Industry Alert - Horticulture: Fruit Growers Face Uncertain Future Following SPC Ardmona Announcement

Corporate Finance & Restructuring

June 15, 2013

The fruit and vegetable processing industry contributes AU$6 billion a year to the national economy. IBIS World estimates that 23.7 percent of all apples, pears and stone fruit grown in Australia are directed to fruit processing plants such as SPC Ardmona. The future for growers is therefore significantly influenced by the food processing industry.

SPC Ardmona recently announced a reduction of fruit intake tonnages by up to 50 percent for the 2014 season. Intake of stone fruit is forecast to fall from a norm of 60,000 tonnes per annum to 30,000 in the 2014 season.

The drop in 2014 intake volumes is reflective of recent market conditions, with SPC's peaches intake declining from approximately 53,000 tonnes in 2008 to a forecast of 15,000 tonnes in 2014. Growers are skeptical about other uses for their fruit, with the fresh fruit market already saturated with excess supply.

FTI Consulting considers that SPC's position is reflective of movement in the market generally, with high Australian production costs, unfavourable exchange rate movements and poor climatic conditions all contributing to a shift in focus towards imported, private label products.

Read the full report to learn about our forecasts for the industry, options and risks for fruit growers going forward and how our team can help make the right decisions for your business.

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