BY: TOM WARD
Last autumn the Covid pandemic and lockdown hit the venison business harder than any other primary industry sector, triple-tackled by the drop in restaurant demand, widespread drought throughout most of New Zealand, and the slowdown in killing capacity at New Zealand processing plants.
In the South Island, the first weaners (off mum) sold in March at $5/kg LW, down a bit on 2019 but pretty good. With Covid and feed shortages, mixed sex sales were down to $4/kg LW by the end of March and have since fallen further. By late May, post-rut weaned animals were down to $3-$3.50/kg LW, and some reports were at $2.50.
The three major weaner sales – High Peak and Mt Arrowsmith in the South Island, and Taihape in the North Island – were cancelled. These sales account for only a few thousand deer between them, but set a benchmark.
Finishers elected to take fewer weaners, and breeders sent a lot of pregnant hinds to the works to make room for retained weaners. One Taihape farmer, well known for good quality animals, deer fenced an additional 30ha to make room for retained weaners and bought 120 bales of grass and 10t maize. He sold all his weaners in the winter for $4/kg LW (tops 70kg LW, $6/kg LW last year) with the females $0.50-$1.00/kg LW less. In general weaners were $3.50-$4.50/kg LW.
Feed issues also pushed supplements to $100/bale for balage and $400/t for PKE.
One finisher bought winter lambs rather than weaner deer, another reduced weaner deer purchases by a third and bought beef. One (King Country) agent said generally large weaners sold, with smaller ones retained. Drought would have affected many finishers’ ability to buy as usual anyway.
Some saw this as an opportunity to cull hinds heavier and to buy superior genetics.
By June 2020 the effect of the Covid lockdown had totally disrupted the venison farming industry. Processors were unable to give any guidance to finishers going forward. Chilled orders for summer venison programmes had been cancelled and any negotiations for later delivery postponed.
The situation improved slowly and guidance was given by July, although at much lower levels. For example, Silver Fern Farms (SFF) gave a guaranteed $5/kg CW with top-ups at risk. Latest indications were for $6.50 to $8.00/kg CW but volumes for chilled programmes were still uncertain. At 4 Jan 2021 SFF AP stag(45-85kg CW) was $5.50 on the advertised schedule.
Mountain River thought sales for the 2020-2021 season were likely to be 40-60% of normal. Foodservice, still the best return, being 95% down in USA, and 50% down in Germany. The situation in China was improving. Throughput in plants was reduced due to social distancing measures. Airfreight capacity was also down.
Deer Industry News, Jan 2021 reported 1368 tonnes of venison exported to China in 2020, worth $17M, a 94% increase in volume and a 33% increase in value. That publication reported that a collection of published schedules to the end of October 2020 averaged $6.39/kg CW, 33% down on 2019. The variety of offerings between companies makes comparisons difficult. One farmer sold his fattened yearling stags at $6/kg CW on contract: another reports receiving $7.30/kg CW but only for animals supplied in October 2020. This is in line with processors’ warnings to slaughter deer early in expectation of a short chilled season; 28,000 deer were processed in September, up 15,000 from the year before.
Spring 2020 has been challenging for most, with low winter feed levels mitigated somewhat by a dry winter but compounded by a slow spring only recently relieved by extensive rain. It appears a number of traders may have done all right, as the October schedule reached reasonable levels and weaner prices in late winter/early spring reached low levels.
Currently, lockdowns and restaurant closures are reoccurring in Europe and USA and there are freight issues, with only 25% air capacity available.
Breeders will be hardest hit, with sale prices last autumn down $150 to $200 per head for sizeable weaners, and small weaners not really saleable at all. These will have been retained and killed later this summer.
While survival is critical, the need for strategic thinking long term is important too. Exporters have emphasised the venison business fundamentals are good, with a lot of effort going into marketing in an attempt to educate customers on how to cook venison. It is interesting to hear that Peel Forest Estate’s 2020 venison stag sale at $9000/head average was an increase on 2019.
With regards to the autumn 2021 weaner price, there is currently more uncertainty as Covid cases in Europe, UK and USA increase and lockdowns are once again in place in those areas. Freight problems persist, however there does not appear to be a build-up of venison inventory in the market supply pipeline, and processing capacity in New Zealand is back to normal. Online sales have increased.
Apart from the schedule and market access, drivers of the weaner price are feed availability, competition from alternative livestock enterprises, and supply of weaner animals.
To the right are two forecast FARMAX gross margins, one for a breeding hind selling weaners and the other for a trader buying weaner stags and hinds, finishing from 11 months at 55kg CW.
At this distance we are still guessing and while no one would suggest an increase in the schedule is likely, there are some reasons to be positive. Most of New Zealand has seen good rain and this should mean winter crops will be reasonable at least. The processing and exporting people appear to be in a good space. Most breeders do so because they like deer and their farms suit deer breeding, so the supply should still be there for 2021. Many will have large, diverse operations and will look to survive the downturn. The increasingly onerous environmental regulations around fencing may encourage some to exit breeding deer. Finishers may well be attracted to other enterprises, however, while disappointing, the returns to deer finishing for venison still appear bankable if somewhat uncertain.
The respective gross margins are:
cents/kg DM
Breeding weaners 6
Trading weaners to finish 25
Summarised below are the gross margins for alternative enterprises:
cents GM/kg DM
Trading steers: Yearling to 26-month 27
Trading bulls: 100kg weaner to 18-month 22
Wintering dairy cows 27
Summer lamb trading 30
Winter lamb trading 25
