The Fruit Growers News - November 2002

When Julia Hersey wore red on a recent agricultural tour of China she was approached by many Chinese and complimented on the color. In China red is their good luck color, the Michigan apple grower said. Coincidentally many of the imported apples she saw in the country’s upscale markets were Red Delicious. Alongside the Washington-produced Reds were large Galas that had been bagged when small, to keep out the pests. These raised-by-hand apples were over four inches across. Those impressive fruit are one result of China’s greatest asset: cheap labor. So affordable is the labor and the people willing to work that Hersey had a hand-made dress made overnight. That cheap labor also fuels the Chinese apple juice concentrate industry.
The most impressive part of the China tour sponsored by Michigan Farm Bureau China might have been the apple juice concentrate plant. The 25 farmers visited China’s largest apple juice concentrate operation, Shaanxi Hengxing Fruit Juice Concentrate Corp. Ltd., located in the Shaanxi Province of China. Upon the tour’s arrival to the plant, the excess struck Hersey. “We saw a top-of-the-line juice plant with a marble driveway out front - everything was the top-of-the-line.” The juice concentrate company operates three juice-processing plants in the province; each built within the last five years. With 240 employees, the corporation is considered the largest employer in Western China. They have a total capacity between the three plants to produce 25,000 tons of apple juice concentrate, according to the Michigan Farm Bureau. The plant toured by the Michigan delegation is located near the town of Yangling and is the oldest of the three plants, according to Wen Youcang, owner and general manager of the organization. Last year, Youcang made $18 million in the juice concentrate venture. The tour members saw modern, imported equipment and technology from Alfa-Delaval. The plants boasts a 6:1 conversion ratio, turning those 150,000 tons of apples into 25,000 tons of apple juice concentrate, much of it destined for the United States. The apples are raised by nearly 40,000 farm families working on one-acre plots leased from the government. The apples that these growers supplied to the juice facility were small - ranging from 1-1/2 to 2-1/4 inches, said Hersey. Since the declared end of the Chinese commune system, the government has adopted a family responsibility system. Growers lease small plots for 30 years, giving a portion of their crop to the government with the remainder going to the family to sell. Area extension agents oversee up to 1,500 of the apple growers. The average one-acre apple grower’s income is $300. Producers, on average, receive $24 (U.S.) per ton of apples, with quality incentives adding a 15% variance to the price. This year Michigan apple growers are expected to receive $90 a ton for their juice apples. “Within a 120-mile radius of the juice plant, there were nearly 40,000 acres of apples that fed that plant, “Hersey said. “The orchard floors are hand hoed, and in the processing orchard there was not good pest management - there was more concern for tree health, though.” In 1995, China operated just five plants and produced 20,000 tons of apple juice concentrate annually. Today, there are more than 60 plants, producing nearly 250,000 tons. Those plants are only operating at 50% capacity, according to USDA Foreign Agricultural Service (FAS). Exports to the United States prior to the 1999 U.S. anti-dumping duty accounted for 80% of his total production, according to Youcang. Oddly enough, he said, today 90% of his concentrate ends up in the United States after being remixed with European concentrate. While imposition of the duty put a short-term crimp in the flow of concentrate from his plant to the United States, the enterprise rerouted concentrate instead to Europe. “They have a very high acid base over there, so they buy our product and mix it with theirs, and then sell to the U.S.,” Youcang told growers. Hersey said that processors have a problem obtaining high-quality apples. Most of Youcang’s 40,000 growers are located within a 120-mile radius of the plant and produce and deliver Fuji apples. Youcang has already began the process of further vertical integration by obtaining access to land and growing his own apples - Granny Smiths - which are more suited for the high-acid apple juice concentrate preferred by the marketplace. “You can see the apples we get here, and they are not high quality. They don’t look very good for processing.” Youcang told the tour. “In China, we have 60 manufacturers and we’re the only one to develop high-acid apples. “The organization has already assumed control and planted more than 800 acres of Granny Smith apples, with a nursery that promises to deliver even more acres of the apples.” Youcang is also contracting with apple producers willing to provide the Granny Smith variety. Since 2000, he has taken the additional step of providing Granny Smith tree stock free of charge to producers. Finished product is warehoused in 55-gallon drums before being marketed by Youcang’s domestic and export marketing staff. The plant is only operating at 50% capacity, with four months downtime allowed for plant maintenance and upgrades, Michigan Farm Bureau reported. Youcang’s future plans include expansion of strawberry juice production, and eventually entry into fresh-market apples destined not only for Europe but U.S. shores as well. He is currently working with an unnamed “joint-venture partner in the state of Washington” to make that happen. While not pleased to hear the news, Hersey wasn’t surprised. “It may not be tomorrow, but I would expect China will be competition for fresh-market apples within five years,” Hersey said, adding that improvements in pest control and orchard management will be needed first for China to be successful. Ed Raak, a fruit producer from Allegan County, expects Youcang’s operation will enter the U.S. market for apple slices first, but acknowledged that apple quality will be a problem. Raak also questioned the bio-security measures and was concerned with how the operation controls Platulin, a bacteria that develops on apples that come in contact with the ground, bird droppings, or manure. The plant employs 32 women to sort and hand cut bad spots from apples being processed. Raak was also skeptical of the 800-bushel-per-acre production figures claimed by Youcang, but noted the narrowly planted orchards, may make it possible in newer stands. He was impressed with what he saw in one of the corporation’s orchards. All trees four years and under had been cut and grafted to Granny Smith apple stock and showed significant growth in the first year. The operation also had a very sizeable nursery of Granny Smith tree stock in place. “There was enough stock there for every Michigan apple producer south of Grand Rapids to replant,” he speculated.