Large European apple stocks are continuing to strain the market even as the Southern Hemisphere’s export season gets underway, putting the dampers on hopes of a forthcoming recovery in prices, says Gerhard Dichgans, CEO of the VOG Consortium, in his latest update on the current international situation.
According to figures from the World Apple and Pear Association (WAPA), stocks amounted to 2.3 million metric tons (MT) as of April 1 – 1.1 million MT more than the “lean year” of 2017-18, and 210,000MT more than the more typical season in 2016-17.
Poland is responsible for a large proportion of these surplus stocks, while others are in historic production areas in Western Europe.
“The run-down in European stocks in February and March was below average, in spite of low prices and fiercely competitive quotes from growers,” Dichgans comments.
“So the hopes for market recovery present at the start of the year have been confirmed only in part, with large differences between one variety and another.”
Meanwhile, the German market has been dominated by local supplies so far, though customers are starting to make more purchases from South Tyrol in northern Italy, says the consortium.
This way, they can bridge the gap over the coming months until the bulk of imports from the Southern Hemisphere arrive, it adds.
To the north and northwest of Europe, the U.K. and Scandinavia continue to be active, but Eastern Europe remains at a standstill.
However, VOG describes exports to Mediterranean countries as a pleasant surprise, explaining that the Middle East is proving to be a reliable destination.
As in the past, the huge Indian market is making a crucial difference; it has opened up to exports from Italy, since China and the U.S. have halved their supplies of apples, it explains.
“This highly fragmented picture on the markets we serve is perfectly reflected in the stock reduction trends of the individual varieties,” Dichgans comments.
“The sales season for Royal Gala closed at the end of March, with constant demand from the Mediterranean countries helping us to keep in line with our sales plan. India has been our salvation for Red Delicious, although sales of the same variety are also on the increase in the Middle East after the end of the Royal Gala season.
“Demand for Granny Smiths has been moderate but steady across all markets. However, the situation for Golden Delicious and Braeburn is completely different. For the Braeburn variety, the large local crop in Germany means the markets have been under pressure ever since the autumn, with very few openings for imports.”
He goes on to say that the large chains’ buyers have only recently started contacting VOG for its supply in order to plan the weeks left before the arrival of New Zealand Braeburns.
When it comes to Golden Delicious, he notes that Italy is variety’s “reference market” and that prices are still low, fueled by continual promotional offers, though these initiatives have failed to stimulate consumer demand.
“This variety is being further penalised by a high percentage of rusty and second grade apples, which are proving hard to sell in view of a plentiful offering of first grade fruit,” he says.
“This heaviness of the Italian market is surprising, since the availability of products is in line with the average of the last 3 seasons – with the exception of 2017/2018 – and, considering the low first grade ‘pack-out’ percentage, there is actually a shortfall.”
Yet he believes the final phase of the apple sales season could see improved conditions.
“Southern hemisphere crop estimates lead us to hope that the quantity of apples available for shipping to Europe is lower than predicted. New Zealand, for example, has cut its estimates by 10%,” he explains.
“Exporters from the Southern Hemisphere will focus first on the more lucrative markets in South East Asia, leaving Europe aside. Forecasts for exports to south-eastern Asia seem to be promising, in view of the poor Chinese crop.”
VOG claims that initial import statistics confirm these expectations – by the end of March, only 10,000MT of apples had reached Europe, while in the two previous years incoming volumes from the Southern Hemisphere were almost four times this amount.
“This will enable Europe to concentrate on disposing of its stocks without having to worry about competition from imported apples,” Dichgans says. “However, there is still a lot of the sales season to go, and there is no doubt that Golden Delicious stocks will hold out until September, overlapping with the arrival of the new 2019 crop.
“I do not expect any significant price increases in the coming months, partly because existing inventories make continuous sell-out essential.”