Issues and Trends
Peony growers have developed an effective mechanism in the Peony Exporter and Grower Forum, for facilitating the orderly sale of flowers over the growing season. Over the growing season, 2-3 flower exporters and 3-4 flower growers participate in a weekly telephone conference to communicate on market conditions and flower production expectations. Growers advise how the season is affecting production and the likely volumes expected from growers in their locality over the coming week. This provides the exporters with some indication of the likely flower volume. The exporters provide feedback to the growers on the performance of various market sectors, and their ability to absorb the flower volumes forecast for the coming week.
The outcome is that the exporters and growers establish what they consider to be a reasonable indicative flower sale price and this price is disseminated throughout the industry. Growers can then compare the indicative price with the price they are being offered by their specific exporter.
This process has improved relations between growers and exporters and has also improved the quality of flowers sold. In previous seasons there were instances when growers withheld flowers from distribution to exporters because they felt the price was too low and it would improve the following week. If the price did not improve, the growers would sell both the older flowers, which had deteriorated in quality, as well as the flowers that had been harvested that week. This had the effect of both depressing the quality of flowers sold and of increasing the volume of flowers on the market thereby compounding effects on reducing prices.
The peony growers and exporters have been operating this forum over the past three seasons and intend to continue using it into the future.
Peony growers continue to be frustrated with transport arrangements and costs of transporting flowers from their property to exporters in Auckland. Peony growers are located in rural parts of the South Island and must transport their crops to Christchurch for transport to Auckland. Ansett is the only carrier that has a nationwide coolstore network and is prepared to handle a seasonal crop such as peonies. This season Ansett introduced new charges which would have resulted in a 3-4 fold increase in the freight costs to smaller growers (freight accounts for under $4,000). Growers sought ways to avoid this extra cost including using exporters' freight accounts where possible and collective use of refrigerated trucks from centralised locations through to Christchurch.
Nevertheless, transport costs are still high and growers consider the service received is relatively poor. The transport issue has a particularly large impact on peony growers as many are rurally located and the industry only requires transport space for a relatively short period of the year. Transport companies with coolstore facilities tend to give priority to all year round, or longer season, operators such as the fish and chilled meat industries.
The Orchid Price Monitoring Service established last season by the New Zealand Export Growers Orchid Association (NZEGO) did not appear to achieve the benefits that were initially expected. The service was initiated to provide growers with weekly production and price trends for the season to date and from the previous season. The expectation was that this would prevent price undercutting by exporters. However, due to the lower than expected volume of cymbidium orchids in 1999, prices stayed firm and there was little impetus for undercutting. Exporters have been actively supporting the service and it will continue for the coming season.
Export flower returns to growers have been strengthened this year by the lower value of the New Zealand dollar. The exchange rate of the Yen to the New Zealand dollar in November was approximately Yen 54 compared to Yen 66 in November the previous year and in March the exchange rate was about Yen 53 compared to Yen 63 the previous year. This reduction in exchange rate effectively resulted in a 20% improvement in the returns to growers. Accordingly the mood of export flower growers is buoyant.
New Zealand lily growers have finally received access to the Japanese market for the supply of lily bulbs. The New Zealand industry has been negotiating for the past two years with MAF and their Japanese equivalent a protocol for the importation of New Zealand grown bulbs. Japan currently imports its lily bulbs from Europe, and New Zealand will be able to supply bulbs that have been lifted six months later than existing Northern Hemisphere suppliers. This will provide a benefit to Japanese growers who produce out of season, as they will be able to purchase 'fresher' bulbs, which have been held for a shorter period under storage conditions and so produce better quality flower crops.
New Zealand annually exports approximately $10 million of lily flowers, bulbs and seeds. The bulb industry group, Bulb Export New Zealand Limited, is forecasting that this could increase by up to 50% within the next five years, through the export of lily bulbs to Japan.
The proposed industry commodity levy continues to remain the primary focus of the New Zealand Flower Industry Federation Incorporated (FloraFed). In August and September 1999 two members of the FloraFed executive (Simon Ensor and David Blewden) conducted a roadshow addressing over 750 growers at 24 meetings. The roadshow presented a vision for the future of the New Zealand floriculture industry and proposed six key areas as being crucial to the future long-term profitability and success of the industry. FloraFed's proposal to the growers was that the funding to implement these initiatives be generated by a commodity levy on both export and local market flower sales.
Grower feedback, provided by completion of a questionnaire at the end of each meeting, indicated that 65% of respondents were supportive of the levy proposal, 27% were undecided and 8% were unsupportive.
Since the roadshow there has been considerable debate throughout the flower industry concerning the levy, and there are a number of vocal opponents to the introduction of the levy. The orchid industry body, NZEGO, has formally withdrawn from the participation in any industry commodity levy. This is a disappointment as, although traditionally remaining outside New Zealand flower industry bodies, NZEGO indicated it would initially be supportive of participating in the commodity levy. Orchids represent the single largest category of New Zealand flower exports accounting for 43.7% of total cut flower export receipts of $45 million during the year ended June 1999.
FloraFed is currently preparing the levy ballot papers for distribution to growers. Two ballot papers will be sent, one for the export levy and the other for the local market levy. The ballot papers are being developed in conjunction with the Ministry of Agriculture and Forestry's legal advisors to ensure the papers comply with the legal requirements of the Commodity Levies Act. It is anticipated that the ballot papers will be with growers before the end of 2000. The ballot must achieve a positive response by over 50% of the growers who respond to the ballot, measured both by number of growers responding, and the value of the crop they represent. If the ballot is positive, then a levy application must be made to the Minister of Agriculture. Indications are that the application would be processed within 12 months.
A commodity levy, if granted, remains in place for six years. The grower ballot has specified a levy ceiling level for most crop sectors, at 1% of gross sales, less commission, and specified the initial level also be set at the 1% level. Of the 1% levy, one-quarter is to be used by FloraFed for administration and representation of industry wide issues. The other three-quarters is to be utilised by the contributing flower industry sectors, termed Producer Member Organisations (PMOs), such as the NZ Peony Association, NZ Calla Council etc, to utilise in the manner they consider to be most beneficial to their members.
Funding of FloraFed since its inception in August 1998 has been by way of grants and donations. Grants have supplied the majority of the funding and have been received from Technology New Zealand and AgMardt. The most recent grant ($100,000) was secured from AgMardt in 1999 and was to be paid out over two years. To receive the grant the industry had to demonstrate a contribution to the cost of the project both in cash and also in 'kind' (in kind refers to the value of members' time contributed etc). FloraFed has advised the industry that at the time the grant was approved there was a misunderstanding of the amount of industry cash contributions as opposed to the in kind contributions. When FloraFed came to make its first claim against the grant in September 1999, it became clear the amount of industry cash contribution required by AgMardt was a lot higher than had been the case with FloraFed's first grant. The amount of industry cash required is approximately $80,000 over the two-year life of the grant. The result was that AgMardt did not pay out on the full value of the first claim and FloraFed were unable to pay all its creditors.
Over the last few months FloraFed has been managing its way out of this situation and has announced they are on track to have their financial affairs sorted out by the time of the ballot. These financial difficulties have been utilised by some opposed to FloraFed to advance their argument against the organisation. However, the full extent of grower support, or otherwise, will become evident when the ballot is conducted. FloraFed have a range of contingency plans depending on the support received for the two levy proposals.
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Monitoring and Evaluation
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