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Tree fruit future: Optimism

California tree fruit yields were off 30 percent to 70 percent this season due to a wide array of weather factors ranging from low winter chilling to summer hail.

However, diversified growers with varieties to pick all season long pocketed returns that covered cost and made a little extra, according to Gary Van Sickle, research and regulatory compliance director for the California Tree Fruit Agreement, Reedley, Calif.

Growers who only had a few varieties may not have fared as well.

Fortunately, marketers held the line on pricing through most of the season and many varieties sold for $1 to $2 more per pound than the year before with the short supply.

The future for tree fruit growers looks brighter than it has in several years. “Industry consolidation and vertical integration that has been occurring, as well as increased orchard removals of poor varieties, has now reached a turning point,” according to Van Sickle.

Ahead is encouraging per capital consumption potential as the nation takes a hard look at obesity and diets with an anticipated trend toward eating healthier. This bodes well for California-grown fresh fruit and vegetable consumption.

“Added to that is the fact that consumers have grown accustomed to paying premium prices for products at the local markets, provided their expectations of quality have been met,” Van Sickle said.

Unfortunately, those supermarket premium prices are not being reflected in higher grower returns. There has been a steady decline in the grower portion of the final price, even though consumers are paying more than ever for peaches, plums and nectarines.

An Arizona State University study found no correlation between grower/shipper prices and retail prices.

A retail audit of peach, nectarine and plum supermarket prices by the California Tree Fruit Agreement in 31 U.S. and Canadian markets in 2006 found the crop selling for more than $2 per pound compared to $1.91 last season. Promotional prices averaged about $1.60 per pound compared to $1.42 in 2005.

“Gone are the days peaches sold for 39 cents per pound,” Van Sickle said.

Retailers are capitalizing on the consumers' willingness to pay more for fruits and vegetables, which are perceived to provide nutritional and health benefits.

Another reason growers are getting less of the final price is that some retailers are focusing more on their margins rather than on sales volume. Some grocers have concluded that they can achieve the same total return by selling less at higher prices than cut prices to move a higher volume of fruit and incur more spoilage and handling costs.

The disconnect between farm gate prices and prices charged to consumers is increasing. Growers are getting only about 20 cents per pound at retail, down from a paltry 27-29 cents a few years ago.

This is exasperated by the consolidation among grocery retailers that has given more power to fewer retailers and less ability for shippers to influence prices. The top 10 chains now account for 68 percent of grocery sales. Six years ago, it was 53 percent.

“The future challenge will be for growers to capture an increased share of the retail price,” Van Sickle said.

Grower gross return has held steady or increased over the past few years. However, costs have risen at a rapid pace. Van Sickle cited fuel costs, workers' compensation insurance, increased inventory costs and inefficiencies of specialty packs — such as clamshells and club store packages — which cost shippers an additional 10 percent to 15 percent. Worker training classes, audits and added documentation to bolster food safety also are increasing business costs.

Compliance with new air and water quality regulations also are expected to add to farming costs.

For this season, the only plus on the cost side was the big California mountain snow pack that provided additional surface water, allowing many growers to reduce water well pumping bills.

There are increasingly more fruit and vegetable choices, imported and domestic, and this is challenging the California tree fruit grower to gets peaches, plums and nectarines into supermarket baskets.

Fortunately, the national health crisis over obesity in America should provide positive markets for all fresh fruits and vegetables.

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