Article Contributed by
Cornell University Jamestown
Concord prices have plunged by as much as $200 per ton in the last two years. As the cash market announces prices for 2015 it appears area growers will now be paid between $150 and $250 per ton. The growth of the wine industry is keeping some market prices at sustainable levels, while the juice and jelly market struggles.
Most Concord grapes produced in the Lake Erie Region are marketed through cooperatives, processors owned by the growers themselves. Everything else is referred to as the cash market, which is actually split between annual tonnage contracts, acreage contracts, and a small non-contracted spot market.
For grapes not marketed through cooperatives, area processors must file a stated grape price with NYS Department of Agriculture and Markets. The stated prices must also be distributed to contracted growers prior to August 15th.
We are seeing a perfect storm of declining agricultural commodity prices, slumping demand for juices and jellies, and the closing of local ConAgra processing facilities. Those market realities will now significantly impact the farm gate value of all area producers. Since 2013 the average farm gate value of Concord grapes has fallen from $290 per ton to $212 in 2015. On top of these lower prices the local Concord crop is expected to be average or below average in size. Concord is a variety native to our climate but with winter temperatures falling as low as -30 °F the vines sustained moderate damage. Most damage was limited to primary buds. This type of damage decreases potential crop yields. Most areas did not observe widespread physical damage that would impact vine health. The region should return to full Concord production by 2016. LERGP also estimates that over 2,000 acres of grapes have temporarily suspended production because of poor market conditions. Proceeds paid to Chautauqua County Concord growers is expected to fall by $13 million dollars, or 42%.
Area grape growers operate on slim profit margins and the decline in farm gate value will directly impact the local economy. To sustain their business, growers will hire fewer employees, invest far less in capital equipment, refinance debt and decrease operating costs. The large majority of impacted people, suppliers, and mortgage holders are all local.
It is important to keep in mind that area processors have seen similar declines in their profit margins. To sustain their operations, as the demand for juice and jellies wains, local investment and employment is likely to decline. Further struggles relate to the private label market in general. ConAgra, while no longer located in Chautauqua County, is struggling to manage its portfolio of private label brands in other parts of the country, which continues to impact area growers.
The real impact on the local economy will depend on the length and depth of the low price cycle. The boom and bust cycle of agricultural commodities is nothing new. Industry insiders are concerned that the decline in demand for juices is more permanent. The USDA began to encourages the decreased consuption of sugar-sweetened beverages as it updated its food pyramid to MyPlate. Consumers appear to be incorrectly responding to that advice by reducing consuption of 100% juice products, which are not sugar-sweetened.