Analysis

By DAN WHEAT

Capital Press

With a record crop and smaller crops elsewhere in the nation and world, the Washington apple industry is poised for what could be a very good sales season.

"It's everybody's dream," said Desmond O'Rourke, apple industry watcher and retired Washington State University agricultural economist.

The initial forecasts: New York's crop down 18 percent; Michigan down 43 percent; Europe down 11 percent; Canada down 1 percent, Mexico down 10 percent and China down 3 percent.

Weather damage is said to have caused most of the projected declines.

The total U.S. crop is forecast at 221.5 million boxes of fresh and processed apples, down 6 percent from last year and 3 percent from the five-year average.

The Washington crop is estimated at 133 million boxes. That's up 4 percent and is 60 percent of the national crop. Washington's fresh-only portion was estimated at a record 108.8 million boxes on Aug. 1, up 5.8 percent.

But as soon as that forecast was released, the organizations that gave it and industry leaders said it likely would shrink.

Golden Delicious and Fuji have suffered from russeting, which is skin discoloration. There's been some hail and wind damage. A cool, wet spring hampered pollination and chemical thinning, holding down size and deforming some fruit.

With harvest just now starting, there's still weeks of weather to go. Excessive heat can slow development and cause sunburn. An early cold snap, like last October, can sap apples of storability.

The main concern so far is small fruit, that there's not enough heating days left for apples to gain the size they need.

Given all of that, Washington industry leaders lowered the estimate of their fresh crop to 105.5 million boxes at the annual outlook conference of the U.S. Apple Association in Chicago, Aug. 19-20.

"The Yakima District indicated some blocks of Fuji and Goldens most likely won't be packed. Conversions of packouts might not be what they've historically been, so we dropped the number," said Bruce Grim, manager of the Washington Apple Growers Marketing Association.

"The September weather pattern will tell the tale of how this crop turns out," he said.

Still given the size of the estimate in relation to those of the other states and nations, Washington's wholesale average of all varieties should hold at around $19 a box, said Dan Kelly, assistant manager of the Washington Growers Clearing House Association. Grim said the price might increase some.

But O'Rourke urged caution.

He noted that in 2008, with what finished as a record 108.3 million-box crop, the industry set prices too high, sales slowed and inventory stayed too high. Prices had to come down.

"By the time they got the price down to where movement took off, the industry was already in a deep hole," O'Rourke recalled.

Once a price slide starts it can be hard to stop, let alone turn it around.

"It's imperative to start at a level to create momentum and repeat sales," Grim said. "If you start too high and people don't buy, then you lower prices and they don't buy because they expect them to drop more."

At the outlook conference, Steve Lutz, executive vice president of the Perishables Group of Chicago and former president of the Washington Apple Commission, said keys to a good season are setting the price right in the first quarter and marketers helping retailers target consumers who aren't buying.

In some stores, 11 percent of the produce is apples. That's the high, Lutz said. Some are as low as 4 percent.

"So there's good opportunity," O'Rourke said, "to work with weaker retailers to get more apples moving."

Beside crop size and pricing, a variable this season is the extension of Mexico's retaliatory 20 percent tariff over a trucking dispute to apples.

The industry just shook years of a 47 percent Mexican tariff on certain varieties from an antidumping case in March to gain a new tariff in August.

Early estimates are a loss of 2 million boxes of apples worth about $44 million, but Mexico doesn't buy Washington apples until December so there's time for the situation to be resolved, O'Rourke said.

Grim said a loss of 2 million boxes to Mexico doesn't sound like much but can have a significant impact on prices. O'Rourke said the need to sell that much might be offset by the crop shrinking.

"Right now it's all speculation and estimation. When we get the fruit in the barn, get it on the line and see how the packouts are, then we will know what we've got," Kelly said.

It will take a couple of months for that to happen. It's called the Nov. 1 storage report. A more accurate read. Real numbers of what's in hand.

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