New Zealand meat processors are having to pay more to secure supply of local venison to service their overseas contracts as farmers retain their breeding hinds to rebuild herds.
Spot prices for a 60kg AP stag have hit $7.85/kg, up from $6.60/kg this time last year and the highest level for this time of year since 2011, according to AgriHQ.
Venison production dropped 36 per cent in May from the year earlier month, and is down 23 per cent in the processing season so far, from October 1 through to May 31, according to AgriHQ.
New Zealand deer numbers have almost halved over the past decade and are at their lowest level in 26 years as farmers switched to more profitable sheep and dairy farming.
However, recent weakness in dairy and sheepmeat markets is stoking renewed interest in the deer industry, where an improved outlook for venison is prompting farmers to retain their breeding hinds to rebuild their herds, creating a shortage of supply for meat processors and pushing up prices.
"What's happening now is we are seeing the venison profitability much higher than competing land uses," said Rachel Agnew, an agricultural analyst at AgriHQ's iFarm. "We are seeing some quite heated procurement competition in this venison processing space."
Agnew said venison exporters were wary of avoiding the previous "boom bust" cycle seen in 2011 when prices rose higher than buyers were prepared to pay, causing a slump in the market.
"The prices got too high, it was priced out of the market in the EU and the market pretty much collapsed following that," she said. "Exporters are trying very hard not to have a repeat of that situation.
"The global protein market at the moment is awash with cheap protein.
"There's a lot of pork and poultry that's very cheap so you have to be very careful not to overprice a protein in comparison to those because restaurants will take it off the menu if it gets too expensive," she said.
"There's a bit of a fine line there that's being walked between being able to ask really high prices from the market because of the short supply and pricing the product off the menu."
Meat processors have started offering attractive supply contracts for as much as $9.80/kg in an attempt to secure venison for the traditional European chilled export season through September and October with some also extending the offer through until March, she said.
"It's great for farmers, they are getting some fantastic prices," Agnew said.
"But if you are looking at the big picture, while it's really good for farmers, there is a battle going on at the market end to preserve those prices and make them sustainable as opposed to seeing what we saw in 2011 where the prices got too high and the market collapsed and then deer farmers went through a period of low prices.
"So to keep those prices sustainable at the market end, New Zealand exporters are walking a fine line there."
Agnew noted an appreciation in the New Zealand dollar against the euro after Britain's decision last month to leave the European Union was also likely to squeeze processor margins for venison. BusinessDesk