Michigan’s apple industry has rebounded from devastating spring freezes and storms in 2008 to produce an expected 26 million bushels this season, up 82 percent from last year and 46 percent above a five-year average.
The increase, coupled with decreased production in Washington, means the nation’s apple growers predict they will harvest 235 million 42-pound bushels, or about 1 percent more than they did a year ago. And with a nearly depleted storage carryover comes hope that grower prices, which languished last year, will increase.
The crop estimate is based on industry input at the recent U.S. Apple Association Outlook Conference in Chicago.
The U.S. Department of Agriculture predicts the nation’s apple growers will harvest 240.7 million bushels. The largest differences in the two estimates center on Washington.
The USDA predicts growers there will harvest 138 million bushels, making it the 11th largest crop in history. The Vienna, Va.-based USApple expects 132 million bushels.
Of the US Apple’s Washington crop estimate, about 107 million bushels are expected to go fresh, with the remainder moving into processing.
“One hundred seven is consistent with the numbers I’m hearing from talking to other people,” says West Mathison, president of Wenatchee, Wash.-based Stemilt Growers Inc.
Lindsay Buckner, senior vice president of field services for Yakima, Wash.-based Tree Top Inc., agrees. “I’m hearing numbers from 105 to 120. I think 105 to 115 is where it’s at. Fruit size is averaging bigger than last year.”
That may be in part to a smaller crop this season than the 109 million bushel fresh-market crop of 2008.
“If you sell an apple that is two sizes larger, you’re selling 10 to 20 percent more pounds,” Mathison says.
Last season, high prices for processing apples prompted many growers to strip trees of fruit rather than color pick. As the processing prices softened, much of that fruit moved into fresh outlets, depressing prices.
Despite the large crop, the Washington industry was able to clear out most of the carryover with record shipments, says Dan Kelly, assistant manager of the Washington Growers Clearing House in Wenatchee.
This season, he says he expects growers to selectively pick for the markets.
“People are not going to pick everything on the tree,” Kelly says. “If it doesn’t meet the criteria, they will leave it.”
Unlike recent years where many growers were short workers, Kelly says he expects labor availability will not be an issue this season.
Retail prices languished
For much of the early 2008-09 marketing season, which began July 1, 2008, grower prices were depressed. For the entire marketing year, growers of fresh-market apples received an average of 29.6 cents per pound, down 23 percent from the 38.3 cents per pound of the 2007-08 marketing year, according to USDA figures.
Steve Lutz, executive vice president of the Chicago-based Perishables Group, blames part of the poor returns on retailers hiking prices to maintain their overall apple category margins.
“Retailers didn’t get the ‘big crop’ message, at least early on,” Lutz says. “Prices stayed high despite the size of the crop. Volume lagged behind during the critical part of the 2008-09 marketing year.”
It wasn’t until March that retail prices began to come down and movement began to increase.
And the higher prices didn’t go unnoticed by consumers. Based on consumer-intercept studies conducted in March, Lutz says 91 percent responded that apples were more expensive than the previous year.
Of those saying prices were higher, half said they had substituted another item for apples.
“Consumers are going to remain very conscious of pricing,” Lutz says. “Retailers are very slow to respond to the crop supply and the pricing cues that we give them.”
At the same time, promotional dollars were redirected to other produce items. And the number of apple items in produce departments declined to an average of 19 from 28 or 29, Lutz says, citing data collected from 13,000 conventional supermarkets, interviews with consumers and Nielsen household panels.
Apples only saw a 6 percent increase in promotional spending during the 2008-09 marketing year, whereas berries enjoyed a 16.3 percent increase and grapes an 18.2 percent increase.
Sales responded accordingly, Lutz says. For the 52-week period ending July 1, berry sales were up 12.7 percent and grape sales up 4.6 percent. Apple sales, on the other hand, were down 6.3 percent.
Adding to the apple industry’s malaise is low consumer sentiment, which has caused them to rein in spending and increase buying substitutions, he says. And Lutz says he sees that trend continuing into the 2009-10 marketing year.
“Consumers are focused on basics,” he says. “They’re hunkered down and are coupon and promotion oriented. They’re trading down and across categories. They’re looking for that value item. And they’re willing to swap out.”