Strong seasons set up venison industry to weather Covid-19 storm - industry analyst

Wednesday 20th May 2020

Several seasons of strong export returns have left New Zealand’s venison farmers well positioned to overcome the severe trade disruptions resulting from Covid-19, according to Rabobank animal proteins analyst Blake Holgate.

Speaking on a recently-released RaboResearch podcast, Mr Holgate said New Zealand’s venison producers have enjoyed a good run in recent seasons with the industry benefitting from healthy export sales into both established and new venison markets.

“In the last five years we’ve seen significant export growth in the US – due in part to increased demand for venison as a component in pet food – while we’ve also seen strong sales in long-standing European markets such as Germany and Belgium,” he said.

“In addition, the industry has been able to increase sales into emerging venison markets like China, with exports to this market growing rapidly – particularly throughout the course of 2019.”

Mr Holgate said venison prices reached a historical peak of $11.50 per kilo in 2018 and, while prices had drifted lower in 2019, the industry was in a healthy position moving into 2020.

“Many in the industry started this year with strong resilient businesses and this will be important as the industry navigates what is now likely to be a challenging next 12 months following the onset of the Covid-19 pandemic,” he said.

Demand drop

Mr Holgate said the impacts of the coronavirus on the global food service sector had significantly affected venison demand.

“As a high-end product, venison demand is heavily linked to the food service industry, and with this industry currently closed or operating at significantly reduced capacity in virtually all key markets across the globe, venison sales have been hit hard,” he said.

“Venison importers in key markets across North America, Europe and Asia are reporting a significant decline in demand from end-users for venison products and this has resulted in a many importers cancelling or delaying their own incoming orders for venison.”

In the Chinese market, Mr Holgate said, venison exporters were also running into additional challenges over and above lower food service demand.

“With the initial outbreak of Covid-19 thought to be linked to a Wuhan wet market, the Chinese government declared a ban on consumption of wild animals in January and this originally included deer products. Fortunately, since then many deer species have been re-classified as “special livestock”, exempting them from the ban,” he said.

“However, there are still concerns that confusion about the status of deer products under the ban could cause some disruption once the product arrives in China. Exporters are seeking assurances that the exemption for deer is well understood and consistently applied across the various Chinese regional authorities.”

Mr Holgate said the fall in global demand for venison had quickly translated into lower New Zealand venison exports.

“Export volumes for the month of March 2020 were down 30 per cent on last year, with the United States the most affected market, dropping by 55 per cent on the same month in 2019,” he said.

“Prices for New Zealand venison have also fallen with the current stag price sitting at $7 per kilo, 20 per cent back on the same month in 2019. Fortuitously for New Zealand producers, March is typically the end of the venison production season – with most young venison processed from September through to March – and most farmers will have moved most of their finishing stock off by now so they can focus on removing cull hinds through the autumn and winter.”

Mr Holgate said the challenges for the industry stemming from Covid-19 would evolve as the year progressed.

“We’re currently seeing some any countries across the globe slowly begin to relax restrictions on the movement of their people and, as a result, the food service industry will begin to open up. While this should help boost venison demand, we also expect the virus to have longer-lasting economic impacts.” he said.

“The probability of a global recession is growing, along with a likelihood of a negative impact on consumer spending across all our markets. And for New Zealand venison producers, the magnitude of the fall in consumer spending and the speed and extent of recovery will be very important.”

Despite the likelihood of considerably-lower demand for venison in coming months, Mr Holgate said sales of manufacturing venison and the European game season would help ensure a base level of demand.

“Venison sales to manufacturing remain stable and in coming months we expect demand for these products is likely to fair better as more consumers are shopping and preparing meals in their own homes,” he said.

“The well-entrenched game season in the northern hemisphere autumn remains an important sales window for New Zealand exporters and, at this stage, we anticipate the worst of the Covid-19 related disruptions may be behind us by then. However, given the high level of uncertainty currently facing European buyers, there has been a reluctance to commit to large forward orders of product.”

Industry rebound

While the industry faced several challenges in the short term, Mr Holgate said there were a number of factors to support a strong rebound in New Zealand venison sales once global demand recovers.

“The New Zealand deer industry is well diversified across markets with the USA, Continental Europe and now China providing balance for marketers,” he said.

“This will advantage New Zealand exporters by giving them the ability to switch exports to those markets that recover earliest.”

Mr Holgate said New Zealand’s strong response to the crisis should also help position New Zealand venison exporters for future sales.

“If New Zealand can continue to contain the virus, this will also benefit ongoing venison sales by helping to position New Zealand as a reliable producer of safe food.”

Source: Rabobank New Zealand Limited

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