Chile is the most competitive

The United States ranks fifth out of 28 apple-producing countries in terms of international competitiveness, according to data compiled by agricultural economist Dr. Des O’Rourke, president of –Belrose, Inc., Pullman, Washington.

Topping the list as the most competitive apple producer is Chile, followed by New Zealand, Italy, and France. The United States inched up slightly from its number-six slot in 2006. Chile and New Zealand’s rankings were unchanged from a year ago, while France and Italy swapped places (see chart).

China ranked number 18, moving up from number 21 in the 2006 rankings. In compiling the rankings, O’Rourke looked at major apple-producing and trading countries, and compared production efficiency, industry infrastructure and inputs, and financial and market factors. Factors considered under production efficiency included production shifts and variability, percentage of nonbearing acreage, percentage of production in newer apple varieties, planting densities, and average yields.

Under industry infrastructure and inputs, O’Rourke considered adequacy of storage, modern packing facilities, efficiency of distribution, marketing systems, the availability of land, water, labor, and the cost of inputs.

Financial and market factors that O’Rourke compared included 2006 interest rates and inflation rates, the availability of capital, the security of property rights, product quality control, exports, average export prices, and average distance to markets.

Exports

O’Rourke said there are several reasons why the United States ranks number five. The percentage of U.S. fresh apple production that is exported is relatively low—only about 14 percent. That’s compared with 63 percent for New Zealand and 58 percent for Chile. France, Italy, and South Africa each export between 30 percent and 40 percent of total production, O’Rourke said.

The U.S. data reflect the country as a whole. If data for Washington State, by far the major U.S. apple producer, were singled out, the state would rank up near Chile and New Zealand, he said. Washington State exports about 30 –percent of its fresh apple production.

Citing the United States’s number-15 ranking for production efficiency, O’Rourke said that across the board, the United States has weaknesses on the production side. U.S. fresh apple production has declined from a high of 278 million boxes in 1998 to 236 million in 2006, while world production has increased, he said. Average yields in Washington State showed little improvement when 1995-1997 figures are compared with 1985-1987, he said. Other apple-producing states saw increased yields, but not enough to affect the overall U.S. statistics.

He attributed static yields in Washington State primarily to substantial orchard acreage that was removed because of low returns. Many of the bulldozed orchards were in less profitable Red Delicious, and it takes time for newer apple varieties to come into full production, he said.

Climate

Chile and New Zealand have significant climactic advantages over the United States, O’Rourke said. In both of those Southern Hemisphere countries, the weather is mild with fewer harsh incidents that pose threats to tree vigor or crop quality.

New Zealand has been an innovator, especially in the development of newer apple varieties, O’Rourke said. In 2006, 91 percent of New Zealand’s total apple production, and about 60 percent of Chile’s overall production were in newer varieties. That’s compared to 24 percent of overall U.S. production and 37 percent in Washington State.

New varieties

Newer, managed or club varieties haven’t had the financial impact that some in the industry had hoped, O’Rourke said. Worldwide, managed varieties account for less than 1 percent of total apple production, he said.

The United States ranks number two for infrastructure and inputs, primarily because of its sophisticated storage and packing facilities, and for its distribution and marketing system, O’Rourke said. Washington State is particularly well positioned with good ports and proximity to Pacific Rim export markets.

Chile’s top ranking in the category was attributed to its modern packing plants, good ports, and strong ties to U.S. companies. However, Chile sells much of its exports on consignment, which tends to impact prices, O’Rourke said.

New Zealand, ranked third for infrastructure and inputs, has excellent storage and packing facilities, but is handicapped by its long distance from export markets.

The United States ranks number 12 in terms of financial and market factors that affect competitiveness, O’Rourke said. He cited the country’s low export rates and distance from European export markets as downsides. France ranks number one in the category, in part because of the European Union’s low inflation rate, particularly in the northern countries. France exports 35 percent of its fresh apple –production, much of it to the United –Kingdom, a relatively short –distance.

O’Rourke has been compiling competitiveness rankings for about a dozen years, and over that time, changes in rankings have been gradual. A few countries made gains in the rankings, but no countries faced major declines. That could suggest that, while some countries are holding their own, others have been able to take advantage of current political, economic, and market shifts to improve their –competitiveness.

O’Rourke compared the rankings to other "best places" rankings that appear in the media from time to time, for example, the best places to retire or the best cities in which to do business. While the rankings aren’t particularly scientific, they can be viewed as a lighthearted way to remind the industry what it needs to focus on to maintain or improve global competitiveness, he said.