Predictions for 2024 - Honeycrisp pricing will continue to slide.

The Environment -

January fresh apple holdings were 112.2M bushels (bu) nationally, 22.8% higher than the 5yr average according to the US Apple’s January storage report.

This huge surplus is mainly led by Honeycrisp with fresh holdings +71% higher than the 5 yr average (+6.5M bushel). Granny Smith holdings +36% vs 5 yr average, Pink Lady +26%. With some noticeable increases from managed varieties including Cosmic Crisp (+4.9M bu) Ambrosia (+1.2M bu) and Envy (increase unidentified) all contributing significant volumes to the surplus as well.

With this surplus of product, we’ve seen depressed pricing through the Fall and winter of 2023 to increase movement. Honeycrisp in particular have seen nearly a 40% decrease in pricing here in the East Coast due to low FOBs and urgency to move through product from Western supply. According to numbers made available from US Apple we’ve seen a 24% lift in volume in exchange for the 40% discount in price, not quite the elastic yield one would hope for. Although we are moving more apples, simple math dictates that a 24% lift will not move through 70% more fruit.

So, what does this all mean for market conditions in 2024 and what could we expect to see?

The Effect -

As an industry we have certainly gotten better and managing Honeycrisp as a variety, growing, picking, packing and storing. For many years this variety was the problem child, the squeaky wheel and over the years we’ve been improving its greasy cocktail. This is likely contributing to the extremely long supply on this variety this year and to some extent, makes me feel more confident that current storage protocols will allow the 2023 crop to carry well into 2024. Which will put even more pressure from the supply side of the microeconomic supply/demand model we are seeing so clearly demonstrated this year.

As January comes to a close, apple demand historically begins to trail off. As January passes so do focuses on healthy eating. New fresh fruit items come into the spotlight, winter citrus, Florida berries followed by mangoes and melons a couple weeks later, apples get less and less of the flare on the store shelf and at the consumer’s table. I think we are going to see another price drop at this time to try to reinvigorate movement. However, I think this price investment will yield less than the 0.6 return we’ve seen crop to date.

Then in March and April we’ll start to see Chilean (and New Zealand) Honeycrisp enter the market from the Southern Hemisphere. We’ve already heard from Chilean shippers of serious reductions in contracted/committed programs in the US and Canada for the 2024 season. Undoubtably due to the bountiful supply of US goods here. But will that mean the Chileans will redirect Honeycrisp to other markets… unlikely.

The US and Canada are the primary consumers of Honeycrisp apples globally. Not much of a market exists in Asia and the Middle East. Certainly, a lack of export development on behalf of US shippers has existed up until this point. With a strong domestic market, and the concern of travel condition there was no point in investing in Honeycrisp exports. Europe has tried and rejected the Honeycrisp. For the most part their taste buds align with the Royal Galas and Pink Ladies of the world. As a result, the whole Chilean program is dependent on the spring/summer gap in US supply which will not really exist this year. But the Chileans will send the crop anyway, perhaps not in full but I am confident there will be plenty of open lots bouncing around without a home, worsening the supply size of the scale and pricing will fall again.

By May/June of 2024, we will likely see pack outs begin to fall and some questionable quality be pushed through the pipeline to turn apples to cash. Then we will start the new crop with Premier Honeycrisp from the earliest growing districts in August of 2024.  It will depend on the outlook for the 2024 crop but if it’s even slightly normal or larger than average this could be a mess for pricing. With the 2023 storage crop, Chilean imports and new crop Premiers on the market, pricing may experience another dip and I predict shippers will be practically giving away whatever is left of the 2023 Honeycrisp crop, regardless of quality.

The Effect of the Effect -

I wouldn’t be surprised if the Honeycrisp market remains depressed for the next several seasons. Yes, Honeycrisp have biannual tendencies but as forementioned we are figuring out the Honeycrisp formula a bit more each year, after all the variety was released in 1991, we have plenty of time for trial and error.

On the macro scale of things, if you ask the nurseries what they have been supplying on much of the new stock over the last 5-10 years, they are going to tell you some strain of Honeycrisp. These new orchards are getting into maturity now, with better production, better pack outs and good storage quality. Perhaps we won’t see the about 40M bu crop of 2023, but I believe it will be 30-35M going forward, that is until trees are taken out.

At the end of the day Honeycrisp ARE in fact more expensive to produce. Even with the advancements made, yields are still lower than gala or fuji, at least on the east coast, and to get the good pack outs and storage condition many additional steps need to be made. A unique fertility management program, multiple picks during harvest, stem clipping perhaps reflective fabric or higher color strains with royalties attached. Many growers will be in the red on their Honeycrisp blocks this year and if supply remains elevated the losses will inevitably persist until the supply corrects itself to reach a sustainable return to the farm. Trees will be removed.

Actions & Reactions -

If you’re a grower buckle down, there is little room for error in the coming seasons. Minimize the burn, be smart where you choose to spend your dollars. Quality is still going to trump quantity but look at where your biggest ROIs are on those expenses. I think it’ll be those low efficiency blocks that will be on the cutting board, planted at low densities or with bitter pit prone rootstocks. Highly leverage farms are most at risk, those that have thin margins of error on incoming profits and cashflow. Partner with a packer/sales agent that can offer you better terms to weather the storm.

If you’re a retailer, should you be dropping retails to reflect the lower costs? With Honeycrisp I fear the answer is truly unclear?  I genuinely feel the low elasticity we’ve seen crop to date is not solely because retailers are margin hungry. It is certainly happening in places, but I believe Honeycrisp were already a relatively inelastic item. Consumers have been conditioned to pay more for the Honeycrisp eating experience. For years this apple was sold at a premium and consumers were willing to pay for it. Discounting the price may entice a small portion of customers not previously purchasing to buy, but for the most part that core Honeycrisp customer was going to buy regardless.

Perhaps those retailers that focus on more price conscious shoppers will see more elasticity in dropping prices, but at what collateral cost? If the price discount does entice shopper conservation, what item are they leaving behind on the shelf? If it’s another apple SKU is it a true net benefit to the shipper?

Interesting dynamics at play in the category this year. A market correction is sure to come for the industry.

About United Apple Sales LLC -

Established in 1905, United Apple Sales is a leading marketer and distributor of Fresh Apples and Cherries based out of Lyndonville, NY. They offer export, domestic and slicer programs to customers globally on more than 20 varieties from 50+ local growers! Expedited lead times with exceptional service, call us today!