Kiwifruit industry going strong despite challenging conditions

Kiwifruit market update June 2020

Market update | June 2020

The 2019/20 growing season has been affected by the drought in the North Island, and during harvest the industry had to deal with the challenges that the global Covid-19 pandemic presented and the fast-changing global environment. Despite all this, the sentiment in the industry remains very positive. 

Growing conditions were affected by the draught and the crop is smaller than the previous season. Total trays harvested are down 4.5% from 155 million to 148 million this harvest. This is mainly a result of drop in volumes for green variety, from 83 million trays to 70 million. SunGold on the other hand, rose from 67 million trays in the 2019 harvest to 75 million in the 2020 harvest.

The change is explained by an increase in production area for SunGold kiwifruit as new greenfield developments are coming to fruition along with ongoing conversions of Green to SunGold. The crop yields between the two main crops also vary with SunGold being 35% more productive on a per hectare basis.

Generally, SunGold plantings are in more recent developments, compared to most of the Green developments that have been in existence since the 1980’s. Newer orchards are more likely to have irrigation and therefore coped better with this season's dry conditions and generally resulted in  higher yields compared to non-irrigated properties.

Despite the smaller crop, the industry still expects that the payments to the local kiwifruit industry will be up on last year’s total of $1.96 billion, which was an increase of 9% on the 2018 harvest, confirming the upward trend.

Zespri, known to be conservative in their estimations, has so far revised their forecasts up twice. At their last update on 16 June 2020, their forecast prices for Green are expected to be in the range of $5.40-6.90 per tray and between $12.50-14.50 per tray for SunGold. These forecasts are higher than the average prices achieved for the 2019 harvest of $6.46/tray for Green and $11.71/tray for SunGold, fuelling optimism in the industry.

The forecast Orchard Gate Returns (OGR) for the 2020 harvest have been underpinned by growing demand from key markets despite the pandemic (or because of it) and overall exports are up 7% on the same period last year, according to ANZ.

The result is influenced by the increased share of SunGold, which is harvested earlier. It also reflects the strong demand for healthy, vitamin C rich foods and much stronger supermarket sales, coupled with strong brand position of all Zespri varieties and a nimble response from the New Zealand kiwifruit industry to the logistic challenges presented by the global shutdown and supply chain interruptions it caused.

The 2020 licence tender process has been completed with both the SunGold and Zespri Red pools oversubscribed. 700 hectares of Sungold licence was released at a median price of $400,023 per hectare, up from $290,000 last year. 50 hectares of Organic SunGold was released at a median price of $219,565, up from $153,217. and 150 hectares of the new Red licence was released at a median price of $62,500. This significantly increases the capital requirements for new greenfield developments and underpins the prices for existing orchards.

In the past few months we had a reasonable level of sales activity in the kiwifruit property market, consistent with the current sentiment in the industry. Kiwifruit orchard prices remain strong.

The global events in the past few months and the drop of the economic activity across the world, are casting high levels of uncertainty over how the next few years will play out for the industry. Judging from the industry response and the demand levels that we have observed so far, we have a reason to consider the kiwifruit industry in New Zealand to be well placed to weather the crisis successfully, however, another 6 months to a year will provide more certainty.

Find our full report for 2020 released earlier in the year here.

Bay of Plenty Kiwifruit Property Report 2020


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Chris Boyd

Executive Director | Rural Valuation

Tauranga

Chris has 35 years valuation and consultancy experience across a wide variety of property related matters including compensation, financial reporting statutory compliance, acquisition and rural valuation. He previously held senior positions at both Valuation New Zealand and Quotable Value – where his primary focus was the Bay of Plenty and Waikato regions.

His client work for the firm since 2008 has covered a range of property types and issues including; agribusiness, horticultural ,  lifestyle and residential development land, forestry land valuations, Emission Trading Scheme issues, specialised asset valuations, valuations for financing, due dilligence tax compliance, trust formation, matrimonial disputes and compensation. In addition he has provided expert evidence in the High Court, District Court, Maori Land Court, Environment Court  and Land Valuation Tribunal.

Chris’s infrastructure sector experience has included valuation and advisory projects covering compensation for easement and right of way property interests acquired by Transpower and other leading New Zealand energy companies, for new transmission lines and infrastructure upgrades, and compensation assessments for Crown entities taking property under the Public Works Act 1981 for motorways and pipelines.

His forestry sector experience has encompassed numerous valuation and advisory engagements throughout the country – including advice in relation to devolution of the New Zealand Forestry Service in the late 1980s, land value and rental review assessments as part of Crown Forestry license protocols and Maori Land rental review requirements, various Treaty of Waitangi settlement awards and providing expert evidence.

Chris is based in our Tauranga office and offers our clients sound market advice founded on a comprehensive understanding of the specific sector dynamics and balanced by experience gained working on behalf of owners, regulators and adjudicators in both the public and private domain. He is involved in a number of practice areas including forestry, dairy, Kiwifruit Avocados, infrastructure and pastoral.

Chris is the immediate past chairman of the Tauranga branch of the Property Institute of New Zealand and is a member of  the Waikato No. 4 Land Valuation Tribunal.

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