Prospects For Horticulture Look Bright

The horticultural sector has continued to surge ahead despite the turmoil and uncertainty Covid-19 has inflicted at a local and international level. Latest figures from Horticulture New Zealand highlight this success with the sector generating a record-breaking $6.2 billion of exports for the year ended June. This is up $700 million from last year and the sector’s earnings now account for 10 percent of the country’s export merchandise earnings.

Kiwifruit has become the “poster fruit” for the horticultural industry’s success, now generating over a third of that export income followed by wine accounting for $1.8 billion of export earnings and apples at $830 million.

This year’s grape harvest of all of these crops bought real challenges, falling as they did while the Covid-19 lockdown commenced with social distancing rules and limited travel all impacting both in the field and within processing facilities.

Despite initial fears that Covid-19 infections could catch and spread through these facilities, they never came to pass and this year’s harvest ended up off the tree and vine relatively smoothly. In fact, the harvest has been so successful that some winemakers are claiming 2020 one of the best vintages ever.

For the kiwifruit sector the challenge of Covid-19 came almost the same week as harvest commenced and it was only through intense industry co-operation and effort which was first seen during the Psa outbreak back in 2010 that the harvest was kept on track.

Zespri chairman Bruce Cameron says this year’s harvest has in fact again broken records, with over 160 million trays harvested from a bumper crop with market prospects looking extremely positive.

The harvest is expected to include a record volume of high-value SunGold fruit accounting for almost half, and SunGold’s success in markets continues to drive investor and grower interest in the sector.

Over the 2019/20 financial year, SunGold earned an average of $11.86 a tray, generating an OGR average of $160,000 per hectare, while Green earned $6.67 a tray, or $67,000 on average per hectare.

Bayleys Bay of Plenty lifestyle and country sales manager Matt Clutterbuck says many successful growers are generating gross revenue of over $200,000 per hectare on their SunGold crop.

“This is a figure that has continued to improve over the last few years. When you consider growing costs of about $50,000 per hectare, this represents a very healthy net income for a crop, and that is reflected in the value of orchards.”

Matt says SunGold has proven to be adept at growing well beyond the traditional kiwifruit growing region of Western Bay of Plenty. Recent investments have included a 250 hectare greenfield conversion now underway near Edgecumbe. Other plantings have gone in the ground around Opotiki, East Cape and Hawke’s Bay.

“Supply has been increasing, but that has been driven by offshore demand for the fruit.”

The recent SunGold license tender round reflects the level of industry confidence in the fruit’s future with offshore consumers.

The latest 700 hectare tranche of SunGold license to grow the fruit sold for a median value of circa $400,000 per hectare excluding GST, a 37 percent leap on last year’s value. The offering was oversubscribed by over 2:1 with growers seeking 1,660 hectares worth of licenses.

The value puts SunGold at the top of fruit license values with the next closest being Envy apples at about $100,000 per hectare.

This year also marked the first time Red kiwifruit have been offered for commercial growing after years of trial work and the 50 hectares of licenses were snapped up at a median value of $62,000 per hectare and was also oversubscribed by 110 hectares. This comes while Zespri continues to work on tuning up Red’s shelf storage life and works to lift its potential yield and fruit size.

Bayleys Te Puke salesperson Snow Williams says interest continues to be strong in orchard purchases from both investment groups and from growers wanting to expand their holdings.

“The valuations of orchards are based on very sound economic principles, on what those crops are earning in the market rather than any particular perceived future value, and it is holding the market to very realistic expectations,” he says.

With such good sustained yield and the ability to contract management, more opportunities will open for non-orcharding investors in the coming months.

Bayleys national director rural Duncan Ross says the sector will benefit from an input of external capital as bank sources stay tight.

“The proven track record of the sector and its ability to bounce back from Psa in 2010 and power through Covid-19 more recently should provide potential investors with a good level of confidence about where they are putting their money.”

He says the horticulture sector is reflecting greater attention among consumers to what they eat. Seeking out healthy, beneficial fresh products sourced from a clean environment puts the New Zealand industry in an extremely positive position, he says.

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