New Zealand. Fresh Deciduous Fruit Annual. Nov 2014 Nov. 11, 2014
Apple and Pear growers have enjoyed a second year of good prices for their fruit in 2013/2014. A biennial bearing “on” year in 2014/2015 should result in a production increase to 555,235 metric tons and a corresponding increase in exports to 331,500 metric tons.
Despite a recent upward revision in estimated 2013/2014 apple and pear production in New Zealand to 501,550 MT, this year’s output is expected to fall short of 2012/2013 production levels by eight percent, mainly as a result of the biennial bearing “off” year. Nevertheless, in 2013/2014 New Zealand apple and pear growers are enjoying a second year of good profitability.
Looking forward to 2014/2015, total apple and pear production is forecast at 555,225MT. The nation’s orchards generally returning to a biennial bearing “on” year explains to a large extent the 11% increase, along with an estimated three percent increase in planted area to 9,100 hectares for all deciduous fruit. It appears the trend, evident since 2004/2005, of net tree removal has ended and the sector is well into a rebuilding phase with new varieties and increased planting densities. So far the new growing season has been conducive to the forecast volume being achieved.
Notably total apple and pear exports in 2013/2014 are now revised to 315,850MT which is 3.4% ahead of the previous estimate. Concentration on quality from growing to post harvest operations has contributed to a higher export packout rate than had been anticipated. Additionally higher prices for most of the shipping season in the off-shore markets have encouraged exporters to maximize export shipments. However the downturn in European markets late in the shipping season (since August 2014) may have some growers and exporters wishing they hadn’t chased the European market quite so hard.
New Zealand apple and pear exports are forecast to increase by five percent to 331,500 MT in 2014/2015. This increase will coincide with big crops in the northern hemisphere. It is likely that growers and packers in New Zealand will adopt measures to limit the amount of fruit that can find its way onto those oversupplied markets. Sources indicate widespread, comprehensive crop thinning programs will be adopted that will focus the crop on the highest attainable quality, with fruit sizing aimed at satisfying the higher priced markets of Asia and the Middle East. It is likely that the proportion of the crop destined for the UK and Europe will decrease in 2014/2015.
In addition a higher proportion of the crop, forecast at 147,775 MT, is likely to be sent to processing in 2014/2015, a 28% increase.
Note1: The Marketing Year MY2014 is from Jan1, 2015 to Dec31, 2015 and will be referred to as 2014/2015 in the text to conform to Northern Hemisphere country marketing years. Similarly MY 2013 is shown as 2013/2014. CY2015 refers to the calendar year 2015.
Note2: A TCE stands for Tray Carton Equivalent and is 18.0 kilograms of fruit
Planted and Harvested Area
Looking forward to 2014/2015, the apple area planted is estimated to be three percent greater than planted area in 2012/2013, at 8,685 hectares (ha). The harvested area is estimated to be 260 ha greater (3%) than 2012/2013 at 8,585 ha. Nationally the sector seems to have turned a corner with a higher rate of plantings than removals. This year, 2014/2015, signals the result of the acceleration of the trend, since 2006/2007, to change blocks over to new higher color, sweeter varieties of Royal Gala or to other varieties more suited to Asian and Middle East markets. Growers don’t register new plantings with Pipfruit New Zealand until they are ready to harvest so information on new plantings is imprecise and anecdotal. Reportedly new plantings are continuing with some new green field plantings, almost exclusively in the Hawkes Bay area. Existing blocks continue to be reworked into dwarf/semi-dwarf rootstocks, with higher tree densities and modern varieties.
While Braeburn now comprises only 16% of total apple planted area it still accounts for about 20% of the total fresh apple export volume. The dilemma facing growers who contemplate further Braeburn tree removal is despite Free-On-Board (FOB) returns per TCE that are approximately 18% less than average over the last three years; per hectare crop yields for this variety are 20% to 25% higher than the all varieties average. In addition, per TCE expenses for Braeburn blocks can be lower than other varieties, so profitability per hectare can sometimes be comparable to higher priced varieties that yield less and cost more to grow. It is contended, with the prospect of a poor year in 2014/15 for apple prices in Europe the main market for the tart tasting Braeburn variety that the removal of Braeburn blocks will continue though.
The pear area is expected to be up three percent at 415 ha in 2014/20152013/2014 in line with expectations that new plantings will come into production.
MY 2014 -2014/2015
Coming from a biennial bearing “off” year in 2013/2014 New Zealand apple orchards will be back to a biennial bearing “on” year. This combined with the slightly increased harvest area is forecast to yield a total of 540,500 metric tons (MT) in 2014/2015. This would represent an eleven percent increase over 2013/2014.
Industry participants are reporting that the required winter chill arrived late, but was compressed. There have been no problematic weather events to disrupt the flowering period which is being reported as being a very good bloom, compressed in duration, but later than last year.
Potentially the crop could be heavier than the forecast but growers are likely to start a widespread, comprehensive crop thinning program with chemical flower bud thinning. In part this will be in response to offshore market information indicating that northern hemisphere apple crops will be large in 2014/2015. Growers in New Zealand will be very careful to target their crops for the most profitable markets and to moderate the amount of fruit which is potentially destined for the European and North American markets. It may mean some Braeburn blocks are programmed to be sent direct to juice processing.
Total apple production in 2013/2014 has been revised upward by 1.6% to 488,000MT. In light of the larger-than-anticipated export shipment volumes and the processing volumes already squeezed to low levels it is likely the production total and export packout rates were underestimated at the previous revision (April 2014).
MY 2014 -2014/2015
Pear production in MY2015 (CY2015) is forecast to increase six percent to 14,725 MT.
Pear production for 2014/2015 has been revised upward 6.7% to 13,550 MT based on higher than expected actual pear exports and stable consumption.
Growers are set to enjoy a second successive year of good profitability. Profits for 2013/2014 per TCE are probably on a par with 2012/2013 but because generally production was down the per hectare or whole orchard profits would be less than 2012/2013. The industry is still enjoying a level of profitability well in excess of the annual results from the ten years prior to 2012/2013.
Reportedly the 2013/2014 exporting season has yielded prices on average just in excess of 2012/2013, but sale prices in the EU have dropped significantly in the last two months of the selling season.
Apple consumption in New Zealand for 2013/2014 is estimated at 65,000MT, basically no change to the previous forecast. With a greater volume of domestically produced fruit in abundance during 2014/2015 it is forecast domestic consumption will increase to 70,000MT, an eight percent shift.
The lower volume of apples available in 2012/2013 and the push by exporters to ship as much fruit as they could has seen processing volumes squeezed. This revision of the 2013/2014 number estimates the processing volume at 113,500MT, down two percent from the previous forecast. It is likely with the greater volume of crop available in 2014/2015 that processing volumes will return to a normal level at 145,000MT (28% up year-on-year). If very strict grading is used to divert fruit away from export markets in 2014/2015 there is upside potential to this forecast.
It may be difficult for prices to maintain their current levels in 2014/2015 if exporters are to ship a forecasted export volume of 326,500MT which will be five percent greater than 2013/2014 volume. This will be made all the more difficult with the anticipated large harvest of apples in the Northern Hemisphere.
The New Zealand export volume could undoubtedly go higher if allowed, but growers will most likely control export volume and fruit size by comprehensive thinning programs (both hand and chemical); distributing a larger volume onto the local market; and diverting a higher proportion of the total crop to processing.
Given the current price and production scenario, growers are expected to be conservative if not cautious during the coming year by not over-cropping trees; and by paying particular attention to chemical and management programs to carefully target fruit for the highest value markets. These markets are generally in Asia such as Taiwan, Japan, Vietnam, Singapore, China/Hong Kong, and Indonesia.
The countries mentioned above often have onerous SPS-based market access conditions which require specialized orchard and pack house management programs during the growing season and post-harvest. The industry believes it is almost unique among apple producing nations in being able to meet EU requirements for very low chemical residues, as well as the tough quarantine pest conditions for access to many Asian markets with the same fruit.
It is likely there will be a resumption of the trend to less reliance on the UK and European markets in 2014/2015 by New Zealand apple exporters. From 2004/2005 to 2011/2012, consistently better returns in Asia have fueled a trend to replace European markets with ones in Asia. Relatively good pricing in Europe over the last 18 months has halted this trend, but those prices have begun to come under pressure in August through September 2014. There is a now a considerable risk that unless the big northern Hemisphere crop clears the markets satisfactorily then there will be a continuation of poor pricing for New Zealand apples entering North America and Europe in 2014/2015.
The slightly later flowering time for the 2014/2015 crop won’t help exporters aiming to get fruit to Asia as early as possible but may give them a few extra weeks’ leeway to get a better supply and demand balance in Europe.
Looking back at 2013/2014 apple exports have been revised up by three percent to 310,500MT based on actual exports to date which are ahead of expectations. Sources indicate that because of strong offshore pricing early on in the shipping season every bit of fruit that could be found of saleable standard has been shipped. Now that prices have plummeted in Europe some growers who have had fruit shipped late into Europe (August to October 2014) may now wish they hadn’t bothered.
Apple imports are expected to be stable at 1,000MT for both 2013/2014 and 2014/2015.
Pear Exports and Imports
Pear exports in 2014/2015 are forecast at 5,000 MT, a 6.5% reduction from exports in 2013/2014. Even though total pear production in New Zealand is expected to increase by nine percent it is likely that much of this increase will go to processing and local consumption, leading to a decline in exportable supplies in the country.
NZ pear exports in 2013/2014 have been surprisingly strong. Based on year-to-date shipment data, post has revised its export forecast for 2013/2014 to 5,350 MT. This represents a 19% increase compared to our previous forecast.
Pear imports are still expected to reach 3,700 MT in 2013/2014. However, with higher domestic production on the market during 2014/2015, Imports are forecast to decline by 12 percent, to 3,250MT.
Market Access, SPS Issues, and Individual Country Analysis
Since the vast majority of apple shipments from New Zealand for 2013/2014 have taken place by the end of September 2014, the year-to-date (YTD) data through the end of September is a good indication of total shipping volume.
The high tariff barrier (50 percent) still faces apples being exported to India. In addition the potential for methyl bromide treatment to be enforced by Indian officials over all apple imports still lurks in the background. It is a real threat, and if it were to be implemented by India it would have a huge potential to halt exports from NZ. So far representations to Indian officials made by the Ministry for Primary Industries (MPI) have been heard, and so far the regulations have not been enforced.
A combination of high quality fruit and the removal of the 20% tariff has been a shot in the arm for New Zealand exporters who have shipped nearly 20,000 MT of fruit to this market in 2013/2014. This level puts the performance back on a par with pre 2010/2011 volumes. In 2004/2005 and in 2007/2008, 25,762 MT and 20,599 MT of New Zealand apples respectively were shipped to Taiwan.
Apples shipped from NZ have to comply with MPI’s “codling moth sensitive market program” which does create extra pressure on growers in order to comply and also achieve low chemical residues for grades of fruit within a block which may be better exported to Europe. In lieu of a fumigation condition NZ operates under a three strikes condition, whereby if codling moth is detected in three consignments the trade is shut down. MPI considers this good access as most countries are on a single strike condition.
The last two marketing years (2013/2013 and 2013/2014) have been kind to NZ Exporters who have been shipping to the US with good prices and increased volumes. It is unlikely this will continue for 2014/2015 because the good 2014/2015 harvest of US fruit is likely to fill the market and narrow the window of opportunity for New Zealand fruit.
New Zealand still has the issue with the more stringent access conditions for California versus the other states because of Apple Leaf Curling Midge however MPI accepts there are technical reasons which support both sides of the issue. Some exporters are frustrated because the most cost efficient supply chain for them is via Californian ports but because of the Apple Leaf Curling Midge conditions it necessitates shipping into other ports which increases distribution costs for some destinations.
The issue with the post-harvest rot caused by the fungus “Neofabraea Alba” which caused cessation of shipments to China late in 2012/2013 was resolved in March 2014. MPI working with Pipfruit New Zealand has agreed with China AQISQ to a supplementary protocol to the existing protocols governing access for NZ apples to China. The supplementary protocol requires a range of activities to be undertaken by growers, post-harvest operators, and the regulator before apples can be certified and sent to China.
With the reduced total volume of fruit available in 2013/2014 and the final protocol coming after the start of the shipping season exporters had already committed a lot of fruit elsewhere. However in 2014/2015 with the expected increased volume of exports of fruit to ship the Chinese market will once again become very important to take an increased volume.
In the whole of the 2012/2013 year only 67MT of apples were shipped across the Tasman from New Zealand. There is still a lot of sensitivity surrounding the phyto-sanitary protocols on both sides of the Tasman. The industry in NZ perceives the interpretation of the protocols as being overly stringent, and apple sector interests in Australia would like the status quo to remain with virtually no imports coming in. The trade figures for the 2013/2014 year to date would indicate that some exporters at least are becoming more familiar with the protocols because 399 MT have been shipped so far.
The UK market is featured here to contrast a traditional destination for New Zealand apples with the emerging and developing markets of Asia and the Middle East. There is predictable market access for the fruit. It is price driven and takes the traditional varieties: Braeburn, and the traditional Royal Gala variety. Achieving higher prices has revolved around the Jazz and Pink Lady varieties supplanting the traditional varieties