Financial Factors
Revenue
Overall, the continued appreciation of the NZD has resulted in lower returns for growers. The economic depression of our major markets has compounded this - the Japanese economy remains slow, the US is still recovering from 11 September 2001, and the war in Iraq. The fear of SARS has almost shut down the South East Asia markets (Hong Kong, Singapore and Taiwan) and recovery of these markets is expected to take 2-3 years. To avoid catching SARS, people are avoiding the outdoor flower markets, and visiting friends less, reducing the demand for imported flowers.
Flower export volumes for the year ended March 2003 are estimated to be 20% lower than in 2002. The total FOB export value of flower and foliage sales for the year ended March 2003 is estimated at $40.4 million. This is 20% lower than the year ended March 2002, mainly due to weak market conditions and poor seasonal weather (see Graph 1). The main export crops continue to be cymbidium orchids at $17.8 million, callas at $6.4 million and sandersonia at $1.3 million (see Graph 2). Japan continues to be the main export market, accounting for 62% of export sales (by value), followed by the US with 14%.
Cymbidium Orchids
The average cymbidium flower price for the year to March 2003 was $6.05/stem (FOB), 4% lower than the previous season. Overall, the season was late which meant fewer stems were available in the early season even though prices were similar to 2001/02. Consequently, mid-season volumes were higher than the previous year and prices were weaker, particularly in Japan. The exchange rate only moved at the end of the season so had little impact on returns.
The gross margin for cymbidium orchids in 2002/03 dropped by 5% due to these lower returns and increases in freight to all destinations.
Prices in 2003/04 are expected to reduce further due to the strengthening of the NZD against the yen and the continued weak market conditions in Japan. To date this season, the net effect has been a 5-10% reduction in prices to New Zealand growers compared with last season.
Calla - Cut Flowers
The average calla price for the year to March 2003 was stable at $1.13/stem (FOB), compared with $1.14/stem in the previous season. However, fluctuations in price occurred between grades with the taller stem prices dropping due to Japanese buyers being less willing to pay a premium for that product.
Prices for the mid-length grades improved slightly on last season due to higher demand and this extended to other markets such as the US and European Union. This resulted in more reasonable returns relative to the very poor season in 2001/02 despite increases in freight and unfavourable exchange rates. Consequently, the gross margins for calla production remained relatively steady with an 8% increase for greenhouse production and a 13% decrease for field production. The latter was due to the increased cost of production.
Prices for the 2003/04 season are expected to reduce due to the strengthening NZD against both the yen and the US dollar.
Graph 1: Total New Zealand Flower and Foliage Exports
Years based on 12 months to March.
Sources: Statistics New Zealand and AgFirst Consultants NZ Ltd
Graph 2: Export Flower Prices and Stem Numbers
 |
 |
 |
 |
Sources: Statistics New Zealand and AgFirst Consultants NZ Ltd
Sandersonia
Sandersonia export prices for the 2002/03 season were down 19% on the previous season, at an average of 63 c/stem (FOB). Prices have continued to fall due to very poor market conditions in Japan, which was influenced by lower domestic prices. Decreases in prices from last season were more dramatic (8-9%) for the shorter stem grades, while taller stem grades of 60+ cm lengths had less of a drop (at 3-4%), as they are still used by boutique florists in Japan. These marginal prices have reduced the economic return for smaller greenhouse growers, resulting in them leaving the industry during 2002/03.
The gross margin for sandersonia cut flowers continues to decrease (6% on the previous year), even though production costs have remained steady and the percentage of higher value long stemmed flowers has improved.
Sandersonia flower and tuber prices in the 2003/04 season are, at the least, expected to remain similar to this season as alternative markets are being developed outside of Japan.
Lilies
Prices for lilies over the year to March 2003 were up 8% from last season to an average $1.63/stem (FOB), with the drop in volume responsible for this price increase. North America, Japan and Hong Kong remain the major markets for lilium cut flowers, but volumes are not expected to increase due to lower priced material being produced by developing countries. Consequently, prices in 2003/04 are expected to be a little lower than 2002/03.
Peonies
Export prices for peonies were 13% lower at an average of $1.69/stem (FOB), compared with $1.95/stem in the previous season due mainly to poor market conditions in North America. However, this improved in the latter part of the season as prices did not drop as far as the exchange rate movement would have indicated. This is thought to be due to the annual industry promotion in New York by the grower organisation (New Zealand Paeony Society Inc), Trade New Zealand and exporters.
The gross margin for peony production decreased by 8% to $6.75/m2, due mainly to a reduction in revenue from lower average seasonal prices.
Prices in 2003/04 are predicted to improve slightly as more of the newer varieties come into production, though this may be offset by an expected volume increase, with both new and old varieties being marketed. New Zealand is leading the way in growing newer varieties. Initially New Zealand will receive a premium for these varieties, but overseas producers will eventually catch up and the price is likely to fall.
Hydrangeas
Export prices for hydrangeas are estimated to have dropped for the 2002/03 season, even though total export volumes have increased from 2001/02, as a result of new plantings coming into production.
Prices in 2003/04 are expected to continue to drop due to the strengthening NZD.
Bulbs
Bulb exports for the year to March 2003 were worth $22.9 million (FOB), a 33% increase from the previous season and double the value for the year to March 2000. The figures include exports of calla, sandersonia and peony tubers, as well as lilies and tulips.
Prices for calla tubers were strong last season as a result of increased volumes of the newer "focal" varieties being available. This is expected to continue despite some threat from major production increases in developing countries.
The gross margin for calla tuber production increased 23% for the season, due to an increase in production of the larger grades and efficiencies in production costs.
The gross margin for sandersonia tuber production remained steady at $24.50/m2 for the 2002/03 season, despite a significant reduction in price of 17-27% for larger tubers. As previously mentioned, this was due to the Japanese market, which still represents over 80% of export sales in sandersonia tubers. This reduction in returns for New Zealand growers was offset by lower costs in production.
Roses
The gross margin for greenhouse roses dropped significantly in 2002/03 due to poor domestic market conditions, and increased competition with other crops. Production costs remained steady, but the average price dropped 15% from the previous season.
Expenditure
Expenditure by flower growers during the 2002/03 season was very similar to the previous year for all the cut flower types. However, growers are becoming more aware of production costs. While many of the newer crop types can be grown outside, they perform better when under cover, which requires significant capital investment. Overall, the standard of greenhouse structures has improved to allow better control of the greenhouse environment with improved coverings and better ventilation (by automated motors). There are fewer new entrants to the sector, as potential growers become aware of the significant investment required. Expansion of existing production sites for crops, such as callas and cymbidiums, has been minimal in 2002/03 and this is not expected to change in 2003/04.
Net Result
Gross margins for a number of flower crops are presented in Table 1. These assume average to above average grower management skills under Auckland growing conditions (Southland for peony). The revenue, prices, yields and expenditure levels are considered typical under the market and climatic conditions of the season. Labour costs for the high labour demanding activities, such as flower harvest and packing, are included.
The gross margins presented are on a per square metre basis, but crops are not necessarily directly comparable with each other. Some gross margins are based on crops that produce year round, e.g., roses. Other crops are produced over a 6-8 month period, e.g., calla tubers. There can be considerably different capital investment for the different crops, e.g., glasshouse versus outdoor growing.
These figures indicate that most crops had relatively stable gross margins this season despite the difficult climatic and market conditions mentioned earlier.
Table 1: Gross Margins ($/m2)
Crop |
Growing Method |
2000/01 |
2001/02 |
2002/03 |
Calla - Cut Flowers |
Greenhouse |
25.00 |
21.90 |
23.80 |
Calla - Cut Flowers |
Field |
12.60 |
6.00 |
5.20 |
Calla - T1 Tubers |
Greenhouse |
10.10 |
10.90 |
13.50 |
Cymbidium |
Greenhouse |
35.20 |
31.20 |
29.70 |
Rose |
Greenhouse |
30.70 |
30.00 |
19.50 |
Peony Rose |
Field |
9.10 |
7.30 |
6.80 |
Sandersonia - Cut Flowers |
Greenhouse |
40.80 |
26.40 |
24.90 |
Sandersonia - Tubers |
Shadehouse |
31.10 |
25.30 |
25.50 |
Source: AgFirst Consultants NZ Ltd
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
Contact this person
