Apart from a brief downward dip in prices two years ago, driven by uncertainty about regulatory changes in China, New Zealand velvet production and prices have had a buoyant eight years.
And on the back of reasonably stable consumption in Asia increasing in line with production growth in NZ, the velvet market this season is expected to hold up.
But Deer Industry NZ Asia manager Rhys Griffiths cautions the trend cannot continue forever.
There are always unknowns that could upset the market, such as an escalation in the trade war between China and the United States but, based on all the known factors, deer farmers can expect another good year.
“Major velvet exporters and DINZ are working closely together, building demand with major health food companies in Korea.
“These companies prefer to deal direct with their NZ suppliers and put high value on price stability.
“It gives them the confidence to invest in product development,” Griffiths said.
Branded health foods based on NZ velvet have transformed the Korean market. Creating a similar product category in China is now an industry priority.
“In contrast, for the commodity traders who still buy two-thirds of NZ velvet price instability can be a good thing so despite good prices we are putting a lot of energy into building strong relationships with manufacturers and marketers in our major markets.
“We are taking control of our own destiny and making the commodity traders less relevant.”
Griffiths said 200 tonnes of the expected 725-tonne harvest will go to health food companies selling high-value, branded products in South Korea, a market segment that didn’t exist 10 years ago.
Since then, following the lead of the Korean Ginseng Corporation, 30 companies have developed and marketed 73 velvet-based health food products, most of which are enjoying strong consumer demand.
Of those, 55 are based on NZ velvet with the NZ provenance strongly promoted.
NZ wants to repeat that success story in China.
Griffiths says DINZ has been working with Chinese regulatory agencies to provide a clear path for imports of NZ velvet to manufacturers in China.
“Health food marketers in China are very much aware of the success of velvet-based health foods in Korea but they want to be sure that the velvet they are buying is legitimate and is available in sufficient quantities at stable prices before they invest the large sums needed to develop and market new products.”
It took several years for DINZ and exporters to interest Korean health food manufacturers in developing velvet-based products.
It will be the same for China, where DINZ is talking to some firms considering whether to take the plunge.
On the venison front farmgate prices reached record levels in the year ended June with the Ministry for Primary Industries latest Situation and Outlook Report forecasting a further increase in the year ending June 2019 when total export revenue is expected to reach $200 million, a five-year high.
DINZ venison marketing manager Nick Taylor said prices upward of $11/kg are largely related to constrained supplies versus strong demand indications and a correction is expected as the market begins to baulk.
“There’s obviously a price ceiling and we are seeing some resistance starting to show in the market feedback we are getting over the past couple of weeks, particularly in the seasonal German game market.
“We are starting to see resistance at the restaurant level and prices are coming back a little but the good news is the markets for this season are looking to remain stable.”
But, like velvet, the record high prices can’t last forever.
“The end story is we are competing with a number of other proteins available in the market and when the likes of the South American beef prices come back a tenderloin of beef looks very attractive and the chefs will switch.”
With NZ deer farmers still rebuilding herds the supply versus demand driving NZ venison prices is expected to self-correct without major impact.
“Indication is slow and steady growth, which is good for market stability.”
Primary Growth Partnership projects are focused on growing alternative markets to take extra supply as herd numbers build and more product becomes available.
“As an industry we are looking forward to address these issues and meantime the markets still want NZ venison so it’s about more focus on how we produce it here in NZ to have a competitive point of difference,” Taylor said.
