The United States Apple Report: Adverse Weather; High Prices; China Juice Imports
Adverse Weather To Blame for Smaller U.S. Apple Crop in 2012
In August, USDA’s NASS initial forecast for the 2012 U.S. apple crop was pinned at 8.1 billion pounds, down 14 percent from a year ago. If realized, this would be the smallest crop produced by the U.S. apple industry in over two decades. On top of other weather problems experienced this growing season, multiple spring freezes were mostly to blame for significantly smaller crops produced across the central and eastern U.S. apple-growing regions. In the western region, a relatively normal growing season encouraged reasonable-sized crops. Despite the occurrence of a late spring hailstorm, the region’s largest producer—Washington—is forecast to produce 5.7 billion pounds, up 5 percent from a year ago and 6 percent above the previous 5-year average. Given these initial NASS forecasts, total production in the western region should reach 6.2 billion pounds in 2012, up 6 percent from a year ago, with most other States in the region also achieving production gains.
At the same time, production in the eastern region is forecast at 1.6 billion pounds, down 31 percent from a year ago, and in the central region, a more substantial decline, with production forecast at only 252 million pounds, down 79 percent. Together, the production shortages in these two regions will more than offset production gains in the west, resulting in an overall smaller U.S. apple crop this year.
Unusually mild temperatures early this spring promoted premature bud growth which increased their susceptibility to frost damage from the spring freezes that later followed. A very hot summer, coupled with drought conditions, also contributed to lower fruit yields. Across the central States, Missouri’s crop was the only one spared this year, with production forecast to be more than double the size of last year’s crop.
All the rest have production down markedly in 2012, including the lead production State in the region—Michigan—with only 105 million pounds, down 89 percent from a year ago and the smallest crop since the 1980s. In the eastern region, production declines ranged from 3 percent to 71 percent, except in Maryland, Pennsylvania, Virginia, and West Virginia where crop size is forecast to increase. Production in the region’s largest producer—New York—is forecast at only 590 million pounds, down 52 percent from a year ago and the lowest over the past three decades.
The smaller than average crop this year will limit production for fresh and processing use for the marketing year 2012/13 (August-July), most especially in the regions where production is anticipated to be down substantially. Based on 2012/13 forecast growth rates from the U.S. Apple Association on apple production shares designated for fresh and processing uses, ERS projects about 5.8 billion pounds of the 2012 U.S. utilized apple crop (between 1 to 2 percent of total production is not marketed) will be going to the fresh market, down 8 percent from a year ago and the smallest since 2003’s 5.4 billion pounds .
Although Washington contributes over 70 percent of all U.S. apples for fresh use, sharp production declines in the central and eastern United States will likely drive down the overall fresh-market crop in 2012/13. Moreover, because most central and eastern apple States market a larger proportion of their crop to the processing sector, total processing-use apples in 2012/13 is projected to be reduced by a bigger magnitude than in the fresh market—down 26 percent from a year ago to 2.2 billion pounds—a record low since the 1970s.
Apple harvesting for the 2012/13 season is already in progress for earlier varieties, with USDA’s Agricultural Marketing Service (AMS) data showing apple shipments through late August, up 31 percent from the same period in 2011/12. Washington and California apples make up most of the shipments to date, partly explaining the increase in shipments. Although shipments are up thus far, anticipated production shortages, particularly in the central and eastern regions, are boosting demand for western U.S. apples, resulting in strong early-season apple grower prices. The August NASS Agricultural Prices report show U.S. fresh apple grower prices at an average $0.529 per pound in August, increasing from $0.419 the previous month and $0.458 in August 2011.
Historically, it is the second highest August price dating back to 1985, only short of a few cents from the August 2009 price of $0.537. NASS also reported August prices in Washington at $0.490 per pound, up from $0.422 the same time last year and in California, $0.756 per pound, from $0.634. Overall, fresh apple grower prices are likely to remain strong this season as a result of below average production. Less market competition, resulting from a smaller U.S. pear crop this year, will also help boost 2012/13 apple grower prices.
The higher early-season fresh-apple grower prices have not translated yet to higher prices at the retail level for some apple varieties. BLS price data for Red Delicious apples—still the most prominent variety produced in the country—report an average retail price of $1.504 per pound in August 2012, down from $1.529 per pound the same time last year. From AMS Market News, U.S. advertised retail prices for Red Delicious apples and gala apples averaged below a year ago in August and through early September, while prices for Fuji and Honeycrisp apples averaged higher for both months (price data comparison during these two months only available for September for Honeycrisp).
A projected smaller than average fresh-market apple crop this year will likely result in reduced fresh-apple domestic consumption in 2012/13 (table 4). This would mean that domestic fresh-apple per capita use this season could slip below the 15.3 pounds estimated in 2011/12 which was comparable to the 2010/11 estimate but was below the average of the past three decades. In 2011/12, with the fresh-market crop relatively flat from the previous season, and exports up 2 percent to a record 1.85 billion pounds, domestic fresh apple use stayed unchanged as imports grew over 15 percent.
In terms of value, exports were also at an all-time high last season, amounting to $996.9 million. Increased export volume to Mexico, partly aided by the termination of the import tariff related to the U.S.-Mexico trucking dispute, countered the declines to Canada, along with strong exports to India. Exports in 2012/13 will likely fall behind this record volume, as there would be a bigger demand for Washington apples to fulfill domestic demand, particularly in portions of the country with apple production shortages. Though the domestic market would have a greater need to import fresh apples this season, weather-reduced crops in Canada and Chile, both major suppliers of fresh apples to the United States, will likely limit imports.
At the same time also contributing to strong fresh-apple grower prices, the projected significant decline in processing-use apples will likely result in higher processed-apple grower prices in 2012/13. Prices are likely to be strong across all processed- apple product categories (juice and cider, canned, frozen, dried, fresh-sliced, and other) as this season’s production for use in each of the processed product categories are projected to decline substantially. Biggest declines so far are for fresh sliced apples and frozen apples, down over 30 percent each, followed by canned, juice, and other (which include vinegar, wine, and slices for pie making) with declines ranging from 24 to 26 percent, and dried apples down 13 percent.
Even though U.S. juice-apple production rose slightly during the 2011/12 season from the previous, production was relatively below average, partly contributing to higher grower prices for juice apples. World apple juice concentrate supplies were hampered last season by reduced production and inventories from China. This translated back to increased demand for U.S. juice apples from domestic processors, boosting average grower prices for U.S. juice apples in 2011/12.
U.S. juice apple grower prices increased from $149 per ton in 2010/11 to $196 per ton in 2011/12,the highest reported season-average price since the 1980s. As a net importer of apple juice, primarily from China, U.S. apple juice imports (mostly in concentrate form) decreased to a 5-year low of 446.6 million gallons single-strength equivalent (sse) in 2011/12, down 24 percent from the previous season. Imports from China alone declined 27 percent. Imports were up from Argentina and Poland, but were down significantly from most of the United States’ other major suppliers like Chile, Brazil, Canada, Mexico, and Turkey.
U.S. apple juice exports totaled 9.3 million gallons sse in 2011/12, up 3 percent from 2010/11. In value terms, these exports amounted to $ 37.5 million, up from $33.1 million in 2010/11. Reduced shipments to leading export markets—Canada, and Japan—were compensated by increases to most other markets, including South Korea, Mexico, and Taiwan. Though indications point to smaller crops in Canada and Europe, projections of decreased U.S. apple juice production will likely dampen export prospects for the industry in 2012/13.