Over supply and low prices for produce marks the season

7 August 2000

The farm gate value of vegetables sold in New Zealand broke the half billion barrier for the first time in 1999 with sales of $517 million, however VegFed predicts that up to 20 percent of commercial growers will leave the industry if current downward produce prices continue.

This is according to the Ministry of Agriculture and Forestry's Arable Monitoring Report released today.

The report monitors the production, finance, trends, issues and sector concerns on New Zealand farms and orchards. The expectations and intentions of the farmers and those servicing the sector are analysed and presented in a model farm or orchard. The report highlights the 1999/2000 season and forecasts the coming season. The views reflected are those of industry, and not necessarily those of MAF.

Increased acreage, excellent growing conditions and high yields lead to depressed market prices for the onion and potato industry in 1999/2000. For onion growers this came on the back of a very average season the previous year, when produce quality forced prices down.

The New Zealand onion crop entered an already over-supplied export market. Ideal growing conditions produced record crops worldwide. The European Union stock was of a high quality and the volume was estimated to be up 40 percent on the 1998 crop. Thus the normal window for NZ onions into Europe was effectively closed. The European onions were also exported to Japan - New Zealand's second largest market.

Growers reported having been offered between $2 and $4 for $20kg of under 75mm onions, and a marginally better $3 and $5 for 20kg of over 75mm onions.

Potatoes growers received $60-$80/tonne for potatoes this year, compared to $300/tonne in 1999. There were reports of growers selling for as low as $35/tonne for stock food because there was no other outlet for their product. Several supermarkets sold top quality washed and pre-packed potatoes at 25 cents/kg. At this price, growers say they cannot cover harvest, handling, grading and packaging costs, let alone the growing costs.

The quality of most greens during the 1999/2000 season was described by many as average. Without large fluctuations in weather or rainfall, production was consistent, with very few periods of over or under supply.

Production of some key green vegetables, including broccoli and lettuce, increased as several growers expanded their production. This again led to a general trend of lower prices.

Volume of squash exported in the 1999/2000 year was 92,057 tonnes, down slightly from 94,634 for the 1998/1999 season. However, both these figures are higher than the previous two years when export volumes ranged from 68,181 tonnes to 83,323 tonnes.

The cooler summer temperatures delayed maturity in most growing areas. As a result immature fruit reached the Japanese market. This shortened the New Zealand season up to five weeks, as many Japanese importers were not prepared to take the risk with early season New Zealand fruit and consequently did not start buying until mid-February.

The 1999/2000 season saw a drop in both the number of squash growers and the area planted. The Buttercup Squash Council reports 150 registered growers compared to 163 in 1999, and a total area of 7,066 hectares compared to 7,944 in 1998. The biggest decline in area planted was in Auckland, Waikato, and Bay of Plenty, dropping from 745 hectares to 442 ha.

On top of the year's low produce prices, growers agreed the costs of growing were increasing. This includes commission to merchants, crate hireage, installing, maintaining and using cool storage facilities, high transport costs, and having to deliver five days a week instead of two.

Vegfed has released a quality assurance programme that aims to create a traceable production system from seed to plate, so that all inputs into production and distribution can be identified and also to comply with changes to food safety requirements in New Zealand and internationally.

A manual and training course accompany the programme, with only those successfully completing the training requirements eligible to use the Vegfed approved supplier logo. About 220 growers have joined the programme so far.

This year there are nine monitoring reports. Five are sector reports (deer, sheep and beef, horticulture, arable and dairying). The same information is packaged in four regional reports.

MAF Farm Monitoring Reports can be accessed from the MAF website.

For further information contact:

Chris Ward, Senior Policy Analyst, Domestic Policy, MAF, Telephone: 04-474-4168

To purchase reports contact:

Tamara Finlay, MAF Information Bureau, Telephone: 04-474-4100 Ext: 8436

Contact MPI

for general enquiries phone

0800 00 83 33