Stable Forecast Despite Challenging Marketplace

Media Release - 22 October 2009

In its latest industry forecast, ZESPRI has announced a $48 million increase in payments to growers, compared with last season, despite a challenging market.

The company anticipates that final payments will be $827 million ($8.06 per tray), compared with $779 million ($7.59 per tray) last year. This is an increase of $22.3 million (or $0.08 per tray) over the forecast released in August, and represents an increase in payments for GREEN and GOLD Kiwifruit, with no change for GREEN ORGANIC.

Chief Executive Lain Jager says the forecast reflects positive impacts from reduced costs (particularly fuel) and improved foreign exchange movements compared with last season, which have helped offset the pricing impacts of a tough sales environment on GREEN and GREEN ORGANIC.

“It’s important to note that this is only a forecast and we have a way to go in most markets. At this stage GREEN pricing and sales volumes are tracking as expected as we work our way to a positive close for the GREEN season, and this has allowed us to marginally lift per-tray and per-hectare returns for GREEN growers in this latest forecast. At $6.91 the return is $0.07 down on last year but on a positive note for growers, good fruit quality with lower onshore fruit loss and fruit handling costs, have resulted in an extra 19 cents compared with the August forecast, for growers at Orchard Gate Return level. This delivers average forecast Orchard Gate Returns (net of post-harvest costs) of $29,033 per hectare, or about $1,000 down compared with last year.

The world fruit market has been severely impacted by the global recession this year with many produce growers globally experiencing much lower returns than in previous seasons. “The relative stability of ZESPRI’s result in this environment can be attributed to a number of factors, including a strong marketing campaign focused on health, vitality and nutrition; a weaker New Zealand dollar against ZESPRI’s key trading currencies; and an outstanding performance by growers and post-harvest operators to deliver shipments in specification and on time.”

The integrated industry structure enabled the industry to proactively manage supply with commercial decisions taken early by ZESPRI and growers regarding the size profile and volume of GREEN Kiwifruit. “We asked growers to thin their fruit in order to optimize the size profile and we worked with growers to leave some lower quality crops on the vine at the start of the season,” said Lain. “The crop management early in the season was about optimising market allocations and grower returns and those who know our industry and fruit business understand that. It’s about allocating and phasing fruit supply to genuinely meet demand requirements and optimising fruit quality for both the trade and consumers.”

“This year has been about reacting flexibly and commercially in a difficult and dynamic market and we needed to reduce volumes and reduce price in some markets to sell through the crop in an orderly manner. Our strategy was to start strongly in all markets and align pricing appropriately to ensure that our high quality offering was perceived as being good value in a year of uncertainty and financial pressure for consumers.”

For GREEN ORGANIC, per-tray returns are forecast to be down by 5 percent from last year to $8.81 per tray, with no change from the August Forecast. “GREEN ORGANIC growers are feeling the impacts of the global recession more than our other categories,” said Lain. “This demonstrates a short-term shift by less-frequent organic consumers towards conventional products at cheaper pricing.”

“It is important to note that this positive market performance does not take away from the fact that GREEN returns have not been where they need to be over recent seasons and this year has been another challenging season.”

Lain Jager will discuss the 3-year outlook for each category with growers at meetings being held throughout the country in November. “Despite the challenges of an increasing world supply of Hayward, we see some real opportunities for the GREEN business over the next three years.”

The GOLD forecast is a completely different story to GREEN and reflects the returns possible from a new cultivar for which ZESPRI holds the Plant Variety Rights. GOLD Fruit and Service Payments are set to be $11.99 per tray, compared with $9.70 last season.

“This is an extraordinary result in a challenging year,” said Lain. “It reflects the superb quality of the fruit, and the fact that we’re seeing strong repurchase patterns by consumers as they begin to prefer GOLD to other fruits. This year, demand exceeded supply which led to strong market pricing and an early close to the season. The forecast return is also reflective of the positive Yen/Kiwi exchange, given a high portion of the GOLD crop is sold in Japan.

Chairman John Loughlin said: “While the year is not done yet, the October forecast represents a satisfactory result in a year where many fruit growers around the world have been devastated by a difficult market, supply and demand imbalances, and weak selling.”

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