Pipfruit Growers Expect Slightly Improved Profitability

Ministry for Primary Industries
For immediate release

Pipfruit Growers Expect Slightly Improved Profitability

Pipfruit growers are expecting a small improvement in profitability this year, due to a lift in prices.

The Ministry for Primary Industries has released an analysis of pipfruit production and profitability as part of its annual Farm Monitoring Report series. The report is based on models of a Hawke’s Bay and a Nelson orchard and an overview of the financial performance of typical orchards, based on information gathered from a sample of growers and industry stakeholders.

A cool spring delayed flowering and harvest by around two weeks this season. Hawke’s Bay also had below-average temperatures and lack of sunny weather over summer.

Overall, production and sizing achieved was more variable than usual, with Royal Gala in particular significantly smaller. On the other hand, fruit colour and quality were generally excellent.

The delay in harvest meant a shorter window than usual for early-season sales in Asia before the arrival of competing southern hemisphere supplies.

Markets in Europe seem well-balanced, helped by a significant reduction in exports from the main southern hemisphere suppliers. Import prices in Europe are substantially higher than last year, and will help to compensate for the high value of the New Zealand dollar against the Euro and UK pound, says MPI senior policy analyst Annette Carey.

“Growers are particularly welcoming the expected lift in the return for Jazz TM this year. It’s looking like they will receive an average of $22 a carton after getting $19 last year.”
The Hawke’s Bay orchard model shows that a typical owner-operated orchard in the region should make $76,000 before tax in 2012, while the Nelson model is budgeting on a profit of $13,300 before tax. This would be the first profit achieved by the Nelson orchard model since 2008.

MPI reports low profitability in recent years is driving change in the industry. Vertically integrated businesses appear to have an advantage over grower suppliers in the current environment. Margins they gain from provision of post-harvest services or marketing are offsetting any orchard losses. Further rationalisation of the industry is considered likely.

The pipfruit sector is optimistic about the potential for market expansion in Asia in the medium term, with outcomes from research and development programmes helping to meet pest, disease and residue requirements.

To view the full report, go to the Publications section of the MPI website, www.mpi.govt.nz

This is the first of a series of Farm Monitoring reports which will be released over the next month.

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