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Commentary on the Apple Industry Crisis

Commentary on the Apple Industry Crisis

Thursday 7th Dec 2000 Owen Jennings Article -- Other

Three major events in the life of the apple industry occurred yesterday:

1. ENZA the statutory marketing monopoly was granted an injunction stopping the Export Permits Committee from granting permits. It also effectively wipes out the already granted permits for the coming season.

2. Two hundred and fifty angry apple growers marched on Parliament to voice their indignation at the Minister of Agriculture’s refusal to recognise their plight and act immediately to resolve the growing crisis in the industry.

3. One of the apple industry decision making bodies, PGINZ met to discuss their future and failed to come to a united position with the great majority present supporting changes.

Several things are now evident:

1 This industry is seriously under-performing and at a time when exporters of other commodities are enjoying their best profits for years. Individual apple growers are going broke, being forced off their property and recording substantial losses.

2 The arrangements put in place for the 1999 Restructuring Amendment Act are at best tortuous, expensive and anti-grower and at worst a hopeless compromise that shows the stupidity of Parliament passing unprincipled legislation. While permits were granted last year and the system gave relief to some growers by returning higher prices to them, the present situation is now untenable and impractical.

3 The architects of the legislation did not envisage a corporate raider taking control of ENZA especially one with a record of aggression in the market place and a penchant for rushing to the courts and using litigation to thwart those who cross their paths.

Growers will be wondering what this injunction is about and why it is being sought at this particular stage. The cynics among them will be aware that the timing is deadly accurate for doing the most damage to independent exporters.

That shouldn’t be surprising as Mr Gibbs, the Chairman of ENZA has said he didn’t want any independent exports and ENZA will be doing its utmost to slow down the process of growers bypassing the Statutory monopoly. At this very moment some 2.5 million cartons have been approved for export, however, it is critical that it is understood that of that 2.5 million cartons permitted only a 100,000 or so have been uplifted. In other words the Injunction effectively blocks the 2.4 million cartoned permits that for a variety of technical and minor reasons have not been picked up by the exporters.

The same cynics would observe that ENZA have left seeking the Injunction till as late as they possibly can to create maximum disruption to independents exporters plans. The independent exporters have been busy negotiating marketing opportunities and many of them have arrangements firmly in place. Right now urgent faxes will be flying to the other side of the world to convince nervous buyers in the market place that the exporters will be able to meet their commitments.

I have a reasonable understanding of the food industry market place. I know that huge damage will be done by independent exporters having to admit that they might not be able to deliver product. Relationships will be broken, commitments will be undermined and confidence, not just in independent export apples but confidence in NZ apples will be lost. Every grower will lose.

The real tragedy of this action is that it might not stop with the Court judgement later this month. Given the stance by ENZA, if they lose, an appeal is likely. By the time an appeal is heard it will be far too late to rescue their position, restore buyers’ confidence and offer growers an improved deal that they will able to accept.

This morning in open session, the Primary Production Select Committee heard the Chairman of the Permit’s Committee declare several times that there was a good relationship between ENZA and the Permit’s Committee. Other than making some minor recommendations on details of process the Permit’s Comm said they had a sound system in place for handling permit applications with ENZA and were clearly comfortable with the position between themselves and ENZA.

So what other reason could their be for going to the Courts other than the fact that ENZA wanted to spike the guns of the independent exporters at a critical time of the industries development?

What will be the effect out there in the orchards?

Last year everyone involved in the industry except ENZA is now convinced that independent exporters managed to pay growers $7-8 more per carton than ENZA could achieve.

ENZA’s returns when adjusted for the $4.75 for orchard to ship side costs and the $1.20 that should have been paid out on the profits of the Frucor sale are simply abysmal. No grower no matter how efficient can manage on the $9 that ENZA paid for some mainstream varieties.

Growers told me yesterday that even an extra $2 per carton would make the difference between loss and profit. It is unthinkable that this coalition Government should be standing in the way of growers having access to that extra return when they are going broke.

There is a crisis. It is no good the Minister of Agriculture saying growers can afford to wait for some exercise assessing orchardist’s views. Just this last week I assisted a family who were forced off their orchard property penniless because of their poor returns.

Apple growing families can’t afford to wait for a discussion document to come back to the Minister. He should act and act today.

The challenge is to the Minister’s commitment to rural NZ. Does he believe in letting growers have choice and the opportunity better returns or is he going to be recorded in history as the great procrastinator who let families go to the wall rather than act.

Don’t tell me that he cannot act until the industry is united. He knows that will never happen. Even the conservative PGNZI was split in various directions.

I believe there is a substantial majority of growers by number and certainly a majority of growers by volume who strongly support the Minister dealing with this problem urgently. Even the few remaining die-hards cannot justify supporting the ENZA organisation in its current mode and activity. For the Chairman of ENZA Mr Gibbs to be saying he is supporting small growers is a travesty. It is the small growers who have suffered most from ENZA’s high cost and arrogance. The next short while is a test for this Government’s understanding of the business sector. Sitting on their hands will indicate that business is justified in having no confidence in the coalition Government.

END

For more information visit ACT online at http://www.act.org.nz or contact the ACT Parliamentary Office at act@parliament.govt.nz.

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