Apple harvest forecast

Washington Apples to stay profitable

Information courtesy of Northwest Farm Credit Services
Drivers for the Northwest apple industry include a lighter 2018-19 crop, improved season-to-date fruit pricing and tariff concerns.
• The 2018-19 Washington state fresh crop is smaller than recent crops, but improving packouts have increased crop size estimates to 118.7 million boxes.
• Although prices for most varieties recovered from early season softness as the 2017-18 crop and low quality fruit cleared the market, upward price movement is tempered.
• Retaliatory tariffs will be a significant factor in the 2019-20 crop that is expected to be large.
Northwest FCS’ 12-month profitability outlook expects
thin profits. A lighter current crop and improving quality
has allowed prices to increase and growers will see
modest returns for the remaining 2018-19 crop.
However, the 2019-20 crop is expected to be large. With
the current trade disputes, a large crop will be difficult to
sell and prices will likely adjust, compressing margins.
2018-19 Crop
On March 1, the Washington State Tree Fruit
Association (WSTFA) estimated the 2018-19
fresh crop at 118.7 million boxes, 11 percent
smaller than last year. Although the March 1
crop size is 9 percent below the August
estimate of 131 million boxes, it is up 1.9
million boxes compared to the Oct. 1 estimate
due to better than anticipated packouts.
At harvest, Gala production was projected to
surpass Red Delicious for the first time.
However, the latest storage report shows Red
Delicious and Gala production nearly tied.
Early 2018-19 crop movement was slowed by
2017-18 crop overlap and some quality issues
in certain varieties weighed on early season
prices. By the end of 2018, the 2017-18 crop
cleared the market and movement improved.
As of March 10, 51.9 percent of this season’s
crop shipped, in line with last season’s pace.
Apple exports are down 29.3 percent from
season to date due to the smaller crop size
and tariff pressure.
For most varieties, year-to-date pricing is
higher. However, 2018-19 pricing is more
subdued than hoped due to carryover of the
prior crop and tariff pressure. A smaller
Washington crop, better quality and favorable
fruit size help support higher prices. The
March 1 storage report shows fresh
Washington state inventory on hand at 60.6
million boxes, about 9 million boxes fewer
than a year ago. Additionally, national fresh
inventory is 91.8 million boxes, down 11.2
percent from last year.
Labor Rates and Availability
The USDA proposed Washington’s and
Oregon’s 2019 H-2A wages of $15.03 per
hour, a 6.5 percent increase over 2018. The
2019 H-2A wage will be 25 percent greater
than the 2019 Washington state minimum
wage of $12 per hour and 33 percent greater
than Oregon’s minimum wage, which goes up
to $11.25 in July. Washington’s and Oregon’s
H-2A hourly wages are the highest in the
nation.
Washington state’s Senate Ways and Means
Committee recently endorsed additional fees
for Washington farmers using H-2A workers.
The bill, if passed, would authorize the
Employment Security Department to begin
collecting fees within two years. Fees can be
up to $75 per H-2A worker and an application
fee of up to $500. The increasing cost of labor
is a significant challenge for growers.
Labor supply was adequate in 2018 due to the
smaller crop and increased H-2A labor. The
U.S. Department of Labor predicts
Washington farmers will hire 30,000 H-2A
workers in 2019, an increase of almost 6,000
workers year over year. While the use of the
H-2A program is necessary to ensure labor
supply, users incur substantial costs in
transportation, housing and wages.
Producers must continue to seek and
implement labor saving technologies to
remain competitive.
Winter Weather
The Pacific Northwest enjoyed a mild winter
until early February. The region experienced
cold temperatures followed by blizzard
conditions the weekend of Feb. 8. The month
was 15 to 20 degrees cooler than average
and the cold weather persisted into early
March. It’s not anticipated that the cool
temperatures damaged orchards as
temperatures remained above zero and the
trees were cold hardy. It is too early to tell how
the cold and lingering winter conditions will
impact the 2019 crop.
The Bureau of Reclamation released its
“March Total Water Supply Forecast” for the
Yakima Basin on March 7. The report
indicates that snowpack is 80 to 90 percent of
normal as of March 1. The report predicts an
adequate water supply for senior water right
holders. However, the Bureau of Reclamation
estimates that junior water right holders will
receive 90 percent of their allocated rights.
Despite a slight water shortage in the Yakima
Basin, mountain snowfall and timing of
snowmelt are key factors that will affect
overall 2019-20 crop water supply.
Exports and Tariffs
Although tariffs are affecting exports, the small
crop is dampening the negative effects. The
domestic market typically consumes 90 million
boxes. For this season’s crop, that leaves less
than 30 million boxes for export. While tariff-
free markets would be more favorable,
marketers aren’t having too much difficulty
moving 30 million boxes to export. However, a
large 2019-20 crop is anticipated. The
Northwest has the capacity to grow close to
170 million boxes considering planted acres.
Although unlikely, it shows that a significant
increase in supply is possible. A large crop
would give marketers over twice the amount
of fruit to move to export markets. If a large
crop occurs and trade disputes aren’t
resolved, the apple market will be
oversupplied.
Additional Information
Northwest FCS Business Management Center
northwestfcs.com/Resources/Industry-Insights
U.S. Apple Association
usapple.org
USDA Agricultural Marketing Service
ams.usda.gov
Washington State Tree Fruit Association
wstfa.org