Ag faces uncertain year as food spending drops

Jun 15, 2009      The Wenatchee World

Rick Steigmeyer

Jun. 13, 2009 (McClatchy-Tribune Regional News delivered by Newstex) -- WENATCHEE -- The past year has been a riches-to-rags story for many North Central Washington growers. Prices for many crops have dropped dramatically over the past several months, and the outlook for the coming year may not be a whole lot better.

"People are spending less on food. I think it may be the first time that's happened since the Great Depression. I've never seen anything like it," said Desmond O'Rourke, a private consultant in Pullman who has been a world agricultural economist for the fruit industry for more than 40 years.

O'Rourke's research shows an unprecedented decline in world agricultural trade the past few months as national economies have gone into a tailspin. U.S. agricultural trade with other countries has dropped 3 to 4 percent since the first of the year, and other countries in Europe and Asia have reported similar declines. Marketers could have trouble selling large crops at high prices if shoppers are skimping and export sales are down, he said.

Fortunately, the past two years have been some of the most profitable years on record for many growers of wheat, apples, pears and cherries. Wheat prices have fallen from unheard-of prices last year and continued to fall the past few months, but are still higher than they were two years ago.

"The good news is that the fruit industry has had two really good years, so maybe they can absorb a bad year or two," said O'Rourke.

Apples

Washington apple growers harvested their largest-ever crop last year and a lot of those apples came in smaller sizes, said Kirk Mayer, manager of the Washington Growers Clearing House in Wenatchee.

"Growers' thinning program wasn't as successful as was needed. A certain kind of weather is needed for chemical thinners to work properly," Mayer said. Other growers may have left more apples on the tree thinking they would make more money if prices stayed as high as they were for the 2007 crop, he said.

For whatever reason, many growers found themselves stuck with a lot of small apples that have been selling at a loss, Mayer said. Growers who had mostly large apples made money. Prices for this year's crop could improve if overall crop size is better controlled, he said.

O'Rourke said apple growers need to start thinking how they can better promote their product. That has been difficult since the downsizing of the Washington Apple Commission several years ago, he said.

"The Apple Commission doesn't have the clout that it used to. Apples are being out-promoted by grapes and other fruit," he said. O'Rourke said the coming year could be better than this past one if the crop size is manageable, but growers should tighten their belts and prepare for what could be another tough year.

"If the industry accepts the reality of the situation, they'll be far ahead," he said. "I've never seen trade drop off like it has the past few months, and that could mean we'll be seeing lower prices."

Cherries

Cherries sold for fantastic prices last year -- averaging $50 for a 20-pound box -- but frost and rain greatly reduced volume. The 2008 crop was down 38 percent from the previous year, Mayer said. This year, growers are concerned about having too large a crop. Some are paying workers to thin the fruit and break up clusters to make sure the cherries have room to grow to large sizes that bring the most money.

"Thinning cherries is something that hasn't been done much in the past, but it pays to produce premium fruit in premium sizes," Mayer said.

Pears

Pear growers have benefitted from short crops worldwide the past few years. The 2008 crop has sold well and profitably, Mayer said. With another average-size crop on the trees, NCW growers are hoping for a strong season.

But a 20 percent tariff on pears imported to Mexico will have an impact if it is not resolved by this year's harvest, said Mark Powers, vice president of the Northwest Horticultural Association. About 13 percent of the Northwest pear crop -- $50 million to $60 million worth -- is exported annually to Mexico. The 20 percent tariff adds about $4 a box to the sale, and marketers may have to lower their prices to complete a transaction, he said. The tariff also affects Washington cherry, apricot and frozen potato exports to Mexico.

Wheat

Wheat growers have been on a roller coaster the past two years, said Paul Katovich, assistant manager for Central Washington Grain Growers Association in Waterville. It hasn't been all fun, but it has been profitable. Wheat prices soared to as much as $15 a bushel in early 2008 and started 2009 at more than $8 a bushel. Growers sold their wheat as fast as they could to get in on the unprecedented prices that were driven up by world shortages and high oil and gas prices, Katovich said.

Prices have declined over the past year and growers have held on to their wheat hoping prices would climb again. The ups and downs haven't been good for farmers with ulcers, but even the low prices have been $2 a bushel higher than what prices have been for the past 30 years, he said. The May Waterville price was $5.14 a bushel. Most years, the price fluctuates between $3 and $4 a bushel.

"It's been very volatile," Katovich said. The coming year could be another good year for NCW wheat growers. The crop has suffered from lack of moisture and is likely to be average in volume, at best, he said. But continued high prices -- still above $5 a bushel -- and a new crop insurance plan that guarantees farmers who signed up for it the same prices they made the previous year, are setting the stage for another profitable, if not bizarre, year, he said.

Rick Steigmeyer: 664-7151

steigmeyer@wenatcheeworld.com

Newstex ID: 35775263

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