Good Fruit Grower

December 2012

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Orchard Economics HOW LONG can this last? Washington Honeycrisp f.o.b. prices are twice the average of other varieties, which compensates C for the additional expense and hassle of growing them. by Geraldine Warner onsumer demand for Honeycrisp apples is so intense and the return so high that growers can afford to spend the additional time and money it takes to grow the fickle variety. But how long will that last? Mike Robinson, production manager for Double Diamond Fruit in Quincy, Washington, said marketers need to have enough Honeycrisp to satisfy their customers' needs, and there's no sign of demand flagging yet. "In every conversation I've had with retailers, Honey- crisp comes up in the first three to four minutes," he said. Washington apples sold last season for a record aver- age of just under $23 a box f.o.b. The average f.o.b. price for Honeycrisp has been more than $44 a box for each of the past five seasons—ever since it was tracked as a separate variety—and reached almost $48 last season. But the costs of growing it are higher than for other varieties, and the packouts are much lower. Last season, the industrywide packout rate for Honeycrisp was just 58 percent, compared with 75 percent for Red Delicious, according to the Washington Growers Clearing House Association. Economic study Dr. Karina Gallardo, agricultural economist with Wash- ington State University, conducted an economic study last year on the costs of establishing, producing, and packing Honeycrisp apples in Washington. The numbers are based on a hypothetical 10-acre block of Honeycrisp with trees spaced 3 by 10 feet apart and were compiled FIGURE 1 Honeycrisp prices Per-box f.o.b. prices for Honeycrisp have been more than double the average for all varieties during the last five years. 10 15 20 25 30 35 40 45 50 0 5 Honeycrisp Red Delicious All varieties SOURCE: Washington Growers Clearing House Association. 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 with input from apple producers based on their actual costs. Gallardo estimates that the variable costs for produc- ing Honeycrisp are about $7,262 per acre (excluding packing charges) and fixed costs about $4,211. With a yield of 43 bins of packable fruit (without culls) per acre and a net warehouse return of $433 a bin, the grower could expect a profit of almost $6,500 per acre. She assumes the packout rate would be 72 percent. Using the Clearing House's actual statistics for the 2011-2012 season, the average actual net return was $392 per orchard-run bin, based on a 58 percent packout rate and packing charges of $193 per bin. Gallardo said Honeycrisp currently gives growers a good potential profit margin, but it all depends on their production level and the f.o.b. price. Growers can control production but not price. "I think the really good growers that have learned how to manage the horticulture of this difficult variety are able to produce that net production that I am putting in the study, with the 72 percent packout. That's not the average of the industry. The average of the industry is 58 percent. That's critical, I believe." Honeycrisp is profitable now, because the variety still has novelty value as well as good quality characteristics, she said. "There are no other varieties that can compete directly with it, so it has a premium price. Whenever that changes—and it will change at some point—I'm sure the premiums will be shrinking. That's where we stop making a profit with Honeycrisp. We don't know what will happen five years from now." Growers say the industry is beginning to figure out how to improve production, just as it did when it adopted other new varieties. Robinson said when he began to grow Fuji a generation ago, it was described as "the variety from hell." "We started figuring out all the things we were doing wrong and the trees got older, packouts were up, and costs were down," he recalled. "We find the problems first, and then we find the solutions. Almost every variety has its own set of problems. I think some of the companies who've been at it awhile have figured out Honeycrisp." Robinson said he's planting more Honeycrisp because of retailer demand and to make sure the company can take care of its customers, even though the costs associ- ated with planting an orchard—ground, trellis, pipe, and trees (if you can get them)—are high now. "This is not a time when I would normally be planting, other than I need to get some Honeycrisp in the ground," he said. "We have a high-colored strain of Honeycrisp we're excited about." 34 DECEMBER 2012 GOOD FRUIT GROWER SEASON-AVERAGE F.O.B. PER CARTON dollars

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