NEW ZEALAND DEER MODEL CONCEPTUAL FRAMEWORK
In this section, the conceptual framework dealing with the domestic supply of and export demand for the main deer products (Venison and Velvet) are discussed. In order to do this, the model variables and data sources are identified and defined first. This is followed by the discussion of supply and then demand relationships.
Model Variables and Data
The variables employed in the model can be categorised into those which are explained by the model itself (Endogenous variables) and those variables which are pre-determined and thus are known as explanatory (Exogenous) variables (Appendix C: Table 1, Sections I and II).
Endogenous Variables
The main supply related endogenous variables used in this model are the deer numbers (inventory), both male (stags - KDS & KYDS) and female (hinds - KDH & KYDH), and production levels for venison (QYVEN) and velvet (QTVEL). They are mainly sourced from the Department of Statistics Agricultural Census and other related series as well as those obtained from agencies related to the Deer industry (Appendix D: Table 1, section 1).
The deer inventory levels are in thousands and the output levels are in tonnes of carcass weight. The schedule prices paid for stag venison (AP2 stag $ per Kg, net of GIB levy) and the velvet pool prices (A grade $ per Kg) paid to deer farmers are the main supply related endogenous price variables used in the model.
The endogenous variables related to venison demand are the export returns at fob level in the main export markets (i.e. Germany - NZRETG, Sweden - NZRETS, etc.), used as proxies for wholesale venison returns, and the level of exports to these markets (i.e. Germany - NZFXPG, Sweden - NZRXPS, etc.). These are sourced from the Department of Statistics export series and related data (Appendix D: Table 1, Section I).
The fob returns for venison are in the respective overseas currencies (i.e., Deutsche Mark, Kroner, US $) in which they are sold per tonne of product weight and the export quantities are tonnes on a product weight basis. The export velvet returns (i.e. Korea - VPRKOP and Hong Kong - VPRHKP) are also in the respective overseas currencies (i.e., Wan and HK $) per Kg of processed product.
Exogenous Variables
The main exogenous variables relate to several price series in domestic as well as overseas markets for venison and velvet related products. The price of breeding hinds (PBRH) in NZ $ per head and the price of beef (PPB), lamb (PL) and milkfat in NZ cents per Kg are the relevant domestic prices paid to farmers used in the model along with the Prices Paid for Inputs (PPIDR) by deer farmers (Appendix D: Table 1, Section II).
The wholesale beef prices in the overseas markets for New Zealand venison (i.e. Germany - BPWX, Sweden - SWEBP, etc.) and the Velvet Check price in Korea (VCPRKO) are the prices in overseas currencies which are exogenous to the model. New Zealand venison return in other markets not modelled separately (i.e. USA, Asia NZRETRN) is another exogenous variable.
Other exogenous variables are related to venison and velvet stock carry over levels in tonnes and Kg respectively, venison processing capacity utilisation, Consumer Price Indices (CPI) and New Zealand Dollar Exchange Rates (EXR) for countries such as Germany, Sweden and USA. There are also two (binary) dummy variables related to the Chernobyl nuclear accident in 1986 (DVCH) and the German Unification in 1990 QVEG) (Appendix D: Table 1, Section H).
Data periods
As the farmed deer industry in New Zealand is relatively young, time series data on supply and demand was available only for a restricted time period. Deer numbers and slaughter data as well as the venison schedule and velvet pool prices for June years were available from about 1980 only.
The export returns and volumes for venison were available for a few more years starting from 1977 as there was some trade in feral venison during the earlier period. Velvet export levels and returns were however, available from 1983 only.
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