Deer glut leads to Catch-22 situation

Venison hasn't been on the menu in Europe because of the mild early winter. Picture / Mark Mitchell

Record venison production combined with low prices has farmers trapped in a vicious circle, says Deer Industry New Zealand.

Chief executive Mark O'Connor describes the situation as a "catch-22".

"Prices are low because supply is high but supply is high because prices are low."

The number of deer slaughtered in the year to July was a record 750,362, up from 445,467 in 2002, a rise of 68 per cent.

Farmers were killing stock to reduce exposure to a sector which has been through a tough few years.

At least 95 per cent of venison is exported to 37 countries and, although supply is well up, income is down - a provisional $205.5 million in 2005 compared with $212.8 million in 2002.

O'Connor says it's been a difficult few years for farmers. The roots of the problem can be traced back to outbreaks of BSE, so-called mad cow disease, and foot and mouth in Europe in 2002.

The public relations nightmare then facing the European cattle industry was expected to boost demand for alternatives, including Kiwi venison.

In reality, European consumers switched back to more familiar meats faster than anticipated and venison importers took a hit on expensive stock they could not sell.

As they clawed back their losses during the next two years, the prices paid to farmers fell.

In response, some farmers increased kill rates to reduce their exposure.

The result is record supply and a continued suppression of farm-gate prices as the market absorbs the produce.

At the start of November, venison prices were $4.33 a kg, 30 per cent down on the $6.17 10-year average. The high dollar is also taking a toll. However, O'Connor says the good news is that additional supply is selling.

Demand for manufacturing grade meat has increased in Taiwan, Korea and Australia, keeping the pressure off key European markets.

Next year, supply is expected to fall back to about 650,000 animals but if it drops too far "then prices shoot up too much and we just end up on our little rollercoaster ride again".

Adding to the challenge is unseasonably high winter temperatures in Europe and a slow start to the season. But O'Connor does not expect it to damage the annual result.

"Their minds will really turn to game once things are a bit cooler," he said.

It is the minds of European consumers that the industry has to change to increase demand outside the November-to-January game season.

"What we are trying to do is change essentially millennia of tradition," O'Connor said.

And growing demand outside of the season and the restaurant trade means swaying the mind of another tough customer - the supermarket owner.

He says local venison benefits from Kiwi branding and economies of scale unmatched by European producers.

But expansion of the European Union presents an opportunity and a threat.

"[It] obviously opens up a lot of farm land and so that, over time, could develop into competition that has some pretty meaningful scale."

But O'Connor remains bullish about the prospects for the industry.

"There's a lot of opportunity there and things will get better."

The deer facts

* Record deer slaughter of 750,362.

* 95 per cent of produce exported.

* Supply suppressing farm-gate price.

* Slow start to season with warm European winter.