Zespri Gold3 kiwifruit orchards are in hot demand. Photo / Supplied
An eye-watering new record of $2 million/hectare has been set for top gold kiwifruit orchards in blue chip growing region Te Puke.
But the gold rush requires cool heads say sector specialists.
Rising inflation and interest rates, a severe labour shortage and a concerning rogue growing situation in China warrant some economic caution by the sweetheart of New Zealand horticulture.
Veteran PGG Wrightson real estate agent Stan Robb sealed the $2m per canopy hectare record in a recent tender sale of five orchards by one seller. One of the five fetched $2.1m/canopy hectare.
Last week he sold another two gold fruit orchards for $2m/canopy hectare and closed on $824,000/ha for a green fruit property. Most orchards range in size from 3ha to 9ha.
Just five years ago in 2017, there was excitement in the sector when a Te Puke orchard sold for $1m/ha, breaking the previous record of $850,000/ha.
Robb's at pains to emphasise the top money is going to "very, very good orchards".
But even at these prices and with banks tightening lending, he said demand this year has been "huge" with few orchards on offer.
"I sold a very average orchard in Te Puke for $1.7m per canopy hectare. You'd be hard pressed to find anything in Te Puke under $1.7m per/hectare."
Demand could be further fuelled by a squeeze on Zespri licences to grow SunGold kiwifruit this year. To ensure global consumer demand stays ahead of supply, the grower-owned export marketer is to release licences for just 350ha of new plantings, compared to 700ha last year. Growers set the price through a closed-bid tender.
Last year the median licence price for gold fruit was $550,000/ha. Robb thinks it could be close to $800,000 this year.
The buyers - and the searchers - are 90-95 per cent existing orchardists, said Robb. Well-established Indian grower families have been the main buyers.
Of the 15 orchards he's sold this year, all but one were bought by Indian growers, he said.
"The banks have tightened up in the last couple of months. You need 40-50 per cent deposit before they'll bank you."
But the returns tell their own story.
The orchards come with fruit and with the harvest now underway, a buyer of one of the $2m/ha properties can expect $200,000 instant cashflow, Robb said.
An average orchard will return a minimum of 10 per cent a year after all costs are taken out - including management costs, he said. Kiwifruit orchards are so labour intensive they require professional managers - a year round service supplied by the packhouses or contractors.
A top orchard can return well over 20 per cent a year, Robb said.
The average orchard gate return on a gold fruit property last year was $170,000/ha.
But a top orchard like the $2m/ha properties could expect $250,000-$300,000/ha.
Robb said it costs around $65,000/ha to grow gold fruit. For green fruit it's more like $45,000/ha. Zespri's total payment to growers increased 15 per cent last year.
Zespri, which reported net global sales worth $3.58 billion last year, is expecting an export crop of more than 190 million trays this current season.
Last year total sales were 181.5m trays. The marketer's planning for a 33 per cent increase in harvest volumes from this season to 2026-2027.
The outlook is positive, a pandemic world is crying out for more Vitamin C, so why the caution over the record orchard price?
Colin Bond, chief executive of NZKGI, the organisation representing the country's 2800 kiwifruit growers: "While there is a lot of confidence in the demand for New Zealand kiwifruit and the future of our industry, we should be careful about drawing too many conclusions from a limited number of sales".
Inflation is flowing through to operational costs, he said.
"An example of this is one of the industry's biggest inputs, labour, the cost of which has recently experienced a significant increase. Return to the orchard gate ... has been relatively stable but escalating costs on orchard are impacting the net orchard return.
"Growers need to be very mindful of both the reward and risks and when making business decisions."
ANZ agriculture economist Susan Kilsby senses the sector is consolidating and that the appetite for licences has maybe eased from the previous "rush".
General economic uncertainty may be a factor "plus a little uncertainty" due to Zespri's problem in China with unauthorised planting of the New Zealand-bred Gold3 variety (SunGold brand), she said.
That creates a risk of more of the fruit in the market and that it could be lesser quality.
Zespri chairman Bruce Cameron reveals in his latest update to growers there could be more Gold3 being grown in China than in New Zealand.
Accurate assessment of 2021-2022 grafting was difficult due to China's Covid restrictions, but Zespri now estimated 7000-8000ha of Gold3 had been planted, mainly in the Sichuan province.
Anecdotal evidence suggested another 3000-4000ha grafted in regions outside Sichuan, Cameron said. Last year Zespri estimated 5400ha of unauthorised planting of Gold3 in China.
In New Zealand around 8800ha of Gold3 is planted and 9000ha licenced, including organic Gold3.
ANZ's Kilsby noted Zespri's recent five-year outlook was positive while it acknowledged challenges such as labour as fruit production and processing expanded, and the need for more investment in post-harvest facilities to build handling capacity.
"Under-investment in packhouses is not a new issue but is becoming more critical as more land is planted in kiwifruit vines and yields continue to improve on existing orchards," she said.
REINZ rural commentator Brian Peacock said bigger growers, many of them packhouse owners, appeared to be buying smaller orchards as they were financially strong enough to absorb the high cost structure.
He expected prices to flatten while there was general economic uncertainty and with "financiers quite cautious".
Latest REINZ rural statistics show the median price per hectare for horticulture operations increased 65.7 per cent over the past 12 months.
Growing green kiwifruit was still a good investment proposition, Peacock said.
"With a sensible outlay, with a good operator green provides a good return on investment."
Japanese food group Meiji is listed on the Nikkei 225.