New Zealand's apple growers fear a shortage of workers

High demand in Asian markets

New Zealand is one of the top five exporters of apples globally, representing 8.3% of the global market share with a value of 566 million dollars in 2019. The main exporting destinations are China, the US, Vietnam, with the rest of the apples heading to the EU and other Asian countries. Particularly China, the country with the largest import volume, imported 15.25% of the apples in the global market last year. The total import volume has increased more than 2,000% over the last five years with strong demand in the Chinese market. On top of that, the total import value for Vietnam, Thailand, and Hong Kong reached their highest point last year, nearly USD 40 million, respectively. Also, the Philippines and Bangladesh both showed a respective increase in demand by more than 200% during the last decade. The demand increase in Asian countries is largely attributable to the quality and organicness of New Zealand apples. In line with this trend, more and more apple growers in New Zealand are expanding their market to meet the global demand for organic apples.

Demand increase in Asian countries, 2012-2019

Source: Tridge

Lack of workers to pick the apples

During the harvest season, the primary labor force consists of three sources: the New Zealand nationals, temporary migrant workers through the RSE scheme mostly from the Pacific countries, and backpackers from all over the world via the working holiday program. The proportion of local people is significantly smaller than the other two sources since most of them do not prefer to work for the apple farm on a minimum wage. Since the RSE workers and backpackers, unlike the local people, are willing to work at a minimum wage, the apple farms in New Zealand usually hire them temporarily during the apple harvest season.

However, as the pandemic set an invisible barrier on workers’ free movement across the borders, apple growers fear an upcoming shortage of workers starting from mid-February. According to the Development Policy Centre, the number of backpackers and RSE workers in New Zealand has decreased dramatically by -98%(70,000 to 11,000) and -54%(14,400 to 6,500) in 2020, compared to the previous year. As orchardists rely heavily on foreign workers during the harvest season, they will have to find an alternative method to cover for the labor shortage. However, it is almost impossible to attract the local people to work on the apple farm, as explained, because of the wage.

While the Government of New Zealand allowed RSE workers’ exceptional entrance last November to deal with the labor shortage issue, it is still questionable whether this method is sustainable. Above all, the recruiting process of the RSE workers has become much more complicated, with the employer having to cover the cost of 2 weeks of mandatory quarantine and pay for 30 hours of work per week during the quarantine period. While large farms might have the capacity to go through the recruiting process, considering that most apple growers are small-scale farms, it is even more challenging to fill the harvest season’s labor shortage.

Lower apple harvest expected

If the situation continues, the suppliers might not be able to find alternatives. In that case, the apple production volume in New Zealand is expected to fall in the upcoming season and cause an apple shortage, leading to a higher market price in the global market. The lack of apple supply will partially affect the national economy as 5.6 percent of the export structure is supported by the fruit industry. Therefore, to avoid the worst scenario where the apple farmers have to throw away the overripe apples, the government will need to find a sustainable way to supply enough labor force to the apple growers.

In addition, as demand for apples in the Asian market keeps increasing, there is a need for these markets to find alternative supply sources. In China, 40% of the imported apples are from New Zealand, followed by the United States(27%) and Chile(17.6%). But due to the distance and higher freight costs, it could be hard to replace the NZ apples with the US and Chilean apples in the short term. The situation in Japan could be worse since 90% of its imported apples are from New Zealand. Although the end of Covid-19 will eventually ease the labor shortage, it is vital for these markets to diversify their importing channel to reduce the risk. One potential market is South Africa, which could be an option for Asian countries as apple suppliers in South Africa are now looking at the Asian market to reduce the risk of traditional channels, according to Nicholas Cogill, Regional Manager of Tridge in South Africa. Considering that New Zealand and South Africa's harvest seasons start in February, the South African market could be a prime candidate to attract the Asian market to overcome the upcoming shortage of New Zealand apples.

Sources

Development Policy Centre, "Pacific seasonal workers return for New Zealand’s summer harvest"

Development Policy Centre, "New Zealand’s seasonal labour shortage: why local workers aren’t enough"

Fruitnet, "Demand peaks for New Zealand organic apples"

Freshplaza, "Serious shortage of workers for apples and kiwifruit harvest"

Ministry of Business, Innovation, and Employment of New Zealand, "Recognised Seasonal Employer (RSE) scheme research"

Stuff, "Orchard owner 'terrified' for upcoming apple season, predicts $100m loss for Hawke's Bay"

Stuff, "The apple crop is 'outstanding' but will there be enough workers to pick them?"

Tridge, Seasonality Information on Apple(Malus pumila)

Tridge, Market Comment on Apple(Malus pumila)

Tridge, Export and Import data on HS Code 080810