- Prioritisation of issues
- Table 4.2.1: Technical constraints identified by the workshop, and their relative importance to conversion to organic apple production
- Table 4.2.2: Infrastructure and industry - constraints identified by the workshop and their relative importance in conversion to organic apple production
- Apple financial analysis
- Table 4.2.3: Export production implications of conversion to organic apple production compared with the Hawkes Bay pipfruit model
- Table 4.2.4: Comparisons for the MAF Hawkes Bay pipfruit model and the organic model Revenue and cost comparison
- Table 4.2.5: Changes in expenditure assumptions for the organic model compared with the Hawkes Bay apple model
- Comparison with other pipfruit models
- Table 4.2.6: Comparison of pipfruit cultivars typically grown in Hawkes Bay and Nelson
- Risk and the impact of risk on financial performance
4.2. Apples
4.2.1. Prioritisation of issues
Technical constraints
Relative to kiwifruit production, there are many more technical constraints to organic apple production. Growers recognise many of these constraints as being difficult and in the long term may make organic apple production unsustainable. Issues raised by the workshop participants included the establishment of new plantings, tree management, nutrition, and pest and disease control. These key constraints are discussed in more detail below. Table 4.2.1 at the end of this subsection provides a detailed list of the technical constraints identified by the workshop participants in both districts.
(a) New plantings
The development of new areas of orchard under an organic regime is considered to be very difficult. The difficulties relate to tree nutrition, understorey management and plant health, which are also important issues in established organic apple orchards. Growers agree that it is best to establish an orchard under conventional production methods and then convert to organics.
The nutritional products available for use by organic growers do not generate the vigorous growth desired in young trees. Organic nutritional products are by definition more slow acting. It was thought by workshop participants that this would extend the time to full production and may in fact limit the ultimate productive potential of the mature tree.
In mature plantings, understorey species are used to reduce the vigour of the tree and hence retain some balance between vegetative vigour and fruitfulness. In young plants, the competition generated by plants in the understorey will limit growth. Strategies used to reduce this competition under an organic regime, for example compost mulches, do not work as well as the bare herbicide strip used by conventional growers.
Products used to control diseases in apples can have a phytotoxic affect on the plant. For example, sulphur has been shown by HortResearch to reduce the photosynthetic rate of Braeburn by 50 percent and to damage leaf morphology (Palmer, J W, et al, 2001). This phytotoxicity will impact on a young plant's health and exacerbate the relatively low vigour in the plants, as a result of the nutrition and weed competition discussed previously.
The difficulty of developing new areas of orchard under an organic regime limits the opportunity for growers to shift their tree mix to a range of cultivars that are better suited to organic production.
(b) Tree management
Apples have a tendency to crop heavily in one year and then less heavily in the next year. This is referred to as biennial or alternate bearing. Different apple varieties express this characteristic to a greater or lesser extent. To manage biennial bearing conventional growers use chemical thinning products to remove excess flowers and/or fruitlets from the tree, particularly in an "on" year. Organic apple growers do not have fruit thinning products available that are as effective as those that conventional growers use, and organic products used can also have a debilitating impact on plant health. To reduce the impact of biennial bearing and to enhance fruit size, the timing of thinning is critical. Organic growers have to use more, slower hand labour to reduce these crop volumes. The timeliness of their intervention is often not optimal. As a result the fruit size benefits of timely thinning are not captured.
(c) Tree nutrition
Annual nutritional requirements for apple trees are difficult and expensive to apply with products allowable under an organic regime. The annual removal of nutrients in a typical apple crop of 50 tonne per hectare is provided in Appendix I. To replace these nutrients and also allow for losses in the system requires annual inputs of often twice that removed in the crop. Nitrogen is particularly difficult to supply in the required amounts. Also, because of the inherent slow acting nature of organic products, the nutrients are not available when the tree requires them.
Growers have also had difficulty responding to low nutrient levels or deficiencies identified in leaf analysis. The range of organic products available makes the correcting of micronutrient deficiencies particularly difficult.
(d) Pest and disease management
Somewhat surprisingly, the workshop participants in Hawkes Bay and Blenheim ranked the issue of disease management as only the fourth most important issue. However, the mag-nitude of the rating difference between the first ranked issue and disease management was very small. In Nelson, disease management was considered a major impediment to successful organic production. This is due to the higher rainfall that occurs in Nelson creating a better environment for fungal development.
Apples are susceptible to a number of fungal and bacterial diseases. The most significant of these is the fungal disease Venturia inaequalis, commonly known as blackspot. This disease creates fungal lesions on the fruit that cause the fruit to be rejected from export. At worst, the fungal infection can completely distort the young fruitlet so that the fruit does not develop. Growers have to be particularly vigilant in their application of protectant fungicides prior to infection periods to reduce losses to blackspot. Infection periods include periods of wet weather and high temperatures. Conventional growers have an advantage, as they are able to apply what are known as "kick-back" chemicals after an infection period to contain damage.
Organic growers have a limited range of protectant fungicides available to them. What fungicides they do have require frequent application to provide the protective function over infection periods and also have little kickback function. A number of these products (e.g. lime sulphur and sulphur) are also phytotoxic. There are concerns about the ultimate health of the tree and the long-term impacts on productivity of using these products. The use of copper, a key disease control chemical for organic growers, has to be limited to reduce the environmental risk of copper levels in the soil increasing too much. The Biological Producers Council (BioGro) limits the use of copper to a maximum of 3 kg/ha/year. Therefore, growers are faced with balancing the use of sufficient copper to achieve disease control and hence achieving clean fruit finish required by the market, against plant health concerns and allowable use levels.
The three species of leaf roller caterpillar that damage apples are difficult to control with the Bt sprays used to control caterpillars in other organic and conventional crops. There is also an issue regarding the compatibility of these Bt sprays and some of the fungicides used. This lack of compatibility means that growers are forced to apply separate sprays, so must spray more frequently.
Table 4.2.1: Technical constraints identified by the workshop, and their relative importance to conversion to organic apple production
Issue |
Comment |
Rating* |
Orchard |
Extremely difficult to establish young trees under an organic regime. |
All |
Difficult to shift from apple varieties not suited to organic production to the more suitable varieties. |
Many | |
Tree |
Limited options for managing alternate bearing on organic apple trees. |
All |
Lack of chemical thinning options result in a high requirement for labour to hand thin fruit. |
All | |
Sulphur sprays used for disease control have a phytotoxic affect on trees, so tree vigour is reduced. |
All | |
Tree |
Products allowed to be used under an organic regime are not sufficient to meet the nutritional requirements of the plant. |
All |
Disease |
Risk of total crop failure due to disease pressure. |
All |
Fewer products available for disease control and they only have a protectant mode of action compared with those with "kick-back" mode of action available to conventional growers. |
All | |
Protectants available are only moderately effective in controlling disease. |
All | |
Negative impact of protectants on tree health and productivity. |
All | |
Negative environmental impact of protectant products available (e.g. lime sulphur, sulphur and copper). |
All | |
Pest |
All three species of leaf roller are difficult to control with products available. |
All |
There is a lack of compatibility between insecticides and some fungicides. |
All |
*The words "All", "Many" and "Few" rank the importance of an issue in terms of the proportion of votes it received by the workshop
Infrastructure and industry constraints
The key infrastructure issues that present a constraint to organic apple production relate to issues of the organic premiums, institutional support, and skills and knowledge including research and development. The range of infrastructure issues discussed by the workshops is listed in Table 4.2.2.
(a) Organic premiums
While significant premiums for organic apples have been maintained over recent seasons, returns may decline in future as more supply becomes available. Currently the organic premium is as much as $11.30 (55 percent) per tray carton equivalent. Continuing reduction in premiums will at some point, make it uneconomic to produce apples organically.
(b) Institutional support
Apple growers in New Zealand generally have undergone a significant trough in grower returns. Workshop participants felt that this had led to the withdrawal of support from institutions, such as banks, central and regional government, and research and development organisations. Because organic apple production is seen as a risky venture, organic producers have felt this withdrawal of support even more acutely.
(c) Skills and knowledge
Apple producers find it difficult to attract people with appropriate skills and knowledge into the industry. Labour is particularly difficult to attract to an organic orchard where there are the frequent applications of relatively unpleasant (smelly and corrosive) fungicides and in locations where people with a horticultural bent are being enticed into the more attractive viticulture industry.
Organic apple growers believe that there is a lack of understanding of much of the basic technology of organic apple production. Coupled with this, there is a lack of research and development on issues that will help bridge this understanding gap.
Where research and development is occurring, some growers feel that there is a lack of an effective technology transfer mechanism to get the information to growers in more remote areas.
Table 4.2.2: Infrastructure and industry - constraints identified by the workshop and their relative importance in conversion to organic apple production
|
Issue |
Comment |
Rating* |
Organic premium |
Diminishing returns for organic fruit. |
All |
Institutional support |
The apple industry generally is faced with a perceived loss of support from banks, regional and central government and research and development organisations. |
All |
Skills and knowledge |
It is difficult to get labour onto pipfruit properties. |
All |
There are gaps in understanding of the technology of organic growing. |
All | |
There is a lack of research into organic production systems that would bridge these gaps. |
All | |
Lack of knowledgeable service industry. |
Many | |
Growers in Blenheim feel that they do not have technology transfer agents available to them as the Hawkes Bay growers do. |
Few | |
Biosecurity |
Growers have a limited range of control options available to them in the event of a major biosecurity breach. |
Many |
Grower stress levels |
Growers commented on the significantly higher stress levels involved in protecting a crop from the fungal diseases under an organic regime. |
Many |
Local infrastructure |
Growers in some regions felt that there was insufficient critical mass to build an organic apple industry around. |
Few |
Market access |
Growers are concerned that the issue of the increased energy used to produce organic apples may be used as a non-tariff barrier to apple exports. |
Few |
Certification integrity |
Growers were concerned about the organic food scares that had occurred and the risk of the loss of the integrity of the organic brand. |
Few |
There is a perception that organics is "spray free" and this perception would be affected if consumers knew the amount of spraying required to produce organic apples. |
Few | |
Energy use |
The requirement for frequent spray applications has increased the amount of energy used. |
Few |
The words "All", "Many" and "Few" rank the importance of an issue in terms of the proportion of votes it received by the workshop
4.2.2 Apple financial analysis
The MAF Hawkes Bay pipfruit model was used as the basis to examine the implications of conversion to organic pipfruit production. The Hawkes Bay pipfruit model represents a 12.5 hectare orchard (12 hectares planted). The orchard is owner-operated with a mix of pipfruit varieties. An organic apple model was constructed to compare to the MAF model. The unit of production discussed in this analysis is the tray carton equivalent (TCE) which weighs approximately 18 kg.
Table 4.2.3 provides detail on the production implications for apple growers with respect to conversion to organic apples. The Hawkes Bay pipfruit model assumes a variety mix of approximately 35 percent Gala types, 28 percent Braeburn types, 21 percent Pacific Rose, 12 percent Fuji and 4 percent other apples. These varieties are affected differently by the conversion to organic productions systems. Gala types and Fuji suffer least from the conversion with their production only considered to be down by 15 percent and 17 percent respectively. Braeburn types and Pacific Rose on the other hand are more difficult to crop reliably in an organic regime and can suffer losses of 28 percent and 35 percent respectively. Overall, it is considered that the conversion to organic production will result in an average reduction in yield of 22 percent.
Table 4.2.3: Export production implications of conversion to organic apple production compared with the Hawkes Bay pipfruit model
|
Variety |
Orchard mix |
Hawkes Bay |
Organic model |
Variance compared |
Gala types |
35 |
2,181 |
1,854 |
-15 |
Braeburn types |
28 |
2,722 |
1,960 |
-28 |
Pacific Types |
21 |
849 |
552 |
-35 |
Fuji |
12 |
2,356 |
1,955 |
-17 |
Other apples |
4 |
2,006 |
1,605 |
-20 |
Total TCE export |
2,076 |
1,612 |
-22 |
The various cultivars traditionally experience different ratios of picked fruit to export packed fruit (packout). This figure does not seem to change under an organic production regime.
The export revenue per TCE used in the MAF pipfruit model for 2001/02 for conventional apples is $20.70. Organic apples currently achieve a $11.30 (55 percent) premium at a price of $32.00 per TCE.
Detail on the differences in revenue and expenditure between the conventional model and the organic model are provided in Table 4.2.4.
Table 4.2.4: Comparisons for the MAF Hawkes Bay pipfruit model and the organic model Revenue and cost comparison
|
Hawkes Bay model |
Organic model | |
Yield (TCE/ha) |
2,076 |
1,612 |
Price per TCE ($) |
20.70 |
32.00 |
Export apple revenue |
515,678 |
619,008 |
Other orchard income |
7,735 |
7,735 |
Gross orchard revenue |
$523,413 |
$626,743 |
Orchard working expenses |
||
Pruning |
11,254 |
11,141 |
Thinning |
17,754 |
24,145 |
Harvesting |
56,967 |
50,488 |
Other |
6,881 |
8,500 |
ACC |
1,267 |
1,286 |
Packing |
77,483 |
67,317 |
Packaging |
83,159 |
64,609 |
Coolstorage |
47,087 |
36,560 |
Freight |
6,754 |
5,416 |
Spray & chemicals |
27,674 |
27,674 |
Pollination |
825 |
825 |
Fertiliser |
1,820 |
2257 |
Electricity |
1,244 |
1,244 |
Sundry expenses |
4,200 |
4,200 |
Vehicle costs |
9,840 |
10,004 |
Repairs & maintenance |
5,535 |
6,035 |
Communication (phone & mail) |
1,768 |
1,768 |
Rates |
3,180 |
3,180 |
Accountancy, legal & consultancy |
4,320 |
4,930 |
General insurance |
2,062 |
2,062 |
Crop insurance |
7,672 |
9,209 |
Other administration |
5,818 |
7,818 |
Cash orchard expenses |
$384,564 |
$350,670 |
Cash orchard surplus |
$138,902 |
$276,073 |
The revenue for the organic model is $103,330 (20 percent) higher than the revenue for the MAF Hawkes Bay pipfruit model despite the lower yields.
Expenditure on an organic orchard overall is reduced. The organic model shows a reduction of $33,894 (9 percent) compared with the conventional model. Much of this reduction is yield related.
Most of the variable costs were reduced for organic producers because of the reduced yield, though many variable costs increased on a per carton basis due to the smaller size of the fruit being picked and packed and hence higher costs per carton.
Labour costs overall were significantly increased for organic producers. Growers expected a marginally reduced pruning cost due to the lower vigour of the trees but the hand thinning
required due to the lack of chemical thinning options raised the overall labour cost. Additional labour is often required for the increased spray applications.
Though organic growers are applying agrichemicals more frequently, the products used are cheaper and therefore there is a nil impact of conversion to organics on the cost of spraying and chemicals.
The increased number of sprays and the corrosive nature of some of the sprays has lead to an increase amount of expenditure required on the maintenance of plant and machinery and fuel.
Fertiliser costs increase for organic producers due to the high cost of obtaining products that will meet both the nutritional needs of the plant and the organic standard. It is estimated that organic growers spend 24 percent more on nutrition than conventional growers.
Crop insurance for organic growers is higher due to the higher value of the crop being insured. This scenario will vary depending on the insurance option taken up by the individual grower.
The cost of organic certification leads to an increase in the orchard expenditure on administration.
Table 4.2.5 provides more detailed explanation on the changes in expenditure.
Table 4.2.5: Changes in expenditure assumptions for the organic model compared with the Hawkes Bay apple model
|
Cash orchard |
Comments |
MAF |
Organic |
Pruning |
Slightly cheaper in the organic model due to reduced tree vigour. |
11,254 |
11,141 |
Thinning |
More expensive in the organic model due to lack of chemical thinners and smaller fruit to thin off. |
17,754 |
24,145 |
Harvesting |
Less expensive in total in the organic model due to the lower yield but more expensive on a per TCE basis (up 14%) because of the smaller fruit. |
56,967 |
50,488 |
Other |
Slightly higher due to increased labour needed to apply sprays. |
6,881 |
8,500 |
Packing |
Less expensive in total in the organic model due to the lower yield but more expensive on a per TCE basis (up 12%) because of the smaller fruit. |
77,483 |
67,317 |
Packaging |
Less expensive in total in the organic model due to the lower yield. |
83,159 |
64,609 |
Coolstore |
Less expensive in total in the organic model due to the lower yield. |
47,087 |
36,560 |
Freight |
Less expensive in total in the organic model due to the lower yield. |
6,754 |
5,416 |
Spray & chemicals |
No change despite more frequent chemical applications in organic model because chemicals used are cheaper. |
27,674 |
27,674 |
Fertiliser |
Organic model more expensive as composts and manures more expensive per unit of nutrient and bulkier to apply. |
1,820 |
2,257 |
Vehicle costs |
Increased fuel required die to increased frequency of sprays. |
9,840 |
10,004 |
Repairs and maintenance |
Organic growers spend more on the R&M of plant and machinery. |
5,535 |
6,035 |
Accountancy, legal and consultancy |
Organic growers spend more money on consultancy. |
4,320 |
4,930 |
Crop insurance |
Growers in organic systems spend more on crop insurance as frost has a higher value. |
7,672 |
9,209 |
Other administration |
Higher for the organic grower due to the cost of the certification fees. |
5,818 |
7,818 |
Despite the lower yield in organic apples, the higher per carton equivalent price ensures that the organic model currently generates a higher cash orchard surplus. The cash orchard surplus under an organic regime is $137,172 (99 percent) higher than the Hawkes Bay pipfruit model. With existing premiums in place the organic yield could drop a further 574 cartons per hectare before the cash orchard surplus for the two growing systems were the same. Similarly, the price per carton could drop a further $7.20 to $24.80 before the cash farm surplus for the two systems were equal at present estimated organic yields. This is a $4.10/TCE (20 percent) premium over conventional revenue.
4.2.3 Comparison with other pipfruit models
The Hawkes Bay model has been used as a basis for comparison between conventional and organic production systems. The other model developed by MAF in pipfruit is the Nelson pipfruit model. There are two significant points of difference between the Hawkes Bay model and the Nelson model. These are the range of apple cultivars grown by the growers in the two regions and the relative size of the properties. The Nelson model orchard is 21 percent larger being 15.13 hectares in total.
The Nelson Model relies less heavily on the cultivars that seem to produce well under an organic production regime. That is, the Nelson growers produce fewer Gala types and less Fuji. The Nelson area is known for producing a large proportion of Cox's Orange. This cultivar is known to perform relatively poorly under an organic regime due to russet problems.
Table 4.2.6 provides a comparison of the types of pipfruit cultivars grown in the two regions.
Table 4.2.6: Comparison of pipfruit cultivars typically grown in Hawkes Bay and Nelson
Variety |
Hawkes Bay |
Nelson |
Difference between Hawkes Bay & Nelson |
Orchard mix (%) |
(%) | ||
Gala types |
35 |
33 |
-6 |
Braeburn types |
28 |
36.5 |
-30 |
Pacific Rose |
21 |
0 |
-100 |
Fuji |
12 |
5 |
-58 |
Cox Orange |
0 |
11 |
+100 |
Other pipfruit (including pears) |
4 |
14.5 |
+262 |
Together with more susceptible varieties, Nelson also experiences higher rainfall, which will impact on an organic growers' potential to control diseases. Nelson growers therefore anticipate a reduced yield relative to the Hawkes Bay under an organic regime. Nelson growers expect that their yield would be reduced by 43 percent to approximately 1,136 TCEs per hectare. In addition, spray and spray application costs would be higher as more applications are made.
This reduction in yield reduces the cash orchard surplus for Nelson growers to $214,344. This is $75,440 (54 percent) higher than the Hawkes Bay pipfruit model for the 21 percent larger area of production. The breakeven price for Nelson growers where they are no better or worse off producing organically is $27.55 per TCE. That is, organic growers in Nelson require a margin above conventional of $6.85 per TCE (33 percent) to generate the same cash orchard surplus. This compares with $24.80 (a 20 percent premium over conventional prices) for Hawkes Bay growers.
However, growers in Nelson are also at a greater risk of total crop failure due to disease risk and growers at the workshop considered their breakeven price even higher because of this.
1.5.10. Risk and the impact of risk on financial performance
The major risks with respect to organic apple production relate to disease risk and the long-term productivity of the trees under an organic regime. The other risk, faced by all organic producers, is the ability to extract a premium from the market place given the lower yields able to be generated.
The management of black spot is an ongoing issue for organic growers. In benign seasons, organic growers may suffer additional 2-3 percent losses at harvest, compared with conventional growers, as a result of black spot lesions on the fruit. Loss of control of this fungal disease in a difficult season can result in export rejects of around 25 percent and at worst, losses of 80 percent have been recorded. Losses of 80 percent at the packhouse not only reduce export yield but also increase many of the variable post harvest costs. The organic model under this scenario has a cash orchard surplus of -$32,253. Even losses of 25 percent at the packhouse impact considerably on the profitability of organic pipfruit production but the system is still ahead of the conventional Hawkes Bay model.
In section 4.2.1 the issue of the long-term productivity of the apple trees given the phytotoxic nature of the fungicides was discussed. Over time it is uncertain how this will impact on grower profitability. A study, funded via the MAF Sustainable Farming Fund, is currently underway to quantify the impacts of this loss of productivity. It is likely that there will be reduced yields from organic apple trees over time. Ultimately, this will reduce the profitability of organic apple production.
The profitability of organic apple production will need to be underpinned by continued high price premiums.
Contact for Enquiries
Kay Brown
Sector Performance Policy
MAF Policy
Ministry of Agriculture and Forestry
PO Box 2526
Wellington
NEW ZEALAND
Phone: +64 4 894 0695
Fax: +64 4 4 894 0746
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