FRUIT AND TREE NUTS May 5, 1997 Approved by the World Agricultural Outlook Board ====================================================================== FRUIT AND TREE NUTS Situation and Outlook is published three times a year by the Economic Research Service, U.S. Department of Agriculture, Washington, DC 20005-4788. FTS-279. Please note that the tables that accompany this report are provided in Lotus 123 (.WK1) files. Subscriptions to the printed version of this report are available from the ERS-NASS order desk. Call, toll-free, 1-800-999-6779 and ask for stock #FTS, $18/year. ERS-NASS accepts MasterCard and Visa. ======================================================================= Summary This winter, grower prices for fruit and nuts averaged 3 percent higher because supplies of most noncitrus fruit were lower. Prices, however, began to decline in February and will likely continue to fall until harvest of noncitrus crops begin in late spring and summer. U.S. orange production is expected to increase 7 percent from last season and overtake the previous production record set in 1979/80. California-Arizona navel orange production is up 3 percent. The record-setting Florida orange crop, mostly processed into juice, is forecast 9 percent over last season. Orange juice production in the United States in 1996/97 is expected to increase about 9 percent from last year's record because of increased juice yields as well as the large crop of Florida oranges. Near-term futures prices for frozen concentrated orange juice have been at their lowest since 1993. Retail prices have declined more slowly than futures prices. With pressure from growing juice supplies, retail prices should fall in the coming months. USDA forecasts a record grapefruit crop, 12 percent higher than last year. Slow movement early in the season compared with previous years has kept f.o.b. and retail prices above last year. With the greater emphasis on citrus in the market during spring, grapefruit shipments should increase and prices decline. Utilized production of noncitrus fruit, including berries, decreased in 1996 by 2 percent from the year before, and was the lowest since 1991. Cool, damp weather in the Pacific Northwest, dry weather in Michigan, and freezes in some areas, hampered crop development in 1996. In the winter of 1997, flooding in California and Washington exposed trees to extreme growing conditions. It is too early, however, to detect the damage to the new 1997 noncitrus and nut crops. The farm value of the U.S. 1996 noncitrus fruit crop was $7.2 billion, up 6 percent from 1995. With smaller crops, the preliminary season-average grower prices were up for a majority of the noncitrus crops. U.S. apple production reached 5.2 million short tons in 1996, up slightly from 1995 but 8 percent less than 1994's record crop. Washington State produced its second largest crop on record. Grower prices for apples were up 4 percent in 1996. With the slightly larger crop and higher prices, the value of the apple crop is projected to be $1.8 billion, up 4 percent from a year ago. U.S. grape production was down 6 percent in 1996 from the year before with declines in California and Washington. Increased demand by wineries resulted in the largest quantity of raisin-variety grapes being diverted from raisin use for wine crush since 1992. U.S. grape grower prices for fresh use increased 17 percent in 1996 and 16 percent for all processing uses. U.S. peach and pear utilized production declined in 1996. Untimely cold weather destroyed over 90 percent of the peach crops in South Carolina and Georgia, and lowered pear crops in Washington and Oregon. Smaller crops of both peaches and pears helped push up the fresh-market and processing value of both crops in 1996. U.S. avocado production rose 9 percent in 1995/96 from a year ago. California's crop rose 10 percent, but Florida's crop fell 5 percent. The increased production brought grower prices down by 9 percent over the same period. The grower price for Florida avocados fell 3 percent; for California, 10 percent. In 1996/97, Florida's crop is expected to be about 18 percent higher than the previous season, and the California Avocado Commission estimates a 3-percent increase in the State's production. The 1996 strawberry crop was up 2 percent from the previous year with a record amount going to the fresh market. The large supply in the fresh market lowered average fresh strawberry prices by 7 percent from 1995. Despite lower production of processing strawberries, the average 1996 processed price fell 22 percent due to record beginning stocks. Total tree nut production rose 3 percent in 1996, with production up for almonds and macadamia nuts, but down for pistachios, pecans, walnuts, and hazelnuts. Grower prices were lower for all tree nuts, except macadamia nuts and pistachios, which resulted in lower grower cash receipts. Imports of fruit from Chile totaled $440 million in 1996 up 34 percent from a year ago. Tighter supplies of Chilean grapes, along with new markets for Chilean winter fruit in other countries helped boost prices. The value of total U.S. fruit and tree nut imports from Mexico in 1996 was $626.5 million, up less than 1 percent from 1995. From 1993 to 1996, the value rose 59 percent. In 1996, imports of Mexican grapes were 14 percent of the total fruit and tree nut import value. Other important products were mangoes, strawberries, orange juice, pecans, and fresh citrus (mainly limes). The value of U.S. fruit and tree nut exports to Mexico increased 16 percent to $124.9 million in 1996 as economic conditions in Mexico improved. This issue contains a special article looking at the U.S. wine industry. The industry is seeing sharply higher producer and retail prices in 1997, mostly due to tight inventories and high domestic and export demand for quality wines. The strong market for U.S. wines is forecast to continue for several years, as world wine supplies are sharply lower than 10 years ago. Fruit Price Outlook Grower Price Index for Fruit and Nuts Beginning To Decline In January 1997, the index of prices received by growers for fruit and nuts was 11 percent below December (table 1). Lower prices for almonds, apples, and pears more than offset increases in prices received by orange and strawberry growers. The index, however, is up 1 percent from January 1996, and is the highest level of any January in the past 5 years. The higher index this January over past years reflects higher prices being paid for grapefruit, lemons, and pears. Offsetting some of the increase was lower average grower prices for apples due to a large apple crop in Washington State, along with lower prices for strawberries. The grower price index is falling and will likely continue this trend until noncitrus and nut crop harvesting begins in the late spring. In February, the index fell 3 percent from January and was below February a year ago. The index will likely remain below a year ago in the spring as ample supplies of grapefruit, Valencia oranges, and apples reduce grower prices. Grower prices for lemons, oranges, apples, and strawberries averaged lower than last February, while prices for grapefruit and pears provided some upward pressure. The stronger than expected price for grapefruit, in a year when crop size is forecast to be a record, is likely the result of slow movement of the crop during the early part of the season. Retail Prices Higher than Last Year Higher retail prices for grapefruit, lemons, apples, and bananas in January 1997 helped boost the consumer price index (CPI) for fresh fruit 5 percent above January 1996 (table 2). While higher than the same time last year, the CPI fell 5 percent from December. The strong influence of citrus crops on the winter CPI put downward pressure on January prices. As citrus prices decline seasonally, their strong presence in the 1996/97 market has brought the CPI down from a month earlier. In February, the CPI for fresh fruit continued to decline, dropping 3 percent. Reflecting the record navel orange crop, U.S. average retail prices for navel oranges fell to $0.55 a pound in February, their lowest level since December 1994 (table 3). Meanwhile, tight supplies of bananas have kept banana prices up since October, offsetting some of the decline. The average retail price for Red Delicious apples was up in January and February as poor weather hampered truck movement in Washington State, led to reduced supplies. January consumer prices for processed fruit averaged 6 percent above a year ago but only 1 percent higher than December. In February, prices continued to follow an upward trend, rising 1 percent above January. Smaller stocks of processing apples and pears as well as raisins, helped maintain high retail prices for canned and dried fruit. Orange juice retail prices were up in January and February despite increasing supplies and falling futures prices, contributing to higher prices for frozen fruit and juice. Prices in the next several months, however, should start declining as the new crop juice supply increases. Citrus Fruit Outlook Record Orange Crop Expected in 1996/97 Total U.S. orange production is expected to increase 7 percent from last year, with production estimated at 12.5 million tons in 1996/97. This year's crop is setting a new production record, 6 percent higher than the 1979/80 record of 11.8 million tons. California-Arizona navel production is up 3 percent from last year at 1.5 million tons. The new crop, if realized, would be 11 percent higher than the 1994/95 output (table 4). Valencia orange production in California and Arizona is forecast at 1 million tons, 7 percent below 1995/96's production. Harvesting began in mid-February in California's desert area. Texas orange production continues to increase. There was no change in Texas' estimated orange crop for 1996/97 after freezing temperatures hit the State January 14. While still small compared with crops in other orange-producing States, Texas' crop is expected to increase 56 percent over the previous year's crop. The Florida orange crop, which is mostly processed into juice, is forecast at 10.0 million tons. If realized, the 1996/97 crop would set a record, increasing 9 percent over the 1995/96 crop and 8 percent over the 1994/95 crop, which was the second highest on record. The record-sized crop reflects the increase in yields on maturing trees planted in the early nineties after a heavy freeze in 1989 destroyed trees growing further north than most of Florida's present commercial production. The early and midseason varieties are up 11 percent to 6.08 million tons. Valencia production is forecast up 6 percent to 3.9 million tons. Freezing weather that hit Florida on January 19 had the greatest effect on the Valencia orange crop, where picking had not yet begun. About two-thirds of the early and midseason oranges had been picked by the time the freeze hit. As a result of freeze damage, the forecast for Valencia oranges dropped 3 percent from the October forecast, the first forecast for the 1996/97 crop. Wet weather in California in December and January periodically hampered harvesting of oranges for the fresh market. The delays in picking also produced very large-sized oranges in 1996/97. Once the fields dried, harvesting progressed, and the crop was reported to be of good quality. By early February, about a third of the crop had been picked, the same as last year when the harvest was delayed due to slow fruit maturity. The limited crop available in December and January pushed f.o.b. prices above the previous year for those months (fig. 1). As more oranges entered the fresh market during the end of January and February, prices have begun to fall. The larger supply on the market later in the navel-orange season will continue to put downward pressure on f.o.b. prices for fresh navel oranges for the remainder of the season. However, the high quality of this year's crop should maintain prices at levels above last year. Average grower prices followed the same trend as f.o.b. prices, with prices received by growers in California and Arizona falling in February as more oranges became available for the fresh market (table 5). California Valencia oranges do not really become available for the fresh market until mid- to late-February. In the spring and summer months, most oranges in the market are Valencia, with navel oranges dominating the market in the fall and winter months. The January 9 forecast for the 1996/97 Valencia orange crop in California and Arizona is forecast down 7 percent from last year, with declines in both States' crops. Texas' Valencia crop is expected to be up 50 percent again this year as it was last, but production still only accounts for less than 1 percent of Valencia production. With the expected smaller Valencia crop, prices this summer should be above last year. Fresh orange exports fell 12 percent in 1995/96 from a year earlier. Poor-quality fruit, that did not hold up well in shipping, reduced quantities going to Japan and Hong Kong. Exports of fresh-market oranges are expected to be up in 1996/97 and in November through January were running 13 percent ahead of last season. The good quality of the fruit and large supply of navel oranges could set records, according to industry sources. The slow recovery of Japan's economy could be a problem in realizing the expected high level of exports. Orange Juice Production Expected Up Due to Large Florida Crop and Higher Yields Orange juice production is expected to increase about 9 percent in 1996/97 from last year's record level (table 6). Oranges for processing (Florida round oranges and temples) are 9 percent above last year. Florida's early and midseason orange crop was estimated at 135 million boxes in March, 11 percent over 1995/96. The March forecast, after most of the early and midseason crop has been harvested, is also 4 percent above the January forecast. Florida's 1996/97 Valencia production forecast, at 87 million boxes, is also above last season's crop. Temple production is pegged at 2.5 million boxes. There was only one significant freeze in Florida this past winter, hitting the southern part of the State hardest. Damage was scattered and seemed to affect young trees and unirrigated fields the most. The freeze was not expected to cause long-term damage to the trees. By the end of February more than 96 percent of the early and midseason oranges and 97 percent of the navel oranges had been picked. Only 5 percent of Valencia oranges had been harvested. About 98 percent of the early and midseason oranges and 36 percent of the navels were processed into juice. The frozen concentrate orange juice (FCOJ) yield for 1996/97 is forecast at 1.54 gallons per box (of 42 degree Brix concentrate), the highest since 1993/94 (table 7). Early and midseason oranges are expected to yield 1.50 gallons per box, up from earlier estimates of 1.48 gallons. The January freeze caused icing in some of the Valencia oranges, causing yield estimates to decrease from 1.62 to 1.60 gallons. The new Valencia yield estimates are 4 percent below last year's level of 1.67 gallons. Tighter stocks of FCOJ coming into the new marketing year pushed grower prices to or above last year's levels in December and January (fig. 2). Prices to growers in February began to decline relative to January and February of last year (table 8), reflecting the expected record orange juice production. Near-term futures prices for FCOJ have ranged from $0.8056 to $0.8870 per pound solids since December, averaging 31 percent below the same months a year ago (fig. 3). Monthly contract prices are at their lowest since 1993. Prices have stayed low in response to the expected record total orange juice production in 1996/97 of 1.4 billion gallons, single-strength equivalent. In spite of the low futures prices, retail prices have remained relatively high, averaging $1.74 to $1.77 from December to February, reflecting tighter stocks coming into the 1996/97 marketing year (fig. 4). Retail prices should decline as the new juice supply is pushed through the market. U.S. orange juice imports are expected to be down 11 percent this year. The large orange crop and high yields in 1996/97 should reduce the need for a large quantity of imports to supplement rising domestic inventories. According to the U.S. agricultural officer in Sao Paulo, Brazil, the 1996 Sao Paulo orange crop, accounting for almost 88 percent of all juice produced in Brazil, was 3 percent higher than the previous year at 369 million boxes. Despite a drop in use of inputs, such as fertilizer and pesticides, by financially strapped orange producers, favorable weather conditions from September through December benefited crop development. The increase in production will result in a larger amount of fruit delivered to processors. As a result, FCOJ production increased 5 percent for marketing year 1996 (table 9). While Brazil continues to concentrate on the European market for most of its orange juice exports, shipments to the United States were up in 1996. In calendar year 1996, 72 percent of U.S. FCOJ imports came from Brazil, up from 51 percent the previous year. Mexico's share dropped to 18 percent from a high of 36 percent in 1995, when Mexico had unusually large supplies and Brazilian FCOJ was priced above U.S. before-tariff prices. U.S. orange juice exports are forecast to increase 9 percent in 1996/97. The increased output and lower prices of U.S. orange juice this season should help boost U.S. exports. Lemon Production Slightly Lower Than Last Year U.S. lemon production is forecast at 988,000 tons, down 3 percent from the October forecast, but only fractionally lower than last year (table 10). The forecast for California's production is unchanged from October, but is 5 percent above a year ago. The California crop is reported to be in good to fair condition, with large fruit as a result of the rainy winter. There had been several wind storms in the lemon-growing areas, which caused some scarring on the skin. Industry sources also indicated that lemons are maturing more rapidly than in past years. With the fruit ripening and turning yellow on the trees, there will be fewer dark-green skinned lemons available for storage. Because of the reduced amount of storable fruit, lemon shortages may be seen later in the summer, driving up prices when lemon demand is usually its highest. Arizona's lemon crop is expected to decline 22 percent this year from 1995/96 and 15 percent from the first crop estimates for 1996/97 in October. Production in Arizona is declining as growers take acreage out of lemon production faster than the young, nonbearing trees come into production. To make up for some of the Arizona lemon shortfall, southern California growers have been shipping fruit they would not normally market this early in the year, which may further lower available lemon supplies in the summer months. Average lemon f.o.b. prices have been higher than the previous 2 years because of Arizona's smaller crop which dominates the market early in the year. As California lemons have been entering the market earlier than usual to make up for lower Arizona supplies, prices have begun to fall rapidly, declining from $28.30 per box in November to $20.40 per box in February (fig. 5). Prices should stay stable throughout the spring and early summer. As the summer progresses, prices should rise again as demand typically heightens in the summer months and supply tightens. Record Grapefruit Crop for 1996/97 USDA forecasts a record grapefruit crop of 3.06 million tons in 1996/97, 12 percent higher than a year ago (table 12). Florida's crop is expected to total 2.5 million tons, 13 percent higher than last year, and 6 percent higher than the previous record set in 1994/95. The abundance of fruit per tree has caused fruit size to be smaller than for the previous 2 years, but similar to fruit sizes of the past. The white seedless crop, forecast at 1.1 million tons, is 14 percent above last year, and the red seedless, at 1.3 million tons, is 10 percent above. Production of seedy grapefruit, at 43,000 tons, is 4 percent below a year ago and 22 percent below 1994/95 as production continues to decline in favor of seedless varieties. Florida's grapefruit crop was mostly unaffected by the freezing temperatures that hit the State in mid-January. Grapefruit production is centered around the Indian River area, which did not receive such low temperatures. By late February, about half the red seedless grapefruit, 36 percent of the white seedless, and 21 percent of the seedy crop had been harvested. A larger proportion of fruit remained to be harvested by the end of February than at the same time last year. Delayed maturity of this year's crop has contributed to domestic shipments being down from the same time a year ago. Over half of the white seedless and about a third of the red seedless grapefruits went to processing as of late February. All of the seedy grapefruit went to processing. California's grapefruit production is forecast to increase 11 percent over last year. Warmer than usual weather last fall caused the crop to start maturing a little earlier than is usual, but the fruit are reported to be of good quality and size. Texas' production is expected to be up 16 percent from last year. The crop is 7 percent lower than first forecast in October. The quality of the fruit was reported good, despite freezing temperatures on January 14. Fruit damaged by the freeze went to processing. Arizona's grapefruit crop is expected to fall 15 percent as growers take acreage out of grapefruit production. Despite a larger crop, f.o.b. prices for fresh grapefruit, from November through March, have averaged 4 percent higher than last year, ranging from $12.70 to $13.40 per box (fig. 6). Domestic grapefruit shipments had been below usual quantities early in the season, supporting prices. Also, f.o.b. prices in 1995/96 were lower than usual. Shipments started picking up in late February, which should bring prices down. With the noncitrus fruit shipments from Chile winding down in early March, grapefruit shipments should pick up. If demand for fresh grapefruit increases over the next few months, growers will need to send less to processing which should improve their revenues. Even so, industry sources are not optimistic that all of Florida's grapefruit crop will be utilized. Total grapefruit exports rose in 1995/96 for the fourth straight year, reaching 551,000 tons. Increased shipments to the European Union more than offset reduced shipments to Canada and Japan. Exports are predicted to total 584,000 short tons in 1996/97. With the continued promotion of grapefruit under the Market Access Program, exports for this year should improve once total grapefruit shipments start to increase. Tangelo and Tangerine Crops Expected Up in 1996/97 Tangelo production is expected to increase in 1996/97, after declining for 2 consecutive years. Production is estimated to be 64 percent higher than last year, with a total of 180,000 tons produced (table 14). By the end of February, 98 percent of the crop was harvested; almost 80 percent of the crop went to processing. This is the largest utilized tangelo crop since 1987/88. Tangerine production is expected to be up 23 percent in 1996/97 to 428,000 tons. Production is expected up 40 percent in Florida and 4 percent in California, but down 26 percent in Arizona. Florida, accounting for 70 percent of U.S. tangerine production, is expected to produce 299,000 tons. Most of Florida's production is in the early-season varieties, Robinson, Dancy, Fallglo, and the major early variety, Sunburst. All of the early varieties were harvested by the end of January. Honey tangerine is the major later-season variety of tangerine grown in Florida. Early-season tangerines accounted for most of the production increase, rising 55 percent over last year. Later varieties increased 6 percent. The early-variety tangerines were mostly picked before the mid-January freeze and so were unaffected. The Honey tangerine production forecast, however, was cut almost 5,000 tons due to freeze losses. By the end of February, over 60 percent of the honey tangerines had been harvested. The large crop of early tangerines brought f.o.b. prices down an average of 28 percent from December through mid-January, ranging from $9.69 to $10.73 per carton, according to industry sources. Honey tangerine f.o.b. prices started out lower than a year ago, and since January, they have averaged about 3 percent lower than last year, ranging from $15.88 to $17.71 per carton. Tangerine exports rose 13 percent in 1995/96 from a year earlier. Most shipments went to Canada. Exports have been down 9 percent so far this season. Japan began accepting Florida tangerines this year, expanding future prospects for U.S. tangerine exports. Noncitrus Fruit Outlook A Smaller Noncitrus Crop Produces Record High Value in 1996 The preliminary estimate of utilized production of noncitrus fruit (including berries) decreased in 1996 to about 16 million tons, down 2 percent from 1995 and the lowest since 1991 (table 15). Cool, damp weather in the Pacific Northwest, dry weather in Michigan, and freezes in some areas, hampered crop development. Utilized production decreased for berries, sweet cherries, tart cherries, dates, figs, grapes, kiwifruit, papayas, peaches, pears, and prunes and plums (produced in Idaho, Michigan, Oregon, and Washington). Utilized production increased for apples, apricots, cranberries, nectarines, olives, pineapples, California prunes and plums, and strawberries. Utilized banana production was unchanged. The preliminary estimate of the value of the 1996 noncitrus fruit crop is a record $7.2 billion, up 6 percent from 1995. With smaller crops, the preliminary season-average grower prices were up for berries, sweet cherries, dates, grapes, peaches, pears, and prunes and plums (produced in Idaho, Michigan, Oregon, and Washington). Despite small crops, the prices for figs and papayas decreased in 1996 from a year ago. With larger crops, the preliminary season-average grower price for 1996 decreased for nectarines, California plums, and strawberries. Even with the larger crops, prices increased for apples, apricots, olives, and pineapples. USDA's National Agricultural Statistics Service (NASS) estimates for season-average grower prices for avocados, tart cherries, guavas, kiwifruit, and California prunes will be available July 3, 1997, and the cranberry estimate will be published August 19, 1997. Winter 1997 Conditions Affect on Crops Uncertain The Florida freeze on January 18-19 caused little damage to most noncitrus fruits. Strawberries were protected by growers using overhead sprinklers and there was virtually no loss. The current avocado crop showed no discernible loss due to the cold weather, but early blooming varieties for the 1997/98 crop may be affected. The effect of the freeze on mangos is less certain. The cold weather caused blooms to drop off the trees. In Dade County, some of those trees may re-bloom. In Western Florida, re-bloom is less likely and some younger trees appear to have died. California had flooding problems during the winter. Some stonefruit orchards and vineyards in the Sacramento Valley were in standing water for extended periods of time. It is still too early to assess the impact, if any, on production during 1997. U.S. Apple Production Up Slightly with Record Fresh Apple Utilization Expected in Washington Total U.S. utilized apple production in 1996 was 5.2 million tons, up only 1,100 tons from 1995 and down 8 percent from 1994's record utilized production. Utilized production was down in all States except Rhode Island, Delaware, Maine, Connecticut, Minnesota, Kentucky, and the Western States of Arizona, California, Idaho, New Mexico, Utah, and Washington. Washington produces more apples than any other State. In 1996, Washington's utilized production was 2.8 million tons with excellent quality, up 16 percent from the previous season and the second largest harvest. Washington is the largest producer for both the fresh and processed market. New York, California, and Michigan are the three next most important producing States, although the rank varies from year to year. In New York, the second largest producer in 1996, output was down 5 percent from the previous year. California ranked third with an increase in output of 6 percent over 1995. Michigan production ranked fourth but output was down 41 percent due to poor weather conditions. USDA's preliminary estimate of the 1996 season-average grower price for apples is $354 per ton, up 4 percent from 1995 (table 25). With a slight increase in utilized production and price, the 1996 value of utilized production is expected to be $1.84 billion, up 4 percent from a year ago. Although total production in 1996 is up marginally from 1995, the volume of apples going into the fresh market is higher. Fresh market apple grower prices have been below last season since December (figure 7). The Wenatchee Valley Traffic Association expects Washington to have record fresh usage due to the large crop and excellent quality of fresh apples. Fresh apple exports for the 1996/97 season (August to July) through December increased 15 percent over the previous season. However, total exports in 1995/96 were low, down 17 percent from the average of the previous two seasons. The largest markets for U.S. apples through December of the 1996/97 season were Taiwan with 25 percent of total U.S. exports, Canada with 13 percent, and Hong Kong with 6 percent. Exports to all three of these markets increased over the same period last year. In the 1996/97 season, Washington State has had more export-quality apples and larger production of varieties such as the Fuji, which are desirable in the export market. Ongoing Market Access Program activities also have contributed to increased U.S. apple exports. While the fresh market has had ample supply, processing apples have been in relatively short supply in some areas. In Michigan and the Appalachia region, some processors have had to buy processing apples from other regions, pushing up processing prices in the East. Washington has an ample supply of processing apples and prices there were down in February 1997 from a year ago, but above prices 2 years ago. Prices in 1995/96 were high for Washington processing apples due to the high prices for apple juice concentrate. Apple juice imports through December of the 1996/97 season are up 28 percent from a year ago. The increase is related to lower prices this season for apple juice concentrate, which some processors are able to substitute for juice-apples or to complement their juice-apple supplies. According to the U.S. Apple Association, total movement of apples in January 1997 was up 4 percent from the same time last year, but down 1 percent from the 5-year average. Fresh apple movement accounted for 74 percent of total movement. Fresh movement in January 1997 was up 15 percent over last January and up 6 percent from the 5-year average. Processing apple movement accounted for 26 percent of total movement, and was down 18 percent from a year ago and down 17 percent from the 5-year average. Total Washington apple shipments were up 17 percent. In January 1996, f.o.b. prices for Washington Red Delicious and Golden Delicious apples averaged about 12 and 16 percent lower respectively, than the year before. Statistics from the U.S. Apple Association show that on February 1, 1997, apple stocks were up 17 percent from a year ago and up 13 percent from the 5-year average. Fresh-market apple holdings, 75 percent of total holdings, were up 21 percent from a year ago. Washington State holds 83 percent of total fresh- market holdings. Red Delicious apples accounted for 55 percent of fresh-market stocks. Other important varieties held in stock include Golden Delicious (18 percent), Granny Smith (7 percent), Fuji (6 percent), and Macintosh (3 percent). Processing apple stocks totaled 488,187 tons on February 1, 1997, up 8 percent from a year ago. Washington held 40 percent of total processing stocks. Other States with large processing apple holdings include Pennsylvania (15 percent), New York (14 percent), Michigan (8 percent), Virginia (7 percent), and California (6 percent). Red Delicious accounted for 24 percent of total processing stocks. Other important varieties, in order of stock share were Golden Delicious, Rome, York, Granny Smith, Newton, Idared, and Fuji. Grape Prices Up in 1996 In 1996, total U.S. utilized grape production was 5.5 million tons, down 6 percent from 1995, and down 8 percent from the record 1992 crop. Total California production was down 4 percent. California is the largest grape producer in the United States with 5.0 million tons, 90 percent of total production in 1996. Grapes utilized for raisins accounted for 26 percent of total California grape production in 1996, with grapes for wine accounting for 58 percent, and for use as table grapes 16 percent. California utilization for raisins was down 18 percent, use for wine was up 2 percent, and use for table grapes was down 1 percent. New York and Washington are the next largest grape producers, each accounting for 3 percent of total production. In 1996, utilized grape production declined 56 percent in Washington due to freeze damage and increased 13 percent in New York. USDA's preliminary value estimate of the 1996 grape crop is $2.24 billion, up 10 percent from 1995. In 1996, 15 percent of the total grape crop was utilized in the fresh market. Fresh grape utilization was 837,270 tons in 1996, down 2 percent from the record high in 1995. The U.S. season-average grower price for fresh grapes in 1996 was up 17 percent to $727 per ton. Fresh grape exports through December of the 1996/97 season (July through June) were 210,295 tons, down 4 percent from the same time in the previous season. Grapes used in processing fell to 4.7 million tons, a 7-percent decline from the previous year and the lowest since 1987. The U.S. season-average grower price for all processed grapes was $348 per ton, up 16 percent. The season-average grower price varied by processing use from $211 per ton for juice to $416 per ton for wine. Estimates of processed use in 1996 show that 362,450 tons of grapes went to juice (with small amounts for other processing uses such as jam and jelly), down 27 percent from 1995 and the lowest volume since 1990. Dried use accounted for 1.3 million tons, down 17 percent from 1995 and the lowest since 1986. Grapes going to wine increased 1 percent from 1995 but down 7 percent from the record set in 1992. In California, grapes going to wine increased 2 percent. In 1996, the price of California grapes used for wine averaged $410 per ton, up 10 percent from 1995 and 19 percent from 1994. Some of the California grapes going to wine are raisin- and table-variety grapes. When supplies of wine-variety grapes are short, wineries increase their purchases of other types of grapes, particularly raisin-variety grapes. In 1996, wineries took 30 percent of the raisin crop, the largest raisin-variety crush since 1992. Concord grape production in 1996 was down 23 percent from last season. New York was the largest producer of Concord grapes in 1996, with 38 percent of total production. In 1996, New York's production was up 25 percent. Washington was the second largest producer in 1996 with 28 percent of the market. Washington production was down 59 percent in 1996 from the previous year. Tighter Wine Supply and High Demand Boost Prices The U.S. wine market in January confirmed earlier signs that domestic supplies are tight and demand remains strong, resulting in the Producer Price Index (PPI) for wines increasing 10 percent in January, compared with a year earlier. Four months earlier, the market had recognized that extremely hot weather in California would mean lower than expected yields from the 1996 grape crop. The September 1996 PPI for U.S. wines was up 5 percent, a large increase in a market which sells from an inventory averaging 2 to 3 years old. Beginning inventories for 1996 were down 14 percent from the 1990-95 average. Throughout 1996, U.S. wine producers warned of impending price inflation. California, accounting for over 90 percent of U.S. total wine production, had 2.9 million tons of grapes crushed for wine, up 2 percent from 1995. However, 1996 wine production is not likely to fully replenish inventories, which were already drawn down from significantly lower output in 1994. The recent upturn in domestic demand for wine and continued strength in exports are spurring imports. U.S. wine exports increased 23 percent in 1996 (37 percent in value), while imports were up 28 percent (24 percent in value). The 1996 export value of U.S. wines topped $300 million, up from just $80 million in 1988. U.S. domestic consumption of wine topped 8 liters per person in 1995, up from just 6.4 liters in 1992. Peach Production Down From Year Ago Total utilized peach production in 1996 was 1 million tons, down 8 percent from 1995 levels, and down 15 percent from the 1990-95 average (table 16). Freestone production, which is largely consumed in the fresh market, was 484,600 tons in 1996, down 29 percent from the previous year. Clingstone production, which is generally canned, was 520,500 tons, up 27 percent from the previous year. California is the largest peach grower in the United States, producing both freestone and clingstone peaches. California utilized freestone peach production increased to 316,500 tons in 1996, 26 percent above 1995. South Carolina and Georgia are the next most important States for peach production. In 1995, these two States accounted for 25 percent of total freestone production. In 1996, the peach crops in South Carolina and Georgia were down over 90 percent from 1995 due to freeze damage. Fresh peach utilization in 1996 decreased to 368,300 tons, down 35 percent from the previous year. With such a shortfall in production, the grower price for fresh peaches was $660 per ton, up 27 percent from the previous year. Processed utilization increased to 636,800 tons, up 21 percent from 1995. The preliminary estimate of processed peach prices was $212 per ton, up 2 percent from the year before. Canned peaches accounted for 78 percent of processed peach use. Canned peach imports in 1996 were 25,091 tons, up 31 percent from the previous year and the largest since 1992. Exports declined to 18,793 tons, down 21 percent from 1995 and the smallest since 1990. Pear Crop Decreased Total utilized pear production fell to 778,250 tons in 1996, down 18 percent from 1995 and down 26 percent from record production in 1994. Washington, California, and Oregon are the largest producers of pears with a combined share of 96 percent in 1996. Production in Washington and Oregon declined 30 and 26 percent, respectively, in 1996 due to cool weather during the early season. California had a 7-percent increase in production. In 1996, Bartlett pear production totaled 405,000 tons, down 19 percent from the previous year. About two-thirds of the Bartlett pear crop is processed, mainly canned. California is the largest producer of Bartlett pears, with 255,000 tons, which is 89 percent of the State's total pear production. Sixty-nine percent of California Bartlett pears were processed in 1996. Washington and Oregon produce smaller amounts of Bartlett pears and 64 and 60 percent of those crops, respectively, go to processing. With a smaller volume of pears in the fresh market, the fresh pear price per ton for 1996 increased 42 percent to $488 (figure 8). Price varies by variety. The fresh Bartlett pear price for 1996 is estimated to be $449 per ton, up 40 percent from the previous year, and the price for all other fresh pears is $510 per ton, up 47 percent from last year. The price for Bartlett pears for processing increased to $246 per ton, up 32 percent from the year before, and the price for other pears used in processing was $98.40 per ton, up 19 percent from a year ago. Fresh pear imports are traditionally very small. The 1996/97 season (July to June) is no exception, with imports through December totaling 1,814 tons, down less than 1 percent from the same time a year ago despite the large U.S. production shortfall. Fresh exports through December of the 1996/97 season totaled 92,440 tons, down 10 percent from the same time last season. California Plum and Prune Production Increases California utilized plum production in 1996 rebounded to 222,000 tons, up from 124,000 in 1995 but still below the record of 250,000 tons in 1992. With the higher production, price per ton fell to $420 in 1996, down 56 percent from the previous year. California prune production (dried basis) was 217,000 tons in 1996, up 20 percent from the previous year but still below the record of 229,000 tons in 1987. Utilized plum and prune production in 1996 for Idaho, Michigan, Oregon, and Washington was 19,100 tons, down 11 percent from the previous year and an all-time low. Forty-two percent of the utilized production in these four States is estimated to go to processing, with most going to canned production. For the four States, fresh prices were $576 per ton, up 31 percent from 1995, and processed prices were $266 per ton, up 83 percent. Processed prices were $311 per ton for frozen prunes and plums, $294 for canned, and $175 for dried or other products. Sweet and Tart Cherry Production Down in 1996 U.S. utilized sweet cherry production in 1996 was down about 1 percent from 1995 and the lowest since 1991. Production was down in all States except California, Idaho, Oregon, and Utah. Production in Washington, the largest sweet cherry producer, fell 4 percent. Utilized tart cherry production in 1996 was down 17 percent from the previous year. Michigan accounted for 75 percent of total utilized tart cherry production despite a 22-percent decline in output. While total utilized sweet cherry production declined in 1996, the volume going to the fresh market increased 26 percent. Fresh use accounted for a little over one-half of the sweet cherry production. Washington produced 61 percent of the sweet cherries utilized in the fresh market. Michigan, Oregon, and Washington were the largest producers for processed sweet cherries, accounting for 85 percent of total processed production. The 1996 supply of sweet cherries for processing declined 20 percent from last year. About 69 percent of processed sweet cherries are brined, many destined to be maraschino cherries. Almost all tart cherries are processed, with 66 percent frozen, 31 percent canned, and 3 percent processed in other ways. In 1996, the season-average grower price for fresh-market sweet cherries was $2,120 per ton, down 5 percent. The price for processed sweet cherries was $730, up 32 percent from the previous year. NASS estimates for tart cherry prices will be published on July 3, 1997. Industry analysts expect 1996 tart cherry prices to rise from low levels in 1995. Sweet cherry exports totaled 29,105 tons in 1996, about 36 percent of fresh sweet cherry utilization. Imports were 1,978 tons, up about 1 percent from the previous year. On February 20, 1997, an agreement was signed allowing unfumigated U.S. sweet cherry exports from Washington, Oregon, and California to Mexico. Exports are expected to begin later this year. Cherry exports to Mexico ended in 1991 when Mexican plant health officials determined that U.S. cherries posed a risk of introducing apple maggot and plum curculio to Mexican orchards and ordered all cherry imports to be fumigated with methyl bromide. Methyl bromide fumigation causes the fruit to deteriorate rapidly. In 1995, the North American Free Trade Agreement (NAFTA) agricultural dispute panel decided that unfumigated U.S. cherries posed no danger to Mexico. Under the new work plan, Sanidad Vegetal (Mexico's equivalent to USDA's Animal and Plant Health Inspection Service [APHIS]) will conduct a pre-season inspection of cherry orchards to assure that the agreed-upon systems approach to regulating pests is adequate. This inspection will be paid for by the cherry industry. Sanidad Vegetal will accept APHIS inspections during the rest of the season. Early Estimates Indicated Larger Avocado Crop in 1996/97 NASS releases the first official avocado crop estimate for the 1996/97 season in July 1997. Florida and California, however, have preliminary estimates of their crops. The Florida Agricultural Statistics Service estimates that the Florida 1996/97 crop will be 22,500 tons, up 18 percent from the previous season. The cold temperatures in Florida on January 19, 1977 appear to have caused no discernible damage to the current crop, although next season's early blooming varieties may be affected. According to the California Avocado Commission, the 1996/97 California avocado crop is estimated at 3 percent higher than last season. Total California shipments through March 1, 1997 are up 12 percent from last season and prices are down 3 percent. For the Hass variety, shipments are up 10 percent and prices down 5 percent. United States-utilized avocado production in 1995/96 totaled 190,250 tons, up 9 percent from the previous season (table 17). California was the largest producer with 90 percent of total production. Production in California was 171,000 tons in 1995/96, up 10 percent from the previous season. Florida produced 19,000 tons, down 5 percent from the previous season. Florida is rebuilding from the damage caused by Hurricane Andrew on August 24, 1992. In 1993/94, Florida production was only 4,400 tons compared with 28,300 tons in 1991/92. Hawaii produced 250 tons in 1996. Virtually all U.S. avocados are sold in the fresh market. Since the 1991/92 season, only California uses avocados for the processed market, but utilization fell from a high of 19,000 tons in 1992/93 to 1,500 tons in 1995/96. Imports of processed avocados from Mexico, either pulp to be further processed in California or retail-ready processed avocado products, increased substantially over the same time. For the 1995/96 season, the U.S. average grower price for fresh avocados was $1,260 per ton, down 9 percent from the previous season, which had lower production. Florida and California produce different types of avocados because of climate conditions and consumer preferences. The Florida price averaged $596 per ton during the 1995/96 season, down 3 percent from the previous season. Average California grower prices for all fresh avocados in 1995/96 were $1,330, down 10 percent from the previous season. Hass avocados are estimated to account for 85 percent of total California production. Other varieties include Fuerte, Bacon, Zutano, Pinkerton, Reed, and Gwen. Fresh imports from November 1995 through October 1996 were 23,341 tons, down 5 percent from the previous year (figure 9). Chile is the most important source, with 61 percent of U.S. avocado imports. Fresh exports were 10,410 tons, down 29 percent from the previous year. The Netherlands, Japan, and Canada were the most important markets for exports, accounting for 41, 29, and 12 percent, respectively, of the export market. Imports of processed avocados in 1995/96 declined 1 percent from the previous season. On January 31, 1997, APHIS approved a rule allowing importation of Hass avocados from the Mexican State of Michoacan into the District of Columbia and 19 northeastern States: Maine, New Hampshire, Vermont, Massachusetts, Connecticut, Rhode Island, New York, New Jersey, Pennsylvania, Delaware, Maryland, West Virginia, Virginia, Ohio, Michigan, Wisconsin, Illinois, Indiana, and Kentucky. Since July 1993, Mexico has been allowed to ship fresh avocados to Alaska. Imports from certain growers will be allowed into these States from November through February, when cold weather in the destination States would likely kill any pests that manage to slip through pest control safeguards. This time period precedes the peak harvest of California Hass avocados. The first imports could begin in November 1997. APHIS reports that sales during the time period and area open to Mexican avocados represents about 8 percent of total U.S. production. Under the APHIS systems approach, Mexican avocado imports must meet stringent pest-control requirements in production, packing, and transportation to minimize the risk of introducing pests to the United States that could threaten the health of U.S. avocado groves. Mexican producers will have to apply a country-of-origin sticker to each avocado indicating the phytosanitary number of the packinghouse. Avocados entering the United States will be shipped in sealed refrigerated vehicles. Other provisions of the agreement work to minimize the risk of introducing pests. Record Fresh-Market Strawberry Utilization Total U.S. strawberry production increased to 813,700 tons in 1996, up 2 percent from 1995, but down 1 percent from the 1994 record (table 18). The average production for 1994-96 was 813,000 tons, up 20 percent from the 1990-93 average of 675,150 tons. California accounted for 84 percent of the total U.S. crop in 1996 and ships throughout the year, but the largest shipments occur from April through July. Florida, the second most important producing State, accounted for 10 percent of national production. Florida produces in the winter season and ships most of its production from December through May, with the largest shipments in March. Florida production was down 7 percent in 1996 from the previous year. In 1996, a record 607,050 tons of strawberries, 75 percent of production, were consumed in the fresh market. Total fresh production was up 6 percent over the previous season. California accounts for 82 percent of fresh-market production. With larger fresh-market production, the average 1996 U.S. fresh strawberry price fell 7 percent from 1995. In 1996, 25 percent of the strawberry production was processed. California is the largest producer for the processing market with 88 percent of production in 1996. Twenty-seven percent of California strawberries were processed. While Oregon and Washington have much smaller strawberry production than California, most of that is processed, 90 and 76 percent, respectively, in 1996. Total processed production in 1996 was 206,650 tons, down 9 percent from 1995 and the smallest amount since 1992. Despite lower production, the average 1996 processed price fell 22 percent from the previous year because of record beginning-season stocks. The severe Florida freeze on January 18-19, 1997 had virtually no impact on the 1997 Florida strawberry crop, which was protected by growers using overhead sprinklers. Florida's 1997 winter strawberry acreage is estimated at 6,100 acres, up 100 acres from 1996. Smaller Berry Crop in 1996 U.S. production of blackberries, boysenberries, loganberries, black raspberries, red raspberries, and cultivated blueberries totaled 116,890 tons in 1996, down 20 percent from 1995. Production of all types of berries, except boysenberries, declined. The declines ranged from 3 to 25 percent. Boysenberry production increased 12 percent in 1996 over 1995. California, Oregon, and Washington suffered through a rainy spring, which decreased berry production. Cultivated blueberry production was 62,590 tons, down 21 percent in 1996 from a year ago (table 19). Production declined in all States except Oregon and Washington. Michigan, the largest producer of cultivated blueberries in 1996 with 34 percent of total cultivated blueberry production, experienced a 37-percent decline in production. New Jersey produced 27 percent of the total cultivated crop and is the largest producer of blueberries for the fresh market; 68 percent of the total State production went to the fresh market. Traditionally, Michigan is the largest producer of cultivated blueberries for the processed market; in 1996, 64 percent of the production went to the processed sector. Lower production led to higher prices; the value of the 1996 cultivated blueberry crop increased to $113.6 million, up 12 percent from the previous season. According to USDA's Cold Storage report, as of January 31, 1997, frozen blueberry stocks were 27,807 tons, 8 percent lower than a year ago and 24 percent below the prior 3-year average (table 20). Maine produces almost all the U.S. wild blueberry crop. Preliminary estimates for 1996 show that Maine produced 30,000 tons of wild blueberries, down 9 percent from the previous year and down 29 percent from the 1992 record. Cool and wet spring and early summer weather yielded poor growing conditions. Cranberry Supplies Increase Cranberry production in 1996 totaled 230,850 tons, up 10 percent from 1995, but 1 percent short of the 1994 record. Harvested acreage was up 2 percent and average yield per acre was up 8 percent. Growers brought in larger crops in all producing States. Wisconsin production increased 3 percent over the 1995 record. Cranberry production in Massachusetts increased 14 percent; growing conditions were very good prior to harvest, but the berries were small and lacked color, thereby reduced their value. Wisconsin and Massachusetts are the two largest cranberry producers, accounting for 40 and 39 percent, respectively, of total 1996 production. New Jersey, Oregon, and Washington produce the rest of the crop. Grower prices for cranberries may be up in 1996 despite increased production. Holdings of cranberries at the beginning of the 1996/97 season (September 1, 1996), were down 25 percent from the previous season. Also, as more cranberry processors enter the industry, they are anxious to line up a consistent supply. USDA's estimates of cranberry utilization and prices will be published on August 19, 1997. Tree Nut Outlook Tree Nut Acreage and Production Rise, But Value Declines Total tree nut bearing acreage rose 2 percent in 1996 to nearly 691,000 acres, boosting total production to 838,000 tons, in-shell equivalent, up 3 percent from 1995. Grower cash receipts for all tree nuts was $1.66 billion for the 1996 crops compared with $1.71 billion the previous year. Grower prices for all tree nuts were lower except those for macadamia nuts and pistachios. Almond Production Up Sharply, Record Grower Receipts Almond production increased to 520 million shelled pounds last year compared with the small crop of 370 million pounds in 1995 and the record crop of 735 million in 1994. The higher production resulted from a yield of 1,270 pounds per acre and an increase of 10,000 bearing acres to 410,000. The beginning stocks on hand July 1, 1996 were 93 million pounds, 55 percent below the July 1, 1995 beginning stocks. This lower stock level sharply offset the 40 percent increase in production, resulting in a total supply of 583 million pounds for the 1996/97 marketing year, only 5 percent higher than the 1995/96 marketing season. Due to the much improved production in 1996, the grower price fell to $2.10 per pound compared with the previous year's price which was a record $2.48, but still much higher than the $1.34 received by growers in 1994. However, the total value of the 1996 crop reached a record high of $1.05 billion. F.O.B. prices (West Coast) increased by the end of 1996 and were only modestly lower than the previous year. Prices should continue to increase for the balance of the season as shipments decline (table 21). The January almond industry report by the California Almond Board showed domestic shipments to date (July 1-January 31) totaled 85 million pounds, down 5 percent from the same period the previous year, while export shipments totaled 295 million pounds to date, up 34 percent. The computed inventory as of January 31, total supply minus total shipments, stands at 204 million pounds, 17 percent below the previous year. This smaller inventory will support selling prices for the balance of the season. Domestic demand has been somewhat sluggish, while export demand has been strong. Quality has been quite good with only 2.6 percent rejects (inedibles). Export deliveries to all major market regions of the world have been higher this season, including North and South America, Western and Eastern Europe, the Middle East, Asia, and others. Production in other major almond producing countries was higher last year, including Spain, Turkey, and Greece, but lower in Italy and Morocco. The 1996 Spanish almond crop estimate has been reduced to 61,500 metric tons compared with 45,300 tons in 1995. In spite of the higher world almond production, actually only a rebound from a small crop year in 1995, world almond supplies are only modestly above the previous season and well below historic levels in prior crop years such as 1992, 1993, and 1994. World trade and consumption has been very good and carryover stocks for the 1997/98 season will likely be lower than last season and historically small. Even though the U.S. crop was much larger in 1996, the low beginning stocks and strong export demand will result in a relatively "tight" ending stock situation for June 30, 1997. Prices are likely to continue strong until the new crop supplies become available and then decline if the 1997 crop output is higher than last year. Prospects for the new crop appear very good. The heavy rains in California ceased about mid-January and the bloom period for almonds has been excellent. It is still undetermined what impact the flooding had on individual orchards, if any. However, conditions are much improved and orchards are drying out. Some trees may succumb at a later date as their roots may have been "oxygen-starved" during the prolonged wet period, and there is not a sufficient live root system to support the developing new crop and leaves. Some trees may also experience "die-back," where parts of the tree do not survive. Although the die-back reduces bearing surface of a tree in the current year, growers can prune out any dead parts of a tree and invigorate the tree to develop new growth. Also, growers are dealing with fungal problems, exacerbated by the excessively wet winter conditions. Pistachio Crop Supply Fell Sharply Despite record-bearing acreage of 64,100 acres in California, pistachio crop production was sharply lower due to a much smaller 1996 yield of 1,650 pounds per acre. This yield was one-third less than 1995 and was probably due to the cyclical nature of pistachio trees. It is likely that the 1997 yield will be much improved. The 1996 crop of 106 million pounds, in-shell basis, was the smallest since 1991's production of 77 million pounds and 28 percent below 1995. Grower prices last year rose modestly (4 cents per pound) to $1.13. This gain resulted in grower cash receipts totaling $120 million, virtually the same as 1994, but well below 1995's crop receipts of $161 million. According to the California Pistachio Commission (CPC), industry carryover on August 31, 1996 was 20 million pounds (in-shell stock only), modestly lower than the previous year. The smaller crop and lower beginning stocks have caused a significant decline in domestic and export shipments. Domestic shipments of in-shell product through January 31, 1997 totaled 34 million pounds, down 29 percent, and export shipments totaled 17 million pounds, down 22 percent from the same period a year earlier. About two-thirds of the pistachio crop is sold into domestic channels, and one-third is exported. The CPC reported a total inventory of 32.2 million pounds as of January 31, 1997 compared with 46.5 million pounds on hand January 31, 1996. Expected carryover on August 31, 1997 will be very low and should help to bolster grower prices for the 1997 crop. Despite the smaller supply for the 1996/97 marketing year, export shipments into some major markets, such as Canada, Brazil, Mexico, and the Phillippines, have increased dramatically. Some markets have also declined sharply, including Korea, Taiwan, Japan, China, Hong Kong, Singapore, Western Europe, and South America. Most of the pistachio producing countries in the Mediterranean and the Middle East, such as Syria and Greece, showed modest production changes in 1996. Turkey had a moderate increase in 1996. It is likely production in Iran, the world's largest producer, declined from the large crop in 1995. It is generally believed within the U.S. pistachio industry that in 1997 there will be some increase in bearing acres and that yield should rebound, resulting in a much improved supply situation for the 1997/98 marketing year. Pecan Production and Value Down in 1996 Higher pecan production in 1996 for Alabama, Florida, Georgia, Louisiana, and South Carolina, was more than offset by sharp decreases in production for New Mexico, Oklahoma, and Texas. Extended hot and dry weather during the growing season was the major cause for the production declines in the Southwest. There was no significant commercial production of pecans in North Carolina in 1996 due to hurricane damage. California, Arkansas, and Mississippi also registered production decreases. Due to these sharp changes in the U.S. pecan crop, utilized production fell to 227 million pounds (in-shell basis) in 1996, 15 percent below 1995. The 1996 season-average grower price also declined sharply to $.67 per pound, in-shell basis, compared with $1.01 for the 1995 crop season. Prices decreased in every State due primarily to lower quality and smaller nut sizes. Production of improved variety pecans last year was 181.7 million pounds, in-shell basis. The grower price (excluding Arizona) fell to 79.9 cents per pound compared with $1.12 in 1995. Production of native and seedling variety pecans decreased 41 percent from 1995 to 45.1 million pounds, and the grower price also fell sharply to 43.0 cents per pound. Stocks in cold storage on January 31, 1997 for shelled pecans totaled 38.5 million pounds compared with 30.8 million pounds. In-shell stocks totaled 100.6 million pounds compared with 153.6 million the previous year. Ending stocks for August 31, 1997 will be at one of the lowest in recent years. Deliveries by growers during January were seasonably light, and harvest was winding down by the end of the month. Available supplies are primarily coming from non-managed orchards. End users were making most of their purchases directly from producers of well-managed orchards and were bypassing accumulating buying stations. Walnut Production Lower Bearing acreage of California English walnuts remained unchanged in 1996 at 169,000 acres, but yield decreased to 1.23 tons per acre resulting in an 11-percent smaller crop of 208,000 in-shell tons. An unseasonably wet spring and summer heat conditions were major factors in the yield decline. The estimates for season-average grower price and value of the 1996 walnut crop will be available on July 3, 1997. According to the California Walnut Marketing Board, in-shell shipments, August 1, 1996 to January 31, 1997, totaled 138 million pounds, up 3 percent from the same period a year earlier, while shelled shipments, at 86 million pounds, were down 11 percent. Export shipments of in-shell and shelled product have been up significantly, but domestic shipments have been off from last year. Deliveries this season have been higher to most markets in Europe, East Asia, the Middle East, and Canada, but lower to Mexico and South America. World production of walnuts was forecast last September at a record 602,000 metric tons with higher production expected from all countries, except the United States and Italy. A record high crop of 260,000 metric tons was expected in China. The estimate for walnut production in France continues at 27,000 metric tons, but the estimate for Chile has been raised to 10,600 metric tons. At this time, it is estimated that world trade and consumption will be higher in 1996/97, and the ending stocks this season will be lower than the two previous seasons. This situation will help bolster grower price prospects for the 1997/98 marketing year. Hazelnut Production, Value Drops The U.S. hazelnut crop production dropped substantially last season to 19,000 tons, in-shell basis, less than one-half of the 1995 record-large crop. The smaller production was entirely attributable to a very low yield as bearing acreage continues to increase. The season-average grower price also fell to $837 per ton, nearly the same as the 1994 crop price, resulting in one of the lowest grower receipts in recent history. The lower yield was likely the result of a combination of weather-related conditions as well as it being an "off- year" in the production cycle of the trees. Although domestic shipments of in-shell hazelnuts are off 25 percent (July 1- December 31) this season from the prior crop season, domestic kernel shipments have been higher. Shipments of in-shell hazelnuts and kernels to export markets have also been lower this season due to the smaller supply, but demand has been good for U.S. product. Major markets for U.S. hazelnuts include Canada, Germany, Italy, China, Brazil, England, and Spain. World hazelnut supply for the 1996/97 marketing year is only modestly lower than the prior season, but substantially below the record supply in 1994/95. Although world trade of hazelnuts is expected to decline, consumption is high and ending stocks will be moderately lower than last season. The production estimate for Turkey continues unchanged at 410,000 tons. Record Macadamia Nut Crop Hawaiian macadamia nut production reached a record high of 55 million pounds (in-shell basis) in 1996/97. Although bearing acreage slipped to 19,200 acres, yield increased to 2,860 pounds per acre. The grower price also increased to 76.0 cents per pound, 2 cents above the 1995/96 crop price. World acreage and production (in seven major countries) of macadamia nuts continue to increase. Production for the 1996/97 marketing year is forecast at 64,130 metric tons, up 12 percent from 1995/96. Chilean Noncitrus Fruit Imports into the United States Up in 1996 Imports of fruit from Chile were up in 1996 from the previous year (tables 32 and 33). Increased supplies of Chilean apples and pears, along with strong demand in the United States for a year-round supply of noncitrus fruit helped boost imports. Tighter supplies of Chilean grapes and strong demand from competing markets in the European Union, Japan, and neighboring Latin American countries, boosted prices of U.S. imports from Chile. Chilean apple production rose in 1996 and was of good quality as yields continued to increase among maturing trees. The number of varieties available for export also have expanded in recent years, as producers have been uprooting Red Delicious apples and replacing them with increasingly popular varieties, such as Fuju, Gala, Jonathan, and Braeburn. Apple exports to the United States jumped 38 percent in 1996 over the previous year, and comprised about 6 percent of the volume of total fresh noncitrus fruit imports from Chile for the year. U.S. imports of apple juice from Chile rose 62 percent from a year ago. Tight U.S. stocks of processing apples coming into 1996 increased demand for imported apple juice. Unusually cold weather during the spring of 1996 in Chile, along with the continued reduction in acreage planted to grapes, reduced grape output. Strong export demand, however, boosted 1996 fresh grape shipments to the United States by 11 percent in volume and 38 percent in value from a year earlier. Grape juice shipments rose 80 percent in response to reduced availability of grapes for juice in the United States. Pear production for export rose in Chile during 1996. As economic returns have been improving to pear producers in the last 2 years, growers have stopped uprooting their trees and have been increasing quality through better orchard management. The United States is the second largest market for Chilean pears after the European Union. U.S. pear imports from Chile increased 28 percent from a year ago. Chilean avocado production increased over 6 percent in 1996 from the year before. The area of production and bearing acres increased in 1996. Avocado imports increased 43 percent in volume and 52 percent in value. Chile's wine grape harvest was delayed in 1996 because of a colder than normal growing season. Wine production decreased in 1996 because of the weather. Acreage planted to wine grapes has been increasing since the mid-1990s, and in the last few years with better quality and higher yielding varieties. Chilean wine production is projected to increase almost 40 percent between 1996 and 2000. Wine exports are expected to be vigorous. U.S. imports of Chilean wine in 1996 rose 117 percent over 1995. A large part of the wine was lower priced bulk wine to help U.S. vintners meet domestic demand, holding import value down. Chile is a major source of fresh fruit during the winter months for many Northern Hemisphere countries. Its two largest markets for deciduous fruit (excluding grapes) are Europe and Asia, with the United States' share of its exports about 15 percent. This past fall, Chile ratified an association agreement with Mercosur (Latin America's largest trading bloc, including Brazil, Argentina, Paraguay, and Uruguay) beginning October 1, 1996. Since the early 1990s, it has also signed trade agreements with Mexico, Venezuela, Colombia, and Ecuador. Latin American markets are becoming increasingly important for Chile's high-value agricultural goods. Chile is also planning to resume talks with the United States and Canada to become a member of the North American Free Trade Agreement (NAFTA). Talks with the United States are dependent on fast-track negotiating authority, which has not yet been granted by the U.S. Congress. Mexico Trade, 3 Years After NAFTA NAFTA went into effect January 1, 1994. The agreement opened up trade between the United States and Mexico by removing trade barriers and establishing a schedule to reduce tariff rates between the two countries. Tariffs on the least trade-sensitive commodities were eliminated immediately. For example, the United States eliminated the tariff on grapes. For the most trade-sensitive commodities, the tariff is phased out over 15 years. Orange juice has both a 15-year tariff phase-out period and a tariff-rate quota. There is also a special safeguard provision to protect U.S. producers during periods of depressed prices. Sanitary and phytosanitary barriers are still important constraints to U.S.-Mexico trade, although NAFTA has improved the dispute settlement process. In early 1997, agreements were signed to allow Mexican avocados into certain northeast States of the United States during certain winter months and U.S. sweet cherries into Mexico without methyl bromide treatment. Aside from tariff issues, weather is an important factor. Production of fruit and tree nuts tend to be concentrated in small areas, and poor weather conditions in one area can have a serious impact on total supply and trade. For example, Hurricane Andrew in 1992 destroyed much of the U.S. lime bearing acreage in Florida, and led to increased imports from Mexico. The economic crisis and peso devaluation in Mexico, which began in late 1994, may have had the most widespread impact on fruit and tree nut trade during the first 3 years of NAFTA. Mexican consumers were not able to purchase as much U.S. produce as in more prosperous times. Mexican producers had less domestic marketing opportunities and very attractive prices in the United States due to the peso devaluation. U.S. imports of Mexican produce increased. Fruit exports to Mexico, which had grown as trade was liberalized in the early 1990s, decreased dramatically in 1995, but now are beginning to recover. U.S. Imports from Mexico Continue To Rise The value of total U.S. fruit and tree nut imports from Mexico in 1996 was $626.5 million, up less than 1 percent from 1995 (table 34). From 1993 to 1996, the value of fruit and tree nut imports from Mexico rose 59 percent. In 1996, grapes accounted for 14 percent of the total value of fruit and tree nut imports from Mexico. Other important crops were mangoes with 13 percent of the value of fruit and tree nut imports, fresh and frozen strawberries (11 percent), orange juice (9 percent), pecans (7 percent), and fresh citrus, mainly limes (6 percent). In 1996, the volume of U.S. imports from Mexico increased over the previous year for most fruit and tree nuts. Notable exceptions were grapes and strawberries (both fresh and frozen), pecans, and apple and orange juices. Weather problems contributed to lower production of grapes. Weather problems and lower planted acreage accounted for lower Mexican strawberry production. Apple juice imports from Mexico have declined steadily since 1994. Orange juice imports from Mexico totaled 49.7 million single-strength equivalent (SSE) gallons in 1996, down 22 percent from 1995, which was an exceptionally good year for Mexican orange juice production. Under NAFTA, all tariffs on Mexican orange juice are being phased out over 15 years. The United States allows 40 million SSE gallons of frozen concentrated orange juice and 4 million gallons SSE orange juice from Mexico to enter the United States annually at half the prevailing most-favored nation (MFN) tariff rate that existed in 1994. Imports over the quota level are taxed at a higher rate, declining in phases until both the quota and the tariff are phased out at the end of 15 years. With the exception of 1995, imports from Mexico have been about the same level as the preferential NAFTA quota. Most Mexicans buy fresh oranges and make juice at home. The Mexican orange processing industry is almost exclusively an export industry and must compete with the fresh market for raw product. U.S. Fruit and Tree Nut Exports to Mexico Increase from Lows of 1995 U.S. fruit and tree nut exports to Mexico grew steadily during the 1990s until the economic crisis in Mexico during late 1994 (table 35). The value of exports to Mexico in 1995 fell to $107.9 million, 51 percent below the record trade of 1994, the first year of NAFTA. Economic conditions in Mexico are improving gradually and the value of exports to Mexico increased 16 percent in 1996 but still lag 44 percent behind 1994 trade. The single most important U.S. fruit and tree nut export to Mexico is apples, which accounted for 33 percent of the value of trade in 1996. In 1991, Mexico removed import licensing restrictions on apples and the volume of exports to Mexico increased by 80 percent. The volume of exports to Mexico increased every year until 1995 when it fell by 51 percent. In 1996, export volume increased to 89,524 tons, up 9 percent from 1995 but still below 1993 levels. With NAFTA, Mexico's tariff of 20 percent on fresh apple imports will be phased out over 10 years. In 1994, Mexico allowed 55,000 metric tons of apples from the United States to enter at the reduced tariff and apples in excess of that level are charged the pre-NAFTA tariff of 20 percent. The tariff-rate quota level increases each year. U.S. apple exports have exceeded the tariff-rate quota each year. Pears were the second most valuable fruit and tree nut export in 1996, with 13 percent of the total value of trade. Pear trade followed the same pattern as apples, with trade increasing every year during the 1990s until the Mexican economic crisis. Pear exports to Mexico in 1996 totaled 36,729 tons, up 30 percent from 1995. With NAFTA, Mexico cut the 20-percent tariff on pears to 15 percent immediately, with the rest to be phased out over a 5-year period. Pecans were the third most important export to Mexico with 9 percent of the total value of trade. Pecan exports (in-shell equivalent) value was $11.5 million in 1996, while imports value was $42.2 million. Grapes are the fourth most valuable fruit and tree nut export to Mexico, (9 percent of the total). U.S. exports in 1996 were only 12 percent of the value of imports from Mexico in the same year. SPECIAL ARTICLE The U.S. Wine Situation and Outlook for 1997 John M. Love Abstract: The U.S. wine market is seeing sharply higher producer and retail prices in 1997. Several years of below-average U.S. grape production in the 1990's, a resurgence of U.S. demand, and continued strong exports have reduced inventories held by U.S. wineries. Following a 25-percent increase in 1996, U.S. wine imports are likely to continue increasing in 1997. U.S. wine producers, facing increased demand for quality wines, in turn have demanded grape growers supply more of the high-valued international grape varieties: cabernet sauvignon, merlot, pinot noir, and chardonnay. The strong market for U.S. wine is likely to continue for several years, as world wine supplies are sharply lower than 10 years ago. Keywords: Wine, prices, production, inventories, exports, imports. Wine's Important Place in U.S. Agriculture The U.S. wine industry is increasingly important to the economic performance of U.S. agriculture. Nearly 55 percent of the 1996 U.S. grape crop was used for wine, and farm value is estimated at $1.25 billion. According to wine industry sources, 1996 U.S. retail sales of wine totaled about $13 billion. In California, the 1996 grape harvest recorded the highest value ($2 billion) in the largest agricultural State, where total crop revenues were $14 billion. California typically produces over 95 percent of the grapes crushed for U.S. wine. New York, Washington, and Oregon will also contribute to the 500 million gallons of expected wine production in 1997. For U.S. agricultural exports, wine will likely contribute $400 million in 1997, up 25 percent from 1996. Wine exports increased 40 percent in value and 25 percent in volume during 1996. From 1985 to 1995, U.S. wine export value increased 22 percent annually, far outstripping the 6.5-percent trend in the rest of U.S. agriculture. While wine export growth has been impressive over the last decade, imports have declined, until recently (table A-1). With limited domestic supplies in 1996, U.S. producers and distributors increased wine imports 25 percent in 1996, the first sharp increase since 1992. And, with escalating land prices in prime wine-growing areas, U.S. producers are increasingly looking abroad for investment opportunities to increase supplies for United States and world markets. What Kinds of Wine Are Produced? Wine includes every kind of product produced from fruit or other suitable agricultural product and containing not more than 24 percent alcohol by volume. However, most wine is produced from grapes, while a minor portion comes from pears, apples, and berries. Total U.S. wine production includes about 95 percent still wine (not effervescent) and 5 percent sparkling wine. Table wines, those with less than 14 percent alcohol, accounted for over 90 percent of all U.S. still wine bottled in 1996. From total U.S. production, wineries may produce coolers, wine diluted usually with fruit juice and water, and special natural wines such as vermouth. Coolers and special natural wines account for a declining share of the U.S. wine market, about 10 percent in 1996. Red wines account for an increasing share of U.S. production, as indicated by the types of grapes crushed for wine in California. In the 1996 California grape crush, red wine-types accounted for 37 percent of all grapes, compared with 31 percent in 1990. Higher 1997 Wine Prices Forecast In 1997, producer prices for U.S. wines are likely to rise substantially over 1996 as domestic supplies are not sufficient to meet domestic and export demand. The market for U.S. wine opened 1997 with sharply higher producer prices (table A-2). January and February producer prices for domestic wine rose an average 10 percent in 1997, following 6 years of 1- to 2-percent annual increases. Among bottled table wines, producer prices for reds increased 28 percent, while whites increased 8 percent. Producer prices for wines in bulk containers increased 20 percent. The higher producer prices have led to higher retail prices, which increased 5 percent in January and February 1997, compared with a year earlier. The current price strength for wine is a result of recent limited U.S. crops of wine-type grapes and increased demand for quality wines. Tonnage of U.S. grapes used for wine totaled 2.7 million short tons in 1994, 8 percent less than the previous 5-year average. And because most wine sales lag behind the vintage year of grape production by several months to several years, the impact of reduced wine production has become evident for 1997. In 1996, California's wine-type grape crush was off 2.5 percent to 2.17 million tons and the lowest in 10 years. At the same time that wine-type grape supplies are lower, the trend in U.S. consumption of wine is up, as reflected in net domestic use. Net domestic use of wine increased from 430 million gallons in 1992 to 575 million in 1995 (table A1). U.S. wine inventories on January 1, 1997 were likely near a year earlier, but well below average for the early 1990's. The Economic Research Service (ERS) estimates 500 million gallons of wine inventory in bonded establishments entering 1997, about 15 percent less than the 1990-95 average. The official estimate of year-beginning inventories from the Bureau of Alcohol, Tobacco, and Firearms (U.S. Department of Treasury) is scheduled for publication in June 1997. 1996 Grape Production Up Slightly, Prices Up 10 Percent The quantity of U.S. grapes crushed for wine in 1996 is estimated at 3 million tons, slightly more than 1995, and 4 percent more than the 1990-94 average. The California crush estimate of 2.91 million tons includes amounts for juice products. Strong winery demand pulled up grower prices to $416 a ton for grape crush, 10 percent more than 1995. The last 10 years have seen a turn-around in the market of wine grapes. During the early 1980's, wine supplies out weighed demand, and grower prices stagnated. During 1985 to 1995, grower prices paid by wineries increased 8.5 percent annually. In California, grower prices for wine-type grapes averaged $540 a ton in 1996, 26 percent higher than 1995. Wine-type grapes, such as cabernet sauvignon and chardonnay, accounted for 75 percent of the 1996 California crush. Raisin-type grapes, mainly Thompson Seedless, accounted for 21 percent, and table-types accounted for 4 percent. California wineries paid 16 percent higher prices for raisin- and table-type grapes in 1996, compared with 1995. U.S. production of wine is made increasingly from four high-valued international varieties: cabernet sauvignon, merlot, pinot noir, and chardonnay. In California, wineries paid growers $1,140 a ton on average for these four varieties in 1996, compared with $350 for the remaining wine-type varieties. And in 1995, the acreage planted to these four varieties accounted for 41 percent of the nearly 354,404 acres of wine-type grapes. In 1990, the four-variety share was 31 percent. U.S. wine production in 1996 is estimated by ERS to top 500 million gallons, up about 1 percent from 1995 and 8 percent more than 1994. Wine producers are likely to increase wine production above the increase in grape production by adding sweeteners, ameliorants, and vinous spirits. These additions averaged about 8 percent of total wine production during 1990-1995. During the first half of 1996, additions were nearly twice as high as a year earlier. New World Wines Increasing Share in U.S. Market U.S. wine imports are likely to reach 120 million gallons in 1997, up from 95 million in 1996 (table A-3). In the 1990's, imports have increased from South America (mainly Chile, Brazil, and Argentina), Australia, and South Africa. These "new world" producers are likely to account for nearly 30 percent of U.S. wine imports in 1997, up from 6.5 percent in 1990. Western Europe (mainly Italy, France, Spain, and Germany) still accounts for most of U.S. imports of wine, a likely 70-percent share in 1997. But, in 1985, Western Europe accounted for 96 percent of U.S. wine imports, declining to 88 percent in 1990. A declining exchange rate for the U.S. dollar against Western European currencies contributed to a weakened competitive position in the U.S. market during the late 1980's. Also, when U.S. consumers turned toward quality wines, demand for low-priced wines, mainly coming from Italy, decreased. The average U.S. import value of wines increased 11.5 percent annually during 1985 to 1990, and prices for imported Italian wine increased 12.5 percent. Italy's share of U.S. wine imports decreased from 51 percent in 1985 to 36 percent in 1996. Exports Surged in 1996 Exports of U.S. wine in 1996 increased 25 percent in volume and 40 percent in value from a year ago (table A-4). The total value of U.S. wine exports rose to $320 million in 1996, up from $236 million in 1995. The per-unit value of U.S. wine exports increased 11 percent in 1996, more than 3 times the average increase in domestic producer prices. In 1996, 50 percent of U.S. wine exports went to Western Europe, mainly to the United Kingdom (U.K.), Germany, Switzerland, and the Netherlands. Canada accounted for 20 percent, Japan 10 percent, and Caribbean countries most of the remainder of 1996 exports. U.S. wine exporters compete mainly with foreign domestic producers and French, Italian, and Spanish exporters. In the United Kingdom's market, with its small domestic industry, the United States competes mainly with other European Union (EU) countries, which account for 70 percent of U.K. wine imports. However, non-EU exporters are gaining market share in the U.K. (increasing from 20 percent in 1994 to 30 percent in 1996). U.S. exports to the U.K. have increased 23 percent annually over the last 10 years, reaching 9.9 million gallons in 1996. Switzerland, importing nearly 60 percent of its wine needs, is another growing market. During 1986 to 1996, U.S. wine exports to Switzerland increased 36 percent per year, from 68,600 gallons to 2.4 million. Switzerland is likely to increase wine imports from about 50 million gallons during 1995/1996 (July-June), based on changes in Swiss policy which previously protected the domestic white-wine industry. During 1995/96, Switzerland wine imports comprised 82 percent red wines and 18 percent white wines. For Germany and the Netherlands combined, U.S. exports increased 34 percent annually during 1986 to 1996, from 145,000 gallons to 4.4 million. Germany imported nearly 300 million gallons in 1996, with 70 percent coming from Italy, France, and Spain. The Netherlands imported about 60 million gallons of wine in 1996, with 70 percent coming from France, Germany, and Spain. Despite high rates of U.S. export growth since the mid-1980's, the U.S. share of world wine trade remains only about 3 percent. Expected further increases in U.S. producer prices in 1997 are not likely to dampen export demand appreciably. Worldwide, wine supplies are not sufficient to meet demand. According to the International Office of Wine and Vine, 1995 world wine production totaled 6.50 billion gallons, down 2 percent from 1994 and 3 percent from 1993. In 1996, wine production in Italy, France, Spain, the United States, Argentina, and Germany, representing over 70 percent of the world total, was up 9 percent, compared with 1995 and 5 percent more than 1994. However, with the usual period of more than a year before significant amounts of the 1996 vintage are released, the current upward pressure on prices is likely to continue. END_OF_FILE