Turners hit hard as apples go sour

Listed produce company Turners & Growers has been forced to downgrade its profit outlook as apple growers face a season which their own industry body is describing as catastrophic.

Chairman Tony Gibbs said yesterday prices in the European market were at an all-time low, leaving the industry no respite from the downside of the strong dollar.

"This is the worst season ever," he said.

Turners & Growers' share price fell more than 10 per cent on the news, shedding 25c to end the day at $2.20.

In a private letter sent to Pipfruit NZ members this week, chairman Ian Palmer described the situation as "a total catastrophe".

"Some growers will face insolvency," he said.

Hawkes Bay growers are facing up to the fact that returns for some apple varieties are less than half they had been expecting.

The letter said because apple marketers had advanced payments earlier in the season at higher rates there were likely to be no more returns to growers despite the season being only three-quarters complete.

Palmer declined to comment on the letter but conceded that this was the worst season the industry had faced.

"We are, unfortunately, going to go through a period of consolidation in a way that nobody really wants to," he said.

Growers were already struggling after a pretty tough season last year.

Pipfruit NZ members will meet over the next few weeks to discuss ways forward for the industry.

Gibbs said the plummeting prices had been caused by a glut of Argentinian, South African and Chilean apples on the European market.

Compounding the problem were the dozens of small New Zealand exporters shipping apples to Europe and driving the price down even further.

"It's kiwis eating kiwis," he said.

Other exporters had a single seller - such as kiwifruit marketer Zespri - which allowed them to control supply out of New Zealand and give growers more stable earnings.

Turners & Growers-owned Enza is the biggest marketer of New Zealand apples, accounting for about 40 per cent of exports. But the rest of the industry is fragmented with about 100 other smaller exporters.

Turners & Growers chief executive Jeff Wesley said the exact size of the downgrade would not be clear until later in the season.

He said it was likely that the upcoming half-year result would be only slightly down on the same period last year.

While returns from Enza had dropped dramatically, it was only one part of the company's diverse business.

Enza was still managing to maintain a premium price for its apples in Europe - up to 3 ($5.30) more a carton than its competitors. But the bottom line was that the prices were at rock bottom.

Hastings grower Gary Wake said he had never seen the industry look this bad.

He had been predicting returns of between $16 and $22 a carton of Braeburns, but that had dropped to $8.

"It's very, very grim," he said.

New Zealand growers have been waging a political battle with their Australian counterparts seeking to have an 85-year-old ban on exports across the Tasman overturned. 

Big bite

* European prices have dropped by more than half for some apple varieties.
* Two-thirds of New Zealand apples are exported to Europe.
* Growers expecting $16 to $22 a carton of Braeburn apples are receiving $8.
* A return of at least $16 a carton is needed to break even.
* Some niche varieties such as Pink Lady remain profitable but they are produced in low volumes.
* Apple exports were worth $485 million in 2004.

- additional reporting NZPA