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This report presents a general overview of the fruit outlook in 2005, focusing on the apple crop, export situation, and market conditions for other fruits. It highlights the rebound of the apple crop, increased exports due to a weak US dollar, and challenges faced by fruit growers such as higher interest rates and inflation.
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Fruit Outlook 2005 Presented by G. B. White Department of Applied Economics and Management Cornell University
General overview: • Considerable larger apple crop nationally than last year (225 M. Bu; +10% above last year, but just 1 % below 5-Yr. av.) WA’s crop rebounded to 20 % above last year’s short crop. Northeast crop is +2.3 % above last year, but a normal crop compared to 5-year average. Pressure on fresh apple prices for the rest of ’05, esp those varieties produced by WA (R. Del, G. Del, Gala) • NY’s apple growers had a large crop (25.5 M Bu.) Slightly reduced prices for fresh fruit; peelers priced at about last year’s average; juice lower @ 4.25-4.5 cents/lb. Projected receipts: about like last year’s $148 M, a record crop value for NY apples. • Active market for processed apples out of state (e.g. MI and PA). Some processors paid for trucking, which is a big deal this year with higher shipping costs due to higher fuel costs. • Very weak US dollar relative to the Euro, the British pound, and the Canadian dollar, is a positive for exports of apples and other fruit products. Exports of apples to the UK and Canada are roaring ahead far above the pace of last year. (By end of November, 371 M Bu, up 50 % from last year, and up 65 % for Canada, and +44 % for the UK.)
Apple Export Situation 1998/99 908,057 Bu 1999/00 867202 Bu 2000/01 759,957 Bu 2001/02 809,803 Bu 2002/03 540,614 Bu 2003/04 921,677 Bu • 2004/05 >1,000,000 Bu • Unfavorable ruling by WTO opens the possibility for eight countries (EU, Canada, India, Korea, Japan, Mexico, Chile, and Brazil) to impose retaliatory tariffs on imported apples. So far, apples have been identified as a target only in India, which is not important as an export destination of NY or US apples. If the EU decided to target apples, it would have negative consequences for NY apple marketers.
Overview (con’t) • US tart cherry crop is at 210 M. #, (v. 226 M. # last year). Price in “low 30’s cent range” vs. 36 cents last year. • NY’s utilization was about 10.3 M #, vs. 7.3 M # last year, likely to give $3.3 M in value compared with $2.2 M last year– a healthy increase but still modest compared to the $6.5 M crop in 2002. • Large US budget deficit and trade deficit will lead to higher interest rates (neg., esp. for fruit growers), higher rates of inflation (neg.), and a weak dollar (pos. for exports, pos. for competition from imports, neg. for imported inputs). Also, cost of petroleum products will be high (fuel, pesticides, increased cost of shipping means less returns to growers).
Overview (con’t)-Grapes • The New York grape crop this year is projected to be 145,000 tons, about 16 percent below the average of the last five years. Quality was much better than last year, when a cool, wet harvest season led to slow ripening and over 40 thousand tons of unharvested grapes. • Market conditions were unfavorable for juice grape growers. • The big story was the winter injury in the Finger Lakes, which greatly reduced the V.vinifera crop, and placed 20 to 30 percent of the vinifera acreage in a replant situation. • Most growers’ revenues (assuming a mix of American, hybrid, and vinifera varieties), will be below last year, with lower production not being offset by higher prices. Furthermore, with substantial replant costs to replace freeze damaged vines, costs will be higher. It requires over $14,000 total costs, including about $10,000 in cash costs, to bring an acre of vinifera grapes into full production. Furthermore, the loss in production capacity will result in lower crops for at least the next two years. • When the final crop value estimate is available, it will likely show a crop value of $38 million, up slightly from last year due to higher prices for wine grapes, but a low value compared with the historical crop values of the past 10 years (Figure 8-3).
Overview (con’t)-Wine • Performance in the US wine market is being driven by increased table wine consumption and the super value wines now available at the retail level (Figure 8-4). • From 1995 to 2001, wine consumption grew at the rate of about 2.5 percent a year. However in 2002, wine shipment increased by a remarkable six percent to a record 595 million gallons, despite the weak economy. US consumption in 2003 was 627 million gallons, an increase of five percent over the previous year. • Increase of volume is being driven by “extreme value” varietals such “Two-Buck Chuck”, and innovative new packaging such as bag in a box selling for the equivalent of $4-$9 per bottle. Volume of wine sold growing faster than retail sales of wine.
Source: Wine Institute/Department of Commerce/Gomberg, Fredrickson and Associates
Overview (con’t)-NY wineries • Small wineries in the Finger Lakes with quality wines and good marketing skills experienced modest sales growth (four to five percent) so far this year. Winery visitation is up slightly. • The environment for price increases is tough at the current time, but some wineries have had success in upgrading their product offering by marketing limited production of reserve vinifera wines at higher price points. • Many wineries expect slightly increased dollars spent per visitor for the entire ’04 fiscal year. Nevertheless, this was a substantial change for the area’s wineries that had been experiencing growth in retail sales of five to ten percent a year for the last several years until 2003. • Disappointment that direct interstate shipments was not approved in Albany this year. • The most immediate challenge for small wineries in the next two to three years will be to sustain modest sales growth while facing the challenge of sourcing grapes for their current product lines, given the acreage that was damaged by the freeze. Even if wineries are able to maintain their volume, they will experience higher costs and reduced profits for at least the next two years with the necessity to buy in more grapes.
