Prime Movers sector report: Apples

The apple industry entered the brave new world of multiple exporters this year. Horticulture reporter ROSE MANNERING finds out how city dweller-turned-apple grower Dermott Malley fared.

Dermott Malley bought a 60-hectare orchard at a very public mortgagee sale at Pakowhai, Hawke's Bay, in October 1999. Orchard prices were at an all-time low, as were returns and growers' outlook for the future.

"In our first year here, Braeburn prices crashed and the world looked ugly," he said.

Poor weather for growing fruit for the next two years meant Malley, and the rest of the apple growing industry in Hawkes Bay, struggled to grow profitable large Royal Gala. Prices for small fruit are heavily discounted.

He was new to fruitgrowing, but had many strings to his bow including farming, merchant banking and publishing. A sour business experience in Auckland prompted Malley, wife Linzi and son Patrick to look for a new venture. Their new orchard was run-down, and they have worked hard to build it up.

Now, the industry has been through one of the biggest changes in its history - the removal of the monopoly selling status of Enza, the former Apple and Pear Marketing Board - last October.

Malley said it had to happen following major changes worldwide in fruit distribution and sale. The channels of fruit to the market were far more direct, and driven by large supermarket chains. There was an ever-increasing demand for food safety, and removing steps from the distribution chain helped trace product back to the grower.

Malley was instrumental in setting up, and now chairs, a 12-member export co-operative which exported 500,000 cartons of fruit this season. The group, Orchard Crisp, formed as an Enza supply group under the single desk regime, and exported under licence.

Malley said its aim now was to maintain some level of influence over cost and the fate of members' fruit after harvest.

"We don't want our fruit getting lost in a big pool," he said.

More than one exporter in each off-shore market was selected for the first year. The group also marketed a considerable portion on its own, using the Hawkes Bay Wine Country brand.

They had wins and losses but are committed to their co-operative Orchard Crisp, which will handle an estimated 650,000 cartons next season.

Their focus is on the least-cost distribution system. "We can control our costs, but we can't control our income," Malley said.

He said growers should be looking for returns close to $25 for Royal Gala, and $21-$22 for Braeburn.

In reality, the average price for New Zealand's biggest export apple variety, Royal Gala, will be close to $20-$21 this year, a similar level to last year. Braeburn prices averaged $18.50 last year, and this year are expected to yield something similar.

Apple prices were good last year, but production was down by at least a third after a poor growing season. Prices for other varieties are also expected to be similar to last year, although some varieties have not yet all been sold.

Pipfruit growers began this year with a high level of confidence - the growing season was one out of the box, the crop excellent and many exporters were chasing after their fruit.

The first year of deregulation also met a high market demand.

And for the first time in many years, orchard properties are hotly sought and prices have soared.

The Malleys have added to their orchard holding, purchasing another 40ha for a total of 100ha. They run a diverse fruitgrowing operation, also producing pears and peaches for the canning industry, and fresh marketing of summer fruit.

"We have a balance between processing and fresh market crops; we trade certainty of income versus market uncertainty [for fresh exports]."

Agfirst consultant Ross Wilson said grower confidence was not as high as expected considering the industry had finally put Enza's failed foreign exchange costs behind it. Returns last season were cut by $2.60 a carton to cover the forex debt.

Malley said New Zealand exporters needed to co-ordinate their off-shore marketing effort, like their Chilean competitors. In this first year it had been open slather, with more than 50 exporters applying for licences, and sending fruit to any market they wished, as long as phytosanitary and importation requirements were met.

Weak selling by inexperienced marketers in Europe, and a failure to repack fruit with quality problems had meant prices there for New Zealand apples had fallen.

"The Chileans do a brilliant job, knowing what is coming in on ships, and what is being used for the season."

Enza general manager (international) Clive Durand said while Chileans may co-operate their shipping plans, they fight like cats and dogs in the marketplace. The New Zealand industry needed to rigidly adhere to phytosanitary and food safety issues, but was still some way from co-operating in the marketplace.

He said the marketing year had been good and the reputation of New Zealand apples was still largely intact, although not all growers would be happy with their level of returns. Some exporters selling small volumes at high niche prices would produce excellent results but others who had not done their homework would be disappointed.

Enza would have liked a bigger slice of the export cake. Customs Service documents indicated a larger than expected national export crop of 19 million cartons, and Enza struggled to get half.

Malley has formulated some simple rules after his first year without a monopoly marketer: deal with the right people with good information systems and a passion for fruit, don't take your eye off the ball, and make sure people do what they say they are going to do in the marketplace.

"We all have one common feature - we live or fall by making apples work."

Facts:

Export value: $477 million

Crop size: 19 million 18kg cartons

Key markets: Europe, Britain, US

Number of growers: 1100

Major growing areas: Hawke's Bay, Nelson

Area planted: 14,200ha

Further reading:
nzherald.co.nz/primemovers