Strong rebound in production tipped as more PSA-tolerant Gold3 variety comes on stream.

The kiwifruit harvest is about to start and indications are that production will reflect a strong rebound as more PSA-tolerant "Gold3" fruit comes on stream, bringing a welcome reprieve for Bay of Plenty growers after the virus swept through the prime growing region in 2011/12.

Zespri chief executive Lain Jager said indications were that it would be strong crop, both in terms of size and quality. He expected returns to be favourable although not has high as last year's, when prices for green and gold varieties were boosted by extraordinary supply constraints.

Jager said here had been heavy investment in the post-harvest sector - companies that take care of picking, sorting, packing and cold storage - to handle the higher gold volumes over the harvest months of March, April and May.

"The crop is a good size and the profile of the crop is good," he told the Herald. "We have had a remarkably good summer - hot and sunny - so that is very good for the development of sugars in the fruit so we are looking forward to a high quality crop."

Advertisement

Europe is the biggest market for New Zealand kiwifruit. While that market has not felt the direct impact of Russia's ban on the importation of some food from the west, it was having depressing impact on prices generally in the European fruit markets, Jager said. However, kiwifruit tended to be insulated from price fluctuations there.

Last year, gold was supply-constrained because of the PSA virus as growers transitioned from the PSA-susceptible Hort16A to the tolerant Gold3 - which takes two to three years.

At the same time, green prices were unusually strong after a big frost in Chile reduced supply from the southern hemisphere.

"The markets look normal to us," he said. "We have a good crop - expecting 70 million trays of green and 30 million trays of gold," he said.

"So we are selling a good-sized crop into normal markets and so we expect a sort of normal return this year, although its still too early for us to give a forecast," he said.

While orchards have largely prevailed over PSA, they still have to work around it.

"It appears the crop this year is good, and that crop is being farmed in a PSA environment, so it was an ongoing challenge but our business seems ok," he said.

Jager said Zespri, a single desk seller responsible for marketing the New Zealand kiwifruit crop to the the world, expects to meet its net profit for 2014/15 of $34 to $37 million - compared with $17.2 million the previous year.

Advertisement

Zespri appointed four new importers last year, including Dalian Yidu as its agent in Northeast China, after its previous China agent and importer, Shanghai Neuhof Trade
Company, was found guilty on smuggling charges. The circumstances remain unclear but it appears Dalian Yidu is being investigated by Chinese authorities.


"Obviously we continue to monitor the situation with Yidu. Right now we have suspended our business relationship with them," Jager said.

Zespri was waiting to see what unfolds with Yidu. "We continue to believe that we don't have any exposure from a kiwifruit perspective. Certainly there is no financial exposure and we do not think that we are implicated in any way, so for us it is just a watching brief," he said.

Jager said Zespri has a big presence in the major "tier one" cities and is present in the tier two cities, but there was more work to do from a market penetration perspective.

"Over the next five years we would expect to grow a compound 20 per cent year a year - from 11 million trays to 30 million by 2018/19."

"On the other hand, China remains a complex and challenging market," he said. "The anti-corruption campaign by president Xi Jinping is obviously well known and what we are seeing is a rapid evolution of the way that business is done in China.

"On the one hand, it is tremendously positive, but on the other it creates risks," he said.

Zespri had in the past relied on importers "to get everything right".

"It has become very clear to us that that doesn't work in China; that you have got to go a lot further than that, and you have to take great care that your importers are doing everything right."

"We subject importers to very careful due diligence before we appoint them.

"We work with them closely to ensure that the full duties are being paid on our product."

"Like all business, it's about risk management and in our view the opportunity is worth the risk, and so we will persevere and we will do everything we can to ensure that our business practices are robust," he said.

Zespri has benefited from strong growth in Europe and Japan over the past two decades."

In a typical year, Japan takes 18 million trays, Europe 26 million compared with 11 million for China.

Jager said pursuit of growth in China would not be at the expense of other promising markets of South-east Asia, the Middle East, Brazil and the United States.