Financial Factors
Revenue
The lower value of the New Zealand dollar in relation to the United States dollar has helped the international competitiveness of Canterbury's process vegetable exporters. This has been partly offset by increased freight and other input costs, particularly diesel. Processors and exporters want greater stability in the value of the New Zealand dollar.
Prices paid to growers for the main process crops have remained at similar levels to last year, i.e., potatoes average $185/tonne, peas $240-$400/tonne (average $300/tonne), carrots $100/tonne, and sweetcorn $150/tonne. Due to the weather, the area of pea crop rejected or purchased at a reduced price because of quality factors was higher than in recent years. With generally high yields of potatoes, volumes greater than the contracted volume were purchased at a lower price, which resulted in lower overall returns per tonne to growers.
Prices for onions have decreased significantly from last year. Dependent on sale time, size and quality, prices for onions have been as low as $150/tonne for those going to the European market and $300/tonne for those going to Japan. The break-even point for production and packing costs is typically over $200/tonne. Though more profitable, the Japanese market only takes larger onions which were more difficult to grow this season in Canterbury because of the climatic conditions. In addition to the low prices, some growers report that there was a higher demand for quality by exporters, which led to a higher rate of rejects. These low prices have resulted in some farmers not harvesting their crops.
Fresh potato prices have decreased significantly from last year, while seed potato prices have on average stayed at the same price. Prices of below $85/tonne for fresh potatoes have been reported, which is well below the cost of production. Prices for potatoes which are destined for export have also been low, reflecting increased competition from northern hemisphere suppliers to South East Asian markets, as well as price wars between New Zealand exporters. The low prices have resulted in some farmers not harvesting their entire crop.
Asparagus prices were higher this season.
Expenditure
Most crop input costs remained at a similar level to last year. However, diesel prices have increased for both growers and processors, which has resulted in a squeeze on overall profit margins.
This season's humid conditions resulted in the more frequent use of fungicides on some crops, e.g., beans and potatoes. The frequency of irrigation was lower than average, which did result in some cost savings for irrigated farmers.
Net Result
Table 2 shows the gross margin results (crop income less variable costs of production) for the main crops. This excludes overheads such as taxation, debt servicing and administration costs. They are based on average returns and costs over the Canterbury region. There was considerable variation in these margins, depending on individual circumstances, timing of critical stages relative to climatic conditions, and the nature of contracts. Many have lost money on growing particular crops due to circumstances often beyond anyone's control, while others report satisfactory overall returns. This season has highlighted the risks of growing these types of crops.
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