Issues and Trends
Kiwifruit growers are generally very positive. These are good times and they are doing well. However, they are not taking continued success for granted and are still focused on achieving good orchard performance. They could reduce spending if necessary but many have no need to at present so they are enjoying life! The impact of the higher value of the NZD relative to main kiwifruit markets is a dampener on 2003 returns, but higher yields are expected to offset this.
Growers consider their current returns are at a high point. They expect some future decline but are confident that the industry will continue to be sound and profitable due to the strategies being pursued. They consider the industry structure, particularly the marketing system via the dominant-seller status of ZESPRI, with other marketers being used in a collaborative approach, is an important component of the industry success.
The OGR has become a widely used basis for comparing orchard revenue per tray. It is a figure net of costs that occur outside the orchard gate, like freight to the packhouse, packing and coolstorage. The OGR is available to the grower to spend on "within the orchard" costs, like growing and picking the crop, overheads, debt servicing and drawings. ZESPRI calculates and publishes estimated OGR figures for green, gold and organic fruit in their monthly newsletters to growers. Different packhouse groups vary their presentation of revenue figures to growers considerably which still makes comparisons difficult, but it has improved over the past year.
During 2002, levels of fruit fumigation for the Japanese market were lower, following greater attention to control key quarantine pests within orchards. Growers were paid an incentive, which helped cover the cost of non-chemical pest control and this has been widely adopted.
The gold fruit harvested in 2002 stored well, in contrast to the previous year when high fruit losses depressed returns. The variety is still relatively new and appropriate handling and management practices are being rapidly developed.
For the 2003 crop, late fruit maturity has delayed progress of harvest but, once harvested, fruit has been quickly shipped and the earliest market reports show slightly higher volumes of fruit sold than a year ago.
The volume of gold variety fruit increased for the 2002 harvest due to the increased age of orchards of this variety, which now provides 14% of total production. The organic green and green variety fruit produced 4% and 82% of total production respectively. Further increases in the production of gold fruit are expected as orchards continue to mature, and new plantings will also increase green production.
Organic production is static or declining. The three key product types are important for ZESPRI in marketing the fruit. Organic orchards usually produce a significantly lower yield and smaller fruit size. Converting to organic production takes three years. Significant premiums over conventional fruit encouraged conversion to organic production, but these premiums have now declined. More fruit was able to meet the Japanese quarantine standards in 2002, which was important because Japan is a key market for organic fruit. A temporary arrangement to underpin premiums for organic fruit ends after the 2003 crop. The future prosperity of organic growers is an industry issue as customers expect ZESPRI to be able to supply certified organic product.
The gold variety is protected by licences and new licences are not available for New Zealand plantings as sufficient production is expected from existing licences. Plantings are being licensed overseas to develop 12-month market supply of the variety.
One means to compare financial performance between green, green organic and gold kiwifruit is the OGR per hectare estimated by ZESPRI. This takes account of differences in revenue per tray and yield. For the 2001 and 2002 crops, organic green fruit had the lowest OGR per hectare. For the 2002 crop, gold OGR per hectare was more than $10,000 higher than for green or green organic although gold growers report higher on-orchard costs, so this does not necessarily flow through to a higher surplus.
Growers consider concern about the Severe Acute Respiratory Syndrome (SARS) will have a positive impact on kiwifruit sales. This is due to the documented nutritional benefits of eating kiwifruit in the media in Asian kiwifruit markets and specific comments suggesting kiwifruit will help protect against SARS.
The New Zealand kiwifruit industry has begun seeking Euro-Retailer Produce Working Group Good Agricultural Practice (EUREPGAP) accreditation. This was begun quickly and at short notice late in 2002. Growers reported few problems complying with the orchard requirements, with the main issues being the short timeframe and providing documentation, rather than making many changes to orchard practices. ZESPRI and packhouse groups provided considerable material and support to assist growers to prepare for the EUREPGAP process. Growers accept the market demand for such assurance programmes, but are concerned about the non-productive expenditure required. ZESPRI is paying an incentive for fruit from orchards that comply with EUREPGAP.
The sophistication of sampling and handling systems for kiwifruit is constantly increasing. One example is segregating lines at harvest that are likely to taste consistently good when ready to eat, and another is conditioning fruit during shipping to market so it is in eating condition on arrival. Growers and packers are very responsive to incentives paid for fruit meeting specific quality attributes. Some of these activities have increased post-harvest costs and may require further investment, e.g., increasing storage space to aid segregation of lines.
Kiwifruit exports to Australia are likely to come under the New Zealand Horticulture Export Authority Act 1987 (HEA), although this requires an amendment, which is in progress. Illegal re-export of New Zealand kiwifruit from Australia to Asian markets has depressed returns from these markets. HEA disciplines should reduce the incidence of this.
As a result of normal succession processes, ZESPRI Group Ltd has both a new CEO and Chairman who have been well received by growers. The Chairman has been on the Board for some time including a period as Chairman-elect. The CEO has come from the Australian Wheat Board, which he reports has many similar attributes to the ZESPRI business. ZESPRI has relocated their head office from Auckland to the existing office at Mount Maunganui, and building extensions are underway to replace temporary out-buildings that have been used as additional offices over the past year.
The grower representation organisation, New Zealand Kiwifruit Growers Incorporated (NZKGI), now has formal representation from gold, organic and green growers as well as the existing regional and Maori grower representation within the organisation. An Industry Advisory Council is being set up with equal grower (via NZKGI), ZESPRI and supplier (packhouse groups) numbers to consider industry issues. As things have evolved, a number of key issues affecting growers were discussed between ZESPRI and suppliers without direct grower representation. The direct financial relationship is between ZESPRI and suppliers, and then between suppliers and growers.
Future production of kiwifruit in New Zealand is forecast to rise due to new and maturing plantings. Growers expect this to create downward pressure on prices but they also have confidence in the industry. Growers see having the three key products of green, gold and organic fruit, the incremental advances in growing and handling techniques that are occurring, and the increasing co-operation with overseas producers, as providing a positive foundation for the future.
Industry-wide insurance provides cover for orchards affected by spring frosts. The level of payment for production lost to frost is less than growers would receive from the fruit but provides a worthwhile contribution. Growers can opt to grow on the crop even at a very low yield and earn revenue on surviving fruit plus insurance cover on trays lost to frost. There is debate about whether spring frost insurance should be sought in future. An increasing number of orchards more likely to be affected by frost are installing frost protection systems. Growers in areas not affected by frost debate whether they should contribute to the premiums paid. Whether this cover will be offered or be affordable continues to be reviewed.
Growers have commented about the need for well-trained orchard staff. Much of the workforce is casual, and labour requirements have seasonal peaks. There is an important workforce comprised of recent immigrants, and backpackers are an important source of harvesting and packing labour. There are training initiatives underway, with a number of packhouse groups and larger growers supporting workers through training programmes. The response to campaigns to recruit staff to some industry cadet positions has been poor. Promotion of careers in the sector is also being undertaken. Backpackers are particularly important in Northland. WINZ is funding a labour facilitator in Northland to work with the fruitgrowing industry.
Kiwifruit orchard values are high and real estate agents report orchards are selling well. In the first half of 2003, orchards were selling for around $30-$35/tray or $250,000-$300,000/canopy ha including the 2003 crop. Higher prices are being paid for orchards with better yield, location or facilities like frost protection. Buyers include existing orchardists, dairy farmers and absentee owners who will lease out the orchard. Some existing orchardists would like to purchase additional orchard area but baulk at the high sale prices sought. There has also been demand for bare land for development into new kiwifruit orchards and a couple of Bay of Plenty dairy farms have been bought for this purpose. Bare land priced around $55,000-$60,000/ha has been in demand. Limited availability of suitable land in the western Bay of Plenty, together with strong orchard performance in the eastern Bay of Plenty, has meant buyers are looking towards Whakatane and Opotiki for suitable land.
The main producing region for kiwifruit in the Bay of Plenty is also undergoing rapid urban development and population growth. The local district and regional councils are planning to accommodate growth expected over a 50-year horizon. Maintaining the economic base, including kiwifruit orchards, has been identified as an important issue during the planning process. Kiwifruit is a significant industry in the local economy as well as an important export crop for New Zealand.
Growers continue to be concerned about biosecurity, particularly the risk of foreign pests being found or becoming established near growing areas. They are concerned about potential market access problems as well as changes needed to control any such pests given the pest monitoring and low chemical residue pest control process used throughout the industry.
The research and development subsidiary of ZESPRI, ZESPRI Innovation Ltd, has introduced new strategies in order to protect the intellectual property being developed in the New Zealand kiwifruit industry. Password protected web pages and restricting registrations to a recent Research Forum to people holding a Kiwifruit Property Identification Number (KPIN) are examples of strategies used.
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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