After a couple of bleak years, the sun is starting to shine again on kiwifruit returns and orchard values with a recent valuation report painting a positive picture for the sector’s future expansion and value.
Colliers’ NZ kiwifruit market report has done a deep dive into the sector’s profitability and direction, with authors noting a decline in orchard sales activity in the past two years in response to cost pressures and weather impacts.
Colliers director of rural and agribusiness valuation Chris Boyd said orchards sold in late 2022 and early 2023 went for lower prices, compared to the market’s earlier peak.
That peak had included a sales of a SunGold kiwifruit orchard for up to $1.9 million a canopy hectare in autumn of 2022. The most recent reported SunGold orchard sale recorded in the report had been for $1.2m, in October last year.
Orchard sales volumes had also dropped significantly, with about 25 sales reported last year, compared to about 70 in 2021.
Boyd said those orchards that had sold recently were generally smaller mixed properties with lifestyle attributes.
“Orchard owners that did not need to sell unless otherwise motivated have ridden out the slower period, and as a result higher quality orchards have not generally come to the market.”
He described a “disjoint” in value expectations between vendors and buyers that was also contributing to lower sales volumes, with purchasers offering prices lower than what vendors would accept.
However, better crop yields this year and more normal climatic conditions have contributed to greater optimism. This comes after 2023’s 130 million-tray harvest set a bleak record for being the lowest since 2017, despite total area in fruit having increased by 15% since then.
This year’s harvest is estimated to be about 185 million trays.
Orchard profitability also appears to be turning the corner with estimates of it averaging $61,900 a hectare in orchard gate returns (OGR) for Green, up from the low point of $57,600/ha the year before.
SunGold is expected to also average $140,400/ha, compared to $137,500/ha in 2022.
But returns for both crops remain behind where they peaked in 2020, when SunGold’s OGR averaged $177,800/ha and Green $76,700/ha.
Despite the tougher period, demand in SunGold licences has also remained strong, having peaked at $800,000 a hectare in 2022.
The report also outlines some of the industry’s major challenges.
Unlicensed plantings in China top the list, with estimates that almost 8000ha of illegally planted SunGold fruit exist in China. The impact of such volume of fruit threatens the balance of the market with oversupply that could impact NZ returns, given China accounts for about 25% of NZ’s sales.
Hi-Cane, a spray used to promote uniform bud break, is also identified as a challenge because of the risk that the Environmental Protection Authority may ban it, when there is no viable alternative on the market.
A decision on this is expected in late May. Without it, orchard yields and profitability will be significantly affected.
Given the high entry and establishment costs for greenfields orchard conversions, the report authors say it is more prudent for potential purchasers to enter ownership through an established orchard, rather than consider development.
“However, we expect this balance could change as economic fundamentals improve.”
