August 22, 2005 Volume 14 No. 23 Update on Pest Management and Crop Development
The three of us participated in the IDFTA tour of apple production in China that occurred July 12-24, 2005. David Eddy, Senior Western Editor with Meister Media, provided an excellent blog about our trip that can be accessed on-line at: http://www.americanfruitgrower.com/e_notes/page.php?page=trip.
The objective of this article is to summarize our personal assessments of how developments in China might affect the apple industry in northeastern United States. After our return to the US, each of us agreed to compile a list of our top five observations that might have implications for the eastern apple industry. Those observations were submitted without any further discussion or consultations among the authors. Our individual observations were then grouped into several broad categories with minimal editing. The initials preceding each observation below indicate the author who contributed the comment.
Observations on China's economy and growth trajectory:
DR: Energy demands from continued urbanization/industrialization will cause continued upward pressure on world fuel prices over the next two decades. Sixty to seventy percent of the 1.3 billion people in China still live in small rural villages, but most of them aspire to a US lifestyle. The apple industry should be seriously thinking about how to reduce fuel requirements for growing, storing, and shipping fruit because the coming energy crisis will cause huge economic dislocations and re-juggling of industries within the world economy.
DR: The Chinese people are industrious, optimistic, entrepreneurial, and appear to operate with a minimum of government interference (or assistance) in their agricultural enterprises.
SH: Throughout the country, Chinese people are excited about the world attention that they will receive as they host the Olympics in 2008. In preparation for the Olympics, China is putting a "new face" on the country with an astonishing building and beautification program. We saw building cranes scattered like oil derricks across the country, particularly in Beijing and Qingdao, which are venues for the Olympics. An unbelievable amount of money is being spent just on landscaping highways. Money spent preparing for the Olympics may be reducing expenditures for other sectors such as agriculture. Up-to-date national policies for agriculture appear to be lacking, except perhaps as it relates to higher education, which the Chinese value greatly.
SH: The apple sector, although large by our standards, is relatively small as a total part of the Chinese economy. The manufacturing sector that is producing products for Dollar Stores and Walmarts is likely to receive more government attention and support than is agriculture. However, the industrialization of China may create labor shortages for agricultural producers and is already contributing to huge problems with air quality and water pollution. If and when China begins to address the costs of air and water pollution, that may cause both a slow down in their industrialization process and a significant increase in their costs of production for both agricultural products and manufactured goods.
DR: Air and water pollution in China is tremendous; curbing pollution will eventually become essential and will significantly increase their costs.
GL: China will continue to grow as a world economic power unless the political system blows up.
China's apple industry is huge and will continue to impact world markets:
GL: The volume of apples grown in China will continue to grow.
SH: Chinese growers can use available technology to produce high-quality apples, but yields of high quality apples are low. Nevertheless, even if only a small percentage the 1.1 billion bushels of apples China produces expressly for fresh consumption are suitable for export, that could still be enough to disrupt world marketing. As the quantity of high-quality export apples increases, China's fresh-market production could set a floor price, at least for Fuji apples, and that pricing could affect the floor price for other varieties grown in the US.
GL: Chinese will consume more apples and apple juice as their incomes increase.
Implications for fresh-market apple producers:
GL: China can grow good quality fresh apples, but the growth in fresh-market apples will be slow because of literacy problems among producers and land policies that favor small producers.
DR: China can and will produce high-quality Fuji, Gala, and other hard varieties for export to Pacific Rim countries, including the west coast of the US. Their ability to produce and export softer varieties (e.g., Mac, Empire) and niche varieties (e.g., Macoun, Honeycrisp, Stayman, Silken, etc.) is more questionable. This observation may have implications for what varieties eastern growers should be planting.
SH: Significant quantities of fresh Chinese apples, other than Fuji, are unlikely to reach US markets for the foreseeable future (5 years). Even if the Chinese can meet phytosanitary standards for shipment of fresh apples to the US, export of varieties other than Fuji will be limited because the Chinese currently lack suitable precocious and disease-resistant rootstocks that would allow their industry to convert rapidly to other apple varieties.
DR: The development of China may have greater impacts on apple producers in the Pacific Northwest than on fresh-market apple producers in eastern United States. As China and India compete for fuel, higher fuel prices will raise costs for shipping west coast apples to eastern markets in the US. At the same time, the saturation of Pacific rim countries and western United States with cheap, hard "commodity" apples from China will set a low floor price for the kinds of apples traditionally produced in Washington State. Production of eastern varieties might remain profitable IF eastern producers and brokers can establish and maintain a market identity for eastern apples as compared with the "commodity" apples that will come from China.
Implications for processing apples:
GL: The volume of juice apples and apple juice concentrate from China will grow at a faster rate than fresh apple production and will be an increasing threat to the US processing market.
SH: Chinese apple production poses a tremendous threat to the processing apple industry in the US. China already has the largest concentrate plants in the world and can move their concentrate to any place in the world through the Hong Kong container ports. Although some (many?) locations in China lack adequate roads and cold storage facilities for handling fresh apples, huge quantities of fruit suitable for concentrate production can be moved from relatively remote locations to the concentrate factories. At the same time, their fruit industry is looking for alternate products and outlets other than concentrate. Andre Juice (the largest concentrator in the world with a 1,020,000 ton concentrate capacity) has already built a jelly factory for using the pectin from the pomace. It seems likely that the Chinese will soon start to produce slices and perhaps dehydrated sauce for multinational companies in search of less expensive processing product than what can be accessed in the U.S.
None of us can predict how world events will unfold over the next decade, the next year, or even the next day. Those of us on the IDFTA tour had an interesting glimpse of China as an apple producing country and as an emerging world power. Nevertheless, it was only a glimpse, and that glimpse was limited to a short time period and a relatively small area of a huge country. We came away with some common observations, some differences of opinion, and many "what if" questions. However, none of us would deny that China and Chinese apple producers will have a huge impact on the US apple industry over the next decade. It will be interesting to see how those impacts develop and what directions they will take.
Peach growers probably have been aware of the impending termination of use of azinphosmethyl (AZM) products on peaches and nectarines proposed in 2001 by the EPA in their IRED (Interim Reregistration Eligibility Decision) agreement with the technical registrants -- Bayer CropScience, Gowan Company, and Makhteshim Chemical Works. These uses were originally scheduled to be phased out in December 2005, pending the evaluation of public comments submitted to EPA intended to support further review of this decision. Those comments have now been received and ruled NOT to merit a rescinding of this phase-out date; however, the EPA has in fact decided to extend the sale and distribution of existing stocks, as well as use by growers, until September 30, 2006.
The full text of this decision can be accessed in the August 17, 2005 (Volume 70, Number 158) of the Federal Register, at: www.epa.gov/fedrgstr. It makes somewhat dense reading, but what they want to make clear is that AZM registration on these crops will not be extended, but now they are allowing the use of existing stocks through next year's season. It may be prudently suggested that growers of these crops might wish to stock up on the currently labeled products for use next year.