Michigan: sour cherry crisis continues

09 Apr 2024

At a time when more than a few cherry growers are retiring trees in Northwest Michigan, Nels Veliquette is planting new ones to replace those nearing the end of their 30-year life cycle.

Michigan's cherry growers, who provide 75 per cent of the national crop, have been losing out most of the time over the past decade. The problems are deeper than climate or management. How does Veliquette hold its own in an industry that, by many accounts, experiences the greatest fluctuations in price and production of any crop each year?

He takes a multi-pronged approach, with a hint of optimism. He fully recognises the challenges ahead, many of which are shared by all speciality crop growers, but hopes to move beyond this recession to better days ahead.

High stakes

Veliquette's family, one of the largest cherry growers in the state, owns and leases 2,400 acres (971 ha) of cherries, 95 per cent of which are sweet cherries. The rest is divided between sweet cherries and 50 acres of recently planted high-density apple trees, which expand its labour supply.

In the short term, he is losing money.

"If you only look at it from a five-year perspective, it may seem like a stupid idea to get into this business," says Veliquette, who is a fourth-generation farmer and second-generation cherry grower. "But we are here for the long haul. People are in this business because they love it, not because they get rich. We can still make a living, but it is becoming more and more difficult'.

Some farmers have held out by borrowing their land to help them during the crisis years. Many are not paid for their work and do not take into account the amortisation of the initial investment for the trees. They hope for an equalisation of supply and demand and for prices to become sustainable.

This means learning to cope with invasive pests, inflation, cheap imports, labour costs, adverse weather conditions, a declining number of processors and a marketing order that limits the domestic harvest, while cheap, subsidised imports flow freely, taking market share.

Unlike sweet cherries, which are usually sold as a fresh product, sour cherries are a delicate, thin-skinned fruit that needs to be processed quickly (frozen, dried, squeezed and canned) and are often used in pies, jams and muffins, squeezed for juice or dried for salads and the like.

If you are an independent grower, the power lies with the processor, who decides whether - and at what price - the cherries will be accepted. Some growers have difficulty finding a processor when the cherries are ready.

Buyers tell growers how much their cherries are worth based on the size and quality of the crop, demand, and a marketing order that may limit the harvest - causing growers to 'hijack' their crops by leaving them on the ground or, if a processor accepts them, divert the excess into storage that can only be taken for certain uses.

Vertical integration

Recognising the need for vertical integration, allowing the farm to be part of the final product, the Veliquette family built a stoning plant in 1972. Veliquette is the financial director of Cherry Ke and Cherries R Us.

Through a partnership with Cherry Bay in Leelanau (owned by the Gregory brothers), they created the Shoreline Fruit processing cooperative, which allowed them to follow the process through to the finished product. A drying plant was added in the early 2000s, followed by a concentrating and freezing operation. The company in Williamburg, Michigan, is now the largest cherry trader in North America.

The two families produce 40,000 tonnes of cherries. The farms, which own the processing, are managed separately, but the product is marketed together under the name Cherry Bay Orchards.

"The decisions that are made at the processing level have to ensure a living wage for the growers, because we want to be sustainable, which is not necessarily the relationship that other independent processors have with the growers," explains Veliquette. "But that's how you stay in business."

Sustainable production for Veliquette's farm would mean about 15 million pounds (6800 tonnes), with an average price of about 30 cents per pound. "In this scenario, I'm not buying a yacht or getting a second home on the lake...We're just maintaining our business," says Veliquette.

Payments to growers from independent processors averaged about 15 to 20 cents per pound in 2023, which doesn't cover annual operating and harvesting costs, not to mention orchard planting and soil control costs, according to a recent Michigan State University study that estimated the total cost of production at 40 to 45 cents per pound.

Meanwhile, inflation pushes up labour, fuel and input costs, which do not translate directly into the product. "At this point we are lucky if we can make 20 cents per pound," says Veliquette. "We cannot simply pass on input inflation; it is a function of the market. It is a difficult problem for us to overcome, because consumers want it cheaper and cheaper."

A breakthrough in organic

Looking for another way to add value to his Montmorency cherry crop, Veliquette dived into organic production and is now in his sixth year of organic certification on 260 acres. He focuses heavily on soil and tree health, as this crop requires a completely different management process and mindset in terms of inputs.

"We have learned to manage problems rather than become immediately prescriptive," he says. "I don't care what other people think; the market tells us to produce organic cherries. This is not a moral position; the reality is that the market wants it'.

Organic pays two to three times the conventional price, but also involves a 30 per cent increase in inputs. 'We are not getting rich, but it allows us to stay in business,' says Veliquette. Some cherry growers are diversifying their business by planting other fruits and offering direct products to consumers and families.

Housing and employment issues

The Grand Traverse region is attractive because it is beautiful and more affordable than many other desirable places, says Veliquette, who has seen land values in the area rise considerably. "It's great if you're a land speculator, but it's horrible if you're a company trying to attract workers at a decent wage," he adds.

COVID-19 has not helped either. The Cherry Capital airport in Traverse City facilitates remote work, offering direct flights to places like Chicago, New York, Dallas and Washington, D.C., and putting additional pressure on housing. "If you have housing, you can find labour, whether it's a temporary worker from Mexico or a new mechanic, sales or quality control person," he says.

"If people can't find houses and places they can afford, it creates a housing crisis, which basically causes a job crisis," says Veliquette, who would like to see a dollar-for-dollar tax credit for money invested in building or buying housing for workers.

In 2023, Michigan farmers relied on more than 15,000 H-2A seasonal workers, the sixth highest nationwide. Although cherries are harvested mechanically by shaking the tree, growers need handlers and caretakers of the crop, as well as workers in the processing plant to pit and store the cherries.

Under H-2A, growers or contractors must provide accommodation and pay the required wage rate for adverse effects.

At $18.50, the AEWR is higher than the current federal minimum wage of $11.25 and more than 83% of Michigan's minimum wage of $10.10. Taking into account wages, housing and transportation, Veliquette claims to pay $23-24 per hour. "It's not cheap labour, but housing is our biggest obstacle right now," he says.

Years ago, Veliquette remembers hiring kids during the summer, when they were happy with the work and the chance to earn some money before going back to school. "Those days are long gone: there are no local workers," he says. "They don't come to work or they quit shortly after starting."

These are not low-paid jobs for unskilled positions. "It's about experienced workers," he adds.

What lies ahead?

As farmers sell land or convert crops to make ends meet, could northern Michigan's days as the cherry capital of the world be numbered?

Subsidised imports, largely from Turkey, continue to depress prices. While federal courts have ruled against US cherry growers in a trade dispute, the USDA has helped alleviate the situation by purchasing domestic cherries for food banks and USDA programmes.

The Cherry Industry Administrative Board is pushing for a greater presence in the national school lunch programme with new recipes and products.

"We've been the financial arm of the industry for all the health benefit research, but we haven't led the marketing," says Heather Weber, executive director of the CIAB. "We have good people who are driving this process and we're really excited to see what it can bring to our industry."

Although government purchases are welcome, Veliquette knows they are not guaranteed year after year.

Regular customers do the shopping. "Everyone likes to take pride in buying US-made until it costs 20 per cent more, and then patriotism takes a back seat and capitalism takes over," he adds. "If consumers make the effort to buy American products, cherry juice concentrate can be mixed with Florida pear juice and all of a sudden it is a US product."

However, according to Veliquette, there is hope for the industry, which is facing strong consolidation at both the producer and processor level. "It is an important part of the local and state economy," he notes. "In the coming years there will be a downsizing of the sector. But when there is something we are interested in, we can make it work."

Declining processing capacity

In 2022, Art McManus left more than 1,000 tonnes of cherries on his trees because he could not find a processor to take them. 'It was sad to see those cherries on the tree when there are people starving,' he says.

Cherries are generally not a contract crop and processors adjust their purchases according to market demands and stocks. In 2022 it was a bumper year for sour cherries, after two years of meagre harvests. "I had no choice, I couldn't sell them," says McManus, who farms 200 acres five miles south of Traverse City, Michigan. Eighty-five per cent of his acreage is planted to sour cherries and the rest to sweet cherries.

According to Heather Weber, executive director of the Cherry Industry Administrative Board, the number of cherry processors in the state has shrunk from 22 in 2014 to 16 in 2023.

"There is not one cherry pitter left in Grand Traverse County," says Tim Brian, president of Smeltzer Orchard Co. based in Frankfort, Michigan. "But even if we had cherries, I'm not sure we have the market to support them."

Sour cherry orchards and processing plants are expected to decrease in the coming years. "The costs of planting and maintaining the current orchards are high," he says. "Once they reach full maturity, there are not many to replace them."

Brian buys cherries from about 60 growers under what he calls a 'gentleman's agreement on quantity'. The annual tonnage varies, but in a normal year Smeltzer freezes about 5,000 tonnes of tart cherries in institutional size packages for the growers. The plant also processes apples.

Complicating the situation was COVID, which devastated the supply chain. "Customers sometimes couldn't get the products, so they switched from just-in-time to just-in-case," Brian explains. "Now that we are back to just-in-time, there is an overstock that is being corrected."

If an end-user bought 10 per cent more to protect himself from shortages, the next season he will buy 20 per cent less to return to balance, Brian explains. "We are going through this phase and I suspect that stocks will be corrected in the next 12 months," says Brian.

McManus' family started in the cherry business in the 1930s and at one time he and his four brothers all grew cherries. He has been working with a processor for the 2023 harvest and says: "We cleaned up the orchard well this year. He held out by hiring people to set up a farmers' market on his farm and by offering cherry picking.

"People made a destination out of it, bringing families to get some air, some fruit and some exercise," McManus says. But at 83, with none of his children interested in the farm, McManus says he will stay for another year and "we'll see what happens next".

Allotments are springing up around his farm. "I think that's the direction it will go," he says. "It will probably never be put back into cherry cultivation. But it's hard to let it go."

Read the full article: FarmProgress
Image: Nature's Craft

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