Apple bites "smart money", hot money cross-border hoarding and embarrassment

Approaching "May Day", the weather is getting hotter
.

At this time in the past, it was rare to see the cold storage filled with apples, but it has become the norm this year

A reporter from China Securities News found that due to a large number of traders hoarding goods during the purchasing season last year, the current inventory was much larger than that of the same period last year
.

High inventory makes Apple's price war inevitable, and it also puts a large number of speculative funds for cross-border hoarding into an embarrassing situation

Inventory far exceeds previous years 

From the time the tree was planted in October to the complete departure from the cold storage in May and June of the following year, it was the business cycle of a season of apples
.

Right now, mid-April has passed, and there is only more than a month left to clear the warehouse, but half of the apples bought by many traders last year are lying in the cold storage

"This year's apple trade is one word-slow
.

I have been engaged in the apple trade since 1998, and I was impressed by this situation once in 2010.

The Spring Festival is the peak season for apple sales every year, and more than 50% of the inventory needs to be digested.
However, during the Spring Festival this year, the consumption momentum of apples is insufficient, and the situation of selling goods on Qingming Festival is also lackluster
.

Huasheng Agriculture’s annual apple sales are between 500 million yuan and 600 million yuan
.

As the main person in charge of the company, Peng Xiaoqiang keeps an eye on the ups and downs of the Apple market and does not dare to neglect

"Currently our inventory is not high
.

Because the purchase price of Apple last year exceeded expectations, we adjusted our plan in October and only purchased 60% of the normal year

According to data from Zhuo Chuang Information, as of April 13, 2021, the remaining amount of apple cold storage nationwide is about 7,135,800 tons, accounting for 62.
8% of the initial inventory
.

The surplus of apple cold storage nationwide was 1,194,100 tons more than the same period last year, 20.

The nearly 1.
2 million tons of apple stocks that were surplus from last year, if calculated according to the general level of 2500 kg per mu, the planting area is about 480,000 mu, which can plant 45,000 standard football fields
.

Chi Guangyuan, general manager of Guangyuan Fruit Co.
, Ltd.
, Penglai District, Yantai City, Shandong Province, who has been engaged in the apple trade for many years, still remembers the lively scene of people grabbing apples in October last year: merchants are rushing for the goods, and fruit farmers are reluctant to sell the apples.
The purchase price has risen again and again, especially in the western region, where apples are abundant in northern Shaanxi and northern Guanzhong.
A large number of red apples have poured into the cold storage.
Fruit farmers and traders have high expectations for the price of apples in the coming year
.

According to data from Zhuo Chuang Information, the output of apples in the new season in 2020 is 38.
48 million tons, a year-on-year decrease of 9.
80%, mainly due to the impact of frost damage on apples in the northwest production area
.

However, the national apple inventory increased by 8.

"After the inventory is full, everyone feels that the situation is a bit dangerous
.
" Chi Guangyuan told a reporter from the China Securities Journal that at present, traders basically only sell their own goods, and rarely adjust fruit farmers to sell
.
His company received more than 8.
6 million catties of apples last year, and currently has more than 1.
8 million catties in stock
.
"According to the current digestion rate, it will probably be sold at the end of May,
" he said
.

As the weather turns hot, a series of seasonal fruits such as strawberries, pineapples, mulberries, mangos, cherries, etc.
have recently appeared on the shelves of fruit stores.
They are widely loved by consumers, and people are sweating for the sale of apples
.
"The purchase price of apples in the new season pushes up the sales price, but alternatives such as citrus fruits are yielding and the prices have dropped significantly year-on-year, which is bad for apple demand
.
" said Wei Xin, an apple analyst at China Securities Futures
.

"Smart money" was mistaken by cleverness 

A "grass" piece recently attracted the attention of a reporter from the China Securities Journal.
A large amount of hot money was stockpiled last year, which is the "culprit" of the current high Apple inventory
.

A reporter from the China Securities Journal heard from several spot traders that hot money did participate last year, but it is only a minority in the current market inventory
.

A trader said that hot money probably came in during the National Day last year, when the price of apples rose rapidly, but they were not pure speculation
.
He said: "Last year the Hebei pear-producing area was hit by a disaster and the pear production dropped sharply, resulting in pear merchants' cold storage empty
.
It coincided with the strong expectation of apple production reduction last year, they came to look for opportunities
.
"

"There are also some garlic dealers who also participated in last year's apple purchase and stock hoarding
.
" Another trader added
.

"These funds pushed up prices during purchases, and later sold them to help them fall
.
" Chi Guangyuan said dissatisfied, "They are not good for the market
.
"

Hot money is often referred to as "smart money", but this time participating in Apple's production cut does not seem to be smart at all
.

"Last year, traders with high purchase costs have lost at least one six cents per catty
.
" Peng Xiaoqiang introduced that the current apple inventory is mainly concentrated in the hands of traders and some large fruit farmers
.

"The slow-selling of apples has a greater impact on fruit farmers and small traders
.
" Wang Xianglong, deputy general manager of Changan Futures, said that the decrease in purchases by traders has passively increased the inventory of fruit farmers, and the sales of traders are mainly self-invented sources and lack of downstream channels.
Facing greater sales pressure
.

Such fruit growers are mainly concentrated in Shandong area
.
"This is mainly because the apples in the western region were planted early and the quality was better.
After the western apples were basically sold, Shandong apples began to sell in large quantities
.
However, even the Shandong fruit farmers who sold apples in the early stage had less income than the western region Fifty cents
.
" Peng Xiaoqiang said
.

Get out of the dilemma of "seeing the sky and eating" 

The apple planting area is relatively stable all year round, and the supply-side changes brought about by the weather are an important factor for the imagination of funds
.
Against the background of high stocks in the market this year, the weaknesses of the Apple industry's "see the sky for food" have been exposed
.

The industry's own characteristics determine that Apple's production reduction is unlikely to occur on a large scale
.
"First, the apple tree itself is perennial, with a large investment in the early stage, and can continue to
bear fruit for many years at a lower cost .
Secondly, traditional fruit farmers are facing aging and are less likely to go out to work.
Orchards are their main source of livelihood
.
Third, they can grow apples.
The area is relatively limited, and apples belong to the local characteristic eugenic varieties
.
” Wei Xin analyzed that once the weather changes have a huge impact on apple production, such as a substantial increase or decrease in production, large fluctuations in apple prices are inevitable
.
Except for a few high-quality apples whose price performance is firm, most apples cannot escape the price cycle
.

The relevant person in charge of the State-owned Assets Supervision and Administration Commission recently stated that companies should actively study the trend of bulk commodities and better respond in their operations
.

For the Apple industry, all parties are paying more and more attention to Apple's price discovery and risk management
.
Chi Guangyuan told the China Securities Journal that many traders, processing plants and even export companies around him are using futures to protect the spot
.

"Now, it is very common to use futures trends to guide spot sales
.
" Peng Xiaoqiang said that "insurance + futures" also played an important role in protecting the income of fruit farmers.
The futures market should expand its coverage in the main apple producing areas
.

From the perspective of futures, as of April 16, the daily trading volume of Apple futures increased from 84,000 hands at the beginning of the listing to 468,000 hands on April 16, and open interest increased from 27,000 hands to 556,000 hands
.

At present, the high inventory in the Apple market is already a "brand"
.
Although the market expects that price declines will be inevitable, Wei Xin believes that due to inflation expectations and the pricing tradition of the production end having a higher voice than the consumer end, Apple prices may go out of the historical medium or medium low level, and are unlikely to hit historical lows.
The overall income of seasonal fruit farmers can still cover production costs
.

Although price expectations are not optimistic, Peng Xiaoqiang is still making a second purchase in the near future
.
At present, his winning side lies in: as long as the cost is kept low enough, he can beat the time of falling prices
.
After all, large-scale purchases will give him more bargaining power in the upstream, and the profits protected by the previous compression of purchases and futures hedging will allow him to have enough funds to make second purchases
.

According to market participants, the pricing area, delivery layout, market cultivation, and "insurance + futures" pilots of Apple futures are all positioned in optimal production areas.
Apple futures can help companies improve their ability and resilience to deal with risks
.
According to statistics, in 2020, the eight leading companies in Shaanxi and Shandong alone will increase revenue (less loss) by 3.
2 million yuan and sell more spot goods through hedging, basis trading, over-the-counter options, integration of industry and finance, and physical delivery.
3,060 tons, effectively reducing the impact of the new crown pneumonia epidemic and maintaining a competitive advantage
.