In this issue:

Development of niche European venison markets
Deer Research Advisory Committee to meet in Melbourne, 23rd March 2001
Eternal vigilance is the cost of any market advantage
Johne’s Disease: WA authorities test animals introduced from Victoria a year ago
The Deer Industry Company Report

Previous issues of this newsletter

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Development of niche European venison markets

Final Report - RIRDC Project DIA-2A
Principal Investigator: Mr Chris Tuckwell, The Deer Industry Company

The Rural Industries Research and Development Corporation recently released the final report of a European venison market research and development project undertaken by Chris Tuckwell from the Deer Industry Company.

This project built upon initial work in Europe undertaken by Rudy Keller with funding from RIRDC under the Project DIA-1A "Venison Market Development in Europe" which was itself based upon preliminary investigations of European venison markets by Austrade and Lynelle Tume.

The objectives of this latest project were to (i) investigate new distribution channels for Australian venison products in Europe and (ii) investigate new methods of marketing venison in Europe.

With the significant decline in profitability of venison production following the 1997 Asian financial crisis, deer industry leaders formed the view that the future of the Australian deer industry is dependant, at least in part, on the development and maintenance of stable domestic and international markets for venison. In 1998 the Deer Industry Association of Australia raised the priority of market development research. Project DIA-2A resulted directly from that change in the industry’s priorities for R&D funding.

The Australian deer industry’s most important output is venison. The DIA-2A report states that "If there is no commersial market for venion, collection and processing of other commodities in isolation (from venison sales) is unlikely to be profitable, while the industry is more likely to be able to survive if there is a profitable market for venison and other products are unsaleable."

Until the mid-1990’s, the Australian venison industry had mainly targeted European markets that are competitively supplied by the world’s biggest supplier of farmed venison, New Zealand. But the downwards pressure on international prices caused by strong competition within the industry for market access led to erosion of returns for deer farmers, delayed payments and little incentive to produce a higher quality product. Markets were very unstable.

The objective of this project was to develop stable commercial relationships with one or more of the 58 small to middle sized companies in Europe which had been identified by Austrade and Rudy Keller as potential long-term trading partners for Australian venison producers. Importantly, the purpose of the project was not simply to find markets and obtain orders for venison. The purpose was to form a long-term contractual relationship with a company directly selling venison on the European market (ie not an import trader) on the basis that all parties would gain a sufficient margin to be profitable in the long-term.

The Final Report from the DIA-2A project describes the general methodology by which this development of a commercial contractual relationship was achieved, inlcuding the use of supplementary contracts with deer farmers to ensure continuity of supply. As much of the detail of the negotiations and procedures which led up to the conclusion of this process is "commercial-in-confidence", the RIRDC report is limited to the discussion of the methodolgy applied and a general outline of the results. The report however clearly indicates successful application of the marketing method developed.

Following selection of the preferred partner in Europe (the "selected company" (SC)), the managing director of this company visited Australia in early 2000. The purpose of this visit was (i) to familiarise the SC with the Australian industry and its potential as a reliable supplier, (ii) to determine the quality requirerments of the SC and (iii) to negotiate contractual terms.

The DIAA took over negotiations on behalf of the Australian industry. The DIAA and the SC agreed to a first shipment of one sea freight container (approx. 7.5 tonnes) of frozen venison, approximately 50% red deer and 50% fallow with not more than 10% from animals over 5 years of age. Supply was sourced by the DIAA under contract from the Victorian Venison Producer’s Cooperative. Subsequently , Rudy Keller has acted as an agent for the SC in continuing negotiations for the supply of one sea freight container per week for 43 weeks per year.

Despite the commercially sensitive nature of much of the negotiation, the DIA-2A Report discloses the Memorandum of Understanding which the DIAA drafted to commence this commercial relationship and various contracts with suppliers.

Importantly, the project demonstrated that clients exist in Europe who are willing to purchase venison directly from Australian suppliers rather than through traditional importers.
 

Deer Research Advisory Committee to meet in Melbourne

The RIRDC Deer Industry Research Advisory Committee will be meeting in Melbourne on 23rd March 2001 to consider final proposals for deer R&D funding for the coming year.

Deer farmers who would like to have any particular issue considered by the committee are advised to speak to one of the members of the committee as soon as possible.

Eternal vigilance is the cost of any market advantage

The recent outbreak of foot and mouth disease in pigs in the United Kingdom again highlights the advantages that Australian farmers have traditionally enjoyed as a result of isolation on an island continent. Over the last century Australian farmers have also been well protected by the Commonwealth’s quarantine services against the incursion of many diseases that have caused serious economic losses in other countries.

Some disease have slipped through the net in recent years, reflecting the difficulties faced by quarantine authorities in the modern era of rapid air travel and high volume trade in animal products. Additional challenges have also more recently arisen from the limitations imposed upon trade restrictions for non-tariff reasons by the World Trade Organisation. The WTO agreement effectively prohibits a nil-risk quarantine policy in Australia.

But perhaps most importantly for farmers, the demand from Australian livestock breeders for access to international genetics means that some risk must be accepted if we want to maintain our competitiveness in animal production. Risk minimisation has become the current policy. AQIS then attempts to ensure that the risks in any approved introduction of new genetics are known and acceptable to all key stakeholders.

As a result of our historical isolation and effective quarantine policies in recent times, Australia is in a good position to compete effectively in those markets where consumers are concerned about human health issues related to animal disease. However, this advantage is not as simple as it might at first seem.

For example, given the current consumer concern in Europe, North America and Japan about Bovine Spongiform Encephalitis (BSE) and the new variant Creutzfeldt Jakob Disease (nvCJD), one might expect an immediate and huge demand for beef from the few countries such as Australia that are BSE free.

But this is not the case. Concerned consumers in Europe and Japan have simply stopped eating beef. Undoubtedly they would be keen to buy beef that was reliably free of any contamination by BSE affected animals, but the problem is that there are no reliable meat distribution channels in Europe that would satisfy consumers of the imported status of meat for sale. Moreover, the economic incentives for the substitution of the more expensive imported product with cheap local product in these markets would be significant and consumers are well aware of this.

Most animal products and particularly meat are traded on world markets as an unbranded commodity. Hence when there is public concern about any health issue in a major importing country and a consequent decline in consumption, all countries that export meat are likely to be affected - even if they can produce meat that is reliably free of the subject of the consumer concern.

With the current concern about a possible relationship between Chronic Wasting Disease of Deer and BSE, there is little doubt that deer farmers may be caught up to some degree at least in the consumer reaction against the BSE epidemic in European cattle. The idea that venison will be purchased by consumers frightened off beef may in fact be very short-lived.

Nonetheless, the ongoing spread of BSE in Europe and probably into SE Asia will provide Australian producers with a significant marketing opportunity. But this opportunity will require some significant changes to marketing strategies if it is to be exploited.

As producers of a commodity that traditionally has no reliable identification as to source at the point of sale to the end consumer, meat producing farmers are at a real disadvantage. In any BSE conscious market, meat from an unknown or unverifiable source will be valueless. In this market, what will sell is branded product, packaged and sealed in the country of origin. This will require a shift from marketing whole carcases or primal cuts to marketing meal portions in sealed packages. Marketing through importers who profit from breaking down carcases or primals in destination countries should become obsolete. Direct marketing of meals in sealed packages to supermarket chains in foreign countries can maintain profit margins for farmers from processed producst.

To retain consumer confidence that there has not been any substitution, sealed packaging will need to be tamper-proof and clearly labelled as to their origin. Packaging will need to provide some statement of the evidence that the product is derived from an animal population which has been demonstrated to be free of the main problems that concern consumers in the target market.

The current surveillance program for Transmissable Spongiform Encephalopathies in Australia is designed to collect information required to assure our trading partners that Australia is BSE free. Animals which show any neurological signs like those seen in BSE are routinely examined by methods that can eliminate BSE as the cause of these signs of disease. Packaging of meat products for export could be designed to promote our BSE free status and state the surveillance evidence on which this claim is based.

Johne’s Disease: WA authorities test
animals introduced from Victoria a year ago

recent development in the current Johne’s disease program in Western Australia highlights the difficulties faced by small industries caught up in the growing national JD program.

Western Australian animal health authorities recently tested a deer herd at Margaret River which had introduced three animals from a Victorian property where cases of JD in red deer were detected in April 2000. Apparently the animals introduced into Western Australia had tested negative before leaving Victoria, but the WA authorities decided to test them again - "just in case".

The three deer introduced onto the Margaret River property from Victoria had only arrived in January 2000. The chance of detecting infection in any of the three Victorian deer with the available blood tests if they were infected would have been quite low, but the chance of detecting any infection transmitted to other deer in the herd by these three deer after only a year of contact would have been very low indeed, given that none of the introduced deer had shown any signs of the disease.

Perhaps the most significant question that this incident raises relates to the test used by the WA department.

To date, no test for JD in deer has yet been approved by the national Veterinary Committee.

This is itself a significant problem for the deer industry because a national Market Assurance Program for JD in deer cannot be developed until there is a test approved for that purpose.

The deer industry, through RIRDC, is trying to commission an R&D project to validate one or more of the tests that are currently approved for use in other species for future use in deer. This R&D project will require a significant commitment of deer industry R&D funds.

In the meantime however it appears that animal health authorities in WA at least have sufficient confidence in the available tests to apply them in a testing regime in deer designed to clear the Margaret River herd of suspicion of infection on the basis of testing a very small sample of deer at risk of infection.
 

The Deer Industry Company Report

Quality Assurance

The updating and rewriting of all Deer Industry QA Program manuals (farmers, transporters and processors) is expected to be complete by the end of March.

A computer data base program has been developed (DeerQAMA) and is being tested by industry representatives in each state. Testing and correction of `bugs’ is expected to be complete by the end of March.

DeerQAMA will provided at no cost to all those who seek industry quality assurance accreditation and should simplify recording and reporting requirements of the Deer Industry QA Program.

The Australian Consumer Control Commission has experienced staff shortage problems and the final assessment of the five industry quality marks for deer farms, deer transports, venison, unprocessed velvet antler and processed velvet antler is unlikely to be complete before the end of March. The marks will be available to any person in the deer industry that meets and continue to adhere to the rules and agreed standards for their use.

Quality marks are designed to promote the fact that the product or service provided is guaranteed by industry to meet agreed and strict minimum standards of quality.

The recent banning by Korea of the importation of velvet antler from Canada because of health concerns (real or perceived) from Chronic Wasting Disease (CWD) demonstrates the importance of well-maintained and objectively recorded data from which countries are able to guarantee to consumers that their products meets the minimum acceptable standards. Australia is one of a small number of countries that is accepted as not having either Bovine Spongioform Encephalopathy (BSE) or CWD.

Venison sales

Venison prices across all species and weight ranges continued to rise from an average price of $3.34 in October to $3.49 during November and $3.48 in December. The average price for fallow deer venison (price per kg hot carcase weight, less industry levy, delivered to abattoir) rose from an average price of $3.01 in October 2000 to $3.09 in November and to $3.26 by the end of December 2000. During the same period, the average price for red and red hybrid venison (price per kg hot carcase weight, less the industry levy, delivered to the abattoir) rose from $3.64 during October to $3.74 in November and to $3.70 per kg HCW by the end of December.

For the first six months of the 2000/2001year, a total of about 15,192 deer were processed by cooperating processors, while during the same period last year, about 27,552 were processed (approximately 45% decrease). The average carcase weight of red and fallow deer processed for the first six months of the 2000/2001 year was 59.8 kgs and 24.0 kgs respectively. These average weights are about 10% and 2% heavier than averages for the same period of the previous financial year for red and fallow deer respectively.

Bilby Co products project

Part one of the Bilby project funded by RIRDC (Development of Domestic Markets for Value Added Australian Velvet Antler and Deer Co Products) is almost complete. The research is developing estimates of the average volume of value added velvet antler and venison co products purchased by Asian tourists who visit New Zealand. Using this information in combination with information on the number of Asian tourists that visit Australia we are determining the potential demand for these products by tourist markets.

Importantly, prior to the commencement of the project, the Directors of Bilby International gave RIRDC an undertaking that this project would result in a premium being paid to farmers for co products collected from their animals before the end of the project. At the beginning of February 2001, Bilby began paying a premium for venison co products.

Even with the positive information the project is beginning to accumulate, it is important to stress that although the estimated potential value of Australian sales to specified tourist markets appears significant, farmers should not look at the retail values for value added velvet and venison co products and mistakenly expect an unrealistic premium from purchasers.

Based on estimated Australian production of venison co products, our research suggests that if more than one or two Australian businesses compete in attempts to influence and service the apparent market, each small group is unlikely to be able to source, process and supply quantities of product that will sustain consumer interest.

Chris Tuckwell, Deer Industry Development Manager
 

FALLOW					RUSA					RED
Weight  Category	SEP 00	OCT 00	NOV 00	DEC 00	Weight Category	SEP 00	OCT 00	NOV 00	DEC 00	Weight  Category	SEP 00	OCT 00	NOV 00	DEC 00
less than 20	$2.37	$2.34	$2.23	$2.28	less than 20	-	$1.62	-	-	less than 30	$1.81	$2.82	$2.32	-
20 to 22.9	$2.73	$2.88	$2.55	$2.69	20 to 24.9	-	$1.62	$3.32	-	30 to 34.9	$1.83	$2.73	$2.32	-
23 to 25.9	$2.98	$3.10	$3.00	$3.23	25 to 29.9	-	$2.52	$3.32	-	35 to 39.9	$2.38	$2.75	$2.32	$2.60
26 to 28.9	$3.24	$3.35	$3.16	$3.56	30 to 34.9	-	$2.62	$3.32	-	40 to 44.9	$3.03	$3.22	$2.86	$2.73
29 to 31.9	$3.37	$3.34	$3.55	$3.53	35 to 39.9	-	$3.33	$3.32	-	45 to 49.9	$3.33	$3.59	$3.23	$3.24
32 and over	$3.14	$2.70	$3.22	$3.04	40 to 44.9	-	$3.42	$3.32	-	50 to 54.9	$3.72	$3.85	$3.69	$3.50
Maximum	$3.37	$3.48	$3.82	$3.82	45 to 49.9	-	$3.42	$3.32	-	55 to 59.9	$3.79	$3.89	$3.85	$3.75
Minimum	$2.20	$2.20	$2.00	$2.12	50 to 54.9	-	$3.42	-	-	60 to 64.9	$3.95	$3.95	$3.85	$4.05
Average	$2.86	$3.01	$3.09	$3.26	55 to 59.9	-	-	-	-	65 to 69.9	$4.07	$4.08	$4.06	$4.13
					60 and over	-	-	-	-	70 to 74.9	$3.33	$3.87	$3.80	$4.09
					Maximum	No	$3.42	$3.32	No	75 to 79.9	$3.35	$3.37	$3.54	$3.99
					Minimum	Sales	$1.62	$3.32	Sales	80 to 84.9	$3.62	$3.81	$3.78	$3.99
					Average		$2.52	$3.32		85 to 89.9	$3.62	$3.46	$3.56	$3.37
										90 to 94.9	$2.32	-	$3.34	$3.39
										95 to 99.9	$2.32	$2.92	$3.72	$3.04
										100 and over	$2.32	-	$3.59	$2.98
										Maximum	$4.22	$4.22	$4.10	$4.25
										Minimum	$1.57	$2.40	$2.32	$1.82
										Average	$3.13	$3.64	$3.74	$3.70

 

Last updated: 8 March 2001
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http://www.rirdc.gov.au/pub/deer/mar01.html