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Higher US tariffs on Chinese AJC may open door to Polish imports

The potential for an additional 10% duty on Chinese apple juice concentrate (AJC) imports into the US could be catastrophic.

The US Trade Representative has released a fresh list of 6,000 items, worth around USD200 billion, that it plans to impose tariffs on in the escalating trade war between the two countries. The list includes many agricultural goods including fruit juices, canned produce and fresh fruit. 

In both the 2015/16 and 2016/17 seasons, China exported around 280,000 tonnes of AJC to the US. Exports for the current season are running at 258,590 tonnes, with two months’ data yet to add. Unfortunately, as part of the massive trade war, China has stopped publishing its export figures so the figures for May and June are IEG Vu estimates.

China started its pricing for the US low this season, but when it saw it had the market to itself, it started raising them, thus improving its profitability. 

The second problem for China is that its own apple production has been cut by the frosts that hit in April. The damage depends on region and who you talk to, but a national production cut of around 20% seems feasible. That would bring production back below 40 mln tonnes, and apples for juice production will almost certainly be more expensive than they have been for the current season.

Chinese exports to the US were worth over USD250 mln in the 2016/17 season, based on an fob price of USD1,000 per tonne. IEG Vu reckons that Chinese prices will rise by about 25% this year, so the 10% tariff should cost China something between USD30-35 mln.

However, Europe is going to have a very good apple harvest this year. At the time of writing, we are about three weeks away from the World Apple & Pear Association (WAPA) forecast, but IEG Vu expects Poland to have a harvest of around 4.5 mln tonnes. That would have a big effect on processing apple prices. Poland, Ukraine and Moldova are already harvesting their fruit (the hot summer has brought the harvest forward by between one and three weeks, depending on region).

So Polish AJC could be cheaper this season into the US, even without the extra 10% tariff.

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