How Horticulture is blossoming along with investment dollars

Kiwifruit: the star of the New Zealand horticulture export show. Photo / File

Packing big capital investment and export growth numbers in recent years, horticulture is one of New Zealand's sunnier outlook sectors whose players are taking their confidence to the bank.

While their industry organisation Horticulture NZ is nervous about the potential impact of the Government's new freshwater management policy on vegetable growers, chief executive Mike Chapman thinks it will be possible to navigate a way through to a successful outcome for the flourishing sector.

Meanwhile, conversions to horticulture from pastoral-animal farming continue and hundreds of millions of dollars are being invested in new orchards, with avocados, hops for craft beers, and cherries showing vibrant export performances alongside that of the five big stars kiwifruit, apples, wine, potatoes and vegetable seeds.

Horticulture exports last year were valued at $5.5 billion, almost 10 per cent of New Zealand's total merchandise exports, and up from $1.7b 20 years ago.

Total investment in the sector in 2018 was estimated by Plant & Food Research to be more than $54b, compared to $40b in 2015.

A graphic example of the confidence is that of the change in the investment portfolio of MyFarm Investments. Four years ago its investments were 80 per cent in dairying and 20 per cent in sheep and beef farming. Today it's 60 per cent horticulture, 20 per cent sheep and beef, and 20 per cent dairying.

Over that time the rural syndicate investor has put $300 million into kiwifruit, viticulture, manuka plantations, hops, apples and cherries ventures, both established and new conversions.

"A lot of horticulture ventures will have profit margins well in excess of the capital value of a dairy farm, never mind the capital value of the horticulture product," said chief executive Andrew Watters.

There were plenty of reasons to be confident in the sector.

Innovation and years of research and development are giving customers what they want in flavour and fruit size, the opening up of Asia markets has produced up to 500 million new consumers prepared to pay a premium for quality food and demand stays ahead of supply.

In the wine area, New Zealand had "good stayers" in highly defined areas like Marlborough sauvignon blanc which have stood the test of time.

New Zealand sweet red apples help plump growing horticulture export earnings. Photo / File

"There are some challenges looking forward as to what sort of chemicals we'll be able to use in future - horticulture production still has some environment effects, so we'll have to manage those. But not nearly as much as others," Watters said.

"The greenhouse gas impact is low and relatively easily offset.

"A 10-hectare horticulture block in gold kiwifruit is actually quite a large enterprise both in terms of revenue and capital. We're extracting a lot more value per unit of land."

Farm investment and management company Craigmore has committed around $250m to new and expanded horticulture projects in the past three years, said chief executive Che Charteris.

The 10-year-old company grows kiwifruit, apples, pumpkins and squash for the Asian market, wine grapes, hops and cherries. Its estate spreads from the Far North to Central Otago, embracing Gisborne, Hawke's Bay, Bay of Plenty, Wairarapa and the top of the South Island on the way.

Charteris said there's no question the mood in horticulture is optimistic and that's due to a combination of drivers including emerging Asian premium price markets, the healthy-eating focus and years of painstaking New Zealand research paying off, as evidenced by kiwifruit - "an outstanding piece of fruit".

"Something people don't talk about much in horticulture is its ability to build a relationship with the people who eat the products. You can go on to an orchard and touch the product and eat it straight away. There's a close relationship between the grower and the consumer which is more and more important as people increasingly care about what they are eating and where it's from."

This enhances the marketing opportunity and ensures producers are growing what consumers really want, he said.

The outlook is bright because New Zealand produces "fundamentally great products with a point of difference", said Charteris.

"Look at our sauvignon blanc and our hops - they have a distinct flavour profile. Our apples are among the highest quality and have the highest yields per hectare in the world. Generations before us have built the IP and the capacity.

"The biggest barrier is resource - the most important one is people. Then capital. It costs a lot to do conversions. For some it's half a million dollars per hectare, for the cheaper ones it's about $100,000 per hectare."

Horticulture NZ's Mike Chapman said sector confidence was about a 7 on a scale of 1 to 10.

"That's pretty good when you think of all the influences like the weather, exchange rates, access to markets, competition offshore."

Horticulture NZ chief executive Mike Chapman. Photo / File

He's been in the job nearly five years and put confidence at level 7 back then too.

"There were different issues and problems back then. What we are facing with climate change and freshwater quality (policy) and looking after the environment is significant.

"It's going to be tough and we'll be working on the basis we can make this work going forward. I think we can. But it's not going to be easy - but then no one is going to find it easy. There are some significant challenges ahead for all New Zealanders - urban and rural in meeting freshwater quality standards."

More than a third of New Zealand horticulture export revenue comes from kiwifruit, said Plant & Food Research. Wine had also seen massive growth - 20 years ago there were fewer than 5000ha of vineyard. Now around 35,000ha produced exports valued at more than $1.8b a year.

Fresh fruit exports last year were worth $2.8b compared to $962m in 2000.

Of this apples earned $733m ($404m) and kiwifruit $1.8b ($462m).

The export value of lesser fruit crops had risen markedly in the five years to 2018.

They included avocados at $98m compared to $33.7m in 2013, cherries $84m ($21m) and hops $15m ($8.5m).

Fresh vegetable exports earned $226m, of which potato export revenue was $114m. Processed vegetable exports were valued at $399m.

Of an estimated total 135,000ha of land devoted to horticulture last year, apple, kiwifruit, wine grape, potato, and vegetable seed production took up 82,000ha or 60 per cent.

BUILDING CONFIDENCE