Review of Canadian Apple Market & Trends 2015 Mid-Summer - - PowerPoint PPT Presentation

Review of Canadian Apple Market & Trends

2015 Mid-Summer Meeting- Canadian Apple Industry Wolfville, NS – August 4th, 2015

Farid Makki Sector Development & Analysis Directorate Agriculture and Agri-Food Canada

Significance of Apple Production in Canada

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• Second most valuable fruit crop after blueberries (FGV of $188 Million in 2014)
• Most significant fruit produced in Canada in terms of tonnage.
• Largest tree fruit crop by volume and value.
• Apples represent 22% of 2014 total fruit Farm Gate Value

Fruit Crop

Farm Gate Value (in $ Million) for Top 5 Fruit Crops

2010 2011 2012 2013 2014 5 Year Average

Blueberries

Total

149 203 243 187 246 206

Low-bush

57 86 101 80 117 88

High-bush

92 117 141 107 129 118

Apples

149 162 186 197 188 177

Grapes

110 128 145 154 116 131

Cranberries

70 88 109 94 90 90

Strawberries

69 72 71 70 72 71

Total Fruits

659 771 879 843 849 800 Share (%) of Total Fruit Farm Gate Value for Top 5 Fruit Crops

2010 2011 2012 2013 2014 23% 26% 28% 22% 29% 9% 11% 12% 9% 14% 14% 15% 16% 13% 15% 23% 21% 21% 23% 22% 17% 17% 16% 18% 14% 11% 11% 12% 11% 11% 10% 9% 8% 8% 8%

Provincial Share of Apple Production

(by Volume)

Ontario 35% Quebec 28% British Columbia 27% Nova Scotia 9% New Brunswick 1%

2014

Marketed Volume in 2014: 374 M Kg (19.6 million bushels)

• Ontario: 133 M Kg
• Quebec: 105 M Kg
• BC: 100 M Kg
• Nova Scotia: 33 M Kg
• New Brunswick: 3 M Kg

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Ontario 41% Quebec 19% British Columbia 29% Nova Scotia 10% New Brunswick 1%

2005

4 409 376 446 427 435 371 395 274 387 374

50 100 150 200 250 300 350 400 450 500

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Marketed Volume (Million kg)

Marketed Volume Source: Statistics Canada

Canadian Apple Production - 10 Year Trend

(based on Marketed Volume)

Canadian apple production has been stagnant over the last decade and has been hovering around 400,000 metric tons (21 Million bushels). Although planted area has been steadily declining, high density plantings have been increasing.

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Source: Statistics Canada

50 100 150 200 250 300 350 400 450

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 British Columbia 117 91 77 106 93 92 97 98 81 100 Ontario 169 155 184 169 178 136 146 35 151 133 Québec 78 88 141 108 120 105 110 101 113 105 New Brunswick 5 4 4 4 4 4 4 4 4 3 Nova Scotia 39 39 41 39 40 34 34 38 37 33

Marketed Volume (Million kg)

Canadian Apple Production

Marketed Volume by Province

53 54 53 50 49 45 44 42 43 43 47 46 45 44 42 40 40 38 38 38

10 20 30 40 50 60 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Area (‘ 000 Acres)

Bearing and Non-Bearing Bearing

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Source: Statistics Canada

Planted area has fallen by about 3% per year for the last decade and is starting to stabilize.

Canadian Apple Area (Planted Area) – 10 Year Trend

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139 148 164 172 182 149 162 186 197 188

• 1

2 5 8 11 14 17 20 23 26 29 32 50 100 150 200 250

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Average Farm Gate Price (Cdn ¢/lb) Farm Gate Value (Million $) Farm Gate Value Average Farm Gate Price

Source: Statistics Canada

Canadian Apple Farm Gate Value & Average Price per Pound

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0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Volume (%)

Source: Statistics Canada

Canadian Apple Utilization

% of Total Volume

Fresh Processing

Share (%) and Value of Marketed Apple Production Destined for Processing

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Province

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Ontario

40% 34% 30% 40% 30% 27% 23% 25% 26% 17%

Québec

33% 34% 51% 44% 50% 50% 36% 45% 36% 32%

B.C.

21% 15% 9% 6% 6% 23% 8% 7% 12% 15%

Nova Scotia

53% 48% 49% 43% 42% 45% 42% 36% 39% 41%

New Brunswick

27% 22% 1% 15% 33% 12% 7% 15% NA 21%

CANADA

34% 31% 32% 33% 32% 34% 25% 27% 27% 23%

117 127 141 146 153 127 143 159 176 168 22 21 22 26 29 22 20 28 21 20

20 40 60 80 100 120 140 160 180 200 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Farm Gate Value (Million $)

Fresh Market Processing Market

Canadian Apple Varieties

Variety by Volume and Total Share of Production

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Apple Variety 2013 2004

Million bushels Share of Total Production(%) Million bushels Share of Total Production(%)

McIntosh 6.38 30.6% 9.59 38.9% Gala 2.22 10.6% 1.87 7.6% Empire 2.08 10% 1.97 8% Spy 1.73 8.3% 1.35 5.5% Spartan 1.18 5.7% 1.74 7% Red Delicious 1.20 5.7% 2.36 9.6% Cortland 1.07 5.1% 0.86 3.5% Honeycrisp™ 0.74 3.6% NA NA Idared 0.73 3.5% 1.06 4.3% Ambrosia 0.55 2.6% 0.14 0.6% Golden Delicious 0.41 1.9% 0.71 2.9% Paula Red 0.22 1.1% NA NA Fuji 0.18 0.8% 0.35 1.4%

Source: Provincial Producer Organizations

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Source: Food and Agriculture Organisation

• f the United Nations (FAOSTAT)

Iran (1.7 MMT) India (2.2 MMT) Canada (0.3 MMT) Turkey (2.9 MMT) Poland (2.9 MMT) France (1.4 MMT) Italy (2 MMT) United States (4.1 MMT) Other Countries (22 MMT) China (37 MMT)

• 2012 World Apple Production: 76.4 million metric tons
• Canada’s apple production: less than 0.4% of global apple production

Global Apple Production (in Million Metric Tons)

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12 158 205 208 222 236 241 269 437 631 1,050 200 400 600 800 1,000 1,200 Taiwan India United States Canada Mexico Spain Netherlands United Kingdom Germany Russia

Canada: 7th top fresh apple importing country in the world by volume! (with 82% of imports from the US) and 6th by value.

Source: Global Trade Atlas (GTA Navigator)

Global Fresh Apple Imports: Top 10 Importing Countries (2014)

234 259 262 271 277 306 347 588 656 685 200 400 600 800 Spain India United States Taiwan Canada Mexico Netherlands United Kingdom Germany Russia

Volume (Million kg) Value (Million Cd $)

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Source: Global Trade Atlas (GTA Navigator)

43 174 174 308 382 701 820 865 889 975 1,062 500 1000 1500 Canada Netherlands Belgium New Zealand South Africa France Chile China United States Italy Poland

Global Fresh Apple Exports: Canada & Top 10 Exporting Countries (2014 Exports in Million kg) Canada’s exports of fresh apples represent only 0.5% of global fresh apple exports

50 100 150 200 250 300 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14 13-14 May 14-15 May

Volume (Million kg)

Imports Exports

Trade Balance

Canadian Balance of Trade for Fresh Apples

113 96 145 115 145 161 168 158 237 191 154 135

Source: Statistics Canada

Canadian Fresh Apple Imports

by Country of Origin

Source: Statistics Canada

Canadian Fresh Apple Imports

by Country of Origin (excluding the United States)

10 20 30 40 50

Volume (Million kg)

04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14 13-14 May 14-15 May Chile New Zealand South Africa China France Argentina

Source: Statistics Canada

29.6 31.9 40.3 34.2 39.1 39.3 34.8 53.2 35.7 44.5 27.3 18

Canadian Fresh Apple Imports from Washington State

50 100 150 200 250 300 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14 13-14 May 14-15 May

Volume (Million kg)

10 20 30 40 50 60 70 80 90 100

Average Import Price (Cdn ¢/lb) World Washington State Imports

Source: Statistics Canada

Canadian Fresh Apple Imports from Washington State

0.5 1 1.5 2 2.5 3

Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul

Volume (Million kg)

0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8

Average Import Price (Cdn ¢/lb)

2012-2013 2013-2014 2014-2015 May

Source: Statistics Canada

Red Delicious (HS 0808.101.096)

Canadian Fresh Apple Imports from Washington State

0.5 1 1.5 2 2.5 3 3.5 4

Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul

Volume (Million kg)

0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9

Average Import Price (Cdn ¢/lb)

2012-2013 2013-2014 2014-2015 May

Source: Statistics Canada

Golden Delicious (HS 0808.101.092)

Canadian Fresh Apple Imports from Washington State

1 2 3 4 5 6 7 8

Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul

Volume (Million kg)

0.2 0.4 0.6 0.8 1 1.2

Average Import Price (Cdn ¢/lb)

2012-2013 2013-2014 2014-2015 May

Source: Statistics Canada

GALA (HS 0808.101.097)

Canadian Fresh Apple Imports from Washington State

0.5 1 1.5 2 2.5 3

Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul

Volume (Million kg)

0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8

Average Import Price (Cdn ¢/lb)

2012-2013 2013-2014 2014-2015 May

Source: Statistics Canada

Granny Smith (HS 0808.101.093)

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• Northwest facing a downturn in prices for 2014-15 crop and a bearish outlook for 2015-16.
• A record 2014-15 crop: 140.6 million boxes (21.6% higher than previous year and 9.2%

larger than the previous record of 128.7 million boxes set in 2012-13). Record levels of apples remaining in storage represent a marketing challenge.

• Lower Profitability: Northwest apple growers are experiencing profit margin compression

this year: prices for nearly every major apple variety are down from levels in the last 2 years. As a result of low pack-outs and low prices for most varieties many growers will not be

• profitable. However, following a string of profitable crops, most producers appear to be

financially well positioned to work through this down market. 2015-2016 Crop Outlook:

• No expectation of back-to-back record crops. Initial reports suggest a fresh apple crop of

100-125 million boxes this season. Reduction in size driven by removal of apple orchards, including R. Delicious , G. Delicious and other varieties that have lost favor in the domestic

• market. Growers also impacted by spotty hail damage this year that reduced crop potential.
• Harvest timelines are running 2 weeks earlier than normal, due to a mild winter and early
• spring. The early summer heatwave may push timelines even further forward.
• A smaller 2015-16 crop is positive, but sustained and intense heat this summer could be

detrimental to the quality of the crop.

Source: Northwest Farm Credit Service

Northwest US Apple Market Snapshot

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• Rising input costs (land, capital, labor, water, power, transportation and chemicals),
• More challenging access to resources (labor shortages, limited land and water supplies).
• Increased concentration along the supply chain with number of firms declining at every

level (grower, packer, storage, marketing).

• More stringent fresh market requirements (quality, food safety, traceability, sustainability)
• Static or declining demand for fresh apples in many developed countries due to intense

competition from processed snacks and other types of fruit (berries, tropical fruit..).

• Potential for growth in demand has moved from developed world to the developing world.

The 2014-15 season has been a very challenging season for the world apple industry due to:  High crop volume (almost 71 million metric tons, despite declines in China and Turkey)  Slow global economic growth or stagnation (Brazil & Russia in recession, while Chinese economic growth rate falling from above 10% to 7% in 2015)  Western sanctions against Russia and the closing of the Russian market to apples from Poland and other European countries leading to market disruptions as far as in N. America

Common Factors in Key Apple Producing Countries

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Austria 14.6 1.45 13.5 35.4 3,000 32.4 Belgium

• 30.9

1.78 11.4 65.7 2,275 36.2 France

• 7.2

1.36 9.8 41.0 1,874 34.8 Germany

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1.33 12.2 39.0 2,361 33.4 Greece

• 4.4

1.32 8.2 11.9 1,060 17.6 Italy 1.7 1.20 14.1 33.7 2,351 41.0 Netherlands

• 18.5

1.43 9.7 42.4 2,538 36.3 Portugal

• 4.4

1.13 11.0 26.4 1,591 11.7 Spain

• 20.5

1.68 8.6 24.0 467 16.1 United Kingdom 3.5 1.40 10.2 43.0 1,134 22.4 Russian Fed

• 30.1

3.38 15.5 6.5 620 3.4 Hungary 50.1 3.64 2.1 22.8 1,135 24.2 Poland 54.2 3.18 11.4 16.1 1,221 20.3 Canada

• 19.2

1.65 8.6 26.2 980 22.2 Mexico 24.8 2.29 6.2 8.2 250 10.7 United States 8.5 1.15 12.0 43.0 1,000 35.2 China 43.8 1.88 15.2 75.3 350 20.0 India 3.9 1.90 3.4 0.0 220 6.3 Japan

• 9.4

1.39 9.8 64.6 1,072 20.9 South Korea 3.7 1.38 29.0 72.0 1,010 21.0 Turkey 9.1 1.40 11.0 3.4 315 17.4 Argentina

• 7.9

1.45 5.6 35.4 1,063 35.7 Australia 8.5 1.27 7.4 79.5 540 15.3 Brazil 11.3 1.86 3.0 95.0 875 34.1 Chile 32.1 1.56 10.0 79.1 501 51.2 New Zealand 18.9 1.30 1.2 92.5 1,120 62.2 South Africa 16.7 1.54 7.0 56.5 1,204 42.3 AVERAGE 3.3 1.84 10.1 38.6 1,174 24.6

Source: World Apple Review 2015 Edition

% of Acreage non- bearing, 2014 % of New Varieties (2014) Planting Density, #

• f trees per

hectare (2014) Yield per hectare- 2014 (in mt) Country % Change in Production, 2006-08 to 2012-14 Relative Variability of Production, 2004-14 (ratio)

Comparative Performance Measures of Production Efficiency

(2015)

25 2015 Country Production Infrastructure Financial & Overall Rank

(2014 Overall Rank)

Efficiency & Inputs Markets 1 New Zealand (3) Austria United States Belgium 2 United States (2) Italy Chile Netherlands 3 Chile (1) Chile New Zealand France 4 Italy (4) South Korea Canada Japan 5 Austria (8) New Zealand South Africa Italy 6 Belgium (9) China Brazil Austria 7 France (5) South Africa Austria New Zealand 8 Netherlands (10) Belgium France Germany 9 Japan (6) Netherlands Italy United Kingdom 10 South Korea (7) Germany Turkey South Korea 11 Germany (12) United States Argentina Spain 12 Canada (11) France Japan United States 13 South Africa (14) Brazil South Korea Canada 14 United Kingdom (13) Japan Belgium Portugal 15 Australia (16) United Kingdom Netherlands Poland 16 Brazil (15) Argentina Germany Australia 17 Spain (18) Portugal Australia Chile 18 Portugal (21) Australia Spain Slovakia 19 China (17) Poland United Kingdom Mexico 20 Poland (20) Canada China Slovenia Source: World Apple Review 2015 Edition

Common Factors in Key Apple Producing Countries

2015 Competitiveness Rankings for Major Apple Producing Countries

Canadian Apple Industry’s Current & Near Term Situation

Although Canadian apple growers operate in an increasingly competitive environment, with pressures in the marketplace due to the following major challenges:

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There are a number of opportunities that the sector can explore to boost profitability and enhance its competiveness such as by:



Strengthening consumer appeal of apples through collective promotional efforts (health benefits, pleasure, fun)



Capitalizing on the buy local trend to displace imports



Investing in production and packing efficiencies (Increase orchard productivity ,yields and pack-outs)



Further altering the product mix with the introduction of “appropriate” varieties



Building stronger relationships with retailers sourcing Canadian branded apples



Building alliances with packers/marketers to help meet retailers and consumers’ needs



Exploring and creating new direct sales opportunities for Canadian apples.

 World oversupply  Increasing production costs  Labor availability and cost  Increasingly competitive marketplace with pressures coming from low-cost

producing countries

 Stagnating/declining apple consumption  Increased pressure from retailers both on margins and expectations (more

stringent requirements on quality, safety & traceability, sustainability)

Who/What Are You Competing Against?

• Other Fruits &

Healthy Snacks

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Better promote & position apples through collective promotional efforts Increase Profitability

 Replace old varieties with new varieties  Switch to high density plantings  Improve quality & consistency  Introduce labour efficiency measures/tools  Modernize infrastructure  Consolidate (# of growers & packers)  Value-added opportunities that you as growers can directly benefit from

Focus on Quality, Service, Branding, rather than on Price & Volume

• Other Jurisdictions

such as the U.S. and particularly Washington State

How to Compete Better?

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Farid Makki

Sector Specialist - Fruit Horticulture and Cross Sectoral Division Market & Industry Services Branch Agriculture and Agri-Food Canada Telephone: (604) 292-5868 Email: farid.makki@agr.gc.ca