ference weicker & company developing the tree fruit industry in british columbia phase i report

FERENCE WEICKER & COMPANY

Developing the Tree Fruit Industry in British Columbia

Phase I Report


Presentation

Overview of the Project• Objectives• Work Completed to Date• Work to Be Completed

Presentation of the Phase I Report• Profile of the Tree Fruit Industry• Key Trends• Key Issues to be Further Reviewed

How You Can Provide Input


Overview of the Project


Objectives

The British Columbia Fruit Growers Association has commissioned development of a strategic plan for the tree fruit industry. Specifically, the project is designed to:

Identify and assess key issues that are strategically important to the overall long-term success of BC tree fruit industry

Identify specific strategies and meaningful actions that industry, government and others can pursue to assist the industry to enhance its competitive position and build a stronger industry future


Three Phases of the Project

Phase Key Activities Key Outputs

Discussion Paper

Collect and review available data to develop a profile of the tree fruit industry in BC and identify key issues that need to be addressed

Review the competitive position of BC Identify potential strategies that could be

implemented in the short-term (quick hits) and longer-term

Develop a profile of the industry, prepare a short

discussion paper for distribution to workshop participants, and identify

priority activities that could be acted upon in

the short-term

Industry Consultation

Stage one or more workshops with industry to obtain input on the key issues as well as on specific strategies and meaningful actions that can be taken to address these issues

Agreement on key issues and input on

actions to be taken to address

these issues

Preparation of Strategic Plan

Define specific actions and strategies to be undertaken. Hold meetings with Steering Committee members to discuss strategies and highlight actions which are of the highest priority in the near-term

Definition of recommended actions

and strategies


Work Completed to Date

• Met with the Project Steering Committee• Collected and reviewed available data and previous studies• Developed a profile of the tree fruit industry in BC• Established a website for the project (www.treefruits.ca)• Reviewed characteristics of the tree fruit industry in other

jurisdictions (Washington, Oregon, Ontario, California, and NZ)• Conducted interviews with 50 industry stakeholders including

growers, packers, marketers, retailers, wholesalers, institutional buyers, associations, processors, government, and researchers

• Identified strengths, weaknesses, opportunities and threats facing the industry

• Conducted a preliminary assessment of key issues and opportunities for development

• Prepared the Phase I Report


Next Steps

• Stage public meetings (August 24)

• Conduct an industry workshop to define the key issues and identify potential strategic directions (October 18)

• Participate in the BCFGA Horticultural Forum (November 15)

• Conduct further research into key issues and strategic direction (November – December)

• Prepare the Strategic Plan (to be released at the BCFGA Annual Convention – January 27, 2007)


Profile of the BC Industry


The BC tree fruit industry generated farm gate receipts of $68 million from about 18,000 acres of production in 2005

Tree Fruit Acres by Commodity Groups (2005)

Apples69%

Cherries15%

Other5%

Pears4%

Peaches7%

Farm Gate Receipts By Commodity Group (2005)

Apples68%

Cherries24%

Other2%

Pears3%

Peaches3%


Farm gate receipts have risen at less than the rate of inflation over the past 35 years

Farm Gate Receipts (FGR) for BC Tree Fruits

$68

$53 $55$64

$17

$79

$67

$40

$17

$87

$0$10$20$30$40$50$60$70$80$90

$100

1971 1981 1991 2001 2005

Far

m G

ate

Rec

eip

ts

($ m

ilio

ns)

Current Dollar FGR 1971 FGR - Inflation Adjusted


Significant declines in production acreage have been largely offset by increases in production per acre

Production Acreage and Yields for Apples

0

5,000

10,000

15,000

20,000

25,000

1971 1981 1991 2001 2005

Years

Acr

es &

Lb

s P

er A

cre

Acreage Yields


Turnover in the industry has been relatively high and is likely to continue

How Many Years Do You Plan to Continue Farming?

15%

32%

30%

23%

0% 5% 10% 15% 20% 25% 30% 35%

Don't know/refused to answer

11 or more years

5 to 10 years

Less than 5 years


Nevertheless, tree fruits remain a significant economic driver for the region

• Approximately 1,800 growers (400 to 500 larger commercial growers)

• Industry employs about 5,000 people on farm, over 1,000 in packing houses, and about 1,000 more in support industries

• 40 to 50 BC companies involved in processing tree fruits, employing about 2,500 people

• Orchards serve as a major tourism draw and a defining feature of the Okanagan


BC accounts for less than 3% of combined Canadian and US apple production

Relative Size and Growth of the Apples Sector in Select North American Jurisdictions

$0

$3,000

$6,000

$9,000

$12,000

$15,000

-20% -10% 0% 10% 20%

Growth Rate - FGR (2001 - 2005/2000 - 2004)

Ave

rag

e F

GR

per

Acr

e

BC

WA

OR

QC

ON

CA

NZ


While a small cherry producer, BC has benefited from strong prices for its late season variety

Relative Size and Growth of the Cherries Sector in Select North American Jurisdictions

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

$11,000

0% 5% 10% 15% 20%

Growth Rate - FGR (2001 - 2005/2000 - 2004)

Ave

rag

e F

GR

per

Acr

e

WA

ORON

CA

BC


BC is a net importer of the tree fruits we produce

International Trade Balance of the BC Tree Fruit Industry, 1992-2004 ($ millions)

$0.0

$20.0

$40.0

$60.0

$80.0

$100.0

$120.0

$140.0

$160.0

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Imports Exports


Key Trends


All countries are struggling to deal with the impact of increased world production and trade

Over past 15 years, worldwide production has increased by about 60%:

China apple production increased six-fold, now accounting for over 40% of world production

Poland increased production three fold Brazil doubled production Chilean production grew by 90%.

Trade liberalization and technological advances (e.g. storage) that allow more products to be delivered quickly to any market in the world have greatly heightened the competitive environment


Apple demand is stagnant or declining in many regions

• Per capita consumption of fresh apples in North America fell from 8.1 pounds in 1991 to 6.8 pounds in 2005

• Only in China is there a significant rise in demand, driven largely by the ready availability of apples and rising household incomes


Production increases, which outpace increases in demand, have resulted in declining grower returns

Apples Wholesale Fresh Price by Variety ($/lb) 1994 - 2005

$0.00

$0.10

$0.20

$0.30

$0.40

$0.50

$0.60

$0.70

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

All Apples Ambrosia Gala McIntosh Red Delicious Spartan


One way industry has attempted to respond is through development and commercialization of new

varieties

• New varieties, such as Ambrosia, can generate significantly higher prices than older varieties

• There is increasing emphasis on the protection of cultivars through plant patents and trade marking products

• We have seen the emergence of club varieties which promote demand through specialized marketing programs and limit production


There has been a shift in the varieties produced in BC over time

Apples Market Share by Variety (% Volume) 1994 - 2005

0

5

10

15

20

25

30

35

40

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Ambrosia Gala McIntosh Red Delicious Spartan


Other Trends

• Grower consolidation, particularly in the US and New Zealand

• Greater consolidation in other levels of the value chain (now dominated by large corporations who wield extensive market power)

• Crop management is intensifying (higher planting densities and improved cultural practices)

• Quality assurance, product traceability and food safety programs such as HACCP have become increasingly important


Strengths and Weaknesses of the BC Industry

Strengths Weaknesses and Threats

Strong participation in replanting programs Proximity to major markets Long established research infrastructure Increasing consumer interest in fresh,

healthy products Climate well suited for tree fruit production An acceptance of change within the

industry Stakeholder commitment to the industry Well developed infrastructure in terms of

packing facilities, storage capabilities, and marketing systems

Strong food safety and quality control systems

Declining financial health Comparative disadvantages vis-à-vis

Washington State in areas such as production yields and scale of operations

Difficulties in accessing workers Rising costs (e.g. labour and energy) Limited resources available for marketing

and market research Complexity of the regulatory environment Lack of industry-wide planning and

coordination. Rising value of the Canadian dollar Impacts of increased urbanization Restrictive environmental regulations


Potential Issues

Identified for Further Analysis


Fourteen issues were identified for further review

Fruit quality and grading Structure of the industry at the packing house and marketing levels Access to labour Access to market, business and technical information Productivity and costs at all levels of the industry Opportunities in organic production Development and commercialization of new varieties Consumption of BC tree fruits in BC Food safety Long-term lease restrictions Partnerships with other jurisdictions Value-added products Export markets Anti-dumping trade actions


In addition, four items were selected for immediate review

• The CAIS Program

• Potential to establish an Agriculture Development Fund

• Opportunities for funding under ACT Now!

• Commercialization/marketing strategies for new varieties


How You Can Provide Input

• Visit the Website (www.treefruits.ca)

• Provide input through the website

• Contact the consultant, the Association or a member of the Steering Committee

ference weicker & company developing the tree fruit industry in british columbia phase i report

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