Financial Factors
Revenue
Onions
New Zealand onion growers are facing record low prices for their onions in 1999/2000. This has come on the back of a very average season in 1998/99 when quality issues forced prices down. Some growers are faced with large bills or claims from the exporter for quality and disease problems associated with last season's crop.
The larger New Zealand onion crop entered an already over-supplied market. In December 1999, total European Union (EU) onion stocks remaining was estimated to be up by 40% from 1998. Ideal growing conditions produced record crops worldwide including Europe, Argentina, South Africa and Tasmania.
To make matters worse the 1999 European onion crop was first-class with excellent keeping quality. This year new 'high tech' storage facilities in Europe were used for the first time. Thus the normal window for New Zealand onions in Europe was effectively closed. Adding salt to this wound, European onions were exported to Japan - New Zealand's second most important market.
This over-supply has had a pronounced negative effect on prices received. Growers have reported being offered between $2 and $4 for 20 kg of under-75 mm onions, and a marginally better $3-$5 for 20 kg of over-75ÿmm onions. The lower end of these prices represents a negative cashflow.
Squash
Japan is still New Zealand's largest export market for squash. Problems with early fruit immaturity has impacted on the normally high prices received over this period. Because this is an industry-wide problem, the rate of inspections for early season product will be increased next season, and any immature product will not be allowed to be exported.
Retail prices in Japan this year are the same, or close to the same, as the last two years at 40-60ÿc/kg. Japanese supermarkets continue to buy low and sell high.
Wholesale prices later in the season were very flat. This is thought to be due to market nervousness caused by current stock holdings being unknown.
Potatoes
The combination of increased potato area, higher yields and an equally successful Northern Hemisphere growing season has led to poor prices for growers on local and export markets.
Prices have been depressed since the beginning of the season, due to the large production of "new" or early potatoes in the South Island. Growers received $60-$80/tonne for potatoes this year, compared to $300/tonne in 1999. There have even been reports of growers selling at $35/tonne for stock food because there is no other outlet for their product.
The over-supply problem exacerbated as the season continued and more potatoes were produced. Several supermarkets have been selling top quality washed and pre-packed potatoes at 25ÿc/kg. At this price growers cannot cover harvest, handling, grading and packaging costs, let alone the growing costs.
Greens
The quality of most green vegetables over the 1999/2000 season has been described by many as average. Without large fluctuations in weather or rainfall, production was consistent, with very few periods of over or under-supply. Quality suffered during the drier summer months, but most growers made good use of irrigation and kept losses to a minimum.
The prices for green vegetables were static compared to last year. Cauliflower prices hovered around $10-$11/veg pak range. Quality problems did surface during December and February because of the very dry conditions. More recently, prices for cauliflower have risen slightly due to the warmer autumn temperatures, which do not suit the more cold tolerant varieties normally grown during this time.
Cabbage prices were very similar to last year at around $10/veg pak. Localised problems with diamond back moth did create quality problems over the dry summer months, forcing prices to increase slightly. Supply and quality have both improved over autumn with growers expecting to see prices rise as the weather cools.
Prices for broccoli have been very flat throughout the year. Increased production by several large growers has seen overall production of broccoli increase again. This has not had a huge impact on prices, but nevertheless prices during 1999/2000 have seldom gone over $12/veg pak. Small head size has been the biggest quality problem this season.
Lettuce quality improved compared to last year, probably due to the good growing conditions. Prices were up slightly on last year.
Expenditure
On top of this year's very low prices, growers agree that the cost of growing is increasing. Examples of this include an increase in commission to merchants, crate hireage, installing, maintaining and using cooling facilities, higher transport costs, and having to deliver five days a week instead of two.
Many growers are now using Integrated Pest Management (IPM) systems for controlling pest levels in their crops. Although this method is beneficial and should slow the resistance of pest species to chemical control, it does bring with it the additional cost of scouting and the use of more expensive target specific chemicals. However, crops produced in this manner do not command any premium.
Following this year's very poor prices, growers will all be looking at their cost of production and only expenditure that is absolutely necessary will be made.
Net Result
Table 3 shows the gross margin results (crop income less variable costs of production) for the main vegetable crops. This excludes overheads such as taxation, debt servicing and administration costs. Onion and potato gross margins fell considerably with the cost of production being higher than income received, resulting in a negative situation. Greens gross margins remained static with very little movement compared to 1999.
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Monitoring and Evaluation
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