PROSPECTS OF GROWING APPLES FOR JuIcEm I. : NORTHWEST MICHIGAN AS A MEANS OF PROVIDING A mvmsmcmon ALTERNATIVEITO GROWERS For the Degree of M. S. MICHIGAN STATE UNIVERSITY LaVERNE ANDREW ‘ NORMAN! — :« _4933 m 0 ~ ‘ ,. |. . . I - . 0 n I_ .I" "I. M . _ | .- . t ‘ I. .I ‘ ~‘ . .‘ . ‘°.‘u~ , "- ' . . u ‘ y . ' . l . It" . - .. . . \ I_ . . ‘ ‘. ‘. . , “I cf? l MICH. STATE UNIV. PLACE IN RETURN Box to remove this checkout from your record. TO AVOID FINES return on or before date due. DATE DUE DATE DUE DATE DUE MICH. STAT UKNI'v. 1/98 chlRCDateDmpGS—p.“ PROSPECTS OF GROWING APPLES FOR JUICE IN NORTHWEST MICHIGAN AS A MEANS OF PROVIDING A DIVERSIFICATION ALTERNATIVE TO GROWERS By LaVerne Andrew Norman Submitted to Michigan State university in partial fulfillment of the requirements for the degree of MASTER OF SCIENCE Department of Agricultural Economics 1983 DEDICATION TO MY CHILDREN, LARA LYNNE AND GREG ANURRH WITH LOVE FOR THE TIME AE LOST BEING TOGETHER AND:THEIR PATIENCE DURING THE DEVELOPMENT OF THIS PROJECT CHAPTER I. 1.0 2.0 3.0 4.0 TABLE OF CONTENTS INTRODUCTION BACKGROUND INFORMATION OVERVIEW INFORMATION ON NORTHWEST MICHIGAN AND SELECTED HORTICULTURAL COMMODITIES 1.1 Background Apple Information PROBLEM AREA OBJECTIVES, HYPOTHESIS AND RESEARCH APPROACH 3.1 Objectives of the Study 3.2 Hypotheses 3.3 Research Approach 3.“ Statistical Data 3.5 First Handler Processor Interviews 3.6 Other Information Sources ECONOMIC RELEVANCE OF THE PROBLEM CHAPTER II. COMMODITIES INITIALLI CONSIDERED IN STUDY 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 11.0 SHEET CHERRIES PLUM/PRUNES PEACHES RED JUICE CHERRIES BRAMBLES BLUEBERRIES FEARS OTHERS ASPARAGUS JUICE APPLES GROHER CONSIDERATION iv I»? T n: \0\O(IJ\I\)O\\.0\0 IA I4 <3 C2 H O 12 13 15 15 16 16 l7 17 18 19 19 20 TABLE OF CONTENTS (continued) 12.0 SUMMARY CHAPTER III. THE APPLE JUICE MARKET SITUATION 1.0 DEMAND FOR APPLE JUICE IN THE UNITED STATES 2.0 300 1.1 Increasing United States Consumption 1.1.2 United States Per Capita Consumption of Apple Juice 1.2 Factors Affecting Consumption 1.2.1 Changing Consumer Preferences 1.2.2 Factors Affecting Buying Decisions 1.3 Conclusion About Demand for Apple Juice SUPPLI 0F JUICE APPLES IN THE UNITED STATES 2.1 Apple Juice Production in the United States 2.2 Special Features of Apple Juice Production 2.3 A Review of Apple Utilization in the United States 2.4 Juice Apple Production in Selected States 2.5 Conclusion from the Supply Data ECONOMIC CONSIDERATIONS 0F JUICE APPLE PRODUCTION 3.1 The Differences of Juice Apples 3.2 Consideration of Growing Apples Exclusively for the Juice Market 3.2.1 'Potential for Reducing Production and Harvest Cost 3.2.2 Apple Production Costs in Michigan 3.2.3 Calculated Juice Apple Production Cost 3.2.“ Discussion of Juice Apple Production Cost and Grower Prices 22 23 23 3o ‘1; 39 43 ’+5 45 51 53 ES 67 79 81 85 4.0 5.0 6.0 7.0 TABLE OF CONTENTS (continued) 3.3 Planting New Apple Blocks Exclusively for Juice 3.4 Apple Production in Northwest Michigan 3.4.1 Potential Juice Apple Yield in Northwest Michigan 3.4.2 Varieties of Apples Crown in Northwest Michigan 3.4.3 Summary REGIONAL COMPETITION FACTORS IN JUICE APPLE PRODUCTION 4.1 Apple Production Costs in New York and Washington 4.3 Discussion of Production and Harvest Costs in New York, Michigan and Washington States 4.4 Comparison of Michigan Transportation Costs To Selected U.S. Population Centers with Costs New York State and Washington State THE TRENDS IN IMPORTATION 0F APPLE JUICE INTO THE UNITED STATES FINDINGS OF INTERVIEWS WITH PROCESSORS AND PROFESSIONAIS ABOUT APPLE JUICE 6.1 Views of the Apple Juice Market 6.2 Processor Preferences for Selected Apple Varieties 6.3 Concerns about Adulteration of Natural Apple Juice 6.4 Promotion of Michigan Apple Juice/Cider SUMMARY AND CONCLUSIONS --APPLES CROWN FOR JUICE 7.1 Demand Considerations 7.2 Supply Trends and Future Supply 7.3 Combined Impact of Demand and Supply Trends vi 102 104 106 108 108 109 111 118 125 125 128 128 129 130 130 132 134 TABLE OF comm (continued) 7.4 Potential Gains in Cost From Raising Certain Apple Blocks Just for Juice 7.5 Michigan Regional Competitive Position in the U.S. Apple Juice Market 7.6 Economic Gains for Northwest Michigan Growers Growing Apple Blocks Just for Juice CHAPTER V. SUMMARY APPENDIX REFERENCES 143 144 147 148 156 157 LIST OF TABLES Table Number 3-1 United States Apple Juice Pack 3-2 Total Apple and Pear Juice Imports 3-3 Total Canned & Imported Juice Apples Utilized in the United States. Measured on the Basis of Fresh Weight Equivalents 3-4 Unit Movement 3-5 Canned Juice and Fruit Flavored Drinks 3-6 Apple Juice Per Capita Consumption 3-7 Buyinngecisions 3-8 Incidence of Purchase: Advertising and Displays 3-9 Fruit Juice Canned: U.S. Packs 3-10 Michigan Apple Crop: Production and Utilization 1974 to 1979 3-11 U.S. Pack of Canned Fruit Juices: Juice/Cider Processed 3-12 1980 Sliding Brix or'Sugar Content Scale for Determining Michigan Juice Apple Price 3-13 1982 Sliding Brix or*Sugar Content Scale for Determining Michigan Juice Apple Price 3-14 ' Effect of Bottom Pruning on Bruising Home Beauty Standard Trees 3-15 Bruise Comparisons on Mechanically Harvested and Hand Harvested Golden Delicious Apples 3-16 Cost of Harvesting, Using the Nest Virginia University Machine 3-17 Total Yield in Tons Per Acre From Three Apple Varieties Grown as Juice Since 1974 3-18 Comparable cost of Producing Juice Apples in 1978 and 1980 on a Acre Basis viii 29 32 33 41 42 47 55 57 63 71 72 75 76 77 LIST OF TABLES (continued) Table Number 3-19 Gross Returns per Acre From Three Apple Varieties Grown For Juice Since 1974 3-20 A cost comparison of an integrated pest management. minimum spray and non-IPM orchard in 1980-81 3-21 1980 Pesticide Summary for Participants in the Pest and Beneficial Mite Study in Southwest Michigan 3-22 Apples: Season Average Processing Prices Received by Growers 3-23 Five Year Average Apple Yields--Michigan Bearing 3-24 Difference Between F.0.B. Price of 12/32 oz. Case of Apple Juice and Raw Apple Prices 1973’1979 3-25 The Top’Six Apple Varieties in Northwest Michigan and in Michigan 3-26 Cost of Shipping Apple Juice 3-27 Apple Juice Shipping Cost 3-28 Common Carrier Rate - Truck Load Apple Juice 3-29 Michigan's Per Gallon Apple Juice Transportation Cost Advantage to Selected Cities From Points in Michigan. New York, Washington 3-30 List of Countries Importing Apples Juice in United States by Number of Years Importing 3-31 List of Apple Juice Imported Countries and Year Importing - 1971 through 1980 ix 78 83 87 91 97 107 113 114 115 116 123 124 Figures 3-1 3-3 3-4 3-6 3‘? 3-8 3-9 3-10 LIST OF FIGURES United States Apple Juice Pack Total Apple & Pear Juice Imports U.S. Per Capita Consumption of Apple Juice U.S. Pack of Canned Fruit Juice Michigan, New York and Washington Pack of Canned Fruit Juice Apple Juice Price - Quantity Relationship Michigan Grower Prices for Juice Apples Calculated Cost Curves for Juice Apples in Michigan and Price U.S. Apple Juice Imports by County Three Market Situations The Changing Market Situation for Apple Juice 25 27 35 49 59 88 122 138 140 INTRODUCTION The impetus which led to the choice of commodities discussed in this paper was the result of questions of several fruit farmers in regard to what they might consider growing, in addition to their present fruit crops. In northwest Michigan. the geographical focal point of this paper, sour or red tart cherry. (Prunus cerasus), has a long history of being the major horticultural crop. The cherry cultivar, Montmorency, has accounted for nearly all the commercial production of red tart cherries. Presently. nearly two million Montmorency cherry trees are grown on over twenty thousand acres in northwest Michigan. The entire state of Michigan had 3.8 million tart cherries growing on 41 thousand acres in 1978. During the 1970's cherry growers planted large numbers of Montmorency cherries. This has caused many in the industry to believe that the crop is being over planted. Growers know that historically, production and price of tart cherries have fluctuated sharply between high production years with relatively low unit prices paid to the growers, and low production years with relatively high prices paid to the growers. These sharp changes in production and price have caused market uncertainty. which has made it difficult for the red tart cherry industry to build and expand into new markets. Some fruit growers. mindful of these past tart cherry industry characteristics, are interested in what other horticultural crops they might add to their farm Operation, that would utilize existing equipment, and even out their farm income. 2 This paper accepts as fact that tart cherries are the primary fruit crop in Michigan's northwest fruit region. It will, therefore. generally mention them in some relationship to the commodities discussed throughout this paper. The two commodities selected for in-depth study were selected after initial analysis of eight horticultural craps which were hypothesized to be economically viable possibilities for northwest Michigan. The list was narrowed down to what initially appeared to be two of the most promising prospects for farmers in the northwest Michigan area. This paper will provide information on the commodities that were eliminated from insdepth investigation after preliminary research and early discussion with representatives of the state's processing industry. Much greater information on supply. demand, and cost will be presented on the one commodity the study of this paper focuses on: the apple juice/cider. Asparagus. the other crop selected, will be dealt with in a separate paper. Information and data on apple juice/cider, along with discussion of what impact these factors will have on the prospects for future growth will be presented. The broad objective of this paper is to determine the economic feasibility of expanding production of apples for juice in northwest Michigan. An over all view of the selected commodity, apple juice/cider, from the grower level to the consumer will be included. The analysis of relevant economic and horticultural factors concerning the feasibility for growers in northwest Michigan to expand the production of apple juice is the body of the paper. CHAPTER 1 1.0 OVERVIEW INFORMATION ON NORTHWEST MICHIGAN AND SELECTED HORTICULTURAL COMMODITIES The Michigan fruit growing region. generally referred to as the northwest, takes in part of several coastal counties along the eastern shore of Lake Michigan. This part of Michigan's fruit belt starts a few miles north of the city of Manistee and runs north along the rolling coastline of the state. taking in parts of Antrim. Benzie, Charlevoix, Emmet, Grand Traverse. Leelanau and Manistee counties. Generally. northwest Michigan fruit growers can be characterized as being primarily producers of red tart cherries. However. a significant number of apples, (4,572 acres) are grown in the region. Also, patches of asparagus have been sparsely scattered throughout the area. although there is no county by county Crop Reporting Service data on asparagus production. The other horticultural crops grown in the region consist of sweet cherries, (8,804 acres); plums/prunes. (1.796 acres); peaches, (493 acres); pears. (402 acres); grapes, (100 acres): bush berries. (blueberries. raspberries, blackberries). strawberries and rhubarb. 1.1 Backgggund Apple Information Michigan Agricultural Reporting Service data indicates that the state has 1.579 apple growers. growing three and a half million apple trees on over fifty thousand acres of land. In 1980. Michigan apple total production was 900 million pounds. 3 t‘:-r .. ,-=—..-_-¢-“ w - ~—<. ._, x . as: 4 Northwest Michigan apple growers represent 16 percent (252) of the state growers. They have growing on their land 383,713 apple trees or 11 percent of the state's trees. These trees grow on 4,974 acres of land, which represents 9.6 percent of Michigan's apple acreage. The Michigan Agricultural Reporting Service figures indicate that northwest Michigan growers have adopted dwarfing apple rootstocks, or compact fruit trees, more readily than the larger apple growing districts of the state.1 Northwest Michigan growers' average number of trees per acre is ten trees higher than the state average of 67 trees per acre. In northwest Michigan. 62.? percent of the apples are grown on dwarfing rootstocks compared to a 54.2 percent average for the state. The data on apple croP utilization for Michigan is not broken down by growing regions. The utilization of the 1978 Michigan apple crop by products show that, of the 680 million pounds produced, 350 million pounds went to fresh market, 237 million pounds were crushed for juice or cider, 148 million pounds were canned. 122 million pounds were frozen and 33 million pounds went to make various other apple products.2 It is generally acknowledged in the apple industry that the northwest Michigan apple crOp is primarily sold to local processors. However, area growers do send significant quantities of apples to local and downstate fresh market packers. 1Michigan Fruit Tree Survey - 1978, M.D.A. - U.S.D.A. 2Michigan Agricultural Statistics - 1980, M.D.A. 5 Some processors have shown considerable interest in apple juice in the past ten years. with utilization of apples for juice/cider ranging from a low of less than 100 million pounds in 1973 to 316 million pounds in 1979. The quantity of Michigan apples that was pressed for juice between 1974-79 ranged from 25 to 32 percent of the crop. The six years average was 27.7 percent. From 1965 to 1979. the quantity of apple and pear juice concentrate imported into the United States increased by over twelve times to an amount equal to 18.5 million bushels of apples. This quantity was equal to more than ten percent of the apples produced in the United States in 1979. or 2.6 million more bushels than were produced in Michigan in 1979. What does all the above suggest? First, that a significant portion of the state apples are grown in northwest Michigan and that the apple growers in northwest Michigan are adapting new apple production practices (i.e. size controlling rootstocks) more rapidly than other areas in Michigan. However. there is still significant numbers of standard apple trees in production, as indicated by the state average of 67 trees per acre. Further. the crap utilization figures indicate considerable growth in the use of apple juice/cider in Michigan and the United States during the past ten years or more. A major portion of Michigan's apple crap is being processed into apple juice/cider. Because of the growth in the state's and nation's apple juice markets and the availability of juice processors in the area. northwest Michigan apple growers may want to 6 consider the economic and horticultural pros and cons of converting existing, older standard apple blocks from the fresh or peeler markets to the juice market, and limit their production cost in those blocks. Then, the grower might consider doing a more intensive job of production on younger dwarf block of apples that have the newer cultivars growing on them. 2.0 PROBLEM AREA In northwest Michigan, cherries are the dominant agricultural crop grown. As a result, there exists a combination of processing facilities and harvesting equipment, with a relative scarcity of quality hand labor. This area also grows a significant number of apples. Apples are the second major tree fruit crop produced in the region behind cherries. The above combination of factors may provide an opportunity for growers to adapt a mechanically harvested apple juice program, if data were to indicate it was possible horticulturally and economically. Spreading the high cost of existing capital investment in mechanical harvesting equipment over juice-apple production may be an Option for some fruit growers to consider. A second consideration is that some northwest Lichigan a'ple producers have had relatively low fresh and/or peeler apple "pack out" percentages. Therefore, their net returns, after storage, handling, grading and packing charges are deducted, at time; could be less than what apples might bring if harvest for the leCO market. Apple growers, with Both standard and dwarf apple trees, who channeled fruit from the standard trees to the juice market, could possibly produce higher quality fresh or processin: apples from their 7 dwarf trees. Generally, apple pickers, whether local or migrant, prefer to pick dwarf trees. In 1979, fifty one percent of the apples sold to processors in the United States were utilized as juice/cider apples. The availability of processors, the scarcity of hand labor for harvest, and probability that apple growers will receive low returns from selling in the fresh or peeler apple marketsif they do not produce a crop that will yield a high "pack out” percentage, all suggest it would be useful to analyze the economics of growing apples for the juice/cider markets. Increasing portions of the United States apple crop are being utilized for juice/cider, coupled with increased imports of apple concentrate, suggest that the American buying public is increasing its consumption of apple juice. The above points indicate a need for a close look at the outlook situation for the apple juice/cider market. 3.0 OBJECTIVES, HYPO'IHESIS AND RESEARCH APPROACH 3.1 Objectives of the Study The over-all objective of the study was to analyze the potential of several horticultural crops as possible diversification alternatives for interested northwestern Michigan fruit growers. Because of the broad nature of the over-all objective, the specific objectives of this study were developed in somewhat of an evolutionary manner. The first specific objective was to determine which of several choices were the most "promising" commodities that might be grown or expanded in production in the region. After selected industry interviews 8 and a review of the supply and demand factors and other economic con- siderations of juice apples was then undertaken. The specific objectives of the apple juice study evolved from the overall objective to determine the economic potential for northwest Michigan farmers to grow more juice apples. 1. Discuss factors of consumer demand for apple juice/cider. 2. Determine the trend of consumption of apple juice/cider. 3. Examine factors of supply of apple juice/cider nationally and in selected states. 4. Summarize available information on trends in the importation of apple juice. 5. Review cost factors in the pnmduction of apple juice/cider in selected regions. 6. Determine the potential for juice production from standard and dwarf apple blocks. 7. Calculate reductions in production and harvest cost by growing and shaking apples for juice. 8. Determine if Michigan has a competitive advantage in transpor- tation cost to selected United States population centers, when compared to the major competing states. 3.2 Hypgtheses 1. There exists some economic potential for northwest Michigan fruit growers individually or as a group to diversify their their horticultural crop mix to spread their economic risk. 9 2. There exists the potential in northwest Michigan to produce more apples for juice markets with positive net returns. 3.} Research Approach The research approach taken in this study was evolutionary in nature. The study's foundation was built on the objective of answering growers' questions regarding possible crops they might grow to reduce the risk inherent in the production of a single commodity. From this desire by some growers for a degree of diversification, the main hypothesis was formulated: That there are some crops that have good economic potential in northwest Michigan. The next step was to develop a list of possible crops that have some history in the region and do some preliminary research as to their future prospects. This investigatory data was gleaned from knowledge- able sources in the industry and include preliminary review of some historical statistical sources. In the narrowing down process, the views of first handlers processor in the Michigan's fruit regions, were given consideration because their acceptance is vital to marketing a grower's processing crops. One commodity was selected for more concentrated in-depth analysis. The data reviewed included published historical statistical information on commodities, and supply and demand trends. Comprehensive interviews with processors in Michigan were part of this stage of the process too. 3.4 Statistical Data Statistical sources were selected that could provide the necessary historical data.on the production, consumption, acreage and prices of 10 the commodities under consideration. This data allows analysis of historical trends of the apple juice utilization in the United States and Michigan's share of the markets. 3.: First Handler Processor Interviews The interviews with representatives of processing firms were aimed at answering specific questions in regard to the selected horti- cultural crops that they have interest in handling: apple juice. The firms were located geographically throughout Michigan. They were selected because they were considered important as potential purchasers of the commodities of interest in this paper. In some cases. they were chosen because their marketing is such that the whole state is affected by their action in regard to the commodities under study. . The specific individuals interviewed at a plant were individuals "in charge" of the management and/or marketing for the organization. 3.6 Other Information Sources For the purpose of fulfilling some of the objectives of this paper, various industry and Cooperative Extension Service publications were utilized. Speeches and/or papers presented at various horticultural meetings were reviewed. Informal interviews with professional in industry, universities, U.S.D.A. and commodity organizations contributed to the objectives of this paper in varying degrees. 4.0 ECONOMIC RELEVANCE OF THE PROBLEM If Michigan apple growers are to realize a higher net return from their harvest of juice apples, currently the lowest priced commodity in 11 the apple market, they must grow and market them at some price that will cover fixed and variable cost and give a reasonable return on investment. The factors that impact net returns are: yields, costs, and price. Yields are influenced by management practices and weather. Costs are determined by prices of inputs, service charges, management practices, and yields. Commodity price is a factor of supply and demand for apple juice. If growers experience consistant favorable demand for apple juice, the market may grow into a market similar to the Florida orange juice market. Some in the industry have indicated this is a possibility. During the 1960's and early 1970's, Michigan's apple utilization shifted from fresh to more predominately processing. In the 1970's, the juice market showed the most growth in demand of the processed apple products. Consumers in the 70's showed consistent preference for 'natural' food products and apple juice is a product that fills this need very nicely. Some would claim that because of the number of apple varieties that Michigan grows, the state's apple juice would be a preferred product. Michigan has, for the most part, an economic advantage in terms of time and distance to many major market areas of the United States, when compared to New York and Washington states. This advantage will increase as motor fuels increase in cost and the pressure to conserve fuel grows in the years ahead. If a close examination of the relevant data for this commodity indicates a likely positive net grower returns, northwest Michigan growers may have an opportunity to spread the economic risks of farming without significant new investment in equipment. \r 1 LJ COthJITIES INITIALLY CONSIDERED In ETUI In this chapter, the list of horticultural crops initially con- sidered to possibly provide a means of diversification for interested growers in northwest Michigan will be reviewed. The results of preliminary industry contacts and the investigation of data sources will be covered. Finally, brief comments on why a commodity or a commodity group was either eliminated or not from further study are presented. Because of the importance of red tart cherries and the concerns about a lack of diversification by some in the growing community, they were not considered as main topics of this paper. The concern is what horticultural crop might be profitably grown in addition to and a complement to the existing tart cherry acreage in northwest nichigan. Initially, a list of commodities was developed to use in processor interviews as a means of determining which commodities they viewed as possibilities for growers to produce in northwest Michigan. The list included apples for juice, asparagus, blueberries, red juice cherries, peaches, sweet cherries, freestone plums, brambles and others. Some of the "other horticultural” crops briefly discussed included strawberries, rhubarb, string beans and pears. Each have some positive 0 (1‘ points, ut in general, the processors did n see prospects for str-nr .) enough demand in any of these to be considered for significant expanded production in northwest Michigan. 12 13 1.0 SWEET CHERRIES There are many cultivars of sweet cherries (Prunus avium) grown in Michigan, with most of the state's production in northwest Michigan. Historically, nearly 80 percent of Michigan's sweet cherries have been utilized as brining cherries. Generally, the brine cherry market can be characterized as being weak from over supply which has resulted in low grower prices. This weak brine market in the seventies and early eighties, was preceded by three decades of growth in sweet cherries utilized as briners. During this time, Michigan's share of the brine market went from five percent to over thirty percent of the farm sales of sweet cherries used as briners nationally. Brine cherries could be viewed as a transparent package that carries sugars and dyes, since the cherry brought from the farmer is manufactured into candied and maraschino cherries. These manufactured cherries are, in turn, used to decorate alcholic beverages, desserts, and salads. They are used also in fruit cocktail, candy, ice cream, fruit cakes and other baked goods. This type of product is victim of consumer concern about adulterated food and its effect on health that grew in the seventies. Natural food products rose in popularity, while sweets and synthetic red dyes were attacked by several groups as not healthy. The canning market is the second most important market for Michigan sweet cherries. However, the importance of sweet cherries used for " ,... - -M--u~—~—v .-.——..—— —_.__._. a " ' v1. . fly“ r: new...) 4 -. l4 canning has trended downward nationally for over thirty years. During this period, Michigan's share of the pitted canned sweet cherries market increased to a position of the second leading producer in the United States. Fresh sweet cherries have been historically a very small part of farm sales in Michigan. Nationally, Washington and California hold the bulk of the fresh sweet cherry market. Because of what northwest Michigan growers preceive as a weak sweet cherry marketing situation there is not a strong trend to expand present acreage of brine varieties. Some growers have and others are contemplating removing their Windsor and Hedelfingen cultivars, because of weak processor demand. It seems clear that sweet cherries will have to experience increased demand for existing (or develop new) products, before there will be much incentive for growers to increase their production in any significant amount in the near term. Because the brine cherry market presently is one of over supply and low grower prices, the long term downward trend of canned, pitted sweet cherries and Michigan small share of the fresh sweet cherry market, it was decided not to pursue further research in the sweet cherry situation. This decision was confirmed by the interviews in which no interest was expressed by processors in expanding their output of brine or pitted sweet cherries. 15 2.0 PLUM/PHONES Thirty-four percent of Michigan's prune/plums are grown on nearly 1800 acres in northwest Michigan. In the late seventies some research was directed at the pitting of Stanley plums in an effort to expand their utilization. And though successful in this effort, there were problems with pit fragments from the stem end of the pits. Also, no strong markets were developed fer pitted plums. Most processors do not see this market expanding for Michigan. This lack of processor interest helps explain why during the seventies, Michigan growers: reduced their acreage by over thirty-five percent, and in northwest Michigan, the reduction was sixteen percent. The trend of plum/prune industry in Michigan is one of contraction to a size consistent with its limited demand. Though plum/prunes are a likeable product in fresh and processed forms, there has not been a strong enough demand pull by consumers or demand push by grower and processors/handlers, as consequence grower returns have been lower than other uses for the land. A strong plum/ prune promotion program may increase demand in the future. However, because the short term demand is expected to continue to be weak. and the fact there was little or no processor interest, it was decided not to look further into the plum/prune situation. 3.0 PEACHES Peaches have a strong tradition in southwest and west central Michigan, whereas, presently less than six percent of the state production comes from northwest Michigan. Between 1973-78, the Michigan fruit tree 16 survey showed that peach acreage and tree numbers have decreased fifty- two percent. Acreage in northwest Michigan decreased thirty-two percent to 493 acres. The expressions of some processors could be characterized at best as very mild interest. It was generally felt that the local fresh peach market was a market which a limited number of growers might consider as a outlet for their production in northwest Michigan. How- ever, our observation is that the present growers in the region appear to have the local fresh market satisfied in normal crop years. 4.0 RED JUICE CHERRIES Processors felt that at present there was no market for red juiced cherries. Processors showed interest in the research effort directed towards using red juiced cherries as a coloring agent and for juice. Neither was considered likely to create a big market. The acreage planted to red juice cherries may be characterized as being at the research level and is not likely to increase significantly in the short term. 5.0 BRAMBLES Brambles were viewed by most processors as not a viable alternative, though some thought a limited number could be grown to satisfy limited demand for the fresh and frozen product. Processors who felt there was room to grow more brambles in northwest Michigan indicated that they would need to be mechanically harvested and only limited acreage would be needed. They indicated that price and demand was good for the limited product they put up, but that the national market is dominated by Oregon and Washington. Bramble berry growers interviewed generally concurred 17 with the opinions of processors, thought they indicated there is a good local fresh and U-Eick market. The local markets appear to be the area where brambles may expand in the immediate future. Fecause of the need to hand harvest brambles, it is likely that in northwest Michigan individual growers' acreage would be less the ten acres for local markets. 6.0 BLUEBERRIES most processors were very interested in blueberries, but questioned if they could be grown in the fruit areas of northwest Michigan. There is what can be described as very limited acreage of high bush blueberries grown in northwest Michigan for local U-Pick markets. The plantings in northwest Michigan are atypical, since they are not on what is considered "blueberry ground". In the short term, the innovative growers may consider the local market advantages to growing a limited quantity of blueberries, on experimental basis. It will take several years before the innovative grower works out growing practices for northwest Michigan, as a result it was concluded that at this time, no firther investigation would be made. 7.0 FEARS Pear production in hichigan did not receive any serious discussion from the majority of the state fruit processors. The processing market in the state is limited to the baby food industry, although there is still some local fresh m rket for pears. Cichigan pear production acres decreased by 71 percent in the 1970‘s according to the 1978 fruit tree survey, and the decline in northwest fiichigan uroduction's “hw— .—.—‘—v -4 A-, vik . 18 was sixty-two percent and production has continued to decrease. With Michigan pear production representing only 1.7 percent of the nation and the pear production centering in the states of Oregon and Washington, there is extremely little liklihood of anything but small local markets for Michigan pears in the foreseeable future. Further, presently the Oregon and Washington pear market is in a state of over supply with softening demand. Therefore, it was decided not to study the commodity further. 8.0 OTHERS Grape and strawberries were only briefly surveyed. Michigan holds a 1.2 and a 2.1 percent share of the national production for grape and strawberries respectively. On a state-wide basis, the acreage of both have been declining. In northwest Michigan, strawberry acreage has followed the trend of the state, while grape production has increased as a result of the development of a boutique wine industry in the region. The general view of fruit industry sources is that no dramatic turn around is likely in Michigan strawberry production, because of the strong market competition of California and Mexican berries. The successful development of mechanical harvesters for strawberries may aid present producers to remain relatively competitive but is not expected to cause a significant acreage expansion. The expanding tourism industry may allow some limited increase in wine grape production for individuals with the personality and resources ‘to manage the complete process of a boutique winery. JV~ 19 9.0 ASPARAGUS The idea of expanding asparagus production received mixed reviews from processors. Generally, processors in northwest and west-central Michigan looked favorably on expanding asparagus production, while processors in stouthwest Michigan thought the market was full and demand weak. Northern Michigan processors indicated asparagus fits in well with their commodity mix and they viewed forzen asparagus as a good product for both consumer and institutional trade. The general feeling among processors from Oceana County north was that the market was good for tap quality frozen asparagus. The key is quality and the industry needs to work on improving the quality of its production. Because of the expressed positive interest by growers and many west/northwest Michigan processors in expanding asparagus production, it was decided to investigate its possibilities further” This was done in a separate paper. 10.0 JUICE APPLES With only a few exceptions, processors were very positive about the prospect of expanding apple juice production. It was described as one of the bright spots in the fruit processing industry. Concern was expressed about the minimal standard for apple juice, (i.e. the only requirement that the Brix level be 11.3%, with no specification on the type or source of sugar). A clear majority foresaw (a bright future for the apple juice. One grower-processor indicated that.he was not in favor of expanded production, because it would not 20 be good for the growers, indicating grower prices would decline with increased production. After reviewing the initial response of first handler processors, apple juice was selected for further study. This commodity clearly had the most processor and grower interest, though neither group was aware of the full range of economic factors that have influences on the product marketability. Therefore, it was decided research would be done on the product, looking at consumer, producer and handler related factors. The demand for apple juice has been a highly significant factor in all apple markets in the seventies. Large quantities of apple concentrate has been imported in an effort to meet the expanded consumer demand for apple juice. The trend to natural products: is expected to result in added strength of demand.for juice apples in the future. It is therefore, the goal of this paper to examine the above and other trends in apple juice. 11.0 GROWER CONSIDERATION From the individual grower's standpoint the advantages of diver- sification is primarily one of spreading risk. The two principal risks that growers face are: climatelogical and economical. These two risks are not always independent variables in horticultural production. By producting several different horticultural crops which have a different bloom and/or harvest season, the weather risk can be reduced and cash flow may be improved. 21 Perennial horticultural crops represent a long term investment risk. The production period often lasts several decades, during which time market conditions for any single commodity may change significantly. If the change in the market is negative, the initial good-looking production prospects may be bad in the long run, because of unforeseeable future events. Growing several different commodities will tend to spread the risk of uncontrollable climate and market changes for the farmer. In northwest Michigan, asparagus is harvested before cherries. Apples are harvested after cherries, and all use much of the same equipment to produce. Thus, they may help to spread the overhead cost. Apple juice and asparagus production nicely bracket cherry operations in northwest Michigan. There was an expressed positive processor interest in the two commodities. Growers and processors did not seem to be fully knowledgeable about the others, and/or the consumers concerns and difficulties that relate to the two crops. Also of interest, was the fact that the two commodities were different from each other, apple juice increasing while asparagus has a decreasing per capita consumption, yet grower asparagus prices appear to be relative stronger than grower apple juice prices. For these reasons and others, further research seemed warranted. 22 12.0 SUMMARY In this chapter, we reviewed the prospects for expansion of several horticultural crops. The merits of expanding were judged after some preliminary interviews with knowledgeable fruit industry sources and a.data search. It was concluded in most cases, the prospects for growth in markets indicated only a limited possibility for the crops. Generally, it was viewed that local fresh market sales merited limited expansion and that processors did not preceive sig- nificant increase in demand for processed products from the horticultural crops listed excepting apple juice/cider and asparagus. It was the feeling of most interviewees that the apple juice/cider market would continue to expand as a result of the public's interest in "natural“ products. In regard to asparagus, the market situation was viewed somewhat differently, with it being a more complex and conflicting situation. However, the general feeling is that Michigan growers could take economic advantage of these factors. These preliminary conclusions about apple juice are what the balance of this paper will explore in greater detail. The asparagus situation will be delt with in a separate paper. -._ l a. I.._§ CHAPTER III THE APPLE JUICE MARKET SITUATION In this chapter, the many factors which affect the marketing of juice apples from the farmer to the consumer will be explored. Information and data will be presented on the historical trends of demand, supply and imports of apple juice in the United States. A section will be devoted to the examination of production costs and some possible manage- ment decisions that might reduce them for the grower. There will be a section on transportation costs as they relate to regional competition in the apple juice industry. Also, we will include data on competing apple juice production in three of the largest apple producing unfit states: New York, Washington and Michigan. 1.0 DEMAND FOR APPLE JUICE IN THE UNITED STATES One of the reasons apple juice was chosen for inrdepth study was its strong growth trend in demand and because processors expect that the demand strength will continue. This section will examine the consumer demand side of apple juice markets. We will review trends in the United States market and per capita consumption of apple juice. A look at factors that influence consumption, consumer preferences and buying decisions will conclude this section on demand for apple juice. The United States apple juice pack increased 170 percent between the years 1965 and 1979; fifty-eight percent in the five-year period beginning 1975 to 1979. as shown in Figure 3-1, Table 3-1, page 25 and 26. The five year average U.S. pack for the 1965 to 1969 period was a average 23 24 of 10,159 cases, while for the 1975 to 1979 period, the average was 20,639 cases. The increase from the 1965 to 1969 average pack to the 1975 to 1979 average pack size was 103 percent. In the 15 year period from 1965 to 1979, imports of non—citrus juice concentrate (apple and pear) increased by 1,127 percent with a 212.6 percent increase in the five-year period from 1975 to 1979, Figure 3-2, Table 3-2, pages 27 and 28. The five-year average imports for the 1965 to 1969 period was equivalent to 1,985,676 bushels, while for the 1975 to 1979 period was equivalent to 11,041,470 bushels, the percentage increase from the 1965 to 1969 average base to the 1975 to 1979 period average was 456 percent. This data clearly shows a strong trend of consumer acceptances of apple juice du ing the 1970's. During the period from 1966 to 1979, imports of apple and pear concen- trate converted into pounds of apples, equaled an average of 25.7 percent of United States apples that were used for apple juice. fhe range of juice imports for the same time period was (equivalent to) from 14.7 to 40.6 percent of U.S. apples processed into canned apple juice, Table 3-3, page 29. In 1 79, the United Statespopulation purchased apple juice that \O amounted to the equivalent of 1/3 of all the apples utilised from the apple 0 I crop; up from 24.5 percent of the 1977 and -6.5 percent of the 1978 apple crop. This again indicates the strong trend in demand growth for apple juice in the United States, and the increasing signi ' :1 concentrate being purchased to meet part of the increased demand. Future market prospects of apple juic depends on continued ccnsan:r ‘1) cceptance of apple juice. Jone aspects of the consumers' outloo; on u pple juice will 3 ramined in more detail in the rest or this seetion. p) (D P Figure 3-1 28,000- 26,000: 24,000- 22,000- 20.000- 18.000- 16,000- 14,000: 12.000- 10.000- 8,000- 6,000— 4.000- 2,000- 000- UNITED STATES APPLE JUICE PACK 1000's of cases* I l I l l I l l l l J [[1 66 67 68 69 70 71 72 73 74 75 76 Time in Years *Based on figures from National Food Processors Association 25 77 78 79 '11-- . . —.. _.._ . -- - c \ —_.. Table 3-1 UNITED STATES APPLE JUICE PACK* PACK IN % OF CHANGE YEAR 1,000's OF CASES FROM PREVIOUS YEAR 1965 9.670 1966 8. 953 -7 .4 1967 9.029 1.0 1968 9.641 6.8 1969 13 .503 40 . 1 1970 14 .472 7 .2 1971 14,148 -2.2 1972 1#,277 1.0 1973 15 .623 9 .4 1974 16.399 5.0 1975 15.926 -2 . 9 1976 16.533 3.8 1977 19 .828 19 .9 1978 24.790 25.0 1979 26.120 5.4 19801 26,810 2.6 1Preliminary *National Food Processors Association 26 TOTAL APPLE & PEAR JUICE IMPORTS Single strength equivalents in millions of gallons 1 U.S.D.A. - FvoSe l m' l Figure 3-2 70,000- 65 0000- .55 0000' 45 .000- fillion ‘ nfllon 5111810 35 9000' urength 25,000- 15,000- 5,000- 196 5 66 6:7 68 69 70 71 72 27 '75 74 75 7677 78 79 Table 3-2 TOTAL APPLE AND PEAR JUICE IMPORTS Single Strength Raw Fruit Total :29; Total Gallons 42 1b. Bushels 1965 5,049,295 1,402, 582 1966 3,080,203 855,612 1967 2,535,422 704,284 1968 10.908.738 3.030.205 1969 14.168.506 3.935.696 1970 16,834,532 4,678,759 1971 34.112.513 9.475.698 1972 25,632,907 7,120,252 1973 20.697.580 5.749.328 1974 21,495.95? 5.986.623 1975 21,216,285 5.908.737 1976 34.387.544 9.576.259 1977 31,906,859 8,886,058 1978 44,394,152 12.363.770 1979 66,501,098 18,472. 527 1980 43,520,365 12,089,324 *1981 33.728.378 9.368.994 . .v .....- _ C p-— SOURCE, U.S.D.A., F.A.S. * 1981, January through May. All of the imports for this period are 125% higher than is in the same 1980 period. 28 u».e.m.-.-I\ Fhuclu-vilm Vulz- anh< 7!! 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New Show 0.88 82 moss mom mesa muse ESE 2033: 5225 needed so 82:8 22.32 mama so 888 moss eon BESS .m.= so Seemed 2. mesmEzocuomEomzH mzoSdz mazes nuance cEmEE es @228 45.8 < me 2.8%: mugs generated 32.8 Sausage .m.= gm» mezwn<>enom erons aware so mHm . mamam use mooasn wanna .mowsn and mode .mxcanc doac>mam washm .mxsaad vmmmxumman concusom ”can moauowopmo* .xo03\ouovm\mua:= ca psoso>oz was: amvca mo chasm meaaowopmo mzcnm psmzo sew new mom mom nea ma.ea oo.na os.ma mm.ma sm.oa em.m neeao\eea=a eaee< asm aom ena ama mac em.nn ma.an oa.ms oo.m¢ an.ns mm.es ooaza passe owma mama mama aama wama mama coma mama mama aama mama mama aama xeo:\oucem amoucoouom *amoomeoz 9H2: i .28 32 eczema moeane> - sssm<4h BHamm az< HUHDH amzzasmo -o.o emote .na mum enemas 7!: Table 3-6 APPLE JUICE PER CAPITA CONSUMPTION 2FRUIT OUTLOOK AND SITUATION, July, 1981. pages 31 & 34, Civilian Consumption Only *Preliminary 36 Canned & Chilled Fruit Pounds Juice (excluding frOEen) Fresh Weig t Year Product Weight Baals Equivalent 1960 .89 1.4 1961 .95 1.5 1962 1.05 1.6 1963 1.21 1.9 1964 1.49 2.3 1965 1.53 2.4 1966 1.17 1.8 1967 1.35 2.1 1968 1.69 2.6 1969 2.41 3.7 1970 2.6? 4.1 1971 3.24 5.0 1972 2.62 4.0 1973 2.56 3.9 1974 2.54 3.9 1975 2.86 4.4 1976 3.32 5.1 1977 3.31 5.1 1978 4.26 6.5 1979 5.27 8.1 *1980 4.76 7.3 1U.S.D.A. - E.R.S. ' 7‘. «In». - A 37 Dieting has become a major concern of a great number of American people during the 1970's. Results of a consumer study on dieting conducted by CHAIfi STORE AGE showed the 72 percent of dieter indicated that they feel the food they eat has the most effect on general health.1 Related to dieters attitude on general health, the study further indicated that a substantial number of dieting consumers reduced or eliminated the use of sugar-based beverages which are substitutes for apple juice. here spe- cifically the study showed that 61 percent of the women and 52 percent of the men reduced or eliminated the use of sugar-based beverages. This would tend to increase the demand for apple juice which is viewed as a "natural juice" by consumers, because it does not have a sugar base as do some of the substitute drinks. The CHAINSTORE AGE study further showed that 30 percent of the dieters surveyed included or increased their con- sumption of fruit juice. The importance of dieters and dieting behavior for products like apple juice is strengthened by the fact shown in this study that a substantial percentage (36 percent of adult females and 21 percent of adult males over age 25) were on a weight-loss diet. This information illustrates some major reasons for the increased demand of apple juice during the decade of the 1970's. Another interesting finding from this study is that the n nber of consumers who are dieting tends to increase with household income. Thus with increases in consumer income over time this suggests that a higher n dieting and hence would *1. percentage of the population may be involved increase their purchases of products such as apple juice. l - ._ - ShAINCTCRZ ACE/RUPERhaRKET, 43rd Annual nielson Rev1ew of ”stall Grocery frends, October, 1978. 38 The concern by consumers about dieting, nutrition and an avoidance of sugar-based foods provide a set of reasons for the increasing demand trend for apple juice. These patterns for consumer preference are expected to continue in the future and will probably continue to show a strong and growing demand for apple juice. The increase in demand for apple juice may also be related to the fact that the ayerage age of the U.S. population has been increasing in recent years. A study by Salatke and Buse1 found that consumers tend to consume more fruit as they grow older. Although the study was related primarily to fruit in general rather than specifically to apple juice, the increasing preference for fruit by other consumers may also be a factor in increasing consumer preferences and the growing demand for apple juice. Since the U.S. population is expected to continue to increase in average age in the future, this factor may also tend to continue to increase demand for apple juice over time. This suggests that the apple industry needs to emphasize the natural nutritive value of apple juice, to reinforce consumer attitudes that identify positively with apple juice. 1 Salatke, L. and Buse R., Household Food Consumption Patterns in the United States, U.S.D.A - E.S.C.S. - T.B. #1587, page 20, January, 1979 39 1.2.2 Factors Affectigg Buying Decisions Knowing what influences consumer buying decisions will aid the apple industry in promoting sales for apple juice. This sub-section will examine factors that impact purchases of apple juice. The POPAI/DUPONT Consumer Buying Habits Study reported in CHAINSTORE ACE/SUPERNARICE‘I‘l presents data based on 4,000 consumer interviews con- ducted in some 200 representative supermarkets in the United States between October and November of 1976. An individual only needs to enter a modern supermarket to know that shoppers have to choose between many thousands of items in the supermarket. The POPAI/DUPONT Study ranked the top one hundred "Shopper Stoppers" in the supermarkets surveyed. The first item listed was fresh vegetables; fourth, fresh fruit; canned fruit juice and drinks were fifty-first; frozen fruit juice concentrate an“ A ..- .wa; as... were sixtieth; and cannedmfl bottled fruit juice was eighty-fourth on their list of one hundred. The survey measured what was referred to as the incidence of purchases, which is a measure of popularity of an item. and not volume. The survey did not measure multiple purchases of the item, or different size containers among the products purchased. For example, if there were 15 purchases for each 100 customers, the incidence of purchase (IP) would be "15.00". However, the quantity purchased would not be known. 1 CHAINSTORE AGE/SUPERMARKET, POPAI/DUPONT, Consumer Buying Habits Study, pages 41-145, December, 1978. 40 The report states "canned fruit and vegetables and their juice derivatives are strong impulse items, with in-store buying decisions well above the grocery store average. People are not only reacting to price in category, but also to display and product availability--." "Canned fruit juices and drinks also have a higher than ayerage percentage of in—store decisions, canned and bottled fruit drinks have an in-store decision factor of 71.2 percent with the majority coming from the ”unplanned" column. Private label fruit drinks hays an in-store decision factor of 87.5 percent with 81.3 percent coming from the impulse buyers. Canned and bottled fruit juices IP is similar to the fruit drinks IP, again higher than average--." See Tables 3-7 and 3-8. pages 41 and 42. The IP for products mentioned above was for fresh vegetables 99.31; fresh fruit, 61.03; canned fruit juice and drinks, 15.52; frozen fruit juice concentrate, 14.13; and canned and bottled fruit juice, 10.79. The July, 1981, issue of CHAINSTORE AGE/SUPERMARKET indicated that another reason for the increase in sales of canned juices and the decline in fruit-flayored drinks sales is the cost of sugar. The cost of sugar causing fruit flavored drinks to be relatively less price competitive. The volatile sugar market was expected to see further wholesale price increases of twelve to eighteen percent in 1981. CHAINSTORE ACE/SUPERMARKETl indicates that consumers perfer the 64 ounce glass container of apple juice. It is a "perfect" size container of apple juice. with shipments having increased 54 percent from 1977 to 1978. 1 CHAINSTORE ACE/SUPERMARKET, July, 1979 53...»? Ha. .. .v. $1.. Enjm mama .sonsoooo .essmazsssom\so< magmzaaro 41 m.ao ~.no a.~ a.~ ~.aa o.om o.ooa ooass eases aoaeeoo s assess sosoo m.ao m.on o.a n.n a.m a.~m o.ooa ooasa seeps m.oa a.am m.e a.aa e.a~ o.ooa ooasa oasnaoaeso a.oo m.oa a.o a.~a m.mm o.ooa nossexaz e moans ammonsmno m.no m.oo a.m m.oa a.so o.ooa ooasa oases o.ao o.on a.~ o.~ m.oa m.oa o.ooa unease eases noaesoo a assess m.ao N.ao m.o m.oa o.ooa aoooa ooe>ass m.aa o.om a.m o.a m.oa m.oa o.ooa essays eases ooaeeoo s eossso ~.o s.~m m.~ m.~ o.aa ~.am o.ooa ossaao e ooasa eases eossoo oeoauaooo eossoaoso + seasons asses + eosssas aosssas someones sooooss 83m 33333 :1 sa8a 389 \ nuance nuacosam R mzoamaoso ozasom a-m oases mama .sopsoooo .emsmazmmsom\mo< mmosmza<=o No.o mm.o ao.n aa.o sm.s oooasa eases soasoom a museum noseo mm.oa am.a nn.a ma.a ma.a ooasa seems ma.a mo.~ am.m an.a om.a ooasa oassaoooso ma.a mm.o ma.o mm.o nonsexaz e ooasm anuonseno aa.m mm.o ma.a ma.a mm.a ooasa oases sm.m mm.m n~.m mm.a ma.a nooasa sagas eoaeoom o mosses mm.o em.o am.o sa.o aoooo oeo>ass mn.m mm.a ma.a mm.o ma.a nssaso sagas eoaeeom m eoseoo omm mm.o mm.m sma ma.a nssasQooasa eases aoesoo seasons seasoao ssaaoao soaaoao someones sooooms a oz e oz a owm9o>< .>ee e .>s< .>a< oz .>a< oz mxsqmmHn nz< oszHBmm>n< «mm<:um:m ho mozmnaoza m-m oases 42 43 Other factors that may have aided the continued growth of apple juice purchases were the freezes in the Florida orange groves, which weakened orange trees. The trees have difficulty returning bloom for the next crop and the price of orange juice increases as a result of the small supply. As a result. making apple juice relatively more price competitive with orange juice. 1,} Conclusion Apput Demand for Apple Juice In this section we reviewed the factors of demand for apple juice in the United States. It was noted that the apple juice pack has increased dramatically, 170 percent in the period 1965 to 1979. The increase for the 1975-79 period was nearly 60 percent. Import of apple and pear concentrate increased 121? percent in fifteen years, 212.6 percent in the 1975-79 period. It was noted that the explosive growth rate‘was evident in data available in several issues of CHAINSTORE AGE/SUPERMARKET, a respected industry publication. Its data showed a seven year increase in apple juice sales of 141.1 percent or 20 percent per year average with a 610.5 percent increase in gross profits. Further, knowledgeable sources in the processing industry expect this growth rate to moderate some to around ten percent a year over the next five years. In Table 3-7, the sub-category indicates that 85.3 percent of the purchases of apple juice are made in the store, while 24.7 were planned purchases. In Table 3-8, that of those purchasing apple juice, in store display appears to be the most important factor, while other forms of advertising seem to be significantly less important. Advertising and no display having the lowest IP even lower than no advertising and no display. 44 We see that per capita consumption increased very dramatically and that the reason for the increase was mostly the consumer's desire to have a "natural" product, and that on those purchasing apple juices over 85 percent made their decision in the store. The fluctuating sugar market and freezes in Florida were added factors which aided the improved competitive position of apple juice. In general, economy theory states that demand for food has a low income elasticity (the percentage of income spent on total food declines as income rises). However, there are indications that apple juice may have a.higher income elasticity than the fOod in general, since dieting and natural feed tends to become a concern with increases in income. From this positive information, it appears that consumers will continue to buy natural apple juice at a competitive price. The a- vailable infermation indicated demand will continue to expand in the foreseeable future. 4 _l ‘-_-— su - . 45 2.0 SUPPLY OF JUICE arELJS IN T’E UNITED STATES This section will review the historical supply data on juice apple production in the united States and in selected states. It will show that United States has significantly increased production of juice apples in the decade of the 70's. 2.1 Apple Juice Production in the United States The United States production of juice apples increased by 59.1 percent during the decade of the 1970's according to 3.3.D.A. figures, Table 3-9, page 47, Figure 3-4, page 46. The states of New York, Michigan and Washington account for roughly 50 percent of the 1979 juice apple production. Collectively, production trends in these states closely parallel the national production trend. Individually, the three states apple juice pack trends show significant points of variation from each other and the national pack, Figure 3-5, page 49. Nashington apple juice pack in the 70's trended sharply higher, while New York state production trended sharply down from 1970 to 1975 then in 1976 through 1980, the production was sharply upward. Nichigan's juice production was the most erratic of the three states moving up, then down, back up to a lower plateau, then down and then rising sharply at the end of the decade. A review of total production data shows that nichigan's low juice pack years of 1973, 1976 and 1977 were associated with shorter than average total production caused by cold weather, while New York's smaller decrease in juice packed could not be associated with a short crop year. The data indicated that in each of the three states, supplies of apples for juice increased, in response to increased consumer demand during the late 1970's. Figure 3—4 U.S. PACK OF CANNED FRUIT JUICE (Juice/Cider Processed in Millions of Pounds) U.S.D.A. AG STATISTICS 2000— 1900- 1800- 1700- llions 1600- of _ unds 1500_ 1400- - T 13..- 3 ' E 1200- ' \ 1100- /// \ - y \ lOOO- é E 1970 71 72 73 74 75 76 77 78 79 1970-74 75-79 Five Year Average 46 macaudnomo Hmzua>auca mo enamoaomwc cwo>0 on decades“ 0H0 canonm no 00090 moawwvcwzu ovdvm 0200 you coasn 0:0 .Hovao .ndmo:0> mom uocmzho haemoz** omeo>< Ham» o>wm * 0:00: «.0: «.qwx ..0H a.daH a.daH «.muH “.000 ..H0Q ..:=oo “.000 n.xn< «.0003 u.m> £03 0.550. “.0 .0 7H .0 .020 ..0 .z a: .z “.0 .0 70 .2 300800: 7000: 3001.3: "000:8 muse» msoand> I moapmapmam Hdnzaazownw< 0.0000 0.000 0.00 0.000 0.000 0.00 0.0 0.000 0.000 0.000 00** 0.0000 0.000 0.00 0.0% 0.000 0.000 0.: 0.0H0 0.30 0.000 as... 0.002 0.000 0.00 0.000 0.00 0.00 0.0 0.03 0.000 0.000 00.... £003 0.000 0.3 0.000 0.00 0.00 0.00 0.000 0.00 0.00H 00.... 0.080 0.02 0.00 0.000 0.3 0.00 0.000 0.000 0.0: i. 0 .00: 0 .80 0 .3 0. 000 0 .00 0.00 0.000 0.000 0.00: 3.000 0.00: 0.000 0.00 0.000 0.00 0.00 .350 5 0.000 0.000 0.000 00 H.002 H.000 0.00 0.000 0.00 0.00 0.000 0.09 0.03 00 0.0000 0.000 0.00 0.000 0.2. 0.00 3: 0.000 0.03 0.000 R 0.00.: 0.000 0.00 0.000 0.000 0.00 0;: 0.000 0.000 0.000 00 0.0000 0.000 0.00 0.000 0.0: 0.000 0.00 0.000 0.000 0.030 00 0.002 H.000 0.0: 0.000 0.00 0.00 0.000 0.000 0.02 00-00 .2000. .850 20> .2 .083 .2, .530 .080 0.3» .2 .03: .0200 .80» mxo coweoseonm use» 3 were: 38. domnoooum mucsom soaaaaz couposuonm Quad 09 :fima .onBmom soamcouxm o>0psuoaooo 0:0 mOHHmwpmvm .mOHEocoom “momaom 0.000 0.000 0.00 0.00 0.00 0.00 0.000 0.00 0.000 0.000 0.000 0.000 0000 0.000 0.00 0.0 0.00 0.00 0.00 0.00 0.00 0.000 0.00 0.000 000 0000 0.000 .<.z 0.0 0.00 0.00 0.00 000 0.00 0.000 0.00 0.000 000 0000 .0.0000 0.000 0.00 0.00 0.000 0.00 000 0.00 0.000 0.000 0.000 000 0000 0.0000 .<.z 0.0 0.00 0.000 0.00 .000 0.00 0.000 0.000 000 .000 0000 0.0000 .0.0 0.00 0.00 0.00 0.000 .000 . 0.00 0.000 0.000 000 000 0000 0.0000 .<.z 0.0 0.00 0.00 0.00 0.000 0.00 0.000 0.000 000 000 0000 0.0000 0.000 0.00 0.00 0.00 0.00 000 0.00 0.000 0.000 000 00 0000 0.0000 .0.0 = = 0.00 0.00 0.00 000 0.00 0.000 0.000 000 000 0000 0.0000 0.000 = = 0.00 0.00 0.00 000 0.00 0.000 0.000 000 000 0000 0.0000 0.000 000000 000 0.00 0.00 0.00 000 0.00 000 000 000 000 0000 0.0000 0.000 0.00 0.00 0.00 0.00 000 0.00 000 000 000 000 0000 0.0000 0.000 0.00 0.00 0.000 0.00 000 0.00 000 000 000 000 0000 0.0000 0.000 0.00 0.00 0.000 0.000 .30 0.00 000 000 000 000 0000 .0.0000 0.000 0.00 0.00 0.00 0.000 000 0.00 0000 000 000 00000 0000; .0.000 .0000 .00 0000.0 000000 .5; .00 .0200 .0300 0.00.00 0.3.0.0 .0003 . I if 00000 0050.. 5. .0000 as: $230 8050 5 57 58 2.5 Conclusion from the Supply Data This section reviewed much of the available historical data on juice apple production in this country with emphasis on several of the major apple producing states. The data showed that juice apple utilization has responded to the increase consumer demand, as discussed in Section 1. However, it was also clear that juice imports hold a significant share of the market for apple juice in the United States. Information was presented that shows the portion of Michigan apples utilized for juice increased to 37 percent of the state's apple crop. In 1979, this represented 51 percent of the apples utilized for processing in Michigan. Fifty-four percent of the U.S. processed apple crop in 1980 went into apple juice. Even though apple growers have committed more apples to the juice market. it appears as if they have not enjoyed all the potential benefit of the expanding consumer demand because of the increasing amount of juice concentrate imported into the United States. 3.0 ECONOMIC CONSIDERATIONS OF JUICE APPLE PRODUCTION Earlier. it was pointed out that consumers have increased their purchases of apple juice and that this trend is expected to continue. Further. juice apple supplies have increased significantly in the past decade. and that increasing amounts of apple concentrate has been imported into the U.S. The growers prospects to benefit from the increased consumer demand for apple juice seems to have been hampered because marketers were filming the increased demand with increasing quantities of imported juice concen- trate. Relatively, a few apple growers seem aware of the magnitude of ' m4 v - 0. , 0 .0 . .0. "—7,-nam-‘w 7‘ ~30! . .‘ A. e .— 'ru'cw- ""‘I .Q' 59 imported concentrates and its influences on U.S. apple prices. There- fore. there has been a little talk of import controls on concentrated juice. Figure 3-6 APPLE JUICE PRICE — Quantity Relationship 3 D1 D 2 . bc1 S. 1 P4 ...... -- P I"; ;:::.-’.--‘=- 6. l I%""" “'1' I ! ll ' a '3 I I .I ' I 3 1: ! £14241, «‘3 _ Quantity Figure 3-6 illustrates how even with a strong demand message (quantity-price). prices paid to growers do not increase significantly. Some Quantitiy Q1 of juice is purchased at price Pl by consumers from domestic production, due to relatively seasonally fixed production and allocation of apples, only a limited supply of U.é. apples are made a- vailable from domestic sources. However. the food industry observing a strong consumer demand recognized that they can import juice concentrate profitably at P1 price or less. The result is that both domestic Supply Curve 3d and imported juice Supply Curve Si’ were available to the market r'w‘f-rq—‘Fv-‘w—fl-rfi-r‘t-fi- ‘ , . . .. .- _- Q"... l a“- A 60 at P1, price or less. The price shifted lower along Demand Curve D to 1 P2 with Q2 being marketed. However. because domestic demand for apple juice continued to strengthen. the demand curve shifted to the right to some point represented by demand curve D2. The effect of this shift to the right in demand was a new price P , the same as (or nearly) P1 when the original quantity Q1 was available from domestic source only. If the apples for the increased demand had come from domestic sources only. the juice price would have increased to some higher price. Pu, along to new demand curve. D2. with some quantity Q“. marketed. 0n the other hand. a very rapid grower price increase for juice apples and correspondently fresh and peeler prices may have resulted in apple growers expanding their planting. The increase production could result in lower prices in the long-term. assuming eventual increase in supplies exceeded demand. It must be recognized that under present U.S. government policies. the apple market is a world market for U.S. apple growers. Therefore. the juice market is subject to world apple supply and demand conditions. Further. if U.S. consumer prices for apple juice were to increase to a level higher than competitive juices (i.e. orange) and juice type products, demand growth for apple juice might stagnate. And with the relatively fixed nature of apple plantings. an over supply situation could develop, resulting in lower grower returns. 3,1 The Differences of Juice Apples This sub-section will look at some of the factors that impact on achieving a favorable economic return for juice apple growers. Those factors most controllable by producer. are the items that directly affect their cost of productions. ,.......-4.-- w—qoq H, gr. - r l .‘ “ A, ,". - ' _ . -‘ - v - 61 In the past. juice apples were considered the "junk" apples of the United States apple industry. However. with apples utilized for juice approaching twenty-five percent of the apples grown, to think of them as "junk" is less than a positive image for the strongest growth item in the industry. Very few U.S. growers will admit to growing apples specifically for the juice market. There are exceptions though, and growers are beginning to consider the possibility of growing selected blocks for juice. Typi- cally, many juice apples are sort—outs from the fresh pack or processing lines. Generally. they are undersized or lack red color or damaged fruit. Most of the apples going to fresh-packing houses, or to processors. have . _,. “ll, 4.2-“, not reached their highest level of internal sugars. Generally. apple juice processors prefer apples with high brix or sugar content, preferably eleven percent or above. The other apple markets are willing to accept apples at a lesser brix or maturity level. {3 ‘ Presently, there are no standards fer juice/cider apples beyond the U.S.D.A.‘s .1! definition of cider apples: free from decay, worm damage and internal breakdown. Grade A apple juice is to have a brix level of at least 11.5 percent.1 During the 1980 harvest season. the Michigan Processing Apple Grower Marketing Committee signed an agreement with two apple juice concentrate processors to purchase juice apples on a sliding brix scale 1The Almanac 1977 of Canning, Freezing. Preserving Industries, 62nd Edition. page 281 62 as the pricing factor. Table 3-12. Page 63. This scale, developed by processors and growers for the first time. set up a quality standard for a base price for juice apples. In 1980. it was 11.0 - 12.4 brix at $3.50 per hundred weight. Loads of apples above that received a bonus and below the 11.0 brix. a lower price than base was paid. One processor re- ported that sixty percent apples received were in the 11.0 - 12.4 category, 16 percent were below 11.0 brix and 26 percent were above the 12.4 brix level. The processors indicated they, on the average, paid more than $3.50 per hundred weight. during the two week test period.2 One of the effects of a pricing system based on brix is to encourage growers of apples destined for juice plants. to leave the fruit on the tree a little £5 longer. to raise the sugar content. The sliding scale was not established if for the 1981 crop. but was developed late in the 1982 harvest period. Practically. all processors who receive apples with no brix standard must blend varieties or loads of apples if they want to make the U.S. Grade A of 11.5 brix standardt This may account to be the variability in the quality of apple juice available to consumers. Tom Butler, Manager of Michigan Processing Growers, points out some problems in establishing brix standards for juice apples.3 1. "No agreement among processors." 2. Single strength and concentrate processors need to be treated separately, since single strength processors cannot recover the extra cost of high brix apples, that are necessary for concentrators to increase their yields. 2Butler, Tom.. Michigan State Horticultural Society, One Hundred and Ten Annual Report, 1980. page 65. 3mm 0'- 9r Table 3-12 1980 Sliding Brix or Sugar Content Scale for Determingng Michigan Juice Apple Price Sugar or Brix ' Content Price per CWT* % of $3.50 14.5 - Up 4.03 115 14.0 - 14.4 3.99 114 13.5 - 13.9 3.92 p 112 13.0 - 13.4 3.82 109 12.5 - 12.9 3.68 105 11.0 - 12.4 3.50 100 10.5 - 10.9 3.33 . 95 10.0 - 10.4 3.08 88 9.5 - 9.9 2.77 79 9.0 - 9.4 2.38 68 9-5 ' 8.9 1.93 ; 55 8.0 - 8.4 1.40 40 SOURCE: Michigan Processing Apple Growers as published in One Hundred and Tenth Annual Report of the State Horticultural Society of Michigan. 1980. Page 64. *hundred weight 63 Table 3-13 1982 Sliding Brix or Sugar Content Scale for Determining Michigan Juice Apple Price 33:31.? Brix Price per CWT* % of $4.25 13.0 - Up 4.76 112 12.5 - 12.9 4.63 109 12.0 - 12.4 4.46 105 11.5 - 11.9 4.25 100 11.0 - 11.4 4.04 95 10.5 - 10.9 3.88 91 10.0 - 10.4 3.36 79 9.5 - 9.9 2.89 68 9.0 - 9.4 2.34 55 SOURCE: Michigan Processing Apple Growers Newsletter. Volume 22 No. 14, October. 1982, page 1 *hundred weight 65 3. Each processor produces a different "type" of juice. there- fore. there is a lack of uniformity in apple juice. 4. Needed is a uniform representative sampling method. 5. Develop more accurate methods of reading brix from samples. 6. Work on rot and trash tolerances. R. J. Gilliam, of the Coke-Cola Company, is a proponent of the Brix scale. as indicated by his remarks before the December, 1980, meeting of the Michigan State Horticultural Society. entitles, "Should Apples for Juice be Graded on a.Brix Basis?" He indicates that both the processor and grower would benefit from such a system. If the processor of apple concentrate were able to determine cost, quantity of raw product, and schedule more accurately. he could give more of a commitment and greater "financial award" to the grower who "cares for his fruit in a proper manner and harvests at proper maturity. Both years. the Michigan Processing Apple Growers Division of the Michigan Agricultural Cooperative Marketing Association, Inc.. agreed to a sliding brix scale with Coca - Cola Food Division of Paw Paw, Michigan and Indian Summer of Belding, Michigan after the harvest season was in progress. These late agreements were of concern to some individuals because single strength juice processors had previously agreed to a base juice apple price. also, because growers had made many of the harvest and marketing decisions. The change made it difficult for them to knowledgeably evaluate all options for the crop once they were in harvest season. Perhaps with some research, the state- ment by Butler that the need to single strength and concentrate juice processors are different could be further clarified. It.may be more a matter of a need to better time the harvests with the 11.5 brix level 66 for each apple variety. However. the investigation of that question is beyond the scope of this paper. Because single strength processors have historically considered apple juice as a salvage market, the grower price for juice apples has been the floor in the apple price structure. Further, very little attention has been paid to quality and yield factors that relate to positive economic return to growers of juice apples. With the recent strong demand for apple juice, as discussed in Section 1. there is more interest in quality considerations, especially by juice concentrate processors. From the juice concentrate processor's view, quality is tied to the brix level of the apple. Brix also directly affects yield of U.S. Grade A juice. presently for the grower yield is judged in pounds per acre and not sugar content. Historically. quality for fresh apples has been viewed in terms of size, color and lack of bruises. For peeling apples. size and the lack of bruises give both markets little or no consideration for brix level. With the continued growth of the juice market, the apple industry will need to develop standards that will apply to this important market for the apple crop. A grower could more knowledgeably decide which market would likely be best for his crop based on its condition and the various cost and price considerations. Hopefully. this would result in the best allocation of resources in the industry and maximize net returns to apple growers. 67 3,; Coppidepption of Growipg Apples Exclusivelx for the Juice Market With juice apple prices below prices of alternative apple markets. it is necessary to accomplish one or more changes in traditional apple production. Growers cannot affbrd.to spend the same resources on a lower priced commodity. like juice apples. as they would for fresh apples. They do so at the risk of not covering total cost of production and harvest. The juice apple grower must produce more pounds of apples per acre at a reduced cost per pound. and/or reduce the cost of harvesting the apples in an attempt to lower total costs below that of fresh apple production. The remainder of this section will consider possible changes in juice apple production and cost. With the present pricing structure, juice apple growers need to be m concerned about the yield of apples in his orchard. Because neither size nor color are factors in the grower price in the juice market. therefore. only by increasing bushels produced per acre can a grower increase gross revenue per acre. Traditional apple production practices include thinning the crop that a tree sets to increase the leaf to fruit ratio. so that the remaining fruits will be larger in size. However. thinning may cause a reduction in potential yield, as measured in pounds per acre. If the grower intended on sending his apple crop into the juice market. size of individual apples would not be a significant factor. By either not thinning. or reducing the amount of thinning of the crop, the grower should experience increased yield in pounds per acre of apples. However. there is a potential for causing bi-annual bearing in some apple varieties. such as Golden, 68 McIntosh. Delicious. Jonathan and Northern Spy. To the extent that some thinning sprays are eliminated. there should be some reduction in growing cost per pound. Other approaches to improving yield per acre are: increasing nitrogen ratio; increasing bee concentration in the orchard: altering pruning practices and delaying harvest to achieve the maximum growth of the apple. The latter practice will also allow for the highest sugar content of the fruit. This could result in a higher price if processors adopt the system of paying for juice apples based on brix or sugar content as two concentrate processors did fer a few weeks in October and through November, 1980 and 1982. The reduction of the cost per pound of growing apples may take a long-term research effort to determine the best combination of cost reduction practices. and still achieve acceptable yields. We need to draw together information from around the world.on growing apples for juice. For example. growers in Great Britian presently have specified apple varieties and production practices that they use for the cider markets. U.S. growers may be able to draw upon some British experiences. and readily adapt practices that have proven successful for them. 3 3.2.1 Potential for Reducing Production and Harvest Cost Two ways growers can cut production costs are to reduce and/or change pruning techniques and to reduce the number of pesticide sprays. This may be possible since. with juice apples. the exterior appearance is not as important as interior sugar content. Though caution is suggested, y. A .4, . .4 A . a - —“'-‘-?r-vr . . ‘ 4 . «24.57.. 69 since more research needs to be conducted to determine optimum pruning levels and pesticide programs for juice apple production. Researchers at Agriculture Canada. have been conducting a longbterm study to look at some of those factors. The possibility of a reduction in harvest cost of juice apples could be achieved if present efforts to develop a mechanical apple harvester are successful and accepted by growers and processors. Currently available mechanical harvesters may be adequate for standard and semi-dwarf apple blocks if operators use care and good judgement in operating the machines. Researchers at West Virginia.University report that they have 1'- developed a modified "Friday Harvester”. that successfully harvested 18,000 4 bushels of apples in 1979.1 The Golden Delicious apples mechanically l“: harvested had fewer bruises than hand harvested apples, and were sold to # _.— __." w-..‘ a processor in Virginia with no discount for bruising. At least two Benzie County, Michigan, growers have been using "Friday" shakers to harvest in processing apples since the mid-70's and they indicate no processor complaints. Apple bruises are a quality factor; the longer the delay in processing a bruised apple, the greater the chance for a reduction in quality of the juice do to rot which reduces processing yields. The U.S.D.A. tolerance for rot in juice apple is five percent. Table 3-14 shows that by modifying pruning practices. mainly pruning the lower limbs off to allow the harvester through. there was no bruising on 77.6 to 89 percent of the apples harvested in 1978 and 1979. The treatment that included some detail pruning to remove overlapping lower l R.G. Diener, K.E. Elliot. P.E. Nesselfood. J.C. Johnson, R.E. Adems. S.H. Blizzard. S. Singha. M.Ingle; Apple Harvestipg and Handling Research at WVU - 1979. Paper presented at Manistee-Benzie Horticultural Show, March. 1980 70 limbs provided the least amount of bruising. Table 3-15 gives the results of a study comparing bruise level of mechanical and hand harvesting Golden Delicious apples. It shows that there was less bruising and the bruising that did occur from the machine harvesting was smaller than from hand harvested apples. The West Virginia researchers indicated that with future refinements, they may be able to harvest fresh quality apples with the harvester. The significance of harvesting juice apples with less bruising may not seem important since the apple will be ground up and crushed to make juice. However. some juice processors have expressed concern about apple bruises. Their specific concerns center around internal quality changes in the apple (i.e. decomposition) and the reduction in quality of the final product. The above bruise data has implications for the harvest labor problem for the entire apple industry. (i.e. it may consider going the way of the cherry industry and in time shift to mechanical harvesting of the processed portion of the crop). Another significant finding of the research at West Virginia on "The Bruise Energy of Peaches and Apples",1 which was part of their mechanical harvesting research. was that "very clearly the reduction in bruise volume and increased bruise resistance as the apple matures" which means that a riper sweeter apple will not bruise as readily as greener less mature fruit. Juice processors prefer the more mature fruit because of higher brix levels. 1R.G. Diener, K.C. Elliot, P.E. Nesselroad, M.Ingle, R.E. Adams, S.H. Blizzard, Bruise Ener of Peaches and A les, TRANSACTIONS of the ASAE (Vol. 22 No. 2, pages 287-290. 19793 {.I‘. {é IE. 1.4.4.! . 6.4%.- .I 41.. .11“. .|.. ‘.1|..‘k.\ul“||a.ln . llii. I .V‘. .omoa .ma .NH some: .xocm Houseasonumo: oepmacmz : cancom one on uneconoma .Hn no .apowaaa .uocofia an mmoa .apflmuo>wca mdcfiwnw> ones on commoner mswaucdm use wcwpmo>mmm mamm< "doapwp momma < chH .mmma mnEaH Hosea mcaammamm>o o>osom ow docsmm Heaven and moon: magnets soaam co as nausea u 9m whoa noes: seasons zoaflm ow a: sacrum H mm whoa your: reasons roads on a: sacrum u 2m mm.~ --- mmH.H oo.o oo.o os.a sa.m co.mm em Amamev on.k --- ¢:.m ¢:.o ma.a mm.o oo.s mm.mm mm Ammoav mm.o --- ma.a o~.o ao.o mo.~ ma.a mn.ak 2m seamev musaocsa\ms=o =:H gee .mxa =e\m gm :9 azoz f qm>mq mmHsmm azmze3 an nonsense maidens: and mcmsmo>nex maaa< sedate madam < aama ease mn.n we”: on.: oo.o ma.a mm.o om.n 00.55 mcaemo>nwx cameos: 53.: oo.o He.o no.H ma.a as.m ma.a mm.om MQH3¥OGSQ :WH :WH :®\N =:\m .3“ :9 oCOZ \mpso R .525 mmHDmm Ammone on roam memo: condom Hommv mmqmm< mDOHoHAmn zmgqoo QHBmH>mm< em.oH mm.o ma.aa NN.~H owed oa.m~ Nm.oH ~N.~H mm.oH mama ma.aa ma.a oe.na mo.nH mama 30.4H nn.:~ mo.ma mm.oa aama aw.mH as.mH ss.oa nm.aH mama on.oa ma.afl m~.nH am.aa need ma.a om.n~ no.3 an.HH seea <\m:oe <\mcoa <\m:o.u <\m:o9 Ham » mg a mmmmfldm 3 :59” HUZHm HUHE. md 2395 magnum—HQ" mama: mama soma— mmo< mam mzos 2H 94me 32.8 SA 322. 76 Table 3-18 COMPARABLE COST OF PRODUCING JUICE APPLES IN 1978 and 1980 ON A ACRE BASIS (all these varieties: McIntosh. Delicious, Red Spy) .123 12% Per/A Per/A, % Increase Pre-Harvest Costs .144 192 33% " Harvest Costs 243 250 3% Orchard Overhead 327 403 23% “ Total Production Cost 714 845 18% Avg. Gross Returns 996 728 , Net Returns to 4” Management 282 ' (-76) % Return on Investment 39% (- 9%) SOURCE: S.R. Miller, Apple Juice Production Studies, 1980 77 .' -4. ||,|u , .I-r . .. tn P ......5 x.l... _.. a .1. 11.1.4... o I . LL: 1 emeeasoaao* owed .mmaesem compozeoum moans oeaa< .noaaez .m .m "momaom .Hmo .mom .nHm .mea o.am .m>< .mma .mus .aam .anm .Hm owe” 63H .32 .132 .3: .3 mama .ema .sec .omma .mooe .om mama .maoa .wmoa .mam .sama .mm aama .moafl .mmm .mmoH .eama .Hm same .118 .30 4.8 .mme .2 name .omm .maa .Hnm .ame .am» same :09 nos :09 nos :09 new» owmum>< ”mm eom msoaoaaon .mmmmmmmm see not mafimm moanw .Mmo<\a mzmaemm mmomo 3N0.” oocwm moan—H. 99m c.3090 moaooaau> oaaa< cause some owo< nod mzmsemm mmomo mH-n canes 79 Dr. Miller's study indicated both pre-harvest costs ($144/A vs $350/A) and harvest costs ($243/A vs $616/A) can be reduced by better than 50 percent by changing pruning and spraying practices when managing an apple orchard specifically for juice markets. Overhead was considered the same for both juice and fresh market apples. Both juice apple gross and net returns to management were nearly half of that calculated for fresh market apples. In 1978, the McIntosh yield was 652 bushels per acre. The total production cost of juice apples plus harvest and over- head cost was $1.10 per bushel. The gross return per bushel was $1.68, leaving 58 cents per bushel as net to management. For fresh apples. the total cost was $1.98 per bushel. with a gross return of $3.16 per bushel. for a net to management of $1.18 per bushel. There are more quality standards for fresh market apples and they, therefore. generally command a higher price than do juice apples. Miller assumed 60 percent extra fancy pack fer the fresh apples. in figuring the cost data. From the information presented in the Canadian and West Virginia.University studies. it appears that it may be possible to reduce production and harvest costs when growing apples specifically for the juice market when compared to costs of producing fresh market apples. 3.2,2 Apple Production Costs in Michigpp This subnsection will look at the-available data on the cost of apple production in Michigan. Then we will calculate costs using assumptions from.Dr. S.R. Miller's and the West Virginia University research. and draw conclusions for growing apples specifically for juice. The most recent survey of Michigan's costs is "Costs of Apple Production in Western Michigan, Standard Orchard Planting", E-1106 8O revised 1979. by Kelsey and Johnson. This study indicates that variable growing costs are $437 for one acre. variable harvest costs were $292 for one acre. These figures represent a variable growing cost of $1.09 per bushel and $.73 Per bushel harvest cost. based on a yield of 400 bushels per acre. Overhead costs figured at $.77 Per bushel. Therefore, the total cost per bushel was $2.39. Former M.S.U. District Horticultural Agent, Frank Klackle, calculated that it costs $1.06 per bushel to grow. $1.07 per bushel to harvest and had fix cost of 54 cents per bushel. giving a total cost of $2.67 per bushel of apples.1 He assumed a 500 bushel per acre yield in his western Michigan district. It should not be assumed or concluded that the above grower cost figures reflect any particular grower or grower group cost because there is considerable variation between farms in organization and financial structure. Cost can only be viewed as indication of relative costs in the present inflationary state of the economy. The figures may be helpful in the evaluation of production and market risk of apple growers. In management decisions, growers should evaluate their own situations, decide how they want to allocate fixed and variable costs, along with how much and which risks they are willing to shoulder. lKlackle, Frank. "The Cost of Growing, Harvesting and Marketing 1980, C.A. Apple Crop", 110th Annual Report of the State Horticultural Society of Michigan. Pages 152-159, 1980. 81 3.2.3. Calculated Juice Apple_Ppgductign Cost In this sub-section. we will attempt to draw together the information on the cost of apple production and the potential for reducing production and harvest cost discussed earlier in this paper, and the calculated costs for growing apples for the juice market. The report on apple juice production studies by S.R. Miller. Superintendent of Smithfield Experimental Farm. Trenton Ontario, Canada" is the only long-term study available that specifically looks at reducing pre-harvest production cost of growing apples for juice markets. The figures presented show a 40 percent reduction in the pro-harvest pest control costs. by reducing the number and strength of sprays and in the time per tree spent pruning. Rather than using the Michigan recommended 3 to 5 gallons per acre of Defolitan to control scab. they applied a single spray of 4.? quarts to McIntosh and 2.4 quarts on Spies and Delicious. They also used a single insecticide spray at calyx time. However. they did experience some scale on McIntosh, and twenty percent maggot damage on Spy and Delicious fruit in 1980. In personal correspondence with Mark Whalon of M.S.U. Entomology Department. he agrees that a minimum spary program can reduce spray costs in the *range of forty percent as indicated in Tables 3-20 and 3-21. A seventy-five percent reduction in pruning cost was realized as a result of changing to a system that alloted only fifteen minutes per tree, with major cuts made with electric pole saws. _ 1,,2.§..4,-. ‘I ' -2‘fi‘ 82 The Canadian Study provides a bench mark in the forty percent reduction in cost of the spray program and seventy-five percent re- duction in pruning costs for other regions to use in developing calculated juice apple production cost. It should be kept in mind that spray and pruning programs are dependent on variety, rootstock. past care and the environmental setting of an orchard. Gross overhead costs will not change much regardless of the market for the apple crop, since land cost, taxes, interest. equipment. etc.. generally are not influenced by market utilization. Unit overhead costs will. of course. vary with yield. A forty percent reduction in the costs of the spray program and a seventy-five percent reduction in the pruning program would reduce the cost in Michigan by a calculated $.44 per bushel (Kelsey & Johnson), or $.43 per bushel (Klackle). Variable growing costs than would be $.65 per bushel (Kelsey & Johnson) and $.64 cents per bushel (Klackle). compound to $1.09 per bushel (Kelsey a: Johnson) and $1.07 per bushel (Klackle) when grown for the fresh market. The West Virginia University study indicates the most efficient method to harvest juice apples may be a mechanical harvester. Harvest costs could be reduced to 42 cents per bushel, from $.73 per bushel (Kelsey & Johnson) for hand harvest. using the 200 bushel per hour harvest rate on a.40.000 bushel season harvest, according to West Virginia University research. While the Canadian study indicates a 37 cent per bushel costs. according to data presented in Section 3.2. Table 3-20 83 A cost comparison of an integrated pest management (IPM), minimum spray and non-IPM orchard in 1980-81. The orchards were selected for similar age of trees (12-15 years), markets (U-Pick, wholesale and retail) and location (southwest Michigan) Management Practice Pesticide 1980 1981 Ave. Ave. Ave. Ave. No. Sprays Cost/A No. Sprays Cost/A NON IPM1* Insecticide 11 (NA) 8 34.92 Fungicide 8 (NA; 11 63.88 Miticide 3 (NA 2 12.26 Total (NA) $118.76 1981 Harvest Damage: 2.1% loss all causes and 97.9% clean fruit 2 IPM Insecticide 11 185.00 7 66.77 Fungicide 12 223.00 12 180.50 Miticide 4 1 .OO 2 40.22 Total $567.00 $287.49 .1981 Harvest Damage: 4.8% lose all causes (Limb rub 1.2%) and 95.2% clean fruit .Minimum3 S pray Insecticide (NA (NA) 3 26 . OO Fungicide (NA (NA) 7 43.12 Miticide (NA (NA) 1 4.84 Total 3 73.96 1981 Harvest Damage: 7.2% loss all causes and 92.8% clean fruit 1 Horticultural Comparison - vigar: 8-12 in. growth/year; fruit set in 1980: ixxxz in 1981; 40% pruning: good - excellent; and site: excellent. ZHorticultural Comparison - vigor: 8-12 in. growth/yr.: 100% in 1981: 40-60%: pruning: excellent; and site: good. fruit set in 1980: ' 3Horticultural Comparison - vigor: 26- pruned. for 8 yrs. , 1981 to and side hedged i 6 in. growth in 1981 (trees were not ; fruit set in 1980: 20%. (scab problems-spray penetration , and 1981: 30-40%: pruning: poor; site: excellent. By Mullar. Whalon and Davidhizer I. . .I . . I . . V 5 I -tullm. Jinkifalib I... II. .. 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