Growers pay steep prices to Zespri for right to grow gold kiwifruit
Prices kiwifruit growers are prepared for the right to grow gold kiwifruit are skyrocketing as analysts sound a bullish note about the industry's future.
Growers have paid a median per hectare price of $270,000 to Zespri in the latest round of licence release, which compares to $200,000 last year. It is the second year that the licences have been offered; Zespri is releasing 400 hectares a year through until 2020.
Many growers who bid for the licences were disappointed, with 938 trying to buy them, but only 235 being successful. The average size of the successful bids was 1.7 ha.
The sale of the licences has boosted Zespri's coffers by $98 million, compared to last year's $50.2m, and unlike last year when growers were allowed to spread their payments over several years, this year they have to pay the full amount by July 28.
PGG Wrightson Real Estate general manager, Peter Newbold, said the prices paid reflected the buoyant economics of the industry.
"It's not like people are gambling. We don't see any let up, and people are still getting 10 per cent returns."
Recently growers had paid more than $800,000 per canopy ha for gold fruit in Te Puke. Newbold said he would not be surprised if prices soon went well over that.
Grower Neil Trebilco said confidence was "sky high" and reflected the recovery since Psa hit in 2010, and how well the new SunGold variety had performed.
"I think the prices paid are justified by the economics, although there is always a risk in growing any fruit, whether it's an issue in the market or in the orchard."
He said some of the successful bidders would have had to approach banks for funds because the licence money was due to be paid by the end of July. This highlighted the confidence the banks had in the industry.
Trebilco said he hoped some of the $98m paid to Zespri would make its way back to growers, either as dividends for those who owned Zespri shares, or in the form of a loyalty payment for those that did not.
NZ Kiwifruit Growers chief executive Nikki Johnson expressed surprise at the amount successful growers paid for licences, saying it reflected the demand for the variety.
It also showed a large number of growers were keen to switch from growing green kiwifruit to gold.
Zespri general manager grower and external relations Dave Courtney said the Zespri board would decide later on allocating the $98m it had raised through the process. Some would likely be offered to shareholders by way of dividends, but some would also be invested into capital, and research and development.
The board would also look at whether to lift the numbers of hectares on offer in future years, because of the high demand, but he stressed it was a balancing act.
"We don't want to get ahead of ourselves on volumes and be in a position where we can't sell what we grow," Courtney said.
There has been a trading halt on Zespri Group Limited shares which will be lifted on Friday April 7 at 9:00 am.