U.S. Apple Growers Needing To Account For Some Bad With The Good Right Now
May 20, 2024 Give Chris Gerlach the annual crop production reports plus the once-every-five-years results of the 2022 Census of Agriculture, and the apple industry’s foremost numbers cruncher can fill an hour-long webinar like da Vinci filled canvases. Such was the case May 14 during USApple’s 2023-2024 season wrap-up.
Gerlach, the association’s Director of Industry Analytics, had plenty to say about the latest production statistics and industry trends. Whether everyone in the industry wants to hear such facts — the bad ones and even the apparent good ones — is debatable. The Mona Lisa those numbers are not in terms of apple growers turning a profit now and possibly in the future.
“I know there are some people that are saying, ‘Chris, please stop finding apples — we have enough,’” Gerlach says. “To that I say, ‘Not counting them doesn’t make them go away.’”
While such a supply situation is certainly a “sensitive one,” according to Gerlach, it is not the lone one affecting the industry. At the moment, it may not even be the most serious, although all issues are intertwined in some way.
DAUNTING TIMES: PRICES DOWN, COSTS UP
The industry is in a period of apple price deflation, a “scary picture,” Gerlach said. Between July 2023 and March 2024, the Consumer Price Index (CPI) for apple growers decreased 11.3%. This nearly matches the 11.7% decrease that closed the 2014-2015 season, which was then considered the industry’s best production season ever.
What is discouraging is that the CPI drop in 2014-2015 had not yet bottomed out in March of 2015. It wound up dropping another 2.5% over the following five months to reach 11.7%.
Chris Gerlach, USApple (Photo: Thomas Skernivitz)
“So, when we say ‘season wrap-up’ for this webinar, we’re not quite done this season,” Gerlach said. “Hopefully prices will stabilize, but just know that, with our historical benchmark, prices continue to fall throughout the season.”
Why is this so problematic? Heading into the 2023-2024 season, the costs to grow apples, per the Producer Price Index (PPI), were up 34%. Those costs include fertilizers, utilities, and labor. Combined with the 11.7% decrease in apple prices, this has led many growers to sell at a loss, Gerlach says.
“This really breaks my heart because this year, for so many growers, instead of getting checks from their packing houses and sales desks, they’re getting bills,” he said. “They have to pay for the privilege of working their tails off all year long to provide Americans with their favorite fruit.”
These trends are not sustainable, according to Gerlach. “And if something isn’t done,” he added, “especially on the labor front, very soon we’re going to see a lot of these multi-generational farms throw in the towel, and eventually we may be eating a lot more fruit from Mexico and Turkey. I hope that doesn’t happen, but it’s something we need to keep our eye on.”
FACTORING IN OVERSUPPLY
As previously mentioned, the apple industry, according to USDA-NASS, set a record in 2014-2015 with 282.4 million bushels (bu) produced. The 2023-2024 season, at 270.4 m bu, fell short of that mark; however, those two seasons are not an “apples to apples comparison,” Gerlach said.
USDA, since 2017, has limited its data set to only the top seven apple-producing states, having periodically expunged 25 states that USApple now classifies as “other states.”
“If you add that number back in, ‘Congratulations, industry! I think we’ve had our biggest year in U.S. production,’” Gerlach said of 2023-2024. “We can go back and forth on whether or not my ‘other states’ calculation is accurate, but at least adding something back in to be able to compare to 2017 levels, I think, is justified.”
Creating that justification was the Feb. 13 release of the 2022 ag census. Beforehand, USApple had estimated that the various “other states” produced 14 m bu in 2023-2024. In retrospect, those “other states” are far more productive than anyone had thought, according to the census. Thus, USApple raised its final overall 2023-2024 production number from 270.4 m bu to a record-setting 291.8 m bu.
“Understanding how this increasingly large group of states is moving is absolutely critical in helping the industry make informed decisions for long-term planning,” Gerlach said. “Not knowing where these apples are coming from isn’t doing anyone any good. So, I’m trying to get to the best number possible.”
In order, the top 10 “other states” in production (rather than acreage) are now North Carolina (almost 3 m bu), West Virginia (around 1.75 m bu), Ohio and Wisconsin (nearly 1.5 m bu each), Maryland, Massachusetts, and New Jersey (over 1 m bu each), and then Idaho, Maine, and Missouri (between 500,00 and 1 m bu each).
“It’s really in these states that I need to be looking for additional apples,” Gerlach said.
AG CENSUS: THE BIGGER (AND SMALLER) PICTURE
Per the 2022 ag census, the top 10 apple-producing states (by acreage) are:
1. Washington (188,973)
2. New York (62,521)
3. Michigan (44,985)
4. Pennsylvania (25,457)
5. Virginia (11,149)
6. California (10,975)
7. North Carolina (6,962)
8. Wisconsin (5,783)
9. Oregon (5,202)
10. Ohio (5,034)
The three boldfaced states, as referenced earlier, are not among those top seven states recognized by USDA-NASS. “There’s some argument there that we should really be paying attention to what’s happening in those states,” Gerlach says.
The U.S., as a whole, boasted more than 410,00 apple acres, of which 89% (363,000) were bearing. That percentage falls within the typical range of 86% and 90% since the 2002 ag census. “In terms of that renewal rate of new acres coming in and replacing plantings and making sure orchards stay up to date with the latest systems and varieties, that has been pretty constant,” Gerlach said.
Specific to acreage growth during the five years between the 2017 and 2022 censuses, the top 10 states are:
1. New York (12,071)
2. Washington (9,074)
3. Michigan (6,422)
4. Pennsylvania (2,944)
5. Wisconsin (1,110)
6. North Carolina (940)
7. Iowa (380)
8. Virginia (270)
9. New Jersey (249)
10. Maryland (227)
Again, the boldfaced states are those not among the top seven states recognized by USDA-NASS. “You’re starting to have these Wisconsins and North Carolinas of the world come in and have significant acreage that we really didn’t have any idea about because of those lost data sets from NASS,” Gerlach said. “This ag census is really useful in that regard.”
The entire U.S. over those same five years added around 30,000 total acres. Bearing acreage actually increased by 33,000 (or 10%), meaning non-bearing acreage declined.
On the flip side, the bottom 10 states in terms of acreage loss during those five years are:
1. California (2,662)
2. West Virginia (1,160)
3. Oregon (589)
4. Minnesota (381)
5. Idaho (320)
6. Maine (154)
7. Connecticut (119)
8. Indiana (113)
9. Utah (107)
10. South Carolina (82)
In this case, the two boldfaced states are among the top seven recognized by USDA-NASS.
Moving to the county level, the top 10 U.S. counties in acreage growth are:
1. Grant, WA (10,534 acres)
2. Kent, MI (4,461)
3. Wayne, NY (4,076)
4. Ulster, NY (3,386)
5. Adams, PA (2,806)
6. Okanogan, WA (2,277)
7. Douglas, WA (2,165)
8. Adams, WA (2,010)
9. Orleans, NY (1,161)
10. Newaygo, MI (912)
“They are all in familiar states: Washington, Michigan, New York,” Gerlach said.
The next 10 counties on the upside, in order, are: Columbia, NY; Oceana, MI; Henderson, NC; Monroe, NY; Klickitat, WA; Cass, MI; Stanislaus, CA; Franklin, PA; Chelan, WA; and Onondago, NY.
Meanwhile, the 10 counties with the largest five-year declines in acreage are:
1. Yakima, WA (4,967 acres)
2. Benton, WA (2,862)
3. Sonoma, CA (1,752)
4. Franklin, WA (852)
5. Van Buren, MI (649)
6. Worcester, MA (603)
7. Addison, VT (420)
8. Muskegon, MI (414)
9. Fresno, CA (386)
10. Umatilla, OR (386)
“With Vermont and Massachusetts, these losses in acreage are a little bit more widespread, but it is interesting to see that Yakima and Benton in Washington are shrinking in acreage,” Gerlach said.
The next 10 counties on the downside, in order, are: Wilkes, NC; Ottawa, MI; Berkely, WV; Hood River, OR; Oakland, MI; Rensselaer, NY; Clinton, NY; Kittitas, WA; Cumberland, PA; and Frederick, VA.
Over the last 20 years (or four censuses), Grant County, WA, has added more than 25,000 acres of apple. Wayne County, NY, is next-best at 8,171 acres, followed by Kent, MI (3,444 acres), Walla Walla, WA (2,942), Adams, WA (2,084), Adams, PA (1,741), Ulster, NY (1,625), Orleans, NY (1,424), Newaygo, MI (878), and Franklin, WA (843).
Across the same two decades, three counties — Benton, WA, Kern, CA, and Chelan, WA – have each lost approximately 6,000 acres, followed by San Joaquin, CA, Frederick, VA, Berkeley, WV, Douglas, WA, Berrien, MI, Sonoma, CA, and Van Buren, MI, each of which lost between 2,000 and 4,000 acres.
“California, over the 20-year period, has lost more than 27,000 acres — about 71% of their acreage,” Gerlach added.
The entire U.S., while adding acreage the last five years, has lost 53,000 total acres and 39,000 bearing acres over the last 20 years.
“It looks like we took out a lot of acres up to 2017, and then started putting them back in,” Gerlach said. “Those plantings from 2017 onward appear to be a lot more productive than the previous ones.“
In terms of consolidation over the last 20 years, the number of small farms (1 to 49 acres) and medium farms (50-179) decreased 40% and 33%, respectively. Large farms (180-499) increased 2%, but extra-large farms (500-1,999) dropped 16%. The largest farms (2,000-plus) rose 42%.
“What is steadily increasing are those extra-extra-large farms,” Gerlach said. “Large farms are getting larger, and small farms are aggregating into bigger operations that can take advantage of some economies of scale.”
Apples currently represent 19% of the total acreage among all non-citrus fruit. Grapes are first at 52%, followed by apples, other non-citrus fruit (14%), sweet cherries (5%), peaches (5%), pears (2%), and tart cherries (2%).
REVISITING (AND REVISING) LAST SEASON’S ESTIMATES
The original USDA-NASS 2023-2024 crop production report, released last August, had estimated that the top seven apple-producing states generated 236 million bushels (m bu). USApple, at its annual conference the same month, adjusted that figure to an estimate of 242 m bu, an increase of 3%.
USDA-NASS this month released its final figure — 270 m bu, a 15% increase that is a “pretty high revision for them,” Gerlach said, adding that typical revisions range between 2% and 5%.
On the state level, the final order was:
1. Washington (181 m bu), up 14% from original estimate
2. Michigan (32 m bu), up 17%
3. New York (30 m bu), up 13%
4. Pennsylvania (13 m bu), up 26%
5. California (6 m bu), up 20%
6. Virginia (5 m bu), up 8%
7. Oregon (4 m bu), up 27%
“Shout out to Michigan, who outproduced New York for the first time since 2016,” Gerlach said.
ALSO NOTEWORTHY …
Expense Rundown: The census also notes that, in the last 10 years, expenses for farms of all types grew by 29% while fruit tree and nut farm expenses grew by 49%, primarily driven by increased costs in labor (55%) and fertilizer (92%). “In 2022 labor accounted for 40% of tree and nut farm expenses vs. 12% for all farms. So it’s definitely more labor intensive than some of the combine-harvesting techniques of other commodities,” Gerlach said.
Meanwhile, net income for fruit tree and nut farms has been decreasing, falling from $6.4 billion to $5.8 billion, down 9% between 2012-2022. Conversely, all farm net income has increased by 64% over the decade.
Fresh vs. Processed Sales: The latest five-year averages of fresh (67%) and processed (30%) sales remain consistent, Gerlach said, although the numbers do vary by state. New York (5%) and Pennsylvania (4%) are moving up in fresh sales, while Virginia is notably up 10% year over year and 16% over five years. Oregon is also up close to 10% in fresh production.
Where movement has slowed is on processing apples. “A lot of that has to do with the fact that we had such a good year last year, the processors filled up their storage containers, and there wasn’t really a processor market to speak of at the beginning of the season,” Gerlach said.
Varieties: ‘Honeycrisp’, at 11 m bu, is up 83% year over year while ‘Granny Smith’ is up 75% at 9 m bu. ‘Red Delicious’, at 12 m bu, is up nearly 30% while ‘Cosmic Crisp’ is up 61% at 6 m bu. Overall inventory as of May was up 33% year over year.
“New production is coming online, especially for varieties like ‘Honeycrisps’ and ‘Cosmics’ with higher yields, so we’re getting more efficient with the trees we do have. There’s also better fruit quality and storage protocols, which means we’re having higher pack-outs,” Gerlach said.
Imports/Exports: The strength of the U.S. dollar is making exports more expensive and imports relatively cheaper. “We have done a great job since that larger crop in 2014-2015 at replacing imports with domestic apples. Following that big season, they were able to cut off the tap on imports. That doesn’t happen anymore because our import picture is a bit stickier now,” Gerlach said.
In 2014, for example, fresh apple imports were 9.9 million bushels leading into the large domestic 2014-2015 season. In 2023-2024, fresh apple imports were 5.2 million bushels, a decrease of 48% over the decade.
On exports, they are up considerably this year over last year — by 11 million bushels to date. “We’re still not offshoring as many as we did a decade ago,” Gerlach said, noting that factors such as trade policies, the strong dollar, and increased transportation costs all factor into it. “Whatever the reason is, we’re still not getting as many of our apples overseas.”
Gerlach did note market differences — shipments to Mexico are up 48% year to date while Canada is down. “India has come roaring back since the removal of the retaliatory tariffs at the start of the season. Not quite where we were, but last year at this point, we’d sent 31,000 bushels, and we’re already up at 1.7 million bushels.”
There is also declining domestic demand to contend with, Gerlach said, a topic the industry continues to examine.
Looking at 2024-2025: Reports indicate a strong return bloom with no major frost issues to report. “Replacement plantings continue taking place, but there’s not a lot of new acreage coming online,” Gerlach said. “Tree orders this year for delivery in two years from now may be down somewhat given the market conditions.”
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