CEO’s Report: Tackling market imbalance, a shared responsibilityBoard information
Phil Turnbull – APAL CEO, shares this update to industry in the latest edition of AFG.
It was fantastic to see so many of you face to face in Melbourne in late May for our first APAL Forum in three years. Thank you to those who braved the challenges of Covid-19 travel and airport queues to join us.
Although the significant challenges facing the apple and pear industry were very much the focus, it was pleasing to see speakers pointing to some positive emerging trends and opportunities.
Reclaiming the snacking space, improving quality and consistency, sharing data and improving marketing are all areas which show potential for benefiting industry.
As leading demographer Bernard Salt put it: “Australia emerges well from adversity. We’re upbeat and optimistic. We are going to rebuild a better version of ourselves on the other side of Covid.”
Better packouts, poorer prices
One area where we are all too well aware of the need for a ‘better version’ of ourselves is the apple and pear domestic market.
Frustratingly, when the headlines are full of $12 lettuces and the skyrocketing prices of fruit and vegetables, apple and pear prices remain stubbornly at the lowest levels in years.
In part, this a product of our own success. The 2021 season produced 232,000 Class 1 tonnes of apples, across all varieties, 26 per cent more than in 2020.
The combination of new high-density plantings of new club varieties and productivity gains has the potential to consistently provide more Class 1 tonnes in 2022, in 2023 and beyond. There has not been a corresponding reduction in older varieties.
Historically a strong market, in recent years the apple market has become oversupplied with unsustainably low wholesale prices. The pear market continues to struggle with the overhang of fruit once destined for a canning market that has since all but disappeared.
Low wholesale prices, discounting by retailers and low-priced commodity varieties making club varieties look expensive means poor returns all round.
Increasing demand is one of the levers we can apply to rebalance the market and improve prices.
Market research has shown that quality and consistency are key to expanding domestic demand.
On the recommendation of the Strategic Marketing Panel (SMP), Hort Innovation has this season used the marketing levy to fund instore merchandising to improve the consumer experience at point of sale. The improvements already made, outlined at the Forum by Strikeforce’s Rowan Blyth, show what many of you identified, that this is one of the best investments of apple and pear levies in a long time, and long overdue.
But growing domestic demand alone will not rebalance the market.
History shows us that a sustainable healthy domestic market at which prices cover the cost of production is one where Class 1 apple volumes are around 180,000 tonnes, 22 per cent below the volume produced in 2021.
An industry-wide issue requires an industry-wide engagement in the response.
APAL is delivering the initiatives that support improvement – quality, industry data, export access and development, retailer engagement – but there is also a role and an opportunity for every individual grower in this response.
We need to export meaningful volumes of Class 1 tonnes to reduce our dependence on the domestic market, taking supply from packing sheds in all states and quality fruit from growers who have previously deemed export too risky.
We are asking growers to consider their poorest performing blocks and what future, if any, these have.
Be part of the solution
Prepare for export – Engage, talk to growers who already export, and to exporters to see where the opportunities are and what you need in place to be able to export. Nominate blocks and prepare them this winter for the 2023 season.
Review your future production – Ask yourself which blocks are achieving the lowest packout or bin return. Could the resources used on that block be better used elsewhere? Consider removing the poorest performing blocks. Review the future prospects for older varieties or varieties not performing well in your region. Which varieties can you sell on both domestic and export markets?