MAF report projects kiwifruit prices likely to remain steady

18 December 2002

Kiwifruit prices are forecast to remain close to current levels, with a slight decline in the medium term due to expanding export volumes and an appreciating New Zealand dollar.

That's according to the latest Ministry of Agriculture and Forestry forecasting report - the Situation and Outlook for New Zealand Agriculture and Forestry December 2002.

The report focusing on the kiwifruit industry says production fell in the 2002 harvest (for the year ending March 2003) as a result of adverse climatic conditions over the previous twelve months. The flavour and market conditions were however good, and prices have increased over the previous year.

Production levels for the 2003 harvest are uncertain as the impact of late frosts in September and October this year is still unclear.

Looking at the 2001/02 season, the number of trays packed and exported in the year ended March 2002 was 68.7 million - nearly seven percent more than in the previous year. This increase occurred despite a difficult growing and harvesting season weather-wise. Fruit size was smaller than usual for the second season in a row. Gold kiwifruit made up nine percent of the crop and green organic fruit made up four percent, with the balance conventional green kiwifruit.

Market conditions were challenging, with increased volumes, smaller fruit, strong market competition and slow economic growth in some Asian markets. Average prices for New Zealand fruit fell in Asia, including the key Japanese market. An aggressive marketing approach by the major marketer ZESPRI held prices in Europe, and some favourable exchange rate movements also contributed to a good price out-turn in New Zealand dollars.

The average supplier price for kiwifruit for the year rose by five percent on the previous year. The fruit payment for first grade organic kiwifruit rose by over 18 percent, increasing its premium over conventionally grown fruit to 20 percent. The fruit payment for first grade gold kiwifruit rose by one percent in the face of a ten percent increase in volume, and achieved a 28 percent premium over first grade green kiwifruit.

In the outlook for 2002/03 to 2005/06, the report forecasts that production in the 2003/04 year will be affected by the aforementioned spring frosts this year.

The report's author, policy analyst Irene Parminter, says increased production of both green and gold fleshed kiwifruit is expected in the longer term with the maturation of grafted and newly planted vines, assuming normal weather conditions.

She says forecast production levels are also dependent on adequate pollination and that is heavily dependent on honey bees. "Growers are now paying more per hive for honey bees as a result of the spread of the Varroa mite, which has increased the cost of providing a strong hive suitable for pollination," she says.

Ms Parminter says key factors affecting future markets and product prices in the medium term are Southern Hemisphere and global kiwifruit production, production of competing fruits and other snack foods, income growth in key markets, and the exchange rate.

Globally, production of all fruit types has risen over 50 percent over the past two decades and the market for fruit is saturated at many times of the year. In addition, non-fruit snack foods are increasingly competing for the consumer's discretionary expenditure.

"Assuming a return to more normal levels of European kiwifruit production, steadily increasing volumes of New Zealand kiwifruit and sluggish GDP growth rates in key markets, prices are expected to fall slightly in the medium term," Ms Parminter says.

On a more positive note, she says, the increasing proportion of gold kiwifruit in the market mix, strategies to improve fruit flavour, and strong market development programmes will mitigate this expected trend.

Looking at projected prices, the report says early season estimates of supplier payments for the 2002 crop (year ending March 2003) are nearly 16 percent higher than the previous year. Orchard gate prices are expected to fall slightly over the medium term, with gold fleshed kiwifruit projected to hold at a small premium over green fleshed fruit.

In the longer term, the report paints a scenario of stiff overseas competition, but New Zealand grown kiwifruit remaining positioned at the premium end of the international market, due to innovative marketing and promotion strategies. It will, however, require strong branding, environmental and quality assurances, promotional programmes linking the fruit with good health, programmes to ensure good tasting fruit reaches the market, and possibly a broader product range.

For further information, please contact:

Irene Parminter, Principal Advisor, MAF Policy, Email irene.parminter@maf.govt.nz

Contact MPI

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