What's the price of risk?

The price the public pays for fruit and vegetables in New Zealand may not accurately reflect the level of risk involved in growing them, says vegetable industry leader, Robin Oakley, of Oakley’s Premium Fresh Vegetables of Canterbury, pictured right with his daughter, April.

That level of risk has been highlighted by the devastating impacts of Cyclone Gabrielle on the North Island’s growing regions, but Robin believes extreme weather events are just one of the risks growers face.

“I maintain that historically the prices growers have been paid for crops hasn’t reflected the true level of risk to their businesses.

“Recent weather events have highlighted some of those risks, but the level of risk has gone up significantly in the last two years, including inflationary impacts.

 “Risk versus margins is out of kilter for a lot of growers and some may not have factored in weather event risks. Now these have eventuated, many growers may be reassessing the prices they need to get in order to continue to grow crops.”

That reassessment may mean some growers decide to leave the industry. “A lot of crops are grown on land close to urban areas with the potential for subdivision. Growers who have had a rough time may be thinking of re-purposing the land to something else, and for the industry this is of concern.

“There may well be a gap between people pulling out, causing vegetable prices to go up, and people deciding to reinvest or invest in vegetable growing. The higher prices consumers are paying may go on for a bit longer than one might anticipate.

“I think we may have seen the best times of supply and price for vegetables in New Zealand but in reality, vegetable prices have only gone up along with everything else in these inflationary times.” 

Growers in Northland and the Hawke’s Bay were among the worst affected by Cyclone Gabrielle which destroyed crops and closed roads, meaning even those who had crops to harvest, faced difficulty getting them to market.

Robin says Oakley’s and other vegetable growers were unable to step up production to meet the shortfall in produce caused by the cyclone.

“At the end of the day we only have our normal production and are growing and harvesting the same volumes of product as normal.

“It’s a supply and demand market, and the shortfall in product in the North Island meant higher prices, so more product from the South Island has gone north, which has had the effect of increasing prices in the South Island.

“For Oakley’s we have been involved more on the logistics front by sending product to different destinations than it would otherwise have gone to.”

Robin says because of the lead time required to produce a vegetable crop, there is nothing Oakley’s, or other growers can do to fill the gap in the market.

“Our potatoes, beetroot and pumpkin are annual crops with one growing season. With broccoli there’s a six-week lead time to grow the plants and even if we miraculously had more plants to get in the ground, here in the South Island it takes three to four weeks longer for the crop to mature than in the North Island.

“We don’t grow crops on a speculative basis that some region might have a weather event, and I don’t see us changing our planting programme in future.”

Written by Elaine Fisher. First published in the May 2023 issue of the NZGrower magazine.