Velvet Co-Op slams sales tactics

As a past deer farmer, I find the present selling systems for velvet disapointing, which has sent the marketing of this product back 20 years, and the price back to unsustainable levels.

I also find it ironic that one of the companies that was involved in the combined company to sort out these issues and is now disbanded, is now critical of the present situation. They and all the other partners all had an opportunity to solve some of these issues but failed at the expense of all in the industry.

Prices and market disciplines were providing reasonable returns and even growth in production, but it appears present price levels if they continue, will return this sector to the boom and bust cycle all were trying to avoid.

Their failure has created an opportunity for the small traders to re-enter and undercut previous market disciplines. Some sectors of this business fail to understand the demands of cashflow a percentage of deer farmers need to operate under, and they need to be catered for.

If the deer sector is to grow again this velvet marketing issue must be sorted, and in the venison sector improved weaner weights ( little change in the last 20 years) urgently needs targeting.

New Zealand’s competitive advantage as the world’s largest and most efficient producer of velvet is being frittered away by market ill discipline and an obsession with competition at the farm-gate, says a producer-owned co-operative. ProVelco’s general manager Ross Chambers says market discipline has “gone out the window” in the past two seasons in a marketing free-for-all that has dropped prices.

There’s been a resurgence of brokers and velvet is becoming “the great under-performer in New Zealand’s pastoral sector,” he maintains.
 In market prices have been dropped to make sales and generate quick turnover, but in doing so millions of dollars have been “stripped” from deer farmers’ pockets reports The Rural News.  Raking velvet into a heap and expecting customers to turn up and bid for it just does not work anymore – in reality it never did.”

Recent announcements by one broker for producers to expect velvet returns 10% lower than last year and published prices $15/kg lower than early season’s opening sales are a self-fulfilling prophecy, he says. While ProVelco started the selling season with its production contracted with advance payments, undercutting is making it hard to keep customer loyalty. “Already we have had to re-adjust our contracted prices for several sales downwards so that our customers are not burnt by new market levels. Our customers were happy to pay more but when their competitors and traders are being offered product well below them they are instantly disadvantaged. If we want to keep their custom we are forced to follow the trend.”

“When your country is the world’s dominant player, there is no excuse for this sort of behaviour. We know that New Zealand’s deer farmers expect their chosen venison exporter to work hard to build durable, quality business and to act responsibly when establishing price levels so why not take the same approach to marketing velvet?”

“You cannot force our three months of production into markets with year-round consumption unless you manage the process. Either the sellers/farmers manage that process or traders do. If traders get back in control their primary motivation is to maximise their margins and the easiest way to do that is to pay the producer less.”