August, 1998


Apple growers look to difficult marketing year

World oversupply of apples and poor economic times in export countries will make it a tough marketing year.
U.S. apple growers are facing a world shock in terms of export demand because of the Asian financial crisis and Mexico's antidumping allegations against Washington last year.
The Mexican market was cut off for many months with a 101.1% preliminary antidumping duty. In March the two countries settled the dumping allegations and restored the U.S. apple industry's access to Mexico's market. The agreement signed established a minimum FOB price of $13.72 per 42-pound cartons of Red and Yellow Delicious apples.
China's cheap juice exports, which has pushed concentrate prices to record lows, has also dropped the bottom of the apple market and is pushing processing prices lower.
The export troubles and low processing prices are occurring at a bad time for the industry. Washington State expects to pack over 100 million boxes for the fresh market, the first time it has gone over the century mark. To market the crop, Washington will need to sell about 70 to 75 million boxes on the domestic market, yet the industry has never sold much more than 60 million boxes domestically before.
There has been talk of establishing a national generic promotion program to increase apple consumption in the U.S. It hasn't gotten past the preliminary discussion stages. Eastern marketers are hesitant because they fear Washington would have the most to gain.
They U.S. apple industry is getting together to help fund nutritional research in conjunction with the Processed Apples Institute. The industry has pledged between close to $100,000 for the project.
The Washington State Apple Commission is trying to do what it can and has asked their growers to increase the promotion assessment 60% from 25 cents a box to 40 cents for the next three years. Ballots went out August 5, with results expected by the end of the month.
The move would boost the state's apple commission's budget from $25 million to $40 million. The extra $15 million would be aimed at increasing U.S. apple consumption which has been stagnant for many years. If it passes the commission will test year-round radio, television, and print advertising - something that's never been done before.
None of the money will be used to pay retailers to take more Washington apples, according to commission President Steve Lutz.
"We've done the job at the retail level," Lutz said. "We aren't going to make any more sales by paying off retailers. We've got to make the market bigger."
Eastern marketers are skeptical of Lutz's statement because retailers have are telling them that Washington representatives are already coming in and saying they will help fund year-round promotions.
"Retailers are seeing Washington coming in and establishing early season promotions to keep us out," said Don Armock, president of Riveridge Produce in Kent City, Mich. "We've got to do what we can to keep our markets."

Crop Estimate
While Washington has a record crop, the entire nation combined doesn't.
The USDA's August estimate is pegging the crop at 269.5 million bushels, up 9% from last year's 247 million bushel crop. It is 1.6% below the nation's record crop of 273.8 million bushel crop in 1994.
Washington's total crop is estimated at 145.2 million bushels, up 22% from last year's 119 million bushel crop. New York is estimated to the second biggest producer at 24.7 million bushels, down 7% from last year's crop of 26.6 million bushels. Michigan comes out in the number three spot with an estimate of 23.8 million bushels, down 5% from last years crop of 25 million bushels. California is fourth with 21.7 million bushels, down 5% from last year. Following are Pennsylvania at 10.2 million, down 20%; Virginia, 7.3 million bushels, up 15%; and North Carolina, 4.76 million bushels, up 32%.

Fresh market
Washington will again be the locomotive pulling the price for the fresh apple market.
John Rice, sales manager for Rice Fruit Company in Gardners, Penn., said retailers are telling him Washington apple commission representatives telling buyers that they need year-round promotion to market their crop.
"They are paying out large sums in promotions and it will make it a very competitive market," Rice said.
Retail chains are still indicating interest in promoting apples from their regions and Rice believes there will be a good window in September, October and November to move apples.
"From that point on the numbers of features drop and we must work to get exposure," he said. "I have no doubt that Washington will be selling at a lower price than they'd like to and we will be under pressure to match these prices. That's how the market works."
Newer varieties like Gala, Jonagold, Fuji and Braeburn have usually brought higher returns, even in years of big crops. That is changing too as supply comes into balance with demand and prices drop, according to Rice.
"This was to be expected, but Gala has held up better than expected in recent years," he said. "Demand for this apple has grown as fast as the supply. Gingergold is another bright spot and is still being sold at a premium."
One bright spot will be the McIntosh market, Riveridge's Armock said. The nation's McIntosh crop will be down, but will have excellent size for cell packs.

Export market
The export market should be fairly strong for Eastern marketers, but could also feel the effect of Washington looking for any market that will buy its fruit and the strong U.S. dollar.
"There are some windows of opportunity, it's just a matter of who going to get that biz," Armock said. "Because of the amount of export that Western shippers have done, it gives them a better understanding of the market, so as a consequence they may have the advantage."
Some export markets for Eastern shippers will remain strong including Empires to England and McIntosh to Scandinavia countries and the northern UK.
There has been substantial hail in Italy, one of the largest producers in Europe, offering even more opportunity in the UK market, Armock said.
Central South America, which has been a good market for Eastern growers in recent years, will be tougher because of the big Red Delicious crop in west.
Canada will have a dollar value advantage as the Canadian dollar is near a record low value against the U.S. dollar making it very advantageous for shippers to the north to export into the U.S., Rice said.
The Great Lakes Fruit Growers News