Over 90% of Taiwan's pineapple exports depend on China; is a threefold surge in sales a blessing or a curse?
By Jiao Jun (author of the book Fruit Politics)
The 2005 "Lian-Hu meeting" thawed cross-strait relations and created a boom in Taiwan fruit sales to China; boom-and-bust political procurement has had multiple effects on Taiwan's agriculture. In 2019, China's agricultural political trade war against Taiwan has resumed. How should Taiwan respond? "Upstream and Downstream" has invited experts to analyze this, and the special feature will continue to be published. To read the series of articles, please click here.
Pineapple exports to China boom, with a threefold leap in 2014
Pineapples earned Taiwan a considerable amount of foreign exchange in the last century, and Taiwanese people over the age of 50 have all eaten Taiwan Phoenix pineapple cans. Even more than a decade ago, when the economies of second-tier cities in mainland China were just starting to take off, Taiwan's canned pineapples once again became a hot souvenir gift. However, fresh pineapple exports began to take off in 2012, especially exports to the Chinese market, which showed a nearly threefold leap in 2014. Will the prosperity of pineapples in the Chinese market continue? Is there still the pull of political procurement supporting it behind the scenes? How can Taiwan's pineapple exports further diversify market risks? Below is our in-depth analysis.
From the trend perspective, pineapple exports showed huge growth between 2014 and 2016, exporting 9,000 metric tons in 2014 and rapidly growing to a peak of 29,000 metric tons two years later; in 2018, it set another record high, reaching nearly 32,000 metric tons. But this is not a number worth celebrating, because more than 90% of the entire market's export share is in the Chinese market. This is a very distorted phenomenon. (See table below)
Pineapple exports to Japan have stagnated in the past five years, while the Chinese market stands alone
In contrast to the past, when Japan was still an important pineapple export destination for Taiwan, pineapple exports to Japan have almost stagnated in the past five years (see chart below). The situation of the Chinese market standing alone has become increasingly obvious, making people worry that the work of diversifying overall market risk has achieved almost zero results. Moreover, behind this growth figure, policy-based procurement has basically exited the stage. Most purchases now are made by fruit traders or channel operators on the Chinese side, who directly purchase and export from Taiwanese farmers' pineapple production and marketing cooperatives.
In other words, pineapples sold to China have developed their own separate pattern, basically operating under two different sets of thinking and modes of operation from pineapples exported to Japan; the former wins by quantity, while the latter still must maintain product quality to sustain order stability.
Pineapple area grew 26% in 6 years, with concentrated planting of the "Tainung No. 17 Golden Diamond" variety
In addition, Taiwan's pineapple planting area clearly began to show an upward trend starting with the export surge in 2014; in 2011, the pineapple planting area hit a trough of 9,029 hectares, and by 2017 it had reached 11,452 hectares, a growth rate of more than 26%, which is truly astonishing. (See table below) Looking at the central and southern regions, in the past pineapples were only planted in areas with good drainage on hillsides, but now it has become the case that almost any land rented from Taiwan Sugar Corporation is planted with pineapples, which shows the extent of it.
Lack of a "place-of-origin traceability mechanism" makes it easy to pass off inferior goods as superior
The expansion of pineapple planting is concentrated in the "Tainung No. 17 Golden Diamond variety," mainly because this variety is favored for sales in the Chinese market; but according to my past experience, most Golden Diamond pineapples sold to the Chinese market, especially those under the name "Pingtung-produced," do not necessarily come from Pingtung. More of them come from the Chiayi and Tainan areas. This also means that, on Taiwan's side, export traders, lacking a "place-of-origin traceability mechanism," allow even more mislabeled Pingtung Golden Diamond pineapples from Taiwan to enter the Xiamen and Shanghai ports for sale through the mini three links and the three links.
Over 90% of Taiwan's pineapple exports depend on China; is the risk too high?
The numbers have already told us the fact: the "only export market" for Taiwan's pineapples is China. Those familiar with the international situation also know that the export growth that began in 2013 and 2014 came from the then South China Sea Scarborough Shoal dispute between China and the Philippines. China technically banned Philippine pineapple imports into China, allowing Taiwan's Golden Diamond pineapples to find an "export outlet."
The question is: are farmers satisfied with the output value of such pineapple exports? With the Chinese market accounting for more than 90%, is such a "distorted" export result beneficial to the development environment of Taiwan's pineapple industry, or is it harming the long-term survival of Taiwan's pineapple farmers?
Because the main production area for export pineapples is Pingtung, the government has vigorously assisted local farmers' production cooperatives, with the aim of stabilizing the quality and quantity of pineapple exports, and this has indeed achieved certain results; but in the end, the problem still lies with importers in the Chinese market on the import side. Are they willing to "operate long term" in the market for Taiwan's Golden Diamond pineapple? Or will cheap MD2 variety pineapples from Philippine multinational enterprises return to the Chinese market and abandon this one for another?
Market rumors say Taiwan's pineapple quality control is poor; will this affect its prospects?
Facing market uncertainty, the only thing Taiwan can do as the export side is "increase the added value of products," that is, through higher standardization, so that the export value of Taiwan's pineapples can be raised further, in order to differentiate itself from the low-price competition of large-scale planting by multinational companies. Taiwan's competitive advantage in pineapples is flavor and texture, but the disadvantage is that quality control varies too much due to weather. Compared with multinational companies' varieties, this is both an advantage and a disadvantage: because sweeter pineapples have a shorter shelf life, and in recent years abnormal climate has made pineapples have higher water content (the so-called "fleshy-sounding pineapples"), which is also unfavorable to consistency in export quality.
In recent years, there have been constant reports that the quality control of Taiwan pineapples exported to the Chinese market has been getting worse (with fleshy-sounding pineapples predominating). Even Japanese experts who went to China to inspect Taiwan pineapple exports lamented that if exporters on Taiwan's side do not properly manage quality, the good days for Taiwan's pineapple exports will last only a few more years.
Taiwan's pineapple industry should establish a more complete export industry chain
Reading the positive meaning from the numbers, Taiwan's Golden Diamond pineapple has indeed gained a firm foothold in the Chinese market, but what must be noted next is to avoid "losing one's own footing," especially once abnormal climate causes unstable production: in recent years it has often happened that when there is overproduction, everyone engages in price-cutting competition, and when production is insufficient, everyone in turn drives prices up and holds back shipments. This is also the fate of Taiwan's fresh agricultural product exports in the past: an unclear understanding of foreign markets, and failure to understand that international competitors are pursuing from behind, often giving away in just a few years the territory that was hard won!
Agricultural authorities plan to install a set of fully automated cleaning, grading, and packaging equipment dedicated to exports in Pingtung, the main pineapple production area. This is absolutely positive news for raising the added value of pineapple exports; however, how to involve more farmers in such work, rather than making it only the task of one company, Taiwan Agricultural Development Corporation, will depend on more patience and communication from government departments, so that the establishment of the pineapple export industry chain can be accomplished in one sustained effort.