Short crops grow long tails, they say in the grain trade, and it apparently applies to apples, too. Apple marketers in Michigan are still trying to deal with the after effects of the freeze-decimated 2012 crop, and the large crop that followed added steam to the pressure cooker.
Dawn Drake, manager of the Michigan Processing Apple Growers, said that “negotiations were some of the most difficult” between the association, which represents growers, and the dozen apple processors in Michigan. Despite that, the growers negotiated processing apple prices for the 2013 crop very close to those in 2011 (see Michigan announces price schedule for processing apples.) Prices for hard varieties were $12.50 per hundredweight and higher.
Processors were in a difficult position, Drake said. They had been out of the market the year before and had to reestablish relations with customers.
“Processors had difficulty in securing business,” she said. “They were hesitant to purchase apples based on speculation about incoming orders.”
In addition, the inventory of processed apple products was large. While Michigan and New York were picking short crops in 2012, Washington State had a record large crop in 2012 and filled what would otherwise have been Michigan and New York’s market to serve. More than half of Michigan’s apple crop goes for processing in a normal year.
With processors hesitant to buy at harvest time, Michigan growers themselves had to speculate—and they had to store processing apples and wait for the market.
Drake described the negotiations that led to the announcement last September. For eight days straight, there were at least two conference calls a day before agreement was reached.
Michigan produced fewer than 2.5 million bushels of apples in 2012 and then followed up in 2013 with a crop estimated at 30 million bushels, which might be a record. However, Drake said, “We’ll never know for sure. We left an estimated 2 to 5 million bushels in the orchards because of a labor shortage. There were not enough workers to pick them all.”
The USDA’s National Agriculture Statistics Service, which normally would be there to estimate the crop size and utilization, had dropped the apple crop reporting service after its funds were sequestered early in 2013.
To add more tales to the short tail, Michigan’s weather in 2013 brought the crop in late, while Washington’s weather brought the crop in early. The Washington crop was also large, its third largest on record, driving many more apples into the processing market.
Of the 140 million bushel crop in Washington State, Drake estimated that 113 million will be packed for fresh market. “The extended harvesting season there led to some quality issues out of storage,” she said. These apples would usually flow into the processing market, but she said, “processors are buying less than last year, about 10 percent less Some packing houses had to dump apple sorts in landfills because of no demand.”
On the good news-bad news front, the price of apple juice concentrate is currently about $8.50 a gallon, up from $7 a year before. That is an important outlet for processing apples. But on the bad news side, 84 percent of all the apple juice consumed in the United States comes from imported concentrate. Of that 84 percent, 80 percent comes from China, Drake said.
The Michigan Processing Apple Growers, staffed by Drake and Phil Pitts at the sales desk, is a force pressuring the USDA to purchase processed apple products for the school lunch and other feeding programs.
In January, USDA announced a $20 million “bonus buy.” “They apparently got tired of our calling every week,” Drake said, jokingly. She gave USDA credit for stepping in to make purchases when products are in surplus and markets are stressed. And she gave credit to Michigan processors for filling the contracts when they become available.
In mid-March, Michigan processors took more than 80 percent of the bonus offering for 493,000 cases of 8/64 apple juice, 145,000 cases of 8/64 cranberry/apple juice, all of the 575,000 cases of 24/300 applesauce and 100,000 cases of cherry/apple juice, and more than half of 337,000 cases of 96/4.5 applesauce cups.
“USDA’s regular quarterly purchases will all be much larger this year,” she said.