Apple Growers Are Calling It Quits -- The Apple Crash -- High Yields, Foreign Competition Knock Small Operators Out Of The Business

TONASKET, Okanogan County - Wayne Verbeck works with his father, Emert, readying farm equipment for its last ride to the auction yard.

The Verbecks did everything the experts recommend: They expanded their apple ranch to 70 acres, and were beginning a conversion to organic fruit, in hopes of nailing a niche market that could bring a higher price for small, family orchards like theirs.

But their dream got caught in a vise of low prices and high debts that forced them to do the unthinkable last spring: bulldoze their trees and declare bankruptcy. And they are far from alone.

Throughout Washington, apple growers are reeling from a financial disaster as bad as anyone can remember. The lowest apple prices in a decade coupled with the largest crop in history, shrunken export markets and burgeoning competition overseas have some orchardists losing a lot more than their shirts.

About 20 percent of Washington growers in business today are expected to lose their farms within the next three years, said Jay Penick, president and CEO of Northwest Farm Credit Services in Spokane. That's 800 farmers, many of them working small, family-run places carefully nurtured for decades.

After two generations of tending their ground, the Verbecks will be left with nothing but their homes. Emert Verbeck, 83, shakes his head as he looks at the bulldozed trees, some of which he planted more than 40 years ago.

Trees could not be left alive

The day's first light washes over sandstone pinnacles that tower over Verbeck's ghost orchard. The trees could not be left alive and untended; they would attract pests that could infest surrounding orchards. The trees had to be ripped out and pushed over by backhoes and bulldozers, one at a time.

"You hate to see it," Verbeck says. "It's been a good producing place. But there was nothing else to do. There was just no money for these apples."

Emert's son John, 53, has taken a job as a maintenance man at the local school and Wayne, 56, has gone to work in another man's orchard, now that he's lost his own place.

As much as it hurt, yanking the trees, in some ways it was a relief. John Verbeck spent all of last winter shuttling from bank to bank, going over the orchard's books, watching the family's equity drain away and the undertow of debt suck them down.

Even worse, for people in the business largely out of the love of watching things grow, was the agony of farming without the money to properly care for the land and the trees. "It was harder not being able to do it right," John said.

The next crop for some of this land will be headstones: the city wants it for a cemetery.

Okanogan County declared a disaster

In August, the Okanogan County commissioners declared their county an economic disaster, in the wake of $70 million in losses in the tree-fruit industry - the county's most important - in just one year. That declaration has gone to Gov. Gary Locke, who could authorize assistance, including access to low-interest loans.

Locke met with growers last month and came away "deeply moved and extremely concerned," said spokesman David Chai. The governor has directed the state departments of Agriculture and Emergency Management to present him with recommended responses to the crisis.

Apples are the state's most important agricultural commodity, and the price crash is a statewide problem, affecting the entire $1.5 billion industry.

The causes of the crisis are many.

Production has increased steadily as the apple industry has expanded, with acreage planted in apples jumping from 170,000 in 1992 to a high of about 205,000 acres in 1997.

But even as Washington's apple production expanded to a record 96 million boxes of apples last year, growers lost the dependable export markets they were counting on. Depressed Asian markets, tariff barriers in Mexico, a strong U.S. dollar and increased competition overseas have dealt Washington growers a knockout blow.

Consolidation at the retail level has also left growers with fewer options and less power when they market their crop. Smaller, independent grocery stores are going out of business, and large retail stores have consolidated into even larger supermarket chains. Those chains can powerfully influence prices.

"Growers are receiving the lowest prices in a decade, while consumers are paying the same price," said Kraig Naasz, president and CEO of the U.S. Apple Association, a national industry trade group in Virginia. "Who do you think is pocketing the difference? A small number of major retailers."

For Washington growers, the crowning blow was hot weather in 1998 that damaged tons of fruit.

Growers were forced to leave an unprecedented 10 million boxes of sunburned and substandard fruit rotting in the field. And much of the crop they did pick had a poorer-than-usual shelf life. That forced warehouses to sell a bumper crop fast, at fire-sale prices.

The 1998 price of fresh apples dove more than 26 percent from the previous year. Growers lost an estimated $205 million statewide on fresh apples alone, according to a study released in August by the National Food and Agricultural Policy Project at Arizona State University.

The same study showed prices for apples that were sold for processing were even worse, diving more than 70 percent, and bleeding Washington growers for another $33 million.

Growers depend on the processing and juice market as a safety net to provide a market for poorer quality fruit.

But prices for apples processed into juice and other foods have slid steadily, blowing the floor out from under the industry. Prices were $189 a ton on average in 1995; $150 a ton in 1996; $80 a ton in 1997 and $40 a ton last year. Some growers got as little as $10 a ton for their juice apples in 1998.

The Washington Growers Clearinghouse in Wenatchee, an industry group, estimates grower returns last year were the worst in 30 years, with the typical 50- to 60-acre family orchard losing between $70,000 and $100,000.

Prices were so low they didn't even cover the handling charges, and instead of receiving a check from the warehouse, many growers got a bill for packing, storing, selling and shipping their apples.

Faced with unpaid debts from the 1998 crop, some growers can't get the operating loans they need to stay in business.

Even so, there is some good news this year. The 1999 harvest, now under way and running through November, is expected to bring in a smaller crop, at an estimated 88.5 million boxes, which should help boost prices.

The quality of the apples is also expected to be the best in years, with good color, flavor and crunch.

But for many growers, the good news comes too late. They are in too-deep a hole for one year of good returns to dig them out.

Aid packages in the works

Here in the highland orchard country of Okanogan County, tucked just below the Canadian border in the center of the state, the landscape tells its own story.

These blue skies and tawny hills and apple bins bursting with luminous garnet and gold fruit mask the harsher reality every grower here lives with.

For that, look instead at the hundreds of acres of orchard bulldozed as growers were forced to walk away from their farms.

Brown heaps of dead apple trees roll to the foothills of the Okanogan highlands, their broken roots grabbing at the air and the Indian summer sun bleaching the broken heartwood.

Stumps of white plastic irrigation pipe stud the fields of weeds and sagebrush that can't seem to wait to take over this ground. Wind machines stand lonely sentry over acres of abandoned land.

As the pain spreads, growers have approached Congress for help.

The U.S. Apple Association is pushing a relief package in the federal agriculture-appropriations bill now under consideration intended to provide both short- and long-term help.

In the short term, the commission is pushing for $250 million in disaster aid for growers in the fruit and vegetable industry nationwide, up from the $50 million already in the works. But with total losses reaching $238 million on fresh and processor apples in Washington alone, that nationwide aid package won't go far.

For more long-term help, growers want the limit on federally guaranteed loans increased from $200,000 to $400,000 to better reflect the reality of farmers working bigger and bigger places, with larger capital requirements.

And they want Congress to greatly increase the federal contribution to the nation's fruit- and vegetable-export marketing efforts, up to $200 million next year from $90 million this year. Domestic sales of apples have been flat for a decade. Significant growth in export markets is essential to keep pace with ever-increasing apple production.

Growers also hope for a decision within weeks from the U.S. Department of Commerce on their call for a retroactive, 91 percent duty on apple-juice concentrate imports from China.

Those imports jumped by more than 1,200 percent between 1995 and 1998. During the same period, prices for the product dove more than 50 percent. China's U.S. market share has grown from 1 percent to 18 percent, making it the single largest foreign supplier of apple-juice concentrate to the U.S.

Beyond looking to Congress for help, growers are also taking matters into their own hands.

They have already stiffened quality standards for red delicious apples, which are still the industry's trademark, to require higher, more consistent quality. A national apple-promotion campaign is also contemplated, to boost domestic sales.

And when they can afford it, growers are putting in new varieties of apples that bring higher prices: galas, fujis, braeburns and a rainbow of others.

But orchardists can't turn on a dime to reflect consumer tastes and fads. It takes three to five years to bring a new tree into full production, depending on the variety. And orchard conversion is expensive, costing as much as $15,000 an acre.

The old trees have to be torn out; irrigation systems replaced and reconfigured for the new trees, planted on closer spacing under newer, higher-yield orchard practices. The trees also require trellising, and sometimes fencing, to protect them from deer.

Most orchardists can't afford to replace more than 5 percent of their orchards at any one time. Some are so strapped by the price crunch that an orchard overhaul is out of the question.

"I know people who are cashing in their IRAs so they can pay their bills in town," said Gordon Roberts, who runs a growers' credit cooperative in Tonasket.

"Gordon has the hardest job in town," said orchardist Sam Davis. "He's the guy who has to turn people away he's known all his life."

Ralph Longanecker, a third-generation Tonasket orchardist, is one of the lucky ones: He retired just before the price crash and sold his place. But he's mourning, not gloating, as he looks at the state of the industry.

He fears the loss of a way of life on family farms knitted so closely into the fabric of the community that it's common practice for growers to plant a row of so-called neighborhood trees, free for the picking by neighbors and friends. These gift trees are often the fanciest fruit in the orchard.

But across Washington, smaller family operations are steadily disappearing, with only the larger outfits showing growth in numbers.

By 1997, 10 percent of the growers controlled 62 percent of the tree-fruit acreage in Washington.

Nearly 1,000 orchardists left the business between 1987 and 1997, with most of those losses occurring among those with 25 acres or less. Meanwhile, the number of orchards larger than 500 acres more than doubled. The current industry crisis is only accelerating the trend toward consolidation.

"The industry will come through this. But it will be a different industry," Longanecker said. "It's going to be more of a business, less personal. There will be the small hobby farmer, and the corporate operation. There won't be that middle group any more. It's disappearing."

`We like to work'

There are individual lives caught in this industrywide shakeout and structural realignment.

Jose and Maria Gomez came to this country illegally, as migrant pickers from Mexico 21 years ago. They became legal residents, and managed, over decades of pruning, thinning, and picking other people's crops, to save enough money to buy their own place.

Six years ago they finally did it, buying a handsome piece of ground with good, producing trees, a sweet farmhouse and a garden where the Gomezes grow grapes, tomatoes the size of softballs and towering Mexican corn.

They were one of the families hit so hard by the price crash that they got a bill instead of a check from the warehouse for the 1998 crop year.

They are still in debt from last year and had to get an advance from the packing house just to pick this year's crop, which is a beauty. Yet they don't know if they can even stay in business next year: They have been denied an operating loan.

Maria's dress shop in Omak - Fashions Gomez - isn't bringing in the side income it used to. The economy is depressed throughout the north central heart of the state, a mountain range and a world apart from the racing economic engine of Puget Sound.

"We don't know what to do," Maria said. "The only school we have is our hands. Work hard and believe next year will be better."

One daughter has taken a second job to help with the family bills. Jose has let their hired help go and is doing the work of three people to keep their place.

The struggle playing out in this small, 22-acre orchard by the side of a country road is unceasing, deeply personal and terribly lopsided, as one family pits its dreams against market forces far bigger than they are.

"We get up at 4 a.m. He is always working, working, and I keep sewing," Maria says, her words coming fast with her tears. "We could lose the whole place. I don't know what happened.

"We never asked for anything, all those years. We like to work, and having our own money. It is so hard, when we have this beautiful house and this beautiful place, and after all these years of working so hard."

Lynda Mapes' phone message number is 206-464-2736. Her e-mail address is lmapes@seattletimes.com