Economic outlook for tree fruit
The economic outlook in export markets is more positive than for the U.S. market.
The economic outlook for the tree fruit industry in Washington State and the Pacific Northwest is quite good. This conclusion may surprise many readers accustomed to the steady stream of negative stories in the media. However, the reason for this optimism about the fruit industry is that it now services a global market. While its fate is still heavily influenced by conditions in the United States, it also competes very effectively in many growing export markets.
Since 2007, the United States, like many other countries, has suffered both severe recession and a financial crisis. Economists Kenneth Rogoff and Carmen Reinhart have analyzed similar past occurrences. They have concluded that such recessions are much longer and deeper than simple recessions. By their criteria, the United States may not fully recover from the present so-called "Great Recession" until near 2020.
Table 1 compares key statistics for the current recession, and the average for the previous five recessions in the United States since 1970, in the three years before and the three years after the recession hit bottom. Prior to the current recession, unemployment was similar to that of past recessions. Inflation, as measured by the consumer price index, was lower. However, real gross domestic product (GDP) hit a lower bottom in 2009 than in past recessions, and recovery in 2011 and beyond is forecast to be much slower. Unemployment is expected to remain above 9 percent through 2011, about 50 percent higher than in past recessions.
If the Rogoff-Reinhart scenario plays out, recovery of real U.S. GDP will not be fast enough to generate the jobs needed by a growing population. Unemployment and underemployment are likely to remain at high levels. The Federal Reserve Board will come under increasing criticism for failing to meet its mandate of assuring full employment. Without job creation, politicians at every level of government will fear the wrath of the voters. The Federal Reserve Board, the administration, and Congress are all desperate to craft policies that will generate faster growth, create more new jobs, and help the economy avoid either inflation or deflation. At the same time, their options are constrained by the mounting federal debt, the need to maintain the faith in the U.S. dollar of foreign bondholders, especially the Chinese and Japanese,
and Tea Party demands for smaller government.
The resulting uncertainty as these policy battles are fought out is likely to keep American consumers on their new path of frugality for several more years. Spending on durables such as homes, cars, and appliances are likely to be curtailed. Spending in upscale restaurants will also be slow to rebound. However, spending in grocery supermarkets, where most fresh apples are sold, is likely to continue to be relatively stable. Retail buyers will continue to press suppliers for lower prices, but the present balance of supply and demand puts fruit marketers in a strong negotiating position. For the remainder of this marketing year, prices of apples and pears should remain healthy. However, unless the uncertainty is resolved, the 2011 sweet cherry season and the 2011-2012 marketing year for apples and pears could become more difficult.The Washington State fruit industry could be seriously affected by future decisions on government programs, taxes, and regulations. However, those effects will not be felt for several years.
The economic outlook in major export markets for Northwest fruit is much more positive. Canada skated through the world crisis with minimal pain. The economic rebound in Mexico has been strong. However, sales into Mexico could be slowed by continued failure to resolve the North American Free Trade Agreement trucking dispute. In the rest of the world, China, India, and Brazil continue to maintain staggering rates of economic growth. If that continues, they will become even more important targets for fruit exports. Recovery has also been strong in major markets like Indonesia, Malaysia, Taiwan, and Thailand.
However, many competing exporters are targeting the same markets, and have a price advantage over Washington State. With little growth likely in the U.S. market, the Washington State fruit industry needs a frank debate about the level of funding needed to help it maintain and expand its exports through the next decade. Specifically, it needs to:
- Organize a summit of industry leaders to compare potential future supplies with potential domestic and export markets
- Discuss where potential markets can be found for the increased supplies
- Begin evaluating what promotional programs will be needed to sell those extra apples at a profit
- Discuss how and where to raise the needed promotional funds, and how those funds should be managed.