Good Point - Harold Ostenson
Resuscitating the Golden Goose
Over the last several weeks, I have received a number of phone calls from growers asking the same questions:
"Should I stay organic?"
"Should I continue to transition
"Is there any way to protect organic fruit returns in the current market economy?"
One could expect these inquiries, since the Washington apple industry has managed to increase its organic volumes 100 percent over last year. On top of this, the market situation is confounded by the economic downturn, with consumers becoming more concerned about price than health and environment.
Washington's organic and conventional fruit industry produced a record crop of small, bagged-size apples. At the same time, pricing for value-added products, such as fresh apple slices and peeler/juice processor apples, has declined. It is into this environment that the typical organic grower is looking for new insight to develop a confident game plan to resuscitate his "Organic Golden Goose."
This year, more than ever, I hear the comment that since organic supplies have grown and organic has moved in volume to mainstream markets, organic prices must mirror the conventional price structure. This would force growers into the mode of weighing lower organic returns against the increased costs of raising organic crops. Yet, in this same market environment, there are organic growers who are continuing to receive the same high returns to the land as last year, and, in a number of cases, the organic bonus has continued to grow over the last several years. It is this latter situation I would like to expand on.
First, let me review a couple of data points that caught my eye during the first four months of the current tree fruit sales season.
• When there were adequate volumes of organic Golden Delicious and organic Honeycrisp, Honeycrisp weekly sales movement was higher than Goldens, though the average f.o.b. price for Honeycrisp was three times higher (so much for the economic downturn).
• Starting in November, in most weekly sales reports, the combined weekly movement of Honeycrisp and Pink Lady was higher than that of all other individual varieties, such as Red Delicious, Golden Delicious, or Granny Smith.
• In most cases, f.o.b. prices for organic apples and pears, Washington Extra Fancy grade in prime sizes, were at or higher than the last two-year average, while f.o.b.s for bagged sizes were far lower. The "Standard box dollar advantage" table shows apple size and grade packout data I gathered from the first four months of this packing season. The grower's per-bin return increases by roughly $50 to $350 by growing Washington Extra Fancy grade in sizes larger than 100.
We can draw several more conclusions from current industry fruit sales numbers:
• Growers of organic pears, organic Honeycrisp, and organic club varieties will average for the most part from $100 to $200 more per bin than organic Red Delicious, Golden Delicious, Granny Smith, Braeburn, Cameo, or Jonagold growers. The current organic bonus over conventional returns ranges from near zero on Golden Delicious to more than 150 percent for Bartlett pears, and the differentials in returns will increase as the latter varieties will remain a challenge to sell. The Organic Golden Goose is breathing on its own for some growers with varieties in demand by the national market.
Although the organic industry is basically sold out of pears, Honeycrisp, and specialty varieties, and has sold 40 percent more organic apples so far this season compared with last year (led by a 70 percent increase in Gala movement), this great sales momentum falls short of the required 100 percent. Combined with a conventional apple market that is moving volumes at last year's rate when it has an additional 12 million boxes to move, there is no easy marketing solution for the remaining excess volumes for either organic or conventional apples. A strong, active sweet cherry market may provide the best support for the late-season apple volumes.
Washington's organic sweet cherry volume will increase this year by an even greater percentage than the organic apple crop. The GF-120 bait for cherry fruit fly has made it more feasible to grow cherries organically. While this increase will initially place stress on the marketers for movement, this new volume will allow for the first time the organic cherry market to move from a spot market into a full-season marketing plan. The retail market will have a consistent Washington organic volume over a two-month period. Coupled with expanding organic cherry acreage in California, soon there will be a domestic organic cherry supply matching conventional market windows.
There are two other events shaping Washington's organic volumes and markets that I think are important to consider as all growers, especially organic growers, develop profitable game plans moving forward. The first is developing international organic markets. Within the last few months, new organic standards have emerged for Canada, Japan (regarding fumigation only), and Taiwan. These new standards will increase awareness of organic fruit and demand for more Washington organically grown fruit. In addition, a number of countries are making changes to many chemical Maximum Residue Levels [MRL]. As this process of lowering MRL rates continues, it requires the export shipper of tree fruits to move closer and closer to organic practices. The long-term cost of farming and packing conventional fruit becomes more expensive.
Looking ahead over the next five years, what will it take to be successful?
First, downsize organic blocks of Red Delicious, Golden Delicious, Braeburn, Cameo, and Granny Smith. Maintain blocks of newer strains of Gala and Fuji, and transition old variety blocks to new "club" varieties. If you cannot downsize older varieties immediately, you cannot afford to be anything but the most aggressive grower in the neighborhood when it comes to organic chemical bloom thinning. Anything less will result in unhappy meetings with your banker. Grow size 100 and larger pears, and even think about planting high-density Bartlett blocks. For cherries, control mildew early, grow 10 row and larger, don't transition varieties that will mature during peak harvest periods, and make sure the organic cherries qualify for the Japanese and Canadian markets.
In my opinion, continued environmental concerns (including long-term associated costs), lower and lower MRL rates for conventional chemicals, worker pesticide exposure blood testing, and increasing food safety issues at retail in domestic and export markets all combine to make growing organically the most sustainable, and profitable option for tree fruit growers in Washington. •
Harold Ostenson has been involved in the Washington organic industry for the last 25 years as a tree fruit grower, packer, and shipper.
Ostenson is organic program manager for Stemilt Growers, Inc., Wenatchee, Washington.