Frankly Speaking

Week ending Sunday 12 July 2020

Welcome to this edition of Frankly Speaking – Seeka’s stakeholder update. In our kiwifruit business, our teams are concentrating on inventory management – loading out the right fruit and working through the issues arising from harvest 2020 including the changes to SunGold kiwistart rates, the set up for maturity testing for 2021 and how should growers be incentivised for taste. The Seeka Growers Council has met regularly to consider Seeka’s approach to these issues. The kiwifruit inventory quality is ok and fruit performance to date good, but it’s not as good as recent years with drought stressed lines requiring some attention. Our orchard business is busy pruning and working on orchard developments.

In our avocado business, the team is preparing for export harvest with the local market shoulder pools already underway. Seeka is optimistic about the avocado season with Western Australia supply reportedly short of fruit. The second wave of COVID-19 in Australia remains a worrying concern.

Collectively, we have regathered ourselves after the harvest and have been reviewing the areas where we could improve our harvest experience – and while we are relieved to have got the job done, there is a lot to reflect on. Our labour issue is repatriating the RSE workers to their home countries meaning we have more workers than we need where we are short of work, and a shortage of workers where we have the work. And it is dynamic.

Earlier in the year, Seeka prophetically outlined the issues facing the industry in 2020 (week 4 update 26 January) these were:

• Drought
• Labour cost and availability
• Availability of bank finance
• Market uncertainty with Coronavirus (now called COVID-19)
• Inflation
• The need to invest in on shore infrastructure with a lack of supply chain innovation
• The challenge to EPA for the continuing use of Hi-Cane.

A number of these items proved to be non-issues, but a number have really hit home. Seeka was calling out on COVID-19 very early.

Recently, Seeka was fortunate to have the Reserve Bank Governor to present to its growers on the economic outlook for New Zealand. As well as the economic outlook Adrian Orr also answered a number of questions put forward by our stakeholders. You can view the webinar by clicking the link here. 

Those who attended the seminar understood that the Reserve Bank had prepared the New Zealand banking sector for a shock and that the Government’s finances entered the COVID-19 economic calamity comparatively in good shape. But we should be in no doubt that the worst of the economic impact from COVID-19 is yet to come.  Previous recent economic events have been different because the economic effects of COVID-19 has reached every country where as recent other economic shocks only affected some economies and not others. Everything has changed and everything will continue to change.

Looking forward perhaps the following are the challenges for the next six months for you to consider:

• World markets for produce and kiwifruit in a COVID-19 economy, with the New Zealand kiwifruit industry increasing volumes in 2021
• Labour, the cost of labour and balancing the supply of New Zealand available workers with our continuing access to trained RSE workers particularly from the Pacific Islands and Asia noting that the availability of backpackers will largely be zero. The Industry need access to its trained workforce as well as hiring locals.
• Supply chain innovation in the kiwifruit industry, there is more fruit coming.
• Increased Gold3 volumes, the market mix and the impact this will have on returns for Hayward.
• The cost to the New Zealand economy of the Government spend to keep the country afloat and whether that results in an environment that companies like Seeka continue to invest.
• The banks and their approach to lending, to date it’s been quite remarkable when you reflect on the price of license.

It’s clear we are not out of this yet and there is downside risk in the economy and our sector.

To the numbers:

Kind regards

Michael