The farm gate price for California canning peaches has increased significantly due to a shorter crop which does not quite meet consumer demand, according to industry officials.

The 2015 price is 21 percent higher than last year’s price. The price that canners agreed to pay growers for this year’s 2015 crop is $460 per ton, compared to $379 per ton in 2014.

This is occurring after years of declining statewide production due to competition from more-profitable nut crops and cheaper foreign imports.

Will price boost increase production?

Industry leaders hope that the price increase will boost statewide production.

Rich Hudgins, president and chief executive officer of the Sacramento-based California Canning Peach Association (CCPA), said, “We purposely did this early so that we sent the signal to growers prior to the time at which they had to place tree orders from the nurseries.

“It was important to have a clear indication that pricing would be significantly better in 2015, and there is a strong likelihood that raw product pricing will increase further during the next several years,” Hudgins said.

The CCPA is the nation’s oldest farm bargaining association.

Optimism helps

“We had to inject a little bit more optimism back into the business,” Hudgins said. “We are slightly short on meeting existing market demand. We need to make sure we’re not continually shorting the market and opening the door for imports to come in and fill the void if we don’t keep a sufficient number of acres in the ground going forward.”

Grower reaction

Peach grower Monte Johnson of Gridley, Calif. said, “The $81 increase is a good thing. Demand is not skyrocketing by any means; however, the supply is short for current demand.”

Johnson and his brother, Brad, partners at Johnson Farms, plan to plant more peaches.

Merced County peach producer Eric Spycher of Spycher Farms Inc. in Ballico said, “The $81 per ton increase has been long needed.

“The issue we have with planting more acreage is we don’t have any additional labor. Our labor pool has been reduced. It’s really tough.

Spycher has planted a few more acres over the years.

Labor needs

“When its harvest time, we just don’t seem to get enough hands to get the harvest in on time.

California peach acreage has declined in recent years, as many peach growers switched to more profitable permanent crops including almonds and walnuts.

In 2000, growers planted 4,150 acres of cling peaches, compared to 1,220 acres last year.

With fewer cling peach trees planted, the bearing acreage also declined. Hudgins said there has been a 35 percent reduction in bearing acres since 2005, and acreage is still ratcheting downward.

In 2005, there were 30,200 bearing acres, which steadily decreased to 19,900 acres last year. The industry projects there will be 18,800 bearing acres in 2015.

In terms of bearing acreage, “I believe we’re going to see a bottoming out very shortly,” Hudgins said.

Input costs, water tall challenges

While the peach price has increased, growers says their input costs for labor, pesticides, fertilizer, and electricity have also gone up.

The on-going drought also poses a challenge for peach growers, particularly those in the San Joaquin Valley.

“We’re in the Turlock Irrigation District and we received our first water on the April 9, several weeks behind normal,” Spycher said. “Our normal allocation is 48 inches of water per acre (4 acre-feet) and this year we get 18 inches (1.5 acre-feet). We have to use well water to supplement our irrigation district water. Even with drip, it takes about 30 inches of water to produce a crop.”

Johnson said the cost of pumping groundwater continues to go up.

“We are fortunate to have a well, unlike some growers who rely on district water, so we have had a supply of water, but electricity costs have been high,” Johnson said.

“Also, with very little rain throughout the winter to replenish the ground moisture, we have put on at least two additional irrigations.”

Canning peach industry

Last year, the canning peach industry had the smallest cling peach crop since 1950, Hudgins says, and it was 11 percent smaller than the 2013 crop. California growers delivered 324,458 tons in 2014, down from 364,343 tons the year before.

Last year’s average peach yield was 16.3 tons per acre which was below the industry’s 10-year-average yield of 17 tons per acre. Given average yields, the industry projects that growers will produce 319,000 tons in 2015.

Un-filled capacity

Meanwhile, there have not been enough peaches to operate processing plants at full capacity, which may lead to industry consolidation. Pacific Coast Producers, an agricultural cooperative based in Lodi, has bid to buy Seneca Foods Corporation’s Modesto fruit-processing plant, and at press time, the Federal Trade Commission was reviewing the deal.

“You can trace it all back to crop size,” Hudgins said. “As California’s production has trended downward over the past decade, it became apparent that we didn’t have enough volume to run all the plants efficiently without absorbing higher production costs.”

Spycher grows peaches for Seneca and Del Monte Foods.

“As the tonnage has been reduced, there has been less need for processing, so there’s consolidation, and each time there is consolidation, it just limits our options more,” Spycher said.

Foreign competition

Foreign competition has continued to impact U.S. canned-peach production. Imports from China have quintupled in the last eight years, from 699,000 cases in 2006 to 3,523,000 cases in 2014, according to the CCPA. California growers also continue to face competition from Greece.

Ninety percent of U.S. canned peaches are destined for the domestic market, and the rest is exported.

In terms of exports, U.S. growers exported 2,125,000 cases in 2004, which dropped to 1,069,000 cases in 2014. Top foreign markets include Mexico and Canada.

Canned vs. fresh peaches

Declining retail sales mirror changing consumption patterns, as people are eating less canned fruit in favor of fresh fruit, Hudgins explained. A bright spot is that canned peaches are popular in the National School Lunch and Breakfast Programs.

“I really see opportunities for us in the school feeding programs,” Hudgins said. “There are also more opportunities for us in the export marketplace.”

Renewed confidence

Promising export markets include South Korea and some Central American countries that have free-trade agreements with the United States.

With prices on the rise, Hudgins hopes to provide growers with renewed confidence in the future of the canned peach industry.

“The expectation is that we’re going to see several more good years in the peach business provided we have enough labor and water to go around,” he said.