Colin Stevenson, CK Import Export managing director, believes that although prices do vary from company to company, the price for Korean grade velvet has lifted 6-7% on average this season. For example, the farmgate price last year of $100/kg is around six to seven dollars more this year.
“I can’t speak for all the companies but my farmer clients seem extremely happy with prices this season.”
Before farmers get too buoyant, Stevenson adds that he is seeing some Korean consumer resistance to this price lift. For this reason he advises caution. He is also concerned about the location of some product that had been held over to June-July 2013 and the potential effect on price when released.
“Who owns this product and when will it be released?”
Stevenson said velvet is a bright thing for deer farmers at the moment and the industry has, in large, been well disciplined.
Rhys Griffiths, Deer Industry NZ, velvet marketing services manager, said while increased demand and throughput of product from farms to Asia has bought a lift in price, the overall theme of the market is stability. Five years of relative stability in price is a good thing and he describes the price lift this year as slight.
“Farmers need this stable and slightly upward trend in price.”
Price strengthening has been driven by increased demand from the Chinese across all grades, although spiker regrowth is favoured, he said.
“Sale contracts were filled rapidly, deals done and product shifted relatively quickly this year.
“The previous season closed on a healthy note and this one opened with a hiss and a roar.”
There are still some opportunistic traders though that undermine long term value and can upset the current stability the industry is experiencing, Griffiths said.
“Producers should question what happens to their velvet beyond their farmgate and align with those buyers that have long term involvement and investment in the industry.”
The backdrop of trade agreements has allowed some more value to be created, although changes are sometimes frustratingly slow for farmers.
“Chinese market access is still an issue and we must do better,” Griffiths said.
“We don’t have good meaningful access here yet, particularly for venison and co-products.”
The Free Trade Agreement with China has reduced tariffs but access and regulation are the issue. In December 2013 a four year phase-out of tariffs on NZ dried velvet to Taiwan began. Each year the tariff drops a quarter, with no tariff by four years, something described as really good by Griffiths.
There is now a zero tariff on a small, country specific quota NZ is allowed on frozen velvet exports. Griffiths said this gives only a slight advantage in the big picture, due to small volumes.
“It is all in the right direction though and provides certainty so companies can invest and develop markets.”
“There is now an end point to the WTO quota for New Zealand frozen velvet and, in the meantime, we can focus on providing value with the rapidly reducing tariff for processed velvet.”
Price strengthening has been driven by increased demand from the Chinese across all grades, although spiker regrowth is favoured.
PGG Wrightson velvet sales are managed entirely through contracts. Tony Cochrane, velvet manager for the firm, said mid-October contracts were 3.5% higher than the previous season.
“For a start we did lead the market but reports are now of some higher prices on shorter premium grades,” he said. He agrees that there was more demand than supply, with firms being able to pick and choose buyers this year.
“We have chosen four key buyers across China, Korea and Taiwan.”
Demand was such that the entire NZ crop could have been sold pre-Christmas but sales will continue through to May. The updated regrowth/spiker contract price will be released in January and Cochrane was expecting a higher price here. He advises a stepped approach to price.
“A steady rise is better than a fast rise then a plunge.”
PGG Wrightson has signed a Heads of Agreement with a pharmaceutical company in China that is motivated to see NZ velvet based products branded in the Chinese retail market.
Ross Chambers, of Provelco Co-operative, has witnessed increased demand and slightly less supply this year across their 60 sale grades. This has resulted in an improvement in price fundamentals, he said.
“Buyers have had to be a bit more active.”
He doesn’t believe Chinese velvet buyers are overly concerned with the current price strengthening as long as it is sustainable and not too sharp. The functional food contract is fully subscribed and takes about 20% of Provelco-sourced product. The three year contract has the price negotiated annually.
“It is an important category for us, although be mindful that this market takes time to build.”
Sticks heavier
Ross Cambers, of Provelco Co-operative, said it is too early to say whether total velvet volume exports from New Zealand will be up this season on last year. Onfarm signs suggest volumes may be up as weights per stick continue to increase each year. This is driven by genetics and better feeding.
The percentage of super grade velvet is up about 1.5-2% on last year, so there are more heavy sticks in the market, he said.
“The work on grading and tightening specifications has been a good thing as we need confirmation as well as size.”
Colin Stevenson, of CK Import Export, said that the percentage of Super A velvet is up this year, although the market prefers A Grade. He said all companies are guilty of having a payment focused on weight, creating an incentive to produce Super A over A Grade. He believes changes are starting to occur though with Premium A Short worth more than Super A.
“There are some market incentives for farmers but not a wide enough difference to make a change.”
Deer Industry NZ expects the velvet crop to be around 450- 475 tonnes; similar levels to the 2012-13 season. Tony Cochrane, PGG Wrightson velvet manager, said there is little demand for elk/wapiti velvet at the moment.
This is because of internal issues inside the Korean market. The product sold for around $110/kg in the previous season and Cochrane hopes that the overall higher velvet prices should buffer this lighter demand for elk/wapiti velvet.
