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Possible winners and losers in the volatile apple juice market
11 February 2021
Raw material prices have varied between 9 and 13 euro
cents per kilo.
AJC prices have fluctuated in a narrower
band.
Apple and juice inventories have to be
reduced.
The rapid rises and falls in the price of Polish processing
apples may be less to do with the availability, or otherwise, of
the fruit and more to do with attempts to keep the juice price high
at a time when demand is not particularly strong.
According to all IHS Markit sources contacted, the AJC market
has been remarkably quiet through late 2020 and into early 2021,
with few buyers taking long forward positions because of the
uncertainty over the foodservice sector and the travel industry (on
which much of the foodservice industry depends).
Now, however, things are definitely starting to move.
The first factor is the raw material price. At last one major
processor offered PLN0.40 (about 90 euro cents) per kilo for fruit,
expecting the market inertia and the large fruit stocks in storage
to prompt farmers and coldstore owners to sell their fruit.
This has not really happened. First, the take-up of the offer
was apparently not as good as expected. Secondly, processors in
other countries were offering higher prices for processing fruit,
which understandably attracted more interest. The offer was raised
to PLN0.45/kg and then PLN0.50/kg (which is where the price was in
October 2020) and the most recent price heard by IHS Markit is,
from one processor at least, PLN0.65/kg.
The second factor is the price of AJC. This has fluctuated
between about EUR1.05 (USD1.27) and EUR1.20 per kilo ex-works and
most recently has been around EUR1.10-1.15/kg. Within these
parameters, the price has been fairly stable, while the raw
material price has varied considerably.
The third factor is inventory. Poland's fresh apple stocks in
coldstores and AJC inventory in tanks are both considerable. AJC
movement has been slow for the reasons cited above.
The fresh apple stores will need to be opened soon because the
farmers will need cash. At the same time, the juice storage tanks
will probably also have to be opened. This will almost certainly
weaken prices both of raw material and finished product. Fresh
consumption is also low because consumers are opting for oranges
this winter rather than apples.
At the same time, trade in Poland's wholesale market has been
dramatically cut by the cold weather.
"People are wanting to get rid of stock now, so we are seeing
some quite aggressive pricing," commented a well-trusted source.
"They need to move product not just because they will be sitting on
expensive AJC, but because the storage costs are mounting up and
they need to make room for the berry juices which will be coming
in, in a few months.
"So those who are selling now have probably stolen a march on
their competitors."
IHS Markit has just heard of a contract apparently concluded at
EUR1.00/kg for 2.0-2.5% acidity AJC. If the opening of the apple
stores and the selling-off of AJC stocks materialises, this could
prove to have been a shrewd move.
China and others
China is reported to have little stock left and production after
the Chinese New Year holiday is unlikely to happen. Most US buyers
are covered and there is little business being done. China is
quoting prices in the US exclusive of freight costs, because of the
parlous container situation and according to US sources, is not
doing any business there right now.
Turkey appears sold out and there are fears that its freight
rates will rise soon.
Conclusion
There is a possibility that processors will be caught holding
stock that they cannot sell at a reasonable profit if prices dip
and especially if the foodservice sector takes months to re-open
fully. If they have enough tank space, they can probably afford to
hang on and carry over stock into next season. A smaller harvest in
2021 and the ending of travel and horeca restrictions at the same
time would benefit them considerably.
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