North Island Deer

Model Description

Deer farms are commonly of two types - deer units run within a mixed livestock system, and stand-alone deer farms. The deer units are generally smaller than stand-alone deer farms. This model farm sits between these two farm types, and can best be described as a "small stand-alone deer farm that is big enough to support a family".

The model farm is theoretically situated near Rotorua in the Bay of Plenty, and is 140 effective hectares (ha) in size. Opening stock for the 2003/04 season consisted of 420 red mixed-age breeding hinds, 100 rising two-year (R2yr) hinds (first fawners), 446 mixed-sex weaners, and 105 R2yr and mature breeding/velvet stags.

Weaner hinds and stags are all carried through the winter and sold to slaughter. Half of the breeding hinds are mated to a crossbred stag. The stocking rate (12.6 su/ha) is set to allow yearling stock to reach slaughter weight targets in late spring, when market prices for chilled venison traditionally peak. The breeding hinds are scanned and only in-calf hinds are wintered. Each year, around 25 selected yearling stags are retained to enter the velveting herd. This model farm does not run sheep and beef cattle.

Table 1: The Model in Summary 2003/04

Effective area	140 ha
Opening stock wintered:		R1yr stags	218 hd
Breeding hinds (mixed age)	420 hd	R2yr stags	25 hd
R2yr hinds (mated)	100 hd	R3yr stags	70 hd
R2yr hinds (unmated)	0 hd	MA and breeding stags	10 hd
R1yr hinds	218 hd	Total stock units wintered	1,758 su

Table 2: Key Parameters

	2000/01	2001/02	2002/03	2003/04	2004/05f
Effective area (ha)	140	140	140	140	140
Opening deer stock units	1,750	1,732	1,750	1,758	1,809
Stocking rate (su/ha)	12.5	12.4	12.5	12.6	12.9
Fawning (%):¹
Farm average	85	83	84	86	86
Mixed age hinds	87	87	86	88	88
2 year-old hinds	75	70	75	77	76
Velvet (kg/stag):
Farm average (includes re-growth but excludes yearling velvet)	2.9	2.7	2.7	2.0	2.0
Mixed age	3.1	3.2	3.2	3.8	3.8
3 year-old	2.8	2.8	2.8	3.5	3.5
2 year-old	1.6	1.6	1.6	1.8	1.8
Carcass weights (kg):
Cull 2 year-old hinds	50	52	52	52	52
3 year-old plus stags	-	-	-	100	100
2 year-old stags	67	69	69	69	69
Yearling stags	56	57	55	55	55
Gross farm revenue ($)	180,300	197,200	132,548	90,918	118,225
Cash farm surplus ($)	96,600	104,100	39,814	-2,470	31,254
Net trading profit ($)	93,630	98,400	30,700	-6,920	23,255

¹Fawning % - breeding stock scanned in calf at balance date

Key Points

Most farms were affected by the dry autumn and are entering winter 2004 with adequate pasture covers. However, supplement reserves are high and stock are generally in excellent condition.
Where farms are committed to deer there has been an increase in deer numbers. Other groups of farmers are changing to alternative policies, or are exiting the industry. Stock numbers on the model farm are forecast to be higher for the 2004/05 season.
Venison revenue dropped by 33% in 2003/04, reflecting the decrease in schedule price to only $4/kg at peak and down to $3/kg in the autumn.
Venison revenue is forecast to increase by 33% in 2004/05. Farmers have varying expectations for venison prices in 2004/05, ranging from $3.50-6.50/kg.

Physical Factors

Winter 2003 was mild, resulting in good growth. Spring was cold, with extremely low pasture growth rates, which placed pressure on feed supplies for young stock. As a result, yearling stag and hind killing weights were below target levels at traditional sale times. The lower feed supply allowed pasture quality to be maintained longer, although early supplement was not made. A number of farms retained sale animals longer than normal to meet planned carcass weight targets.

Summer pasture growth was favourable, as a result of consistent and high rainfall, providing a number of farms with surplus feed from which to make supplements. Generally, more supplement than usual was made on-farm, which increased feed costs.

Most areas of the Waikato and Bay of Plenty experienced high rainfall over February, but this was the last significant rain for 2 months, resulting in a "green drought" over autumn. Good summer pasture growth resulted in additional weight on all animals, and deer farmers were able to manage autumn feed demands, with an early start on crops and supplements, and the sale of surplus animals.

Pasture covers were low towards the end of April, but an extremely high growth period in May resulted in excellent growing conditions. Most farms are entering winter 2004 with adequate pasture covers, stock in excellent condition, and ample conserved feed supplies.

Fawning percentages increased 2% across-the-board in 2003/04, reflecting ongoing emphasis on improving mating management of first fawners. Stock were in good condition during the rut in 2004. However, farmers anticipate a potential decrease of 1% for R2yr hinds in 2005 fawning.

Weaning weights for 2004 were generally ahead of 2003 as a result of the wet summer. Farmers appear to be carrying out less intensive monitoring of liveweights, and weaning policies appear to be changing, with a number of farms now weaning post rut.

There were very few animal health problems through the 2003/04 season. Facial eczema spore counts were considerably lower than average, and there was no facial eczema damage reported. Death rates remain low, at just below 3%.

There has been significant change in the industry, with a number of properties previously surveyed either going out of deer totally, or selling on a high real estate market. A number of deer farms surveyed, with additional land not deer fenced, have carried out new development and are dramatically increasing deer numbers. Where additional land was not an option, farmers have been reluctantly selling surplus hinds and stags at very low prices to achieve winter capital stock numbers. The availability of killing space was a major factor in the timing of sales this season.

The model reflects the changes, and farmer reaction to low venison prices, by retaining additional hinds in 2003/04 and progressively increasing the stocking rate over 2005.

Financial Factors

Figures used in the printed version of the 2002/03 North Island deer budget reflected the North Island average velvet cuts (kg/hd). Reassessment of these cuts has found that while they were representative of the North Island average, they did not accurately reflect the velvet production of a farm of this size situated near Rotorua. As a result, the budget has been recalculated using more representative cut figures. This changes the velvet revenue received in 2002/03 significantly. The table below updates key financial indices for the 2002/03 season using the revised velvet revenue. It is recommended that these figures be used when comparing the 2002/03and 2003/04 seasons.

	2002/03 as Published $			2002/03 Revised $
	Whole farm	per ha	per SU	Whole farm	per ha	per SU
Revenue
Venison	110,449	789	63.11	110,449	789	63.11
Velvet	24,639	176	14.08	31,699	226	18.11
Gross farm revenue	125,488	896	71.71	132,548	947	75.74
Cash farm expenditure	76,734	548	43.85	76,734	548	43.85
Cash farm surplus	32,754	234	18.72	39,814	284	22.75
Net trading profit	23,640	169	13.51	30,700	219	17.54
Net trading profit after tax	-211	-2	-0.12	6,849	49	3.91
Disposable surplus/deficit	-48,213	-344	-27.55	-41,153	-294	-23.52
Net cash change	-40,213	-287	-22.98	-33,153	-237	-18.94

2003/04 Review

Revenue

Gross farm revenue decreased by 31% to $90,918 in 2003/04, reflecting the significant decreases in both venison and velvet returns.

Venison

The venison schedule through 2003/04 was considerably lower than the previously low schedule in 2002/03. It peaked at just over $4/kg in spring 2003, down 33% on the $6/kg peak of 2002. After the spring peak, the schedule fell rapidly, finishing the season at around $3/kg.

Carcass weights achieved in 2003/04 were the same as in 2002/03. However, sales were more spread out as stock struggled to meet target weights, and some delays in gaining killing space meant later animals were killed outside peak schedule prices.

The model farm recorded a decrease in venison revenue to $74,412 (down 32%) compared with the 2002/03 season, when venison revenue was $110,449. Prices received were considerably lower, at $176/hd for yearling stags compared with $270/hd last season. The revised price for mixed-age hinds was $166/hd, 29% less than the average of $233/hd last season.

Velvet

The average price received for velvet in 2003/04 was much lower than in 2002/03, at $61/kg. The model farm experienced a 27% decrease in velvet revenue during 2003/04 as a direct result of reduced prices. Total revenue received from velvet in 2003/04 was $23,006.

Other

In order to reflect the number of deer farms that are running ewes or young beef cattle (up to 20% of total stock units) to assist in pasture management, it is important to include an estimate of the potential revenue these stock units could contribute. At a cash farm surplus of $35.30/su (taken from the 2003/04 Waikato/Bay of Plenty intensive sheep and beef model budget), the potential net revenue from 350 su is $12,355. However, as noted previously, this model does not run sheep and beef cattle.

Expenditure

Cash farm expenditure increased slightly by 2% in 2003/04, to $78,389, compared with $76,734 in 2002/03. At this level expenditure uses 86% of gross farm revenue. This represents a 48% increase from 58% in 2002/03, indicating that despite poor returns for venison and velvet, North Island deer farmers did not reduce spending at a comparative rate, thus eliminating any potential cash farm surpluses.

Key increases in expenditure occurred in communication costs (38%), insurance (27%), hay/silage (25%), freight (20%), and electricity (19%). A 25% increase in hay/silage costs, to $6,000, represents additional supplement made during the season. Fuel costs increased by 13% in 2003/04 as a result of rising fuel prices, rather than increased usage.

Decreases in spending occurred in animal health and breeding costs, down 7% and 12%, respectively This reflects a relatively quiet animal health year, and a reduction in the use of artificial insemination (AI). Fertiliser and lime costs also decreased in 2003/04, reflecting price adjustments to inputs from a high New Zealand dollar (NZD), rather than reduced inputs.

Re-grassing remained a priority in 2003/04, with increased reliance on Brassica cropping ($1,500) to provide high quality cheap supplement, well-suited to deer farming. Repairs and maintenance expenditure remained the same in 2003/04, at $12,500, as planned programmes were still carried out.

The average price paid for breeding stags increased to $3,250/hd in 2003/04, compared with $2,400/hd in 2002/03, as the use of AI decreased and higher quality breeding stags were purchased.

Tax due in 2003/04 was down 81% on the $23,851 paid in 2002/03. Provisional tax due in 2003/04 was significantly higher than the assessed tax liability, resulting in a significant increase in estimated tax payments due. The model farm reassessed its tax liability during the 2003/04 year (to reflect actions taken by North Island deer farmers), thus resulting in a smaller tax payment of $4,498.

Development costs and capital purchases decreased significantly during 2003/04, dropping 71% and 75%, respectively, as most deer farmers reduced on-farm development and capital purchases as revenue levels decreased.

Net Result

The model farm experienced a $42,284 (106%) decrease in cash farm surplus in 2003/04 as a result of the lower venison schedule, decreased velvet price, and retention of planned programmes maintaining cash farm expenditure. The net trading profit before tax decreased by $37,520 (122%) to a deficit of $6,820.

Off-farm income was generated on 40% of the farms monitored during the 2003/04 season. This represents an average off-farm income of $10,000, which is a 25% increase from 2002/03. The net cash change for the model farm for 2003/04 was a deficit of $38,847.

North Island Profitability Trends

2004/05 Forecast

Revenue

Gross farm revenue is forecast to increase by $27,307 (30%) to $118,225 in 2004/05 as a result of higher venison returns.

Venison

Total venison revenue for 2004/05 is expected to rise by 34% to $99,815, compared with 2003/04. Prospects for venison prices are generally optimistic and most farmers were expecting the peak venison schedule to be at least $4.50/kg.

Price forecasts for R1yr stags sold to slaughter are up $41/hd, to $217/hd.

Velvet

The model budget velvet revenue is forecast to increase to $24,910 in 2004/05. Farmers are expecting the velvet price to lift by about $5/kg, to $66/kg, in 2004/05.

Expenditure

Total cash farm expenditure in 2004/05 is forecast to drop 10%, to $70,971. This decrease returns cash farm expenditure, as a percentage of gross farm income, to 60%, compared with 86% in 2003/04. This reflects farmers' expectations of a reduction in spending in order to increase cash surpluses.

Two key areas are forecast to decrease. These are repairs and maintenance, down 48% to $6,500 (a response to 2003/04 lower returns), and hay/silage, down 20% to $4,800, reflecting average expenditure on feed items. This is compared with 2003/04, when high levels of conservation were undertaken.

Key areas forecast to increase in 2004/05 are freight (17%), electricity (10%), rates (4%), fuel (3%), and fertiliser (3%). Animal health and breeding expenditure is forecast to remain the same, at $3.10/su, but will show an overall increase due to stocking rate increases.

Mortgage interest rates are expected to increase on average, and are budgeted at 8% pa. Development and capital expenditure are forecast to remain the same as in 2003/04, and off-farm income is expected to increase by 5%, to $10,500.

Net Result

The net trading profit before tax is forecast to increase by $30,075 in 2004/05, as a result of higher venison and velvet returns, and a 10% decrease in cash farm expenditure.

The model cash farm surplus for 2004/05 is forecast to increase to $31,254, due mainly to reductions in expenditure on farm maintenance. This represents a $33,724 increase from the cash deficit of $2,470 in 2002/03.

The net cash change is forecast to return to positive figures in 2004/05, to $5,445, reflecting an anticipated tax refund, reduced spending, and increased off-farm income.

Issues and Trends

North Island deer farmers are unusually apathetic about the state of the industry. In contrast to previous years, where there had been significant discussion on industry issues, farmers have lost interest in how the international markets are placed, focusing more on issues at the farm gate, such as availability of killing space, supplier/processor relationships, and supply contracts.

Most farmers feel let down by the industry in relation to current record low prices for venison and velvet, and the perceived failure of venison marketing systems.

Confidence is at an all-time low, with many farmers carefully assessing complementary and alternative systems. High land values and competition from alternative land uses, coupled with record low returns, have seen many people exit the industry earlier than anticipated. Those exiting tend to be older farmers nearing retirement who have decided not to sit out the current market low. Farmers remaining in deer are watching the market, monitoring and budgeting carefully, with expectations of higher venison and velvet prices in 2004/05, based on the theory that they cannot get any worse. Many committed to deer farming have taken the opportunity to dramatically increase their deer-fenced area, purchasing extra deer at low entry prices.

Concern remains in the industry over the apparent lack of skilled experienced staff. Farmers running mixed livestock enterprises are tending to manage the deer units themselves, leaving the running of other stock classes to employees. Coupled with this, there is a perceived lack of training/education opportunities for deer farmers.

Deer farmers continue to be environmentally aware, and ongoing work is being undertaken to minimise the physical impacts of deer on soil stability. Farmers in the Taupo/Rotorua regions are watching the Lake Taupo nitrogen issue unfold with keen interest and consideration of the implications for water courses nationwide.

Non-specific diseases of deer are generally discussed with concern, as Johne's disease becomes more prevalent. Cattle ticks on deer are being experienced in increasing numbers. A new product released late last year shows promise in long-term protection for deer, including fawns. Python ear tags are impregnated with the insecticides Piperonyl, Butoxide and Zetacypermethrin, and are claimed to give up to 16 weeks' protection from ticks. One ear tag is applied to each ear, giving excellent control around the head, neck and antlers, and during the deer's normal grooming, control over the rest of the body. There is no withholding period, but the high cost, at around $7-$8/animal, and the chore of applying two ear tags, is restricting their use.

Previous growth in the safari market has slowed in the North Island, with the market reaching a plateau. However, the market continues to exist amongst specialists who are targeting breeding policies for suitable animals, but it is not expected to become general practice.