Possible winners and losers in the volatile apple juice market

• 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.

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.