Writing Assignment 1
Melissa Knox
Econ 200B – Autumn 2015
Article Title: As Red Delicious Declines, Growers Make Bets on the Next ‘Hit’ Apple
Source: See cut and paste below
Article Summary:
In this article, we learn about the demand for different varieties of apples in the United
States and the effect of changing demand on prices. Red Delicious apples used to make
up more than two thirds of the apples grown in Washington State, but now they are only
about a quarter of the fruit grown here. In many cases, red delicious cost more to grow
than they can be sold for. Galas have taken the place of red delicious as the most popular
apple in the United States. Other popular varieties are Fujis and Honeycrisps and prices
for these apples are much higher than the prices for Red Delicious. Other varieties such as
Braeburn and Firmgold are delicious, but not as popular and hard to sell. What all of these
apples have in common is that they are considered superior in flavor and texture to the red
delicious.
Economic Analysis:
In chapter 3, we learn about supply and demand and how they contribute to the price and
quantity sold when the market is in equilibrium. In the case of Red Delicious apples, the
demand for these apples used to be high and therefore prices were high. Once consumers
learned about Gala apples and other, tastier varieties, their demand for those apples
increased and their demand for Red Delicious fell due to a change in their preferences.
After prices fell, suppliers realized that they can’t get as much for Red Delicious and they
began growing Galas and other varieties in their place. In the graph, I show the market for
Red Delicious apples and the shifts in supply and demand that have happened over time.
First, demand shifts downward, lowering the equilibrium price and quantity sold. Then, in a
response to low prices, growers cut back on the number of Red Delicious sold and supply
contracts or falls at every price. The end result is that even fewer red delicious apples are
sold, and the final equilibrium price goes up a bit, although it is still lower than it was
originally.
(Please note: You could have shown the market for Honeycrisps instead, or possibly drawn
two graphs for both markets.)
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The Market for Red Delicious Apples
Price
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Quantity
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Source:
http://nwpr.org/post/red-delicious-declines-growers-make-bets-next-hit-apple
As Red Delicious Declines,
Growers Make Bets On The
Next ‘Hit’ Apple
By ROWAN MOORE GERETY
•
OCT 8, 2014
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Grower Rob McCormick stoops to examine a knotty tree trunk in an apple
orchard in Selah, Washington. “You see right here?” he says. “These had
been Red Delicious. Then we cut this down to a stump and grafted in the
Galas.”
Washington growers are expecting a record crop of apples this year, but not
of Red Delicious: most American consumers have moved on.
At the height of their popularity, Red Delicious accounted for more than two
thirds of Washington apples. Today, the variety represents just over a quarter
of the fruit grown here. Prices have fallen dramatically. Frequently now, old
varieties like red and golden delicious cost more to produce than you can sell
them for.
“Everything is worth something. But sometimes that something is less than
nothing,” McCormick says.
Like many growers, there are years he lets his harvest fall to the ground. “Is
that an easy thing to do? Can I be dispassionate about it? No. I produced
these things…it would be a hard thing to waste ‘em'," McCormick says.
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Galas are originally from New Zealand. In 30 years, they have taken the
place of Red Delicious as America’s most popular apple. But McCormick
says there are still profitable years for Reds too. He has converted some
Reds to Galas, “but we didn’t do the whole place. That was more of a gamble
than I wanted to take,” he says.
In 35 years growing apples, McCormick says he’s seen more than one fellow
grower invest heavily in a new variety and end up taking a loss. Reds are
“cheap” and reliable to grow – they don’t require a lot of special treatment.
He tugs at a Red Delicious dangling from a branch. “When that is mature,”
he says, “it will be as good an eating apple as you can find.”
David Nelley, Director of Apple and Pear Operations for apple marketing firm
Oppenheimer, disagrees.
“Reds came out a long time ago and I dare say expectations have risen since
then,” Nelley says. “The specifications that some of the retailers require from
us, have changed."
Today’s apples are sweeter and more crisp. They have a longer shelf life.
First there was Gala, then Fuji, and now, Honeycrisp.
Nelley calls it “the rockstar of the apple world in North America right now.”
Last year, a box of Honeycrisp apples fetched nearly three times as much as
a box of Red Delicious.
But as more and more growers get in on the action, quality control becomes
key.
Somewhere, Nelley says, “There is a consumer who walks down to their
store, picks up a Honeycrisp, and they may have one that was picked a little
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bit too early, or grown in the wrong place during this gold rush of the
Honeycrisp years. So that person is gonna think, ‘Wow, that’s not what I
remember a Honeycrisp tasted like." When that happens too many times,
prices will fall.
Some growers, like Dave Allan, are trying a new strategy to avoid this cycle
of boom and bust.
Stepping down from his pickup truck into an orchard south of Yakima, Allan
plucks a rosy-hued apple from the tree and begins to extol its virtues: “Now,
Pacific Rose is a big, sweet apple. And it will get a brighter red. It’s just a
beautiful apple.”
“What’s neat about this Pacific Rose,” Allan says, using a pocket knife to cut
himself a slice, “is after storage, you get this kind of aroma that comes out of
it.”
All these qualities make Allan think Pacific Rose could be the next
Honeycrisp. But it’s not his only bet. Aided by DNA sequencing and advanced
computing, the number of new varieties is exploding.
“Envy was the last one that came to us,” Allan says. “It came as a number,
and I don’t even remember the number now.”
Both Envy and Pacific Rose are known as “club varieties”: you can only grow
them if you’re part of the club. What that means is that breeders trademark
their new creations, and license the right to grow and sell them to handpicked partners. Then, together, they invest a lot in building a new brand, and
they limit production.
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Suzanne Wolter, of Rainier Fruit, says, “You want to make sure that you don’t
plant so many trees that you’re not able to sell the fruit when it actually gets
to the market.”
Wolter oversees marketing operations for Rainier, one of Washington State’s
largest apple producers. She says trademark protection allows companies to
invest more in marketing their new proprietary varieties. One goal is to ensure
that new varieties avoid the fate of an apple called Cameo. When Cameo
was introduced, “Growers were getting more yield and we were packing more
fruit every single year,” Wolter says. But, consumers didn’t buy it! People
didn’t know about it.”
With dozens of new varieties and a resurgence of heirloom and regional ones
competing for market share, there’s a long list of also-rans in today’s apple
world: delicious, but hard to sell. Rob McCormick singled out Braeburn and
Firmgold, which he calls a “superior apple.”
“They’re firmer, they store better, look how big they get,” McCormick says,
marveling at the sight of an overloaded Firmgold tree nearing harvest. “Look
at the size of that thing! Now, how can that not be worth something?”
Though McCormick says it’s a bit arbitrary which varieties ultimately win out
for shelf space in the grocery store, there’s not much to do about it. “You
can’t tell people what they want,” he says. What they want is what they want.
You either grow what they want, or find another business.”
Copyright 2014 Northwest News Network
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