Chinese Mandarin Oranges: How Shortage and the Chinese New Year is Impacting Business.
The mandarin orange season seems to be a little more complicated in China this year than last year. The packing season started slowly due to the lack of interest of buyers that had significant higher priced inventory from the 2018/19 season. However, things turned around quickly near the end November when the raw material prices started moving up rapidly. The raw material from Hunan and Hubei was short and not as good of quality this season and this has put pressure on the Zhejiang region. The crop from Zhejiang, which is the preferred purchasing region, is good as far as quantity, but the raw material is smaller than previous years, which is causing a lower yield for manufacturers. Due to the shortage and lower yield in other regions the raw material from Zhejiang has become much more expensive and the race for fresh fruit resulted in “bidding wars” among canneries.
Another factor that is affecting prices is the short packing season. Fresh fruit usually becomes available around mid November and canning continues until Chinese New Year the following year. However, Chinese New Year is early in 2020; the long holiday starts on January 25th, leaving the factories with some 20 less packing days this season compared to last season. Most factories will close a week or 10 days before the holiday, to allow workers enough time to go back to their families.
Japan and the USA are the biggest buyers for Chinese mandarin oranges; Japan’s demand is consistent with years past, but the USA has been slow to purchase this season compared to last season when the US buyers bought heavy early to have product arrive before additional tariffs on Chinese imports were enacted. Manufacturers in China usually pack mandarin oranges for firm orders, not for speculation. However, since the raw material prices have almost doubled compared to last year, they had no choice but drop their prices for prompt shipment, as they need cash to pay their workers before Chinese New Year and to buy more fresh fruit.
Booking mandarin oranges before the season ends is very important this year because manufacturers are choosing to scale back production by about 20-30% and they can’t afford to keep unsold inventory at these higher raw material costs. We highly recommend our customers to look at their sales forecast for 2020 carefully and secure their mandarin orange supply accordingly.
-Schreiber Foods International