Issues and Trends
Kiwifruit growers continue to be very happy with their orchard businesses. They feel confident their industry is achieving through good strategies and marketing. In particular, they have received excellent prices for their 1999 crop following good returns for 1998. The exchange rate is at a level growers are comfortable with, and is assisting New Zealand dollar returns. Orchard values are high as a result, and many growers have had significant cash surpluses for the last two-three years, which they have been able to use for personal drawings, reducing debt, fine tuning orchard performance, orchard expansion and off-orchard investment.
Growers see the past few seasons as a new era. They consider that the ZESPRI brand and system have been strengthened in the international market-place. World production levels have stabilised and the New Zealand production base is lower and more diversified than at the time of poor returns in the early 1990s. The increased diversity of New Zealand kiwifruit into product types like organic fruit, branded Class II and now the gold variety, provide increased differentiation and brand strength. The ability to market year-round, and the commercial and legal protection for new varieties via plant variety rights and trade-marked brands, provide both an opportunity for other players to participate, and greater protection of the value for New Zealand growers. In addition, growers have more resilience than they did 10 years ago, as some per tray costs (particularly packing costs) have fallen, and yields have increased.
Harvest of the 2000 crop is still continuing at the time of writing this report, but the total volume of Class I green fruit is likely to increase a little over 1999 levels. Fruit size will be significantly smaller than for the 1999 crop. This has implications because larger fruit size is usually an important way to differentiate New Zealand kiwifruit in the market, and there are more individual pieces of fruit to sell. At retail, much fruit is sold by the piece whereas growers concentrate on returns per tray. Green fruit is still the main product, comprising over 90% of New Zealand production.
The volumes of "KiwiStart" early harvest fruit were lower for the 2000 crop but fruit was still shipped for early market-place arrivals. The premiums paid to growers for early harvest fruit in 2000 was lower than for the 1999 crop. Standards set for fruit pest status at harvest were increased, aiming to reduce the need for fruit fumigation in overseas markets, particularly Japan. Of particular importance is the Fuller's Rose Weevil, which is a weevil that lays eggs on the kiwifruit. Some of the first growers to harvest were caught by surprise at the stricter standard and felt unfairly disadvantaged, as there is no routine on-orchard monitoring for control of the weevil.
The production of the new gold variety has significantly increased in 2000. The 2000 volume will be several million trays of Class I product which is more than 10 times the volume marketed in 1999. The fruit size of the 2000 gold crop is very large and growers are excited about its prospects. Many growers have produced high yields of the variety this year, far more than they had expected, and therefore feel resilient to a drop in return.
Growers expect returns for the gold variety to drop quite significantly, particularly for this season. This is due to the effort needed to build the market for the product and the amount of the product that will be used for marketing purposes, particularly tastings. The proportion of the total gold production going to the higher priced Asian markets will also reduce relative to the total crop. However, with the high yields growers have achieved, they feel they are able to make a profit with little or no premium over the green fruit. The forecast for New Zealand production of gold product is for similar crop volumes to this year's for the next one to two seasons. Growers feel it is quite likely that returns will increase through this time, as successful marketing builds consumer demand.
Some grafting of existing Hayward vines to the gold variety is continuing, but over the long term it is likely most of the increase in gold production will come from new plantings.
Production of certified organic kiwifruit has been increasing. Growers in the transitional phase, where their production methods meet organic standards but their fruit is unable to be marketed as organic fruit, have been paid a nominated premium to assist their revenue during the conversion process. Organic fruit has returned a premium of around $3/tray in the last few years. Many growers expect the premium to be less this year because with the increased volume expected, a lower proportion of the organic crop will go to the highest price markets. A change of legislation in Japan from October 2000 will mean fumigated fruit cannot be sold as organic, and this also threatens premiums. The organic fruit has historically mainly been sent to Japan and the United States, but more of the 2000 crop will be marketed in Europe.
Most organic growers of kiwifruit are in the Bay of Plenty. Growers in other districts are less ready to embrace certified organic growing methods, often because they have a wider suite of crops to deal with than just kiwifruit. Organically certified gold kiwifruit is being test marketed this year, but does not yet have a separate pool for revenue.
Many growers in all districts are very supportive of sustainably focused growing methods and the extension to the KiwiGreen programme, "KiwiGreen 2000", that is being introduced. Many growers feel that this is meeting consumer demands for product integrity, food safety and environmental sustainability, while allowing them a wider range of management tools to use than organic production methods do.
Class II fruit has been of increasing value to growers partly due to surplus demand and lower total New Zealand production. The fruitÿhas mainly been marketed in New Zealandÿand Australia, but Class II product is now being marketed further afield by ZESPRI International Limited, under the brand K1W1. Grower returns for the Class II fruit were significantly increased for their 1999 crop and growers expect it to continue at higher levels.
The New Zealand Kiwifruit Marketing Board was corporatised as ZESPRI Group Limited (ZGL) effective from 1 April 2000. Existing growers were issued shares based on their recent years' production. Much of the restructuring was in response to the previous government's pressure for producer board reform. The industry now feel they have the benefits of a controlled marketing environment, with more political acceptability through growers now being shareholders; initial shareholding being in proportion to production; shares being tradable between producers; collaborative marketing arrangements to allow other parties to market New Zealand kiwifruit, and a separate, voluntary mechanism for financing the industry's 12 month marketing strategy.
A separate company was formed in 1999 called Kiwifruit International Limited. This company provides a venture capital mechanism for growers to voluntarily invest in the 12 month marketing strategy. This means fruit produced in other countries can be marketed by ZESPRI International Limited, but the financial risk is undertaken through Kiwifruit International Limited. The capital for this company was sufficiently subscribed.
Growers are happy that the restructuring process has preserved what was most important to most of them, being the single desk marketer. There are concerns by growers that having a corporate structure brings with it corporate issues such as the need to increase the capital base and corporate profile. Growers are concerned that expanding the capital base will be at the expense of payments for fruit. The conflicting roles of fruit suppliers and shareholders may also be an issue in the future, as the shareholding and supplier base could become more separate. This is the reason why growers are keen to have shareholding constrained to industry members. A resolution requiring sale of shareholding within a certain period for growers leaving the industry is to be put to this year's annual meeting.
Some growers feel the information flow between ZESPRI and growers has lessened in favour of closer relationships with post-harvest operators
Some growers are making further investment in kiwifruit. New plantings are occurring, with several hundred hectares likely to be developed progressively over the next few years. Bankers are looking fairly favourably on kiwifruit development and this is assisting people with development proposals. Both green and gold varieties are being planted, mostly by existing industry participants including some syndicates. The area thought to be planted to date would probably not be sufficient to replace the area of green vines converted to the gold variety in 1997 and 1998. The scale of development is nothing like the 1980s when thousands of hectares were developed, forming the core of the current industry. The increase in development has led to some pressure on supplies of posts and wire, which are also in demand in the grape industry.
A new biosecurity issue has arisen with the discovery, during early 2000, of the varroa mite that infests beehives. This mite kills honey bees, which are the key pollinating agent for kiwifruit. Kiwifruit growers are very anxious, because pollination is a critical event in kiwifruit production, and requires tens of thousands of hives to be moved into orchards at flowering. Growers are concerned that efforts to contain or control the mite may impair pollination. Large scale artificial pollination is neither practically nor financially feasible. Also unknown is the extent of the population of wild bees. These assist kiwifruit pollination, and are also affected by the varroa mite. The landform in the Bay of Plenty results in high populations of feral bees, as there are many forested or bush gullies close to orcharding areas.
Growers feel it is too early to gauge the full impact of the varroa mite, but consider pollination so important that it must be sorted out. They are very relieved the discovery was made at a time of year which gives almost the maximum time for MAF and beekeepers to plan before the next kiwifruit pollination period in October/November 2000. The likelihood of beekeepers needing to use chemicals for mite control also has implications for organic orchardists as it is unlikely to be acceptable under organic management practices. Growers are generally worried about biosecurity and what other pests may be here that have not yet been detected, or may arrive and affect their orcharding businesses.
Packing the 2000 kiwifruit crop has provided some bottlenecks. Many growers' production of both green and gold varieties was well up on estimate, which then delayed harvesting of the next grower's crop. In addition, the gold variety requires harvest over a condensed period. For a number of packing facilities the high production meant some of their growers were queuing and becoming anxious about harvest dates. Wet weather towards the end of the picking season has also delayed the final week or so of harvest, and some damage is likely from the storms over Queen's Birthday weekend.
A number of packhouses set up specialist graders for each fruit type. These sheds are now looking at more flexible packing arrangements in future to enable ready switching from one variety to another, to avoid bottlenecks. Many packhouses already work seven days and six nights a week so their packing capacity is high. Storage of fruit prior to picking enables packhouses to keep running even if picking may be held up for several days due to wet weather.
Negotiation of fruit supply arrangements for the 2000 crop has brought with it some frustrations. The replacement of the detailed supply arrangement prescription in the legislation with contractual arrangements for fruit supply for the 2000 crop, has been very demanding of people's time and patience, as they attempted to get workable contracts that cover all the details required.
Labour has been less readily available during harvest of the 2000 crop than in recent years. A number of packhouses were advertising for staff right through the harvest period, whereas in recent years most vacancies have been filled two months before harvest. The work-force composition varies between districts with 'back packers' important in Northland, and Indian workers particularly important in Auckland and the Bay of Plenty area. Indian workers in particular are important throughout the kiwifruit production cycle rather than just at harvest.
Orchard prices have been strong in the Bay of Plenty. Prices before harvest were from $26-$30/tray, including the crop. The sale prices have been between $165,000 and $200,000 per canopy hectare, plus dwellings. After harvest the price drops by about $3/tray because the crop is not sold with the orchard. Demand for kiwifruit land has also influenced other sectors, with some dairy grazing land being sold for kiwifruit expansion at prices of around $50,000/ha. In some of these sales part of the farm has been subdivided and sold to neighbouring farmers for additional grazing land, and the better parts retained for kiwifruit development.
Avocados have become an important adjunct to kiwifruit growing, particularly in the Bay of Plenty and Northland. Avocado production is increasing significantly as young trees come into production and management techniques improve. The last two to three seasons, where there have been good production conditions (particularly warm periods at fruit set in spring) and high market prices, have given avocado growers greater confidence. A number of packhouse/coolstore organisations supporting kiwifruit growers are also increasingly involved in avocados. They are also a popular development option compared to kiwifruit because the cost of establishing an avocado orchard is lower. There is no need for a support structure, and annual production costs are relatively low. However, avocado productivity is notoriously variable.
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