Fruit volumes sliced in harvest

6FARMERS WEEKLY – farmersweekly.co.nz – May 30, 2022

News Fruit volumes sliced in harvest

Richard Rennie richard.rennie@globalhq.co.nz

TWO of the country’s most significant horticultural crops have been caught out with lower than expected harvests, leaving the industry and growers short of millions in anticipated income.

The apple industry is entering the later stages of harvest with losses estimated at 10-12% and more than $100 million of fruit either rejected or still hanging on trees.

And kiwifruit analysts are struggling to determine the cause of a 10% drop in the billion dollarplus SunGold kiwifruit crop.

Pipfruit NZ chief executive Terry Meikle confirmed the 10-12% drop in the apple harvest from its pre-harvest estimate carried out in January.

He says this was due to a combination of factors including heavy rainfall events in Gisborne and Hawke’s Bay mid-harvest, and from omicron establishing itself in NZ at the harvest outset.

Its arrival in the three main Pacific islands that Recognised Seasonal Employer (RSE) staff are sourced from a few weeks later has also impacted upon RSE availability.

Hopes were for RSE numbers to reach 16,000 staff this year, but is estimated to be about 20% short on that, with the Tongan eruption making securing staff more problematic.

A lack of backpackers and international students on working holiday visas has also exacerbated the sector’s ability to ensure a timely harvest.

Meikle said the next challenge being faced was a logistics one with transport and shipping continuing to be complicated by a number of factors.

This included China’s ongoing covid elimination strategy causing significant logjams on shipping routes and putting pressure on markets already scarce for container supply.

Further north in Bay of Plenty, Seeka, the country’s largest grower and post-harvest processor, announced in an NZX update that the total NZ SunGold kiwifruit crop was expected to be 103.3 million trays, a drop of almost 10% on earlier forecast industry volumes, NZ wide.

In announcing its financial summary for 2021-22, Zespri chief executive Dan Mathieson confirmed this season’s crop has lower volumes that initially forecast.

He said challenges remaining in the current season also include the impact of the pandemic of global shipping networks.

Seeka’s SunGold volume packed to date reflected the decline, with a total volume of 26 million trays.

While its current year’s volume is ahead of the 17.9m packed in 2021 to date, the season’s total is behind the current year estimate for Seeka by 8.2%.

Seeka chief executive Michael Franks said it was not typical to have a drop over expected crop yield this late in the season.

“In the case of SunGold it was only two months ago we were anticipating 115m trays in total, now it is 103m so yes, it is a surprise.”

He said the industry had anticipated fruit size would improve through the season.

“We thought it was a good start to the season, we did have a wind event in Opotiki, but the rest of the season looked good too.”

Meantime all eyes were on the Hayward (Green) kiwifruit harvest, which was only one third complete.

Estimates for Hayward at this stage have the crop down 4.7% to 65.1m trays, with the risk there would be a further reduction in volumes.

To date Seeka has packed 5.6m trays of Hayward as it hits the main season Hayward harvest in coming days.

Franks said it had been a monumental effort by industry to get fruit harvested this year, given the shortages of overseas workers and the tight local labour supply.

“We will be happy to put the season behind us and look forward to next year,” he said.

Seeka has advised it is too early to provide a current year earnings guidance but expects to do so once the Hayward harvest and packing was complete.

In the case of SunGold it was only two months ago we were anticipating 115 million trays in total, now it is 103 million so yes, it is a surprise.

Michael Franks Seeka

LOWER: Seeka chief executive Michael Franks confirmed the lower than expected SunGold harvest has taken the sector by surprise this late in harvest.

Golden glow on Zespri profit figures

Richard Rennie richard.rennie@globalhq.co.nz

ZESPRI has announced a record level of revenue after a tough season, topping $4.47 billion in earnings a lift on 12% on the previous year.

The earnings include licence revenue and comprise $4.03b from all global fruit sales, from a record setting 201.5 million trays of fruit sold.

The marketer’s net profit after tax was a record setting $361.5m, up from $277.1m the year before, with continuing demand for the SunGold licences buoying profit levels.

Zespri returned $2.47b back to growers as payments.

Zespri chairman Bruce Cameron says the results reflected the efforts by the industry to continue to operate safely throughout the challenges presented throughout the pandemic.

“This was an extraordinary season where the industry faced some considerable headwinds in market, throughout the supply chain and on orchard, yet collectively we found a way to tackle the challenges and to continue to succeed.

“Most pleasingly, not only have we delivered strong returns for growers including our second-highest per hectare returns, we’ve strengthened our partnerships across our global supply chain, continued to make positive contributions to our communities, and made decisions as an industry to set ourselves up for sustained success,” Cameron said.

The average return for Zespri Green per tray was $6.35 and for SunGold $11.51, with an average return per hectare of $176,026.

Chief executive Dan Mathieson says Zespri’s continued investment in brand building and long-term supply chain partnerships have enabled the company to avoid the worst of the global shipping crisis with greater use of charter ships.

He said the offshore crop volumes grown under licence for Zespri also continue to perform well.

The marketer now has 26.5m trays grown under contract offshore, contributing $410m to revenue streams.

“The growth of our offshore production remains critically important, boosting our efforts to serve our consumers yearround, helping to hold our shelf space, make our marketing investment more efficient and to maintain commercial partnerships to allow us to launch our New Zealand sales season.”

Mathieson acknowledged the current season continues to face challenges, with the ongoing impacts of global supply chains as a result of the pandemic’s aftermath, particularly on shipping networks.

Fonterra’s Q3 delivers despite disruption

Hugh Stringleman hugh.stringleman@globalhq.co.nz

FONTERRA is bringing the 2022 season to a close with good financial results despite dealing with multiple disruptive events across multiple markets.

Announcing the third-quarter results, chief executive Miles Hurrell held the farm gate milk price forecast at $9.30/kg midpoint and maintained group earnings guidance at 25c to 35c a share.

Fonterra’s increasingly volatile business environment included further covid-19 impacts, financial markets and foreign exchange volatility, a tightening labour market, increasing interest rates, geopolitical events and the possible impact on demand from higher dairy prices.

Sales volume was down 4% to just under three million tonnes, but revenue was up 10% to $17 billion because of higher product prices.

Hurrell expects these strong pricing relativities to continue in the fourth quarter (May to July) and therefore the earnings guidance to remain.

In the past high milk prices have impacted added-value margins and therefore Fonterra has not been profitable, but this year is different.

Just how different was illustrated by the alarming numbers from the historical $500m Sri Lankan market, where political unrest and bad policies have bankrupted the country and devalued the SL rupee by 70% against the US dollar since March.

Fonterra’s products are sold to Sri Lanka in US dollars, so the local business subsidiary has taken an $81m devaluation hit on payables.

Hurrell said Fonterra’s financial discipline has put it in a good position to manage the impacts of these recent events.

“With over 95% of our milk contracted for the season, our strong balance sheet gives us the ability to hold higher inventory to manage the short-term impacts on demand and our sales profile.

“Our working capital, and therefore debt, is higher than usual at this point in the season but we expect this to balance out over the course of the year.”

In the results, normalised net profit after tax was down 20% to $472m and earnings per share down 18% to 28c.

Therefore, Fonterra has already booked most of the earnings guidance it is forecasting for the full financial year and is not expecting fourth-quarter trading to add significantly.

Submissions from the company and the co-operative council are being made to government policy makers to introduce flexible shareholding into the capital structure.

On the sharemarket, supply share prices are down 35% over the past year to sit at $2.25.

Fonterra Shareholders Fund investment units have fallen $1 in the past year, including 50c in the past month.

Capital restructuring is weighing heavily on the markets for shares and units despite the company having a strong balance sheet and producing good financial results.

“We are continuing our ownership review of our Australian business and the divestment process for our Chilean business, Soprole, is underway.

“We are taking our time to ensure the best outcomes for both businesses and remain confident on delivering on our intention to return around $1b of capital to our shareholders and unit holders by FY24,” Hurrell said.

ALL OKAY: Fonterra chief executive Miles Hurrell says the co-op’s working capital, and therefore debt, is higher than usual at this point in the season but he expects this to balance out over the course of the year.

Continuing ownership review for the Australian business and divestment of Soprole is underway.

Miles Hurrell Fonterra

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8FARMERS WEEKLY – farmersweekly.co.nz – May 30, 2022

News Drinking water proposal hard to swallow

Annette Scott annette.scott@globalhq.co.nz

PROPOSED changes to the National Environment Standards (NES) for drinking are set to sting farmers the worst, according to Federated Farmers.

The Ministry for the Environment (MfE) is proposing to make changes to the NES for human drinking water (NES-DW) that limit activities in the vicinity of drinking water sources.

The proposed limitations are likely to have significant impact on farming, especially around requiring a consent to apply agrichemicals.

In a Federated Farmers online seminar outlining the proposed regulations solicitor and senior policy adviser RMA Mike Campbell and group manager policy Paul Le Miere outlined the impact the proposed new regulations would have for farmers and rural communities.

The one clear message was that most farms are going to be impacted.

“If you thought Three Waters was bad, this will get you riled up.

“This is draconian, overly onerous and unnecessary.

“It is the third beast of the Three Waters Reform,” the policy advisers said.

“The areas the limitations are proposed to apply to are unnecessarily large, particularly onerous and expensive, not just for those who have bores, springs or river intakes on their properties but also for neighbours many kilometres upstream,” Le Miere said.

While Federated Farmers supports clean drinking water, the proposed changes are disproportionate to any risk example requiring consent to apply agrichemicals where there could be no effect on a drinking water source.

“I see the proposed changes as a sledgehammer to crack a nut and these are going to be unnecessary regulations that will sting farmers worst,” Campbell said.

The Water Services Act 2020 places obligations on drinking water suppliers, whereas the proposed changes to the NES-DW will place restrictions that apply to all land users in the vicinity of a drinking water source, regardless of whether they are drinking water supplier or not.

These drinking water sources will have differing levels of protection depending on which of the four source water risks management areas (SWRMA) it is categorised as, ranging from local level to catchment level.

Farmers will need to comply with the NES-DW if they are a supplier of drinking water, other than rainwater captured from a roof.

Water source abstraction points include surface water takes such as rivers, streams and lakes, and groundwater takes being bores and wells.

So, if you supply human drinking water to worker accommodation, rental houses or cottages on the property, a wool shed, packhouse, horse stables, dairy shed, neighbour’s houses, local hall, or school, you will be impacted as a drinking water supplier.

In terms of new requirements for consents for application of agrichemicals alone a conservative estimate is a $500 million cost to the farming sector.

There is an existing NES-DW but MfE considers that it is too often overlooked in resource consenting process.

“One of the justifications for these changes to the standard is essentially to force regional councils to do more,” Campbell said.

As the name suggest a NES sets a national baseline and regime of rules that those writing District Plans or running resource consent hearings must abide by.

Council rules can be stricter but not less strict than what is in the NES.

“Unfortunately, it means we have a one-size-fits-all paradigm with no discretion allowed at the regional level unless it is specifically provided for,” Le Miere said.

There is no date set yet for when these nationwide rules will come into effect nor when compliance is required.

Meanwhile Feds is “fighting hard” the unreasonable aspects of the NES-DW.

This includes through a formal submission and policy team members meeting with officials and Ministers.

Feds is also GIS mapping to map the extent of land the proposed restrictions will encompass.

STUNG: If a farmer supplies drinking water to worker accommodation, rental houses or cottages on the property, a wool shed, packhouse, horse stables, dairy shed, neighbour’s houses, local hall, or school, they will be impacted as a drinking water supplier.

I see the proposed changes as a sledgehammer to crack a nut.

Mike Campbell Federated Farmers

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NZ joins regional economic framework

Eric Frykberg

TRADE experts remain sceptical about what, if anything, the new Indo Pacific Economic Framework (IPEF) can offer New Zealand food exporters.

The IPEF was first proposed by United States President Joe Biden in October and was formally launched in Japan yesterday.

The themes of the framework are fair and resilient trade, supply chain resilience, infrastructure, clean energy and decarbonisation, and tax and anti corruption processes.

The countries agreeing to this are the US, New Zealand, Australia, Brunei, India, Indonesia, Japan, South Korea, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

The group represents 40% of world GDP.

It is being seen in some places as a best option after Biden declined to reverse Donald Trump’s withdrawal from the Comprehensive and Progresssive Trans Pacific Partnership (CPTPP).

But former diplpmat and veteran trade analyst Stepehen Jacobi is very sceptical about IPEF.

He says it is an American-centric arrangement and is at odds with New Zealand’s tradition of inclusive organisations.

“Secondly, it is not a free trade agreement (FTA) so it has no market access commitments...that means it has no immediate commercial benefit for our exporters,” he says.

Jacobi concedes there were trade facilitation provisions which could be useful, but they would not be nearly as effective as an FTA.

Worse still, the US was still applying tariffs to New Zealand steel and aluminium sales on ”bogus national security grounds”.

“I find it hard to believe we are going to have a conversation with the United States about fair and resislient trade, which is the first pillar of IPEF, when they are still applying these tariffs.

“It could be steel and aluminium today but it might be beef and dairy tomorrow.”

The Auckland academic Jane Kelsey is even more scathing, accusing New Zealand of sleepwalking into signing an agreement that was unclear.

“The low-key event was overshadowed by the elephant in the room – no one knows what the IPEF actually is”, Kelsey says.

“Rather than dive straight into these negotiations, the Government should commission an an independent white paper that sets out the opportunities and threats from such an arrangement.”

Kelsey says the agreement appeared to be mainly about helping the US to counter China’s ascendency in the region.

Meanwhile, Professor Robert Ayson of Victoria University told RNZ some of the elements of IPEF were useful.

“But it is not a replacement for CPTPP, it does not have market access.

“It also has the veneer of the US trying to decouple its economy from China and trying to encourage other countries to decouple their economies from China.”

But Ayson added that in terms of encouraging the US to engage with Asia and the Pacific, membership of this pact by New Zealand was a “no brainer”.

He did not expect China to be “super pleased” about this, but the membership of the group was so broad there was a good chance of the American goals behind IPEF being diluted by the diverse interests of its members.

As a result, any attempt by the US to use economic pressure to further its political goals would probably not get very far.

I find it hard to believe we are going to have a conversation with the United States about fair and resislient trade, which is the first pillar of IPEF, when they are still applying these tariffs.

Stephen Jacobi Trade analyst

NO BRAINER: Professor Robert Ayson of Victoria University told RNZ that in terms of encouraging the US to engage with Asia and the Pacific, New Zealand’s membership of the new Indo Pacific Economic Framework was a no brainer.

THE WAY YOU EMPLOY MIGRANTS IS CHANGING.

From 4 July most employers will need to be accredited to employ migrant workers.

From 4 July 2022, to hire a migrant on the new Accredited Employer Work Visa employers need to:

1. Become accredited with Immigration New Zealand 2. Do a job check application for each position you want to fill 3. Invite the migrant worker to apply Visit the Immigration New Zealand website to learn more about the changes and how it will affect you. IMMIGRATION.GOVT.NZ/ACCREDITED-EMPLOYER