Peach and Apricot Farm Business Plan

The United States provides about one-fourth (25%) of the world’s total supply of fresh peaches.

Peaches are the third most popular fruit grown in America. Peaches account for more than 70 percent of all stone fruit produced in the U.S. South Carolina and Georgia follow California’s 72 percent share of peach production at a far distance, averaging about 6 and 4 percent of the U.S. total over the past three years. In 2000, the Georgia peach crop totaled 115 million pounds and brought in $41.7 million. In addition to the Elberta, Georgia now produces more than 40 commercial varieties of peaches.

Domestic and export prices for stone fruit in 2002 depend on several factors and cannot be predicted with certainty. Last year, grower prices for plums and nectarines averaged lower than the previous year, while grower prices for peaches averaged 3 percent higher, even with the larger crop. Much of the increase sprang from higher prices for processing peaches, and prices for fresh-market peaches averaged slightly lower. Although supplies in Georgia this summer are expected to be ample to meet summer stone fruit demand, reduced production and good quality may push up stone fruit prices from last year.

What could also help boost prices are export markets as strong as last year’s, when U.S. exports of fresh peaches (including nectarines) and fresh plums were up 15 percent and 12 percent from the year before. Shipments to all three major U.S. markets for fresh peaches were up (Canada, 1 percent; Taiwan, 29 percent; and Mexico, 42 percent), as were shipments to the two major export markets for U.S. fresh plums (Canada, up 2 percent; and Taiwan, 16 percent). Plum exports to Hong Kong were steady. Although Japan opened its market last year for the first time to U.S. fresh nectarines, it did so late in the season; domestic supplies were already scarce and only a small volume was shipped. This summer, the Japanese market will open for U.S. nectarines around June 15, according to CTFA, when U.S. supplies are ample. On the downside, poor economic conditions in Japan and slower growth in Taiwan this year may weaken demand for U.S. stone fruit. Last summer’s retail prices for fresh-market peaches averaged 1 percent below 1999, but 8 percent above the average of the last five years (1995-99).

 This year, freezing temperatures throughout the Southeast in early March damaged some peaches in northern Georgia. As of the last week of April, 70 percent of Georgia’s peach crop appeared to be in good condition; 81 percent of South Carolina’s peach crop appeared to be in fair to good condition. Harvesting of early peach varieties started the week of April 15, early nectarine varieties a week later, and early plum varieties around mid-May. 

Source: USDA Agriculture Outlook, June/July 2002

4.1 Market Segmentation

Wilson Family Peach Farm plans to sell its crop to three main buyers. In order to keep its profit margin high, the Wilsons will concentrate on selling the majority of its fruit to the local produce stands which are able to charge more for the higher quality fruit. Most of the rest of the fruit will be sold to local fruit packers and distributors that then resell the fruit to grocery stores. Finally any fruit that does not meet the quality/maturity standards of the other two buyers will be sold to canneries.

4.2 Industry Analysis

The is a wide range of industry participants in the fruit business, from large corporations and co-ops to small farms specializing in fruit, to small farms that sell fruit directly to the buyer from a small number of trees. This makes for a very fragmented industry where it is difficult to generalize strengths, weaknesses, competitors, and opportunities. Attempts to consolidate the industry in the past have been of only limited success because of its capital intensive nature and government involvement in promoting family-style farming.

Distribution of fruits generally involves sale of large volumes to highly consolidated packers and canners who have a large influence on the individual farmer. Because any small farm is such a small percentage of the total volume that distributors deal with, switching costs for distributors are low and therefore small farmers use local groups such as co-ops to sell their produce. Small farms are able to direct sell through vertical integration (owning produce stands) or sell to small distributors.

4.2.1 Industry Participants

The stone fruit farming industry is highly fragmented with a large number of industry participants ranging in size from very large corporate farms with hundreds of acres and employing significant migrant workers during the harvest season to the small family farms that are often smaller than a hundred acres and have less than ten laborers per farm.

4.2.2 Main Competitors

There are approximately 1,300 different peach farmers of all sizes in the Georgia/South Carolina area. Due to this large number and the inability of any one industry participant to effect market price, the Wilson Family Peach Farm does not have any specific rivals to compete over market share or important customers.