer to be sure. But in spite of all the inventive thinking and highly skilled horticultural acumen that went into these systems, there is one giant piece of the puzzle missing,” John Rice of Rice Fruit Company in Gardners, PA, said. “Who is going to market all these new apples? How? To whom? And at what price?”

Rice, the inaugural American and Western Fruit Grower Apple Grower of the Year, kicked off his message with some historical numbers to show the exponential growth of the apple industry in the last 40 years, starting with a look at 1975, when he took over the sales department of his family’s business.

U.S. apple Crop by the numbersAt that time, 175 million boxes/boxes were produced — a number previously thought unreachable. He compared that to today’s record crop of 275 million boxes. He pointed out Washington, holding approximately 60% of the market, produced 52 million boxes in 1980, and now 180 million, by some estimates.

“In 2011, Washington produced 108 million boxes of apples,” he said. “In 2012, as thousands of acres of densely planted young trees came on with their first big crops, Washington production jumped to 129 million packed boxes, an increase of 21 million boxes in one year.”

Rice’s presentation and the subsequent discussions could easily become a debate pitting East vs. West, but at the heart of his message to growers is the need to understand the U.S. is producing more apples year after year, with many new varieties, and we need to be thinking about what the industry as a whole needs to do to market and sell these apples.

Doing More On Less
Not too long ago the numbers achieved today would have seemed out of this world. Now with higher density orchards growers are able to hang more apples on fewer acres. The per acre yield has increased 31% in the last 10 years, while total bearing acreage continues to decline. A peak of 468,000 acres was logged 20 years ago, says Mark Seetin of USApple. This past year’s crop was produced on just 328,000 acres.

At last year’s IFTA conference, Bruce Allen of Columbia Reach Pack/Chiawana Orchards in Yakima, WA, surprised attendees by saying “I hope to see 100 bins per acre by the fifth leaf.” This year, Allen upped his figure to 120 to 130 bins to the acre.

Allen was not alone in his assertion. In a young grower panel at this year’s IFTA, Mark Stennes of Stennes Orchards Inc. in Pateros, WA, said “I think 150 bins to the acre is going to be the standard.”

“We may get out of balance with all the planting that’s gone in,” says Tim Welsh of Columbia Fruit Packers Inc. in Wenatchee, WA. “That increase does include not just Washington but New York and Michigan and parts of Pennsylvania,” he says. “It will be brought to balance by short-term oversupply.”

Industry Impact
The question becomes not how high production numbers can go, but how the industry can sustain such growth. Most growers would claim this increased production is a necessity because they don’t set prices.

Desmond O’Rourke, publisher of the World Apple Report, cites the decline of Washington-produced Red Delicious, which dropped from $0.50 per pound in September 2014 to $0.365 in January 2015 for FOB prices — a $0.135 decline. At the retail level, Red Delicious only decreased from $1.404 to $1.345 — a $.059 drop.

“FOB prices fell 23% while retail prices fell only 4.2%,” he said.

Costs for everything from inputs, labor, and equipment continue to rise, and in order stay in business, you simply need to make more money to stay afloat.

“Growers are seeing inflationary increases in a lot of their input costs, some of those driven by commodity prices, fuel prices, labor costs, and regulatory compliance costs,” Jon DeVaney, president of the Washington State Tree Fruit Association says.

Most growers and marketers we talked to believe there will be some sort of leveling off — however there is no consensus on when and how that will happen. Stennes says this oversupply will be balanced by the demand of a larger worldwide population.

What’s At Risk
There’s a lot to jeopardize the delicate balance of the apple industry, says Jim Allen, president of the New York Apple Association. Unfortunately, some factors are simply out of growers’ control.

Labor is a huge stumbling block as production continues on an upswing. If help isn’t there to harvest the crops, the numbers really don’t matter.

“New markets are important, but if we don’t pick them we can’t sell them,” he says.

Also complicating the future of the industry is the murky export market with issues such as MRLs, trade barriers, tariffs, etc. Sales this year have been influenced by the Russian produce ban, Chinese restrictions on imports, a rising dollar and a work slowdown in Western ports. O’Rourke calls it “a perfect storm.”

Alan Groff of Foreman Fruit Company in Wenatchee, WA, echoes O’Rourke’s caution, and says a big risk is the potential for a drop-off in demand, thanks to the increase in the value of the dollar, which in turn, raises the market price for apples. This can ripple in the global market as well as domestically.

“Consequences from overproduction are serious and only beginning to be felt,” he says. “For the first decade of this century, we planted about 4 million trees per year in Washington, but more recently we’ve been planting 13 million per year, which we know will create a 10% per annum rise in supply for the next five years, forcing unprepared players out of the industry while upgrading the overall quality of the product we will deliver to customers. That’s the silver lining.”

U.S. apple crop State By StateNot All Doom And Gloom
It’s easy to see this as a glass-half-empty scenario. However, growers keep investing back into their orchards, which Chris Schlect, president of the Northwest Horticultural Council, says is a positive note.

“People have confidence in the future of the apple industry,” he says. “People would not be investing time and money in it if they thought there wasn’t some opportunity to recoup their investment.”

O’Rourke says large crop sizes mean lower prices, which could help expand the domestic market, which has been stagnant.

“The worst thing that could happen in 2015-16 would be a very short apple crop and high apple prices,” he says. “The industry needs a well-funded promotional campaign that can alert consumers to the great bargains available in large apple crop years.”

DeVaney says larger crops are marketable.

“If you can keep major export markets open, if you can keep the West Coast ports from closing down, it is very possible to market crops even larger than we had this year,” he says.

Lots Of New Varieties
In addition to the large crops, the next marketing challenge is how to manage the many new varieties. Breeders across the world are developing new waves of apple varieties, trying to hit the marks for storage, production ease, and consumer preference.
“So what is every grower looking for today? The next Honeycrisp, obviously. And there are plenty of candidates out there,” Rice said. “Many are patented, and most are going to be managed by some marketing group. But that has not stopped the gold rush fever among growers to find ‘the next big thing.’”

Rice listed off 56 names of all the new varieties from A to Z with Ambrosia to Zonga. The sheer number of these new varieties — with more in development in the coming years — breeds an identity crisis in the market. Rice says we may be bringing too many varieties on the market in the search for the next Honeycrisp, none of which your consumers are familiar with in the first place.

“The thing that worries me as a marketer is knowing most of this drive to plant and produce new varieties is producer-driven rather than consumer-driven,” Rice says. “The consumer did want something better than Red Delicious. Our industry came up with 6 or 8 different varieties that were considerably better. The consumer is not asking for 50 more. And I can tell you the retailer certainly is not asking for them.”

Rice says at his large local supermarket there are 18 different varieties, 16 of those sandwiched between Gala and Honeycrisp endcaps. With most new bi-color varieties looking similar and without the consumers’ education on these other varieties, most will just default to Gala and Honeycrisp.

Rice said growers should be aware a lot of apples are coming from the Southern hemisphere, which is troubling given the large crops already in the states.

“We really shouldn’t have to import any apples to satisfy the American consumer today,” Rice said. “We are producing way too many apples in this country to make general apple farming profitable at the moment.”