North Carolina Apple School 2018

North Carolina Apple School 2018 U.S. Apple Crop Outlook and Overview Mark Seetin, Director, Regulatory Mark Seetin and Industry Affairs U.S. Apple Association Director, Regulatory and Industry Affairs U.S. Apple Association

This presentation contains information from USApple s 2017 Production and Utilization Analysis released at the annual August Outlook and Marketing Conference

Market News monthly storage reports are published from November to June to provide updated information to the industry

AUGUST 2017 USDA APPLE CROP FORECAST Source: USDA - August 10, 2017

USAPPLE ADJUSTED 2017 FORECAST Source: USApple Estimate Jan 2018

TOTAL U.S. APPLE PRODUCTION (MILLION) 42-LB. UNITS Up 6% from 2016 285.0 265.0 245.0 225.0 205.0 185.0 165.0 145.0 125.0 281.3 268.4 284.2 239.0 2014 2015 2016 2017 F Source: USDA + USApple Jan 2018 est for 2017 crop

285.0 265.0 245.0 225.0 205.0 185.0 165.0 145.0 125.0 TOTAL U.S. APPLE PRODUCTION (MILLION) 42-LB. UNITS 281.3 268.4 284.2 239.0 #2 2014 #4 2016 Up 6% from 2016 Three of the last four crops have been in the top five years of historical production #1 2017 2014 2015 2016 2017 F Source: USDA + USApple Jan 2018 est for 2017 crop

BEARING ACRES (000 S) 480 460 440 468 (1995) 252.0 million bu production 420 400 380 323 (2016) 360 340 320 300 268 million bu production (2016) 6 percent higher production Source: USDA 31 percent fewer acres

YIELD PER ACRE 2003-16 950 900 850 800 750 700 650 600 550 500 Yield Per Acre (42 lb units) 50% Increase in 13 years 831 Source: USDA

EASTERN APPLE PRODUCTION (000) 42-LB. UNITS 70,000 58,326 59,924 Up 17% 60,065 60,000 51,533 50,000 40,000 30,000 20,000 10,000-2014 2015 2016 2017 F Source: USDA and USApple Source: USDA + USApple Jan 2018 est for 2017 crop

MIDWESTERN APPLE PRODUCTION (000) 42-LB. UNITS 40,000 35,000 28,976 28,662 30,655 Down 24% 30,000 25,000 23,315 20,000 15,000 10,000 5,000 - Source: USDA and USApple 2014 2015 2016 2017 F Source: USDA + USApple Jan 2018 est for 2017 crop

EASTERN AND MIDWESTERN APPLE PRODUCTION (000) 42-LB. UNITS 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000-87,302 88,586 Up 1 % 82,188 83,380 2014 2015 2016 2017 F Source: USDA + USApple Jan 2018 est for 2017 crop

EAST & MIDWEST PERCENT OF TOTAL PRODUCTION 5-Yr. Average = 33% 40% 20% 38% 31% 37% 31% 29% 0% 2001 2003 2005 2007 2009 2011 2014 2017 F Source: USDA and USApple Source: USDA + USApple Jan 2018 est for 2017 crop

WESTERN APPLE PRODUCTION (000) 42-LB.UNITS 200,000 180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 193,983 150,417 186,229 200,829 0 2014 2015 2016 2017 F F = Forecast Source: USDA + USApple Jan 2018 est for 2017 crop

WASHINGTON FRESH APPLE CROP (MILLION 40-LB.BOXES) 5 Year Average =130 150 145 100 50 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 F Source: Washington State Tree Fruit Growers Assn. August 1 Report, Various Years

2017 USApple Adjusted Crop Forecast States 2016 2017 F % fr 2016 5 yr av from 5 yr New York 28,095 32,310 15% 28,238 14% Appalachia 17,629 20,779 18% 19,563 6% New England 2,507 3,429 37% 2,892 19% North Carolin 2,476 2,500 1% 2,488 0% Total East 51,533 60,065 17% 54,027 11% Michigan 27,976 19,863-29% 21,762-9% Total Midwest 30,655 23,315-24% 24,905-6% Washington 174,286 189,971 9% 158,333 20% California 5,976 5,476-8% 5,867-7% Oregon 4,652 4,167-10% 3,556 17% Total West 186,229 200,829 8% 169,233 19% Total US 268,417 284,209 6% 248,165 15% Source: USDA + USApple Jan 2018 est for 2017 crop

Washington: 9% above 2016 and 20% above the 5 yr av New York: Up 15% from 2016 and 14% above the 5 yr av Michigan: Down 29% from 2016 and 9% below the 5 yr av New England: 37% above 2016 and 19% above 5 yr av USApple 2017 Regional Estimates California: 8% below 2016 and 7% below the 5 year av Appalachia: 18% above 2016 and 6% above the 5 yr av Source: USDA + USApple Jan 2018 est for 2017 crop

AVERAGE U.S. GROWER PRICES ALL APPLE SALES -2016 CROP (CENTS PER POUND) Down 5% 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 33.6 32.0 0.0 2002 2004 2006 2010 2012 2014 2016 Source: USDA

AVERAGE U.S. GROWER PRICES FRESH SALES -2016 CROP (CENTS PER POUND) Down 7% 50.0 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 44.1 41.2 2002 2004 2006 2008 2010 2012 2014 2016 Source: USDA

AVERAGE U.S. GROWER PRICES FOR PROCESSING -2016 CROP (DOLLARS PER TON) 300 250 200 Up 6% 201 213 150 100 50 - Source: USDA

TOTAL U.S. FRESH APPLE EXPORT VOLUME 2016 CROP (000 42 LB. UNITS) 60,000 50,000 UP 6% 42,506 45,085 40,000 30,000 20,000 10,000 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Crop Year Source: USDA FAS-Global Agricultural Trade System (GATS) August 4, 2017 Exports reported on July June marketing year

TOTAL U.S. FRESH APPLE EXPORT VALUE 2016 CROP (MILLION U.S. DOLLARS) Up 3% from 2015 Crop 1200 1000 800 $928,574 $954,332 600 400 200 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Crop Year Source: USDA FAS-Global Agricultural Trade System (GATS) August 4, 2017 Exports reported on July June marketing year

TOP FIVE APPLE EXPORT DESTINATIONS - 2016 CROP TOP 5 COUNTRY SHARE OF TOTAL EXPORTS Country MT (000) 42 lb Bu % of total Mexico 260,716 13,680 Canada 135,369 7,106 Taiwan 64,799 3,401 India 45,142 2,370 Hong Kong 38,596 2,026 Others 314,304 16,498 Total 858,926 45,085 30% 16% 8% 5% 4% 37% Source: USDA FAS-Global Agricultural Trade System (GATS) August 4, 2017 Exports reported on July June marketing year

US-CHINA TWO WAY TRADE US-China trade agreement finalized in early 2015 called for mutual market access for fresh apples Second year of two way trade (July June 2016-17) Volume Value (000 42 lb units) (000's) Per BU ($) Exports 961 $ 22,793 $ 23.71 Imports* 164 $ 4,328 $ 26.44 * Imports from China comprised 2.1 percent of total imports (2016 Crop Year)

APPLE BALANCE OF TRADE ( U.S. DOLLARS IN MILLIONS) 1,400 1,200 1,000 800 600 400 200 Apples contributed a net positive trade balance of $708 million from the 2016 crop $954 $708 $247 0 2009 2010 2011 2012 2013 2014 2015 2016

UTILIZATION OF THE 2016 APPLE CROP Fresh 67% Processed 33% Fresh 67% Not Marketed 3.9% Juice 11.9% Fresh Slices 1.2% Frozen 1.2% Dried 3.0% Other Products 1.2% Total Canned 10.6% Source: USDA, National Agricultural Statistics Service.

UTILIZATION OF THE 1994 APPLE CROP Fresh Slices 0.0% Fresh 51% Fresh 51% Processed 49% Juice 27% Not Marketed 2.0% Total Canned 14.0% Frozen 1.0% Dried 4.0% Source: USDA, National Agricultural Statistics Service. Other Products 1.0%

GROWTH IN FRESH MARKET DRIVES GROWER INCOME 1994 2016 Fresh 51% Juice 27% Not Marketed 2.0% Total Canned 14.0% Fresh 67% Juice 11.9% Not Marketed 3.9% Fresh Slices 0.0% Frozen 1.0% Dried 4.0% Other Products 1.0% Fresh Slices 1.2% Frozen 1.2% Dried 3.0% Other Products 1.2% Total Canned 10.6% Source: USDA, National Agricultural Statistics Service. Source: USDA, National Agricultural Statistics Service.

2016 CROP FARM GATE VALUE - UP 3% - NEW RECORD AT $3.46 BILLION At $3.46 billion, farm gate value of the 2016 crop was up 3% over 2015 Crop Year 2013 2014 2015 2016 Value of Fresh Production (000) $2,792,848 $2,577,739 $3,041,358 $3,113,626 Value of Processing Production (00 $340,088 $293,006 $308,737 $348,834 Total Farm-Gate Value of Production 2 (000) $3,132,936 $2,870,745 $3,350,095 $3,462,460 Source: USDA, National Agricultural Statistics Service, Noncitrus Fruits and Nuts Summary,various years. na = not available Noncitrus Fruit and Nuts 2016 Summary, releasedjune 27, 2017 2 Total revenue to grow ers from fresh and processing sales.

MORE INCOME FROM SIMILAR SIZE CROP 1994 CROP 273.8 MILLION 42 LB UNITS 2016 CROP 268.4 MILLION 42 LB UNITS Comparing 1994 and 2016 crops - Season-Average Prices Received by Growers Inflation adjusted 268.4 273.8 CPI ADJ 2016 M bu M bu to 2016 vs. 2016 1994 1994 1994 ADJ All sales (cents per pound) 32.0 12.8 20.7 35% Fresh consumption (cents per pound) 41.2 18.2 29.5 28% All processing (dollars per ton) 213.0 112.0 181.4 15% Canned (dollars per ton) 244.0 148.0 239.8 2% Juice and cider (dollars per ton) 163.0 89.7 145.3 11% Frozen (dollars per ton) 244.0 148.0 239.8 2% Dried (dollars per ton) 202.0 82.0 132.8 34% Fresh slices (dollars per ton) 390.0 na na na Value of Fresh Production (000) $3,113,626 $1,207,270 $1,955,777 36% Value of Processing Production (000) $348,834 $219,318 $355,295-15% Total Farm-Gate Value of Production 2 (000) $3,462,460 $1,426,588 $2,311,073 33% Source: USDANASS Noncitrus Fruits and Nuts Summary, various years. na = not available 2 Total revenue Even to growers after from adjusting fresh and processing the 1994 sales. crop for inflation growers received 33% more from 2016 crop 33%

APPLE PRODUCTION (000 42 LB. UNITS) Apple Production (000's) 5 Five YEAR Year ROLLING Rolling AVERAGE Average 1943-1943-2017 2017 300,000 250,000 257,148 200,000 150,000 101,411 254,648 (1994 98) 100,000 50,000 0

INVENTORIES REFLECT MARKET ACTIVITY DRIVING VARIETY REBALANCING 6 Years of Market News Inventories from November 1 and June 1 were analyzed (Crop Years 2011 2016)

14 12 10 8 6 4 2 MARKET NEWS 6 YEAR VARIETY COMPARISON JUNE 1 INVENTORY AND NOVEMBER 1 JUNE 1 MOVEMENT BY VARIETY 12.4 million June 1 Inventory (Millions 42 lb. units) Nov Jun % Inventory Moved 93% 120% 100% 80% 60% 40% 20% - Red Granny Golden Gala Fuji Rome Cripps Pink Honeycrisp McIntosh June 1 Inventory Moved % 0% Source: USApple Market News

14 12 MARKET NEWS 6 YEAR VARIETY COMPARISON JUNE 1 INVENTORY AND NOVEMBER 1 JUNE 1 MOVEMENT BY VARIETY 12.4 million June 1 Inventory (Millions 42 lb. units) Nov Jun % Moved 93% 120% 100% 10 8 6 4 Red Delicious (6 year average) 71 % of Nov 1 Stocks Were Moved by June 1 29% of Nov 1 Inventory Remained on June 1 80% 60% 40% 2 20% - Red Granny Golden Gala Fuji Rome Cripps Pink Honeycrisp McIntosh June 1 Inventory Moved % 0% Source: USApple Market News

INVENTORIES REFLECT MARKET ACTIVITY MARKET NEWS INVENTORY ANALYSIS 6 Years of Market News Inventories from November 1, 2016 and June 1, 2017 were analyzed Red Delicious June 1 inventory averaged 29% of November 1 inventory Red Delicious June 1, 2017 inventory represented 47% of all June 1 variety inventories (6 year avg was 38%)

U.S. RED DELICIOUS PRODUCTION (MILLION 42-LB. UNITS) 120 118 110 100 90 80 70 51 F 60 50 40 Source: USApple F = Forecast

U.S. GOLDEN DELICIOUS PRODUCTION (MILLION 42-LB. UNITS) 40 41 35 19.5 30 25 20 15 Source: USApple F = Forecast

RED AND GOLDEN DELICIOUS AS A PERCENT OF TOTAL PRODUCTION 60% 57% 55% 50% 45% 40% 28% 35% 30% 25% Source: USApple

WESTERN U.S. FUJI PRODUCTION (000 42 LB. UNITS) 30,000 24.2 25,000 20,000 18 15,000 10,000 5,000 Source: USApple F = Forecast

WESTERN U.S. GRANNY SMITH PRODUCTION (MILLION 42-LB. UNITS) 30.0 25.0 23.1 20.0 15.0 10.0 5.0 0.0 Source: USApple F = Forecast

U.S. GALA PRODUCTION (MILLION 42-LB. UNITS) 55.0 44 45.0 35.0 25.0 15.0 5.0 10-5.0 Source: USApple F = Forecast

HONEYCRISP AND CRIPPS PINK (PINK LADY ) (MILLION 42-LB. UNITS) 15,206 13,192 9,492 10,899 5,160 6,556 6,981 8,482 16,649 8,346 2013 Honeycrisp 2014 Cripps Pink 2015 2016 2017

40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 0.0% Washington State Variety Mix 2005-17 33.4% 16.6% 14.1% 5.0% Cripps Pink 2.1% Variety Rebalancing Red Delicious Gala Fuji and Granny Smith Golden Delicious 1.4% Honeycrisp 23.7% 22.5% 8.0% 5.3% 5.0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: Washington State Tree Fruit Association (WSTFA)

2017 APPLE CROP - SUMMARY When considering the advances made by the industry in recent years The ability to effectively market larger crops Increased productivity Better postharvest management improved quality New varieties aimed at consumer preferences Innovative marketing programs Export prospects There is real reason to be optimistic about the 2017crop

KEY ISSUES -- FARM BILL USAPPLE WORK PRIORITIES USApple: Founding Member SCFBA Market Access Program $200 m Specialty Crop Research $80 m Specialty Crop Block Grants $100 m Federal Nutrition Programs Pest & Disease Prevention

KEY ISSUES -- FARM BILL USAPPLE WORK PRIORITIES Expires September 30, 2018 SCFBA Strategies/Priorities Bipartisan Agreement to Maintain Key Programs

mseetin@usapple.org Thank You!