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FARM & RANCH: Orchardists Must Change With the Times

With apple prices at a nine-year low, China poised to become a major export competitor and fewer buyers, Washington apple growers are hungry for ideas that will help them stay in business.

Thomas Schotzko is just the man to feed them.

The Washington State University agricultural economist has been studying the apple industry for 21 years. He says the business environment is rapidly changing, but adaptable orchardists can survive and maybe even thrive.

Put another way, growers who want to remain in the business will have to change with the times.

How is the business environment changing?

In many ways, but perhaps none so important or rapidly as mergers and acquisitions at the retail level. Schotzko says nearly 50 percent of retail grocery sales are controlled by top ten corporations.

This is forcing changes in the tree fruit industry. One of these changes is a rising tide of mergers and acquisitions of apple warehouses, which have to get bigger to meet the high volume needs of larger and larger retail firms.

Apple and pear producers typically market by selection of the varieties they grow, and by timing harvest to produce the fruit demanded year-around by the market. They also prune and thin to assure yields and quality.

In today’s environment, harvest is somewhat dictated by labor supplies and varieties being grown. But a producer’s cash flow also impacts how they want their crop harvested, stored and sold.

Schotzko says survival in the economic times just ahead will require growers to focus on three things.

— Sell through a warehouse that has a marketing plan that is good for the type and quality of fruit they harvest, on a variety-to-variety basis. As the market grows more specialized, Schotzko says orchardists may need to deal with several warehouses, instead of delivering all their fruit to one.

— Pay closer attention to strains and varieties that grow best in their orchard. Local environments vary. Some are better for some types of apples than for others. Even in a single, large orchard, some areas may be more favorable, or unfavorable for a specific strain or variety. “If the soil and microclimate aren’t uniform, orchardists must be more concerned about strains and rootstocks they select,” Schotzko advises.

Orchardists must be able to produce top quality fruit to survive. Orchardists are barely breaking even with “U.S. extra fancy” Red Delicious. They can’t afford to have any fruit grade “fancy.” “They’re losing money if they do,” Schotzko says. U.S. extra fancy is the second highest quality of apples.

— Growers are going to have to leave more fruit in orchard. “Don’t pick lower quality fruit,” Schotzko advises. Price of U.S. “Extra fancy” currently is $10-$11 per 42-pound box. “Washington extra fancy” is the top grade. It currently is paying about $14 a box.

“With lower prices it’s in the growers financial interest to not pick fruit for which the market is not willing to pay a profitable price,” Schotzko says. Growers left 10-14 million boxes of the 1998 apple crop in field because prices were low and the fruit graded low because of sunburn.

Leaving low quality fruit on trees or having pickers throw it on the ground reduced warehouse costs and helped stabilize the market for good fruit.

Schotzko says growers should take their own capabilities into account when deciding what to plant. “Some growers can grow certain kinds of fruit better than other kinds,” Schotzko says. Apple and pear production is an art that requires a lot of knowledge and patience. “Although it’s becoming more scientific, a significant amount of art is still involved in the orchardist’s ability to look at the tree and know what needs to be done to get the best crop possible off of that tree,” Schotzko says.

Economics of the future likely will require orchardists to further speed up the rate at which they replant trees and force them to plant even more trees per acre.

Orchards must be replanted more frequently to keep up with changing consumer tastes and to keep high-quality production as high as possible. Smaller trees thus more per acre are planted because they produce fruit in fewer years after planting. This means orchardists start making money on new trees faster and pay less interest for development.

Thirty years ago apple orchards usually were planted with no more than 200 trees per acre. Today it’s common to see 500-600 trees per acre in Washington orchards and a few orchardists are planting 2,000 or more trees per acre.

If growers don’t go to smaller trees they’re paying significantly more interest on investment, due to delayed bearing of fruit and therefore also delaying income generation.

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