Is kiwifruit overhead shelter worth the cost?

A question I am often asked by my clients’ is “should I spend money on erecting a kiwifruit overhead shelter?”

The benefits of kiwifruit overhead shelter are well known. Kiwifruit protective canopies protect against hail and early frost risks, reduce wind damage, increase canopy area through the removal of internal shelter belts and create a warmer environment in which to grow kiwifruit. This in turn leads to likely increased production, dry matter and size and reduced reject rates and PSA risk (through reduced vine damage and increased spray penetration). So far so good and when you consider that every kiwifruit grower has somewhere between $250,000 and $450,000 per hectare invested in their orchard and spends about $28,000 per hectare to grow their kiwifruit to maturity the prospect of reducing risk and at the same time increasing returns sounds very appealing.

The overhead shelter comes in two varieties. The hail cloth variety which costs about $55,000 to $60,000 per hectare to erect and the aluminium framed, plastic cloth variety which costs about $125,000 to $130,000 per hectare to erect. The later does have some additional benefits however in this blog I will concentrate on the hail cloth version which is more popular due to being significantly less expensive.

My approach is this. If I could get a three year pay back on my $55,000 investment I would be wrapped. A four year pay back would be great too. A five year pay back would make me think very hard about whether I should go ahead. So let’s target a four year pay back and do the numbers. If I borrowed $55,000 and paid this off over 4 years at 6.50% it would cost me $15,500 each year in loan repayments. If I had the money available invested elsewhere I would be sacrificing my ability to earn income on that investment so the same logic applies. To recover the cost I need to be confident that the investment will increase my kiwifruit income per hectare by $15,500 a year. This increase would be achieved primarily through a combination of growing more fruit through additional canopy and reduced reject rates.

A conventional Hayward Green grower in the dress circle of Te Puke will be targeting 10,000 trays production per hectare and I will assume an average Orchard Gate Return over the next four years of $5.50 per tray. To recover $15,500 per hectare I would need to increase my export production by 2,818 trays per annum. That’s an increase of 28% and I wouldn’t be overly confident of achieving that. If the average Orchard Gate Return dropped to $5.00 per tray I would need to increase my production by 3,100 trays per hectare which is an increase of 31%. I am certainly not confident in achieving that so for me it’s a no go for Hayward Green even after factoring in a small increase in returns through improved size and taste.

A conventional G3 grower will be targeting 15,000 trays per hectare and I will assume an average Orchard Gate Return of $6.50 per tray over the next four years. Probably a bit light considering this year’s forecast but we will see how the numbers stack up. To recover $15,500 per hectare I would need to be confident of producing another 2,384 export trays per annum which is an increase of 16% which I would be hopeful of achieving. And if I work on an average Orchard Gate Return over the next four years of $7.00 the increase required is only 2,214 export trays per hectare or 14%. Increased returns through improved size and taste and the reduced risk of PSA infection, hail and frost damage make the pain of spending $55,000 per hectare even easier.

To summarise I think you would be hard pressed to justify the cost of erecting overhead shelter over a Hayward Green orchard but those growers looking to maximise returns from their G3 kiwifruit orchard investment and reduce risks should seriously consider overhead shelter. You could recover your investment in four years, increase the value of your orchard and benefit from seven or so free years before the shelter cloth needs replacing at a cost less than the original installation.

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