Ohio State University Research Bulletin

Ohio Apple Production:

National Market Perspective

Conclusions and Implications

1. U.S. apple production increased nearly 50 percent during the 1973-1988 period, from 6.2 to 9.l billion pounds. During those years fresh consumption accounted rather consistently for about 55-58 percent of annual production. This fresh apple industry is a domestic U.S. enterprise, only modestly effected by imports or exports. But the major producer, Washington, (mostly a fresh-market supplier) grew during these years from 30 to 43 percent of total production. Ohio growers also produce primarily for the fresh market, and compete directly with Washington for that market.

2. Consumption of processed apple products increased also, and took the remaining 42-45 percent of domestic production during 1973-1988. Canned products and juice/cider preparations accounted for 75-85 percent of this, but the latter absorbed nearly all of the increase in processed consumption. This increase in U.S. consumption of juice preparations also absorbed some foreign production. Imports and exports (particularly in products like juice concentrate) make foreign competitors more of a factor for concern among U.S. producers of processing apples than of fresh- market apples. Almost all the eastern states (but not Ohio) produce primarily for the processing market.

3. There is evidence that competitive market area price relationships for U.S. apple producers exist on a national basis. Price interrelationships mean that individual industry participants are not safely insulated from the actions of their competitors wherever else they may be in this national arena. External economic forces affect competition within any local area and these are persistent, long-lasting effects. Whether they are favorable or unfavorable to particular individual circumstances may in the long-run have as.much impact on local prices and incomes as will awning that is subject to individual managerial control.

4. Modern agricultural marketing in the U.S. is characterized by specialized production at locations favored by nature and technology, by transcontinental shipment patterns to consumers from remote production areas, and by wholesale purchase and sale transactions based on product description rather than inspection. Where descriptive applications are the norm, wholesaling is quick, efficient, and cheap; where they are not, it becomes more cumbersome and costly. There is evidence of confusion and argument about these descriptive applications among both sellers and buyers of Ohio apples for the fresh market. Clearly, this incurs costs for some that are not borne by their competitors who manage their descriptive transactions with clarity and dispatch.

5. The U.S. apple industry is widely aware of the growing impact of Washington production over the years. And the impact carries the same message as does change in the rest of the U.S. fruit and vegetable industry in this second half of the Twentieth Century, which is that local demand can be served at less cost by long-distance transportation than by local production. If this is true, then much of the future well- being of U.S. apple production elsewhere in the market area (including Ohio) would appear to rest on whatever important exceptions to this truth can be exploited effectively-whether they lie in cost effectiveness, market effectiveness, or product effectiveness. These are important managerial implications for apple producers in Ohio or elsewhere in a competitive market area.

6. The managerial role requires a constant surveillance and preparation for improvements in cost control, new markets and new products. Lowest costs are associated with productivity (input/output) improvements, including both improved technology and improved information to lower the cost of error. New markets include a continuous assessment of income-maximizing alternatives in the fresh market versus the processed market and regard neither as a surplus disposal option. A clear understanding of buyer expectations in either case is required in assessing these alternatives. New product decisions include product quality determinations as well as cultivar selection (and quality commitments are easier to amend or alter than is cultivar selection). Buyers often choose between suppliers of a given cultivar on the basis of a package of advantages that are aside from the product itself. For example, supplier commitments concerning packaging, delivery, volume, and adherence to specifications are all, to the buyer, attributes of product quality. Superiority in these matters are important priorities for producer organizations.

7. Product differentiation is an important element in assessing the possibilities for new markets and new products. What can be merchandised effectively because it is different? What can buyers (including consumers) learn to appreciate about new cultivars (for example) that they do not associate with other providers as well? To a professional buyer, these differences will boil down to arithmetic which may indeed show that the difference is sufficient to warrant a premium price. To the household consumer, differences may be important and might warrant price premiums for things like assurances about pesticide residues, information about recipes or preparation, or the atmosphere surrounding the purchase experience, for example. What else? Successful product differentiation requires a constant application of imagination to the search for answers, and the answers change as preferences change. 8. AD managerial decisions are being constantly attended, altered, improved- somewhere, by someone-in a market area, and all others in the area, for good or id, are affected by the consequences, whether they notice them this year or not. Market forces are vastly indifferent to individual circumstances and the pressure for managerial alertness is indeed unrelenting.

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