11 May 2006

MAF report shows pipfruit industry more optimistic for 2006

A new Ministry of Agriculture and Forestry (MAF) report into the status of the country’s pipfruit growers shows that their outlook for 2006 is for further losses, though smaller than those experienced in 2005.

The 2006 Pipfruit Monitoring report, which features interviews with growers and related businesses, finds that the outlook for 2006 is for a slightly more optimistic season than the 2005 season, which saw export returns at historically low levels.

“This relative improvement in outlook over last year can be attributed to a more favourable exchange rate, a smaller national crop to export, and better co-ordination from orchard to market,” says the report’s author, MAF Senior Policy Analyst Nick Dalgety.

Mr Dalgety says growers and industry representatives both expect export returns and profitability in 2006 to improve slightly on 2005.

Growers, however, are generally more optimistic than industry representatives. Hawkes Bay growers forecast a breakeven situation, while Nelson growers expect a small loss in 2006.

“In contrast, industry representatives in both regions believe that market conditions for 2006 have not improved sufficiently to justify this forecast, and that there will continue to be losses, although less than those experienced in 2005,” says Nick Dalgety.

Mr Dalgety says that the exchange rate has depreciated about 10 percent against the Euro since the time growers were surveyed in January. If this rate is maintained grower returns this season should improve on those predicted in the report.

The 2005 season, says Nelson-based Mr Dalgety, was a harsh year for those in the industry and followed a year of losses in 2004.

“A number of growers quit the industry, and more can be expected to follow if returns are poor again in 2006.

Export returns in 2005 were particularly low for our main apple varieties, Braeburn and Royal Gala. Prices fell 35 percent and 12 percent respectively. As these two varieties make up 77 percent of the national pipfruit crop, the low returns have seriously challenged the financial viability of the entire New Zealand pipfruit industry.

Factors contributing to the low returns of 2005 were:

- the high New Zealand dollar;

- intense competition from other southern hemisphere producers causing an oversupply of fruit on the EU market;

- over-reliance on the EU and UK markets at the expense of the US market where more profitable returns were achieved;

- poor co-ordination among exporters in the marketing of New Zealand fruit, including the shipping of fruit without a marketing plan;

- lack of credible market information being fed back to the grower before and during harvest.

As well as industry intelligence, the monitoring report is based on model orchards designed to best typify average growing operations in the Hawke’s Bay and Nelson regions.

Mr Dalgety says the Hawke’s Bay and Nelson models experienced losses of $8,000 and $12,000 per hectare respectively in the 2005 season. These losses, following significant losses in 2004, forced many growers to increase their debt levels, eroding their equity positions.

The report shows the national planted area has fallen 13 percent since 2005, reducing the volume of fruit available for export in 2006. New plantings particularly in the Hawke’s Bay and Nelson regions have to some extent offset these tree removals.

ENDS

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