Editor’s note: This is the second in a two-part series focusing on the Michigan tart cherry industry. The first featured growers uprooting trees as cherry prices fell below the cost of production, a controversial marketing order restricted domestic cherries and cheap subsidized imports undercut grower prices. Read it here.

At a time when more than a few tart cherry growers are pulling up trees in northwest Michigan, Nels Veliquette is planting new stock to replenish those cycling out of their 30-year life span.

Tart cherry growers in Michigan, which supply 75% of the nation’s crop, have been losing money more often than not in the past decade. The problems are deeper than weather or management. So how is Veliquette holding on in an industry many would argue is challenged yearly with the greatest fluctuation in both price and production of any crop?

He has a multipronged approach, sprinkled with a little optimism. He fully recognizes the challenges ahead — many shared by specialty crop growers across the board — but is hoping to ride out this downturn for better days ahead.

A lot at stake

One of the largest cherry growers in the state, Veliquette’s family owns and rents 2,400 acres of cherries, with 95% being tart cherries. The remainder is split between sweet cherries and 50 acres of newly planted high-density apple trees, which extends his labor offerings.

In the short-term, he’s losing money.

“If you’re only looking at it with a five-year perspective, it may seem like a dumb idea to get into this business,” says Veliquette, who is a fourth-generation farmer and a second-generation cherry grower. “But we’re in it for the long haul. People are in this business because they love it, not because they are getting rich. We can still make a living at it, but that’s getting harder and harder to do.”

Some growers have held on by borrowing against their land to help during shortfall years. Many are not getting paid for their own labor or factoring in depreciation on their initial tree investment. They are hoping for an equalization of supply and demand and pricing to become sustainable.

That means learning to deal with invasive pests, inflation, cheap imports, labor costs, crippling weather patterns, a declining number of processors and a marketing order that restricts the domestic crop while cheap, subsidized imports flow freely, robbing market share.

Unlike sweet cherries, which are generally sold as a fresh market crop, tart cherries are a delicate, thinner-skinned fruit that must be processed quickly — frozen, dried, juiced and canned — and is often used in pies, jams and muffins, squeezed for juice, or dried for salads and such.

If you’re an independent grower, the power lies with the processor, who decides if — and at what price — cherries will be accepted. Some growers have trouble securing a processor when the cherries are ready. Buyers tell growers what their cherries are worth based on the size and quality of the crop, demand and a marketing order that can restrict the crop — making growers “divert” their crops by letting them lie on the ground or, if a processor will take them, divert the excess into storage that can only be taken out for certain uses.

Vertical integration

Recognizing the need for vertical integration — allowing the farm to be part of the end product — the Veliquette family built a pitting plant in 1972. Veliquette is the CFO of Cherry Ke and Cherries R Us.

Through a partnership with Cherry Bay in Leelanau (owned by the Gregory brothers), they established the processing cooperative Shoreline Fruit, which allowed them to see the process through to the finished product.

A drying facility was added in the early 2000s, and a concentrate and freezing business later. The Williamburg, Mich., operation is now the largest tart cherry marketer in North America.

Between the two families, they produce 40 million pounds of tart cherries. The farms, which own the processing, are operated separately, but the product is marketed together under the name Cherry Bay Orchards.

“Decisions that get made at the processing level need to return a living wage to the growers because we want to be sustainable, which is not necessarily the relationship other independent processors have with growers,” Veliquette says. “But that’s how you stay in business.”

Sustainable production for the Veliquette farm would mean about 15 million pounds, with an average price of about 30 cents a pound. “In that scenario, I’m not buying a yacht or getting a second home on the lake. … We’re just staying in business,” Veliquette says.

Grower payment from independent processing plants averaged about 15-20 cents per pound in 2023, which isn’t covering annual operational and harvest costs, let alone orchard establishment and land control costs, according to a recent Michigan State University study putting the total cost of production between 40 and 45 cents per pound.

Meanwhile, inflation is pushing labor, fuel and input costs, which are not translated directly into the commodity. “We’re lucky if we’re getting 20 cents a pound return at this point,” Veliquette says. “We don’t get to just pass that input inflation on; it’s a function of the market. That’s a tricky one for us to overcome, because consumers always want it cheaper.”

Organic pivot

Looking for another avenue to add value to his crop of Montmorency tart cherries, Veliquette dove into organic production and is now going into the sixth year of being organically certified on 260 acres.

He’s hyper-focused on soil and tree health, as this crop requires a whole different management process and mentality in terms of inputs.

“We have learned to manage through issues rather than immediately becoming prescriptive,” he says. “I don’t care what anyone believes, the market is telling us to produce organic cherries. This is not a moral stand; the reality is the marketplace wants it.”

Organic pays two to three times conventional price, but it also comes with a 30% bump in inputs. “We’re not getting rich on it, but again, it allows us to stay in business,” Veliquette says.

Some tart cherry growers are becoming more diversified by planting other fruits and offering direct to consumer markets and family entertainment.

Housing, labor woes

The Grand Traverse region is appealing because it’s beautiful and more affordable than many other desirable places, says Veliquette, who’s watched land values in the area rise considerably.

“That’s great if you’re a land speculator, but it’s horrible if you’re a company that’s trying to attract workers with a living wage,” he adds.

COVID-19 didn’t help either. Cherry Capital Airport in Traverse City makes it easy to work remotely, offering direct flights to places such as Chicago, New York, Dallas and Washington, D.C., putting added pressure on housing.

“If you have housing, you can get labor, whether it’s a temporary worker from Mexico, or it’s the new mechanic, sales or quality control person. If people can’t find houses and places they can afford, it’s a housing crisis, which is basically causing a labor crisis,” says Veliquette, who would like to see a dollar-for-dollar tax credit for money invested in building or purchasing worker housing.

In 2023, Michigan farmers relied on more than 15,000 H-2A seasonal guestworkers — the sixth-highest total in the nation.

While tart cherries are mechanically harvested by shaking the tree, growers still need operators and caretakers of the crop, as well as workers in the processing plant to pit and store the cherries.

Under H-2A, growers or contractors must provide housing and pay the required Adverse Effect Wage Rate.

At $18.50, the AEWR is higher than the current federal minimum wage of $11.25, and more than 83% higher than the Michigan minimum wage of $10.10.

Factoring in wage, housing and transportation mandates, Veliquette says he’s paying $23-$24 an hour. “This is not cheap labor, but housing is our biggest hurdle right now,” he says.

Years back, Veliquette recalls hiring school kids during the summer, when they were happy for the work and ability to make some money before going back to school. “Those days are far gone — there are no local workers,” he says. “They won’t come to work or quit shortly after starting.”

These jobs are not low-paying jobs for unskilled positions. “These are all experienced equipment operators,”  he adds.

What’s ahead?

As farmers sell land or convert crops to make ends meet, could northern Michigan’s days as the Cherry Capital of the World be numbered?

Subsidized imports, largely from Turkey, continue to undercut pricing. And while the federal courts ultimately ruled against U.S. cherry growers in a trade dispute, USDA has helped ease the situation by buying domestic cherries for food banks and USDA programs.

The Cherry Industry Administrative Board is pushing for a larger presence in the national school lunch program with new recipes and products.

“We have been the funding arm of the industry for all the health benefit research, but we have not been the lead on the marketing,” says Heather Weber, CIAB executive director. “We have good people who are guiding this process and are really excited to see what it can bring to our industry.”

While government buys are welcomed, Veliquette knows it’s not guaranteed year after year.

Regular customers price-shop. “Everybody loves to be proud of buying made in the USA, until it costs 20% more, then all of a sudden patriotism goes by the wayside and capitalism takes over,” he adds. “If consumers do make the effort to buy American-made, cherry juice concentrate can be mixed with pear juice from Florida and all of a sudden, it’s a product of the USA.”

Even so, Veliquette says there’s hope for the industry, which is facing a lot of consolidation both at the grower and processor levels.

“It’s an important part of the local and state economy,” he notes. “There will be a right-sizing of the industry over the course of the next few years. But, when there’s something that matters to us, we can make it work.”

Processing capacity shrinking

In 2022, Art McManus left more than a million pounds of tart cherries on his trees, as he couldn’t secure a processor to take them.

“It was sad to see those cherries on the tree when there’s people starving to death,” he says.

Tart cherries are not generally a contracted crop, and processors adjust their buys according to market demands and inventory. In 2022, it was an abundant year for tarts, after two years of lean yields.

“I had no choice; I couldn’t sell them,” says McManus, who farms 200 acres 5 miles south of Traverse City, Mich. Eighty-five percent of his acreage is in tart cherries, with the remainder in sweets.

According to Heather Weber, Cherry Industry Administrative Board executive director, the number of cherry processors in the state has shrunk from 22 in 2014 to 16 in 2023.

“There’s not a single cherry pitter left in Grand Traverse County,” says Tim Brian, president of Smeltzer Orchard Co., based out of Frankfort, Mich. “But even if we had the pitters, I’m not sure we have the market to support them.”

In the coming years, he expects a reduction in tart cherry orchards with processing facilities following step. “There are costs in establishment and maintaining current orchards,” he says. “Once they reach full maturity, not many are being established to replace them.”

Brian buys cherries from about 60 growers on what he calls a “gentleman’s agreement on quantity.”

The annual tonnage varies, but in a normal year, Smeltzer freezes about 5,000 tons of tart cherries in institutional-size packaging for remanufacturers. The plant also processes apples.

Complicating the situation was COVID, which ravaged the supply chain. “Customers could not get products at times, so they went from the just-in-time system to just-in-case,” Brian explains. “So now, as we shift back to just-in-time, there’s a glut of inventory being corrected.”

If an end user went 10% long to protect themselves from scarcity, the next season they are buying 20% less to get back in balance, he explains. “We’re going through that phase, and I suspect inventories to be corrected in the next 12 months,” Brian says.

McManus’s family started in cherries in 1930s and at one time, he and his four brothers were all farming cherries.

He worked with a processor for his 2023 crop and says, “We cleaned up the orchard pretty good this year.”

He’s hung on by hiring people to establish a farm market on his farm and by offering U-pick opportunities.

“People have made it a destination by bringing their families to get some air, some fruit and some exercise,” McManus says.

But at 83, with none of his children interested in the farm, McManus says he’s in for one more year, and “we’ll see what happens after that.”

Subdivisions are popping up all around his farm. “I think that’s where it’s going,” he says. “It will probably never be put back into cherries. It sure is hard to let it go.”