The price of apples is soaring in China, and Beijing is showing concern

A woman buys apples at a market in Beijing on April 11, 2019.

Nicolas Asfouri | AFP | Getty Images

The price of apples in China has surged nearly 30%, and consumers are cutting their purchases of the fruit, according to data from grocery delivery platform Dada-JD Daojia.

That's just one example in several jumps in food prices in the country. The rapid increase is worth watching for any impact on consumer sentiment and spending, especially since Beijing is putting great emphasis on consumption as a way to keep the economy steadily growing.

Government figures released Wednesday showed China's consumer price index rose in May to 2.7%, its highest in more than a year, boosted by an 18.2% climb in pork prices and a 26.7% increase in fruit prices.

African swine fever has hit millions of pigs, while bad weather has hit the fruit crop.

The cost of half a kilogram of apples jumped to 15.19 yuan at the beginning of June from 11.81 yuan at the end of April, Dada-JD Daojia said. That's an increase from about $1.55 a pound to nearly $2 per pound.

As a result, between April and early June, sales of apples on the delivery site fell 5.7% from the same period a year ago, the company said. Year-over-year data for overall fruit sales was not available at time of publication, but the firm said sales in the category did increase 15% in May from the prior month, led by lychees, bananas and watermelon.

Dada-JD Daojia says it has more than 30 million monthly active users in more than 90 Chinese cities. The company, backed by Walmart and e-commerce site JD.com, also claims it can deliver orders to customers in less than an hour. The platform is one of a few major players in China's growing market for fresh produce delivery.

China is the largest producer of apples, followed by the U.S., according to the U.S. Apple Association.

In April and May, frost, heavy rain and hail significantly damaged apple crops in major producing provinces, the U.S. Department of Agriculture's Foreign Agricultural Service said in its June report.

As a result, China's production of apples is expected to drop 25% to 31 million tons, its lowest in 9 years, the report said. That will contribute to an 8-year low in worldwide apple production, according to the report.

Apples entering China from the U.S. face a 50% retaliatory tariff from Beijing, the report noted. The projected 12,000-ton increase in Chinese imports of the fruit are expected to come primarily from New Zealand and the EU.

The jump in fruit prices has caught the national government's attention.

On June 5, the Ministry of Commerce published a statement aimed at providing assurance that the increase in apple, pear and other fruit prices was temporary. During a visit to the apple-producing province of Shandong late last month, Premier Li Keqiang stopped by a fruit seller and emphasized prices would remain reasonable, according to a report from state news agency Xinhua.

"Although inflation data continues to rise, future increases are limited, and the overall pressure is controllable," said Jianguang Shen, chief economist at JD Digits, which was spun off from Chinese e-commerce company JD.com. He was formerly the chief economist at Mizuho Securities Asia.

One reason for that sanguine assessment is that pork prices have risen less than expected, and he expects fruit prices will likely stabilize as more produce comes to market in the future, according to a CNBC translation of Shen's Chinese statement. He also said the consumer price index will likely remain within 3% for the year overall, and that the slight inflation may allow for some monetary easing.

Apple futures on the Zhengzhou Commodity Exchange have also garnered significant attention from local traders. Prices surged 19% in May before falling about 6.5% so far this month, and the product ranks among the top 20 commodities futures contracts by open interest, according to financial information database Wind.

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