Too Many Cranberries

Cranberry Bog
Photo credit: Agricultural Marketing Resource Center

This article was written by UC Davis ARE PhD student Joseph Raymond. It is the fifth in a series of excellent articles written by students in my ARE 231 class this fall.

During Thanksgiving week, cranberry growers provide over 80 million pounds of cranberries to American consumers, accounting for 20% of the year's supply.

However, it hasn’t always been smooth sailing for cranberry growers. In 1959, the discovery of trace amounts of a carcinogenic aminotriazole in a batch of cranberries caused the Great Cranberry Scare. Prices crashed, sales fell by over two-thirds, and Mamie Eisenhower served applesauce with Thanksgiving Dinner at the White House.

Fast forward to 1998-1999, when growers saw prices plummet for a different reason. This time, surplus stocks from previous years coupled with a bountiful crop flooded the markets with cheap cranberries. Although prices rebounded subsequently, low cranberry prices have retuned in the most recent decade. This time, farmers fear that low prices are here to stay. Are they right?

 

Cranberry price
Reproduced from the USDA Fruit and Tree Nuts Outlook: 2020

 

Trade

Two international factors place negative pressure on cranberry prices: increasing Canadian supply and uncertain international demand. 

The U.S. accounts for 60%-70% of global cranberry production, but Canada is the second largest producer. Over the past decade, Canadian production of raw cranberries has grown substantiallyFurthermore, in 2016-18, Canada exported about a third of its crop as raw cranberries to the US for processing. Canadian exports to the EU and US more than doubled in this period. Chile is the third-largest producer and mostly exports processed cranberries to the EU and Asia.

World Cranberry Production
Source: FAOSTAT

 

In 2019, the USDA imposed restrictions on incoming Canadian cranberries citing concerns that growing imports from Canada were contributing to persistently low prices. This resulted in a nearly 50% decrease in the amount of raw cranberry imports from Canada in 2019 according to the USDA’s ERS. Yet, despite the restrictions on Canadian imports, U.S. cranberry prices in 2019 and 2020 remain low.

Instability in global demand may also be pushing US prices down. COVID-19, coupled with various trade wars, seems to have had serious impacts on US cranberry exports. For example, China has been a promising market for US cranberry products and accounted for 11% of prepared cranberry exports in 2019. Yet, as of July 2020, Chinese imports of cranberry products were 66% of their value at the same time in 2019. Other markets such as Mexico and the EU have also imposed tariffs on US cranberry products in the past three years. EU sales have seen a stark drop in 2020 totaling $1.2 million through March, compared to $5.5 million by the same time in 2019.

 

Oversupply in the U.S.

The U.S. market for cranberries has been characterized by flat demand and oversupply in the past decade. In 2018, rising overstock and signals of falling prices prompted the USDA to allow production restrictions that involved dumping up to 25% of the 2018/2019 harvest in some regions.

We would expect acreage to shrink in response to the low prices as farmers shifted to other crops, but this has not happened. Over the past decade, US cranberry acreage increased slightly before dropping back to 2010 levels.  Harvested acres in Wisconsin, the leading cranberry-producing state increased by about 10% over the decade. 

Cranberry acres
Source:  USDA NASS

 

Average yields have been relatively stable if not slightly increasing during the low price period. Aside from Oregon, which is a small producer, there's no sign that surprisingly high yields have caused the price glut.   Furthermore, the dip in 2019 acreage and yield reflects the USDA production restrictions. Without these restrictions, we may have seen increases in yield and acreage in 2019.

Cranberry yield
Source: USDA NASS

 

The reason for this trend in US supply under low prices is unclear. According to some growers, this scenario is a result of producer groups simply overestimating demand and underestimating supply. Recently U.S. demand for cranberry products has been stagnant or even decreasing in the case cranberry juice. The cause of oversupply may be that growers are slow to react to market signals, perhaps because cranberries are a perennial crop that requires significant capital investments.

Going Forward

If prices continue to remain low, it could mean financial hardships for American cranberry growers. Producers are making some concerted efforts to remedy this situation. Ocean Spray, a co-op company that accounts for most American cranberry production, has developed new products such as white cranberry juice and raspberry lemonade-flavored craisins in hopes to find new demand for cranberry-based products. In the past decade, marketing efforts have led to growing sales of dried cranberries in Europe and Asia.

On the cost management side, farmers have also been experimenting with installing solar panels over their fields to sell energy back to the grid. While cranberries can generally survive in low-light conditions, it is still unclear how feasible this practice would be and how much it would impact yields. However, these efforts may be a band-aid solution to the problem of oversupply.

 

The figures in this article were created using this R code.

 

For Further Reading

Cranberry Marketing Committee. 2020. “Data and Reports” https://reports.uscranberries.com/TheCranberryStory/ReportingSelfServiceCenter/

USDA Foreign Agricultural Service. 2018. “Canadian Processed Cranberry Exports Double in Five Years” https://www.fas.usda.gov/data/canada-canadian-processed-cranberry-exports-double-five-years

USDA. 2019. “Fruit and Tree Nut Outlook: 2019” https://www.ers.usda.gov/webdocs/outlooks/99458/fts-371.pdf?v=6445.5