Issues and trends
Pipfruit New Zealand has initiated the formation of an industry market panel comprising 29 exporters representing about 90 percent of the crop. Pipfruit New Zealand aims to provide market intelligence to the panel to align with meetings scheduled during the selling season. The forum creates an opportunity to discuss problems, provide some industry rules and encourage consistent quality standards by introducing a trust mark (indicating minimum quality standards). More co-ordinated action arising from panel deliberations should improve grower returns and the perception of New Zealand fruit in overseas markets.
Growers generally support the panel concept but the litmus test will be whether it clearly contributes to improved market returns.
A number of growers with smaller orchards who relied heavily on pipfruit for their orchard income have left the industry. They tried various methods to stem the losses, including reducing discretionary costs, removing poor performing blocks and leasing out some of the orchard. However, with the immediate future of the industry not looking any brighter, these growers chose to leave before their equity positions were seriously eroded.
The pipfruit businesses showing most resilience at this time are working to clearly defined long-term strategies. They tend to be vertically integrated, with the orchard business strongly aligned with packhouse, coolstore and exporting operations. They have excellent communication channels with retail outlets and are continually looking for ways to improve the business throughout the supply chain.
Orchard size has significantly increased as orchards look for economies of scale. Ownership still remains predominantly in family control, but there has been a noticeable trend towards growers developing strategic alliances with exporters to reduce costs.
Industry consultants and bankers have made real efforts to co-ordinate their assistance to growers through these difficult times. They can provide the facts that individual growers need to weigh up their options for the best way forward. Clearly some hard decisions still need to be made by growers to return bankability to the pipfruit industry. It is imperative that the co-ordinated approach taken to date continues. In the meantime, income from other sources or other crops is proving critical for many growers.
Orchard value
Orchard value is normally divided into land and improvements. Improvements mainly comprise planted apple trees and associated posts and wires. Their value has been marked down if commodity varieties predominate. In contrast, this value has been scaled up where a healthy mix of new varieties like Jazz™ exists. The underlying value of land is still expected to hold firm, depending on the mix of uses the land can be put to.
The level of pipfruit orchard sales has not been high in the two years to December 2005. Sixteen land settlements have occurred in this time period – five in the Moutere area and 11 in the combined Motueka and Waimea plains area. There has been some land banking for future planting (not necessarily for apples). There is still market interest in buying ex-orchard land at prices comparable to a section in the city. Leasehold land that has a fixed rental charged is almost impossible to sell. There is little likelihood of this trend changing until the pipfruit industry returns to consistent profitability or rentals are reduced.
Looking ahead
Growers would like to see more advertising of New Zealand pipfruit to create more market opportunities. They would like to see a return to a New Zealand brand to promote quality fruit. The Trustmark setup by Pipfruit New Zealand is designed to achieve this.
A fluctuating exchange rate makes it difficult for export oriented industries like the pipfruit industry to plan with any certainty. A strong New Zealand dollar over the last two years against our main trading partners has been a concern for growers, who know that it translates into fewer dollars in the pocket. They are hoping that a weakening of the New Zealand dollar noted in recent weeks indicates a downward trend.
Growers are aware that large overseas supermarkets control their destiny to a large extent. Consolidation by retailers is affecting market returns, along with demands by these supermarkets for higher quality at lower costs. New Zealand growers realise that a key ingredient to survival is improving fruit quality in the marketplace. The adoption and continued application of SmartFresh™ is recognition of this.
New chemicals continue to be introduced into the pipfruit industry. Regalis® was commercially available for the first time in 2005 and has been successfully used to control tree vigour and regrowth. Although not cheap at $500 per hectare for multiple applications, it provides very satisfactory results. Many growers have said they intend to spray their whole orchard in 2006. Successful application of Regalis® reduces the need for summer pruning. This frees up skilled labour for use elsewhere on the orchard, or allows the option of reducing the wage bill.
Favourable spring weather, a smaller forecast New Zealand crop and excellent fruit size are encouraging signs, but not enough to lift grower confidence dramatically for 2006. The volumes and quality of carry-over European stock and Southern Hemisphere competitor fruit will once again have a major impact on the market outturn for New Zealand growers. The jury is still out on the effectiveness of recent Pipfruit New Zealand initiatives.
Table 4.5: Nelson pipfruit budget
|
2005 |
|
2006f |
|
|
|||||
|
$ |
$ |
||||||||
|
per |
per |
per |
per |
per |
per |
||||
|
Whole |
planted |
TCE |
TCE |
Whole |
planted |
TCE |
TCE |
||
|
orchard |
HA |
gross |
export |
orchard |
HA |
gross |
export |
||
|
Revenue |
|||||||||
|
Gross pipfruit income |
893 701 |
34 373 |
10.52 |
13.87 |
1 138 460 |
43 787 |
13.32 |
17.54 |
|
|
Other orchard income |
21 580 |
830 |
0.25 |
0.34 |
9 282 |
357 |
0.11 |
0.14 |
|
|
Gross orchard revenue |
915 281 |
35 203 |
10.77 |
14.21 |
1 147 742 |
44 144 |
13.43 |
17.69 |
|
|
Cash orchard expenditure |
1 025 213 |
39 431 |
12.07 |
15.92 |
1 052 936 |
40 498 |
12.32 |
16.32 |
|
|
Interest |
60 502 |
2 327 |
0.71 |
0.94 |
65 286 |
2 511 |
0.76 |
1.01 |
|
|
Rent and/or lease |
26 520 |
1 020 |
0.31 |
0.41 |
27 924 |
1 074 |
0.33 |
0.43 |
|
|
Cash orchard surplus |
-196 955 |
-7 575 |
-2.32 |
-3.06 |
1 597 |
61 |
0.02 |
0.02 |
|
|
Depreciation |
45 604 |
1 754 |
0.54 |
0.71 |
44 252 |
1 702 |
0.52 |
0.68 |
|
|
Net trading profit |
-242 559 |
-9 329 |
-2.86 |
-3.77 |
-42 655 |
-1 641 |
-0.50 |
-0.66 |
|
|
Taxation |
-26 900 |
1 035 |
-0.32 |
-0.42 |
-17 300 |
-665 |
-0.20 |
-0.27 |
|
|
Net trading profit after tax |
-215 659 |
-8 295 |
-2.54 |
-3.35 |
-25 355 |
-975 |
-0.30 |
-0.39 |
|
|
Allocation of funds |
|||||||||
|
Add back depreciation |
45 604 |
1 754 |
0.54 |
0.71 |
44 252 |
1 702 |
0.52 |
0.68 |
|
|
Drawings |
38 142 |
1 467 |
0.45 |
0.59 |
38 974 |
1 499 |
0.46 |
0.60 |
|
|
Principal repayments |
6 812 |
262 |
0.08 |
0.11 |
312 |
12 |
0.00 |
0.00 |
|
|
Development |
70 954 |
2 729 |
0.84 |
1.10 |
59 514 |
2 289 |
0.70 |
0.92 |
|
|
Capital purchases |
109 304 |
4 204 |
1.29 |
1.70 |
30 862 |
1 187 |
0.36 |
0.48 |
|
|
Disposable surplus/deficit |
-395 267 |
-15 203 |
-4.65 |
-6.14 |
-110 765 |
-4 260 |
-1.30 |
-1.71 |
|
|
Other cash sources |
|||||||||
|
Off-orchard income |
72 904 |
2 804 |
0.86 |
1.13 |
44 486 |
1 711 |
0.52 |
0.69 |
|
|
Other cash income |
5096 |
196 |
0.06 |
0.08 |
2 210 |
85 |
0.03 |
0.03 |
|
|
Net cash change |
-317 267 |
-12 203 |
-3.73 |
-4.93 |
-64 069 |
-2 464 |
-0.75 |
-0.99 |
|
|
Assets and liabilities |
|||||||||
|
Land and building (opening) |
1 794 000 |
69 000 |
21.12 |
27.85 |
2 171 000 |
83 500 |
25.40 |
33.45 |
|
|
Plant and machinery (opening) |
104 000 |
4 000 |
1.22 |
1.61 |
140 400 |
5 400 |
1.64 |
2.16 |
|
|
Total orchard capital |
1 898 000 |
73 000 |
22.34 |
29.47 |
2 311 400 |
88 900 |
27.05 |
35.62 |
|
|
Total debt opening |
977 600 |
37 600 |
11.51 |
15.18 |
915 200 |
35 200 |
10.17 |
14.10 |
|
|
Equity |
920 400 |
35 400 |
10.83 |
14.29 |
1 396 200 |
53 700 |
16.34 |
21.51 |
Symbol
f forecast
Table 4.6: Nelson orchard expenditure
|
2005 |
2006f |
|
|
|
|||||
|
$ |
$ |
||||||||
|
per |
per |
per |
per |
per |
per |
||||
|
Whole |
planted |
TCE |
TCE |
Whole |
planted |
TCE |
TCE |
||
|
orchard |
HA |
gross |
export |
orchard |
HA |
gross |
export |
||
|
Orchard working expenses |
|||||||||
|
Wages |
|||||||||
|
Pruning |
55 120 |
2 120 |
0.65 |
0.86 |
55 380 |
2 130 |
0.65 |
0.85 |
|
|
Thinning |
40 664 |
1 564 |
0.48 |
0.63 |
43 134 |
1 659 |
0.50 |
0.66 |
|
|
Harvesting |
141 025 |
5 424 |
1.66 |
2.19 |
140 155 |
5 391 |
1.64 |
2.16 |
|
|
Other |
58 448 |
2 248 |
0.69 |
0.91 |
60 710 |
2 335 |
0.71 |
0.94 |
|
|
ACC |
6 032 |
232 |
0.07 |
0.09 |
6 344 |
244 |
0.07 |
0.10 |
|
|
301 289 |
11 588 |
3.55 |
4.68 |
305 723 |
11 759 |
3.58 |
4.71 |
||
|
Post-harvest costs |
|||||||||
|
Packing |
192 594 |
7 407 |
2.27 |
2.99 |
188 843 |
7 263 |
2.21 |
2.91 |
|
|
Packaging |
217 070 |
8 349 |
2.56 |
3.37 |
219 344 |
8 436 |
2.57 |
3.38 |
|
|
Coolstorage |
104 992 |
4 038 |
1.24 |
1.63 |
109 672 |
4 218 |
1.28 |
1.69 |
|
|
Freight |
11 044 |
425 |
0.13 |
0.17 |
11 110 |
427 |
0.13 |
0.17 |
|
|
525 701 |
20 219 |
6.19 |
8.16 |
528 969 |
20 345 |
6.19 |
8.15 |
||
|
Operating costs |
|||||||||
|
Spray and chemicals |
72 904 |
2 804 |
0.86 |
1.13 |
78 468 |
3 018 |
0.92 |
1.21 |
|
|
Pollination |
2 938 |
113 |
0.03 |
0.05 |
3 484 |
134 |
0.04 |
0.05 |
|
|
Fertiliser |
7 046 |
271 |
0.08 |
0.11 |
8 450 |
325 |
0.10 |
0.13 |
|
|
Electricity |
5 148 |
198 |
0.06 |
0.08 |
5 590 |
215 |
0.07 |
0.09 |
|
|
Sundry expenses |
15 132 |
582 |
0.18 |
0.23 |
15 678 |
603 |
0.18 |
0.24 |
|
|
Vehicles |
21 268 |
818 |
0.25 |
0.33 |
23 010 |
885 |
0.27 |
0.35 |
|
|
Repairs and maintenance |
17 186 |
661 |
0.20 |
0.27 |
17 186 |
661 |
0.20 |
0.26 |
|
|
141 622 |
5 447 |
1.67 |
2.20 |
151 866 |
5 841 |
1.78 |
2.34 |
||
|
Administration and property expenses |
|||||||||
|
Communication |
4 758 |
183 |
0.06 |
0.07 |
5 174 |
199 |
0.06 |
0.08 |
|
|
Rates |
6 838 |
263 |
0.08 |
0.11 |
8 086 |
311 |
0.09 |
0.12 |
|
|
Accountancy, consultancy, legal |
7 852 |
302 |
0.09 |
0.12 |
8 658 |
333 |
0.10 |
0.13 |
|
|
General insurance |
6 422 |
247 |
0.08 |
0.10 |
6 500 |
250 |
0.08 |
0.10 |
|
|
Crop insurance |
11 206 |
431 |
0.13 |
0.17 |
11 258 |
433 |
0.13 |
0.17 |
|
|
Levies and compliance |
11 596 |
446 |
0.14 |
0.18 |
11 310 |
435 |
0.13 |
0.17 |
|
|
Other |
7 930 |
305 |
0.09 |
0.12 |
15 392 |
592 |
0.18 |
0.24 |
|
|
56 602 |
2 177 |
0.67 |
0.88 |
66 378 |
2 553 |
0.78 |
1.02 |
||
|
Cash orchard expenditure |
1 025 213 |
39 431 |
12.07 |
15.92 |
1 052 936 |
40 498 |
12.32 |
16.23 |
|
|
Calculated ratios |
|||||||||
|
Economic orchard surplus (EOS)1 |
-205 517 |
-7 904 |
-2.42 |
-3.19 |
-3 559 |
-137 |
-0.04 |
-0.05 |
|
|
Cash orchard expenditure/GOR2 |
112% |
92% |
|||||||
|
EOS/total orchard capital |
-10.8% |
-0.2% |
|||||||
|
EOS less interest and lease/equity |
-31.8% |
-6.9% |
|||||||
|
Interest + rent + lease/GOR |
9.5% |
8.1% |
|||||||
|
EOS/GOR |
-22.5% |
0.3% |
Notes
1 EOS (see Table 3.7 for calculation formula)
2 Gross orchard revenue.
Symbol
f forecast
Table 4.7: Nelson pipfruit Production and income details, 2005
| Non- | |||||||
| Gross | Export | Total | Export | Export | |||
| Area | Yield | Packout | Export | Return | Return | Revenue | |
| (ha) | (TCE) | (%) | Cartons | ($/TCE) | ($/TCE) | ($) | |
|
Variety |
|
|
|
|
|
|
|
|
Braeburn |
10.7 |
45 881 |
77 |
35 328 |
10.30 |
3.22 |
397 859 |
|
Royal Gala |
8.1 |
22 334 |
81 |
18 091 |
14.42 |
1.94 |
269 101 |
|
Cox Orange |
2.1 |
6 277 |
69 |
4 331 |
17.28 |
1.00 |
76 793 |
|
Fuji |
1.6 |
1 404 |
84 |
1 179 |
31.85 |
1.51 |
37 902 |
|
Other apples |
2.6 |
7 462 |
60 |
4 477 |
17.09 |
1.46 |
80 873 |
|
Pears |
1.0 |
1 596 |
63 |
1 006 |
29.58 |
2.41 |
31 173 |
|
Vacant plantable area |
2.0 |
|
|
|
|
|
|
|
Total |
28.0 |
84 955 |
76 |
64 413 |
13.09 |
2.45 |
893 701 |
Table 4.8: Nelson pipfruit forecast production and income details, 2006
| Non- | |||||||
| Gross | Export | Total | Export | Export | |||
| Area | Yield | Packout | Export | Return | Return | Revenue | |
| (ha) | (TCE) | (%) | Cartons | ($/TCE) | ($/TCE) | ($) | |
|
Variety |
|
|
|
|
|
|
|
|
Braeburn |
9.6 |
42 453 |
76 |
32 264 |
14.29 | 3.48 | 496 514 |
| Royal Gala | 7.8 |
23 182 |
81 |
18 777 |
16.24 |
1.76 |
312 692 |
|
Cox Orange |
2.1 |
6 571 |
70 |
4 600 |
19.02 |
0.99 |
89 434 |
|
Fuji |
2.6 |
2 941 |
84 |
2 470 |
31.89 |
1.56 |
79 506 |
|
Other apples |
2.6 |
7 935 |
66 |
5 237 |
20.00 |
1.94 |
109 979 |
|
Pears |
1.3 |
2 379 |
65 |
1 546 |
32.04 |
0.95 |
50 336 |
|
Vacant plantable area |
2.0 |
|
|
|
|
|
|
| Total | 28.0 | 85 460 | 76 | 64 895 | 16.74 | 2.52 | 1 138 460 |
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
