The fundamentals of the kiwifruit sector are heading in a positive direction following two challenging seasons where the industry dealt with rising on-orchard costs, extreme weather events, and unfavourable economic conditions.
The Colliers Rural Valuation team have released a detailed report outlining the history and current state of the kiwifruit property market in New Zealand.
Valuers Chris Boyd and Brylie Gordon applied a discounted cashflow approach to their valuation analysis allowing a forward-looking approach to valuation, as a secondary approach to direct market comparison.
The report notes that peak market conditions occurred in late 2021 and early 2022. However, sales activity and values have since declined, owing to the aforementioned weather, cost pressures, and economic backdrop.
Start your property search
The poor growing conditions resulted in a reduced 2023 harvest, but the industry has experienced stronger return prices per tray off the back of low supply. Forecasts from within the sector suggest that improved crop volumes are predicted for 2024.
Boyd, Executive Director of Rural & Agribusiness Valuation & Advisory Services at Colliers, says orchards that transacted in late 2022 and early 2023 sold for lower prices compared to the market peak.
"Orchard owners that don't 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. The orchards that did transact tended to be smaller, mixed properties with lifestyle attributes," Boyd says.
"A disjoint in value expectations between vendors and purchasers has contributed to low sales volumes with purchasers offering lower levels than vendors were willing to accept, with some vendors' expectations of price still sitting at levels paid in the market peak.
"Market appetite is starting to improve with fuller crops hanging on the vines for the 2024 harvest. Optimism levels are beginning to improve again and hopefully this will translate into more orchard transactions going forward."
The biggest kiwifruit producing region in New Zealand is Bay of Plenty with Te Puke and the surrounding areas considered the home of New Zealand kiwifruit. Total offshore exports of kiwifruit in the year to June 2022 totalled $2.9 billion with the European Union, China, and Japan popular destinations.
As of 2023 there were 14,682 producing hectares of kiwifruit planted in New Zealand, compared to 12,180 in 2015, prior to the first SunGold licence release in 2016.
Additional production is derived as new development areas come on stream, mostly from varietal licence areas being planted and maturing. There are just over 2,800 kiwifruit producers in New Zealand.
SunGold overtook Green as the leading variety by volume in 2019 and by planted area in 2021. The continued demand for SunGold licenses during a period where few orchard transactions occurred reflects the sector s long-term confidence in the variety.
RubyRed licences were first released to the market in 2020 and an individual fruit pool was established for the 2022 harvest.
Gordon, Valuer at Colliers, says start-up costs for RubyRed are significantly less than SunGold, with obtaining a licence being the main variance.
"For that reason, RubyRed was initially considered attractive for those looking to get into orchard ownership through greenfield development," Gordon says.
"Forecasted orchard gate returns (OGR) for 2023 by variety see RubyRed obtaining the greater returns on a per tray basis than traditional varieties of SunGold and Green. This is largely due to lower crop yields of the RubyRed variety. However, resulting OGR on a per hectare basis is lower than other varieties."
Gordon says the sector still faces headwinds, with the barrier to entry remaining high for prospective new growers due to high startup costs and a lack of available land given the extensive development that has already taken place in Bay of Plenty.
"This has led to development in second-tier growing locations such as Rangitikei Plains, Waikato, and areas of Northland.
"It is currently prudent for potential purchasers to enter orchard ownership through an established orchard rather than consider development. However, we expect this balance could change as economic fundamentals improve."
- Supplied by Colliers
