Tough cherry deal refocuses industry
Volumes are likely to continue to grow in years to come.
The 2009 season should have been a banner year for Northwest cherries, judging by the volume and quality of cherries shipped, the amount of retail shelf space and advertising devoted to cherries, and the feedback from the market. But for growers, it was a dud. An oversupplied market resulted in poor returns and millions of boxes of cherries being left unpicked. As of the end of July, the average f.o.b. price for dark sweet cherries was $26 a box, compared with $46 in 2008, and $34 in 2007. Prices for smaller sizes were reported below $13 a box. The breakeven cost is around $20 a box, according to the Washington Growers Clearing House Association.
"If the farmer doesn't get a return, we've failed," B.J. Thurlby, president of the Washington State Fruit Commission and Northwest Cherry Growers, commented during the commission's July board meeting.
It was an unusually good growing season, with no fruit lost to rain. By the end of July, the industry had marketed 16 million 20-pound boxes, with perhaps another 3 million still to ship. The previous record crop was just under 15 million boxes for the entire 2006 season.
Thurlby said the industry has known for some years that it had the potential to produce this volume of fruit at some point. However, the first official industry forecast during the Five-State Cherry Meeting in May was only 16 million boxes.
Board member Jim Kelley of Kennewick said that, counting the fruit that wasn't picked and packed, the crop on the trees was probably 22 to 23 million boxes. With all the recent plantings of cherries, the volume will continue to increase in coming years.
"We still could see that number take another pretty big jump," he said. "I think it's the right time to have something like this refocus our industry, and hopefully we will turn it into a positive thing. It definitely needs to change, or there won't be enough producers able to stay in business."
This season was a challenge right from the start, Thurlby reported. California had a large, late crop, so California cherries were still working their way through the marketplace when the Northwest season began.
The Northwest season was also late, resulting in a smaller volume reaching the stores in time for the Fourth of July, which is one of the biggest days of the year in terms of retail food sales. Because the bloom and harvest periods were unusually compressed, larger volumes of fruit hit the market at the same time.
Thurlby said that as volume increased, a lot of fruit was shipped to brokers in terminal markets. As a result, marketers found themselves competing with brokers for the same retail customers, which drove down prices. In July, as the market became backed up, warehouses stopped packing the smaller sizes, and a lot of fruit was left on the trees. It became apparent this year that the industry has a finite packing capacity and a finite marketplace, he said.
Gip Redman, with Oregon Cherry Growers, said more growers might have elected not to pick their fruit and send it to the warehouse if they'd known that it would not be packed and they'd end up with charges.
Tate Mathison, with Stemilt Growers, Inc., Wenatchee, said packers and marketers need to set benchmarks in terms of firmness, size, and cullage levels for the fruit they will accept so that unmarketable or low quality fruit is left in the field rather than sent to market. That way, it doesn't drag down the market and quality fruit can still get packed and sold.
Mike Hambelton of Columbia Marketing International, Wenatchee, said the industry must stop shipping the small fruit that puts a downward pressure on pricing.
"I think there are things this industry can do to keep this from happening again," he said. "I think we need to change our marketing order to 11-row and larger cherries because that will eliminate the weakest cherries off the tree that just don't taste as good."
Kelley said one of the problems with encouraging growers to grow larger fruit is that it is accomplished partly through applying gibberellic acid, which delays maturity by about five days and pushes the season back. "I am seeing the early district become not so early because of the farming practices and how they're putting GA on," he said. However, he would still recommend growers use GA because it's a necessary tool for producing quality cherries.
Thurlby said growers need to reconsider the varieties they grow and how they are growing them.
"It's going to be frustrating for some growers, but I think it will raise the bar, which will be good for the industry," he added. "There's a picture here for the future that the grower really needs to be paying attention to. We can't panic. We have to figure out how to move forward."
To move the volume produced this season, the industry had to ship an average of more than 350,000 boxes a day for the entire season, Thurlby calculated. In June, it shipped 5 million boxes, and in July more than 11 million. At that pace, it needed major retailers to sell 40 boxes per store every day.
Commission chair Mike Wade said lessons from this year's experiences may help the industry in the future. It might be time for the commission to shift the focus of its promotions to tactics that will drive retail sales.
"I would encourage this group to provide some leadership to keep this on the front burner," he said. "I think we could be approaching how we spend growers' dollars much differently on next year's crop, and if we do that, we need to be up-front and communicate it."
Wade suggested that Fruit Commission staff discuss the situation with individual retailers. The commission will meet with Northwest sales managers at the end of September to discuss how to proceed with cherry promotions in the future.
"This has been a tough year," Thurlby said. "I can guarantee you there's a lot of grower frustration and uncertainty out there. But I'm trying to keep people positive about the cherry deal. We have a great product, and there's going to be great years ahead of us."
The greater availability of cherries and lower prices this year probably created new cherry consumers, he pointed out.
"Retailers see new expectations for cherries as they move forward. They're going to look back at their cherry category, and there will be great results. They're going to be excited about it."
Cherries were the number-one advertised product in the produce department for the whole of July, he noted. "We have the hottest product on the planet."