New Zealand: Braeburn falters

Here is a link to a USDA FAS report about New Zealand apple situation and outlook.

The late spring frosts (October 2007) negatively impacted on New Zealand’s apple crop during the 2007/08 marketing year. As a result, apple exports are forecast to drop 19,000 tons with virtually all of this volume being used for juice production. Processors are reporting increased volumes of 15-20% this year.
Looking ahead to MY 2008/09 production, it is not yet clear how orchardists will react to the low returns for Braeburn apples, especially the low prices during MY 2006/07, and the reduced yields during the autumn of 2008. It is expected that there will be continued tree removals this winter but there is no clear indication of the magnitude. Consequently, post has taken a somewhat conservative line regarding forecasts for production and export levels. It is expected at this stage that exports will recover and are forecast at 270,000 tons. Juice production is forecast at 110,000 tons, down from 125,000 tons in MY 2007/08. The industry is continuing to search for ways to increase profitability. While some orchards are being replanted with new varieties, such as Jazz, it is not happening as fast as many in the industry would like. Vertical integration of the industry is an on-going trend. There are several notable trends occurring in the New Zealand apple industry, including a reduction in grower numbers. The number of growers has fallen significantly from 1,600 in 2000 to approximately 400 in 2008. There is also trend toward vertical integration with large packers integrating with exporters who are then leasing or buying orchards.

Looking ahead.....

Production in MY 2008/09 will partly depend on the number of trees removed this year during June and July. At this stage, there is no clear indication of how many hectares of trees will be removed. The continued poor returns for Braeburn and Royal Gala varieties, which comprise approximately 70% of production, mean orchardists are looking very closely at whether it is profitable to keep growing these varieties. Some are planting new varieties, such as Jazz and Tentation, and production of these varieties is expected to grow steadily over the next few years. At this stage, post has taken a conservative view and estimates there will be less than a 1% increase in production to 437,000 tons of apples produced in MY2008/09, with 270,000 tons going to export and 110,000 tons for processing. While the new varieties already in the marketplace are profitable, there are several factors that temper a wholesale switch to new varieties. It is very expensive to replant and endure the time delay before production is economic. However, with intensive planting (+2000 trees/ha) on dwarf rootstocks, production is generally underway within two years of planting and is economic in four to five years versus double that under the semi-intensive systems. The pipfruit industry’s strategic review suggested replanting needs to achieve a rate of 10% to 15% per annum. At the moment, it is 7% in Hawkes Bay and 6% in Nelson – the two major growing regions. For those orchards growing Braeburn and Royal Gala apples that opt not to replant with new varieties, there are still opportunities. Industry experts recommend careful analysis of each block within orchards to identify areas where small sizing and poor quality is habitual. Then either these blocks can be grown only for juicing, with a consequent reduction in orchard costs, and some profit, or orchard management can be changed to improve returns. One option is conversion to organic production methods. Approximately 10% of New Zealand apple orchard area is already organic. While carton equivalent returns fell from NZ$50-55 (USD 38.50-42.35) in MY 2005/06 to NZ$35 (USD 26.95) in MY 2006/07, this was still a profitable option. It is likely that organic area will continue to increase. There are several notable trends occurring in the New Zealand apple industry, including a reduction in grower numbers. The number of growers has fallen significantly from 1,600 in 2000 to approximately 400 in 2008. There is also a trend toward vertical integration with large packers integrating with exporters who are then leasing, buying, or participating in joint ventures at the orchard level. ENZA (the former Apple and Pear Marketing Board’s single desk marketing brand), which markets apples for approximately 250 growers, leads the vertical integration trend. Because it owns the proprietary rights to the Jazz variety, it controls the planting of this variety and helps qualified growers with financing to replant. To achieve its overseas marketing goals, ENZA also produces Jazz apples in France, Chile, the United Kingdom and Washington State in the United States.

Two New Apple Varieties Announced

Hort Research, a crown (e.g. government) research institute, together with the Johnny Appleseed Company, has announced the commercialization of a new golden apple, a cross between Royal Gala and Braeburn. In addition, ENZA has announced its new variety, Envy, which is a further development of the Jazz apple.

Labor in Short Supply

Orchardists through out the country are facing labor shortages, especially for seasonal workers. With New Zealand’s unemployment rate at a historical low of 3.4 to 3.5%, there are few New Zealanders looking for seasonal work. Horticulturalists have brought in seasonal workers from other Pacific countries, such as Vanawatu and Samoa, under a New Zealand Government sponsored program.

Peterson and Goodlatte: All but one title enacted

From the office of Rep. Collin Peterson:

House Agriculture Committee Chairman Collin Peterson of Minnesota and Ranking Member Bob Goodlatte of Virginia issued the following statement today:
"Following veto override votes of 316-108 in the House and 82-13 in the Senate, the Food, Conservation and Energy Act of 2008 has been enacted into law, with the exception of the bill's trade title.
"The trade title was included in the conference report passed by Congress but was inadvertently left out of the official copy of the farm bill that the President vetoed. Today, the House also took action to correct the clerical error that resulted in the unintentional omission of the trade title from the enrolled farm bill and ensure that the entire farm bill is enacted into aw swiftly. Most of the farm bill is now law and the Administration can begin implementing the new programs and policies immediately.
"The Food, Conservation and Energy Act makes historic new investments in food, farm and conservation programs that are priorities for all Americans, which is why a broad, bipartisan coalition voted overwhelmingly to pass this bill.
"While no one got everything they wanted in this Farm Bill, we struck a balance that meets the pressing needs of working American families struggling with high food prices and that supports America's farmers and ranchers as they continue to provide a safe, abundant, homegrown supply of food and fiber while protecting our natural resources and developing new sources of renewable energy."

Chile fresh deciduous semi-annual 2008

The great long term expansion in Chilean fruit production is over - for now.Here is the link to the USDA FAS report released today concerning Chile's deciduous fruit crops. From the report:

Total Chilean fruit exports are estimated to continue to grow in 2008. There are some important factors that will continue to affect economic returns mainly of grapes and in lower degree for apples and pears, like the exchange rate. In general, prices for exported fruit have not varied much in dollar terms, but during the last three years the Chilean peso has gone through a significant revaluation process. The exchange rate for the peso has fallen from 740 Chilean pesos to only 450 pesos to the dollar during the first quarter of this year. Another factor is the cost of labor which has been increasing in peso terms. A new law was approved reducing the weekly workweek from 48 hours to 45-hours; industry sources claim that the effective work time does not exceed 40 hours in a week. Productivity has fallen significantly. This is an important factor for the labor-intensive fruit industry in Chile. In the case of table grape production, labor represents 70 percent of total costs. Increasing energy costs is also a big concern for fruit producers. Consequently, industry sources have indicated that increases of new plantings and production increases in the coming years are not expected, at least for apples, table grapes and pears.

About grapes:


As a result of unfavorable weather conditions in most growing areas, total output in MY2008 (Jan-Dec 2008) is estimated to be slightly larger than last year but smaller than our previous estimates. Lower than normal temperatures in late spring and early summer affected the volume and quality of the production, the bunches were reportedly smaller and lighter for most varieties, but mainly for the Red Globe variety. The lack of temperatures also delayed the start of the harvesting season by almost a month which was reflected better prices obtained for the fruit by early in the season producers. For the coming season, production is forecast to be similar than this season as total output increases due to a larger harvested area could be offset by a drought which is affecting all agricultural areas in the country. Additionally, industry sources believe that total planted area could fall as many producers will not replant orchards that are coming to an end of the production period due to a significant fall in the economic returns which is affecting table grape production for the last two seasons.


On apples:


Good weather conditions in most growing areas for apples during the Chilean spring (Sept-
Oct 2007) had a positive effect on production volume . But some production areas were affected by frost and a lack of good temperatures late in the spring and early summer that reportedly affected the quality of the production. As a result our new production estimates for MY 2008 were slightly adjusted downward. Nevertheless, exports are expected to be expanding slightly larger than the previous year. For the coming Marketing Year (2009) we can expect total apple production to be similar than this last year as a possible production expansion, due to an expansion of the production area and/or some orchards which are in the incremental stage of production, could be offset by a drought which is affecting almost all agricultural production regions in the country.

Farm bill: the curse of the enrolling clerk

We might worry the new Indiana Jones movie may be released to DVD before the farm bill is finished, but the word from Robert Guenther, Kathy Means and others is that final Congressional action is expected after the Memorial Day work period (vacation in layman's terms). So look for the Presidential veto on the complete version of the farm bill - and the overwhelming votes in the House and the Senate to override that veto - sometime the week of June 2.

I talked to Autumn Veazey today. After two years of lobbying fresh produce industry issues with United Fresh, she has accepted a DC position with the lobbying arm of a law firm with roots in Georgia, her home state. She had high words of praise for the "family" at United Fresh and her experience there with Tom Stenzel and Robert Guenther.....

Situation Normal: All Fouled Up

Yes, the House voted to override the President's veto of the farm bill. However, a "snafu" caused the bill to be sent to the President without a 34-page section of the bill, which news accounts say may mean another vote may have to be taken on the legislation by the House and then resent to the President for another veto. From The Chicago Tribune:

Within hours, in a show of bipartisan defiance, the House overwhelmingly overrode his veto of the nearly $300-billion bill, 316 to 108.

But an embarrassing legislative snafu may well nullify the House's veto override and trigger a string of new votes that could reopen the farm bill for consideration.

The mix-up occurred in the House, which along with the Senate overwhelmingly approved a final version of the bill last week. The House, however, sent the White House the final version of the bill minus one 34-page section.

Because the White House did not receive the entire farm bill, House leaders were left wondering whether Bush's veto, and their override vote, was legitimate.

The Associated Press reported late Wednesday that the House may have to vote to reapprove the bill in an expedited manner today, send it back to Bush for a new veto, then hold another override vote.

PMA to FDA: Set standards for third party audits

In comments submitted May 19, the Produce Marketing Association urges the U.S. Food and Drug Administration to standardize standards for third-party produce safety audits. From the release:

Newark, Del. – Produce Marketing Association (PMA) this week urged the Food and Drug Administration (FDA) to standardize food safety audit criteria, to provide some much-needed consistency to industry third-party audit programs and to ensure they are science-based.
Writing for PMA, Chief Science Officer Dr. Robert Whitaker urged FDA to set audit standards in comments submitted to the agency May 19. PMA’s request was made as part of the association’s response to an agency request seeking information on U.S. and worldwide third-party food safety certification programs. The agency requested this information in a Federal Register notice published April 2; comments were due by May 19.
“We would hope FDA would move to establish, or partner to create, a globally recognized food safety standard that incorporates the effort the produce industry has invested in developing commodity-specific food safety programs, that are based on best current science, and that are grounded on the principles of risk assessment and risk management,” said Whitaker, summarizing PMA’s comments to the agency.
“We support the certification of third parties to perform audits, and we think it makes sense for FDA to become an accrediting body similar to USDA’s role with the National Organic Program or alternately to align itself with an existing global accreditor,” noted Whitaker. “But more importantly, right now we could use formal recognition that the body of work developed by the produce industry with the federal agencies and others over the last several years is the de facto standard,” he continued.
FDA requested comments on third-party certification, seeking information on programs in the United States and around the world. The agency also asked whether third-party certification programs ensure compliance with FDA food safety requirements, and what obstacles exist to private sector participation in these third-party certification programs. Finally FDA asked for input on what incentives would increase participation in these third-party certification programs. Whitaker provided a snapshot of produce-specific programs; he also urged the agency to proceed carefully and with ample input from industry experts from across the supply chain.
“There is value in FDA having a mechanism to certify third parties, and the agency can certainly take steps to encourage participation in third-party certification programs,” added PMA Vice President of Government Relations and Public Affairs Kathy Means. “If constructed correctly, a third-party certification program can meet the produce industry’s needs, while also addressing the over-arching objective of both the industry and FDA to improve produce food safety.”
PMA’s comments can be viewed at http://owar6exc.vancepublishing.com/exchweb/bin/redir.asp?URL=http://www.pma.com/issues/FDAComments51608.cfm.

Oil - these are the good old days

TK: Let's hope the scenario painted in this youtube commentary by Robert Hirsch, Management Information Services Senior Energy Advisor, is off base. Unfortunately, it has the ring of truth in it. Here is some additional coverage on the current oil run up from the Business and Media Institute that warns of $12-$15 gas. From that story:

It may be the mother of all doom and gloom gas price predictions: $12 for a gallon of gas is “inevitable.”

Robert Hirsch, Management Information Services Senior Energy Advisor, gave a dire warning about the potential future of gas prices on CNBC’s May 20 “Squawk Box”. He told host Becky Quick there was no single thing that would solve the problem, due to the enormity of the problem.

“[T]he prices that we’re paying at the pump today are, I think, going to be ‘the good old days,’ because others who watch this very closely forecast that we’re going to be hitting $12 and $15 per gallon,” Hirsch said. “And then, after that, when oil – world oil production goes into decline, we’re going to talk about rationing. In other words, not only are we going to be paying high prices and have considerable economic problems, but in addition to that, we’re not going to be able to get the fuel when we want it.”