N. Hemisphere Apple Outlook
World apple supply, fruit quality, variety mix…Washington growers have reason to be optimistic.
It's clear that Washington State doesn't stand alone in determining supply, demand, and pricing in the world apple marketplace. Eastern U.S. producers, European Union countries, and China have tremendous influence on whether Washington can successfully market its crop profitably. And, more often than not, determining crop volumes in advance of harvest can be a spiritual event, rather than based on --concrete factual information. These crop predictions oftentimes influence market prices well in advance of delivery.
August crop estimates are just that—estimates! Washington is continually criticized for "growing apples in storage," as our volumes continue to increase throughout the marketing season—and this isn't unique to Washington. The actual numbers can only be finalized at the end of the season when fruit has been shipped. However, an attempt must be made to plan, predict, and --execute marketing plans based on the best information in hand, and so we go!
The most elusive of the Northern Hemisphere apple producers is China, which is also the most influential. As one can imagine, only Buddha himself has all the answers, and information from China on the 2007 crop is sketchy at best. The Washington Apple Commission's representative in China, Philander Fan, tells of an estimated crop volume of 22 to 23 --million metric tons, which is between 8 and 10 percent smaller than last season. To put that in perspective, Washington's total fresh production is less than 2 --million metric tons—one-tenth of China's production. In addition, 85 percent of China's total production is Fuji, with Red Delicious, Gala, Granny Smith, and Winter Banana making up the remaining 15 percent.
Although becoming more transparent, the crop volumes for the 27 countries of the European Union can be hazy if not delved into in detail. August indications are for a 13 percent decrease in volume, but if you look at the production numbers by country, a different picture emerges. From a competitive standpoint, 11 EU countries provide significant competition for Washington, not only in Europe, but in Southern Asia and the Middle East as well. These 11 countries are up in volume by 2 percent, providing a similar marketing opportunity as in 2006-2007. The remaining EU countries represent the more local producers that compete in the EU's backyard and show the decrease in overall volume. The largest of these is Poland, whose production is forecast to be down 46 percent from last year because of a severe spring freeze. In 2006, Poland represented 23 percent of the total volume in the European Union and will continue to be the major producer in the future (see "Major European Union apple producers").
Mexico, being our industry's largest importer of Washington apples but also an apple producer, can influence market conditions for Washington exports. Although apple crop information is mixed from Mexico, it appears that apple growers in Mexico are expecting a 10 to 20 percent smaller crop in 2007 due to frost in late spring. This should provide Washington's growers increased opportunities in an export market that has been taking around 9 million cartons annually. Our neighbor to the north, Canada, is forecasting a crop 13 percent larger than in 2006 and 9 percent over the five-year average. Exports of Washington apples to Canada may start off slow, but producers can anticipate good volumes and firm prices to our second-largest export destination.
In the United States, East Coast producers are positioned for a 5 percent smaller crop than 2006 with New York up 3 percent, and Michigan off 7 percent. As in Washington, New York growers have been talking up the improved quality this year with sights on improving exports to Europe. Improved quality and increased packouts could push New York above estimate. California and other western producers report similar volumes to previous seasons. The total U.S. apple crop is expected to be 10 percent less than last season and 7 percent less than the five-year average.
Washington's pricing structure isn't solely determined on the fresh inventory of apples produced worldwide. In fact, the availability of apples for juice can set a floor price that determines when marginal apples go fresh to the consuming public or to the processor for juice. European Union producers point to the lack of processor apples as an indicator for a good year for their growers. However, history has told us that when retail price and demand are high, marginal apples are packed for the fresh market, leading to an unsettled marketplace. Washington's processing apple inventory is low, resulting in prices in the $120-$130 per-ton range. Firm processor prices are anticipated for Washington's growers through the 2007-2008 season.
The picture in Washington is quite positive with excellent growing conditions leading up to harvest and a quality crop on the trees. Although Red Delicious volume is predicted to be down 16 percent, Gala are up 9 percent, Cripps Pink up 25 percent, and other varieties up 47.5 percent, positioning Washington to meet and exceed consumers' changing preferences. The Golden Delicious crop, though posting a modest increase of 5.3 percent, is back to its traditional cleanliness and high quality.
With changing varietial plantings and high f.o.b. prices for Washington's apples, the export markets have shown tremendous returns. As shown in "Washington's apple exports," the last three seasons' export volumes are relatively similar, but the returns to the Washington apple grower have increased tremendously. Fewer than 400,000 --cartons separate the 2004 and 2006 crops, but the overall increase in return is in excess of $168 million.
Growers and marketers of Washington apples should be optimistic for the 2007 crop domestically with an overall decrease in the U.S. apple supply. World apple supplies appear to be down with increased export opportunities in Washington's growth markets, such as Egypt, Vietnam, Russia, India, and China. In addition, the quality of Washington's crop this year is vintage, opening the doors to increased packouts and repeat sales both domestically and internationally. But there is always one caveat: Watch out for China and the recent quality control issues!