COMMENTARY BY MATT DOLAN, CHIEF EXECUTIVE OF NZPPI
In the December edition of NZGrower & Orchardist, Hawke’s Bay summerfruit grower Kevin Bayley published a strongly worded opinion piece challenging the fairness of nursery terms of trade. His argument is that, as they are written, contracts for supplying fruit trees are unbalanced and leave the grower carrying the risk.
Bayley highlights clauses in contracts, such as enabling nurseries to short deliver trees with no come-back, requiring progress payments even when there is no guarantee of the trees being supplied, and timeframes as short as 7 days for growers to report issues and make claims. He argues that current terms are heavily weighted toward protecting the nursery, leaving growers with little recourse and forcing them to shoulder the risks.
While the article reflects one side of the issue, it has started an important conversation that goes layers deep and is relevant to our entire industry. It is important to understand why some of the common issues are occurring, and why issues like plant variety disputes are more frequent. These are issues that are in regulations, and are industry issues that nurseries can’t control. Nurseries remain vulnerable under the current system.
Cancelled orders happen more often than many realise. Nurseries are often left with specialised plants that can only be resold at a heavy discount, or simply cannot be resold. One producer described this situation as a "double loss”: the lost value of the unsold plants, and the loss to the next nursery that has missed sales.
This is why deposits and progress payments emerged. Not to shift risk unfairly onto buyers, but because without them, nurseries would fail due to the financial exposure. The Billion Trees programme is a textbook example. Many of the nurseries that took on risk due to a lack of firm orders and deposits are not in business today.
Growers and plant buyers rarely see the enormous production, financing and biological risk nurseries shoulder before they supply plants. Those that have robust contracts have usually developed them over time, through experience, but often at the request of their insurance company, or bank.
They are there to protect the business in the worst-case scenario, but most of the time issues are dealt with by working things through to a pragmatic solution. At the end of the day, New Zealand is a small place and relationships are critical.
Despite perceptions, many nurseries are still price takers and do not have adequate terms of trade. They accept that they rely on agreements that offer little protection. In contrast, industries like construction, have standards such as NZS3910 to fairly allocate risk. Horticulture has no common template and no agreed processes to help share responsibility. This is becoming more important as risks like climate and biosecurity increase.
Bayley’s letter has done one thing well: it has highlighted an issue that is long overdue for discussion. The concerns raised are real, but so are nurseries' vulnerabilities - meaning that the current system helps no one. Many in the industry are seeking more professionalism, stability and transparency. Perhaps we need to have some free and frank discussions to solve the issues and move forward.
As usual, we welcome your feedback. Please contact Nick Hoskins, NZPPI's Sector Rep for Horticulture ad Viticulture. Email nick@vinemanagers.co.nz or phone 027 248 7724.