Diversifying export markets will be critical for New Zealand’s avocado industry, with the country’s avocado production set to strongly increase over the coming five years, according to a Rabobank report.
In the report, Australian & New Zealand Avocado Outlook 2022, Rabobank says the majority of New Zealand’s avocado exports currently head to Australia and development of other export markets will be essential to ensure sustainable growth opportunities for the country’s producers as production climbs.
The report says New Zealand’s avocado production is forecast to grow by an average six percent annually for the next five years reaching 57,000 tonnes by 2026 – up from 44,000 tonnes in 2021.
“We expect the majority of this production growth will come from the Northland and Bay of Plenty regions,” says the report’s author, Rabobank associate analyst Pia Piggott (pictured). “And while the general production trend will be in an upwards direction, we also anticipate this growth will be highly variable on an annual basis due to ‘alternate bearing’ which results in irregular crop loads from one season to the next.”
The report says New Zealand is highly reliant on Australia as an export market for avocados with our trans-Tasman neighbours accounting for 79 percent of total New Zealand exports over the past five years.
“New Zealand is well placed to supply the Australian market as it has a price competitive production base and is able to supply product during the periods in the season when Australian production drops,” Piggott said. “However, Australian supply has ramped up considerably of late – particularly in Western Australia – leading to a national oversupply, and it’s essential that the New Zealand industry continues to grow its sales into other export markets that can pick up the slack when Australian import demand is lower.”
Piggott said the New Zealand avocado industry made significant progress growing sales to other markets in 2021, despite lower exports overall.
“New Zealand’s total avocado exports by volume were back by 11 percent in 2021, in large part due to an oversupply of avocados in Australia and the resulting drop in sales into this market,” she said. “While exports to Australia fell, strong growth was recorded in other export markets with avocado sales to the rest of the world (excluding Australia) up by 154 percent.
“This included improved export sales into Singapore, Hong Kong and South Korea – with New Zealand exports making up nine percent, four percent and 12 percent of total imports into those markets respectively – as well as strong export growth in markets like China, Thailand, Taiwan and India.”
Piggott said while recent sales growth into these markets was promising, further market diversification would be required by the New Zealand avocado industry over the years ahead. “While New Zealand was less reliant on Australia in 2021, Australia still accounted for two-thirds of New Zealand avocado exports by volume,” she said. “And with Australian avocado production forecast to grow rapidly over the coming years, it’s essential that the New Zealand industry continues to add new overseas markets and to expand the share of its avocado exports that are heading to other countries around the world.”
Asia presents strong opportunity
Piggott said further export expansion into the Asian market presents the best opportunity for New Zealand as growth of the Asian middle class is expected to continue increasing consumer demand for avocados.
“Many importing countries in Asia have very low supply of avocado per capita, with imported supply per capita significantly below 1kg per annum for most markets,” she said. “Over the past 10 years, Japan has consistently imported the greatest volume of avocados of any Asian country, and during this period we’ve also seen strong import growth for avocados in countries like China, Hong Kong and South Korea.”
Piggott said New Zealand producers were strongly placed to grow exports into Asia, but competition to supply this market was increasing. “New Zealand’s premium avocado quality and proximity to market mean it is well-positioned to increase exports into Asian economies,” she said. “But Australia is similarly well-placed, and over recent years we’ve also seen Mexican and South American avocado exporters increasing exports into Asia to improve their own market diversification. And with so much competition, maintaining consumers’ high-quality perceptions of New Zealand avocados will be critical to competing against other global suppliers.”
Volatility to remain
While increased Asian demand was creating a strong platform for export growth, Piggott warned that local producers should be prepared for a continuation of volatile industry conditions.
“This past year has seen significant disruptions for both producers and consumers, and export markets remain volatile from lockdowns, supply chain challenges and geopolitical events,” she said. “While the global reputation for quality avocado produce still remains high, current production and high growth prospects are affecting the profitability of the industry around the world. The risk in volatile revenue is increasing, and so producers need agile businesses with good equity buffers to ride through the changing supply and consumption dynamics.”
