Kiwifruit lifts sector strength

A sound strategic plan from Zespri, benign weather for harvesting and strong market returns are reinforcing some highly positive market sentiment in the kiwifruit sector this year and underpinned horticulture’s momentum.

Two pieces of positive news in the past month have also added to those already positive prospects.

New plant variety rights protection would be extended by a minimum of five years on proprietary plant breeds that underpin Zespri’s branded fruit offering has been welcomed by the market.

Meantime investors have also given an early thumbs up to the newly commercialised Red80 variety, being prepared to pay $457,000 a hectare for license fees at the recent auction. The auction round also saw Gold G3 fruit regain its momentum, with 400ha auctioned for $684,000 a hectare, well up on last year’s $561,000.

Bayleys Bay of Plenty Country manager Matt Clutterbuck in Tauranga and horticulture sales agent Snow Williams in Te Puke say the wealth of good news around kiwifruit is reflecting strongly in the level of buyer interest they are experiencing, and the values placed on orchards.

“Investors and growers obviously like what they are seeing come out of Zespri, and the bids for the Red fruit are very encouraging,” says Snow.

He says the high values for licenses make it difficult for smaller “mum and dad” growers to compete with larger corporates when it comes to green fields plantings, but interest remains strong among families for existing smaller orchard blocks.

The highest value he has seen paid this season to date was $1.8 million per canopy hectare on a Te Puke SunGold orchard, and $675,000 per hectare for a Green orchard. Meantime interest in bare block land has been starting north of $200,000 per hectare.

Matt Clutterbuck says the Western Bay of Plenty is also experiencing strong activity after what had been a slower year last year for orchard sales.

“I think there is a sense that Zespri are getting it right, and doing a good job, and the question is where would you put your money if it was not in kiwifruit right now?”

He is encouraged by interest coming from a younger generation of growers looking for orchards, while at the same time also seeing growing corporate involvement as syndicated investments also engaged.

“Now the plant variety rights have been extended gives corporate investors greater confidence they will see the full value benefit of their Gold or Red license for longer, without a decline in value.”

Some land use change is also occurring as avocado investors sell to kiwifruit syndicates converting to the fruit, with the land’s good location and generally sound fertility making it a good greenfield option.

Both agents are confident the enquiry and investment they are witnessing is based on sound financials generating a return that is meeting investors’ criteria on a cash flow basis, and meeting bank lending expectations.