Michigan’s extremely short apple crop last year had a greater distorting effect on the market than might be expected. The state’s production is relatively small compared to the entire national crop.
Nearly two-thirds of Michigan’s crop goes to processors and not to fresh market, said Dawn Drake, secretary manager of the Michigan Processing Apple Growers, giving her report at their annual meeting yesterday (March 19).
The loss of 90 percent of Michigan’s crop shorted processors about 15 million bushels of apples. Michigan has about a dozen processors, Drake said, and they had to scramble to find apples elsewhere.
As last fall started, many were paying 21 to 25 cents a pound to obtain apples from states that had them, many incurring high freight costs from the West. There was a huge skew in production, with Washington having a bumper crop and the eastern states a very short one.
The shortage turned out not to be real, and high prices did not last. Washington apple exports to China and India are down, Drake said, leaving apples in the domestic market that would ordinarily be exported.
When the full picture became clear, the price of apples for processing fell to 8 to 10 cents a pound, putting pressure on those who bought apples early. Processors have inventories built on high-priced apples, and they are having trouble recovering their investment.
Processed product prices are higher at retail, and consumers have responded by cutting purchases 20 to 25 percent, Drake said.
Adding to the problem is apple juice concentrate. China has long been a distorting factor, having taken much of the market. Some 83 percent of the apple juice consumed in the United States is made from concentrate, Drake said, and much of that comes from China.
Last year, China raised its price of AJC to $11.25 to $12 a gallon, which benefitted U.S. apple growers, but that price was short-lived. The current price for AJC is $6.75 to $7, Drake said, making it an unattractive market for processing apples.
The shortage in Michigan had huge impact on the Michigan Processing Apple Growers. The organization represents 62 percent of Michigan’s processing apple growers and tonnage, and under state law is authorized to bargain with processors on behalf of all processing apples.
Marketing service fees generated $558,000 in revenue in 2012, a number that fell to $35,000 in the first 10 months of this marketing year. That could not cover expenses of $329,000—spent on such things as staff salaries, rent, vehicles, and travel—so these were paid from the rainy day fund. No patronage refund was made to members last year.
“This year will be a challenge as well,” Drake said. Michigan’s well-rested apple trees could potentially generate 30 to 35 million bushels of apples, New York could produce 40 million, and Pennsylvania 10 to 13 million. Recovering lost buyers will be a challenge, she said.
“Will workers come back to Michigan this year to pick that crop?” she asked. Michigan growers depend on a migrant stream that had little reason to flow here last fall for apple harvest.
The organization lobbied the state legislature last year and obtained state-subsidized five-year loans at 1 percent interest. As of this month, 221 growers have applied for $41 million in loans, and 20 processors have applied for $7 million, Drake said.