Deer velvet marketing faces crisis

Exports of deer velvet from stag antlers have increased but prices have been dwindling

Amid concerns about plummeting prices, negotiations over control of deer velvet marketing have entered a delicate phase.

The industry's Velconz initiative is now considering a PGG Wrightson suggestion for joint control of the sales pool which handles most exports.

Velconz working party member Ian Scott has warned that farmers may ultimately pull velvet away from PGG Wrightson if they can't get a satisfactory result.

New Zealand is the world's biggest velvet supplier, the bulk of it exported to Asia.

In the year to September 2001, nearly 192,500kg of velvet returned just under $35 million. Provisional 2005 figures show production surging to more than 260,000kg, but returns of just under $24 million.

Velconz believes greater farmer say in the way PGG Wrightson markets and sells velvet could help to restore earnings.

It has suggested a farmer-run management company oversee the PGG Wrightson pool and take ultimate control over sales and marketing.

Scott said PGG Wrightson responded by suggesting a jointly run operation - similar to one the company ran with merino wool producers - could be the way ahead.

Velconz was to consider that proposal this week.

Scott said farmers were keen to make changes "because we have destroyed too much value in the product under the current system".

Smaller farmers or those desperate for cash could be prepared to sell at any price through PGG Wrightson, and that could stop others holding out for higher prices.

A new PGG Wrightson system allowing farmers to set reserve prices was not necessarily the answer, as such reserves could be undermined if others were allowed to sell at a cheaper price, Scott said.

While he was complimentary about PGG Wrightson's services and keen to continue co-operation, Scott said farmers supporting Velconz might have to consider selling through alternative providers if no satisfactory new system evolved.

PGG Wrightson's national velvet manager, Tony Cochrane, said the idea of a farmer-owned company controlling pool marketing was not commercially acceptable, but he saw potential in an arrangement similar to the one with merino wool growers.

On the possibility of velvet suppliers switching to an alternative selling system, Cochrane said he was not overly concerned it would happen given the firm's strong ties to its clients.

PGG Wrightson had a strong incentive to get the best price possible because of the commissions it received.

Costs of running the pool were high and its earnings were "moderate", he said. "It's not a huge source of profit to the business."

But he acknowledged running the pool was "complementary" to other services provided to farmers.

The PGG Wrightson pool - which would bring together the merged companies' pools for the first time in the coming season - was looking to beef up its export operation and become more visible to international buyers through the internet, Cochrane said.

Meanwhile, the Christchurch-based Velexco co-op - with about 80 mostly larger deer farmers and its own export operation - is miffed at not being included in the discussions. It handles 10-15 per cent of exports.

Velexco general manager Ross Chambers said he was "baffled" at the co-op's exclusion.

Velexco uses PGG Wrightson's velvet collection services but sells and markets its own produce offshore.

Deer dealings

* Velvet: deer antler consumed in slices as a health tonic, particularly in Asia.

* Velconz: deer industry initiative seeking greater farmer control over velvet marketing.

* Velexco: Christchurch-based farmer co-op handling 10-15 per cent of the market - concerned at being "shut out" by Velconz.

* PGG Wrightson: operates the main velvet export pool and handles most New Zealand sales.