It is peak harvest season in this village in northern China, and apples are piled high on both sides of the road, clogging the traffic of tractors, trucks and carts bringing in the crop from all around. China is the world's top apple grower, accounting for nearly half of the global harvest.
It has also emerged as the world's biggest producer of apple juice, crushing more and more of its crop for exports to the United States, Europe, Japan and even Australia, and accounting for about two thirds of world supply.
Despite the apparent abundance of apples in Guanli, this year's crop has fallen short of the demand from juice manufacturers, which have expanded capacity faster than orchards can plant trees. The shortage was exacerbated by cold, wet weather that reduced the crop.
"Farmers grow apple wherever possible. All here have shifted from grains," said Zhou Yuliang, a farmer in Guanli, near Yantai, in China's top agricultural province of Shandong. "Still the supply is not enough. There's a lot of demand from the juice sector," he told Reuters in early November, pointing to fields filled to the edges with apple trees.
Like many in this area, Zhou has switched to apples from corn in the past several years for higher income. His humble house is now equipped with a washing machine and a refrigerator and his 11-year old son goes to school in the nearby city.
Chinese apple juice makers have more than doubled their capacity since 2004, as demand for apple juice as a substitute for orange juice has grown. International orange juice prices are soaring as Brazil converts orange groves to biofuel crops and the United States still suffers the effects of Hurricane Katrina in 2005.
Industry officials say China now has a combined capacity to churn out 5,000 tonnes of apple juice concentrate per hour, or about 1.7 million tonnes per year, close to the world's annual consumption of about 1.8-2 million tonnes.
China Haisheng Fresh Juice Holding Co Ltd and Yantai North Andre Juice Co Ltd each have a capacity exceeding the 2006/2007 exports by Poland, the world's number-two apple juice manufacturer.
-- Chinese people, however, hardly drink any apple juice.
-- All this expansion has set off a rush for apples.
"Juice manufacturers are sending trucks and agents to every corner of China, competing against each other. They go even to Sichuan, Yunnan or Xinjiang: faraway and remote areas nobody cared about in the past," said Chuk Ng, managing director of Naturz Organics (Dalian) Co, an exporter of organic food, including apple juice.
An official from a juice maker in Shaanxi, in central China, said: " You can't buy enough nearby. You need to travel 2,000 km to get apples." The industry officials say China's 2007/2008 crop is down by up to 50 to 60 percent in some areas due to frost in the spring, though there are no reliable data. They put the country's annual crop at somewhere between 20 and 25 million tonnes.
The US Department of Agriculture's attache in Beijing said China's crop would drop 12 percent in the year to end-June from a record 26 million tonnes last year. Global production was 46 million tonnes last year, according to the department.
Many are operating at two-thirds of capacity, which may prevent China's output from exceeding 1 million tonnes, as many had previously expected. "The figure will be probably about 800,000 tonnes," said the official at a juice maker.
Coupled with high transport costs, the shortage has already propelled the prices of Chinese apple juice concentrate to a record of about $2,000 a tonne from below $1,000 in January. Only a few years ago, at about $500 a tonne, it was regarded as a low-cost alternative to orange juice and sweeteners.
With China now dominating the global apple juice supply, buyers have little choice, especially as severe frost has cut the Polish output as well. As well as being drunk as fresh juice, apple juice is widely used as a sweetener in drinks, preserves and yogurt.
"If China does not produce enough, there's no replacement around," said Fan Bo from Export-Packers Co Ltd, who supplies the United States, the world's top apple juice importer. Asked about food safety, Bo said from Canada: "The quality from China has improved dramatically." "They keep on buying Chinese products. They have reduced the volume because of the prices, not because of safety issues."
A spate of scandals raised an international outcry over safety of Chinese products this year. But the officials saw little problem for the juice industry, dominated by large players with modern equipment. They said apple juice was mostly pasteurised. Farmers also covered each apple on trees with paper bags for protection, which helped shield the fruit from chemical contamination.
Some officials, including Liu Li from Haisheng, say the apple shortage might remain for another few years as it takes three to five years for new apple trees to mature. "More trees have been planted since 2005," Liu told a conference in September. "The supply and demand of apples will ultimately reach the new balance in around three years."
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