Tuesday, October 20, 2015

The good that came out of a fruit crop gone bad

Aside from the automotive industry, Michigan is also famous for growing an abundance of fruit crops. The state boasts 36,000 acres of tart cherry trees, with roughly the same acreage involved in apple production. Both crops are primarily grown on small farms located near Lake Michigan. The region keeps cool in the spring until it’s likely no frost will occur. Indeed, the most abundant fruit-growing region is known as the Fruit Ridge and is located a few miles northwest of Grand Rapids. Being 800 feet in elevation, the ridge protects fruit blossoms and buds from the colder air that creates late frosts.

However, in March of 2012, cherry crops in West Michigan were heavily damaged by a spring frost. Two months later another spring frost wiped out 90% of the apple crops (Michigan produces about 18 million bushels of apples each year). The frost affected food processors who relied upon the state’s apple production for creating pie filling, butter, jellies, applesauce, vinegar, and apple juice/apple cider. Consequently, hundreds of millions of dollars in income were lost by fruit growers, packers, and processors.

Given the devastating economic impact of the frost, the Michigan Legislature created an emergency loan package available to farmers who qualified. Secured by collateral, these low-interest loans allowed farmers to borrow up to $400,000 to cover actual losses, minus any insurance payments. For growers who did not buy available crop insurance, the loan amount was reduced (tart cherry growers don’t generally have insurance available).
The state authorized $15 million to pay lenders for administrative costs and loan origination fees. In all, the loans helped the state’s fruit growing processing industry meet $300 million in economic need.

In the aftermath of the crisis, many packers and fruit growers made improvements to their marketing and branding efforts. Both also upgraded their production facilities to become more efficient. For instance, many farmers began installing high-speed doors to maintain constant production facility temperature. Several others incorporated high-speed internet into their operations.

More importantly, the state’s loan interest loans are helping farmers combat a growing labor shortage. Fortunately, by focusing on labor-saving technology, growers were able to minimize labor shortages in the field. With the extra time not used harvesting crops, farmers allocated additional loan funds to upgrade housing for migrant workers.

Becoming better prepared to handle such weather calamities is a silver lining that came out of the 2012 crop devastation. Fortunately, the State of Michigan worked with willing lenders to help facilitate this process.