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Fresh fruit and vegetable prices – our global connection

This article outlines factors affecting the price we pay for fresh fruit and vegetables. It focuses on international influence, through imports and exports. These factors include: freight costs, growing conditions and weather events overseas, biosecurity issues, and legislation.  

Fresh fruit and vegetables are a dietary staple for most New Zealanders. We live in a country with a variable climate that allows us to produce a wide range of fresh fruit and vegetables during the year. We can also import those we cannot produce, leaving us with a variety to choose from.

Pricing fruit and vegetables

For the consumers price index (CPI), Statistics New Zealand collects prices for 31 types of fresh fruit and vegetables each week, in 15 pricing centres around the country. We record prices from about 105 outlets, including supermarkets and greengrocers – for the cheapest type of each fruit or vegetable that is of good quality. This reflects the shopping habits of many New Zealanders.

For this reason, prices may be collected for either local or imported produce at different times of the year, depending on availability, quality, and price. Some people prefer to buy locally grown produce, even if it is at a higher price, but for the CPI we track the cheapest available, regardless of origin country.

Fruit and vegetable prices account for 1.01 and 1.46 percent, respectively, of the CPI basket expenditure weight; and 5.30 and 8.72 percent, respectively, of the food price index (FPI) basket expenditure weight (based on the Household Economic Survey).

As Seasonal price fluctuations for fresh fruit and vegetables says, fruit and vegetable prices are affected by factors such as temperature, weather, and availability. 

Strawberries show how trade affects price

Strawberries offer an illustration of the relationship between international trade and domestic prices. Figure 1 shows the average price of strawberries collected for the CPI and FPI, alongside volumes of imports and exports.

Figure 1
Graph, Strawberries, by domestic price and import and export quantity, monthly, June 2006 to October 2013.
 
Note: Strawberries are in relatively short supply for consumers in May and June and therefore difficult to price. We don’t include average retail prices for strawberries in the FPI for these months as fewer than half the outlets we track stock them. Therefore no price movement is shown in the FPI over these months. Also, average retail prices for December are based only on prices collected in the first three weeks of the month, because of the holiday period.

According to Turners and Growers’ NZ produce calendar, strawberries are usually in plentiful supply from domestic growers from late September. Strawberries become available in the north of the North Island in September and quickly grow in supply through October to December, peaking in late November or early December. Declining northern supply is supplemented by supply from the South Island in February and March. It is typically in December that strawberries are cheapest for consumers. Correspondingly, it is roughly in October to January that we export strawberries – mainly to Australia and Asia.

New Zealand imports strawberries from Australia and the United States when they are out of season domestically – between April and September. Australia’s climate varies widely, which means it produces strawberries year round across different states (see Strawberries Australia). 

Domestic prices for strawberries generally peak in July, when imports from the United States cease and imports from Australia are just beginning. Between July and September, strawberry imports steadily increase. Combined with domestic strawberries becoming available in September, prices begin to fall as supply increases.

Strawberries have the largest annual price range of all fruit and vegetables in the CPI basket.  In the year to June 2013, the peak price was almost three times as much as the lowest price. They peaked at $33.06 a kg in July 2012, when we imported only 11.7 tonnes. In contrast, they were $11.83 a kg in December 2012 when domestic produce was plentiful – we exported 235 tonnes and imported none. Unlike other fresh fruit and vegetables, there is very little crossover between when New Zealand is importing strawberries and when we supply locally and export.

How the origin country affects domestic prices

Where the fruit and vegetables we consume come from has interesting implications for the domestic price we pay. Figure 2 illustrates how prices for tropical fruit (eg pineapples and bananas), which are all imported, are much more stable over a year than prices for kiwifruit and apples, which are both grown in New Zealand for export.

Figure 2
Graph, Average retail price for selected fruit, monthly, June 2006 to October 2013.
 
During the year to June 2013, the average monthly domestic price of kiwifruit varied by about $4.30 a kg, and by about $1.90 a kg for apples. In contrast, over the same period the average monthly domestic price of bananas varied by only $0.40 a kg. Bananas showed the smallest price range across the year of all fresh fruit and vegetables in the CPI basket.

Relationship between average import and domestic prices

We can use trade data to calculate import prices for the fresh fruit and vegetables we import every month. Prices are derived using the total cost including insurance and freight divided by the quantity imported. This gives us the price per unit (generally kilograms) of produce imported that month.

Bananas

Bananas grow year round in countries such as the Philippines and Ecuador, the origins of most of New Zealand’s banana imports. The prices consumers pay are directly influenced by costs such as overseas freight prices, foreign-exchange rates, and overseas suppliers’ prices.

An example of this was in August 2011 when domestic banana retail prices fell 21 percent, to reach their lowest price since August 2006, at $2.13 a kg. Good growing conditions in Central America resulted in a lower import price, a temporary increase in import volumes, and a consequent lower average domestic price (see Bananas appeal to Kiwis).

Grapes

New Zealand produced 269,000 tonnes of grapes in 2012. However, these are primarily grapes for wine production rather than for eating. New Zealand’s table grapes are therefore mostly imported – mainly from Australia, Chile, and the United States.

Figure 3 compares the average domestic and imported prices of grapes. They are closely linked – the difference is made up of wholesale, transport, and distribution costs; GST; wastage; and retailers’ mark ups.

Figure 3
Graph, Grapes, domestic and import prices, monthly, June 2006 to October 2013.

Relationship between average export and domestic prices

Unlike bananas and table grapes, where the average domestic price closely aligns with the import price, other fresh fruit and vegetables have an average domestic price that aligns with the export price.  These products are usually mainly exported. The volume and price of exports going offshore affects the domestic supply and price. The relationship between export and domestic prices also comes from factors affecting the price and volumes produced domestically: growing costs, local weather conditions, temperature, local demand, and relative transport costs.

We can derive monthly average export prices by dividing the ‘free on board’ value of the exports by the quantity exported – to find a price per unit (generally kilograms).

Onions

Onions are our highest-earning vegetable export and the fourth highest-earning horticultural export – they accounted for 4.6 percent of the total fruit and vegetable export value in the year to June 2013. Onions have about 3 percent of the fruit and vegetables weight in the FPI. According to the 2009/10 Household Economic Survey (HES), the average household spends about $23 a year on fresh onions – up from $18 a year in the 2006/07 HES.

New Zealand has ideal growing conditions for onions. According to the NZ produce calendar onions are in plentiful supply year round.  The main crop can be stored for six to eight months, meaning onions can be exported all year. Onion prices generally peak in December or January.

Figure 4 shows the average domestic and export prices for onions.

Figure 4

Graph, Onions, domestic and export prices, monthly, June 2006 to October 2013.
 
In August 2012, the average domestic price for onions was $1.63, the lowest since August 2006. This reflects a bumper crop. The export price reached a low of $0.31 a kg in June 2012. When domestic supply is abundant, both the domestic and export prices are lower, to ensure the stock is sold and does not spoil.

Kiwifruit

Kiwifruit is New Zealand’s highest-earning fresh horticultural export. It has one of the highest per kg prices of all our horticultural exports. In the year to June 2013, New Zealand exported about 350,000 tonnes of kiwifruit, valued at $934 million. This accounted for 48 percent of all fruit and vegetable exports, by value. The 2009/10 HES estimated our households spent $26 million a year on kiwifruit, an average of $16 a household.

Figure 5 shows the relationship between the average domestic price and exports. Note: from January 2010, kiwifruit exports are classified by variety.

Figure 5

Graph, Kiwifruit, by domestic and export prices and export quantity, monthly, June 2006 to October 2013.
 
Domestic kiwifruit prices are generally at their lowest in June and July. Both domestic and export prices peak around March each year when domestic supply is short – just before most harvesting begins. Small volumes of higher-valued other kiwifruit exports influence the peaks of the export price. Fruit is supplied from cool storage between December and March to meet demand. About one-third of exports occur in April and May, which corresponds with the bulk of harvesting, and then decrease towards the year’s end. Our biggest export market by volume of kiwifruit is the European Union, while the biggest export market by value is Japan.

The average domestic price for kiwifruit is based on the cheapest available kiwifruit at the time of price collection, which is occasionally gold but usually the green variety.

On average, gold kiwifruit fetch a higher price on the export market. In the year to June 2013, the average export price of gold kiwifruit was $4.90 a kg, compared with $2.89 a kg for green kiwifruit.

Apples

Apples are New Zealand’s second-highest-earning fresh horticultural export, accounting for 24 percent of the total value of all fruit and vegetable exports in the year to June 2013. According to the 2009/10 HES, the average household spent almost four times as much a year on apples ($61) as on kiwifruit ($16).

Domestic apple supply is plentiful in the late autumn and winter months, which influences a lower price for domestic consumers and the export market. Apple prices are generally at their lowest in May or June, at the same time as our apple exports peak. Domestic apple prices generally peak in January when domestic supply is low.

Figure 6 shows the quantity of our apple exports and the average domestic and export prices. The domestic price is based on the cheapest variety available.

Figure 6

Graph, Apples, by domestic and export prices and export quantity, monthly, June 2006 to October 2013.  

Domestic and export prices for apples have a similar pattern, although the mix of varieties differs. New Zealand produces and exports a wide range of apple varieties.

Take your pick of apple varieties in the food price index details how different varieties of apples are priced for the FPI and CPI throughout the year, depending on availability and price. The same is true for export varieties. Different varieties are exported at different times of the year, depending on harvest season, storage capacity, and overseas demand.

The most-frequently priced and the most-exported apple varieties are similar. Braeburn, Royal Gala, and Pacific varieties (including Rose, Queen, and Beauty), commonly priced for the FPI and CPI, also led the way in exports. Jazz, a Braeburn and Royal Gala cross, was also in the top six priced. Granny Smith variety is commonly priced for the FPI and CPI, but is not a top export. Fuji and Pink Lady varieties are, although they are not often priced for the FPI and CPI.

Figure 7 shows the different varieties’ shares of apple exports from January 2012 to June 2013.

Figure 7

Graph, Shares of apple exports, by variety, monthly volume shares, January 2012 to June 2013.  

Global seasonality for oranges

The average household spends about $26 a year on oranges according to the 2009/10 HES. We import around 13,000 tonnes, which accounts for about 3.8 percent of our total annual fruit and vegetable imports, by value.

Figure 8 shows where our orange imports come from through the year. Our two main source countries are the United States and Australia.

Figure 8
Graph, Origin of imported oranges, monthly volume shares, average 2010 to 2012.
 
Figure 8 shows we mainly import from the United States in our summer and autumn months, when oranges are in season there and it's the off-season for New Zealand growers. When the southern hemisphere enters the winter harvesting months, both locally grown and Australian oranges are available. 

The source country affects the price New Zealand consumers pay. Figure 9 shows that domestic orange prices are at their lowest in late winter and early spring. Typically their lowest price is in September, when there is an adequate supply of locally grown oranges and Australian imports. In contrast, prices for oranges generally peak in both early summer (December) and early winter (June), when local produce is scarce and we are importing from both Australia and the United States. Imports in May help keep the price down until New Zealand oranges are in supply again. 

Figure 9

Graph, Origin of imported oranges, by price and quantity, monthly, June 2006 to October 2013.

External shocks affect domestic prices

External shocks can influence the price New Zealanders pay for produce at the checkout. Recent imports of Australian tomatoes and capsicum illustrate this.

Tomatoes

In New Zealand, fresh tomatoes are predominantly grown in greenhouses, but a small volume is grown outdoors. The greenhouses produce all year round while the outdoor production is seasonal – summer and early autumn.

Greenhouse production is also seasonal – only about one-third of the volume per square metre is produced in winter compared with summer, due to lower light and temperatures. Glasshouse heating costs are also much higher in winter. For these reasons greenhouse growers tend to target summer rather than winter production. This influences lower domestic supply and higher prices in winter (see TomatoesNZ).

In the year to June 2010, New Zealand imported 2,960 tonnes of fresh tomatoes from Australia. This was 100 percent of tomato imports and 2.0 percent of the total value of fruit and vegetable imports. However, in the year to June 2013, our imports of Australian tomatoes dropped to zero.

In late 2010, Queensland experienced some of its worst-ever floods, which affected horticultural production significantly. Following the floods, the New Zealand price of tomatoes increased dramatically, from an average of $8.70 a kg in July 2010 to a peak of $13.25 a kg in July 2011.

Figure 10 shows the relationship between the average domestic price of tomatoes and import and export volumes.

Figure 10
Graph, Tomatoes, by domestic price and import and export quantity, monthly, June 2006 to October 2013.
 
Following the Queensland floods, another external shock affected the domestic price we pay for tomatoes.

In October 2011, the Australian Pesticides and Veterinary Medicines Authority suspended the use of dimethoate on a number of food crops, due to potential health risks. Using this pesticide was an import requirement for Australian tomatoes and capsicum coming into New Zealand – to protect domestic crops from the Queensland fruit fly.

While the import restriction was in place (until July 2013) we did not import Australian tomatoes or capsicum. The result of this was a significantly higher New Zealand domestic price over the period. In July 2010, the average price of tomatoes was $8.70. This compares with an average July price of $10.43 for 2011–13. 

As the Ministry for Primary Industries has approved Australia’s new form of pest control (irradiation), the import restriction has been lifted. All imports of Australian tomatoes and capsicum are now irradiated. As Australian imports increase and return to normal levels, this may influence tomato and capsicum prices in New Zealand.

Capsicum

Capsicum imports from Australia declined in 2011 after the Queensland floods in late 2010. At that time New Zealand prices were up almost 50 percent, from an average of $13.31 a kg in July 2010 to $19.61 a kg in July 2011.

Capsicum imports generally peak in July, with the average domestic price peaking in August each year – when domestic supply dries up.

Following the price rise in 2011 (after the floods), the price stayed high, with August peaks for 2012 and 2013 being far greater than before 2011. The lack of capsicum imports from Australia from February 2012 to July 2013 influenced this situation.

Figure 11 shows the relationship between the average domestic price of capsicums and the import volumes from Australia and the rest of the world. The highest price was in August 2012 ($22.28 a kg). This was almost 70 percent higher than August 2010 ($13.17 a kg) before the floods and import restrictions.

Figure 11
Graph, Capsicum imports, by price and quantity, monthly, June 2006 to October 2013.

According to the 2009/10 HES, households spent on average nearly three times as much a year on tomatoes ($61 a year), as on capsicums ($23 a year). In the year to June 2010, New Zealand imported about 773 tonnes of capsicums, with almost 90 percent of this being from Australia. In the year to June 2013 imports dropped to 372 tonnes – the Netherlands supplied 86 percent of this.

Imports from the Netherlands have a much higher freight cost than those imported from Australia.  By comparing monthly import values, including freight and insurance (cif) and value for duty (vfd), we can see the difference in transport costs. In July 2010, the average import price for capsicums based on cif was $5.20 a kg; the vfd average import price was $4.46 a kg – imports predominantly from Australia.

In July 2013, the cif average import price was $10.68 a kg while the vfd average import price was $3.75 a kg. This large difference represents the significantly higher cost of importing from the Netherlands than from Australia. The higher freight costs influence a higher import value – in combination with a lower import volume this explains higher domestic capsicum prices in 2013.

As capsicum imports from Australia resume, we may see the lower freight costs influencing the domestic price.

Conclusion

In a small open economy like New Zealand, we are able to choose from a wide range of fresh fruit and vegetables. However, we are also vulnerable to the ways that international and domestic factors can affect the domestic price paid.

Average domestic prices often follow the import and export prices. Having varied origin countries for our imports means consumers can access year-round supplies of seasonal and tropical produce. 

References

Statistics New Zealand (January 2010).  Seasonal price fluctuations for fresh fruit and vegetables. Available from www.stats.govt.nz .

Statistics New Zealand (July 2013). Bananas appeal to Kiwis. Available from www.stats.govt.nz.

Statistics New Zealand (October 2013). Take your pick of apple varieties in the food price index. Available from www.stats.govt.nz.

Strawberries Australia Inc (nd). Facts & figures & other information. Available from www.strawberriesaustralia.com.

TomatoesNZ (nd). The New Zealand fresh tomato industry. Available from www.tomatoesnz.co.nz.

Turners and Growers (nd). NZ produce calendar. Available from www.turnersandgrowers.com 

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