In a season wrap-up, U.S. Apple Association Director of Industry Analytics Director Chris Gerlach shared insights into the 2023-24 season, such as this year’s crop being larger than estimated.
Gerlach started the webinar with a snapshot of the industry. The current 1.6% gross domestic product of the first quarter is lower than past quarters, but it is still positive, and the slowing GDP is likely due to lower exports, lower consumer spending and lower government spending, Gerlach said. Unemployment at 3.9% is another good sign for the economy, he added.
Complicating the export picture for the industry, Gerlach pointed to inflation hovering around 3.5% and Federal Reserve Chair Jerome Powell saying he doesn’t plan on interest rate cuts or hikes.
“With the economy and higher interest rates, this is making our exports relatively more expensive and imports relatively cheaper,” he said.
Big year for U.S. production
Gerlach said the USDA recently released its noncitrus fruit and nut report that listed total production at 270 million bushels, which is up 15% from its August 2023 estimate of 236 million bushels.
“Typically their revisions are in the 2%, 3%, 4% or 5% range,” he said. “This represents a fairly significant upward revision.”
USDA’s revision shows Washington at 181 million bushels, a 14% increase; Michigan at 32 million bushels, a 17% increase; New York at 30 million bushels, a 14% increase; Pennsylvania at 13 million bushels, a 26% increase; and California at 6 million bushels, a 20% increase.
Gerlach said the USDA stopped estimating production in Georgia, Kentucky, South Carolina, Arizona, Colorado, Indiana, Iowa, Missouri, New Hampshire, Rhode Island, Tennessee, Utah, Connecticut, Idaho, Illinois, Maine, Maryland, Massachusetts, Minnesota, New Jersey, North Carolina, Ohio, Vermont, West Virginia and Wisconsin. Those states make up about 21 million bushels of production.
“We’re just sort of guessing whether those states are following the national trend,” he said. “We haven’t had a good look at other states since 2007.”
When taking the additional states into production and using an average of 14% year-over-year growth, Gerlach said the other states make up about 21.4 million bushels, which is up about 54%. While he said that’s not necessarily news growers want to hear while facing a large crop, it’s still important to account for those additional apples.
“You know they’re out there, and you’re competing against them,” he said. “It’s best to know that so that you can make those decisions for your long-term strategic growth.”
Gerlach said while the USDA final counts for 207.4 million bushels, the USApple estimate shows 291.8 million bushels.
“We’ve had our biggest year in U.S. production,” he said.
In other data trends of note this season, Gerlach said December storage volumes are around 56% of the total final USDA volume, and 44% of U.S. apples move prior to Dec. 1. Looking at the data, he said it’s possible pre-December movement in 2023 was slower than the five-year average, or production estimates were low and pre-December movement was on pace.
“Some of each could be true — that the pre-December movement was maybe a little bit slower than average, but the estimate was low, and so that methodology kind of holds,” he said.
Production trends
Gerlach said since joining USApple, he’s worked to get a better picture of the production trends in states where the USDA stopped estimating produce. He estimates about 14 million bushels are unaccounted for from USDA data.
He also noted that the 2017-22 USDA Census of Agriculture shows five-year production increases. The top 10 states for growth include New York at 12,071 acres, Washington at 9,074 acres, Michigan at 6,442 acres, Pennsylvania at 2,944 areas, Wisconsin at 1,110 acres, North Carolina at 940 acres, Iowa at 380 acres, Virginia at 270 acres, New Jersey at 249 acres and Maryland at 227 acres. He estimates the total acres added to production to be around 29,544.
States losing production from 2017 to 2022 include California at 2,662 acres, West Virginia at 1,160 acres, Oregon at 589 acres, Minnesota at 381 acres, Idaho at 320 acres, Maine at 154 acres, Connecticut at 119 acres, Indiana at 113 acres, Utah at 107 acres and South Carolina at 82 acres.
Gerlach gave a breakdown of the changes in acreage for the past 20 years.
“We’re losing acreage so down about 53,000 total bearing acreage since 2002,” he said. “It looks like we took out a lot of acres to 2017 and then started putting them back in, and those plantings from 2017 onward appear to be a lot more productive than the previous ones.”
U.S. Census of Ag
Gerlach also recapped additional highlights of the recent ag census, which showed that fruit and nut growers experienced a 49% jump in farming expenses, fueled by increases in labor and fertilizer.
Gerlach said ag census data also shows a growth in the large farms of 180-499 acres and the extra, extra-large farms of more than 2,000 acres.
“Over the 20-year period, large farms are getting larger, and small farms are aggregating into bigger operations that they can take advantage of some economies of scale,” he said.
Yields are up 48%, Gerlach said, while bearing acres are down 15%.
“You’re doing a lot more with less,” he said.
Other factors
Gerlach talked about apple movement and indicated that the industry is about a month behind and will likely need to promote sales into the summer this year to help set up inventories for the next season. Slowing domestic demand is a major contributor to the greater apple inventories, he said, noting the industry is starting to work together to grow domestic demand.
He said he’s seen some trends about how apple consumption is low with Gen Z when compared to the general population.
“There’s definitely opportunities to get apples in front of more people and show them the benefits and the wonder wonderful fruit that we’re growing these days,” he said.
In terms of exports, the industry saw 11 million bushels more of exports this season to date, which is up about 50%. While it was a good year for exports to Mexico (a year-to-date increase of 48%), exports to Canada are down about 7% year to date, which Gerlach attributes to a strong Canadian season. Exports to Taiwan are up 97% year to date and exports to Vietnam are up 19% year to date. A notable bright spot, Gerlach said, was export to India, which is up 5,212% year to date.
“India has come roaring back,” he said.
Gerlach ended the webinar looking at the cost of growing apples, which is up 34%, while prices are down 11%.
“Instead of getting checks from their sales desks, they’re getting bills,” he said. “[Growers] have to pay for the privilege of working their tails off all year long. These trends are not sustainable, and if something isn’t done — especially on the labor front — very soon we’re going to see a lot of these multigenerational farms throw in the towel.”
A major contributor to the rising cost of production is the increase in the Adverse Effect Wage Rate, which on average is about $17 an hour, and up about 5% year over year. Gerlach said that’s a 63% increase from 2014.
“It’s all coming to a head and causing some issues in the industry,” he said.
While there’s a push to introduce legislation to offer growers relief in the form of freezing the wages or capping the wage growth, it will be difficult for anything to move with 2024 being an election year, Gerlach said.
“If you have a relationship with lawmakers, or you can develop them, please reach out and let them know that we’ve reached a tipping point where costs are exceeding these prices and that these multigenerational farms are in danger,” he said.
