Gearing up for a new season
Apple growers discuss crop size and critical issues.
Several years ago, National Apple Week was expanded into National Apple Month, which is actually three months long and involves intense promotion of apples during the harvest season of September, October, and November.
But for apple growers and marketers, marketing of the new crop kicks off the month before. More than 300 of them gather just off the lobby of the Ritz-Carlton Hotel in Chicago in mid-August to get all the crop statistics together and start to think about volumes, quality, and pricing.
Just for the record, the lobby of the Ritz-Carlton is on the twelfth floor and includes a lounge and floor-to-ceiling glass-walled meeting areas providing an overlook of the heart of Chicago’s North Loop and its historic buildings. Ritzy got its name here.
People fly in from all over the country to talk about crop size and conditions in their regions, and from around the world to report the size and condition of crops in Canada, Mexico, South America, Europe, and China.
The U.S. apple crop is estimated at 221.5 million bushels, about 2 percent below the five-year average. The state of Washington is expecting a bigger than average apple crop, while elsewhere in the United States the crop is less than average and even short. China’s crop is smaller than it has been, and so is the crop in Europe. Mexico will want to import 13 million boxes of apples—despite a new 20 percent tariff that country imposed on fresh and dried apples in retaliation to the United States continuing restrictions of Mexican trucks that should, under NAFTA, be allowed access in states bordering Mexico.
Bruce Grim, manager of the Washington Apple Growers Marketing Association, said, “It looks like an excellent opportunity for a strong marketing season and a successful year.” Washington growers especially seem well positioned.
All the estimates reported at the U.S. Apple Association’s outlook and marketing conference in Chicago are posted on the Good Fruit Grower Web site, www.goodfruit.com.
Besides reporting numbers, speakers at the conference addressed a wide range of issues facing growers and marketers, including not just the Mexican tariff, but the continuing weakness in the American economy. Steve Lutz, executive vice president of The Perishables Group, a fresh food marketing consulting group based in Chicago, said that price is now a focal point for everybody. “Price pressure has permeated at all stores, not just Wal-Mart. Even Wegman’s finds its customers seeking to avoid higher prices.”
High unemployment affects poorer people more than richer ones, but rich folks have joined the coupon clippers as they try to rebuild wealth lost in equities and real estate. People are increasing their savings, backing off on consumption of convenience foods, and looking for cheaper or substitute products.
In addition, the emergence of “the social media craze” has brought democracy to information, according to Janet Helm and Alecia Dantico of the public relations firm Weber Shandwick, the folks who gave us the Milk Mustache. It’s harder to push “sanctioned and authorized” messages when people value opinions from their friends more highly than traditional news and information sources, or commercial advertising.
On the plus side, First Lady Michelle Obama has found her voice promoting healthy eating and attacking obesity. The White House has backed away from the organic garden and now is leading a broad-based health approach in which apples fit nicely.
For three years now, those at the apple conference have heard about efforts to create a futures market in apple juice concentrate. The message this year was the same: Coming soon.
“Expect MGEX to launch this new tool soon,” said Kevin Barley, a financial advisor from Morgan Stanley Smith Barney. MGEX is the Minnesota Grain Exchange. Rita Maloney from MGEX said it is developing a price discovery and risk management tool that will help those in the apple juice business reduce their risk.
This would come back to growers as well, who would know price prospects for juice apples at harvest time, when they can choose to pick, store, or abandon.
Each contract will be set to a standard, likely 1,800 gallons in size—with fixed standards for Brix, acidity, color, clarity, and flavor as well. The USDA will be involved in product testing to assure each lot meets the standards. The Commodity Futures Trading Commission will regulate the market.
Gerald von Dohlen reported on efforts by his company, Port Newark Refrigerated Warehouse, to provide secure storage and a contract delivery point. The juice concentrate would be handled in drums on totes. While delivery is not the point of a futures contract, delivery is an important option that assures traders can in fact buy or sell the physical product.
Price volatility, in which concentrate prices have ranged from $4 to $14 a gallon in the last few years, is a major problem, Barley said. Processors buy fruit and create inventory, and price risk starts at the time fruit is purchased. “A futures contract would allow a processor to protect his original intended profit margin,” he said.
More articles on marketing issues will appear in the November Good Fruit Grower magazine.