See also China's hog production system impresses tour groupSHAANXI, CHINA, Sept. 9, 2002 - "Impressive." Few would disagree with that reaction from one of 25 Michigan farmers on a China study tour during a stop at China's largest apple juice concentrate operation, Shaanxi Hengxing Fruit Juice Concentrate Corp. Ltd., located in the Shaanxi Province of China.
The Michigan delegation was eager to meet with officials to learn what was driving the rapid expansion of apple juice concentrate production - and, for good reason.
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. According to U.S. Department of Agriculture's Foreign Agricultural Service (FAS), those plants are only operating at 50 percent capacity. FAS also reports that the World Bank has financed many of these new plants.
Hengxing Fruit Juice Concentrate 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. 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.
Using top-of-the-line equipment and technology from Alfa-Delaval, the plants boast a 6-1 conversion ratio, turning those 150,000 tons of apples into 25,000 tons of apple juice concentrate, destined originally to the United States. According to Youcang, exports to the United States prior to the 1999 U.S. countervailing duty accounted for 80 percent of his total production.
While imposition of the duty put a short-term crimp in the flow of concentrate from his plant to the United States, the enterprising Youcang turned that lemon into lemonade, routing his 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 explained.
The European connection has actually boosted overseas sales for the operation, which now exports 90 percent of its apple juice concentrate production. Obtaining high-quality apples has been a challenge. Most of Youcang's 40,000 growers for that one plant alone - located within a 120-mile radius of the plant - 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 said. "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 willing to switch.
Producers, on average, receive $24 (U.S.) per ton of apples, with quality incentives adding a 15 percent variance to producer pay prices. Each load is sampled, and apples are even tested in designated "testing zones" prior to harvest to monitor residue levels and quality.
Finished product is warehoused in 55 gallon drums before being marketed by Youcang's domestic and export marketing staff. As impressive as his current production levels are, most were surprised to learn the plant is only operating at 50 percent capacity, with four months downtime allowed for plant maintenance and upgrades. The operation also devotes two months to processing kiwi, strawberry, peach, and pear juice products.
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, Julia Hersey, a Kent County apple producer 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.
"Many of the apples we saw being delivered were terribly small, with many apples measuring 1 to 2-1/2 inches versus our production where we typically will deliver 2-1/4-inch apples and up to our processors," Raak said. "I didn't see a real strong spray control program in the orchards we toured, and they don't thin their apples either to get the bigger apple."
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 currently employs 32 women to sort and hand cut bad spots from apples being processed for juice concentrate.
Raak was also skeptical of the 800-bushel-per-acre production figures claimed by Youcang, but noted the narrowly planted orchards, which are hand-sprayed by backpacks thanks to an endless labor supply, may make it possible in newer stands.
Raak was impressed with what he saw in one of the corporation's orchards toured by the Michigan delegation. All trees four years and under had been cut and grafted to Granny Smith apples 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.
Raak believes that development of a product-tracking system is needed to curb violations and bypassing of the countervailing duty, with severe penalties imposed on violators. He also contends that countervailing duties should apply to all Chinese apple juice concentrate, rather than specific Chinese processors.