Issue link: https://read.dmtmag.com/i/473131
18 MARCH 15, 2015 GOOD FRUIT GROWER www.goodfruit.com I n the face of rising costs, the Washington State fruit industry will need to place renewed emphasis on achieving effi ciencies throughout its operations for the next few years. Each new season, apple growers encounter a new throw of the dice on prices. Naturally, most of their atten- tion is focused on prices they receive. However, industry profi tability in any season is affected by a number of other prices that are often not called by that name—items such as costs of production, wages, interest rates, exchange rates, and personal living expenses. Fluctuations in these are causing increasing uncertainty about profi tability this season, and could affect profi tability for years to come. Price changes not unusual On present trends, f.o.b. prices for Washington State apples in the 2014-15 season will be about $6 per box below prices in 2013-14. However, as Figure 1 shows, that sort of price change has happened often in the past, for example, between the 1986-87 and 1987-88, 2003-04 and 2004-05, and 2007-08 and 2008-09 seasons. Figure 1 shows prices rising over time even in low- er-price years. However, it fails to take account of steady declines in the purchasing power of the U.S. dollar. Between 1986-87 and 2014-15, the value of the U.S. dollar fell by about half. To keep up with infl ation, f.o.b. prices in 2014-15 would have had to be close to $29 per box to equal the purchasing power of a box of apples in 1986-87. So, the expected prices in 2014-15 represent a major reduction in the purchasing power of orchard earnings. Costs of production "Cost" is another term used for the prices growers must pay for the inputs needed in production. U.S. Department of Agriculture National Agricultural Statistics Service fi g- ures show average costs of production in agriculture rose by 4.7 percent between December 2013 and December 2014 due to small but consistent increases in such items as interest, taxes, wage rates, machinery, and services. Wage rates in the Washington State fruit industry may rise faster than average in the coming season. The state's minimum wage remains the highest in the United States and rose by a further 1.6 percent in January 2015. In addition, the effective minimum wage for H-2A workers (the so-called Adverse Effect Wage Rate) has been raised by 4.63 percent to $12.42 per hour. H-2A workers are increasingly used by the Washington State fruit industry to ensure adequate harvest labor. The government-mandated "fl oor" wages tend to raise wages for all workers. Oil prices The major exception to rising costs has been the dra- matic plunge in the prices of oil and of oil-based products like diesel, gasoline, and natural gas in the second half of 2014. World market prices for oil fell by more than a half between June and December 2014. In the same period, the average price decline in the United States was about 47 percent for natural gas, 30 percent for gasoline, and 12.5 percent for diesel fuel. For various reasons, the price of many of the oil-based products used in agriculture change more slowly than world oil prices. For example, the price of fertilizers fell by only 7 percent between June and December 2014, and the prices of agricultural chemicals actually rose by 2 percent. In addition, these materials usually account for less than 20 percent of the variable costs of fruit production, which further reduces their impact on overall production and Prices will force effi ciencies GOOD POINT Desmond O'Rourke, world market analyst and director of Belrose, Inc., in Pullman, Washington Grower proven advanced pollination technology SureSet e x A Su S p Ensure your crop investment with Fusion 360 Technology Results Observed from a Side by Side Trial on Chelan Cherries in Lodi, CA Treated Untreated Lbs picked/acre 6,269 2,647 Pack Out % 87.7% 90.3% 18 lb boxes Packed/Acre 305 133 SureSet Apex was applied in two applications. The 1 application was made at ~20% Bloom and the 2 application was made at ~50% Bloom. SureSet Apex was applied at 2 lbs/acre and 1 lb/acre respectively. SureSet Apex was used in conjunction with pollen at a rate of 20 grams/acre in each of the two applications. Enhances the health and receptivity of the flower Increases activity of honeybees and other pollinating insects Increases germination rate and vigor of the pollen grain Effective with controlled pollination or when used alone nd st For additional information contact us at 1-888-634-F360 or quantumyield@suresetapex.com Innovative, Established, State-of-the-Art Pollination Technology Developed and Patented by Thomas T. Yamashita, Ph. D Figure 1 Apple prices in successive seasons Average f.o.b. prices have risen over time, even when accounting for successive seasons when prices dropped as shown here. 1986-87 & 1987-88 2003-04 & 2004-05 2007-08 & 2008-09 2013-14 & 2014-15 $5 $10 $15 $20 $25 Price per 40-pound carton SOURCE: WASHINGTON GROWERS CLEARING HOUSE ASSOCIATION ANNUAL REPORTS AND THE AUTHOR'S ESTIMATES.