Price of Apples for Processing Continues to Fall

According to EastFruit analysts, the prices paid for apples intended for processing into apple juice and concentrate have fallen significantly last week. As the harvest has continued in domestic farms and the industrial apple supply from Belarus has increased, prices have been declining almost daily.

While early in the previous week prices stood at $ 0.12 per kg, by Friday they had dropped to $ 0.10-0.09 per kg. Local producers are reacting to the price dynamics faster than the suppliers of Belarusian apples, so their sales are going much faster. At the moment, processors have already ceased to buy apples for more than $ 0.09 per kg. Also, some processors have started to demand a more substantial delay in the payments for the apples supplied to them.

Nevertheless, even such a price is still almost twice as high as that currently paid to producers in Moldova, Poland and Ukraine. Moreover, in these countries, the delay in the payments already exceeds 60 days. Some growers even doubt that processors will fully pay what they were promised, given the threat of a huge supply of concentrate.

Under these conditions, Russian industrial apple processors will also have a hard time selling finished products, because almost all the countries mentioned above and even Belarus are preparing to produce record quantities of apple concentrate.

Russian Apple Production is a Long Way From Self Sufficiency

Despite efforts to become self-sufficient in apple production after the embargo, recent figures confirm that the country is far from being able to produce enough apples to meet domestic consumption.

According to the Ministry of Health, the average Russian consumes 50 kg of apples per year, yet, according to AB-Center, recent total production would only amounts to 5.8 kg per year per consumer. This amount includes all apples, including those for processing, so when it comes to the amount of apples for fresh consumption, the amount per person would fall even lower.

Although it seems like self-sufficiency is far from a reality, Rosstat has estimated that the total production of top fruits, a majority of these being apples, did grow by 15% in 2016. In addition, independent experts have reported that the share of imported products on shelves has, for the first time in many years, given way to Russian apples.

Although apple imports have decreased since the embargo, a recent report from UN Comtrade said that Russia is still number 3 on the list of largest apple importers in the world in 2016, with a share of 6%, totalling 678,600 mt of fresh apples. This amount had already reached 622,200 mt in the first 11 months of 2017.

In the first half of 2017, the majority of apple imports were coming in from Serbia and Moldova, with 32.1% and 26.2%, respectively. Other major suppliers include China, Belarus, Chile, Azerbaijan, South Africa and New Zealand. Bosnia and Herzegovina had also been a significant apple importer to Russia, but this is currently on hold after Rosselkhoznadzor placed a ban on the country following suspicions that they were exporting apples from Poland as their own.

Russian Consumers Paying a Pretty Penny for Apples

The World Apple and Pear Association (WAPA) has reported that domestic apple production in Russia for 2017 is expected to be down by 37%, after late frosts and heavy rains hit production. However, this will not be the only reason why apple sales could be down this year.

According to industry sources, ‘The combination of rising apple prices and falling Russian consumer incomes has been the biggest factor in the decline of both imports and apple sales in the Russian market, industry sources acknowledge.’

Since 2013 the price of apples per kilogramme is up by 30%, more than any other fruit or vegetable in the country.

Despite recent increases in production, Marek Marzec from Ewa-Bis, said that Russian apple production only fills around 20% of the demand.

“Russia has been trying to develop the domestic apple industry for the last 20 years, sure, they have made some progress, but no where what is needed to become self sufficient. The positive thing about Russia is that it is such a large country with many different regions, they should be able always have success despite what the weather might throw at them.” said Marek.

Igor Muhanin, President of the Association of Fruit and Berry Producers (ASPRUS), had initially said that apple imports in 2016 had reached 1.38 million tonnes, but later revised that amounts to 1.25 million tonnes, saying that smuggling continued to be an issue in Russia, which authorities there have found it difficult to keep up with.

“The Agriculture Ministry is providing a subsidy payment to apple growers for planting new orchards and equipping them for higher yields of Rb236,000  ($4,140) per hectare. The experts say this represents between 10% and 25% of the costs of planting and equipping new high-yield apple orchards.” said Muhanin.

Estimates have claimed that Russian apple consumption came to 2.5 million tonnes in 2016, about 100,000 tonnes (4%) more than 2015. By 2020 the forecast is for consumption of 3 million tonnes; this represents an annual rate of growth of 4%.

According to BusinesStat, “The rate of growth of both domestic production and imports will depend not on the recovery of Russian consumer incomes and demand, and not on the sanctions or the increase in investments for commercial domestic orchards.”

“This year, apple sales will grow by just 1.7%, roughly the same as government and expert forecasts for Russia’s GDP growth. As the resumption of growth in real incomes begins, apple sales will grow in the retail sector. In 2021 the sale of apples in Russia will amount to 2.08 million tonnes, which will exceed the 2016 level by 35.7%.”

Russia Will Be a True Competitor in the Apple Sector

The fact that Russia aims at being self-sufficient as regards the production of fruit and vegetable is common knowledge. According to economist Gianluca Bagnara, the Russian ban against European produce is just a test to organise its own production chain.

During a recent convention, Jochen Kager from AgroFresh illustrated his report on “New apple orchards in Eastern Europe or east of Europe?”. According to official data, Russia grows apples on 209,240 hectares producing on average 15 MT per hectare. New plans are strictly connected to state funding.

“The first so-called ‘high-density’ orchards were planted in 2002 in Krasnodar and Crimea. Investors relied on Europe for technical skills, plants and systems and developed projects covering as much as 1,000 hectares each. Today, 10,000 new hectares have been planted planted in Krasnodar as well as 3,000 in Kabardino-Balkaria and an additional 1,000 in surrounding areas. Another 6,000 might be planted over the next three years.”

Granny Smith apples are losing popularity, while 30% of the new orchards are of the Fuji variety. “There is a lot of interest for scab-resistant varieties, while organic production methods are not an objective yet. New orchards are covered with anti-hail nets, while often there is not enough water for anti-frost systems. State funding can cover up to 75% of costs.”

Other nations
Poland can count on 180 thousand hectares, 60,000 of which equipped with modern systems. Professional orchards might grow by 10% over the next three years. Kager reported that Polish operators are adapting quickly to the Indian and North African markets. Currently, producers plant mainly Gala (40%), Red Delicious (20%), Red Prince (20%), Golden (15%) and new Champion clones.

Over the next few years, new competitors might emerge, Serbia, Croatia and Macedonia all expanded their cultivated areas (from 2,000 hectares on 2008 to 5,000). Montenegro cultivates 700 modern hectares and is not included in the ban.

In addition, Kazakhstan is becoming an exporter. According to state data, 55% of apple orchards are of the modern type. The closest markets are Russia and China and the most popular varieties are Gala (40%), Red (20%), Golden (20%), Granny (10%) and Fuji.

Uzbekistan is growing too, with 1,000 hectares of traditional orchards and 800 hectares of modern orchards.

China is a totally different matter, as it has 2.32 million hectares, 40% are still to modernise. It could be an excellent outlet for nursery gardeners and service suppliers from Italy as well, but businesses must get organised and work as a team.