Fruit Outlook 2017: Strong demand… stronger production
Canadian and U.S fruit growers in 2016 produced more fruit, but didn't necessarily see the demand to match. This had led to a buildup of stocks for some products and lower prices, resulting in a mixed outlook.
To highlight this, I'll focus on Canada's apple, grape and cranberry markets.
Apples – large 2016 harvest pushes prices lower
Canadian apple production was up 14% while U.S. apple production was up 4% from 2015. A large supply of apples still remains in storage as a result: AAFC’s monthly apple storage report indicates apple supplies are 49% higher than last year’s level.
Currently, US fresh apple market prices are down 12% in 2017 and remain near the previous 5-year average. The same trend has impacted the Canadian market where retail apple prices are down 13% in the first quarter of 2017 compared to the same period in 2016 and remaining above the previous 5-year average.
The USDA’s Fruit and Tree Nuts Outlook indicates that 2017 apple prices should remain below 2016 levels given storage numbers. This price pressure is expected to persist until inventory levels decline. Keep an eye as well on the new apple crop.
Cranberries – large production supporting producer revenues
The cranberry industry has had several years of low prices due to growing North American supplies of cranberries. Increased cranberry production in Canada was mainly the result of strong yield gains. While prices remain low, rising production has compensated for low prices, boosting farm cash receipts. Final 2016 data is unavailable, but estimates indicate cranberry receipts will approach CAD $120 million, an all-time record high.
While there are multiple demand segments that are growing in the cranberry sector (for example organic or China), prices remain soft as evidenced by the most recent OceanSpray auction. Profitability critically depends on the ability of producers to continue growing productivity.
Grapes – wine grape prices outstrip softer fresh prices
Overall, the Canadian grape industry had a good year in 2016, production was up 22% over 2015, led by continued growth in grapes for wine production. Market prices are mixed based on the variety, quality and the end use. Canadian grape prices increased nearly 3% (average of B.C. and Ontario) in 2015 as strong prices for wine grapes were offset by lower prices for fresh grapes. Prices currently remain strong as demand for wine grapes is expected to continue growing in 2017.
A market outlook is always about demand and supply. The 2017 fruit outlook is defined by a large available supply, with growing demand.
The weak Canadian dollar also supports prices of Canadian fruit producers. Trade jitters as well as weaker oil prices recently brought down the value of the Canadian dollar against the U.S. currency. It will be important to monitor if these temporary pressures persist throughout the year. Our expectation remains for the exchange rate to average 0.75 USD per CAD in 2017.