—story by Kate Prengaman
—photos by TJ Mullinax
The three keys to fruit production today are to grow the right varieties in the right places as efficiently as possible.
That’s what Bruce Allen told Good Fruit Grower when he was recognized as the magazine’s first Grower of the Year in 1997. And it echoes what he told us again this fall, except when Allen shared his three pieces of advice in ’97, it was advice for success. Today, he frames it in terms of survival.
“I’ve always thought about: ‘How do you grow? How do you prosper?’ But the goal right now, it’s trying to survive,” he said, so he can be positioned to prosper when the cycle turns. “People need to very carefully analyze their orchards on a block-by-block basis. That’s common-sense advice, of course, but given the cost of production, it should be given much greater consideration. The bad blocks will drag you under. Even a mediocre block on last year’s pricing will drag you under.”
As growers across the industry struggle to stay afloat amid rising costs and falling returns, Good Fruit Grower reached out to a dozen past Grower of the Year honorees, profiled in these pages for their innovation and leadership, to gather and share what they’ve learned about resilience over their long careers.
We discussed labor costs and retail consolidation and the influx of private equity money — and how all three are reshaping the Washington apple industry, which grew to supply a global market for a free-trade era that eroded while competition in the domestic produce section exploded. On many points, there was a surprising amount of consensus, but they offered some unconventional advice as well.
Consensus 1: Too many apples are weighing down prices.
“So now we’ve got too much product here. We’ve got to get rid of 15 to 20 million boxes, and it’s not the Red Delicious,” said Dave Allan, co-owner of Allan Bros. of Naches, Washington, recognized with his brother, George, as Growers of the Year in 2000.
“We need to get our supply back down so we can have a reason to demand higher prices with our retailers,” said Scott McDougall, president of McDougall and Sons of Wenatchee, Washington, who was recognized as Grower of the Year, along with his family, in 2022. He also said there might be 30 million boxes in Washington that no one would miss.
Consensus 2: Regulation-driven labor cost increases now threaten the viability of apples, pears and cherries.
“I don’t know how much more we can endure and keep this state relevant,” said Mark Zirkle, CEO of Zirkle Fruit Co. of Selah, Washington, who was recognized as Grower of the Year in 2016, along with his father, Bill. (See “A new look at labor costs for apple growers.” )
Consensus 3: The 2024 cherry crop was a bright spot, but not bright enough.
“Did it recharge the coffers enough? I don’t know if it did,” said Mike Omeg, an Oregon cherry grower recognized as Grower of the Year in 2017 and who now serves as director of operations for Orchard View Inc. “Over the history of cherries, there have been enough wins over the years for the math to work out, but I think we have to be more cautious than we have been.”
Consensus 4: Outside investors complicate the outlook.
“It’s really changed the landscape if you are going to be on your own,” McDougall said, because those competitors have access to far more funding than family-owned farms to sustain themselves through this down cycle.
Orchards backed by outside investment may have worsened the oversupply problem, but financial firms are in the business of making money, not losing it. Some see farmland investment as a long-term hedge against the economy’s inflation; others that expect higher returns might soon be getting out of the game — a cycle the industry has seen before.
“They’ll head to greener pastures and be aggressive about liquidating assets — and there won’t be many people ready to acquire them,” Allen said. “I think the industry will shrink by 20 percent, and the people remaining have decent prospects if they farm efficiently.”
And Consensus 5: Resilience comes from growers focusing on what they can control.
“Last year, there was obviously a lot of fruit in the U.S., and that drove the prices down, and there’s not a lot an individual grower can do about that,” Zirkle said. “As for what we can do, we can look at the economics of each block over time … to assess if that block is worth farming.”
McDougall advised leaning in. “You’d better be firing on all cylinders to get the maximum amount you can pick without sacrificing quality,” he said. “This problem isn’t going away overnight. It’s hunker down and hope you have some value-added varieties and things that can cover your growing costs while we wait out this firestorm.”
Read on for more thoughts on what resilient growers can do in this difficult chapter for the tree fruit industry.
Pull the blocks that don’t pay the bills
Put your blocks into three categories: Those that produce good volumes of fruit with proper size and color; those that are a disaster, with the wrong varieties and limited production; and the group in the middle, where better execution could make a difference.
According to Allen, growers should use these key metrics to classify each block: your average (not peak) fruit size, average industry sales price for that size, your bins per acre and packs per bin, and what percent of your fruit will pack in the top two grades.
“Notice I didn’t mention costs. We’re all, by habit, tightwads,” Allen said. “The golden rule is that you will increase profitability when every dollar you spend creates more than $1 in revenue.”
There hasn’t yet been a critical mass of orchard removal, but he expects to see more removals in the coming months, including some of his own blocks of club varieties that have fallen from favor. “Most people didn’t realize how bad this was until late spring or early summer,” he said, when growers were already into the 2024 crop.
“The mantra of a farmer is always: ‘Next year will be better,’” McDougall said. “Well, it hasn’t been for several years. You are better to push those trees and let those orchards sit fallow until you can justify the pre-planting costs.”
Growers often wait to pull underperforming blocks until they have a renewal plan in place, Zirkle said, but with this year’s economics, it pencils out better to pull and not replant right away.
“It used to be if you had a bad year, you lost $20 to $30 a bin. Now you can lose $100 a bin. That’s a different economic situation for growers, and we’re taking a hard look at blocks,” he said. “If everyone does that, it might get us to a better place as an industry.”
Bring your A game
It takes money to make money in the fruit business, and taking out the underperforming blocks can help shift cash to better farm the remaining blocks, said New York grower Rod Farrow, the 2020 Grower of the Year.
“It always helped us when we were tight to remove the worst orchards and have less to take care of, so I could increase my profitability without extra operating money,” Farrow said. “It’s funny, every year we took something out, we never missed it. And it’s giving you money to cash flow next year.”
One of Farrow’s favorite mottos states that growers can plan to make a profit by producing the most valuable fruit — focusing on economic yield rather than production. The more information growers have from their sales desks about target fruit size and quality for each variety, the better.
“If you are losing money on a product, pushing trees to their maximum yield to make more doesn’t help. And it takes away from eating quality as well,” he said. “We have to keep producing apples that taste good.”
Likewise, Allen urged growers to focus on the middling blocks that might have lost money last year, but where better management could improve color or size enough to turn things around.
“I still think there’s a lot of potential gains to be made to get those middling blocks up,” he said. “The only possible outcome, unless you have deeper pockets than the private-equity guys, is to be a better farmer.”
Count the sunk costs of new cherry systems
Omeg is radically rethinking his expectations for profitable cherry systems. Growing cherries has always been a gamble, but there were enough expected “wins” over the years to cover the losses. That seems to be shifting with more volatile weather and markets.
“Historically, we have built systems around a certain range of conditions, call it average markets and average weather, and we just aren’t getting those,” he said. “The math is different now, and we might have to get used to it.”
A more difficult path to profitability puts the high establishment costs of high-density cherry orchards in a different light.
“If I have a heck of a lot invested into that block, that means I have to get a heck of a lot out too, or the equation goes south really fast,” he said. “The other way to have a healthy return is with something that costs less to establish, so your balance sheet can withstand some loss years, from the weather or the market.”
Instead of chasing the maximum possible production, with precocious rootstocks and intensively trained systems, Omeg now wants to reduce the risk in the system. That means rootstocks, varieties, training systems and orchard sites that can handle more climate stress, along with less capital-intensive orchards.
“I really question, after this year, if there is a future in us using trellis at all, because I frankly don’t think we can afford them,” he said. “If we look at the number of additional acres we could renew or the cash we could keep as working capital by not putting the trellis in, it’s significant.”
Prioritize your people
Hiring and retaining good people, at every level of the operation, makes it possible to focus on quality.
Dain Craver, an organic grower in Royal City, Washington, who was recognized as Grower of the Year in 2019, said his ability to deliver quality fruit depends on his experienced managers training their workers well.
“We’ve really helped ourselves by making sure that the fruit that goes into the bin is packout,” he said.
McDougall echoed the focus on hiring and retaining skilled people.
“We have to have good people who make sure the job is done correctly the first time,” he said. “We can’t afford to come back and clean up like we used to.”
As companies try to run leaner, cutting back on H-2A contracts and overtime hours, it becomes even more important to retain the best people.
“We used to bring people up for the whole season; now we are splitting contracts so people who want to can travel back home between cherries and apples,” McDougall said, adding that the decision has led to some savings.
Be honest with your budget
Two solutions exist for a revenue problem: cut costs or increase revenues. In the early 2000s, investing in higher density to boost yield per acre helped growers —those who could afford to — innovate and better compete.
“You can only go to that well so many times,” said Jim Doornink, an independent grower from Wapato, Washington, who was recognized, along with his wife, Rena, as the Growers of the Year in 2009. “We are getting pretty quickly to the end of our ability to make improvements there.”
That understandably pushes people to cut costs, but Doornink cautions that’s a dangerous game. Production budgets developed by university economists include returns on investment, reserves for renewal and depreciation costs for good reason, even if growers want to scrape by focusing on cash costs alone for a few years.
“We have a rule that our capital budget needs to include our depreciation, so we keep all our equipment refurbished. You can skip a couple of years, but wait too long and everything is broken down,” he said.
That’s why many folks — himself included — are still farming old, inefficient pear blocks. If those blocks sit on the edge of breaking even and still contribute to the overhead of the farm, paying for their share of the “flat tire on the tractor and the air compressor back in the shop,” the decision to cut losses weighs heavier.
Doornink justifies keeping some pear blocks because hiring the crew to pick them also ensures workers for Gala harvest. But how exactly do you add that to the equation?
“Laying a block fallow comes with a lot of calculations to make sure you are past the point of no return,” he said. “The question is: ‘Can I plot an existence into my future to make money again?’ You have to be firm and don’t fudge the numbers.”
Pause planting, consider grafting
What if you don’t have the right varieties on the right rootstock in the right place? Unfortunately, the outlook is bleak.
“Money guys will say: ‘We’ve got to get that ground into production.’ But right now, no one knows what to plant,” Craver said.
That’s the crux of the problem, as few apple varieties can currently return the $250 to $300 per bin needed for growers to cover their costs of production. And the price of planting is currently near impossible to pencil out.
If a variety shift can move a block into the black, consider grafting.
“If you planted the right rootstock, it makes you more resilient, because it’s not super-expensive to flip an orchard,” Farrow said. He cited his own experience with grafting to get out of failed new varieties and back into production in three years. “There’ve been mistakes, but if you can deal with them yourself, you can handle them.”
There’s strength in community
When Laura and Mike Mrachek of Malaga, Washington, were recognized as Growers of the Year in 2007, between them they were running an orchard, a vineyard, a winery, an irrigation scheduling company and an analytical testing lab.
That diversification helped them be resilient — banks liked the long-term contracts available for wine grapes back in the day, and second jobs gave them stability — but it also stretched them thin. Late nights in hospitality weren’t compatible with early mornings in the orchard, and the family eventually faced some difficult decisions with uncertain outcomes.
Those “harsh strategy changes” are inherent to agricultural businesses, she said. This is why growers must be both “crazy optimistic” and realistic, to navigate family businesses amid an evolving industry. For the growers who are struggling, she urged them not to take the industry’s challenges as personal failings.
In her roles with industry associations and at the helm of Cascade Analytical, she saw firsthand how collaboration can help the industry weather major market and regulation-mandated changes. Her lab team worked closely with warehouses during the advent of wastewater compliance programs and then food safety mandates a decade later. It wasn’t easy, but the industry learned quickly, asked for help from service providers, and “mastered” those challenges, she said.
Mrachek is retired now. The couple’s son, Bryan, runs the family orchard, and she sees her role in the changing industry a little differently.
“Leaning on good friends and acquaintances and supporting the young people in the industry is what our generation can provide,” she said. “We’ve been through these things before, but it’s even more complicated now. These young people are brave, and they are up against a change that is hard to see from here.”
Think labor first
“Because farmers are price takers, not price setters, to be resilient, to stay profitable, we’ve had to focus on the cost-side of the equation,” said Jeff Colombini, of Lodi, California.
As one of California’s largest apple growers, he was recognized as Grower of the Year in 2013, but he hasn’t planted an apple orchard since then.
“We don’t know where the cost of labor is headed, besides up,” he said. “Right now, it’s not a sustainable business.”
Given the increasing wage and overtime costs, it’s only worthwhile to grow fruit that can deliver a return. Over the past few years, he’s taken a hard look at his apple blocks and removed those that consistently struggle to color or size. Now, he focuses on growing more valuable fruit, despite a sacrifice in yield.
“My margin is three times greater on a size 88 than a bagged piece of fruit, so even if I cut my production in half, I am more profitable,” he said. “It takes just as much time to pick a big piece of fruit as a smaller one, so your harvest costs are lower if the fruit is bigger, too.”
For the apple and cherry blocks that still pay the bills, he has adopted platforms to make his workers more efficient, and safer — a benefit that has also significantly reduced worker compensation rates for the farm.
In place of apples, Colombini planted more almonds and olives. “What do those have in common? It’s the low labor requirement,” he said.
Prepare for automation
Washington’s apple industry today was built in response to a different reality: a free-trade vision to feed the world, enabled by innovations in controlled atmosphere storage and the era of affordable container shipping.
The opportunity today lies in quality, not yield, Dave Allan said, and tomorrow it will come from technology.
“We’ll never grow enough ‘A’ Honeycrisp for the market, but we grow way too many ‘C’s,” he said.
Orchards today were built for people, but growers will have to reconsider their orchards to suit the coming automation, Allan said.
That will require simplifying the system, removing the wires and dropping labor-intensive training practices.
“The opportunity that comes when we automate is we can start to build yield and quality maps to build farming models that are more efficient,” he said.
Remember why you’re here
When times are tough, cherry grower Norm Gutzwiler of Wenatchee, Washington, recognized as Grower of the Year in 2006, likes to remind himself why he’s in the industry in the first place: He enjoys the work and the people he works with.
Spending time in the orchard was a source of comfort when he returned from service as a U.S. Marine in Vietnam, and then it supported a lifestyle that gave him purpose and time with his family over the decades that followed.
“My father, when we bought our first orchard, told me that if you make any money this year, put it in the bank, because next year you might need it. I’ve listened to that for a long, long time,” he said.
While many growers feel pressured to grow the farm in search of stability, he stressed the importance of sticking with the size that works for you. For him, that meant a farm he could manage, as hands-on as possible, along with a job as a fieldman that he’s long since retired from.
What keeps him engaged at 77 is spending every morning with his trees, participating in the evolution of the industry, figuring out how new varieties can work for him, and hoping to see mechanical harvest make headway.
Not that there haven’t been challenges. He walked away from his 2023 cherry crop when the compressed harvest drove prices below the cost of picking his fruit, and this year, cold damage left him with no crop. So, he took his wife, Myra, on their first-ever summer vacation.
“We have to accept challenges in our life, that’s what keeps us moving,” he said. “They aren’t always good challenges, but how boring to have no challenges.” •
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