Market Overview

Not Liking Them Apples: An Abundance Of Fruit And Shrinking Markets Spell Uncertainty For Washington Apple Growers

Not Liking Them Apples: An Abundance Of Fruit And Shrinking Markets Spell Uncertainty For Washington Apple Growers

Washington state's 2019 apple harvest officially kicks off September 1 with a crop that is expected to be 20 percent larger than last year, but the increase in volume poses problems for farmers facing shrinking markets due to trade disputes.

"It will be a challenge on the export front," said Mark Powers, president of the Northwest Horticultural Council, a trade association based in Yakima, Washington. 

China slapped a 50 percent tariff on U.S. apples in 2018, reducing state shipments to that country by 20 percent. The levy is likely to be even more damaging in the 2019-2020 season, "when we anticipate a larger crop than last year and need to move more volume overseas," Powers said.

Washington is by far the country's top apple producer. Around 58 percent of apples produced in the United States are grown in Washington, followed by New York, which grows 11 percent of the total, and Michigan, where 8 percent of U.S. apples are grown.

This year's Washington fresh apple crop is estimated at 137.3 million 40-pound boxes, up from around 116 million in 2018.

That's not particularly good news. About 30 percent of the state's crop is exported overseas, where tariffs and shifting markets are conspiring to limit the number of apples sold.

Take India for example, the state's third-largest export market. Following nine months of threats, the country hiked tariffs on U.S. apples to 70 percent in June 2019, reducing shipments from Washington by 67 percent during the 2018- 2019 season.

Powers believes shipments will decline further during the 2019-2020 harvest, as global competitors face lower tariffs of 50 percent. "That is a significant difference in terms of pricing," he said.

China is Washington's number six export market. "It's not a huge volume, but it is a valued market," said Toni Lynn Adams, communications outreach coordinator with the Washington Apple Commission. "Chinese consumers demand a high quality product, and they are willing to pay for high quality product."

Uncertainty over China and India add to existing challenges in Europe. Washington state essentially has lost the European market as a result of regulatory barriers and the closure of Russia to European fruit. The latter has kept home-grown apples in Europe, Powers said, while pushing European fruit into new markets in the Middle East and Southeast Asia.

Unlike the cherry industry, which has a clear demarcation between seasons and perishability of the fruit, Washington farmers sell apples each month of the year. "The technology exists," Powers said, "the fruit is adapted to that kind of storage life, so you've got a global industry that is very competitive."

 He added: "The ability to load a container here in Yakima, keep fruit fresh and cold all the way to India – a 40-day transit time – is a minor miracle."

Washington growers did get a reprieve this year when Mexico, the state's number one export market – importing 13 million boxes annually – removed the threat of a 20 percent retaliatory tariff. Canada, the state's number two market, also dialed back threatened tariffs.

Another boost came in the form of a USDA agricultural trade promotion allocation aimed at blunting the impact of the trade disputes on farmers. The Washington Apple Commission is one of the recipients, said Adams. A separate USDA program purchases apples for distribution to food banks.

How much impact these initiatives will have on Washington growers also depends on the variety of apple produced. Honey Crisp and Ambrosia are popular in the U.S., so farmers don't have to worry as much about what's happening in the export market – other than the fact that there will be more apples this year. 

"And that's never good for pricing," said Mac Riggan, director of marketing at Chelan Fresh, one of Washington state's largest marketers of fresh fruit.

Fuji and Red Delicious apples are export favorites, so farmers growing those varieties will bear the brunt of trade disputes. "It's demand and supply," Riggan said. "When you lose a market, demand goes down."

International trade dynamics are more complicated than they were five years ago, said Powers, who spoke to FreightWaves on the same day President Trump abruptly postponed a new round of tariffs on Chinese goods. "The world has gotten smaller in terms of the apple trade."

Image Sourced from Google

Posted-In: Freight Freightwaves Fruit Logistics produceNews Markets General Best of Benzinga


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