2 Overview of the Deer Sector
Review of 2005/06
Deer farmers experienced another poor year with low prices for venison and velvet even though venison prices began to improve in the latter part of the year. The North Island model experienced a 7 percent increase in gross farm revenue to $110,632 in 2005/06, which mainly reflected a small increase in venison returns. Revenue for the South Island model dropped a further 1.4 percent this year to $142,508. Increases in off-farm income, particularly in the South Island model, were an indication of farmers under pressure in both islands.
Venison prices began turning a vital corner in April 2006 with an average schedule lift of 75 cents per kilogram over a six week period through until June. The national published schedule for 60 kilogram average purchase price stags reached $4.39 per kilogram at the end of June. This is 11 percent higher than the average of the last three years during the same time period. This rise has reportedly been due to the slight slide in the New Zealand dollar against the euro and the lift in the market for quality deer items like Cervena®.
The North Island model experienced an 8 percent increase in venison revenue for 2005/06, while the South Island model increased by almost 2 percent.
The 2005/06 average price received for velvet was static at last year’s price for both the North and South Island models. Low returns for velvet mean many farmers continue to view velvet as a deer by-product. Industry has reported a move away from velvet due to increasing compliance costs and poor financial returns. This is emphasised by an estimated reduction in the national velvet herd of 26 000, leaving a velvet production capacity of around 530 tonnes.
Few animal health issues were reported throughout the country but, as usual yersiniosis, Johne’s disease, fusiformis and lungworm were noted in isolated cases. New Zealand deer farms with bovine tuberculosis (Tb) were down from 50 last year to 37. The number of reactor animals has fallen even more dramatically, from 1350 to 457 in just 12 months. Most of the infected herds were in the South Island (84 percent) and were all in recognised infection zones.
Asian and Australian markets have taken 1700 and 1600 tonnes respectively of venison. While this is predominately lower value cuts and manufacturing products, this has helped diversify significant product volumes away from the European Union and particularly Germany, which currently accounts for 40 percent of New Zealand’s export volume. This prevented over-burdening the United States and European markets with excess venison.
Industry initiatives have placed considerable effort on expanding overseas consumers’ traditional consumption periods and developing new markets. Ensuring overseas markets can differentiate between New Zealand farmed venison and game trade venison has been a particular focus for venison marketing services as it is expected buyers will seek more assurance of both the origin and safety of their venison.
The latest agricultural production statistics (June 2005) showed only a 3 percent decrease in overall deer numbers throughout New Zealand, giving a total New Zealand herd size of 1.705 million. The deer industry remains positive, but stability in pricing is needed before farmers would consider building up their breeding herd numbers.
A slowing down in the number of deer killed has brought hope the industry will become more financially sustainable. A fall in the North Island kill numbers through April/May 2006 allowed venison plants to close for maintenance. This drop in kill numbers is a reflection of the industry exits and of farmers holding on to a diminished supply of finishing animals for spring, when better prices are anticipated. However, the lower South Island took longer to clear, which again highlighted the problems with insufficient killing space for the volumes being committed. Although the bulge in kill numbers has now cleared in the South, killing space seems to be a continuing issue with South Island deer farmers.
Prominent in the North Island have been increasing land values. This in effect, has created a large “carrot” for deer farmers, particularly in the Waikato and South Auckland region, to get out of deer farming or downsize their property to cash in or move towards more off-farm work. A prominent issue in the South, however, has been “muddy deer” (i.e. deer with mud dags on their legs and bellies), which have caused some controversy. Payment for these animals was reduced by $0.40 per kilogram, and in extreme cases “muddy deer” were refused processing and returned to suppliers. South Island farmers believe the issue lies with processing plants, while processors argue that farmers should present deer in an acceptable condition.
Outlook for 2006/07
Venison prices are predicted to increase in 2006/07 due to a drop in the supply of better-weight animals, and shifts to improved management and marketing strategies. Some in the industry have commented that deer farmers are beginning to understand the Cervena market and there is optimism farmers will be able to get much higher returns in the future.
The North Island model expects about a 9 percent increase in venison returns, while the South Island shows greater returns with a 14 percent increase forecast for 2006/07.
The net velvet price is expected to increase to between $49 to $50 per kilogram in 2006/07. This is an average increase of approximately 14 percent. Although this provides optimism to the velvet industry, prices will still only be half of what previous years have returned. The proposed new velvet selling organisation, called 0800 VELVET, should aid in a return to better velvet prices. The organisation looks at co-operative velvet selling, with key differences being the length of the sales period and sales timing being more aligned with demand. This could have a significant impact on how velvet is viewed in the industry.
Figure 2.1: Agricultural Production Statistics June 2005 – North Island
Source
Statistics NZ.
Symbols
...c confidential
...s supressed
Figure 2.2: Agricultural Production Statistics June 2005 – South Island
Contact for Enquiries
Farm Monitoring Programme Manager
Monitoring and Evaluation
MAF Policy
PO Box 2526
Wellington
NEW ZEALAND
Phone: +64 4 894 0623
Fax: +64 4 894 0741
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