Consumer demand for organic foods continues to expand at 15 to 20 percent per year in the United States. Recent research indicates that 23 percent of the population buys organic food weekly, and produce represents 39 percent of total organic food sales, the largest segment. Consumer Reports magazine ran an article on what organic foods to buy (Consumer Reports, 2006) and listed apples, pears, and cherries in the "must buy" category.
Is it any wonder that mainstream supermarkets, including Wal-Mart, have come knocking on the doors of fruit companies in Washington State for a reliable supply of organic tree fruit? Retailers have created demand to the point where some varieties are selling out before the marketing year is done. Price premiums are near all-time highs. Added to this is a strong acceptance of organic presliced apples; Costco carries only organic presliced apples. The presliced market is absorbing large amounts of off size or grade fruit, and paying top prices for it, essentially setting a floor for organic fresh apple prices, says Harold Ostenson of Stemilt Growers, Inc., Wenatchee.
So, the big question is how long the party will last. In Washington, which produces more than half of the organic apples, pears, and cherries in the country and dominates the fresh market, production increased rapidly in the late 1990s and prices dropped after 2001, perhaps due to supply exceeding the growing demand. A repeat of this scenario is possible in the next few years as organic tree fruit acreage is poised to double, with organic apple acres comprising 10 percent of the state’s apple plantings.
The WSU Center for Sustaining Agriculture and Natural Resources has been tracking the organic tree fruit sector since 1999 with the aim of providing timely data to growers and the industry so they can avoid the typical boom and bust cycles of agriculture. The three-year transition required for organic production creates a lag between the decision to convert to organic and the impact of that production in the market. Data on transition acres can provide a leading indicator, but since 2002 growers have not been required to register transition acres. Thus, transition data in the center’s reports represent the minimum number of acres, with no good estimate on the upper end.
The most recent report, with data through 2006, was just released and posted on-line at http://csanr.wsu.edu/organic/organicstats.htm. Organic apple and cherry acres are expected to grow dramatically, while organic pear acreage will grow slightly. Recent and projected acreages are shown in "Projected growth in certified organic tree furit acres in Washington State," based on data from organic certification agencies and from a survey of fruit packers in Washington State.
In 2005, the United States had 12,810 acres of organic apples, with more than 90 percent of the acres found in the western states, where the semi-arid climate provides a comparative advantage for production. Production has also expanded to more than 15,000 acres in Europe, where intensive research and scab-resistant varieties have overcome some production challenges, and in Argentina and Chile. Reliable current data from New Zealand are not available. And even China now reports 3,700 acres of organic apples. For 2004-2005, the world had roughly 37,000 acres of organic apples.
Washington State’s leading varieties of organic apples are Gala and Fuji, followed by Granny Smith, Red Delicious, and Golden Delicious (see "Washington’s organic apple acreage"). Newer varieties such as Cripps Pink and Honeycrisp also have substantial production. Red Delicious, once the leading variety, has declined from its peak in 2001 to a more supportable level.
Similar data for organic pears and cherries can be found in the WSU report mentioned above.
For 2006, organic apples, pears, and cherries represented 4.4, 5.0, and 2.2 percent, respectively, of the total acreage of each crop in Washington State. With organic food sales in the United States nearing 3 percent of total food sales, it is hard to gauge when supply is in line with demand, especially since organic shoppers are diverse, and many are selective in their organic choices (e.g., produce, dairy). But a recent study suggests that more than 10 percent of the population are "core" organic purchasers; thus, when our organic apples reach 10 percent of the state crop, we might be close to balancing supply and demand.
Historically, organic fruit has sold for a premium relative to conventional product, with premiums ranging from zero (rare) to more than 110 percent, according to Washington Growers Clearing House Association data. Data have been collected for more than 10 years, allowing the charting of trend lines (see "Washington Gala price trends"). Premiums have been 50 to 90 percent in good years and 20 to 40 percent in poor years, with differences by variety and size. Premiums for the 2005-2006 crop ranged from 40 to 60 percent for the main varieties, and are higher yet for the first part of the 2006-2007 crop.
Organic pear prices, which were nearly the same as conventional from 2001 to 2004, rebounded dramatically for the 2005 and 2006 crops, with premiums over 50 percent. Organic cherries have sold for $10 to $30 per box more than conventional fruit for the past three seasons, representing a 30 to 85 percent premium.
With major groceries committed to an organic line, with produce the leading organic sector, and with top billing from Consumer Reports, the outlook for organic apples, pears, and cherries is strong. The organic market is expected to continue its growth. Consumers often indicate a price barrier when organic foods cost 10 to 15 percent more than conventional. With Wal-Mart’s stated goal to provide organic products at about the 10 percent premium level, demand for organic product could be boosted but with less opportunity for premiums. Washington organic tree fruit producers have an enviable market position with their majority share of the product and consistent high quality. But if new acres are brought into production faster than demand grows, the past experience with depressed prices may be repeated.