Newspaper Article – Economic pinch puts fruitgrowers at risk

Economic pinch puts fruitgrowers at risk

THE DRAMATIC increase in interest rates and falling land values could force recent entrants to the fruit industry to sell their orchards, Hawke’s Bay Fruitgrowers Association president Colin Wake said in Hastings yesterday.

Growers most at risk were those who bought property while land values were high and interest rates low, he said.

“However, land values have fallen considerably since reaching a peak a few years ago, and interest rates have doubled since last year,” Mr Wake said.

“There are growers who are really feeling the pinch.”

Mr Wake said growers on younger blocks which were not yet producing worthwhile cash flows were in real trouble. Though interest rates, which were running at about 11 per cent last year were sustainable, rates of 20 per cent or more were not.

He sympathised with growers who had done their budgets before interest rates started to sky rocket.

“And let’s be fair, no one in the industry could have foreseen this time last year what they would now be paying for capital.”

Growers will also be further disadvantaged by an Apple and Pear Board move to delay and reduce its initial payment to growers for the coming season. A board spokesman said this had been brought about by a reduction in availability of cheap reserve bank money to the board.

In essence, this will mean growers who in the past received about 90 per cent of fruit value about a week after submission, will now have to wait three to four weeks for a first payment of about 70 per cent.

Mr Wake said this would mean growers would have to carry overdrafts for a longer period, something they could ill afford.

Growers were adopting a wait and see policy, he said. However, it seemed certain growers would have to confine spending to essential items.

Mr Wake said he believed growers would be reluctant to replace plant or machinery while the present conditions prevailed. The industry would be in a worse position had it not been for good yields last season.

Indications for the coming season, however, are not as good with several apple varieties looking patchy. There are about 550 orchardists in Hawke’s Bay, the country’s largest fruitgrowing district.

Photo caption – Mr Wake… ‘wait and see policy’