China Update
February 2007

This is a joyful time for the Chinese as they celebrate the start of their new year.  Most people enjoy the entire week off from work and spend time to visit their family.  As I just returned from a 2 week trip, I was able to see some of the colorful decorations that were being displayed.  In Shanghai, next to our office building where you can find Starbucks, McDonald’s and Hooters was a Christmas tree.  I thought they were late in taking it down, but my colleague told me it was just put up for the Chinese New Year.  Don’t ask me why.

I dread going to China in the winter.  Temperatures can drop to single digits and central heating for companies in the countryside is a rarity.  Growing up in Los Angeles, I’m not used to seeing my breath as I speak while inside the office.  Well, I packed my snowboard clothes and headed off for my 14 hour flight.

I visited the Shandong and Liaoning provinces which are 2 main growing areas of strawberries in China.  As I’ve mentioned in a previous report, the Shandong province has the most advanced farming technology and food processing plants in China.  The strawberries grown in Liaoning province are mainly for the Japan market, so I see a lot of potential for the processors there to ship to the U.S. market.  Growers in the Liaoning province have also been planting raspberries and blueberries in recent years.

Strawberry plantings were increased for the 2007 season as growers enjoyed high returns last year.  The increase was only about 12% which was constrained by a limited amount of nursery plants.  However, the yield on fresh market strawberries grown in greenhouses is at least 25% less than normal at this point.  Our processors attribute this to the warmer than normal winter which they believe has weakened the plants.  Based on this current yield, they believe the plants for the freezer berries will also have a lighter yield.  At this time, our processors are indicating that prices will be about the same as last year.

In addition to the lighter yield, labor cost has increased by 20 to 30%.  I checked with other sources not related to this industry and confirmed that new manufacturing and service related jobs on the Eastern Coast of China near major cities are creating competition for labor.  Finally, the Chinese yuan has increased in valuation by 3% from last year.   Pressure from the U.S. government has contributed to this rise.

I expect to receive price offers by late April just prior to the start of the processing season.

You will see offers for inexpensive strawberries from other areas of China.  We advise you to take caution as we have seen some of these facilities and fields that can offer low prices.  We know the prices are tempting, but let the buyer beware.