Report Highlights:

Uneventful growing and harvest seasons helped the apple and pear sectors to bounce back from a difficult season one year earlier, when spring frost crippled these sectors. Both apple and pear production volumes are back to normal levels, imports are expected to decline and exports to increase. Demand for fresh table grapes remains flat, as the market continues to be supplied almost exclusively via imports, with over half of U.S. origin.

Executive Summary

• Uneventful growing and harvest seasons prompted Post to forecast a 46 percent increase in fresh apple production for marketing year (MY) 2013/14, up to 395,000 metric tons (MT) from 269,837 MT during MY 2012/13. The apple sector re-bounces after a devastating season in 2012 when spring frosts decimated Ontario's apple production, estimated to have declined by more than 80 percent compared to the previous year. Despite this comeback, the longer term declining trend in planted areas continues, reflecting a declining profitability in apple cultivation.

• Post forecasts a 22 percent decline in Canadian imports of fresh apples, estimated at 195.000 MT for MY 2013/14 down from 249,613 MT during MY 2012/13, as apple production returns to normal levels after a challenged season one year earlier. The United States remains the largest supplier of fresh apples, with a stable market share of about 80 percent.

• Post forecasts a 15.5 percent jump in fresh pear production, up to 7,800 MT during MY 2013/14 from a level of 6,754 MT in 2012/13, as the sector bounces back from devastating spring frosts back in 2012. Despite this positive development, pear production remains on a longer term declining trend, manifested in particular through decreasing profitability in the sector, due primarily to the closing of the pear processing industry in Canada.

• Post forecasts a 3 percent decline in imports of fresh pears, estimated to be down to 73,000 MT in MY 2013/14, compared to 75,078 MT in MY 2012/13. A higher domestic production level in Canada, stable demand and a weaker Canadian dollar influence this trend, as imports remain within their traditional levels. An additional factor affecting pear trade has been the disappearance of the canning plants; ten years ago 13 percent of total imports of fresh pears were destined to processing. This has dropped to zero today, contributing to the slowdown in import growth.

• Only a small fraction of Canada's grape production consists of fresh table grapes. Based on available data from Statistics Canada and information from provincial authorities Post estimates that Canada produces about 3-4,000 MT of fresh table grapes annually. Domestic consumption is basically satisfied through imports of table grapes, of which more than half of U.S. origin, with annual volumes around 175-190,000 MT.

• Post forecasts a 2.2 percent increase in imports of table grapes for MY 2013/14, up to 180,000 MT from 176,047 MT in 2012/13.

APPLES

Production:

Generally uneventful growing and harvest seasons prompted Post to forecast a 46 percent increase in fresh apple production for marketing year (MY) 2013/14, up to 395,000 metric tons (MT) from 269,837 MT during MY 2012/13. The apple sector re-bounces after a devastating season in 2012 when spring frosts decimated Ontario's apple production, estimated to have declined by more than 80 percent compared to the previous year. 

In 2013, three of the four the major apple producing provinces – Ontario, Quebec and Nova Scotia – expect above average yields; the exception is British Columbia, where the estimates indicate a 10 to 20 percent decline in production. In this province, spring frosts took an initial toll on production, followed in the fall by a hail storm right before harvest which caused further damage.

In terms of longer term trends, the decline in fresh apple production in Canada is consistent with the declining trend in planted areas which, in turn, reflects a declining profitability of apple cultivation.

Bearing area for MY 2013/14 is expected to stay flat compared to MY 2012/13, but reflects the continued declining trends for production. Bearing area declined for the seven previous consecutive years, with a total drop of more than 30 percent since MY 2001/02. Changing agricultural practices, resulting in higher density plantings on smaller areas, and a reduction in the number of smaller producers, exiting because production costs outpaced market returns, are the leading factors underlying this trend.

More affordable imports from the United States, Chile and other low cost countries, combined with high production costs and a strong Canadian dollar continued to force the apple industry to downsize. Many apple growers are responding to the evolving market situation by converting orchards over to new plantings of vinifera grapes and other fruits, as well as by turning land over for new housing development projects.

Growers that intend to remain in the industry are turning to newer, more popular varieties such as Ambrosia and Honeycrisp and new, modern intensive planting systems in an attempt to remain competitive with imports. To assist producers facing industry pressures and changing markets, Canada’s federal and provincial authorities offered replant programs between 2008 and 2010.

Consumption:

Of all fresh apples available in Canada, about two thirds are consumed fresh and about one third is used in the processing industry (for use in apple juice, pie filling, apple chips, etc.). The share of the fresh apple market in Canada has been on an upward trend over the past decade, reflecting consumer preferences for fresh fruit versus processed products. Between 30 and 40 percent of domestic fresh consumption comes from imports.

Overall consumption in MY 2013/14 is expected to go up by nearly 5 percent, mostly related to the re-bounce in domestic production. Per capita apple consumption, which is not only a function of market conditions but of total population numbers as well, has remained remarkably stable over the past three decades, ranging between 10.5 and 12.75 kg (kilograms) per person, with an average around 11.5 kg per person. Over the same period, Canada's total population increased by nearly 42 percent, with an increase in ethno-cultural diversification. The consumption trend reflects the popularity of apples as a universal fruit consumed not only across generations, but across various cultures and ethnicities as well.

We recently reported on a consumption trend away from some of the more traditional varieties, noting a newspaper article: "For many Canadians, McIntosh means iMacs and MacBooks. McIntoshes just don't age well." At the same time, the Ontario Apple Growers Association reports that "one in every three apples eaten in Ontario is a Gala, most likely grown in Washington state or Chile. In the last decade, Gala apples, firm and crisp with a mild sweetness, cornered a 33 percent market share of the Ontario apple growing industry. The McIntosh: only 12 percent." For decades in a row and for generations of Canadians, McIntosh used to be the most popular variety of apples. But not anymore. It will probably remain, though, "culturally significant, if not gustatorily popular."

Over the past two decades or so there has been an undeniable shift in consumer preference when it comes to apples. As a result, older apple varieties have been replaced with new cultivars, and many growers have adopted a new variety strategy as a way to improve profitability, as new varieties tend to sell at a premium price and have gained significant consumer appeal. For instance, another newspaper article reports that "Honeycrisp apples sell at a 50 percent premium." The same article indicates that "apple consumers can be segmented into different groups: urban, comfortable country, plain rural living and youth 18 and under," and advises that "it is important to align apple varieties with the customer base." Data from Nielsen reported by yet another article show that among the fresh bagged apples the most popular varieties in 2010 were Gala, Royal Gala, Red Delicious, Granny Smith and Golden Delicious.

Except for McIntosh, the Canadian Horticultural Council reports that Red Delicious, Spartan, Idared, Cortland and Empire are the major varieties produced in Eastern Canada. In Ontario, Empire makes up over 20 percent of production, followed by Spy at about 17 percent, Red Delicious at some 10 percent of production and Idared and Honeycrisp at over 5 percent each. In Quebec, it is Cortland and Spartan that account for about 8 percent each of the provincial production, followed by Empire at more than 5 percent. In Nova Scotia, Cortland comes first after McIntosh, at about 20 percent of production, followed by Spy and Idared at under 15 percent each.

In British Columbia it is Gala, with over 40 percent of production, which has moved way ahead of Red Delicious (8 percent) and McIntosh (10 percent) as the most popular variety. According to the Canadian Horticulture Council, the introduction of new varieties has been particularly important in British Columbia, where growers have been planting new varieties like Spartan, Gala, Fuji, Braeburn, Jonagold, Honeycrisp and Ambrosia. New plantings of Ambrosia, which apparently commands the highest premium among all apple varieties in British Columbia, have nearly doubled every year in the past five years, and the variety has been so well received by the market that producers cannot keep up with demand. The Ambrosia variety now makes up more than 12 percent of the B.C. production, followed by Spartan (about 12 percent), McIntosh (about 10 percent), and Red Delicious (over 8 percent).

Trade:

Post forecasts a 22 percent decline in Canadian imports of fresh apples, estimated at 195.000 MT for MY 2013/14 down from 249,613 MT during MY 2012/13, as apple production returns to normal levels after a challenged season one year earlier. The United States remains the largest supplier of fresh apples, with a stable market share of about 80 percent. A higher production level in Canada, stable demand and a weaker Canadian dollar that makes imports less competitive compared to the local production are the main factors behind the current trend.

Since 2000, Canadian total imports of fresh apples increased by nearly 75 percent, while imports from the United States almost doubled. The second largest supplier of apples is Chile, which has a strategy focused on developing export markets. Chile's market share in Canada increased from 7 percent to 12 percent over the past decade years, with a high of 13 percent in 2009/10.

In 2007, Canada was the first country to introduce Harmonized System (HS) customs codes for organic products. Available statistics show the volume of imports of organic apples more than doubled. These represent about 5 percent of the volume of total apple imports and up to three quarters of these originate in the United States.

Post forecasts a 17 percent increase in exports during MY 2013/14, up to 25,000 MT from 21,421 MT in 2012/13, as domestic production re-bounces. However, this estimated export volume represents less than half of what Canada used to export one decade ago. Canadian exports of fresh apples have steadily declined over the last ten years, reflecting the decline in production and reduced profitability and competitiveness in export markets

PEARS

Production: 

Post forecasts a 15.5 percent jump in fresh pear production, up to 7,800 MT during MY 2013/14 from a level of 6,754 MT in 2012/13, as the sector bounces back from devastating spring frosts back in 2012. Despite this positive development, pear production remains on a longer term declining trend, manifested in particular through decreasing profitability in the sector, due primarily to the slow death of the pear processing industry in Canada. In 2008, CanGro closed the St. Davids pear cannery in Ontario, the last of 32 fruit canning plants that existed in the province.

Bearing area seems to have stabilized around 650 hectares, whereas overall pear planted area declined by more than 45 percent over the past decade. Pear production is also down by the same percentage since MY 2001/02.

Consumption:

Since the closure of the last pear canning plant in Ontario back in 2008, basically all pears available in Canada are consumed fresh. One decade ago, approximately 10 to 15 percent of available fresh pears were used in the processing sector. In the last couple years, only a few hundred metric tons of fresh pears are processed in Canada, mainly as artisanal production sold in farmers' markets. About 90 percent of domestic fresh pear consumption comes from imports.

Per capita consumption of fresh pears has been on a constant decline over the past decade, reflecting the diminished appeal of this fruit among consumers. While the Canadian population increased by almost 15 percent since year 2000, the overall consumption of fresh pears has remained relatively stable, explaining the declining trend on a per capita basis.

Trade:

Post forecasts a 3 percent decline in imports of fresh pears, estimated to be down to 73,000 MT in MY 2013/14, compared to 75,078 MT in MY 2012/13. A higher domestic production level in Canada, stable demand and a weaker Canadian dollar influence this trend, as imports remain within their traditional levels. An additional factor affecting pear trade has been the disappearance of the canning plants; ten years ago 13 percent of total imports of fresh pears were destined to processing. This has dropped to zero today contributing to the slowdown in import growth.

The United States is the main supplier of fresh pears, with China and Argentina as major competitors. Organic HS codes were introduced in 2007. The import volume of organic pears has recently increased to about 2,400 MT (about 3 percent of total imports), after remaining stable at around 1,500 MT for five years. Typically, the United States has supplied about three quarters of organic imports. In MY 2012/13 its share dropped to about 62 percent, but is expected to rebound in MY 2013/14.

Canada has an insignificant volume of exports of fresh pears.

FRESH TABLE GRAPES

Production:

Only a small fraction of Canada's grape production consists of fresh table grapes. Based on available data from Statistics Canada and information from provincial authorities, Post estimates that Canada produces around 3,000 MT of fresh table grapes annually. Domestic consumption of table grapes is basically satisfied through imports, with recent annual volumes in the 175-190,000 MT range. Over half of Canada's table grape imports originate in the United States.

Canada has systematically developed its wine industry over the past two decades. In recent years, over 90,000 MT of grapes are produced annually and used for producing wine and other processed products (such a grape juice). The two provinces that supply Canadian grapes are Ontario, with a market share of roughly 75 percent, and British Columbia accounting for the balance.

Consumption:

As with apples, per capita table grapes consumption, which is not only a function of market conditions, but also of total population numbers, has remained remarkably stable over the past three decades. Per capita consumption ranged between 4.2 and 5.5 kg (kilograms) per person, with an average around 5 kg per person. Over the same period, Canada's total population increased by almost 40 percent, and became extremely diversified form an ethno-cultural point of view. The consumption trend reflects the popularity of grapes as a fruit consumed not only across generations, but by Canadians with various ethnic backgrounds as well.

Trade:

Post forecasts a 2.2 percent increase in imports of table grapes for MY 2013/14, up to 180,000 MT from 176,047 MT in 2012/13. As indicated earlier, Canada imports over 95 percent of its fresh table grapes. Local grape production is primarily used in wine making.

The United States is the main supplier of fresh table grapes, with a market share of just above 50 percent, while Chile and, to a lesser extent Mexico, are the major competitors. In 2009, Canada introduced organic HS codes for grapes, and after an initial spike, organic imports have steadily decreased.
Policy:

Government Support

The federal government announced C$ 7 million in response to the science cluster proposal submitted by the Canadian Horticulture Council to the AgriInnovation Program under Growing Forward 2, Canada's new "farm bill" in place since the spring of 2013. While this amount is less than the C$12 million sought, it represents a significant contribution to the sector.

For the apple sector, the following projects have been already approved and will conclude before the March 31, 2018 program sunset:

• Optimizing storage technologies to improve efficiency, reduce energy consumption, and extend the availability of Canadian apples for domestic and export markets

• Improving tree fruit storage management using weather-based predictions of fruit quality at harvest

• Performance of Honeycrisp on new size-controlling rootstocks

• New biological control agents for postharvest diseases of pome fruit

Promotion and Research Agency

The Canadian apple industry continues to discuss the idea of establishing a national marketing agency to promote the consumption of apples and conduct various research projects. Such an agency would collect levies on both the domestic production and on imports of apples to fund its activities