Canterbury Process and Fresh Vegetables
Canterbury Process and Fresh Vegetables
Model Description
This commentary-only report covers the production and profitability of process and fresh vegetables in the Canterbury region.
Key Points
- A very dry autumn and cold winter, followed by an average spring, allowed crops to be established on time although there were problems with frosting of autumn sown crops.
- Heavy rain in January, followed by overcast conditions and lack of sunshine, reduced yields for many crops. Crops harvested prior to Christmas were about average, but tomatoes and process peas were badly affected in the New Year.
- Prices for some of the process crops lifted last year when it was apparent that processing firms could not get sufficient area for harvest.
- The area being grown for process crops has remained about the same, but an increase in sweetcorn and broad beans is planned for mid Canterbury.
- Higher costs of packaging, electricity, diesel and labour are causing a price squeeze on fresh vegetable producers.
Physical Factors
Climate
The dry season from autumn 2001 carried on until June by which time only 48% of the normal rainfall for the period had occurred.
Winter crops, such as cabbages, were adversely affected by very cold conditions at the start of July, and many were unsuitable for sale. Heavy rain fell on the upper plains at the end of July making up for the dry autumn, but the coastal area remained below average.
The late winter/early spring was drier than normal so that establishment of spring crops occurred under good conditions, with moisture carried over from the winter. Growers were concerned in September that it was the onset of a long summer drought, but above average rainfall in October allowed irrigation to be reduced.
Late spring and early summer were wetter than average. Together with a lack of drying north-west winds, conditions were good for crop establishment and growth. Soil temperatures were about average.
A prolonged spell of heavy rain in January, followed by overcast conditions in February with cooler air temperatures than normal, affected later crops of peas, tomatoes and beans so that yields were below average for the year. The quality of pea crops was lower due to disease and harvesting problems, especially on the clay downs of south Canterbury.
Autumn weather conditions were good for establishing crops for the new season, with adequate rainfall and a slow start to winter.
Crop and Vegetable Production
The three major vegetable processing companies in Canterbury are:
- Heinz Wattie’s Australasia in Christchurch, producing frozen and dehydrated peas, carrots, and green and broad beans.
- Talley’s Frozen Foods Ltd in Ashburton, processing sweetcorn, peas, potatoes and broad beans.
- McCain Foods (NZ) Limited in Timaru, processing peas, potatoes and sweetcorn.
In addition, there are a number of smaller companies processing a range of vegetables including onions, peas, potatoes and dried products.
Fresh vegetable production is mainly destined for the South Island and the southern North Island. Winter and summer brassica (cabbage, broccoli, brussel sprouts), root crops (carrots, parsnips), summer vegetables (lettuce, tomatoes, fresh beans), and leeks and celery are typical of the production. Onions and potatoes are for both domestic and export markets.
Crop Area and Yields
The area in process peas in Canterbury is static. The wet conditions in January caused an increase in ascochyta in flowering peas and yields were down, some by more than 50% compared with the start of the season, with some crops being bypassed. Average gross returns were down to $1,500/ha in the latter part of the season. The wet conditions and a lack of sunshine also affected the green bean harvest.
The area of broad beans was static although indications are for an increase next year. The wet summer caused an increase in the level of botrytis, although yields were still above average.
Sweetcorn crops were above average due to higher night temperatures, and processors and growers were happy with the season.
Carrots yielded well due to having adequate moisture through the growing season.
Late blight has been a problem in potatoes and will affect quality for processing. However, yields of early-harvested crops are looking satisfactory.
Financial Factors
Revenue
Process crop prices have been fairly static, although there was a 9.5% increase in process pea prices as farmers were resisting contracting at the price initially offered. Increases in electricity charges, fertiliser, machinery replacement and other costs, have made farmers very aware of the actual returns that they are getting. Higher prices for cereal feed grains ($275/tonne up from $200-$220/tonne), milling wheat and feed barley, plus opportunities for maize and cereal silage, and higher margins for finishing lambs have reduced the relative profitability of process crops.
Export prices and sales of potatoes and onions have dropped since the start of the season, following the reduction of eating out after the events of 11 September in the United States. Exports of potatoes to Fiji are slow, and the prices and demand for onions in the European Union are low. Sales are on consignment only. There is likely to be a surplus of onions this year that may have to be dumped.
Fresh vegetable production is in a cost price squeeze with prices remaining soft for the last four years.
Expenditure
Increased costs of diesel, power, packaging materials and paper, labour, ACC, and the 4.7 c/litre petrol tax are all affecting producers. In addition, the industry believes that in future the Kyoto Protocol is likely to significantly raise the cost of diesel and coal that is used for heating in glasshouses, affecting grower and industry margins. The compliance cost of Environment Canterbury for irrigation is also affecting farmers. Producers remain concerned about the impacts on their returns of the rising exchange rate, and believe the benefits through reduced costs for fuel, pesticides and transport will not be passed on to them.
In addition to rises in electricity costs, in one major production area the line supply charges are rising significantly from $69/KVA in 2001/02 to $157.97 in 2002/03, and to $276.60 from 2003 onwards. This will have a major effect on properties pumping irrigation water from deep wells.
Net Result
High risk crops (green beans) or high capital cost crops (potatoes) returned better gross margins, but on average the net results are little better than for cereals.
Canterbury Process Vegetable Exports 1996-2002
Issues and Trends
Vegetable processing companies have yet to release contracts for the 2002/03 year. Expectations are that there will not be a significant increase in prices due to the firming exchange rate, but there may be an increase in the area of broad beans and green beans. Specialisation of processors is starting to take place, with niche markets for organic peas, carrots and potatoes. The industry also reports a likely increase in the area of broad beans and snap beans in the future.
The opportunity for an increasing area of organic production is limited by several factors. A key one is the 3-year conversion period before higher prices will be paid for fully certified organic produce. The limited range of crops that have markets established, and the improved non-organic crop prices, have also impacted on the number of farmers considering converting to organics. In addition, industry players note that limited options for weed control in a wetter summer, problems with maintaining soil nitrogen levels, and some specific pest problems (aphid, grass grub and cutworm), increase the risks of growing compared with non-organic systems.
The conversion of arable farms to dairying has opened up an opportunity for additional process cropping as dairy farms grow a process crop before or after winter greenfeed. Process peas can be harvested in January allowing greenfeed to be grown for cows after drying off. This may reduce the impact of farm conversions from arable to dairy for the processing companies, but will depend on the returns from harvesting grass for cows and the gross margin from process crops.
The limited area for arable cropping is seen in the competition for available land. Process crops, seed production, cereal and pulse production, and dairying are often competing for the same land. The advantage of growing process crops is the lower labour and capital costs compared with livestock and fresh vegetable production.
Industry is concerned that the introduction of new agrichemical products into New Zealand is likely to be reduced because of the greater demands of meeting the requirements of the Hazardous Substances and New Organisms Act 1996, leading to higher costs. As an example, a number of companies are indicating that to introduce new chemicals for the control of downy mildew in peas and more effective chemicals to control late blight in potatoes will become uneconomic for such a small market. This could make New Zealand less competitive for processed exports in the global economy.
The newly discovered lettuce aphid is likely to have a major effect on the supply of winter lettuce, but may benefit the winter brassica market with market substitution of brassica for lettuce. As yet, the aphid has only been discovered in Canterbury but there are fears that it may spread to Nelson, Otago and the North Island.
While there has been a decline in the number of fresh vegetable growers as more specialisation occurs, there are still new operators coming into the market. These are typically small block holders with high expectations, but often a lack of experience. The recommendation from the president of the New Zealand Vegetable & Potato Growers Federation (Inc) is “Don’t grow it unless you can sell it”.
The lower and fluctuating onion prices are likely to see some smaller processors squeezed out of the market or move into domestic sales only. Retail prices are about half those of last year. Domestic potato sales are slow after starting at moderate prices. Table potato yields have been up due to the wetter summer, although quality may not be as high as last year. Dumping or feeding to stock of surplus potatoes and onions may occur this year.
Canterbury Fresh Vegetable Exports 1996-2002
Contact for Enquiries
Farm Monitoring Programme Manager
Monitoring and Evaluation
MAF Policy
PO Box 2526
Wellington
NEW ZEALAND
Phone: +64 4 894 0623
Fax: +64 4 894 0741
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