As we head toward the Christmas period it is likely that the market challenges that we have experienced over the last several months will continue unabated.
Domestic market volume through to Christmas, according to marketer’s estimates provided to NZ Avocado, will hold in a bracket between 70,000 to 80,000 trays weekly. Clearly export flow plan volumes and potential fruit drop concerns are both factors that are contributing to the high weekly figures.
On a positive note, fruit quality is holding well with little negative feedback from our retail customers. We do have some concern regarding ongoing volumes of small fruit for which values at times can be marginal. To avoid negative OGR values on the smaller sizes, we have ceased packing under size 100 unless we specifically have a requirement to do so.
Values across sizes 16 to 30 have stabilized and are consistent around the $18.00 to $20.00 coolstore-door level (on average). Depending on demand, certain sizes within this bracket can fluctuate above or below. Given the substantial inward volumes, these are reasonably solid returns in a retail market that is generally trading well with good fruit movement. Certain regions within the country are struggling due to a cavalier approach by certain marketers selling direct-to-store at variable and or discounted values. We imagine there will be some interesting marketer/grower discussions once BCTI’s are returned for fruit sold in this manner.
We will leave you with our thoughts for the week. In future seasons, would you as a grower support a Class 1 domestic avocado programme through the entire season? Our retail partners over the last few years have delivered both value and volume growth, probably unprecedented in any market internationally. However they are marketing a Class 2 product which is essentially fruit rejected from export.
Zeafruit wish to table for debate that our retail partners and the New Zealand consumer deserve better than Class 2 and often Class 3 fruit. Given that the OGR value between the export and domestic market is not that dissimilar, it would seem to us that enhancing quality on our market could potentially increase consumer confidence and demand as well as grower return. To us there is a high degree of rationale that supports the reappraisal of quality standards for avocados on the New Zealand market.
We acknowledge that there will be a strong view that as an industry we should be export led – however we can’t forget that a significant lift in production is pending. Substantial new plantings will contribute significantly to future volumes and we believe it is timely to address this prospect sooner rather than later. The obvious question is likely to be: ‘what do we do with Class 2 and Class 3 fruit?’ Our answer to that is that Class 2 fruit could continue to be marketed through the wholesale sector and into certain export markets as a value based proposition (processing). Class 3 fruit could contribute to the growth of avocado oil production within New Zealand.
Under this strategy growers would be motivated to produce fruit that meets Class 1 standard for the New Zealand market and should be financially rewarded for doing so. We ask the question; should the New Zealand market subsidize/reward growers with inferior quality rather than take a more professional and long-term view that would drive category growth and industry well-being?
As we look toward Christmas we have pricing based on a number of scenarios, but with export packing in full swing we do not see any significant lift in value. We will keep you updated.
Glen and team.