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FARM & RANCH: Patented Varieties Promise Big Apple Profits

No one in their right mind would claim these are the best of times for Washington apple producers, but neither are they the worst of times.

The Washington Growers Clearing House Association recently reported returns for Red Delicious below the break even point for the second year in a row. Some 20 percent of Washington apple growers went out of business in the past ten years and another 15 percent may fold in the next three to five.

Those are numbers that cause many people to put the disaster label on Washington’s $700 million apple industry.

So where’s the silver lining in this economic storm cloud?

Washington State University’s Thomas Schotzko, an agricultural economist who specializes in apple marketing, says it lies in new approaches to apple marketing.

One such approach is patented, proprietary varieties that orchardists will be licensed to grow in limited production. Supply and demand will be kept in a balance that produces profits for growers.

You may have encountered one of these patented varieties in the grocery store. Recently I happened upon Pink Lady in the produce section of a local grocery store. Pink Lady is a relatively new variety from Australia, which returned an average $34.48 per box to Washington growers in 1999-2000. That’s nearly double the price growers received for Red Delicious.

This premium is being achieved without production controls. Controlling production through licensing is such a new concept it’s still in the supply pipeline, but it’s just around the bend. Soon we will see new patented varieties of apples, pears, plums, and cherries grown under licenses that control production.

This new marketing mechanism involves development of coordinated international marketing. These arrangements are being worked out as you read this column.

Licensed production will only work for commodities that have consumer identity. It won’t work, for instance, in Red Delicious. Even though improved strains may be patented, consumers can’t differentiate between Red Delicious strains, so it’s essentially impossible to use licensing to control the market and reward growers.

But where a variety of fruit has characteristics that consumers can be taught to identify, it will be possible to control production through licensing and reward orchardists with production royalties.

It’s impossible to predict where this approach will take us, but it is a well established fact that consumers will pay a premium for apples that tickle their taste buds just right.

Just look at what the market already is paying. The Washington Growers Clearing House Association reports the average price for Red Delicious in 1999-2000 was $12.04 per box. Golden Delicious averaged $14.88; Jonagold, $15.62; Granny Smith, $16.47; Gala, $16.73; Braeburn, $18.39; Fuji, $18.84, Cameo, $19.76, and Pink Lady, $34.48.

The obvious point is that there’s a greater potential profit in growing varieties that bring a premium in the market and patented varieties grown under licensing agreements offers the prospect of pushing those profits upwards.

Yes, times are tough. More apple growers will go out of business this year, and the next year and the next. But I’m reminded of something I heard at my grandfather’s knee. Some farmers are going broke in the best of times, and some are making money in the worst of times.

The survivors are the ones who are nimble enough to change with the times. In these times, for apple growers, that means producing for the top dollar market. And soon it will mean controlling the price by limiting supply through licensed production.

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