New Zealand. Kiwifruit Sector Report. Sep 2014 Sept. 15, 2014
The specter of the bacterial disease PSA(v) which has loomed over the Kiwifruit sector since 2011 is diminishing. Although now 2,496 orchards harbor the disease, which comprise 81% of the total Kiwifruit area production is on the increase again. Exports are estimated to reach 345,000 metric tons in calendar year (CY) 2014, eight percent above CY2013. From CY2015 on to CY2018 exports are set to boom up to somewhere between 414,000MT and 475,000MT thanks to the new Gold variety “G3” which will occupy 35% of the total orchard area in the near future.
Kiwifruit production is now on a fast recovery trajectory, three years on from the onset of the PSA(v) vine disease epidemic beginning in spring 2011. Production is estimated at 365,000 metric tons (MT) for the 2014 calendar year (CY) which is 7.5% greater than CY2013. The CY2014 level is still 14% less than the estimated record 425,000 MT produced from the 2011 harvest prior to PSA(v) striking.
PSA(v) and its Effect on Planted and Harvested Areas
PSA(v) is the virulent isolate (v) of the bacterial canker disease Pseudomonas Syringae Actinidiae (Psa). The disease causes the vines to exhibit firstly: leaf spotting, and wilting. If the infection progresses to the secondary phase it results in vine die-back and quite often death of the plant. The bacterium has never been identified on the fruit and there no known impacts on animal or human health. There have been no phyto-sanitary measures taken by any major destination market against New Zealand Kiwifruit.
PSA(v) has now spread to 2,496 orchards, which comprise 81% of the total kiwifruit area.
PSA(v) has galvanized the industry. A huge effort has gone into combating the disease. Growers now have a broad range of measures they can employ to resist the disease ranging from: increased orchard hygiene; a suite of spray chemicals; through to high cost crop covering. In the longer term plant breeding for resistance will be key as well as gradual relocation of orchards into typography’s, soil types and altitudes where the vines are the least susceptible.
One of the main effects of the disease has been the quick demise of the original Gold variety “Hort16a”. It is the most susceptible of the main cultivars being grown commercially. From approximately 2,700 hectares (ha) pre 2011 there was only 560ha harvested in 2014 and it is likely that there will only be 200ha harvested in 2015. This is particularly significant for the sector because gold fruit have returned on average over the last four years 100% greater value per ton at the FOB level than the green fruit. At the grower level this is amplified because orchardists achieve 20-40% higher yields with gold vines over green.
It was fortunate that Zespri had bred a new gold variety “G3”, which was not only more resistant to PSA(v) than Hort16a but also carry’s greater yields. Licensing of orchardists to swap from Hort16a or Green varieties to G3 has been rapid. From only a few hundred hectares pre 2011 there is now approximately 4,700ha of vines grafted over to G3. This is nearly 34% of the total area (13,874ha) that will be cropped in 2015. Total area in Kiwifruit is likely to plateau out at around 14,000ha over the next two years. The balance of the area cropped in 2015 will consist of: an alternative gold variety “G9” at 154ha; and approximately 8,820ha of two Green varieties.
Production Trends 2015 to 2018
This rapid scaling up of the new gold variety G3 will have significant effects on total production and composition of the crop over the next four years. Total production in 2015 is likely to range from similar to 2014 up to 395,000MT. By 2018 production is likely to be in the order of 435,000MT to 495,000MT.
In 2011 the gold tonnage exported peaked at 25% of total exports. By 2018 the gold tonnage exported is likely to be 43-45% of the total. The big gold production increases will probably bring about an equally significant drop in orchard gate returns from NZ$12/tray (3.6kg) for gold over the last two years while it has been in short supply down to NZ$7/tray over the next four years.
Grower Returns Compared to Export Results
High quality and taste are core attributes which provide a key competitive advantage for New Zealand kiwifruit that supports the premium price achieved in international markets. Having essentially only one exporter for all markets apart from Australia has allowed the development of one rigorous grading system for the fruit which maintains the high standards needed. On orchard husbandry to maximize fruit dry matter content and control of the maturity at harvest starts the process off to ensure that consistently high quality fruit is exported.
Exports, Marketing and Trade Policy
Total exports are likely to reach 345,000MT in CY2014 which will be an 8.3% increase over CY2013. However this total is still 14% below the peak volume shipped in 2011. Over the next four years there will be a rapid ramping up of exports in line with the significant production increases forecast. In 2015 exports are likely to be in a range from 345,000MT to 378,000MT and by 2018 likely to lie in a range from 414,000MT to 475,000MT.
This scale of increase will test the statutory sanctioned single desk marketer Zespri as to whether it can satisfactorily market the volumes at profitable prices for the growers. Zespri, a limited liability company, is owned by past and present growers.
Japan is still the most valuable single country destination taking 19% of the fruit in 2013 but returning 28% of the total export receipts for Kiwifruit in CY2013. China received 8.7% of the total fruit shipped in CY2013 and returned 10.25% of the total receipts in CY2013. China is seen as a major growth market. Zespri, after hiccups over the last two years with its importing and distribution partners in China, has re-organised its marketing structure there to develop the market significantly. It would not be surprising to see volumes from New Zealand to China double if not treble over the next four years.
Other countries in Zespri’s sights for intensified promotional work and subsequent anticipated increased tonnages are Brazil and Mexico; parts of the Middle East; and South-East Asia. Zespri’s annual review, 2014, also mentions India and France as worthy of a new marketing focus.
One of Zespri’s long term marketing strategies is to achieve documented health claims for Kiwifruit. It has achieved a health claim, based on ten years of clinical trials, from Food Standards Australia & New Zealand (FSANZ) that Green Kiwifruit can contribute to normal bowel function. In the longer term it hopes to achieve a European health claim.
On the positive side the China/NZ Free Trade Agreement (FTA) is advantageous for Kiwifruit. The tariff rate will be zero by 2016. Taiwan is also an important customer with whom NZ has concluded a trade agreement. The Economic Cooperation Agreement with Taiwan which came into force December 1, 2013 will reduce the tariff on Kiwifruit from 20% to zero by 2016.
Obviously it would be beneficial for the tariff going into Japan to be reduced. There are hopes that the Trans Pacific Partnership negotiations will address this. South Korea is of particular concern: firstly the tariff rate is very high; but also Chile, NZ’s chief competitor in the market, has achieved an FTA with South Korea. New Zealand is negotiating with South Korea to institute a FTA but progress is painfully slow at present