Report Highlights:

Cold spring weather limited China’s apple, pear, and grape production in key northern and western provinces. Post forecasts that China’s MY 2013/14 apple production (July-June) will slightly decline to 38 million tons from the revised MY 2012/13 figure. China’s MY 2013/14 pear production (July-June) is estimated to increase by three percent to 17.5 million tons as south China pear production is expected to offset crop losses in the North. Post forecasts that China’s MY 2013/14 grape production (June-May) will increase by five percent to 7.8 million tons due to expanding acreage. While Washington State Red Delicious apple import permit suspension continues to thwart U.S. apple imports, market access for U.S. pears was obtained in 2013. Demand for U.S. seedless grape variety imports continues to increase.

Executive Summary:

Cold spring weather limited China’s apple, pear, and grape production in key northern and western provinces. Post forecasts that China’s MY 2013/14 apple production (July-June) will slightly decline to 38 million tons from the revised MY 2012/13 figure. China’s MY 2013/14 pear production (July-June) is estimated to increase by three percent to 17.5 million tons as south China pear production is expected to offset crop losses in the North. Post forecasts that China’s MY 2013/14 grape production (June-May) will increase by five percent to 7.8 million tons due to expanding acreage. While Washington State Red Delicious apple import permit suspension continues to thwart U.S. apple imports, market access for U.S. was obtained in 2013.Demand for US seedless grape variety imports continues to increase.

Production

Apples

Post estimates that China’s MY 2013/14 apple production will reach 38 million tons, slightly down from the revised MY 2012/13 production figure, primarily due to adverse weather in key provinces. For example, in western China’s Shaanxi, Gansu, and Shanxi provinces, lower-than-normal temperatures in early April limited flower sets and reduced the overall size of the apples, compared to previous years. In eastern China’s Shandong province, a major apple producing region, persistent heavy rains in July killed a large number of mature apple trees.

Post forecasts that China’s MY2013/14 apple acreage will increase by one percent to 2.3 million hectares, primarily for Fuji varieties which account for more than 70 percent of China’s production. New plantings in China will begin to reach bearing age in the near future, so this year’s lower production numbers should recover quickly. In addition, apple farmer profits have been rising over the past few years due to improved management practices. These factors support a forecast for continued expanding acreage and positive production growth; however, some constraints to production growth do exist. Acreage expansion has slowed considerably in western provinces, such as Shaanxi and Gansu, due to limited land availability. In Shandong province, apple acreage is stable; however, approximately 40 percent of the apple trees are mature and losing productivity.

Since 2009, Shaanxi province has been China’s largest apple producer and apple juice concentrate (AJC) processor. China’s apple juice industry currently consumes around 15 percent of total domestic production, which is 50 percent lower than a few years ago. The downward shift is attributed to higher domestic prices for fresh apples and weaker global demand.

Pears

Post forecasts that China’s MY 2013/14 pear production will increase by three percent to 17.5 million tons from the revised MY 2012/13 figure. Similar to apples, China’s pear production also experienced a ‘spring freeze’ that limited flower set, but larger pear supplies in the southern provinces are estimated to offset losses in northern China.

China’s MY 2013/14 pear acreage is estimated to reach 1.1 million hectares, a slight increase from the previous year. Favorable pear prices are prompting farmers (in northern and central provinces like Hebei) to expand acreage by replacing old varieties, like Ya pears, with more popular varieties such as Huangguan and Sand pears.

Grapes

Post forecasts that China’s MY 2013/14 table grape production (June-May) will improve by five percent to 7.8 million tons mainly due to expanded acreage across China. Overall gains in production were limited, however, by lower-than-normal temperatures in North and West China.

China’s MY2013/14 table grape acreage is estimated at 730,000 hectares, an increase of nearly 10 percent from the previous year, with Red Globe, Kyoho, Thompson and Muscat as the most popular varieties.. Grapes are the most widely grown fruit in China, with new varieties being grown that adapt to local climate conditions and increase the planting zones. Grapes are also produced in greenhouses to extend the supply season and achieve better quality. In some regions, new technologies enable farmers to harvest grapes twice a year.

Prices

Apples

Labor costs continue to be the main driver in rising production costs. Sources indicate that production costs for growing one kilogram of apples is 3 RMB (equivalent to $0.49). While most production management practices are performed by the growers themselves, temporary laborers are needed for harvest. Labor costs vary throughout China: in Shaanxi province, labor costs 80-100RMB ($13.10-16.40) per day; in Shandong province, the cost can reach 180-200RMB ($29.50-32.80) a day. Higher input costs are raising, farm gate prices are reaching record levels year over year. In late October, China’s Fruit Marketing Association noted that the average farm gate price for Fuji apples was quoted at 6.30 RMB ($1.03) per kilo in Shaanxi, an increase of 14 percent from the previous year. The average purchase price in Shandong was 6.1RMB ($1.00) per kilo, up 20 percent on a yearly basis. Purchase prices may decrease as farmers who do not wish to rent cold storage unload their unsold crop for lower prices.

Pears

Pear prices have improved recently in response to much higher prices for apples and grapes. For the traditional Ya variety, the average farm gate price in Hebei was reported at around RMB 2 ($0.33) per kilo in MY 2013/14, an increase of 18 percent from the previous year. New variety pears are more popular and higher priced than traditional ones. For example, the relatively new Huangguan pears are currently priced at RMB 3.4 ($0.56) per kilo in Tianjin, but were priced at RMB 2.4 ($0.39) per kilo a year ago.

Grapes

Grape prices are generally higher compared to other deciduous fruit. Farm gate prices for table grapes in Jiangsu are estimated at RMB 24-30 ($3.93-4.92) per kilo this year. As land and labor costs in western China are significantly less than in eastern and central China, prices average around RMB 16 ($2.62) per kilo in MY2013/14.

Consumption

Improved storage capacity has extended the supply season for most deciduous fruits leading to increased opportunities for year-round consumption. An industry conference revealed that apple storage capacity has reached the level of 11 million tons, including 8 million tons of cold or air-controlled storage and 3 million tons of simplified storage facilities.

Apples are the second most popular fruit consumed in China and consumers are increasingly turning to e-commerce as a source for their fresh fruit demands. Online fruit sales are expected to grow by 300 percent year over year and to increase fruit consumption, especially for high-end imported fruit. Sales outlets in China, including the No.1 Store, China’s first online supermarket and other major online merchants are extending delivery options to include fresh fruit, despite reliable supply and limited cold chain facility challenges.

Trade

Imports

Post estimates that China’s MY 2013/14 apple imports (July-June) will decline by seven percent to 40,000 metric tons. Traditionally, government agencies and state-run enterprises used fresh, imported fruit as gifts during major holidays. Given recent government promotions for frugality among its officials, the demand for purchasing fruit as gifts has weakened. Import permits for some US origin apples remain an issue of bilateral discussion as does the long standing U.S. market access request for additional apple varietals.

Post forecast that China’s MY 2013/14 table grape imports (June-May) will increase by 26 percent due to strong demand for better quality grapes. This year’s adverse weather conditions in key producing provinces lowered the quality of many locally-produced varieties. Moreover, domestic grape prices have increased making imported grapes more price-competitive.

Post forecasts China’s MY 2013/14 pear imports (July-June) at 2,500 tons, an increase of 18 percent from the previous year, due to new market access for U.S. pears. In January 2013, China and the United States approved two-way market access for pears midway through the 2012/13 export season. Traders in both countries are closely evaluating the trade potential during the first full season for market access in MY 2013/14.

Exports

China’s MY 2013/14 apple exports are forecast at 900,000 tons, a decrease of 12 percent from the previous year, primarily due to a 10-20 percent rise in domestic apple prices compared to the same period last year. Additionally, in September, the Chinese currency (RMB) appreciated by nearly four percent against the U.S. dollar year over year, reducing demand from major buyers in Russia and Southeast Asian countries.

Post estimates that China’s MY 2013/14 pear exports will decline by 10 percent to 370,000 tons compared to the previous year. Similar to apples, China’s pear export prices are becoming less competitive in the world market. The average export price (fob) for Chinese pears has increased by nearly 27 percent over the past year.

China’s MY2013/14 table grape exports are forecast at 100,000 tons, down more than 18 percent from the previous year. China’s export prices are currently 30 percent higher compared to last year and, as a result, China has limited exportable supplies for Hong Kong and other Asian countries.

Policy

China’s domestic support policies focus primarily on grains (such as wheat and rice) and other key commodities such as pork and cotton. Domestic support policies for fruit and vegetables are limited. In provinces or counties where deciduous fruit production is a major industry, local governments may provide support or subsidies to fruit farmers. For example, over the past five years, the government of Yanshan of Liaoning invested 20 million RMB to support farmer cooperatives and agribusinesses that assist farmers with pear production and management. In Yan’an of Shaanxi province, the local government provides farm machinery to large apple producers based on their annual income.

Marketing

China’s imported fresh deciduous fruit market can be divided into three major regions: South, East, and North, although Chengdu and Chongqing are emerging Western cities whose markets carry imported fresh fruits. Proximity to Hong Kong enhances Guangzhou’s role in promoting imported fresh fruit. Professional wholesale markets handle large quantities of imported fruits while distributors collect various products and arrange for the distribution to retailers and end-users.

In MY2012/13, California table grapes faced competition from locally produced grapes. U.S. pears gained market access to China in January 2013. Direct shipments of Washington apples into mainland China largely decreased due to China’s import permit suspension.

Regional markets:

South China, in particular Guangzhou, is the most mature fresh deciduous fruit market and has been the transaction hub for imported fruit for over two decades. Shanghai is the leading consumption center in the East while Beijing, Dalian and Qingdao are key markets in the North. Most imported fruits available in Western regions are transshipped from Guangdong Province.

South Region: Imported fresh fruits can be found not only in hypermarkets and supermarkets, but are also available at many small scale fruit chains and street vendors. The Jiangnan Fruit and Vegetable Wholesale Market in Guangzhou is the largest wholesale market in China in terms of total sales and volume of imported fruit transactions. Industry sources estimate that around 70 percent of China’s entire supply of imported fruit passes through this market. Jiangnan wholesale market has developed an ambitious expansion plan for the next five years. Key consumption markets in South China include major cities in the Pearl River Delta such as Guangzhou, Shenzhen, and Dongguan as well as emerging city markets such as Foshan, Zhuhai, Zhongshan, Huizhou, Jiangmen, and Shunde. U.S. fresh fruit sales in the cities of Fuzhou, Xiamen, and Changsha have increased dramatically over the past two years.

East Region:Imported fresh fruit is primarily sold in modern supermarkets. Three new wholesale markets were newly opened in Shanghai, in addition to the existing Longwu Fruit and Vegetable Wholesale Market. According to the industry-insiders, it is likely that within five years, Longwu Fruit and Vegetable Market will be replaced by the newly opened wholesale market operated by Guangzhou Jiangnan Fruit and Vegetable wholesale market. . Shanghai is the leading consumption center while other emerging markets in the East include Nanjing, Hangzhou, Wenzhou, and Wuhan. Consumers in Shanghai, Hangzhou and Nanjing, prefer 88 heads Red Delicious apples.

North Region: The best venues for U.S. imported fruits in the North are the modern retail outlets. Direct shipments to local ports help reduce transportation costs and facilitate trade. Xinfadi Wholesale Market in Beijing is one of the major hubs for the imported fruit trade in the North. Dalian and Qingdao are emerging markets. Consumers in the North prefer bigger size apples with good appearance.

U.S. Table Grapes:

In 2012, the total table grape export value from United States to Mainland China reached $63 million, accounting for 21 percent of China’s total import value of table grapes. Other key table grape exporting countries (in order) are Chile, Peru, South Africa and Australia. Table grapes are the preferred fruit purchased by consumers in South China. U.S. grapes are consumed mainly during the Mid-Autumn Festival (September) and National Day (October) holidays, while Chilean grape exporters target China’s Spring Festival (January or February).

Most retailers offer both imported grapes and domestic varieties. U.S. Red Globe grapes are considered to be firmer, larger, and better tasting than the local product; however, newer Chinese varieties are becoming more comparable to imported grapes from a quality perspective. Demand for U.S. seedless varieties continues to increase even though the retail price may be much higher than seeded varieties. Red Globe is the most popular seeded variety in terms of sale volume. Other U.S. varieties (such as Scarlet Royal, Crimson and Thomson) are becoming popular in some niche markets. South China remains China’s largest fresh table grape consumption region, followed by the East and North regions. Each year, over 70 percent of imported table grapes enter China through South China ports. North China is the key domestic production region for table grapes. In the North, the price of domestic table grapes is much lower than that of imported grapes and it is much more difficult for traders to profitably market U.S table grapes. The East region table grape market is expanding and more varieties are becoming available. However, traders note that table grape sales in East China have not been as robust as expected.

U.S. Apples:

Due to inflation and slow economic growth, consumers have been more conservative with their food expenditures. It is estimated that the total consumption of Washington apples in Mainland China has been reduced by 30 percent. In addition to United States, China also imports apples from Chile, New Zealand, Australia and South Africa.

Since last summer, the Chinese government ceased issuing import permits for Washington State Red Delicious apples. Moreover, the Chinese government policy against corruption also largely reduced the institutional purchases and the gift sales of Washington apples. For example, Red Delicious is considered a preferred choice for gift-giving because of its shiny dark red color and unique shape. These apples were offered as gifts during national holidays such as the Mid-Autumn Festival, National Holiday, Spring Festival, and other special occasions. This year, the demand for institutional purchasing and gift presentation of Red Delicious in the first tier cities has dropped significantly due to this new policy on gift giving.

U.S. Pears:

U.S. pears gained official access to China market in January 2013. Three major U.S. varieties are readily available in the market. Starkrimson was the first variety to arrive for sale at the Jiangnan wholesale market. The supply season is relatively short, from August through January. Green Anjou and Red Anjou are available from September to June. According to traders, Starkrimson has an appealing color and a more attractive fruit shape; while Red Anjou has a better taste and longer shelf life. Being a new product to the market, U.S. pears have great potential, but are facing multiple challenges. Chinese consumers mainly consume domestically-produced pears, which are cheaper and tend to be more crunchy and juicy than imported products. Some local consumers do not like soft varieties, and there is a low number of consumers that are aware of U.S. pears.

Traders and retailers still lack sufficient knowledge of U.S. pears’ availability, varieties, harvest seasons and proper handling. Further training and education are necessary to enhance consumers’ awareness of high-quality U.S. pears. It is also essential to stimulate traders’ interest in pears by organizing buyer missions and field visits in the United States. Once traders have a better understanding of U.S pear production and marketing they will be able to create effective in store promotions that should increase consumer demand and boost U.S pear imports