Canada's slow decline continues for apple, pears

11/09/2010 10:46:04 AM
Tom Karst

Canada's apple and pear producers are still struggling with improving profitability, and this 14-page USDA FAS report does a good job in spelling out the troubles. The good news for U.S. fruit marketers: exports of apples, pears and grapes expected up in the next year.

From the report:

Report Highlights: The declining trend in apple and pear production continues as the sectors struggle to improve profitability. Post forecasts a 2 percent decline in fresh apple production in Canada for marketing year (MY) 2010/11 down to 405 thousand metric tons (TMT) from 413.1 TMT during MY 2009/10. Post also forecasts a decline of 10.7 percent in fresh pear production, down to 7.5 TMT during MY 2010/11 from a level of 8.4 TMT in 2009/10. Canada imports over 95 percent of its fresh table grapes and will continue to do so in the years to come. Post forecasts increased imports of fresh apples by 0.5 percent to 185 TMT, of fresh pears by 0.7 percent to 72 TMT and of fresh grapes by 1.8 percent to 190 TMT.

Executive Summary: Post forecasts a further decline in fresh apple production in Canada for marketing year (MY) 2010/11, down 2 percent to 405 thousand metric tons (TMT) from 413.1 TMT during MY 2009/10. This decline is consistent with the long term declining trend in planted areas which, in turn, reflects a declining profitability of apple cultivation. Post forecasts a small increase of 0.5 percent in Canadian imports of fresh apples, up to 185 TMT during MY 2010/11 compared to 184.1 TMT in 2009/10.

A lower production in Canada, stable demand and a very strong Canadian dollar giving imports a competitive advantage over the local production are the main factors behind this trend. Post also forecasts a further decline of 10.7 percent in fresh pear production, down to 7.5 TMT during MY 2010/11 from a level of 8.4 TMT in 2009/10.

 This longer term declining trend was aggravated by the slow death of the pear processing industry in Canada. In 2008 CanGro closed the St. Davids pear cannery in Ontario, the last one of 32 fruit canning plants that existed in the province. Post forecasts a small increase of 0.7 percent in the volume of imported fresh pears for MY 2010/11, up to 72 TMT from 71.5 TMT in 2009/10. Similar factors to those prevailing for apples influence this trend (strong Canadian dollar and stable demand). In addition, specifically affecting pears is the disappearance of canning plants: ten years ago 13 percent of total imports of fresh pears were destined to processing. This has dropped to zero thus slowing down import growth.

Only a small fraction of Canada's grape production consists of fresh table grapes. Based on available data from Statistics Canada and information from provincial authorities Post estimates that Canada produces about 3-4 TMT of fresh table grapes annually. Domestic consumption is basically satisfied through imports of table grapes, with annual volumes around 180-190 TMT.

Post forecasts an increase of 1.8 percent in imports of table grapes for MY 2010/11, up to 190 TMT from 186.6 TMT in 2009/10. Sustained consumption coupled with a strong Canadian dollar is behind this trend. Orchards and Vineyards Transition Program comes to an end. Over the past three years, Canada’s major tree fruit producing provinces operated an orchard replant program. These programs assisted producers with the removal of older lower yielding, less popular varieties and their replacement with more efficient higher density plantings of newer varieties. Numbers reflecting the impact of such programs will become available in 2011.

APPLES Post forecasts a further decline in fresh apple production in Canada for marketing year (MY) 2010/11, down 2 percent to 405 thousand metric tons (TMT) from 413.1 TMT during MY 2009/10. In terms of current year factors, this decline is primarily due to a spring frost in southern Ontario, which supplies about 40 percent of Canadian fresh apples, and an estimated lower than expected production level in British Columbia, which supplies about a quarter of the total production. Increased crop levels are expected in Quebec and Nova Scotia, which, combined, supply about 35 percent of apples in Canada.

Bearing areas have declined for the fifth consecutive year, with a drop of 6 percent from the MY 2009/10, and a total drop of nearly 30 percent since MY 2001/02. Changing agricultural practices, resulting in higher density plantings on smaller areas, along with smaller producers exiting the industry due to production costs outpacing market returns are the leading factors underlying this trend.

More affordable imports from the United States, Chile and other low cost countries, combined with high production costs and a strong Canadian dollar continued to force the apple industry to downsize. Many apple growers are responding to the evolving market situation by converting orchards over to new plantings of vinifera grapes and other fruits, as well as by turning land over for new housing development projects.

Growers that intend to remain in the industry are turning to newer, more popular varieties such Ambrosia and Honeycrisp and new, modern intensive planting systems in an attempt to remain competitive with imports. To assist producers adapt to industry pressures and changing markets, Canada’s federal and provincial authorities established replant programs (see the Policy Section) back in 2008.

PEARS Post also forecasts a further decline of 10.7 percent in fresh pear production, down to 7.5 TMT during MY 2010/11 from a level of 8.4 TMT in 2009/10. In addition to the longer term declining trend in the profitability of pear cultivation, a major specific factor was the slow death of the pear processing industry in Canada. In 2008 CanGro closed the St. Davids pear cannery in Ontario, the last one of 32 fruit canning plants that existed in the province.

Bearing area has declined by 12 percent since MY 2009/10, while overall pear planted area declined by nearly 45 percent over the past decade. Pear production is also down by the same percentage since MY 2001/02.

FRESH TABLE GRAPES Canada has systematically developed its wine industry over the past two decades. Today, about 70-80 TMT of grapes are produced annually and used for producing wine and other processed products (such a grape juice).

The two provinces that supply Canadian grapes are Ontario, with a market share of about 75 percent, and British Columbia accounting for the balance. By contrast, only a small fraction of Canada's grape production consists of fresh table grapes. Based on available data from Statistics Canada and information from provincial authorities,

Post estimates that Canada produces about 3-4 TMT of fresh table grapes annually. Domestic consumption is basically satisfied through imports of table grapes, with annual volumes around 180-190 TMT, in recent years, over half of which originates in United States.

Consumption: Canadian per capita consumption of apples, pears and grapes continues to remain relatively stable, a trend that has been observed over the past 30 years. However, Statistics Canada is reporting a slow increase in per capita consumption of fresh fruits in recent years. Factors that have contributed to this upward trend and that may very likely continue to shape consumption trends in the future include: an increasingly aware

Canadian consumer that is more concerned about dietary impacts on health; an aging population of considerable and increasing share that focuses on good health and its connection to fruit consumption and nutrition; an increasingly diverse ethnic composition of the population and an increasing share of immigrant population of non-European origin that is used to a higher consumption of fresh fruits.

This last factor, however, may also pose a challenge to Canadian growers of traditional fruits such as apples, pears and grapes: they fear the competition of exotic fruits, which are in increasing demand from such ethnic groups and which may erode the consumption of traditional fruit.



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