Monday 20th August 2018
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New Zealand's pipfruit industry is headed for a record crop this year as it benefits from favourable growing weather, low Northern Hemisphere stocks, market changes, premium varieties, and a weaker New Zealand dollar, according to a report published today by MyFarm Investments.
The vast majority of the 2018 apple crop has been picked and nearly 90 percent has been exported, said MyFarm head of investment research Con Williams, who joined New Zealand's largest rural investment syndicator last month after eight years as ANZ Bank's agri economist. Williams said the crop is expected to have increased by 5-6 percent from last year, registering a new all-time high.
"Indications for this year’s pipfruit crop are that orchard gate prices could rival the records set in 2016 and deliver grower returns well into the double-digits," he said. "An empty Northern Hemisphere market, market access changes, opening of new markets, increased penetration into existing markets and a lower New Zealand dollar have all combined to deliver very favourable returns."
Williams said the past season had benefited from decent growing conditions in both the Hawke's Bay and Nelson regions, with the average fruit size the largest in about 20 years due to regular rainfall, heat and sunshine during the growing season.
The favourable conditions were accelerating demand for new plantings and re-grafting from traditional 'club' varieties, which have protected intellectual property, Williams said.
"It’s estimated club varieties now account for some 45-50 percent of total production and this is only set to increase further as competition for market share heats up," he said, noting club varieties had commanded a price premium of around 35 percent in recent seasons, compared to virtually nothing just five years ago.
New areas being planted could be in the realms of 500-600 hectares per year into the early 2020’s, an acceleration from the 250-300 hectares that is estimated to have been planted over recent years, Williams said. That would add between 4-5 percent per year on the existing planted area, he said.
"Such growth in the planted area, a greater proportion of club varieties and world-class orchard/supply chain management (i.e. productivity improvements) means total production and export volumes are set to soar," he said.
The main constraints to growth were the availability of suitable trees, and labour, he said.
Asia continued to be the main growth region for New Zealand apples, with exports up about 7 percent a year and the market accounting for nearly 40 percent of total exports.
Asian demand reflects New Zealand’s increasing supply of varieties that suit Asian consumer tastes, being redder and sweeter, and was underpinned by Asian demand for healthy food, an expanding middle class that is willing to spend more on high-quality and exotic fruits, and greater penetration into new and existing markets, he said.
In 2018, the New Zealand crop also benefited from a substantially smaller Chinese apple crop due to frosts, and trade barriers which hurt US apple exports to China and Chinese exports to India.
"These dynamics have supported record New Zealand exports to both the Indian and Chinese markets this season," Williams said.
Europe is still the favoured market for Braeburn, Royal Gala and Pink Lady, and prices in the region were favourable in the last season as frosts in key producing areas reduced last year's crop and meant there was less stock on hand when the New Zealand supplies arrived.
Other attractive markets on the horizon include Mexico, Canada, United Arab Emirates and Saudi Arabia.
New Zealand exports benefit from being counter-cyclical with Northern Hemisphere suppliers and the price gap with our main rivals in Chile and South Africa is widening, with New Zealand apples delivering 50 percent more than Chile and double South Africa in US dollar terms, Williams said.
"In terms of Asia, while the super-high returns reached in recent years may be difficult to maintain with increasing volumes there is still plenty of volume growth potential at profitable prices," Williams said, noting that a consumption increase of just 0.80 kg/capita across non-producing pipfruit markets such as Thailand, Indonesia, the Philippines and Malaysia equates to nearly all New Zealand’s current export supply of fresh apples.
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