Deer farming now ‘less risky’

Press, 18 March 1988, Page 14

Deer farming now ‘less risky’

The risks involved in entering the deer industry were now much (lower than they had ever!been, according to speakers' at a deer farming open jday in Christchurch. j I Heavily reduced prices of capital stock, a strong demand for velvet and positive prospects for venison on world markets added up to a major, opportunity for jleer farmers, visitors were told. The open day, organised by the Canterbury branch of the Deer Farmers' Association and Challenge Deer, Ltd, was pitched at boosting the profile of the deer industry- ) Speakers were armed with facts and figures designed to hammer) Home the benefits of deer farming, although most visitors indicated that they (were already involved in- the industry. The branch’s president, Mr Martin Boqifant, brandished in one hand a plastic rubbish bag| containing velvet worth $lO5O — equivalent to the value of 65 prime lambs ! — in an attempt to emphasise the earning power of deer.

Velvet has been the success story of the deer industry in recent times, with prices to the farmer having risen 50 per cent in three years, despite the string gains made by New Zealand's currency. On present prices, the velvet produced by one stag in one year is equal to (the value of 37 prime laipbs, 62 mutton, two steers, or 42kg of wool viators were told. j\nd on the meat side, the venison price of $6 a kifogram was 450 per cent higher than lamb, 1220 per cent above mutton, ana 300 per cent above beef. The farmed deer herd in (New Zealand now numbers about 400,000 hinds, blit Mr David Ward, operations manager for Challenge Deer, believes numbers could grow to 3 million hinds before the industry could be considered a substantial size. Because of the massive decline in livestock prices — caused largely by the changes in livestock taxation — there was an opportunity for farmers to enter the industry with animal prices at about the same level as 1978, before the start of big booms.

Venison dishes were some of the highest priced meals i in restaurants in many parts of the world and it was becoming regarded as a gourmet food, said Mr Andrew Williams, of Challenge Deer. Market prospects were positive, with the chilled venison trade expected to be a big growth area. ! He warned, however, that venison was poised to break through a price barrier in some markets and could just about price itself off the United States market. The United States price had risen 20 per cent this year and 15 per cent last year just to protect the $6 a kilogram return to producers in New Zealand. Mr Williams said he believed a schedule price of $5 a kilogram was sustainable in the long term, but when the price rose to $5.50 or $6 it reached a threshold and margins were small. : The fluctuating supply bf venison made marketing difficult for exporters, but if the product was not kept in the markets, much of the marketing impetus would be lost. Some products could be "history” if

they were taken off the market.

He suggested that a schedule price of $5 would be better for the industry than prices fluctuating between $4.50 and $6.50. This . would help smooth the demand and supply chain and assist the viability of deer slaughtering plants. Velvet production should be balanced against the main revenue earner of the deer industry which was venison, according to Mr James Allison, velvet manager for Challenge. He urged farmers not to base their deer management totally on the financial returns’ from velvet. The velvet market was a risk industry because of the social and political unrest in Korea and the erratic Chinese production and supply methods.

However, velvet was part of an Asian tradition which would continue well into the next century. A farm consultant of Ashburton, Mr Andrew MacFarlane, said there

was now a major opportunity for people to get into deer farming. The industry was a profitable farming alternative with a lower capital risk than previously. Mr MacFarlane urged caution, however, on spending capital on extravagant facilities for deer. The average capital cost of deer facilities, such as fencing and yards, was about $7OO a hectare, based on a 40ha block. Financial calculations showed that it was still economic for farmers to get into share-farming deer if the existing facilities were under-used, and it was still economic for investors to own deer. He calculated the net return per hectare for a typical breeding and venison system (based on a stocking rate of 6 deer per hectare, mixed-age hinds worth $550, 85 per cent fawning, and weaner stags slaughtered at 15 months) as $1212. This would give a net margin above that for sheep of $852 a hectare.

Taking into account the big difference in capital costs between sheep and deer farming, the margin would still be $237 |if all capital was borrowed at 20 per cent interest.! That (margin had reduced considerably jfrom two years ago when weaner hinds were selling for $lOOO or more, he said.

The internal rate of return, however, for moving into deer out of sheep was at present 44 per cent. The average investment in the rural sector in most conventional systems would at best be around 15 per cent.

This showed that: the underlying profitability of spending the money to convert to deer farming was still there, said Mr MacFarlane.

If hind prices were written down further to $350, the internal rate of return would be 40 (per cent, which suggested the risk of entering the industry was significantly lower than it had ever been before.