Zespri reports stronger than expected finish to 2016 season

Green: New developing markets need to be kept open for future growth, says Zespri chairman Peter McBride. Photo/File

Zespri this week updated its December forecast to kiwifruit growers on global sales for 2016, showing average returns up across all grower pools and a total forecast fruit and service payment of $1.37 billion.

However, green yields are expected to be down in the coming season, which will pose a challenge for Zespri in keeping open new developing markets, said Zespri chairman Peter McBride.

The latest green forecast for 2016 is $4.35 per tray, up 13 cents on the December forecast. Mr McBride said green fruit had benefited at the end of the season from a clean finish, with reduced offshore fruit loss and lower provisions for incentives and fruit quality claims.

"It's great to see a strong finish to the season in our markets, which has reduced forecast costs and increased the return to growers across all categories," said Mr McBride.

Green organic was up 26 cents to $6.75 per tray, gold was up 22 cents to $8.52, and Green14 per tray return up 10 cents to $5.69, compared to the December forecast. Gold per-tray returns were up slightly despite New Zealand volumes nearly doubling from 27.5 million trays to more than 45m trays. The final 2016 result is expected in May.

Zespri was forced to crop manage about 5m trays of green last year, by disposing of them largely as fodder in order to maintain prices. But following two consecutive years of record high green yields, the forecast for this year's harvest is for a greatly reduced yields - about 70m trays compared to about 90m trays last year.

Mr McBride said crop management had been the most effective way to maintain market prices in the face of the massive volumes last year. But this year's harvest - which begins next month - was expected to be a mixed bag, with variability in green yields across orchards.

"Everyone's down generally, but some people are down a lot more than others," said Mr McBride.

Noting that Zespri still saw potential growth in the green market, he said the biggest issue would be keeping new developing markets open, because they would be needed to sustain future growth when volumes picked up again.

Mr McBride said he expected that this year class 2 green fruit - normally sold only in New Zealand and Australia - would come into play to help fill developing markets like India.

Kiwifruit Growers Inc chairman Doug Brown said the clean finish to the 2016 sales season had been welcomed by growers. But he acknowledged the reduced green yields for the coming season posed problems for the industry.

"This year's green crop will be well back on 2016, " he said. "But that was the second year of back-to-back high yields."

While the improved prices expected from lower volumes of green could help improve pricing, it was unlikely to offset the expected poorer yields overall, he said. But on the positive side, early indications were that dry matter was up on 2016, and the green fruit was predicted to be a little larger.

The reduced green volumes will present a particular challenge to the Bay of Plenty's post-harvest operators, most of which have made significant investments in increasing capacity over the past couple of years.

Stuart Weston, general manager of Apata, said many companies had now "pressed the pause button" on future development until volumes begin to pick up again.

"Because of the lead times, we have to make commitments long before the crop volumes present themselves," he said, noting Apata had recently completed a new facility in Te Puke.

"We're disappointed volumes are down relative to where we were hoping they might be. But in the long term we know we made the right decision to add capacity."

Zespri net profit estimate (corporate):

- Year to March 2017: $71-74 million.