Taking velvet by the horns

Profits from velvet sales have dropped 34 per cent since 2001. Picture / Mark Mitchell

After a big slide in annual earnings from velvet, deer farmers are making a bid for more control over the sale and marketing of antlers.

New Zealand is the world's biggest supplier of velvet - the antlers harvested from farmed deer - and the vast bulk of it is exported.

The antlers are sold mostly to Korea (59 per cent), Hong Kong (26 per cent) and China (12 per cent) for use as a health "tonic" consumed in slices.

A working party is due to hold discussions with PGG Wrightson today on greater farmer input into sales and marketing. The company handles more than 70 per cent of exports through a pooling system.

Deer farmers - particularly the larger ones - are concerned the steady erosion of returns from velvet could force them out of the business.

In the year to September 2001, 192,459kg of velvet returned just under $35 million.

Since then, production has climbed but returns have slumped.

Provisional figures for the 2005 year show production jumped 35 per cent above 2001 levels to more than 260,000kg, while returns plummeted nearly 34 per cent to $23.8 million.

Working party member Ian Scott, a Waikato vet and deer farmer, said: "According to the Asians, we've moved into a fully supplied or slightly oversupplied [situation]. But because of the nature of the business, it's hard to work out where it goes and what is fully supplied.

"In reality for producers, we've gone from a product, which was probably the most economical thing I could turn grass into, to a product value that's totally unsustainable in terms of feeding Waikato grass, or any sort of grass, to deer."

Scott suggested people would leave the industry unless the situation was sorted out.

One problem was the industry lacked a system allowing farmers to match what they produced and sold to market requirements.

Farmers harvest the antlers and most are taken to PGG Wrightson depots in Napier and Christchurch. There, the antlers are graded according to factors such as thickness and length, and put up for tender under a pooling system. Besides this central system, several independent exporters buy on their own account, as do some Koreans who buy direct from farmers.

Scott said it was felt that if farmers had more say in the way PGG Wrightson operated its pool it would give them "some degree of market control or some degree of governance over the way the stuff is sold".

The deer industry did not have a "quick fix" or want the pool system turned on its head.

But farmers, who collectively had hundreds of millions of dollars invested in the sector, at present had no final say in how or at what price the product was sold or who it was sold to. Producers were at risk by selling commodities such as velvet through a broker. "History round the world shows that you're heading to be a peasant farmer."

Scott stressed PGG Wrightson had provided a good service to deer farmers. But from today's talks farmers hoped to gain more control. "Perhaps what we're hoping to be able to negotiate is that farmers have an ultimate say in the final marketing process."

The objective was to have a heads of agreement signed that defined the broader details of how producers worked with PGG Wrightson. Finer details would be covered by a formal contract to be negotiated after the initial negotiations, if they were successful.

PGG Wrightson national velvet manager Tony Cochrane said the company was happy to discuss new ways of selling to benefit farmers.

But he noted it was harder to get good prices from an oversupplied market and that Korea was a "dominant" buyer.

"Until we can diversify away from Korea, we won't have other sectors in demand for our products."

Options included finding a pharmaceutical chain in China that could market finished New Zealand velvet products, rather than simply sending raw antlers overseas.

However, present customers liked getting raw product.

"They prefer to have it that way because they can manipulate the processing and also put some constraints on us as well," Cochrane said.

Antler Harvest

* Antlers are removed annually from farmed stags.

* The antlers then grow back.

* The removed antlers - known as velvet - are frozen before sale to mostly Asian destinations.

* Asians consume antlers in fine slices as a health "tonic".

* Local research is starting to show health benefits from velvet consumption.