How long can this last?
Washington Honeycrisp f.o.b. prices are twice the average of other varieties, which compensates for the additional expense and hassle of growing them.
Consumer demand for Honeycrisp apples is so intense and the return so high that growers can afford to spend the additional time and money it takes to grow the fickle variety. But how long will that last?
Mike Robinson, production manager for Double Diamond Fruit in Quincy, Washington, said marketers need to have enough Honeycrisp to satisfy their customers’ needs, and there’s no sign of demand flagging yet.
“In every conversation I’ve had with retailers, Honeycrisp comes up in the first three to four minutes,” he said.
Washington apples sold last season for a record average of just under $23 a box f.o.b. The average f.o.b. price for Honeycrisp has been more than $44 a box for each of the past five seasons—ever since it was tracked as a separate variety—and reached almost $48 last season.
But the costs of growing it are higher than for other varieties, and the packouts are much lower. Last season, the industrywide packout rate for Honeycrisp was just 58 percent, compared with 75 percent for Red Delicious, according to the Washington Growers Clearing House Association.
Dr. Karina Gallardo, agricultural economist with Washington State University, conducted an economic study last year on the costs of establishing, producing, and packing Honeycrisp apples in Washington. The numbers are based on a hypothetical 10-acre block of Honeycrisp with trees spaced 3 by 10 feet apart and were compiled with input from apple producers based on their actual costs.
Gallardo estimates that the variable costs for producing Honeycrisp are about $7,262 per acre (excluding packing charges) and fixed costs about $4,211. With a yield of 43 bins of packable fruit (without culls) per acre and a net warehouse return of $433 a bin, the grower could expect a profit of almost $6,500 per acre. She assumes the packout rate would be 72 percent.
Using the Clearing House’s actual statistics for the 2011-2012 season, the average actual net return was $392 per orchard-run bin, based on a 58 percent packout rate and packing charges of $193 per bin.
Gallardo said Honeycrisp currently gives growers a good potential profit margin, but it all depends on their production level and the f.o.b. price. Growers can control production but not price.
“I think the really good growers that have learned how to manage the horticulture of this difficult variety are able to produce that net production that I am putting in the study, with the 72 percent packout. That’s not the average of the industry. The average of the industry is 58 percent. That’s critical, I believe.”
Honeycrisp is profitable now, because the variety still has novelty value as well as good quality characteristics, she said. “There are no other varieties that can compete directly with it, so it has a premium price. Whenever that changes—and it will change at some point—I’m sure the premiums will be shrinking. That’s where we stop making a profit with Honeycrisp. We don’t know what will happen five years from now.”
Growers say the industry is beginning to figure out how to improve production, just as it did when it adopted other new varieties.
Robinson said when he began to grow Fuji a generation ago, it was described as “the variety from hell.”
“We started figuring out all the things we were doing wrong and the trees got older, packouts were up, and costs were down,” he recalled. “We find the problems first, and then we find the solutions. Almost every variety has its own set of problems. I think some of the companies who’ve been at it awhile have figured out Honeycrisp.”
Robinson said he’s planting more Honeycrisp because of retailer demand and to make sure the company can take care of its customers, even though the costs associated with planting an orchard—ground, trellis, pipe, and trees (if you can get them)—are high now.
“This is not a time when I would normally be planting, other than I need to get some Honeycrisp in the ground,” he said. “We have a high-colored strain of Honeycrisp we’re excited about.”
He said it’s hard to know when to stop planting a high-priced, hard-to-find variety. No other varieties excite him as much as Honeycrisp, though he is nervous about how many acres are being planted.
A Washington tree survey conducted in 2011 showed there were 9,000 acres of Honeycrisp in the ground, out of a total of 167,500 acres of apples. This fall, the state produced 3.7 million boxes of Honeycrisp, which amounted to less than 4 percent of the crop.
Scott Jacky with Valley Fruit in Yakima said labor and harvest management are key factors in deciding what to plant and where. Honeycrisp is still a good variety and making a lot of money, but if the company has a lot of Honeycrisp in one location, it might consider planting some other variety or upgrading Gala and Fuji to new strains. “We try to have our ranches set up so we have one crew of one size that can start with Galas and work its way through to Fujis and Pink Ladies,” he said.
Dale Goldy, assistant general manager of Stemilt Ag Services, expects that the market for Honeycrisp will continue to expand as the industry learns how to store it later in the season.
He visited a Walmart store in Montana this fall where the apple display had three trays of Honeycrisp versus one or two trays of other varieties, and Honeycrisp was selling faster at $2.49 a pound than the other varieties at $0.99 or $1.49.
Goldy, who has been growing Honeycrisp since about 1995, said he would never have guessed that demand for the variety would be so high. “We’ve blown my crystal ball out of the water.”
Despite the tantalizing returns, some producers say they would think hard before planting more Honeycrisp. Brent Milne, horticulturist with McDougall and Sons in Wenatchee, Washington, said he has “guarded expectations” about the variety.
“I know some others in the industry are bullish on that particular cultivar—and that’s great—but from our standpoint, dedicating more ground to that variety is not something that’s in our game plan.
“Usually, the returns are there,” he said. “But, good grief, from a horticultural management standpoint and the amount of fruit you lose because of the physiological maladies, it definitely gives you pause.”
Tom Gausman, with the consulting service AgriMACS, Inc., based in Pateros, Washington, said that though returns for Honeycrisp are phenomenal, everyone seems concerned about where the price is going to go, and nervous about having too much of their manifest in that variety.
Historically, prices for new varieties have been high at first, but then dropped off dramatically, not gradually, he pointed out. When a variety has poor packouts, as Honeycrisp does, that’s particularly worrisome.