The hunt continues for the industry's Holy Grail, a higher-earning, New Zealand-exclusive, sweeter green that ticks all the boxes. Photo / Supplied
It must be of little consolation to New Zealand's green kiwifruit growers that their crop is revered as the "backbone" of the export industry while more of them are seeing red ink seep into their books.
With the cost of growing and harvesting one hectare of the green Hayward variety kiwifruit now averaging around $53,000, and global marketer Zespri offering a latest returns forecast of $60,000-$73,000 a hectare, even the most uninformed observer can see it isn't easy being green right now.
But suggest the days of green fruit growing may be numbered as consumers continue to be seduced by the higher earning, sweeter runaway success Zespri SunGold — or the new ZespriRubyRed — and it doesn't go down well in the multibillion-dollar industry.
"Green is the backbone of our industry. The reason we have had money to put into developing new varieties like gold is because of our green growers. We should never forget that," says Colin Bond, chief executive of the voice for the country's 3000-or so growers, NZ Kiwifruit Growers Incorporated (NZKGI).
Global marketer Zespri, entitled by statute to be the main exporter of all New Zealand kiwifruit except to Australia, also offers the "backbone" response, noting green's many loyal consumers continue to favour its sweet-sour taste and health benefits.
Green will continue to be a core part of Zespri's portfolio of varieties and grow in big volumes, says the exporter, noting the opportunity inherent in green production elsewhere in the world declining.
That said, the marketer expects green supply to decline over the next five years as growers switch to other varieties.
"We think we'll come back to around 55-60 million trays (per year) from historic volumes of 70 to 80 million trays," says Zespri chief executive Dan Mathieson.
(Zespri had 2027 down for that contraction, but it recently cut its 2022-2023 export season forecast from 66m trays to 60m due to lower than expected yields.)
Meanwhile, the hunt continues for the industry's Holy Grail, a higher-earning, New Zealand-exclusive, sweeter green that ticks all the boxes — and they are many — necessary for commercial success.
Zespri can't say more than trials are ongoing and that the earliest any new green variety will likely be available is 2027. (Orchardists will have to buy a licence from Zespri to grow it. The Hayward variety, commercialised in the 1950s, does not require a licence.)
But back to the question of how long Hayward growers can keep up the fight against spiraling orchard costs and falling returns?
Who better to ask than New Zealand's biggest kiwifruit grower (and Australia's), NZX-listed Seeka?
Chief executive Michael Franks says returns for both conventionally-grown Hayward, and organic green, are best described as "lacklustre".
He says it costs $45,000 a year to grow the fruit, and another $6000- $8000 to get it picked.
"Even orchards in good growing regions are not earning a fantastic return on their investment. If the average return per hectare is $61,000 (Zespri's August forecast) and it costs $51,000 to grow and pick or something like that — and that's the average — there will be a lot of growers in areas away from the good growing regions who are losing money.
"Returns in comparison to gold are unsustainably low. Last year the average $75,000/ha was better. In good growing areas, a top grower is getting $150,000. But when $61,000 is the average, that's becoming marginal. At $75,000 a number of people were not making money. At $65,000 a lot of people will be in the red ink zone."
But green is still a very good product, says Franks. And Seeka, which grew 8.2m trays of it this year, down on last year's 8.9m, is still planting it.
(Franks notes that another lurking threat to green returns which he says could strip 40 per cent of the yield from Hayward orchards. That's the proposal by the Environmental Protection Agency to ban the use of hydrogen cyanamide, a chemical tool to enhance "bud break" and produce a consistent crop. It's particularly important to green growers.
Consultations between the industry and EPA continue.)
Zespri confirms growers of top-quality green fruit are still doing nicely. It says it has been able to increase pricing in some markets and returns in recent years "have been some of the best ever" at the orchard gate level. But the gains have been eaten up by soaring costs and a severe labour shortage.
While the poor quality of some export fruit this year — more gold than green — has caused industry alarm and made headlines, the marketer says some very good fruit has also gone out.
Out of the total 201.5m trays of kiwifruit Zespri sold globally last year, 71m were New Zealand-grown green fruit and 9.8m were produced by offshore growers contracted to Zespri.
Zespri's latest forecast for grower returns for 2022-2023 has a tray of SunGold returning $10.02 (down from last year's final $11.51 and down on the June forecast) while green is forecast to return $6.13 per tray, compared with $6.35 last season and $6-$7.50 forecast in June.
So how many New Zealand green growers are feeling the pain?
It's hard to put a figure on it because so many growers have a mix of green and gold in their orchards — after grafting over to the more lucrative Sun Gold, say, industry leaders.
NZKGI's Bond thinks 60 per cent of growers produce both green and gold. It's estimated around 30 per cent only grow green.
Why? Some possibilities: the fruit has served them well in the past; after the vine disease Psa ravaged gold fruit livelihoods in 2010, they saw the replacement new SunGold variety as high risk; perhaps they haven't had the funds to compete for a licence for SunGold and have missed the opportunity to switch. (Licensing is a big earner for Zespri, last year it brought in $436.7m.)
So, why are green returns continuing to disappoint?
For Zespri the answer's straightforward. (Though not without angst. One former high-up reckoned Zespri leaders spent more time discussing how to improve green returns than anything else.)
New Zealand might arguably produce the best quality green fruit in the world and the best yields, but the rub is green is grown around the world. This means Zespri has a lot more competition than it does for its own gold variety. The marketer is also up against an overflowing basket of other fruits tempting consumers.
Zespri tries to cash in on the superior quality and health benefits of its green fruit by asking for premium prices in crowded markets. But it says if pricing is pushed too far consumers are lost. Also, quite simply, the current green variety doesn't have the attributes of SunGold so consumers can't be persuaded to pay gold fruit prices.
Zespri says it reduces the green offer to markets where the highest demand is, so to develop its profile and premium.
This strategy of course relies on New Zealand growers producing good crops — both in yield and quality. It's not politic for Zespri to comment on how that's going. It will only say there's "a wide variety" of producers.
About 40 per cent of the annual green crop is sold in Asia and the balance in Europe and North America.
China is the most challenging market.
China's the biggest kiwifruit grower in the world and exports widely — at a very cheap price. The challenge for Zespri in China is to differentiate the New Zealand quality brand without creating consumer resistance to price.
Growers' rep Colin Bond is very concerned for the future of growers not producing north of 14,000 trays/ha.
"There's an important distinction. Our best green growers are making money but the lowest producing growers have some really tough decisions ahead.
"We want to be sure Zespri is upfront about the future of the industry for green, allowing growers to make informed decisions about what to do with their orchards."
He notes the value of those orchards is still high relative to other land uses — and because of the potential to convert to higher earning varieties.
Meanwhile, Bond says NZKGI continues to "push" Zespri on lower green returns.
"We always ask why? We say 'give us confidence you are identifying the best markets and attracting the best price premiums you are able to'."
NZKGI understands that with green fruit grown globally, New Zealand can't influence demand like it can with SunGold, but is he happy with the answers from Zespri?
"Yes, but Covid has restricted our ability to get offshore and see for ourselves… we have to get an independent view of what is going on in the market."
A major grower suggests if Zespri put more effort into marketing green fruit in Asia than "old faithful" Europe, returns might improve.
The marketer's response: "Our research indicates that in some markets consumers aren't willing to pay the same premium for green as other markets like Japan, so we supply the most fruit to our highest-returning markets.
"This year, we're expecting to send just over half of our green crop to Europe which will continue to take the largest share of our green fruit for the next five years given greater demand for the variety."
Why the lean to Europe?
"We know there's strong demand for green in Europe… generally speaking when we consider where to allocate fruit, we look at the value each market generates and our strategic growth plans. This allocation also drives our marketing investment each season."
Another grower suggestion is that Zespri's marketing efforts for SunGold are more vigorous than for green because gold fruit licensing is such a big earner for the marketer, while Hayward doesn't require a licence.
Not so, says Zespri. It says its focus with green, as with other varieties, is to maximize value return to growers. (This is also the base requirement of the export regulations that entitle Zespri to be the dominant marketer.)
It says while SunGold has certainly helped introduce new consumers to kiwifruit and provided greater investment for Zespri brand building, that helps all growers.
One thing is certain. While the pressure is building in the long search for a Hayward replacement, no one's rushing to pull up green vines.
Craigs Investment Partners research analyst David Harris is a close watcher of Zespri and the sector.
"I think green is still going to be a staple of the industry. But there are challenges and headwinds… the best bet is that they probably have new varieties coming through."
Last word to Che Charteris, chief executive of specialist agriculture management company Craigmore, which has around 20ha of Hayward.
"We need green. It spreads the harvest window out — gold is earlier, green later. Imagine trying to pick all the kiwifruit in the country in four to six weeks. Socially green is important as well.
"We want a horticulture sector which employs as many permanent jobs as possible providing the opportunity to work all year round."
On the search for a new green, Charteris says "gold has been so good people have set their expectations a bit high around what a plant programme can do".
"It's going to be very hard to find a truly mega variety like SunGold. It grows well, stores well, tastes good, it can go into all markets.
"But they will crack it. If they find a green variety with an IP licence, it'll be good for the whole country."
A commercially robust new green kiwifruit variety is still at least three years away.
Given there have been no commercial breeding successes since Hayward's debut in the 1950s, do we assume kiwifruit is a particularly tough challenge for plant science?
The Kiwifruit Breeding Centre, a joint venture between Zespri and Plant & Food Research, is working on finding the next green — and the one after that.
Chief operating officer Jayne Chamberlain says there are multiple cultivars in pre-commercial trials.
The many parts to the process include studying male and female compatibility, chromosome numbers and genome arrangements. All of which make some natural crosses hard. The attributes of a fruit must also provide what consumers want, this takes time in a natural breeding programme.
"We need to grow the vines and the time from seed to germinating to mature vine production… can take up to two years at each stage…
"Also to get the best traits into elite germplasm requires multiple generations for the genetic gain to be recovered and very large seedling populations need to be screened.
There's also the matching of male and female plants.
"Kiwifruit is dioecious, with male plants not producing fruit but required for pollination, and different male pollination can impact fruit characteristics from the female plant. This adds another complexity when identifying a female variety which has the traits to be successful commercially."
Green cultivars need more winter chill for good budbreak, which ultimately impacts productivity, says Chamberlain.
KBC has extended the green breeding programme into warmer climates, also with a view to global warming, to ensure any new cultivar released can still deliver the productivity required even with a lack of winter chill and no use of budbreak enhancers. Ideally, the new green will have the current green's very strong storability attribute.
Targeted traits in development span the orchard, supply chain and the market/consumer, says Chamberlain.
For the orchard, a key trait is improved productivity of good-sized fruit and for the consumer, a better-tasting green that still offers the same health benefits.
"Plants that have been bred for many centuries, like apples, have a much higher index (plant to fruit ratio) so there are no biological reasons for kiwifruit not to be more productive in the future.
"Also, we have some great tasting new greens coming through…
"The supply chain area is the most challenging — Hayward is a robust fruit with relative long storage."
After around 20 years of intensive development, the 109ha business park is now finished.