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AgWest Farm Credit’s 12-month outlook sees apple growers as generally unprofitable and packers as profitable for the 2023 crop.
12-Month Profitability Outlook
Large 2023 crop impacts profitability
Conventional honeycrisp and granny smith prices are down more than 20% from last quarter, and this will challenge many producers. While some growers’ varietal mix will align with consumer demand and be profitable, the majority will likely be unprofitable. Ideal weather conditions and alternate bearing between small and large crops from year to year combined to produce the extraordinarily large crop in 2023. Poor weather coincided with a small crop cycle in 2022, which was then followed by ideal weather for the large crop cycle in 2023. The smaller a crop is in one season, the larger it is likely to be in the next. To a much lesser extent, young trees coming into production also helped to create the large crop. Packers should benefit from increased volume throughput.
2023 Crop Size by Variety
Production is up across each variety, but gala, red delicious and fuji varieties are within their historical average.
Season-to-Date Prices by Variety
Prices are down year-over-year for each variety.
Exports surge
Apple exports are up across the board from last season as many in the industry are seeking markets for varieties, grades and sizes that are less desirable to the domestic consumer. Foreign markets often offer lower returns than domestic markets; however, they provide an outlet for fruit that would otherwise struggle to find a home. Increasing exports may help to grow market share in some countries, benefiting future domestic crops.
Season-to-date Exports by Country, as of December
The most significant gains are occurring in Taiwan, Mexico and India.
Growers plan for smaller 2024 crop
Many growers are reviewing their varietal mix and are likely to remove acres with lower producing yields, quality and/or returns to the grower. In addition, many growers are increasing Whole Farm Revenue Protection insurance coverage on the 2024 crop in anticipation of weather and market challenges. Following two years of below-average returns, many producers want to take added risk management measures. Those with dispersed operations appear particularly interested in increasing coverage as a weather event in any one location can significantly impact overall profitability.
Apple producers will likely be generally unprofitable and packers profitable over the next 12 months. The large 2023 crop exceeds domestic demand and prices have fallen in response. While growers whose varietal mixes are aligned with consumer demand will fare reasonably well, many will be unprofitable and incentivized to remove acres. Exports are surging as producers discount certain grades, sizes and varieties.
For more information or to share your thoughts and opinions, contact the Business Management Center at 866.552.9193 or bmc@AgWestFC.com.
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