Canned Deciduous Fruit Annual 2012

An Expert's View about Processed Fruit and Vegetables in China

Posted on: 30 Dec 2012

China’s consumption of canned peaches for MY 2012/13 is forecast to increase as imported canned peaches are becoming popular in China’s growing bakery industry.

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Voluntary Public - Date: 12/21/2012 GAIN Report Number: 12078 China - Peoples Republic of Post: Beijing Canned Deciduous Fruit Annual Report Categories: Canned Deciduous Fruit Approved By: Ralph Bean Prepared By: Ryan Scott, Freddie Xu, and Wu Bugang Report Highlights: Weak world demand and high stocks depressed China’s canned fruit production in MY 2012/13 (June- May), causing peaches to fall seven percent to 420,000 metric tons (MT) and pears to fall fifteen percent to 68,000 MT. Similarly, China’s exports of canned peach and pear products are forecast down to 130,000 MT and 48,000 MT, respectively, from the previous year. China’s consumption of canned peaches for MY 2012/13 is forecast to increase as imported canned peaches are becoming popular in China’s growing bakery industry. The United States, South Africa and Greece are major sources of canned peaches to China. Production: Canned peaches The Office of Agricultural Affairs (OAA/Beijing) forecasts that China’s canned peach production in MY 2012/13 (June-May) will decline by seven percent to 420,000 metric tons (MT) from the revised MY 2011/12 estimate of 450,000 MT, largely due to carryover stocks and weak demand from major export markets. Reduced demand from canning facilities has weakened grower prices compared to last year (see Price section). Although China’s yellow peach acreage remains stable, the industry is concerned that continued low prices may cause the loss of peach orchard acreage as farmers switch to more profitable crops. In addition to lower prices, rising annual input costs of 10-15 percent are another concern for the industry. To address these issues, canneries are mechanizing operations such as washing, sorting and pealing, to replace workers and reduce costs. Furthermore, canned fruit enterprises are seeking new investment through overseas partners, building new processing facilities in locations with lower costs and developing regional brands and distribution networks to capitalize on positive canned fruit consumption trends. Major peach canneries enter into production contracts with producers. These contracts may provide for the provision of technical and input support and establish a guaranteed purchase price provided the commodities meet the company requirements. Canned pears Sluggish demand in key export markets will negatively impact China’s canned pear production in MY 2012/13 (June-May), down 15 percent to 68,000 MT. Less than one percent of China’s fresh pear production is processed into canned products, and more than 70 percent of canned pears are exported. (See Exports) Prices Weak export demand in MY2012/13 has reduced cannery purchases of domestic peaches and dropped farm-gate prices 40 percent compared to record high export prices of $1,315 per ton in MY2011/12. During the beginning months of MY2012/13 (starting June 2012), export prices declined from 1,458 per ton to $1,239 in October 2012. Consumption: Canned yellow peaches are China’s most popular canned fruit. Its consumption trend remains on the rise, albeit leveling somewhat in MY 2011/12, as soaring production costs (including raw fruit, labor, and sugar) pushed retail prices up by 20 percent in MY 2011/12. Consumption forecasts for MY 2012/13 are expected to increase as imported canned peaches are becoming popular in China’s growing bakery industry (see Imports). Consumption of canned pears is also on the upswing, but at a much slower pace. With the exception of canned yellow peaches, consumers prefer to eat fresh deciduous fruits as they believe canned fruit contains harmful preservatives. To overcome this hurdle, some canneries have developed new plastic packaging options and developed new marketing vehicles such as online stores to boost consumption. Trade: Imports OAA/Beijing forecast China’s canned peach imports in MY 2012/13 at 12,000 MT, up 16 percent from the previous year, due to strong demand from China’s baking industry. Compared with domestically- produced canned yellow peaches, imported peaches feature a firm texture and bright yellow color which are attractive attributes to the baking industry. In addition, rising production costs in China have narrowed China’s canned yellow peach price advantage over imported peaches. The United States, South Africa and Greece are major sources of canned peach imports. Exports OAA/Beijing estimates that China’s canned peach exports in MY 2012/13 will fall to 130,000 MT, down eight percent from the previous year, due to reduced demand from major international buyers like the United States. China’s canned peach exports to the United States, its largest buyer, dropped by 15 percent in MY 2011/12. Japan, the largest buyer of Chinese canned white peaches, may also reduce purchases from China due to unfulfilled purchase orders from MY 2011/12 which will likely lower demand in MY 2012/13. Canned pear exports are forecast at 48,000 MT in MY 2012/13, down four percent from the previous year, largely due to shrinking demand from the United States, the largest buyer of China-origin canned pears. U.S. canned pear import volume from China has been declining over the past six years, from 35,458 MT in MY 2006/07 to 23,070 MT in MY 2011/12. Policy: Government support for canned fruit production differs among provinces. Some provincial governments may subsidize equipment purchases of leading agro-businesses. State-owned banks may subsidize loans for canneries to purchase fruit from farmers. Local governments may subsidize the construction of demonstration farms/orchards. In Anhui province, for example, a major cannery has turned its contracted orchards into a demonstration farm based on Good Agricultural Practices (GAP) guidelines for which the provincial government reimbursed half of the company’s investment. Marketing: More on Pricing: In supermarkets and hyper-markets, competing domestic canned fruit brands are similarly priced, but imported canned fruit is priced approximately 50-400 percent higher than domestic counterparts due to high import costs (tariff rate is 10 percent, and value added tax is 17 percent). Competition with higher quality imported products has caused some domestic canneries to produce higher quality canned fruit at relatively cheaper prices. Packaging: Packaging plays a very important role in marketing canned fruit products. Chinese consumers traditionally inspect fruit products before making purchases, so canneries often place their canned fruit in transparent glass or plastic jars to facilitate visual inspection. In addition, transparent containers distinguish their products from canned products which have a negative impression with Chinese consumers. The food service sector (e.g. restaurants), however, still purchases both domestic and imported canned fruit. As shown in the table below, each form of packaging has its pros and cons. Comparison of Different Packages Tin Cans Glass Jars Soft Cans Ease of transportation Yes No Yes Ease for consumer inspection No Yes Yes Facilitates conservation Yes No No Distribution: Imported canned peaches, pears, and apricots are primarily purchased by the Chinese baking industry because of their superior taste, uniform shape and firm texture. Premium bakery shops often garnish bakery items with canned sliced fruit. Sales of imported canned peaches, pears and apricots through high-end retail channels are primarily to expatriate and wealthy Chinese consumers. Promotion Chinese canneries are very optimistic about the untapped opportunities in the domestic market and plan to broaden their consumer base beyond the wealthy. Industry marketing efforts focus primarily on northeast China, which has a high consumption of canned fruits. Billboards, bus advertisements, and free tastings are common promotional tools. As domestic retail channels can involve high slotting fees and marketing budgets, some leading canneries are pursuing niche markets in the food service sector, such as four and five star hotels, VIP clubs and karaoke bars. Opportunities and Challenges Industry experts believe consumption of locally produced and imported canned yellow peaches shows the strongest potential amongst canned fruits, with baking industry demands playing a key role in the growth rate, with consumption of other canned fruits likely to grow at a slower level. The industry must overcome consumer resistance to canned fruits and continue efforts to promote them as a healthy alternative to fresh fruit. Production, Supply and Demand Data Statistics: Canned Peaches Peaches, Canned C 2010/2011 2011/2012 2012/2013 hina Market Year Begin: Market Year Begin: Market Year Begin: Jun 2010 Jun 2011 Jun 2012 USDA New USDA New USDA New Official Post Official Post Official Post Deliv. To Processors 555,000 555,000 600,000 675,000 540,000 Beginning Stocks 17,000 17,000 0 0 28,249 Production 370,000 370,000 400,000 450,000 420,000 Imports 7,651 7,651 9,000 10,362 12,000 Total Supply 394,651 394,651 409,000 460,362 460,249 Exports 139,001 139,001 130,000 142,113 130,000 Domestic Consumption 255,650 255,650 279,000 290,000 330,249 Ending Stocks 0 0 0 28,249 0 Total Distribution 394,651 394,651 409,000 460,362 460,249 Canned pears Pears, Canned C 2010/2011 2011/2012 2012/2013 hina Market Year Begin: Market Year Begin: Market Year Begin: Jun 2010 Jun 2011 Jun 2012 USDA New USDA New USDA New Official Post Official Post Official Post Deliv. To Processors 124,800 124,800 123,200 128,000 108,800 Beginning Stocks 0 0 0 0 7,378 Production 78,000 78,000 80,000 80,000 68,000 Imports 164 164 175 163 120 Total Supply 78,164 78,164 80,175 80,163 75,498 Exports 57,126 57,126 52,000 49,785 48,000 Domestic Consumption 21,038 21,038 25,000 23,000 25,000 Ending Stocks 0 0 0 7,378 2,498 Total Distribution 78,164 78,164 80,175 80,163 75,498
Posted: 30 December 2012

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