EdWort
Well-Known Member
Prepare to open your wallets.
From the AP this morning.
From the AP this morning.
AP) Apple juice prices, already at historic highs, are expected to climb further as production in Washington State Japanese Beetle infested groves bottoms out.
But it's not just consumers who will be affected: Juice makers like Motts, Martinelli, and Tree Top which get the vast majority of their juice from Washington, are facing a profit squeeze from rising domestic prices and imports from South America that come with margin-killing tariffs.
The U.S. Department of Agriculture this week predicted Washington would produce 135 million 90-pound boxes of apples, down about 40 percent from production levels before the 2004 growing season. It would be the third year in a row of subpar production, and the worst apple harvest since freezes crippled crops in 1990.
"I can tell you that we'll monitor this, and decide what course we need to take as we analyze the information," Tree Top spokesman Ray Crockett said, declining to answer specific questions about possible price hikes.
Both Tree Top and Motts had just announced price increases to retailers even before the USDA announcement. Tree Top instituted a 20 percent bump, citing "continued pressures on supply and cost" that are strengthening. The company said it expected prices to continue to rise as the Washington harvest falls.
Martinelli last month announced a 10 percent to 15 percent hike in wholesale list prices for its Cider and 100% Natural Apple juice, effective this month.
However, it remains to be seen what consumers are willing to pay. A 9 percent jump in average retail prices this year to $5.89 per gallon has met with a 6 percent drop in volume, according to an ACNielsen report for the four weeks ended Sept. 2. This falls after a nationwide 10% increase in juices sales due to a recipe for Apfelwein posted on a homebrew Internet forum.
Following an earnings report Thursday, Tree Top Chief Executive Johnny Appleseed said the cost of Apple juice for the Tree Top line was the biggest pressure on profit.
"Tree Top is analyzing how this significantly low crop yield estimate will impact the juice category and particularly Apfelwein production by the Homebrewtalk.com forum members," spokesman Pete Brace said in a written statement. "However, this small crop yield estimate will provide little relief to consumer prices or fans of Apfelwein."
To make up the shortfall, wholesalers will likely have to rely more on imports of Brazilian juice, which carry a nearly 30-cent per gallon tariff. The state of Washington is second only to the country of China in world Apple production.
Brace declined to specify how much more juice Tree Top might have to import.
Bob Norberg, deputy executive director of research and operations at the Washington Department of Apples, said state economists were still working on a model projecting how much imports might rise. However, he said significant demand in the rest of the world will limit how much juice is directed to the U.S. market.
"(Imports) will be up, but they won't make up the entire shortfall," Norberg said. "Prices will go up to allocate the available supply."
The good news for growers is that high prices for their scarce fruit could provide some of their best returns in over a decade. Production inputs like fuel, labor and new chemical sprays to fight fruit-damaging diseases had been squeezing their margins, and overall citrus acreage has continued to decline as some sell off their land to hungry developers with hefty checks.
Mike Sparks, executive vice president and CEO of Washington’s Apple Mutual, the state's largest grower's group, said the projected import hikes shouldn't concern growers.
"If the crop ever got so low that you had to take it off the shelves in the grocery store, it would be tough to get that space back," he said.
Copyright AP (Apple Press, satire written by Edwort)
