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Home / Bay of Plenty Times

Zespri confirms grower earnings fall as fruit quality issues, cost increases bite

By Andrea Fox
Herald business writer·NZ Herald·
25 Aug, 2022 12:47 AM4 mins to read

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Bad news for kiwifruit growers ahead of their annual meeting. Photo / File

Bad news for kiwifruit growers ahead of their annual meeting. Photo / File

Export marketer Zespri has confirmed a significant hit to grower returns this season as fruit quality issues track above historical averages and threaten New Zealand's reputation for producing consistent quality fruit.

With Zespri growers and shareholders due to hold their annual meeting today at Mount Maunganui, chairman Bruce Cameron in the season's first full forecast confirmed an earlier warning on challenges including fruit quality issues and lower yields.

"Fruit quality remains the primary challenge, particularly for Zespri SunGold kiwifruit. Fruit loss and quality claims are tracking well above historical averages and expected to continue to do so," Cameron said in a sector update.

"The impact on returns is significant, with the quality cost to growers forecast to be $2.80 per tray for SunGold kiwifruit, compared with $1.68 last year and this has pushed this forecast below the June range."

Green fruit quality costs were expected to be $1.95 per tray, compared with $1.65 last year.

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"Beyond the impact on grower returns, these quality challenges are putting significant pressure on our reputation for providing consistent fruit quality amongst our distribution partners and we will require an industry-wide response to address this," Cameron added.

The forecast impact will see August per hectare returns for green drop to $61,144 compared with the 2021-2022 season March final $75,494.

The indicative 2022-2023 June forecast per hectare for green was $60,000-$73,000.

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Per tray the new August forecast meant green pool growers would receive an indicative $6-$7.50. The final per tray return last season was $6.35.

News for the $4 billion export industry's best seller SunGold was also disappointing.

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The new August per hectare forecast was $138,495, compared to the June indicative range forecast of $141,000-$161,000 and last season's final March return of $176,026.

Per tray, the new forecast had SunGold growers receiving $10.02, compared to a final $11.51 per tray in March last year.

Zespri's June forecast for this season had been for $10.25-$11.75 per tray for SunGold.

Zespri said the best measure for a total sector impact would be forecast total fruit and service payments (TFSP), which covered direct returns to all growers.

Last year TFSP was $2.42 billion (excluding loyalty payments) from a total crop of almost 180m New Zealand-grown trays supplied to Zespri.

The latest forecast was for TFSP of between $2.23b and $2.28 billion (excluding loyalty payments).

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It was important to recognise the forecast was made on a significantly lower crop estimate of 168m trays supplied to Zespri, the company said.

Zespri also noted that stronger pricing in-market this year was partially offsetting increasing costs.

Chairman Cameron said the forecasts for Zespri's 2700 New Zealand growers also reflected rising costs through the supply chain, especially freight and post-harvest costs, which put pressure on grower returns.

He said Zespri's teams were working hard in export markets to lift prices and manage spending levels to strengthen overall returns but added: "The headwinds we face are significant."

Zespri's corporate net profit after tax was expected to be between $227 million and $247m, including licence income, consistent with the company's June advice.

The company was strongly focused on identifying corporate savings opportunities.

New Zealand and Australia's largest kiwifruit grower, NZX-listed Seeka said the new forecast was disappointing - particularly for green (Hayward variety) fruit.

But chief executive Michael Franks noted returns right across the produce-growing sector were currently down, with the exception of grapes.

He said the fruit quality issue the industry was grappling with was a significant concern, and the new fruit quality cost forecasts reflected "huge numbers of lost opportunity".

Zespri said its updated forecast dividend per hectare range for the year ending March 2023 was consistent with June guidance at $1.10-$1.19.

Cameron also gave an update on unauthorised SunGold (Gold3 variety) plantings in China.

Indications were a total of around 7000ha of plantings, less than an estimate in March of around 7000-8000ha in the Sichuan province and another 3000-4000ha grafted in other regions outside Sichuan.

"This reflects less unauthorised Gold3 being grafted than expected, as well as the difficulties in generating an accurate assessment of the 2021-2022 grafting season earlier this year, given the local Covid-19 restrictions in place in China."

Cameron said Zespri was monitoring the China situation closely and would update growers on next steps in the coming months.

Meanwhile, grower voting closes at 5pm today on a Zespri plan to expand current offshore kiwifruit plantings - excluding China and Chile - to allow the company to meet its 12-month supply strategy.

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