The economics of growing cider apples

The profitable production of cider apples requires an understanding of production costs, expected yields, and realistic price expectations for cider fruit. Two scenarios can substantially affect the underlying economics of growing cider apples: growing apples for making cider within the same or an affiliated business, versus growing cider apples for sale to a separate cidery.

For growers who seek to supply fruit for their own cidermaking, the returns from that fruit must be considered in the overall context of operating a cidery. Cider is a value-added product, so total revenue from the orchard may be greater. However, there are substantial setup, labor, regulatory, operations, and distribution costs with operating a cidery. Those are not included in this discussion of cider apple production. In order to evaluate a such an integrated cider apple enterprise, the value of fruit grown for the operation should be compared to the value of other fruit if bought from the marketplace. In other words, it is important to price your fruit provided to yourself such that the apple growing activity has inherent value.

Culled dessert fruit

Prices for cider apples vary considerably based on variety, supply, intended cider product and market, and quality. Prices listed in a guide such as this may be out-of-date or incorrect for a particular market, so it is best to consider prices in your area based on actual data. With that said, cider apple pricing may range from $3 to $28 or more per bushel ($150 to $1400 per ton). This ten-fold difference between the lowest and highest prices paid reflect two different supply streams for cider apples. Fruit sold or purchased at the lower end of that spread are priced well-below the production costs for likely any orchard system in New England and can only be offered to the market because a substantial portion of fruit from that orchard is sold for a higher price. This represents the ‘culled dessert fruit’ model which provides so much fruit used in cidermaking. This model is dependent on a strong market for higher-value fruit, whether through retail or wholesale channels. In this model, any fruit sold for the lower value, which may be five to ten times lower than the higher value represents a potential loss in profitability. On the other hand, such fruit that are sold to the cider market, either because quality or market conditions prevent them from being sold at full fresh fruit price, provide revenue from waste fruit that otherwise would have zero value. Cider fruit sales are thus an important source of revenue for high-volume dessert cultivar orchards, and represent a stable, cost-effective base ingredient for many ciders.

Higher value cider fruit

In order to profitably and reliably grow intentional cider apples (as opposed to rejected fruit that were originally destined for the fresh market), fruit must command a higher price approaching that or fresh market fruit. Some growers attempt to reduce management practices in order to lower production costs of cider apples, but those savings are relatively insubstantial because tree health and sound horticultural management are still required in order to reliably and consistently produce crops.

Higher value specialty cider apples tend to fall into two categories- dual purpose varieties that may be sold both to the fresh market or to cideries but have unique juice characteristics that cideries will pay more for, and specialty, cider-only varieties. The latter category includes bittersweet and bittersharp varieties that are often unpleasant to eat fresh and have no other market besides cidermaking. In all cases, the product of the orchard yield and combined average price across all grades of fruit needs to cover production costs and allow for profit. In many cases, that means pricing cider fruit at $16-30 per bushel, which requires that cideries will pay that price and commit to it. Long-term contracts between cideries and orchards are a common tool to facilitate this relationship in many production regions.

Assumptions in cider orchard economics

A net present value analysis (NPV) is a common tool used to evaluate long-term performance of a business enterprise like an orchard. Many such analyses have been published by Extension economists in the past 10-15 years. This analysis tabulates costs to plant, manage, and harvest and orchard against returns from harvested fruit and considers the declining value of money over time. These costs and returns vary substantially among producers, and may not be lower for growers of cider apples compared to orchards managed for fresh fruit. Generally, four factors determine the profitability and long-term NPV of an orchard: establishment cost; mature orchard yield; tree precocity, i.e., the time required to attain that mature yield; and fruit price. The shift toward high-density (1000 + trees per acre) orchard systems is based on high yield (1000+ bushels per acre), high precocity (2-3 years to attain yield and full production by years 4-5), good price, and consistent, annual production that offsets the high initial planting cost of these systems.

Cider apple production, particularly for European varieties, presents numerous challenges to that model. To date, growers have not reported the yields for cider fruit that are attainable for fresh market apples, and those lower yields are impacted further by biennialism inherent in many such varieties. Many such varieties also are susceptible to fire blight, and management of that disease through removal of infected wood and potential tree death increases costs and may reduce precocity. Finally, market prices for European-origin cider apples are presently similar to some fresh market varieties, but the limited supply and limited buyers for that fruit suggest that such prices could easily fall should supply increase or demand decrease if buyers leave the market.

Growers contemplating cider apple production could reduce risk in several ways. First is developing contracts or other mechanisms to maintain high fruit price. Second is performing optimum orchard management from the beginning of the enterprise- a cider orchard cannot be treated any less intensively than a fresh market orchard. Tree training, groundcover management, vole management, and a strong IPM program with a keen eye on fire blight are necessary for successful high density cider orchard production. Installation and annual management costs associated with this management is not likely to be substantially lower than for fresh market fruit.

Because cider apple production potentially entails greater risk from suboptimal yield; loss of markets; biennialism; and possibly disease issues, a lower-risk, lower-return model may be appropriate when establishing cider orchards. Free standing central leader trees using either dwarf or semidwarf rootstocks or vertical axis plantings which combine aspects of freestanding central leader trees with more intensive tall spindle plantings will reduce planting costs substantially over high density systems. This reduced investment is potentially easier to return, but both of these systems have lower inherent precocity, and so will take a longer time to pay back for initial and annual investment costs.

Figure 1. Net present value of four cider apple production systems after 20 years. Assumptions include: $20 per bushel for cider fruit and all fruit sold to cideries; establishment costs of $25,000 per acre for tall spindle (TS, 1000 trees/acre), $15,000 for vertical axis (VA, 600 trees/acre), and $6,000 for freestanding central leader (FSCL, 250 trees/acre); full production at years 4, 6, and 8 for TS, VA, and FSCL, respectively.

A comparison of different scenarios applied to three production systems (Figure 1.) indicates that several factors are critical to ensure profitability of cider apple systems. An idealized system for fresh market apples valued at $30 per bushel with high yield and precocity suggests early break-even point in year six and over $80,000 accumulated NPV per acre for such systems (this is before storage, packing, or marketing costs are included). The cider systems with lower fruit price of $20 per bushel and lower yield of 800 bushels per acre all have lower NPV and later return on investment. When biennialism is added to the model, the lower establishment cost vertical axis system had higher NPV than the tall spindle system. High installation and management costs must be offset by early and high yields- if either of those is suboptimal, a lower-intensity system may be more profitable for producing cider apples.

This material is based upon work supported by the National Institute of Food and Agriculture, U.S. Department of Agriculture, through the Northeast Sustainable Agriculture Research and Education program under subaward number  LNE19-373.
Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the view of the U.S. Department of Agriculture.