Apple industry outlook: tough times ahead for Growers, profitable prospects for Packers

In a comprehensive 12-month outlook, AgWest Farm Credit has projected a challenging fiscal year for apple growers, while packers are set to reap benefits in 2024. The industry faces a period of reduced profitability, driven largely by an overabundant crop that is pushing down prices. Simultaneously, there is an uptick in export activity and a shift towards increased insurance coverage by growers, preparing for ongoing industry hurdles.

Impact of the large 2023 crop

The 2023 apple crop has been unusually large due to a combination of favorable weather conditions and apple trees' natural alternate bearing cycle. This cycle typically sees a smaller yield one year, followed by a larger yield the next. The 2023 bumper crop, a stark contrast to the smaller yield in 2022, has led to a significant drop in prices. Conventional honeycrisp and granny smith varieties have seen more than a 20% decline in prices compared to the previous quarter. While a select group of growers may find profitability due to their varietal mix aligning with consumer preferences, the majority are expected to face losses. On the other hand, the Packers are likely to benefit from the increased volume.

Varietal production and price trends

Data from the WSTFA Storage Report indicates increased production across various apple varieties, with gala, red delicious, and fuji varieties remaining within their historical average. However, the WSTFA Weekly Bulletin Report as of January 9, 2024, highlights a year-over-year price reduction for each apple variety.

Export markets offering a silver lining

In an effort to mitigate domestic market saturation, the industry has seen a surge in apple exports. Key gains have been noted in Taiwan, Mexico, and India. Although foreign markets typically offer lower returns than domestic ones, they provide an essential outlet for fruit that is less favored by domestic consumers.

Strategic responses by Growers

Facing consecutive years of subpar returns, apple growers are actively reassessing their strategies. Many are considering the removal of less productive acreage and are also increasing their Whole Farm Revenue Protection insurance coverage for the 2024 crop. This move is particularly prevalent among growers with dispersed operations, as a weather event in any one location can significantly impact overall profitability.

Looking ahead

The next 12 months pose a complex scenario for the apple industry. While apple producers are bracing for a generally unprofitable year due to the oversupply and resultant price drops, packers are positioned to benefit from the increased volume. Growers, responding to these market dynamics and the prospect of continued challenges, are increasingly turning to export markets and enhanced risk management strategies.