GOOD RETURNS POSSIBLE FROM PASSIONFRUIT BUT THE RISKS ARE HIGH Article by Pat Sale Published in The Orchardist July 2003 Passionfruit has been a small part of the New Zealand fruit industry since the first half of last century. In recent years a healthy export market has developed which would account for maybe 25-40% of national production and gives the industry reasonable grounds for buoyancy as compared to some other exotic crops which have struggled hard to develop exports without vast progress. However, several factors have always kept the area in passionfruit relatively small and these fall into the categories of risk and labour: Risk 1. Passionfruit is a true subtropical and only the best sites in the more climatically favoured areas are suitable for commercial production. 2. It is naturally only a short lived plant. Any commercial planting reaching six years of age has done remarkably well. 3. It is susceptible to wet feet problems in heavy poorly drained soils. 4. It is susceptible to a range of soil borne diseases that can cause significant, maybe large scale mortality as early as year two from planting. If crown canker is involved significantly it is extremely risky to replant the same area. 5. It is susceptible to a range of fungal and bacterial diseases that infect fruit, foliage and stems, which can cause severe losses of fruit and vines. Plus or minus 20 fungicide applications are required per season to counter these diseases. The routine disease control programme is so vital that growers prefer to have their own machinery and spray their own crops rather than rely on a spray contractor who may not be able to do the job when it needs to be done. 6. It is susceptible to a number of virus diseases that can reduce vigour, yield and in severe cases cause a large percentage of fruit to be unmarketable. There is no cure for virus once vines are infected. 7. Being a minor crop without a huge market, the supply and demand balance is very sensitive. Some years ago it was reported that 1000 trays on the New York market, a market supplying a multi-million population, caused significant over supply and a dramatic price crash. 8. With most exports going to USA the US$ to NZ$ exchange rate will have a direct effect on returns to growers. Labour 1. The labour inputs required for passionfruit are very high, in the region of 1500 man hours/ha. This includes the postharvest handling. As the passionfruit industry has not developed to the stage of having commercial packing operations, each grower still packs and despatches their own fruit. 2. Following on from 1 above, passionfruit has been a crop taken up by small producers on small areas. Now we come to the good bit if all these risks of Grand National proportions can be overcome, the returns can be very attractive. As mentioned in this years June issue of The Orchardist, the traditional supporting structure was the single dimension two wire fence, but this has now been overtaken by the A frame, and the potential
2 production is greater on the A frame. Providing a block remains healthy and in good condition, reasonable yield profiles could be as follows: YIELD T/HA Year 2 Wire Fence A Frame 1 - - 2 12 20 3 12 20 4 10 15 5 10 15 A good block should be able to achieve a grade out of 50% export, 30% local market and 20% processing. A reasonable returns would be $11/kg for export, $5/kg for local market and $2/kg for processing which averages out at $7.40/kg for the whole crop. A cash profile over five years and sensitivities to yield, grade out and price are shown below for blocks on both the 2 wire fence and the A frame. For the purpose of this model it is assumed the block(s) are already sheltered. Labour is costed at $10/hour and machinery at $25/hour. The capital cost of machinery has not been included. The cost of freighting the crop to market depends on the location of the property and the market. For the purpose of this exercise freight has been calculated from Katikati to Auckland on the basis of $0.80 per 2kg export tray and $1.30 for per 5kg carton for local market. The mandatory passionfruit levy is currently 1.25% of return at the first point of sale. TWO WIRE FENCE Cash Flow Profile $/ha Yield t/ha - 12 12 10 10 Revenue @ $7.40/kg - 88,800 88,800 74,000 74,000 Variable Costs Soil preparation 1,000 - - - - Plants 2,500 - - - - Fence 6,700 - - - - Marking out & planting 500 - - - - Stem collars 900 - - - - Fertilizer 730 1,910 1,910 1,910 1,910 Weed control 355 355 355 355 355 Mowing 1,050 1,050 1,050 1,050 1,050 Pest & Disease control 5,120 10,240 10,240 10,240 10,240 Training 3,000 500 500 500 500 Pruning - 2,000 2,000 2,000 2,000 Frost protection 600 600 600 600 600 Miscellaneous 200 200 200 200 200 Harvesting - 3000 3,000 2,500 2,500 Grading & packing - 4000 4,000 3,300 3,300 Packaging - 4152 4,152 3,460 3,460 Levies - 1110 1,110 925 925 Freight - 3336 3,336 2,780 2,780 Total Variable Cost 22,655 32,453 32,453 29,820 29,820 Revenue-Costs (22,655) 56,347 56,347 44,180 44,180
3 Orchard Operating Surplus Orchard operating surplus = Revenue (Variable costs + Fixed costs) Revenue - 88,800 88,800 74,000 74,000 Variable costs 22,655 32,453 32,453 29,820 29,820 Fixed costs 3,000 3,000 3,000 3,000 3,000 Total costs 25,655 35,453 35,453 32,820 32,820 Operating surplus (25,655) 53,347 53,347 41,180 41,180 Cumulative surplus/deficit (25,655) 27,692 81,039 122,219 163,399 Note: Assumption Fixed costs (rates, insurance, administration, accountancy, power, vehicles etc) = $3000/ha. In practice this will vary greatly, the smaller the property the greater the fixed costs/ha tend to be. Sensitivity to Yield, Grade Out & Price Yield t/ha 5 10 15 20 Total growing costs up to 16,855 16,855 16,855 16,855 harvest Harvesting 25hrs/t 1,250 2,500 3,750 5,000 Grading & packing 1,655 3,330 4,995 6,660 Packaging 1,730 3,460 5,190 6,920 Freight 1,390 2,780 4,170 5,560 Total variable costs 23,343 29,850 36,238 42,845 Fixed costs 3,000 3,000 3,000 3,000 Total costs 25,880 31,,925 37,850 43,995 Sensitivity to Yield ($7.40/kg) Yield t/ha 5 10 15 20 Gross return 37,000 74,000 111,000 148,000 Levies 463 925, 1,850 Gross return less levies 36,537 73,075 10,9612 146,150 Total costs 25,880 31,925 37,850 43,995 Operating surplus 10,657 41,150 71,762 102,155
4 Sensitivity to Grade Out (10t/ha) 1. All processing @$2.50/kg. no postharvest costs. Gross return less levies 19,750 Growing costs + Fixed costs 19,855 Operating surplus (105) 2. 80% Local @ $5/kg, 20% Processing @$2/kg. Gross return less levies 43,450 Total costs 31,925 Operating surplus 11,525 3. 25% Export @ $11/kg, 55% Local @ $5/kg, 20% Processing @ $2/kg. Gross return less levies 53,325 Total costs 31,925 Operating surplus 21,400 4. 50% Export @ $11/kg, 30% Local @ $5/kg, 20% Processing @ $2/kg. Gross return less levies 73,075 Total costs 31,925 Operating surplus 41,150 Sensitivity to Price (10t/ha, 50% Export, 30% Local, 20% Processing) Price/kg 2.50 5.00 7.50 10.00 Gross return less levies 24,677 49,375 74,062 98,750 Total costs 31,925 31,925 31,925 31,925 Operating surplus (7,248) 17,450 42,137 66,825
5 A FRAME Cash Flow Profile $/ha Yield (t) - 20 20 15 15 Revenue @ $7.40/kg - 148,000 148,000 111,000 111,000 Variable Costs Soil preparation 1,000 - - - - Plants 2,500 - - - - A Frame 16,500 - - - - Marking out & 500 - - - - planting Stem collars 900 - - - - Fertilizer 730 1910 1,910 1,910 1,910 Weed control 355 355 355 355 355 Mowing 1,050 1,050 1,050 1,050 1,050 Pest & disease 5,120 10,240 10,240 10,240 10,240 control Training 6,250 1,000 1,000 1,000 1,000 Pruning - 3,000 3,000 3,000 3,000 Frost protection 600 600 600 600 600 Miscellaneous 200 200 200 200 200 Harvesting - 5,000 5,000 3,750 3,750 Grading & packing - 6,670 6,670 5,000 5,000 Packaging - 6,920 6,920 5,390 5,390 Levies - 1,850 1,850 1,388 1,388 Freight - 6,560 6,560 4,920 4,920 Total Variable Cost 35,705 45,355 45,355 38,803 38,803 Revenue Costs (35,705) 102,645 102,645 72,197 72,197 Orchard Operating Surplus Orchard operating surplus = Revenue (Variable costs + Fixed costs) Revenue - 148,000 148,000 111,000 111,000 Variable costs 35,705 45,355 45,355 38,803 38,803 Fixed costs 3,000 3,000 3,000 3,000 3,000 Total costs 38,705 48,355 48,355 41,803 41,803 Operating surplus (38,705) 99,645 99,645 69,197 69,197 Cumulative surplus/ Deficit (38,705) 60,940 160,585 229,782 298,979 Note: Assumption Fixed costs (rates, insurance, administration, accountancy, power, vehicles etc) = $3000/ha. In practice this will vary greatly, the smaller the property the greater the fixed costs/ha tend to be.
6 Sensitivity to yield, grade out and price Yield t/ha 10 15 20 25 Total growing costs up to harvest 18,355 18,355 18,355 18,355 Harvesting 25hrs/t 2,500 3,750 5,000 6,250 Grading & packing 3,335 5,000 6,670 8,335 Packaging 3,460 5,390 6,920 8,850 Freight 3,280 4,920 6,560 8,200 Total variable costs 30,930 37,415 43,505 49,990 Fixed costs 3,000 3,000 3,000 3,000 Total costs 33,930 40,415 46,505 52,990 Sensitivity to yield ($7.40/kg) Yield t/ha 10 15 20 25 Gross Return 74,000 111,000 148,000 185,000 Levies 925 1,388 1,850 2,313 Gross return less levies 73,075 109,612 146,150 182,687 Total costs 33,930 40,415 46,505 52,990 Operating surplus 40,070 70,585 101,495 132,010 Sensitivity to Grade Out (15t/ha) 1. All processing @ $2/kg, no postharvest costs Gross return less levies 29,625 Growing costs + Fixed costs 21,355 Operating surplus 8,270 2. 80% Local @ $5/kg, 20% Processing @ $2/kg Gross return less levies 65,175 Total costs 40,415 Operating surplus 24,760 3. 25% Export @ $11/kg, 55% Local @ $4/kg, 20% Processing @ $2/kg Gross return less levies 87,394 Total costs 40,415 Operating surplus 46,979
7 4. 50% Export @ $11/kg, 30% Local @ $5/kg, 20% Processing @ $2/kg Gross return less levies 109,612 Total costs 40,415 Operating surplus 69,197 Sensitivity to Price (15t/ha 50% Export, 30% Local, 20% Processing ) Price/kg 2.50 5.00 7.50 10.00 Gross return less levies 37,031 74,062 111,094 148,125 Total costs 40,415 40,415 40,415 40,415 Operating surplus (3,384) 33,647 70,679 107,710 Inputs into passionfruit vary greatly according to how meticulous the grower is, the work rate, and the degree of streamlining of the management system. Costs of inputs will depend to an extent on trading arrangements and choice of products. Fertilizer inputs for serious growers will largely depend on the results of soil and leaf analysis, but for this exercise a reasonable standard programme with both major and trace elements has been costed in. Accordingly the above costings are unlikely to be accurate for any one property but demonstrate the type of inputs and returns that can be expected under present conditions. Yield and grade out can be expected to be influenced by the grower, who has virtually no control over price. It cannot be stressed too strongly that passionfruit is a very high risk crop, but for those who produce it successfully the rewards can be well worthwhile.