NZ Deer Industry

Competitive Position

  • The deer farming industry has grown exponentially since the early 1980s, and from 1991 to 1995 total export income doubled from NZ$100 to just over NZ$200 million. Today New Zealand has the world's largest deer farming industry.
  • In 1999 there were an estimated 4,000 farms in New Zealand that contained deer. Production systems are similar to those for sheep and beef and the majority of industry expansion utilises land currently being used for sheep and beef farming.
  • New Zealand farmed venison could not yet be considered a mainstream meat product as it competes with meat from other game animals in the European markets, and in the USA market it occupies a niche as a high quality but low volume item on restaurant menus.
  • In determining its areas of competitive advantage one has to consider alternative suppliers of venison (i.e. wild game in Europe) along with more mainstream meat products such as beef, lamb, pork and poultry. Areas where a competitive advantage exists include:
  • Low cost pasture production system
  • Low labour requirements for most of the year
  • High level of expertise in breeding, stock management and animal health
  • At the upper end of the E.F.S profit analyses
  • Efficient processing facilities
  • Lean, versatile product with an element of the new and unusual that appeals to affluent consumers seeking variety
  • Exporters able to leverage off markets developed for other competing meat products (e.g. beef and lamb)
  • Established and effective systems in terms of quality management (on and off farm), food assurance and safety
  • Optional 2 income streams with alternative income for producers from velvet products in the fast growing nutraceuticals market. While the velvet returns are volatile, they are also one of the most profitable enterprises
  • Economies of scale in production, processing and marketing
  • Recognised Cervena brand to build up on in markets outside Europe
  • Major markets are sophisticated high value markets in developed economies.

Production and Market Trends

  • The NZ deer industry is currently in a growth phase with the national deer herd increasing by an average of 11 percent annually in the past 3 years. Slaughter in the year ending September 2000 was down almost 5 percent in numbers and almost 7 percent in production volume terms.
  • In 1999 there were an estimated 1.8 million deer farmed in New Zealand (half the world's farmed deer population), with approximately 1.2 million of these being female stock for breeding purposes. The regional split is 45:55 between the North Island and South Island.
  • The export industry has faced difficulties in securing consistent supplies when farmers look to build numbers in the expectation of strengthening prices. When these expectations are not always realised an oversupply situation is the result. This pattern of inconsistent supply has made it difficult for exporters to establish mutually beneficial ongoing relationships with importing customers.
  • The erratic trend in annual slaughter numbers is illustrated in the following chart.
  • Rises in velvet prices will see additional male stock retained for velvet production, with a resulting reduction in the volume of stock slaughtered. Likewise a strong venison price or reduction in velvet prices will significantly increase the number of animals sent for slaughter.
  • Speculative increases in the number of deer farmed are restrained by the capital requirements of establishing a deer unit and the relatively large capital cost of stock in comparison to that for sheep and beef.
  • The majority of New Zealand farmed venison is marketed under the processor's/exporter's own brand. Having launched the Cervena appellation in 1993 the industry has now voted to let the Cervena brand stand on its commercial merits.
  • The industry's velvet marketing strategy aims to:
  • create demand by differentiating and improving awareness of New Zealand velvet through the use of branding
  • diversify by developing new geographical markets and new products.

Export Products from the NZ Deer Industry 1995-2000

Export Products from the NZ Deer Industry 1995-2000

Product Type

1995

1996

1997

1998

1999

2000p

Venison (tonnes)

15,037

12,356

11,229

15,029

14,845

14,738

Velvet (kg)

178,491

207,327

182,853

192,776

204,454

121,066

Hides (Number)

309,220

368,073

245,189

239,067

582,698

305,286

Co-Products (tonnes)

1,032

957

1,043

2,611

965

1811

Leather (sq metre)

92,530

104,193

124,016

96,638

100,389

98,478

Live Exports (Number)

900

8

  

26

32

50

Source: NZGIB

          

 

  • Germany is NZ's largest export venison market, taking 55 percent of total venison exports by volume in 1999. European destinations dominate the venison markets with approximately 70 percent market share.
  • On a value/tonne basis, the USA, Norway and Switzerland are the three top returning markets, however scale needs to be considered. The products entering the USA market in particular (under the Cervena brand) tend to be the higher priced, low volume items for the restaurant trade.
  • Venison demand is closely linked to festive occasions (compared with beef, lamb, pork and poultry) and as such, the demand is more seasonal.
  • Venison's status is closer to that of a niche item in both the retail and the hotel, restaurant and institutional (HRI) sectors. In the USA market it competes with the premium cuts of beef and lamb and high value seafood on restaurant menus. In Germany and other European markets it competes with other game products on restaurant and hotel menus.
  • New Zealand is looking to reduce its dependence on European markets which currently account for 90 percent of sale value (48 percent of this is in Germany).
  • On a unit value basis, velvet is an important earner for the industry with exports ranging from NZ$25 million to NZ$63 million over the period 1995-99. The average value was $217kg over the period 1995-99.
  • The domestic New Zealand market for venison is significant and the product regularly features on restaurant menus throughout the country.

Price Trends


  • The charts above illustrates the erratic swings in unit values for venison and velvet.
  • The export venison schedule (averaged across all grades) has been rising year on year since 1998 and currently exceeds the long-term inflation adjusted average of $5.72/kg.

Prospects

  • MAF are forecasting an 8 percent increase in average schedule price in 2001 to $6.46 before prices decline in the 2002/03. The forecast price decline is linked to the EU's Agenda 2000 reform program which will hasten the move from market supports to direct payments to farmers. Under this system, European market prices for beef are expected to decline by 12 percent (OECD forecast), with a resulting impact on venison prices for NZ exporters.
  • The venison industry is somewhat exposed by its reliance on the German market (in 2000 this market accounted for 48 percent of the total venison export volume). The German economy is currently stagnant with low wage growth and high unemployment. Future growth in consumption at prices above the historical average will be strongly reliant on growth in the German economy.
  • A recovery in the Euro would enhance prospects for venison.
  • Venison supply is strongly correlated to velvet prices. Strong growth in velvet demand will reduce stag slaughter numbers.
  • A further recovery in the Korean economy with resultant increased consumer spending and a stronger Korean currency should lead to increased demand (and prices) for NZ deer velvet.
  • Stocks of competing products from Canada, Alaska and Siberia are currently low.
  • A key factor in velvet demand will be the Korean economy's ability to generate growth while also repaying the IMF debt the country owes. Central to this will be the economic stability of the major industrial companies (chaebols).
  • Ongoing strength in the US economy with development of niche opportunities among ethnic minorities in this market offer considerable promise
  • Growth in the nutraceuticals market and the use of deer velvet as a natural health product suggest longer term prospects for the product are good.

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