This 12-page USDA FAS report provides an update on China's citrus outlook and some interesting observations about U.S. citrus export prospects. Some highlights . . .


China’s citrus production is forecast at 23 million metric tons (MMT) for marketing year 2010/11, which is down eight percent from the revised MY2009/10 estimate of 25 MMT. This decrease is due to low temperatures and persistent rain during planting and flowering seasons in key producing provinces. Short domestic supplies have significantly pushed domestic prices to record high levels; and, as a result, locally-produced and imported oranges are becoming price competitive. The United States continues to be the dominant supplier of oranges, mandarins, and lemons to China.


Orange imports are forecast at 96,000 MT in MY 2010/11, up 20 percent from the previous year, on reduced domestic production and larger foreign exportable supplies. Short domestic supplies have significantly pushed domestic prices for oranges to record high levels; and, as a result, locally-produced and imported oranges are becoming price competitive. For instance, in a supermarket in Chengdu, locally-produced oranges are sold at $1.2 per kilo (a 50 percent price increase from last year), while imported oranges remain at $1.8 per kilo. With the United States expecting a nine percent increase in its MY 2010/11 crop, Chinese importers may purchase more U.S. oranges this season. The U.S. remains the largest supplier of fresh oranges to China, as it supplies 90 percent of total imports.

Mandarin imports are forecast at 10,000 MT in MY 2010/11, up 10 percent from the previous year. The U.S. is the largest exporter of mandarins to China, followed by Thailand. New Zealand, once the top supplier, still cannot export mandarins to China due to quarantine issues.

Based on additional supplies from the United States, the largest lemon supplier to China, imports are forecast at 8,000 MT in MY 2010/11, up four percent from last year. U.S. lemon production is forecast to increase by 10 percent in MY 2010/11.

Currently, the United States is the leading supplier of citrus products to China and will continue to expand its current market share of 84%. The main competition for the United States is China’s domestic production as quality is improving at a rapid pace. Despite this year’s unfavorable weather conditions, the quality and size are still desirable to consumers.

Chinese consumers are gradually recovering from the financial crisis downturn with purchases of imported citrus increasing by 9.48% in 2009 from 2008. Direct imports of citrus products continue to arrive at commercial ports in Shanghai, Dalian and Tianjin. Guangzhou is still the primary distribution hub for U.S. citrus products, and Shanghai is the leading port for South African citrus products. The majority of imported citrus is sold by major retailers to middle-upper income consumers. Hotels and restaurants also purchase significant volumes.

Generally speaking, Chinese consumers place a strong emphasis on taste, appearance, and shape. In northern China, consumers focus on size and appearance of large fruits. The most popular fruits tend to have a bright and consistent peel along with high Brix content. According to local importers and retailers, consumers in the north will prefer to purchase a higher priced fruit solely based on appearance over a less expensive product with a similar taste and quality. Presentation and color is essential to maintaining high retail price levels. In southern China, consumers place more emphasis on taste than appearance.

Chinese consumers are also attracted to innovative products for new fruit drinks and citrus varieties. Oranges
U.S. exports over 80 percent of China’s orange imports. Out of the two top varieties (Navel and Valencia oranges), Navel oranges remain the dominant variety in most producing areas. Guangzhou is the top importing port for U.S. oranges followed by Shanghai and Shenzhen.

Lemons:
Lemons continue to evolve as a cooking ingredient in the food service sector because of their color and versatility. Lemons are used as a flavor enhancer and a source of vitamin C. The market for imported lemons is mostly limited to major cities such as Shanghai, Beijing, and Guangzhou. Shanghai is an important hub for imported lemons from the United States. The Shanghai market consumes huge volumes of lemons given the rising demand from the growing HRI and retail sector and growing expatriate community.

Policy: The government of Fuchan, a key orange producing county in Guangxi province, plans to increase orange plantation by an annual 1,200 hectares during the 12th Five-Year period (2011-2015). In order to achieve this goal, the county government will provide farmers with subsidized seedlings. According to a provincial citrus development plan, Guangxi is projected to plant a total of 245,000 hectare of citrus by 2015 with production reaching 3.5 MMT. The details in executing this plan remain unknown.

The Chongqing municipal government decided in March 2010 to invest $1.5 billion by 2012 on increasing farmer’s income. Proposed projects include chicken farming in citrus groves, facilitation of farmer cooperatives, provision of subsidized seedlings, technical extension service, and construction of agriculture wholesale markets.

In an effort to reduce distribution cost and improve food quality and safety, the Chinese government launched a pilot program in July 2009 that encourages direct purchases of fresh produce between supermarkets and farmers. The central government will allocate a total of $58.8 million to construct cold chain facilities, distribution centers, and quick testing systems in 15 provinces.

Under the program, a major citrus producing and processing company in Jiangxi received $447,760 to build cold storage facilities where supermarkets will directly purchase fresh fruits from farmers. According to the Ministry of Commerce, direct purchases will reduce the distribution cost by 15 percent. Currently, sales of directly-purchased agriculture products account for 15 percent from supermarkets and the share is expected to increase to 30 percent by 2015.