Deer herd smallest in 16 years

Deer numbers have fallen to levels last seen in 1994 as the sector continues to feel the fallout from record prices earlier this decade.

The latest available census, done in 2008, showed a herd of 1.2 million.

That is down 500,000 on the 2004 peak, and the same number as in 1994.

The kill this year was forecast to fall below 400,000, compared with a peak a few years ago of 750,000.

Deer Industry New Zealand (DINZ) chief executive Mark O'Connor attributed the decline to farmers killing capital stock as venison prices fell, a situation from which the industry had yet to recover.

He believed there was a rebalancing occurring in the industry, and those farmers who remained carrying larger numbers of animals would be more productive.

DINZ chairman John Scurr, of Wanaka, said the forecast kill was lower than the board would like, but that was a factor of supply and demand which was beyond its control.

The sector had been hit by changing land use, and much of its traditional finishing country was now being used for dairying.

That meant deer herds were being pushed into the high country foothills.

This was despite deer farming being financially competitive with lamb finishing and wool and dairy grazing, he said.

Mr Scurr said there was still a legacy from the boom period earlier this decade when venison prices hit $10 a kg, then collapsed to $3 to $4 a kg when the kill peaked at 750,000.

It has recently settled about $5.80 to $5.90 a kg, despite unfavourable exchange rates.

Velvet prices have also recovered, to about $100 a kg.

He wondered whether farmers had cashed in on those higher venison prices, but tighter bank lending criteria prevented them from getting back into the industry.

Mr Scurr said his Central Otago deer farming neighbours were retaining their herds, as was Landcorp.

DINZ was forecasting a slight recovery in numbers then a gradual increase.

Velvet, for so long venison's poor cousin, had also shown signs of recovery, with average prices now about $100 a kg.

He attributed the price stability to more disciplined selling behaviour.

The New Zealand Velvet Marketing company had secured contracts and implemented a marketing platform.

"I want to be sure that stability continues," he said.

But returning to an annual kill of less than 400,000 took the industry back to where it was 15 years ago, despite it developing new venison markets and positioning venison as a prime meat.

Mr Scurr said it was important to maintain marketing and retain the product's hard-won position, and doing that would probably mean levies would increase.

In the meantime, DINZ was "rewarding those farmers who have stayed loyal" by using reserves to meet a portion of its costs.

The head of the country's largest venison processor said he feared a declining kill could force market prices beyond what consumers were prepared to pay.

Silver Fern Farms chief executive Keith Cooper said the European market was already finely balanced, with supply matching demand.

"It is not a case of the market screaming out for more production," he said.

The impact of recovering velvet prices was also affecting the flow of prime animals.

The industry had to work to retain its investment in existing and new markets, but the small size of some deer farms made it relatively simple for farmers to switch between species, to get out when deer prices were high and return when they were low.

As was the case with prime lamb, Mr Cooper said farmers had the destiny of their industry in their hands, and he said the last thing it needed was a procurement war.

"The resulting tension will force market prices higher and ultimately crash demand," he said.