Professional Documents
Culture Documents
Industry Definition Farmers in this industry grow nuts such as products. Operators in this industry sell
almonds and peanuts, as well as fruits like their crops to downstream processors and
apples, berries, grapes and other non-citrus fresh produce wholesalers and retailers.
Industry at a Glance
Fruit & Nut Farming in 2013
Index
5 120
0 110
−5 100
Year 05 07 09 11 13 15 17 19 Year 04 06 08 10 12 14 16 18
Revenue Employment
SOURCE: WWW.IBISWORLD.COM
p. 28
Products and services segmentation (2013)
8.6%
Key External Drivers Cherries, blueberries and cranberries
Price of fruit
Demand from canned
9.3%
Peanuts
19.9%
Grapes
fruit and vegetable
processing
Demand from wineries
9.7%
Per capita fruit and Strawberries
vegetable consumption
Trade-weighted index 17.6%
Almonds
Population
10.6%
Other
p. 5
11.8% 12.5%
Pecans, pistachios and walnuts Apples SOURCE: WWW.IBISWORLD.COM
SOURCE: WWW.IBISWORLD.COM
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 36
WWW.IBISWORLD.COM Fruit & Nut Farming in the USNovember 2013 5
Industry Performance
Executive Summary | Key External Drivers | Current Performance
Industry Outlook | Life Cycle Stage
Executive Revenue for the Fruit and Nut Farming The United States is one of the largest
Summary industry (excluding citrus fruits) grew growers of tree nuts, and demand for
considerably during the past five years. these products specifically, is expected to
Although general fruit prices declined grow. Additionally, exports make up a
slightly, demand for a few large large part of industry revenue, and this
product segments rapidly increased. trend is expected to continue increasing
Growth in specific segments (i.e. in the next five years. This is because new
grapes, peanuts and almonds) carried farmers are enticed by the potential for
the entire industry to strong growth in high returns from export markets. The
the past five years. Overall, revenue number of fruit and nut farms is
grew an annualized 7.3% in the five therefore forecast to grow 1.8% per year
years to 2013 however, performance on average to 176,953 in 2018, while
peaked in 2012, and as a result, employment follows suit and increases at
an annualized 1.8% to 252,293 workers.
IBISWorld anticipates industry
Growthin specific segments carried the entire revenue will rise over the next five
years. Continued advancements in
industry to strong growth transportation technology will extend
the reach of high-quality, high-value
revenue dipped a slight 0.6% to $25.0 domestically grown fruit in the global
billion in 2013. market. In addition, the growing
While industry revenue ballooned over population will help boost the total
the past five years, its size has remained consumption of fruit and vegetables,
relatively stable. It is difficult to enter or exit while consumers regain their spending
the industry because most fruit and nut power and demand more high-valued
trees require up to four years of growth fresh fruit. These trends will drive
before reaching bearing age. As such, most revenue up an average of 2.7% per year
fruit and nut farmers remain in the industry to $28.5 billion over the five years to
for multiple years. Moreover, annual 2018. However, the price inflation for a
fluctuations in farm numbers are low. number of fruits that peaked in 2012 is
Consequently, the number of fruit and nut expected to ease, causing profit
farms has increased a tempered annualized margins to decline slightly in the next
0.7% to 161,147 in the five years to 2013. five years.
Industry Performance
140 12
130 8
% change
Index
120 4
110 0
100 −4
Year 04 06 08 10 12 14 16 18 Year 07 09 11 13 15 17 19
SOURCE: WWW.IBISWORLD.COM
WWW.IBISWORLD.COM Fruit & Nut Farming in the USNovember 2013 7
Industry Performance
Industry Performance
International trade quarter of export values. The North in order to meet the off-season demand.
continued American Free Trade Agreement (NAFTA) Additionally, the growing and diversifying
makes selling fruit to these two countries US population is expanding their tastes to
convenient for US producers. include fruits more commonly found in
Despite rapid export growth, imports other countries, such as guavas and
have also increased considerably. mangoes. Domestic fruit farmers do not
Providing off-season fruits to consumers, produce enough of these uncommon fruits
allowing them to enjoy the same fresh to satisfy the domestic demand, so the
fruits year-round, has been a major source United States relies on imports to supply
of growth. Supermarkets and other them. As a result, imports have increased
retailers have ramped up imports from an annualized 5.3% to $14.4 billion in the
counter-seasonal countries, such as Chile, past five years.
Industry Although revenue and trade have types of fruit. As a result, the number of
characteristics increased during the past five years, the farms participating in the industry has
overall makeup of the industry remained risen, albeit marginally, over the five
relatively stable. Farmers that produce years to 2013, at an average of 0.7% per
tree fruits (such as apples, pears and year to 161,147 farms. Employment is
cherries) or nuts (like pecans) require also steady, growing at an average annual
about four years before their plantings rate of 1.0% to 231,143 workers. Farmers
produce market-ready fruit. Because hire seasonal labor as needed, depending
these fruit and nut farms require on the harvest size; therefore, annual
significant time and land commitment, it fluctuations in employment are normal
is difficult to quickly enter or exit the and expected.
industry. Furthermore, these major The industry has also increased its
planting obligations make it such that automation by using more machines for
operators cannot easily switch between planting and harvesting. Greater
crop industries or even between different mechanization has led to an increase in
WWW.IBISWORLD.COM Fruit & Nut Farming in the USNovember 2013 9
Industry Performance
Industry efficiency, reducing reliance on labor. segments, has caused profit margins to
characteristics Increased efficiency, combined with increase in the past five years, peaking
favorable price growth in some in 2012 at 21.0%.
continued
Healthy habits During the next five years, consumers benefiting the industry. Additionally,
will be more inclined to purchase the 2008 Farm Bill’s Fresh Fruit and
higher-priced fresh fruits rather than Vegetable Program will continue to
canned, frozen and processed varieties encourage schools to buy fruits and
that were favored during the recession. vegetables and prepare healthier
Per capita disposable income is lunches to meet national standards.
expected to increase an annualized Government support is a particularly
2.5% in the five years to 2018, and a important factor for the peanut-
number of consumers are expected to growing segment of the industry.
put their extra dollars toward Peanut farmers have received some of
upmarket food varieties, including the largest subsidies under the 2002
fruits and nuts. and 2008 Farm Bills. However, a new
Government-backed programs, such as iteration of the Farm Bill, expected in
the Centers for Disease Control and late 2013 or 2014, could change this
Prevention’s “Fruits and Veggies – More policy. If peanut farmers receive less
Matters” campaign will continue to favorable benefits, the price of peanuts
educate Americans about the at the retail level could increase
nutritional importance of eating fruits considerably, leading to reduced
and vegetables. As these programs consumption of the crop and ultimately
resonate with consumers, they will causing the peanut segment of the
demand more fruits and vegetables, industry to contract.
WWW.IBISWORLD.COM Fruit & Nut Farming in the USNovember 2013 10
Industry Performance
Trade and The already-significant role that feasible. This improvement is important
participation international trade has within the because US-grown fruits and nuts are
industry is projected to rise over the next perceived to be of high quality, placing
five years. Imports are expected to grow them in great demand worldwide. Also,
strongly as US consumers demand an President Obama’s National Export
increased variety of fruits and nuts, as Initiative will continue to assist
well as a year round supply. producers in exporting their goods, as the
Furthermore, the dollar is projected to program aims to double the total value of
appreciate and the trade weighted index, the country’s exports by 2014.
a measure of the US dollar compared Furthermore, a new organic trade
with currencies of major trading agreement between the United States and
partners, is also expected to grow an Japan will allow certified organic
annualized 3.4% in the next five years. products in each country to be mutually
Such appreciation will make foreign recognized, which is expected to increase
goods relatively less expensive to the sales of high-end organic fruits to Japan.
domestic market and more attractive to As a result of these factors, exports are
purchase. Consequently, imports are estimated to increase 3.7% per year on
forecast to rise at an average annual rate average to $13.9 billion during the five
of 5.0% to $18.4 billion during the five years to 2018.
years to 2018, increasing their share of Existing participants will benefit from
domestic demand. improvements in domestic yields and
Furthermore, export markets will expanding overseas presence. However,
continue to grow over the next five years. only a small number of fruit and nut
Continuing improvements in farmers will enter the mature industry
transportation will make deliveries of because of the limited growth
undamaged fresh fruit more efficient and opportunities available to these farmers.
WWW.IBISWORLD.COM Fruit & Nut Farming in the USNovember 2013 11
Industry Performance
Trade and Therefore, IBISWorld forecasts a slow employment is also expected to grow at a
participation annualized growth of 1.9% to 176,953 similar annualized rate of 1.8% to
fruit and nut farms in 2018. Moreover, 252,239 in the next five years.
continued
WWW.IBISWORLD.COM Fruit & Nut Farming in the USNovember 2013 12
Industry Performance
Life Cycle Stage The industry’s contribution to the overall economy
is growing at a slightly slower pace to GDP
Growth in industry participant
numbers has been restrained
Widespread domestic acceptance of industry
products has limited US market growth
10
Quantity Growth
Many new companies;
minor growth in economic
importance; substantial
5 technology change
-5 Decline
Shrinking economic
importance
-10
-10 -5 0 5 10 15 20
% Growth in number of establishments
SOURCE: WWW.IBISWORLD.COM
WWW.IBISWORLD.COM Fruit & Nut Farming in the USNovember 2013 13
Industry Performance
Industry Life Cycle The Fruit and Nut Farming industry is in fresh fruit to be exported with greater
the mature stage of its life cycle. Its ease, and also a relatively low-valued US
contribution to the economy as indicated dollar during the past five years.
Thisindustry by the industry value added (IVA), is Product changes are limited. The
is M
ature expected to grow 5.1% per year on industry does not grow genetically
average during the 10 years to 2018. modified (GM) fruits because public
During the same period, GDP is forecast opposition is strong. However,
to grow at an average of 2.1% per year. IBISWorld expects this to change
The industry’s IVA growth over this slowly over the next five years as
10-year period is faster than GDP’s scientists conduct experiments to
growth; however, this high growth is allow farmers to grow allergy-free nuts
partially the result of rapid growth in and perennial fruit. This would
profit during the past five years coming potentially decrease the demand for
off a low in 2008 and peaking in 2012. imports from counter-seasonal
Market opportunities are limited countries and increase the domestic
domestically. Per capita fruit consumers’ reliance on domestic fruit
consumption levels have hovered around and nut crops.
44.2 pounds per year, according to the The industry is also saturated with
US Department of Agriculture (USDA). participants, as evidenced by the
Likewise, nut consumption has also slowdown in the number of entrants.
leveled off in the past five years, totaling Fruit and nut plantings require several
about 3.7 pounds per person annually. years to return outputs, which works as
Consequently, farmers successfully a barrier to entry for many aspiring
expanded to overseas markets. The value farmers. With fewer market and
of exports grew from 37.4% of revenue in product opportunities available within
2008 to 46.2% in 2013. This expansion this industry, would-be fruit and nut
was made possible by advancements in farmers are turning to cash crops,
transportation technology, which allowed which have a more immediate return.
WWW.IBISWORLD.COM Fruit & Nut Farming in the USNovember 2013 14
Products & Services Grapes they are easy to eat, which complements
Grapes are the largest product segment Americans’ increasingly busy schedules.
for this industry, accounting for about
one-fifth of industry revenue. Grapes are Apples and strawberries
mainly sold to wine makers, which Consumption of both apples and
provide a large, steady market for this strawberries has remained fairly flat over
product. The US Wine Production the past five years. Both these fruits are
industry (IBISWorld report 31213) has well-established fruit varieties with a
been growing steadily and is expected to number of uses in different foods, such as
continue to do so, benefiting grape snacks and deserts. Farmers of these fruit
farmers through higher prices and larger also sell increasingly to food processors,
quantities sold. However, shares of who in turn prepare and package them in
production can fluctuate from year to refrigerated or frozen varieties to
year, due to volatility in prices and increase their shelf life and provide
growing conditions. For the retail market, consumers’ greater convenience.
grapes have grown in popularity because Nevertheless, fresh varieties of these fruit
WWW.IBISWORLD.COM Fruit & Nut Farming in the USNovember 2013 15
9.3%
and cranberries
19.9% Grapes
Peanuts
9.7%
Strawberries
17.6%
Almonds
10.6%
Other
11.8% 12.5%
Pecans, pistachios Apples
Total $25.0bn and walnuts SOURCE: WWW.IBISWORLD.COM
still command a premium, and organic almond crop was the second largest on
options, which are increasing in record, due to high yields. Other major
popularity, do so even more. Apples’ tree nuts include pecans, pistachios and
share of revenue has remained flat during walnuts. Tree nuts’ share of revenue has
the past five years. Strawberries’ share of remained at about 30.0% of revenue
revenue, however, has declined slightly during the past five years, the majority of
as strawberry prices dropped below the which comes from almonds.
prices of other fruits due to oversupply.
Peanuts
Cherries, blueberries and cranberries Unlike nuts that grow on trees, peanuts
Cherries, blueberries and cranberries are technically a legume and as such are
have grown slightly as a share of classified differently. Peanuts are often
revenue during the past five years. used in processing to make peanut
This growth has occurred partly butter or are roasted and dried to make
because the media has been promoting snacks. Peanuts have exhibited
these fruits as excellent sources of substantial volatility in the past five
vitamins, antioxidants and other years as a result of changes in
health benefits. Furthermore, dried government regulation. Land that
blueberries, cranberries and cherries produces a large crop in one year most
have increased in popularity because often will produce a smaller crop in the
they make for low-calorie, low- next year to rebuild nutrient reserves.
carbohydrate snacks in an increasingly After a deep low in peanut prices in
health-conscious environment. 2008, peanut prices have surged and as
a result their share of revenue has
Tree nuts increased in the five years to 2013.
Nuts represent more than one-third of
the market. Almonds are the country’s Other
largest tree nut crop, accounting for The other fruit category includes
almost one-fifth of revenue. The United peaches, pears, pineapples, nectarines,
States is the largest almond producer in along with several smaller segments,
the world, ahead of Syria, Iran, Spain and such as guavas, papayas, olives, figs and
Italy. According to the USDA, the 2008 dates. The other nut category includes
WWW.IBISWORLD.COM Fruit & Nut Farming in the USNovember 2013 16
Products & Services hazelnuts and macadamia nuts. Because able to offset declines in another.
continued the “other” segment is so diversified, an Consequently, this segment remained at
increase in the market share of one item is flat during the past five years.
Demand Various factors determine demand from become the primary demand-
Determinants the different market segments of the determining factors.
Fruit and Nut Farming industry. The demand for fruit and nuts is
Domestically, fruit can be consumed in sensitive to price fluctuations. However,
its fresh form or in cans and processed the effect of pricing is limited to the
foods. The preference for one over the industry level, since most consumers
other can determine demand for different consider fruit to be a staple product. In
grades of fruit. Fruit processors (e.g. addition, the large variety of fruit
canners, juicers) do not require an produced by the industry means that an
attractive appearance as the fruit is not increase in the price of one type of fruit
used in its whole form, while fresh fruit will generally cause consumers to
markets demand the highest appearance substitute it for another type, thus
as that is a selling point. The quality offsetting any potential negative effect.
demanded also determines the prices The growing and more diverse
farmers receive, which therefore population of the United States has also
determines overall revenue earned. had a positive effect on demand for fruit
Dietary trends and taste preferences and nuts. Because fruits are a staple
also play a role in determining demand product, consumption rises along with
for fruit and nut farmers. Over the past population. In addition, the increasing
five years, per capita fruit consumption adoption of new foods has led to
has increased. Government programs increased demand for tropical fruit, such
encouraging Americans to eat more as papaya and mangoes.
produce have changed dietary trends Foreign exchange rates directly affect
and preferences, spurring demand for the demand for American fruits and nuts
fruit. With studies from the University in foreign markets. Like domestic
of California Davis stating that canned manufacturers, overseas customers are
fruit have the same nutritional content sensitive to price increases. Any
as fresh fruit, IBISWorld expects tastes appreciation in the value of the US dollar
and preferences to play an increasingly will erode the price competitiveness of
larger role in stimulating demand for American-grown non-citrus fruits
fruits. According to the Harvard School abroad. The availability of non-citrus
of Public Health, higher levels of nut fruit supplies from other countries
consumption are linked to a lower explains why overseas customers will
incidence of coronary heart disease. As reduce their demand for US fruits if their
concerns about money abate, the focus price increases. Exchange rates influence
on a healthy diet and lifestyle will the demand for nuts in a similar way.
9.0%
11.2% Fruit wholesalers
Fresh fruit markets
and supermarkets
14.2% 46.2%
Exports
Wine manufacturers
16.0%
Fruit processors
Total $25.0bn SOURCE: WWW.IBISWORLD.COM
has shown steady decline, reflecting market has declined slightly as consumers
growing concern about the sugar content have flocked to lower-priced processed
in what was previously seen as a healthy fruits and nuts due to falling incomes
way to consume fruits and vegetables. during the recession. However, this
However, canned and frozen fruit have segment is recovering as consumers begin
grown in popularity since the recession to regain spending money.
set in 2008 because canned and frozen
varieties are typically less expensive than Wholesalers
their fresh counterparts. Fruit and nut wholesalers sell the
industry’s products to third party
Wine manufacturers processors, food service establishments
Wine manufacturers represent the and other markets. Over the past five
second largest domestic market segment years, the segment has declined
for the industry. Grapes are the largest drastically. Bypassing wholesalers has
product segment, and about 70.0% of all been an important cost-savings tool for
grapes grown in the United States are many downstream retailers, who now
destined for wineries. Wine consumption purchase their fruit and nut inputs directly
has risen by about 8.0% in the past five from the farmers to avoid the added cost
years from 2.4 gallons per capita annually of the wholesale function.
to about 2.6. This has prompted a small
rise in the volume of grapes sold to wine Export markets
manufacturers in the United States. Exports account for close to half of
revenue in the Fruit and Nut farming
Fresh fruit markets and supermarkets industry. Canned fruit and almonds are
Fruit and nuts sold in their purest form the most commonly exported items from
are sold to fresh fruit markets (e.g. this industry. The United States is a leader
farmers’ markets) and grocery stores. in nut production and exports, accounting
Fruit sold to these markets are generally for more than one-tenth of the world’s
of higher quality and more attractive supplies. The depreciated US dollar over
physical appearance, so they demand a much of the past five-year period has
premium. Over the past five years, this made American produce more attractive
WWW.IBISWORLD.COM Fruit & Nut Farming in the USNovember 2013 18
Major Markets on the international market. Key export include snack food producers and oil
continued destinations are Canada, Hong Kong, processors. One of the most common
Mexico, and Japan. products this market provides is
peanut butter. This segment has
Nut processors grown over the past five years as
Nut processors account for a small products like almond butter are
portion of sales. These manufacturers increasing in popularity.
$ billion
because domestic goods became 0
Imports in the relatively cheaper to the global market,
industry are H igh making it more attractive to purchase. In −10
and I ncreasing addition, the 2010 National Export
Initiative educated producers about −20
export markets and reduced trade Year 05 07 09 11 13 15 17 19
barriers, boosting exports. As a result, Exports Imports Balance
exports grew at a rapid 11.9% per year on SOURCE: WWW.IBISWORLD.COM
International Trade temperature and humidity are period. This factor led to an increase in
continued maintained at optimal levels to trade between the member countries,
preserve the quality of fruit. The North Canada, the United States and Mexico.
American Free Trade Agreement has For example, imports from Mexico
also boosted trade because it phased have increased from 16.0% of imports
out trade barriers over a ten-year in 2008 to 22.8% in 2013.
8%
8% 3% Guatemala
Hong Kong China
8%
Mexico
13%
Chile
20% 49%
All Others
Canada
61%
All Others
23%
Mexico
West
AK
0.0 New
England
ME
Great Mid- 0.4
Lakes Atlantic 1 2
NY 3
WA MT ND 2.2
5 4
13.6 0.0 MN
Rocky
0.0 0.1
WI
OR Mountains SD
0.0
Plains 1.8 MI
2.3
PA
0.9
6
7
3.0 ID IA OH 9 8
0.2 WY 0.4
0.0
NE
0.0
IL IN WV VA
0.2 0.1 0.4
West NV
0.0 0.1
KY
UT MO
0.0 NC
0.0
0.1 CO KS 0.2 1.0
0.2 0.0 TN
SC
Southeast
0.0
CA 0.6
60.3
OK AR GA
0.1 0.1 AL 3.9
AZ MS 0.8
0.2 NM
0.4 Southwest 0.1
TX LA
0.0 FL
1.1 2.5
West
HI
0.4 Additional States (as marked on map) Establishments (%)
1 VT 2 NH 3 MA 4 RI Less than 3%
0.1 0.1 1.0 0.0 3% to less than 10%
10% to less than 20%
5 CT 6 NJ 7 DE 8 MD 9 DC
0.1 0.9 0.0 0.1 0.0
20% or more
SOURCE: WWW.IBISWORLD.COM
WWW.IBISWORLD.COM Fruit & Nut Farming in the USNovember 2013 21
%
fruit and nut production. Four states
dominate production revenue: 20
California (60.3% of total production),
Washington (13.6%), Georgia (3.9%) 0
and Oregon (3.0%).
West
Great Lakes
Mid-Atlantic
New England
Plains
Rocky Mountains
Southeast
Southwest
According to the USDA, California is
the country’s leading producer of grapes,
strawberries, peaches, nectarines, and
kiwi fruit. It is also a major producer of
apples, plums, pears and cherries. Establishments
Furthermore, over 80.0% of nuts are also Population
grown in California, including almost all SOURCE: WWW.IBISWORLD.COM
Competitive Landscape
Market Share Concentration | Key Success Factors | Cost Structure Benchmarks
Basis of Competition | Barriers to Entry | Industry Globalization
Market Share The majority of farmers, including those in additional returns and cost savings
Concentration growing fruits and nuts, are small for farmers.
family-run enterprises. On the other end The total number of farms growing
of the spectrum are a smaller number of fruits and nuts is fairly stable.
Level
commercial farms, which dominate Meanwhile, yields have been trending
Concentration in industry revenue and acreage. Even so, up at a slow rate. Newer technologies
this industry is L ow the production value is dispersed such are allowing farmers to leave less of
that no single farm receives a large their lands unsown or in a state of
proportion of the industry’s total recovery each year, improving their
revenue. The distribution of employment productivity and bottom line. Notably,
is linked closely to production values, consolidation has not been an
with the few commercial mega-farms emerging factor in this industry to the
employing the vast majority of laborers. same extent as it has in many other
In an effort to consolidate this crop industries. This is likely due to the
dispersed market power, farmers presence of co-operatives, which allow
commonly pool their resources to farm farmers to realize many of the benefits
cooperatives. These organizations act of economies of scale by pooling
on behalf of their members to improve resources. The high-value nature of
demand and returns, often through fruit and nut farming also allows
marketing and promotional activities. operating farms to earn high incomes
Additionally, these cooperatives may and continue their operations year
vertically integrate into storing, after year without having to combine
packing and transportation, resulting resources with other farmers.
Competitive Landscape
Cost Structure Cost structures vary depending on the and can freely achieve savings through
Benchmarks size of the farm and on their production the use of machine harvesting, sowing
specialty. Growing peanuts, for example, and packing. The net effect is dependent
requires different focus than growing on the ability of individual operators to
berries, though both fall within the Fruit play to their strengths while minimizing
and Nut Farming industry. Most farms their weaknesses.
are small, family-owned enterprises; Farm labor is important for most
however, there are some commercial agricultural operations, but especially so
farms that benefit from economies of for fruit farms. Key activities that can be
scale, giving them lower per-unit costs. performed mechanically for most field
crops must be carried out manually for
Profit fruit farms. Thinning, cultivating,
Returns to farmers vary by farm size, irrigating, harvesting and sorting must be
region and product. Family farms with carried out by skilled hand labor to avoid
just a few acres are the least profitable damaging the fragile plants and assuring
and often operate at losses that average that the produce meets quality and
10.0% of total receipts. However, larger appearance standards. Capital
operations are able pursue economies of expenditures are higher for farms that
scale to control costs and can negotiate rely heavily on machinery.
better prices with wholesalers, resulting Farms also hire labor seasonally,
in wider profit margins. According to US especially during peak months when
Department of Agriculture (USDA) crops have to be harvested. With higher
survey data, even a modest increase in yields and limited use of machinery on
the size of operations allows farms to fruit farms, farm owners have had to hire
expand profit. However, profitability increasing amounts of third party labor.
levels off at about 20.0% of revenue Still, average annual salaries are
once farms reach commercial size, relatively low, representing the seasonal
generally with annual sales exceeding and unskilled nature of the job. Overall,
$250,000. Though the industry can at wage costs have decreased in the past five
times be profitable, farming overall is a years as more operators outsource labor
volatile business and producers often to farm labor contractors who make it
lose money in poor years. The peanut their business to cut farm labor costs.
segment, for example, operated in the
red from 2007 to 2010. In addition, Purchases
government payments for certain items Purchases are another major cost
(like peanuts) add to the overall level of category for farmers, accounting for
profit earned by farmers. Profit margins about 27.5% of revenue in 2012. Major
have grown in the past five years as items included in this category are farm
product prices have increased. chemicals (e.g. pesticides and fertilizer),
seeds and plant stock. Although the cost
Wages of fertilizer has increased in the past five
Growers of fresh produce can command years due to higher prices of natural gas,
higher prices but are heavily dependent a key input in fertilizer manufacturing,
on costly labor to hand-pick the fruit, other purchase costs have remained
ensuring that it maintains an attractive steady. Overall, the effect has been a
appearance for the retail market. On the slight decline in purchase’s share of
other hand, growers of produce for revenue as revenue has increased
processing receive lower prices but are significantly and profit taken over a
free from meeting stringent standards larger share of revenue.
WWW.IBISWORLD.COM Fruit & Nut Farming in the US November 2013 24
Competitive Landscape
Average Costs of
all Industries in Industry Costs
sector (2013) (2013)
100 ■ Profit
8.8 ■ Wages
19.0
8.5 ■ Purchases
80 ■ Depreciation
■ Marketing
22.0 ■ Rent & Utilities
■ Other
Percentage of revenue
60
60.1
21.0
40
14.0
20 5.0 1.0
3.1 11.0
9.5
12.0
0 5.1
SOURCE: WWW.IBISWORLD.COM
WWW.IBISWORLD.COM Fruit & Nut Farming in the US November 2013 25
Competitive Landscape
Cost Structure transportation costs. Transportation transportation costs can exceed the value
Benchmarks costs vary among farmers depending on of the fruit transported. This situation
distance from common markets and occurred in mid-2008 when oil prices
continued
mode of transport. Because skyrocketed and most fruit prices were
transportation can be costly, most low. Another cost is marketing, which
producers sell their harvest to major accounts for a small 1.0% of revenue.
markets in proximity to their farms. This segment mainly includes the cost of
However, depending on oil prices, cartons, labeling and packing.
Basis of Competition Farmers within this highly competitive moisture levels combine to determine
industry set themselves apart in the quality of harvested non-citrus
several ways. fruit and nuts.
Level & Trend
ompetition
C in Production costs Variety
this industry is This is a key competitive factor among There are about 30 varieties of non-citrus
Highand the trend growers because within each variety, fruits and half a dozen varieties of nuts
most fruits and nuts are homogeneous in grown by the industry, each suitable
is I ncreasing
nature and farmers receive very similar for different purposes. These varieties
prices. Therefore, farmers who can attract different returns depending on
produce their fruit at lower costs will demand levels. Strawberries, for
have a competitive advantage. This is example, typically attract higher
particularly the case for fruit that are returns than apples and pears. Farmers
grown for processing. Prices for these that carry a wide variety of products
fruit can be up to 80.0% lower compared can consistently supply to consumers’
with fruit sold on the fresh market. In shifting preferences.
addition, they are usually grown as part
of a contract with a processing plant, Branding
which will prefer to buy produce at the Over time, the importance of branding
lowest cost possible. is growing as farmers and packers seek
to differentiate themselves from their
Quality competitors. Branding is becoming
To a limited extent, fruits and nuts can be especially important for growers that
differentiated by quality. Fruits and nuts produce varieties that compete with
are commonly judged on their size, taste imports because it is one of the best
and appearance. Premium graded fruits ways for local growers to take
are usually sold into the fresh fruit advantage of America’s reputation as a
market and therefore demand a higher producer of safe food.
price than fruit picked for processing.
The introduction of organically grown Reliability and supply contracts
fruit and nuts is creating a new sub- Producers that are consistently able to
segment in the market. Organically deliver produce are better able to maintain
certified farmers are able to demand a business with wholesalers. There has been a
higher price. Although a base for move within the industry away from spot
competition, quality is difficult to markets (where prices can fluctuate widely)
control because it is largely determined toward maintaining supply contracts. In
by exogenous factors like growing order to maintain these contracts, producers
conditions. Weather, pests, and crop must consistently supply produce.
WWW.IBISWORLD.COM Fruit & Nut Farming in the US November 2013 26
Competitive Landscape
Competitive Landscape
Barriers to Entry the production of fruit. Planting non- crops, such as almonds, have already
continued program crops on land which has been been produced on program crop acreage
enrolled in these programs, farmers because the profitability offsets the loss
forfeit their rights to certain agricultural of subsidies.
subsidies. This limits the availability of Like many agricultural industries,
farmland for producing non-program profitability can be highly volatile. It
crops, particularly leased farmland. depends on factors beyond the control
The USDA investigated the of farmers, including world supply and
implications of removing such demand, weather conditions and plant
restrictions and found that lower value disease. Given this, traditional
commodities are more likely to expand financing companies and banking
should planting restrictions be institutions may be reluctant to
dropped. In some cases, high-value approve loans for establishment costs.
International trade is a Trade Globalization Going Global: Fruit & Nut Farming 2002-2013
major determinant of
an industry’s level of
200 Export Global 200 Export Global
globalization.
Exports offer growth
opportunities for firms. 150 150
Exports/Revenue
Exports/Revenue
Major Companies
There are no Major Players in this industry | Other Companies
Major Companies
Other Companies quite small. Its operations span several Vegetable Farming industry
continued domestic and international industries, (IBISWorld report 11120). IBISWorld
including the Canned Fruit and estimates that Dole’s revenue within
Vegetable Processing industry the Fruit and Nut Farming industry is
(IBISWorld report 31142) and the $133.5 million.
WWW.IBISWORLD.COM Fruit & Nut Farming in the USNovember 2013 30
Operating Conditions
Capital Intensity | Technology & Systems | Revenue Volatility
Regulation & Policy | Industry Assistance
Capital Intensive
Labor Intensive
Operating Conditions
Capital Intensity equipment leads to more wear and tear hand-pick fruit for the fresh fruit
continued so farms spend about 14.0% of revenue market where appearances are
on depreciation costs in 2013. important; wages account for 22.0% of
Although mechanizing harvesting revenue in 2013. Consequently, for every
processes is important to raise efficiency, dollar spent on wages, farms spend on
farms are still dependent on labor to average $0.64 on depreciation.
Technology The technology associated with growing end of each season. Clean tree picked
& Systems fruits and nuts changed significantly over fruit is usually sold to discount markets
the past decade. These changes include or processed into concentrate. Ring
Level the introduction of more vigorous and picking is not as efficient as clean picking
high-yielding root stock, advanced but it allows the fruit to remain on the
The level
of propagation methods (which cut the time tree to ripen into bigger fruit. It also
Technology Change required for new trees to reach bearing reduces the number of fruit rejected at
is M
edium age from five or six years to two or three the packinghouse.
years), extensive planting of disease Intensive orchard and vine production
resistant varieties and precision farming has been an important breakthrough in
(including better trellising techniques fruit growing. The adoption of intensive
and changes to irrigation practices with production provides growers with lower
the introduction of plastic piping). unit production costs arising from
Possibly the most significant technical managing smaller areas. The adoption
development influencing the industry of intensive growing programs has
during the past decade was the general been made possible through
introduction of controlled atmosphere modifications in machinery (e.g.
storage. This technique is designed to narrower tractors, movers).
slow the ripening process of some fruits Precision technologies, such as
like apples and to extend the life of these integrated pest management, are used
once harvested. It provides growers with in peanut farming. The Peanut
an alternative to chemical preservatives Foundation, which was formed in 1988,
and pesticides. Controlled atmosphere conducts research into new
storage involves the control of technologies that will reduce costs for
temperature, oxygen, carbon dioxide and growers. The Foundation also
humidity of storage conditions. In some introduced genetically modified (GM)
cases, apples can be stored for up to one varieties, which are expected to reduce
year under specific controlled allergic reactions to peanuts. In 2006,
atmosphere storage. the American Peanut Council approved
Some non-citrus fruit do not ripen research for growing GM peanuts.
once removed from trees or plants so However, consumer acceptance of GM
quality control occurs simultaneously crops has shown resistance to these
with harvesting. Since many markets do advancements over the past five years,
not accept small fruit, the majority of so changes in the product are uncertain.
fruit is “ring” picked. Under this method, Technology is also improving water
harvest teams use sizing rings to ensure efficiency in irrigation. Advances in
that the fruit picked is larger than a irrigation include the introduction of
specified minimum diameter. Clean tree micro-irrigation. This includes trickle/
picking (picking all the fruit from the drip, micro-spray and mini-sprinkler
tree) is generally only carried out at the systems that are designed to target water
WWW.IBISWORLD.COM Fruit & Nut Farming in the USNovember 2013 32
Operating Conditions
Technology at the root zone of fruit trees rather than American farmers still face strong
& Systems traditional watering systems that wet the resistance in consumer markets.
whole orchard. Opposition is strongest in the European
continued
One of the major problems for the Union where legislators have already
industry is the increasing restrictions on placed a moratorium on GM field crops
the use of chemical treatments. Clone from the United States. Research is well
technology provides a possible solution underway in the area of biotechnology. In
to this situation through better resistance the future, genetic engineering could
to diseases and a more even crop, which potentially deliver improvements in
boosted yields. orchard yields, reduce the effect of pest
To date, the industry does not grow and tree disease and improve the
genetically modified (GM) fruit. nutritional value of fruit.
Revenue Volatility The various segments of this industry example, the economic downturn hurt
fluctuate considerably from year to demand for fresh fruits and nuts but this
year. Revenue to farmers responds to has translated to improved returns from
Level
local changes such as rainfall and the processing market. Similarly, the
The level of temperatures but is also influenced by salmonella scare in peanuts drove
Volatility is M
edium more distant factors, such as exchange consumers away from all peanut
rates and global stocks. These factors products during 2009 and kept
are difficult to anticipate and generally consumers away throughout the next
outside the control of farmers, leading year. However, a health scare may
to considerable uncertainty in drive consumers away from a
individual markets. particular produce and into the arms
On aggregate however, industry of another. While these effects do not
volatility is limited. Drastic changes in perfectly balance each other, overall
one market are offset by movements in volatility is far less than in other crop
other components of the industry. For growing industries.
Operating Conditions
Regulation & Policy There are currently several federal enforcing stringent food safety and
marketing orders that apply to fruit and disease prevention standards.
nut growers in the United States. These An issue of particular concern to
Level & Trend cover tree nuts, grapes, pears, peaches, peanut farmers is that their produce must
he level of
T cherries, avocados, nectarines, kiwifruit, be assessed for the presence of aflatoxin,
Regulation is apricots, papayas and cranberries. which has been known to cause death in
Mediumand the Marketing orders, which are designed livestock and thought to cause cancer in
and administered by handlers and people. All peanuts intended for human
trend is S
teady
growers’ representatives and overseen consumption must be analyzed in a
by the US Department of Agriculture USDA-approved laboratory.
(USDA), are designed to establish the There are also considerable state
conditions within fruit and nut markets. regulations for growing fruits and nuts.
This includes enforcing product quality Most states operate agricultural
standards, regulating the flow of product departments that act as regulatory
to the market, standardizing packages agencies. These authorities monitor
and containers, creating reserve pools pollution levels associated with growing
for storable commodities and fruit and nuts. This typically involves
authorizing production and marketing regulating waste material, chemical
research and advertising. usage and odor emission discharge into
The USDA controls the licensing of the environment.
organic agricultural production. Farmers Serious breaches or failure to comply
wishing to promote their produce as with regulations, laws and other rules
organic must obtain certification from governing fruit and nut farming can
the USDA. The USDA also controls the subject industry players to civil remedies
planting of experimental GM food crops. and administrative penalties. It can also
Currently, genetically modified fruit and result in considerable negative publicity
nuts are not grown on a commercial scale that can damage the reputation and
in the United States. However, all public image of producers. Given this,
growers of GM crops are required to non-compliance can potentially have a
obtain a permit from the USDA before material effect on the earnings and
planting. Finally, the Food and Drug competitive position of firms operating in
Administration (FDA) is responsible for this industry.
Industry Assistance Unlike most other growers in the program. The USDA’s Agricultural
American agriculture sector, fruit Marketing Service (AMS) buys excess fruits
farmers are generally ineligible for direct from handlers and processors if the
Level & Trend payments. However, exceptions are products can be used by government
he level of Industry
T made for ad-hoc disaster relief programs, agencies. All food purchased by the AMS
Assistance is such as in the case of hurricanes and must be produced in the United States. The
Mediumand the other major weather incidents. AMS also purchases non-surplus fruits that
are provided to schoolchildren through the
trend is S
teady
Non-payment programs National School Lunch program and other
The industry does benefit from several food assistance programs, such as the Food
non-payment programs. This includes Stamp Program. The AMS also supervises
assistance through the Agricultural research and promotion activities for
Marketing Service and the Specialty Crops blueberries, mangoes and peanuts.
WWW.IBISWORLD.COM Fruit & Nut Farming in the USNovember 2013 34
Operating Conditions
Operating Conditions
Industry Assistance better known as the Economic Stimulus generally from farmers to wholesalers.
continued Act – reduced the depreciation recovery The proceeds are used to fund marketing
period from seven years to five years for and research activities, targeted at
all equipment purchased through increasing popularity and demand for the
December 31, 2009. This effectively industry’s product. There is currently a
increases the dollar amount a farmer can proposed check-off of 0.046% of product
write off as a cost. The reduction was only value for all fruits and vegetables that is
applicable through 2009, although farm being debated in the industry that would
groups and equipment dealers are trying raise about $30.0 million for such
to keep the change in future tax bills. activities. However, it is being fiercely
Currently, this industry as a whole is debated and will not be a factor until it is
not subjected to any “check-offs” or taxes approved by the industry. Blueberry,
on all quantities produced, a practice that mango and peanut growers in particular
is common for many agricultural have little to gain from this as the AMS is
commodities in the United States. These already providing these services for their
taxes are paid at the first point of sale, products using federal funds.
WWW.IBISWORLD.COM Fruit & Nut Farming in the USNovember 2013 36
Key Statistics
Industry Data Industry Production
Revenue Value Added Establish- Exports Imports Wages Domestic of Noncitrus
($m) ($m) ments Enterprises Employment ($m) ($m) ($m) Demand Fruit (Mil lbs.)
2004 15,635.6 8,625.0 139,922 133,569 203,035 4,451.6 8,116.3 4,598.8 19,300.3 33,645.2
2005 17,401.4 9,718.7 144,177 136,996 208,254 5,420.2 9,155.6 5,237.9 21,136.8 36,544.4
2006 16,837.4 8,881.7 150,399 141,673 216,054 5,526.0 9,386.9 4,882.8 20,698.3 33,631.4
2007 18,201.8 9,112.2 151,040 142,139 214,720 5,865.4 10,148.0 5,353.5 22,484.4 34,095.0
2008 17,609.6 8,100.9 155,250 145,726 219,882 6,578.2 11,158.3 5,331.7 22,189.7 35,205.0
2009 17,951.6 9,077.2 158,642 146,555 227,241 6,794.4 11,388.2 5,232.3 22,545.4 36,138.8
2010 20,270.3 10,092.6 154,804 141,353 226,805 7,768.8 13,004.4 6,025.2 25,505.9 35,748.0
2011 22,865.0 11,784.4 156,223 142,343 224,347 8,901.1 16,220.0 5,660.2 30,183.9 36,052.6
2012 25,137.3 14,579.6 157,811 143,849 226,408 10,287.8 14,960.5 5,781.5 29,810.0 34,830.0
2013 24,989.0 13,744.0 161,147 147,950 231,143 11,541.1 14,416.1 5,497.6 27,864.0 35,004.0
2014 25,638.7 13,896.2 164,714 151,392 236,610 11,986.7 14,865.6 5,691.8 28,517.6 35,178.9
2015 26,638.6 13,852.1 169,658 154,390 244,282 12,563.8 15,468.8 5,860.5 29,543.6 35,354.7
2016 26,958.3 13,398.3 171,383 156,324 246,978 12,999.2 16,135.4 5,850.0 30,094.5 35,532.2
2017 28,468.0 14,034.7 172,772 157,748 250,301 13,402.5 17,265.8 6,063.7 32,331.3 35,709.6
2018 28,524.9 13,349.7 176,953 163,858 252,239 13,868.2 18,363.6 5,933.2 33,020.3 35,887.9
Sector Rank 7/36 5/36 5/35 5/35 6/36 3/25 2/26 3/36 6/25 N/A
Economy Rank 347/1312 194/1312 51/1311 53/1311 168/1312 35/442 39/443 263/1312 87/442 N/A
Industry Jargon BEARING ACREAGEThe total area that is harvested ORGANIC FARMINGFarming that does not involve the
each year, which is different from the total area of farms use of artificial chemicals, pesticides, fertilizers or
(that may be used for other purposes) and total planting genetically modified organisms.
area. SPOT MARKETA market in which a commodity is
COOPERATIVE (CO-OP)An association of trade bought or sold for immediate delivery or delivery in the
professionals who are united voluntarily to meet a very near future.
common economic goal. TAPROOTThe main root of a plant, growing straight
GENETICALLY MODIFIED (GM)A technique where down from the stem into the earth.
specific changes are introduced into a plant or animal’s WHOLESALE BYPASSA popular trend within retail and
DNA by genetic engineering techniques. The most manufacturing industries where producers supply goods
common modified foods include soybeans, corn and directly to stores, eliminating the middleman.
canola.
IBISWorld Glossary BARRIERS TO ENTRYHigh barriers to entry mean that IMPORTS Total value of industry goods and
new companies struggle to enter an industry, while low services brought in from foreign countries to be
barriers mean it is easy for new companies to enter an sold in the United States.
industry. INDUSTRY CONCENTRATIONAn indicator of the
CAPITAL INTENSITYCompares the amount of money dominance of the top four players in an industry.
spent on capital (plant, machinery and equipment) with Concentration is considered high if the top players
that spent on labor. IBISWorld uses the ratio of account for more than 70% of industry revenue.
depreciation to wages as a proxy for capital intensity. Medium is 40% to 70% of industry revenue. Low is
High capital intensity is more than $0.333 of capital to less than 40%.
$1 of labor; medium is $0.125 to $0.333 of capital to $1 INDUSTRY REVENUEThe total sales of industry
of labor; low is less than $0.125 of capital for every $1 of goods and services (exclusive of excise and sales
labor. tax); subsidies on production; all other operating
CONSTANT PRICESThe dollar figures in the Key income from outside the firm (such as commission
Statistics table, including forecasts, are adjusted for income, repair and service income, and rent,
inflation using the current year (i.e. year published) as leasing and hiring income); and capital work done
the base year. This removes the impact of changes in by rental or lease. Receipts from interest royalties,
the purchasing power of the dollar, leaving only the dividends and the sale of fixed tangible assets are
“real” growth or decline in industry metrics. The inflation excluded.
adjustments in IBISWorld’s reports are made using the INDUSTRY VALUE ADDED (IVA)The market value
US Bureau of Economic Analysis’ implicit GDP price of goods and services produced by the industry
deflator. minus the cost of goods and services used in
DOMESTIC DEMANDSpending on industry goods and production. IVA is also described as the industry’s
services within the United States, regardless of their contribution to GDP, or profit plus wages and
country of origin. It is derived by adding imports to depreciation.
industry revenue, and then subtracting exports. INTERNATIONAL TRADEThe level of international
EMPLOYMENTThe number of permanent, part-time, trade is determined by ratios of exports to revenue
temporary and seasonal employees, working proprietors, and imports to domestic demand. For exports/
partners, managers and executives within the industry. revenue: low is less than 5%, medium is 5% to
ENTERPRISEA division that is separately managed and 20%, and high is more than 20%. Imports/
keeps management accounts. Each enterprise consists domestic demand: low is less than 5%, medium is
of one or more establishments that are under common 5% to 35%, and high is more than 35%.
ownership or control. LIFE CYCLEAll industries go through periods of
ESTABLISHMENTThe smallest type of accounting unit growth, maturity and decline. IBISWorld
within an enterprise, an establishment is a single determines an industry’s life cycle by considering
physical location where business is conducted or where its growth rate (measured by IVA) compared with
services or industrial operations are performed. Multiple GDP; the growth rate of the number of
establishments under common control make up an establishments; the amount of change the
enterprise. industry’s products are undergoing; the rate of
technological change; and the level of customer
EXPORTSTotal value of industry goods and services sold
acceptance of industry products and services.
by US companies to customers abroad.
WWW.IBISWORLD.COM Fruit & Nut Farming in the USNovember 2013 38
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