Kiwifruit industry in "sweet spot" with record grower return   25 May 2016

Wednesday 25 May 2016 08:48 AM

Kiwifruit industry in "sweet spot" with record grower returns, sales of $1.9 bln, Zespri says

By Fiona Rotherham

May 24 (BusinessDesk) - The 2015/2016 season for kiwifruit marketer Zespri has been a record-breaker on several fronts – biggest total grower return, highest Green fruit return per hectare, and record sales volumes for both Green and SunGold kiwifruit.

Post the 2011 Psa crisis that nearly devastated orchards and cost an estimated $930 million in lost exports, the kiwifruit industry has recovered and is now in something of a sweet spot, with total sales revenue for the season up 21 percent to $1.9 billion, Zespri says. A total 131.6 million trays were sold with New Zealand-grown kiwifruit sales hitting 117 million trays, up 22 million trays on the previous year.

Total fruit and service payments to New Zealand growers increased 22 percent on the previous year to $1.143 billion while the average return per hectare hit a record $60,758.

Zespri’s corporate net profit rose $1.2 million to $35.8 million due to the increased volumes and a one-off gain from the release by Chinese authorities last month of a $13 million provision relating to under-declaration of customs duties by its Chinese subsidiary, ZMCC, between 2008 and 2010.

Removing that one-off factor, Zespri’s normalised profit is $27.8 million compared to $21.5 million last year. The board has announced a final full-year non-imputed dividend of 24 cents per share, double the previous year.

The only cloud in an otherwise sunny picture is that the per-tray return for Green kiwifruit fell to $5.13 from $6.01 the previous year, mainly due to the 12 per cent increase in crop volumes to 80.7 million trays. By comparison, Gold per-tray returns were $8.21 from a crop of 32.6 million trays.

“Somewhat additive was the strong Gold growth, making the overall growth of 21 percent and Green returns started to come off,” said chief executive Lain Jager. “There’s always a relationship between supply and demand in the fruit business.”

Reduced Green returns were counter-balanced by strong average orchard yields of 11,048 trays a hectare, up from 8,972 trays per hectare last year. The average yield for Gold was 8,653 trays per hectare due to SunGold, the Psa-resistant replacement variety to Hort 16A, only half-way to hitting full production. Sales of Gold are expected to hit 45 million trays this season and 65 million trays by 2018 and Jager said so far prices are holding up despite the higher volume.

Stronger Gold per-hectare returns are also expected in the next few years and Zespri has a tender underway this week to release an additional 400 hectares of licence this year which, along with growth in the global supply business, is likely to boost corporate profit in the 2016/2017 season.

Non-New Zealand grown kiwifruit saw a production increase of 2 percent in Green kiwifruit at 10.9 million trays and a 46 percent lift in Gold to 3.7 million trays. Zespri wants Northern Hemisphere SunGold supply to match New Zealand growth and around 7.5 million trays of SunGold from outside New Zealand are expected to be sold next season, up on 2.3 million trays this season.

The Green return of $56,673 per hectare compared to $53,884 achieved last year. The return per hectare for Green Organic hit a record $52,917 driven by higher average yields of 7,373 trays compared to 5,973 last year. The Green Organic average return was $7.01 per tray and $42,995 per hectare.

Jager said the challenge in the next two to three years was building demand ahead of a period of strong supply growth, which reflected the recovery from Psa and development of the new Gold variety. This season is expected to see an increase in total sales of 27.8 million trays, or a similar percentage growth to this year. Trials are underway of a new generation Green and a red kiwifruit but Jager doesn't expect a commercial release until next year or 2018.

Globally kiwifruit volumes are rising at 4 percent annually and Jager said within 5 to 7 years he sees New Zealand’s growth falling back to a compound annual growth rate of 6 to 7 percent compared to the strong current growth rate.

“We’re in a good space but I’d hasten to add that kiwifruit, as with the dairy industry, these things are traditionally cyclical,” Jager said.

(BusinessDesk)

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