Growers grapple with changing apple industry

Growers grapple with changing apple industry

Batlow Apples has been a cooperative for 96 years, remaining grower owned and operated in all that time.

However, the apple industry in 2017 is not what it was in 1922.

Even in the past two decades, seismic changes have pushed the Batlow Apples board to look for other options to ensure their survival – namely, a partnership with outside investor group AusFarm Fresh that would give them the majority stake.

Board member and grower Ralph Wilson said the possibility of moving to a company structure has been in the pipeline for a while.

“As a grower I think we have to go down this track, we really do need some investment in the cooperative to expand production and upgrade the packing facilities,” he said.

“We are an ageing population so we really do need some people with money to invest to ensure the viability of the cooperative into the future.”

The co-op currently counts 17 growers amongst its members. Ten years ago it had over 40, and 40 years ago there were upwards of 120 members. With the costs of buying into an orchard now sitting at around $150,000 per hectare, it’s simply not an easy or affordable industry for young people to get into.

Mr Wilson said that with the nature of the game being what it is now, outside investment is an attractive option to ensure Batlow Apples are able to grow.

“There’s a huge amount of investment these days,” he said.

“The costs have been rising all the time – the costs of growing, the costs of labour have increased dramatically, the cost of packing has increased dramatically, freight has gone up, everything’s gone up.

“[It’s also] an oversupplied apple industry. That oversupply comes from the Southern states, that are growing quite a lot of apples now. That’s something that’s happened in the past 15 – 20 years.”

There are still just as many apples coming out of Batlow, with more density in the orchards and new technology ensuring their quality and quantity, but there are less people involved, and those people are mostly approaching retirement.

Manager of Batlow Apples John Power said partnering with AusFarm Fresh to become a company with shareholders rather than a cooperative would make them “stronger and more competitive.”

“Let me take you back 20 years,” he said.

“The average orchard had tree spacing of 6m by 7m apart, and you fit maybe 500 trees in a hectare. It was almost all Red Delicious, and you were getting paid $47 for a 14 kilo box.

“Today, if you’re still running those same trees in that orchard, there’s no way you can make money. At all. Labour costs have more than doubled, and now you’re getting $26 a kilo for a 12 kilogram carton.”

He said growers have had to invest significant amounts of money in their orchards just to keep up, which has put Batlow Apples into debt.

Orchards now are densely planted, and need to constantly plant new varieties to keep up with changing tastes. The apple market in Australia is also oversupplied, with new orchards popping up in Victoria and driving the price of the more common varieties of apples down.

A carton of Red Delicious, for example, which is a common variety grown by many farmers, will sell for far less than a carton of a new variety like Kanzi or Jazz – but replanting costs money.

“Now, there are three and a half thousand trees per hectare in some cases,” Mr Power said.

“The challenge is, every hectare you replant, you are investing $150,000, and you’re not going to get a return on that for seven to eight years.

“The last twenty years there’s been about half the area that’s planted compared with what there used to be in Batlow. There’s a number of growers that are replanting, but there’s a lot of farmers that are leaving.

“We need to [approach the future] in a measured way, and we need someone who’s a strategic long-term investor.”

That investor, if the co-op members vote ‘Yes’, is AusFarm Fresh.

And if they vote ‘No,’ Mr Power said the board’s approach would essentially have to be to just hope for the best.

“If you’re not investing now, you’re literally making the decision to leave the industry. That’s the reality,” he said.

“Most [apple] varieties are registered, and you’re only allowed to grow a certain amount in the country. So if you don’t get in now, you cant get in at all. Ever.

“These guys are investing knowing that this is about long term food security, and safe food for consumers, and they understand that those things mean you have to make a very long-term investment. It’s hard to find a patient long-term investor.”

Mr Power said the proposal, if approved, would provide Batlow Apples with the capital it needs to:

• maintain and grow volume by planting new trees, improving orchard yields through investments in new technologies;
• boost productivity in packing and storage through necessary upgrade investments;
• enhance crop risk mitigation;
• sustain brand strength via appropriate marketing;
• fund future infrastructure requirements; and
• reduce debt.