Review of Canadian Apple Market & Trends 215 Mid-Summer Meeting- Canadian Apple Industry Wolfville, NS August 4 th, 215 Farid Makki Sector Development & Analysis Directorate Agriculture and Agri-Food Canada
Significance of Apple Production in Canada Fruit Crop Farm Gate Value (in $ Million) for Top 5 Fruit Crops 21 211 212 213 214 5 Year Average Total 149 23 243 187 246 26 Blueberries Low-bush 57 86 11 8 117 88 High-bush 92 117 141 17 129 118 Apples 149 162 186 197 188 177 Grapes 11 128 145 154 116 131 Cranberries 7 88 19 94 9 9 Strawberries 69 72 71 7 72 71 Total Fruits 659 771 879 843 849 8 Share (%) of Total Fruit Farm Gate Value for Top 5 Fruit Crops 21 211 212 213 214 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% 1% 9% 8% 8% 8% Second most valuable fruit crop after blueberries (FGV of $188 Million in 214) Most significant fruit produced in Canada in terms of tonnage. Largest tree fruit crop by volume and value. Apples represent 22% of 214 total fruit Farm Gate Value 2
Provincial Share of Apple Production (by Volume) Nova Scotia 9% British Columbia 27% 214 New Brunswick 1% Quebec 28% Ontario 35% Marketed Volume in 214: 374 M Kg (19.6 million bushels) Ontario: 133 M Kg Quebec: 15 M Kg BC: 1 M Kg Nova Scotia: 33 M Kg New Brunswick: 3 M Kg Nova Scotia 1% 25 New Brunswick 1% British Columbia 29% Ontario 41% Quebec 19% 3
Canadian Apple Production - 1 Year Trend (based on Marketed Volume) Canadian apple production has been stagnant over the last decade and has been hovering around 4, metric tons (21 Million bushels). Although planted area has been steadily declining, high density plantings have been increasing. 5 45 4 35 49 376 446 427 435 371 395 387 374 Marketed Volume (Million kg) 3 25 2 274 15 1 5 25 26 27 28 29 21 211 212 213 214 Marketed Volume Source: Statistics Canada 4
Canadian Apple Production Marketed Volume by Province 45 4 35 Marketed Volume (Million kg) 3 25 2 15 1 5 25 26 27 28 29 21 211 212 213 214 British Columbia 117 91 77 16 93 92 97 98 81 1 Ontario 169 155 184 169 178 136 146 35 151 133 Québec 78 88 141 18 12 15 11 11 113 15 New Brunswick 5 4 4 4 4 4 4 4 4 3 Nova Scotia 39 39 41 39 4 34 34 38 37 33 Source: Statistics Canada 5
Canadian Apple Area (Planted Area) 1 Year Trend Planted area has fallen by about 3% per year for the last decade and is starting to stabilize. 6 5 4 53 54 53 47 46 45 5 44 49 42 45 44 4 4 42 43 43 38 38 38 Area ( Acres) 3 2 1 25 26 27 28 29 21 211 212 213 214 Bearing and Non-Bearing Bearing 6 Source: Statistics Canada
Canadian Apple Farm Gate Value & Average Price per Pound 25 32 29 Farm Gate Value (Million $) 2 15 139 148 164 172 182 149 162 186 197 188 26 23 2 17 Average Farm Gate Price (Cdn /lb) 14 1 11 8 5 5 2 25 26 27 28 29 21 211 212 213 214-1 Farm Gate Value Average Farm Gate Price Source: Statistics Canada 7
Canadian Apple Utilization % of Total Volume 1% Volume (%) 9% 8% 7% 6% 5% 4% 3% 2% 1% Processing Fresh % 25 26 27 28 29 21 211 212 213 214 Source: Statistics Canada 8
Share (%) and Value of Marketed Apple Production Destined for Processing Province 25 26 27 28 29 21 211 212 213 214 Ontario 4% 34% 3% 4% 3% 27% 23% 25% 26% 17% Québec 33% 34% 51% 44% 5% 5% 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% 2 18 16 14 141 146 153 143 159 176 168 Farm Gate Value (Million $) 12 1 117 127 127 8 6 4 2 22 21 22 26 29 22 2 28 21 2 25 26 27 28 29 21 211 212 213 214 Fresh Market Processing Market 9
Canadian Apple Varieties Variety by Volume and Total Share of Production Million bushels 213 24 Share of Total Production(%) Million bushels Share of Total Production(%) Apple Variety McIntosh 6.38 3.6% 9.59 38.9% Gala 2.22 1.6% 1.87 7.6% Empire 2.8 1% 1.97 8% Spy 1.73 8.3% 1.35 5.5% Spartan 1.18 5.7% 1.74 7% Red Delicious 1.2 5.7% 2.36 9.6% Cortland 1.7 5.1%.86 3.5% Honeycrisp.74 3.6% NA NA Idared.73 3.5% 1.6 4.3% Ambrosia.55 2.6%.14.6% Golden Delicious.41 1.9%.71 2.9% Paula Red.22 1.1% NA NA Fuji.18.8%.35 1.4% Source: Provincial Producer Organizations 1
Global Apple Production (in Million Metric Tons) 212 World Apple Production: 76.4 million metric tons Canada s apple production: less than.4% of global apple production Other Countries (22 MMT) United States (4.1 MMT) Italy (2 MMT) France (1.4 MMT) Poland (2.9 MMT) Turkey (2.9 MMT) Iran (1.7 MMT) China (37 MMT) Source: Food and Agriculture Organisation of the United Nations (FAOSTAT) Canada (.3 MMT) India (2.2 MMT) 11
Global Fresh Apple Imports: Top 1 Importing Countries (214) Volume (Million kg) Value (Million Cd $) Russia 1,5 Russia 685 Germany 631 Germany 656 United Kingdom 437 United Kingdom 588 Netherlands 269 Netherlands 347 Spain 241 Mexico 36 Mexico 236 Canada 277 Canada 222 Taiwan 271 United States 28 United States 262 India 25 India 259 Taiwan 158 Spain 234 2 4 6 8 1, 1,2 2 4 6 8 Canada: 7 th top fresh apple importing country in the world by volume! (with 82% of imports from the US) and 6 th by value. Source: Global Trade Atlas (GTA Navigator) 12
Global Fresh Apple Exports: Canada & Top 1 Exporting Countries (214 Exports in Million kg) Poland Italy United States China Chile France 1,62 975 889 865 82 71 South Africa New Zealand 38 382 Belgium Netherlands 174 174 Canada 43 5 1 15 Canada s exports of fresh apples represent only.5% of global fresh apple exports Source: Global Trade Atlas (GTA Navigator) 13
Canadian Balance of Trade for Fresh Apples 3 25 237 2 191 Volume (Million kg) 15 145 145 161 168 158 154 135 1 113 96 115 5 4-5 5-6 6-7 7-8 8-9 9-1 1-11 11-12 12-13 13-14 13-14 May 14-15 May Imports Exports Trade Balance Source: Statistics Canada
Source: Statistics Canada Canadian Fresh Apple Imports by Country of Origin
Canadian Fresh Apple Imports by Country of Origin (excluding the United States) 53.2 Volume (Million kg) 5 4 3 29.6 31.9 4.3 34.2 34.8 39.3 39.1 35.7 44.5 27.3 18 2 1 4-5 5-6 6-7 7-8 8-9 9-1 1-11 11-12 12-13 13-14 13-14 May 14-15 May Chile New Zealand South Africa China France Argentina Source: Statistics Canada
Canadian Fresh Apple Imports from Washington State 3 1 9 25 8 2 7 Volume (Million kg) 15 6 5 Average Import Price (Cdn /lb) 4 1 3 5 2 1 4-5 5-6 6-7 7-8 8-9 9-1 1-11 11-12 12-13 13-14 13-14 May 14-15 May World Washington State Imports Source: Statistics Canada
Canadian Fresh Apple Imports from Washington State Red Delicious (HS 88.11.96) 3.8 2.5.7.6 2.5 Volume (Million kg) 1.5 1.4.3 Average Import Price (Cdn /lb).2.5.1 Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Source: Statistics Canada 212-213 213-214 214-215 May
Canadian Fresh Apple Imports from Washington State Golden Delicious (HS 88.11.92) 4.9 3.5.8 3.7 2.5.6 Volume (Million kg) 2 1.5.5.4.3 Average Import Price (Cdn /lb) 1.2.5.1 Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Source: Statistics Canada 212-213 213-214 214-215 May
Canadian Fresh Apple Imports from Washington State GALA (HS 88.11.97) 8 1.2 7 1 6 5.8 Volume (Million kg) 4 3.6.4 Average Import Price (Cdn /lb) 2 1.2 Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Source: Statistics Canada 212-213 213-214 214-215 May
Canadian Fresh Apple Imports from Washington State Granny Smith (HS 88.11.93) 3.8 2.5.7.6 2.5 Volume (Million kg) 1.5 1.4.3 Average Import Price (Cdn /lb).2.5.1 Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Source: Statistics Canada 212-213 213-214 214-215 May
Northwest US Apple Market Snapshot Northwest facing a downturn in prices for 214-15 crop and a bearish outlook for 215-16. A record 214-15 crop: 14.6 million boxes (21.6% higher than previous year and 9.2% larger than the previous record of 128.7 million boxes set in 212-13). 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. 215-216 Crop Outlook: No expectation of back-to-back record crops. Initial reports suggest a fresh apple crop of 1-125 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 215-16 crop is positive, but sustained and intense heat this summer could be detrimental to the quality of the crop. Source: Northwest Farm Credit Service 22
Common Factors in Key Apple Producing Countries 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 214-15 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 1% to 7% in 215) 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 23
Comparative Performance Measures of Production Efficiency (215) Country % Change in Production, 26-8 to Relative Variability of Production, 24-14 % of Acreage nonbearing, 214 % of New Varieties (214) Planting Density, # of trees per Yield per hectare- 214 (in mt) 212-14 (ratio) hectare (214) Austria 14.6 1.45 13.5 35.4 3, 32.4 Belgium -3.9 1.78 11.4 65.7 2,275 36.2 France -7.2 1.36 9.8 41. 1,874 34.8 Germany -9 1.33 12.2 39. 2,361 33.4 Greece -4.4 1.32 8.2 11.9 1,6 17.6 Italy 1.7 1.2 14.1 33.7 2,351 41. Netherlands -18.5 1.43 9.7 42.4 2,538 36.3 Portugal -4.4 1.13 11. 26.4 1,591 11.7 Spain -2.5 1.68 8.6 24. 467 16.1 United Kingdom 3.5 1.4 1.2 43. 1,134 22.4 Russian Fed -3.1 3.38 15.5 6.5 62 3.4 Hungary 5.1 3.64 2.1 22.8 1,135 24.2 Poland 54.2 3.18 11.4 16.1 1,221 2.3 Canada -19.2 1.65 8.6 26.2 98 22.2 Mexico 24.8 2.29 6.2 8.2 25 1.7 United States 8.5 1.15 12. 43. 1, 35.2 China 43.8 1.88 15.2 75.3 35 2. India 3.9 1.9 3.4. 22 6.3 Japan -9.4 1.39 9.8 64.6 1,72 2.9 South Korea 3.7 1.38 29. 72. 1,1 21. Turkey 9.1 1.4 11. 3.4 315 17.4 Argentina -7.9 1.45 5.6 35.4 1,63 35.7 Australia 8.5 1.27 7.4 79.5 54 15.3 Brazil 11.3 1.86 3. 95. 875 34.1 Chile 32.1 1.56 1. 79.1 51 51.2 New Zealand 18.9 1.3 1.2 92.5 1,12 62.2 South Africa 16.7 1.54 7. 56.5 1,24 42.3 AVERAGE 3.3 1.84 1.1 38.6 1,174 24.6 Source: World Apple Review 215 Edition 24
215 Competitiveness Rankings for Major Apple Producing Countries 215 Country Production Infrastructure Financial & Overall Rank (214 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 (1) Belgium France Germany 9 Japan (6) Netherlands Italy United Kingdom 1 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 2 Poland (2) Canada China Slovenia Source: World Apple Review 215 Edition 25
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: 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) 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. 26
Who/What Are You Competing Against? How to Compete Better? Other Fruits & Healthy Snacks Other Jurisdictions such as the U.S. and particularly Washington State 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 27
Farid Makki Sector Specialist - Fruit Horticulture and Cross Sectoral Division Market & Industry Services Branch Agriculture and Agri-Food Canada Telephone: (64) 292-5868 Email: farid.makki@agr.gc.ca 28