Financial Factors
Revenue
Orchids
The 1999/2000 Cymbidium production season is currently in its early stages. Prices are $20-$25/carton higher than the mid-season prices last year but a little below last season's early prices. The lower prices appear to be due to the current economic situation in Japan, which is the market that accounts for the majority of Cymbidium sales.
Total export receipts for orchids in 1999/2000 are expected to be similar to 1998/99 due to higher export volumes being offset by lower prices. Orchid prices in 1998/99 were higher than the previous season due mainly to reduced export volumes. The 1998/99 average carton price was in the region of $52 for the mid-season crop, which was an increase of 11% from the previous season ($47).
Callas - Cut Flowers
Calla cut flower prices remained strong over the 1999/2000 season amongst a wide range of markets with strong demand continuing from Japan, North America, South East Asia and Europe. Total export receipts for callas for 1999/2000 is expected to be greater than 1998/99 due to similar export volumes but higher prices. Most New Zealand cut flower exporters report a trend of increased market interest in exports of calla flowers into the United States, although prices are still not as strong as Japan.
Increasing production of calla flowers in Europe and its neighbouring countries has caused a slight but noticeable reduction in the demand for New Zealand grown flowers, which traditionally took advantage of the out of season market. Prices for export calla flowers depends on the variety and time of year. Flower prices are best between October and November and February and March.
Calla flower exports remain dominated by two main varieties, Black Eyed Beauty and Black Magic. Demand is strong for the other colours, particularly strong gold, red and orange coloured varieties. The export markets prefer the grading of calla flowers in 10 cm units rather than the A, AA, etc., grading system used in the past.
Callas - Tubers
Calla prices in 1999/2000 for small size tubers (3 cm and smaller) are expected to be similar to the previous season although this is due to exchange rate benefits offsetting weaker market conditions. Market demand and prices for larger sized tubers remains strong. The 1999/2000 season has seen a strong increase in calla tuber production overseas, predominantly in Europe, Africa, Israel, South America and India. The production has been both in tissue culture plants and tuber production. New Zealand has in the past had a strong market for tubers of high health status in Northern Hemisphere countries. As the crop has become more popular internationally and growing knowledge has increased, tuber production globally has increased.
Sandersonia - Cut Flowers
Sandersonia cut flower export prices for the 1999/2000 season are expected to be up on the previous season due to the improved exchange rate. The total value of export receipts in 1999/2000 is expected to be similar to 1998/99 as a result of lower total export volumes being offset by higher prices. Sandersonia was the third largest cut flower crop (by value) exported from New Zealand in 1998/99. Over 60% are exported to Japan. However, there is increasing interest in the flowers from other countries. Sandersonia occurs in only one colour, as orange coloured bells, and as a result market interest is mainly from South East Asia and Europe.
Sandersonia - Tubers
Sandersonia tuber export prices for 1999/2000 are expected to be higher than 1998/99 due to the more favourable exchange rate. Total export receipts are expected to be higher due to similar export volumes sold at higher prices.
Lilium
Lilium flower prices for the 1999/2000 season were considerably higher than the previous 1998/99 season. Growers have reported average prices per stem of up to double that of the previous season for some varieties. The improvement in prices, particularly of the popular Casablanca variety, appears to be due to reduced volumes on international markets. Dutch bulb companies have forced those growers in Germany and France who were producing the Casablanca variety outside of Plant Variety agreements, to cease production. Total export receipts are expected to be higher in 1999/2000 than in the previous season, due to price increases more than offsetting reductions in volumes.
Proteacea
Proteacea export prices for the 1999/2000 season were higher than 1998/99, due to the favourable exchange rate. Total export receipts are therefore expected to be higher.
Peonies
Peony export revenue and flower export numbers in the 1999/2000 season are expected to be a little higher than the 1998/99 season. The expected increase in export revenue is predicted from a small increase in export flower numbers, combined with a slight price improvement due to the stronger United States dollar.
Table 1 presents export volumes for the past three years, and indicates that total stems exported, and total return to growers, has been fairly similar for each of the years. This result is at variance with strategic industry predictions, which forecasted 30% annual growth in export flower volumes based on the number of plants planted in recent years.
The industry is concerned that export flower numbers are not steadily increasing despite the increasing maturity and productive potential of existing plantings. It is believed the lack of increase is due to adverse seasonal conditions in 1998 and 1999 and if favourable seasonal conditions are experienced next year, and plants perform to their full potential, there could be a significant increase in export flower numbers. It is possible that export markets may not be sufficiently developed to accommodate this extra production and a reduction in prices to growers could result.
Roses
There have been no new entrants into the rose growing industry for the past two years but existing larger growers (greater than 5,000 m2) have continued to expand their production area. This is mainly to maintain economic returns in the face of declining domestic market prices, which are the result of competition from imported roses and new flower types.
Production costs are increasing from items such as chemicals and fertilisers, and growers have not necessarily increased their revenue to compensate for this. Improving rose production through adoption of overseas technology and planting higher producing varieties, remain the keys to maintaining reasonable margins.
Source: NZ Peony Society
Expenditure
Growers have generally not focused on cost reduction in the 1999/2000 year due to the improved returns for most flower types, so expenditure is very similar to the previous year. However, many growers are increasing the scale of their operations in order to spread their fixed costs and achieve economies of scale.
Net Result
Gross margins for a number of the flower crops discussed are presented in Table 2. These assume average to above average grower management skills under Auckland growing conditions. The revenue, prices, yields and expenditure levels are based on what is considered typical of this type of grower under the market and climatic conditions of the season. Labour costs for crop management activities, e.g., flower harvest and packing are included. The gross margins presented are on a per square metre basis but crops are not necessarily directly comparable against each other. Some gross margins are based on crops that produce all year round, e.g., roses. Other crops are produced over a 6-8 month period, e.g., calla tubers, and there can be a considerably different capital investment for the different crops, e.g., glasshouse vs outdoor growing.
The gross margin figures illustrate that most crops achieved higher gross margins in the 1999/2000 than in the previous 1998/99 season, which was largely due to the more favourable exchange rate. In addition to this, the following points should be noted:
- Calla cut flower crops produced higher yields in 1999/2000 due to better weather.
- Cymbidiums produced lower yields in 1999/2000, which effectively offset the improvements in prices.
- Roses received lower winter prices in 1999/2000 as a result of competition from cheaper imported roses from India.
- Sandersonia cut flower and tuber crops achieved better yields and quality in 1999/2000 as a result of better seasonal conditions. They also achieved better prices.
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