With the Mid-Autumn and National Day holidays approaching, the late-maturing apple crop is nearing its production assessment and harvest phase. Market conditions for early-maturing varieties in the western regions have stabilized after structural differentiation, while consumer sentiment in the eastern regions remains subdued, dragged down by older inventories and quality concerns. Regarding trading, the October contract is about to enter its delivery month. Considering the lingering disruptions from extreme weather this year, high-quality apples in western production areas remain scarce. Merchants have already begun competing for early-maturing apples with good appearance, leading us to believe that even under the current weak consumption environment, there will still be demand from industry players to take delivery when the late-maturing varieties come to market. Therefore, the capital dynamics in the apple market may shift, with delivery-related trading potentially recurring in the October contract, which could keep prices for other contracts on a stronger trajectory. The biggest risk for the long side remains the low apple prices in Shandong and the overall weak downstream consumer market. This could dampen merchants' purchasing enthusiasm once prices rise, and their appetite for high-quality apples may not be reflected in institutional quotes for premium goods. Overall, given the high one-sided odds against short sellers in delivery-month trading, we advise traders to exercise caution in shorting apple futures before the late-maturing varieties are extensively harvested.

This information is for reference only.

Market Review

Since late August, the apple futures October and January contracts have generally traded within a range, but the center of fluctuation has stepped down one level from mid-August. Taking the October contract as an example, its rebound peak on August 18 reached 7,950 yuan/ton; on August 28, prices only touched 7,778 yuan/ton, and after reaching 7,788 yuan/ton, they quickly declined. The past three weeks have shown a pattern of repeated tug-of-war: 'downward probe - sharp rally - pullback - stabilization.' In the fourth week of August (August 24-28), both contracts initially fell then rose, dipping midweek before rebounding strongly on Friday. The first week of September saw a surge followed by a decline. In the first three trading days of this week, both contracts strengthened in tandem. The January contract has followed the same direction as the October contract but with narrower amplitude and a noticeably lower price center. In the first week of September, the January contract hit an intraday high of 7,549 yuan/ton on August 31, then pulled back, closing at 7,375 yuan/ton on September 4, a weekly decline of 1.73%, with an intra-week range of only 213 yuan/ton. This week, the January contract accumulated a gain of 2.32%, closing at 7,546 yuan/ton on September 9, with an intraday high of 7,631 yuan/ton, breaking through the highest level of 7,609 yuan/ton since August 18. The trading atmosphere for the January contract has improved.

In terms of open interest, the January contract's position grew from 44,000 lots on August 17 to 116,000 lots by September 9, making it the new main contract, with clear signs of capital shifting. Notably, as the delivery month approaches, the October contract's open interest has steadily fallen from 126,000 lots on August 17 to 19,300 lots on September 9, with capital accelerating its move to far-month contracts. As shown in the chart below, the AP610-701 spread has narrowed, with the discount contracting from approximately 300 to around 113.

Western Early-Maturing Apple Prices Show Clear Differentiation, with Quality Premium Reasserting Dominance

Current inventories of old crop apples in the western regions are limited. According to Mysteel statistics, Gansu stock levels have essentially cleared, and Shaanxi inventories are nearing zero, with the warehouse utilization rate at 0.21% as of this week's data. Remaining merchant-held goods in Shaanxi are mostly being sold off urgently, and at the current destocking pace, inventories are expected to clear this week or next. With minimal old crop leftovers, the large-scale arrival of new early-maturing apples has further reinforced the pricing logic of 'premium quality commands premium prices.' This year's supply of early-maturing apples in the west has been impacted by extreme weather, significantly reducing the quality yield. In the Baishui region, general goods with blemishes are priced at just 1.5-2.0 yuan/jin, while good-quality apples in Heyang have fallen from an opening price of 4.5-4.6 yuan/jin to 2.2-2.4 yuan/jin in early August, with some orchards ending procurement early. In the northern Shaanxi plateau regions (around Luochuan, Huangling, and Yichuan), affected by multiple hailstorms in June-July, the proportion of hail-damaged apples is high. Prices for mixed goods and hail-damaged fruit are chaotic, with most flowing to low-price channels and juice processing plants. In stark contrast, scarce premium supplies are commanding a premium: according to public information, the opening price for bagged Gala apples in Luochuan was around 4 yuan/jin, and after mid-August, prices for high-quality fruit bucked the trend to rise to 4.5-4.8 yuan/jin. Good-quality fruit in Yichuan and Huangling remained steady at around 4.5 yuan/jin, with some production areas selling out within days. The price gap between premium and inferior goods in the Yichuan region exceeds 1.5 yuan/jin.

Scarcity Theme for Western New Crop Commercial Fruit May Re-emerge

With early-maturing apples gradually hitting the market, the impact of extreme weather events like hail in the west on premium fruit rates may return to the capital markets' focus. It's worth noting that since institutional bag-setting surveys began, reports about extreme weather like hail have emerged frequently—some verified, others limited in impact. However, because apple weather issues are highly localized, unlike other agricultural products, the damage from weather is difficult to broadly quantify and typically affects individual orchards. Based on the quality of early-maturing fruit across western regions, our view is that the premium fruit rate for late-maturing Fuji apples may see a proportional downward adjustment. Numerous weather disruptions have already been confirmed. Below is an incomplete summary of weather disruptions based on our survey of various institutional findings this fruit season, combined with our own field research: During the flowering stage in April, parts of Gansu experienced snowfall and low temperatures, with areas like Qingcheng facing strong winds during flowering, leading to widespread shedding of first-bloom flowers and reliance on second-bloom fruit set. Production areas in Fuxian, Shaanxi, also saw bare branches due to wind. From late May to June, severe convective weather intensified: late May saw local hail in northern Shaanxi; on June 3, towns including Puti in Luochuan, Niuwu in Fuxian, and Yaohe in Baishui experienced about 20 minutes of intense hail, with orchards lacking hail nets suffering widespread fruit drop and damage to young fruit (witnessed firsthand during a bag-setting survey by Jianyuan Futures); on June 3 and 5, hail again struck Yan'an, Weinan, and other areas. On a broader scale, from May to June, core production areas including Zhaotong in Yunnan, Yantai in Shandong, Pingliang in Gansu, and Baoji, Yan'an, and Xianyang in Shaanxi all experienced varying degrees of severe convection and hail. In August, according to the Shaanxi Provincial Plant Protection Station, the area affected by early leaf spot disease reached 2.7166 million mu, an increase of 613,200 mu year-on-year. The rate of brown spot diseased leaves stood at 3.01% (compared to 2.48% in the same period last year), with some local areas like Chunhua reaching as high as 26%. Hail-damaged orchards in Liquan, Shaanxi, and Zhengning and Ningxian in Gansu have already shown early defoliation and fruit rot. In a late-August baseline survey, we found that in the Yan'an production area, the area affected by hail was approximately 50% (Luochuan 60%, Fuxian 50%, Yichuan 30%). Using linear extrapolation, we preliminarily estimate a significant decline in the province's premium fruit rate. Fruit rust, mainly pit rust and water-line rust, affects about 15%, more severe in Baishui than in Luochuan or Fuxian. Brown spot disease is causing widespread defoliation, particularly severe in the inner canopy of Fuji trees, which may impair coloration, sugar content, and next season's flower bud quality.

For trading, the more critical focus is the cumulative effect of these disruptions and their forward guidance. On one hand, across various institutional metrics, national bag-setting volume is up about 10% year-on-year. Under the Mysteel data framework, the final production estimate may increase by around 18% year-on-year. The expectation of a bumper crop in quantity is well-established, but the increase in bag-setting does not directly translate into an increase in commercial-grade fruit. Second-bloom fruit set from flowering, hail damage sites, and disease-related defoliation are all eroding the premium fruit rate. A significant divergence between total output and premium fruit quality is likely. On the other hand, early defoliation and hail damage weaken the tree's stored nutrients and affect flower bud differentiation, issues that cannot be directly validated by production data. Therefore, we believe that although the market has not fully priced in the weather theme, as the bag removal period approaches in September and premium fruit rates enter the field verification stage, the quality narrative in western production areas is ripe for re-emergence. If the premium fruit rate falls short of expectations after bag removal, it will directly reduce the effective supply of deliverable goods for the new crop, resonating with the October contract's delivery logic. We recommend closely tracking the second-round survey data from institutions during the September bag removal period.

Eastern Region Sentiment Remains a Key Watch Point

While old crop inventories in western cold storage are largely depleted, creating a heated market atmosphere, sentiment in the eastern production areas remains depressed. Looking at destocking data, the eastern regions are currently in a phase where 'weak reality' meets 'marginal improvement.' According to Mysteel data, cold storage apple inventories in the main Shandong production area over the past four weeks were 366,000 tons, 340,400 tons, 311,100 tons, and 270,200 tons respectively. The weekly destocking pace picked up slightly in mid-to-late August. However, this year's cold storage intake itself is at a lower level compared to historical averages for the same period. The low absolute inventory level does not necessarily indicate warming consumption; the year-on-year destocking pace remains slow. The ongoing market entry of early and mid-season varieties this month is further impacting the digestion of stored apples. The Shandong production area is currently the main battleground for destocking and the core sample for observing eastern sentiment. Comparatively, Shandong is the only one of the three major production areas with a year-on-year increase in inventory. Looking at different time periods, early August saw slow shipping speeds, with significant declines in e-commerce and export orders. The quality of stored goods is generally poor, premium supplies are limited and hard to source, and prices remained stable. Late August saw slight improvement in packaging and shipments, but overall transaction sentiment stayed cold. Merchants were cautious in their purchasing, market channel movement was slow, and some merchants only shipped to their own channels on an as-needed basis. In terms of prices, in the Penglai region, 75# farmer first/second-grade apples are mainly quoted at 1.5-2.0 yuan/jin, 80# first/second-grade at 2.6-3.6 yuan/jin, and third-grade fruit at 0.6-1.0 yuan/jin. In the Qixia region, late Fuji 80# first/second-grade red-striped apples are 2.5-4.0 yuan/jin, and 80# farmer mixed goods are 1.3-2.0 yuan/jin, still maintaining low levels. In the current eastern environment, with the two festivals approaching, key factors to monitor are the realization of Mid-Autumn Festival stocking demand and the opening prices of Hongjiangjun and late-maturing Fuji apples. If the accelerated destocking trend in the east continues under the holiday effect, the logic of Shandong's low prices pressuring the market will weaken, forcing short sellers to reassess both their win rate and odds.

Summary

Compared to August, the apple market is now in a critical window of transition between old and new crop seasons: western old crop inventories are near zero, early-maturing premium fruit is wrapping up amid buying frenzies, the new late-maturing Fuji has yet to be harvested, and the commercial fruit rate faces downside risks from cumulative extreme weather disruptions. After capital completed its shift to the January contract, the market's trading atmosphere has noticeably improved. For future observation, we suggest tracking three key threads: First, the field verification of premium fruit rates during the mid-to-late September bag removal period—this is the crucial time for whether the western quality narrative moves from expectation to reality. If the premium fruit rate disappoints, it will directly squeeze the effective supply of new crop deliverable goods, resonating with the October contract delivery logic. Second, the extent to which Mid-Autumn and National Day stocking demand materializes. Whether destocking in the eastern Shandong region can continue to accelerate and whether low-price pressure can be alleviated will determine the strength of the bearish argument. Third, the opening prices for Hongjiangjun and late-maturing apples in the eastern production areas. On the trading front, the current long-short conflict is asymmetric: the bears rely on relatively high Shandong inventories and weak terminal consumption, while the bulls rely on scarce western premium goods and rising delivery costs. As the delivery month approaches and industry players still have demand to take delivery when the late-maturing fruit hits the market, the one-sided odds for shorts on the October contract have clearly narrowed. Therefore, our view remains: before the late-maturing apples are extensively harvested and premium fruit rates become clear, maintain a cautious stance on shorting apple futures. For those looking to go long and buy the dip, focus on right-side trading and do not use absolute low prices as an entry signal. Wait for confirmation from bag removal period survey data and holiday stocking conditions.

This information is for reference only. Author: Yan Junyong, Practitioner Qualification No.: F03135728, Investment Advisory No.: Z0024434, Apple Analyst, Chang'an Futures.