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Rural Industries Research & Development Corporation |
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Rural Industries Research & Development Corporation |
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Contact the editor, Dr Laurence Denholm, at: PO Box 1564, ORANGE NSW 2800 Phone/fax 02 6361 3268, Mobile 0418 641957, email: denholml@bigpond.com |
October 2000 |
In this issue:
Deer farmers to benefit from RIRDC funded “cold-set binder” research Other issues of this newsletter
Deer farmers to benefit as local venison processor adopts results of rirdc funded "cold-set binder" researchIt is the nature of research and development that not all projects, in fact perhaps only a few, will have a readily apparent relevance for all industry participants when they are first established.
Moreover, as research involves risk - including risk of failure - it can only be expected that about half of all projects funded will achieve their objectives. Of those which do succeed, only a few will have their results immediately and widely applied in industry.
One recent RIRDC project funded by the deer industry which attracted a certain amount of criticism from deer farmers on the basis of its relevance was the project to adapt "cold-set binder" technology for use with venison.
The RIRDC Deer R&D Advisory Committee is therefore very pleased to announce that, only a few months after the completion of this R&D project, at least one local venison processor is now routinely using cold-set binders in the production process to "value-add" to venison trim and other low value cuts. It is expected that this new technology will enable processors to pay a better price to deer farmers for their live animals as returns from carcase processing improve with the use of the technology.
At the time this R&D project began, a number of different cold-set binders were available for use in the meat industry in different applications. The technology was widely used for meat other than venison, but specific formulations for venison were not available.
Different cold-set binders have different optimal conditions for use and their effectiveness at binding small pieces of meat into a larger "roll" or "soccer ball" depends on the characteristics of the meat itself, in particular the pH of the meat. Different meats, even different types of venison, have their own unique characteristics.
Members of RIRDC’s Deer Research Advisory Committee were aware that binder technology was being used successfully in New Zealand to increase the value of small venison pieces (including trim and deboned forequarter meat) by reconstituting the pieces into larger portions suitable for roasting or slicing into steaks.
In the other meat industries this form of "value-adding" had significantly increased returns to processors and hence ultimately returns to farmers. Venison processors and hence deer farmers however were not able to capitalise on this potential value-adding due to the lack of specific cold-set binder "recipes" for venison.
It was obvious to the R&D committee that individual venison processors would be slow to adopt the new technology as they did not have the resources to undertake the "in-house" research.
Accordingly, the committee decided to allocate deer industry funds to Food Science Australia, a food research organisation based in Queensland, to develop cold-set binder recommendations for venison. The project was successfully completed a few months ago. A manual describing results of the research and providing recommendations for the use of "cold-set binders" for venison was published by RIRDC. It appears that the results of this RIRDC R&D are being rapidly adopted in the processing sector.
Do deer farmers need to know the salt-tolerance of deer?Another project that has attracted criticism from deer farmers is the current salt-tolerance project. Why are we funding this work?
Few deer farmers would criticise research on weaner ill-thrift. Poor weaner growth underlies the major QA problem facing this industry - the high proportion of slaughter stock turned-off from deer farms below preferred carcase weights and poorly finished.
Understanding the causes of poor weaner growth is critical to improving pre-farmgate performance in this industry. But most weaner problems are thought to be related to feed - but are they?
Since funding this project we have heard from one deer farmer in an area where salinity has increased in groundwater who, when faced with an ongoing weaner problem, decided to change the source of the drinking water for his deer. The weaner growth rate improved immediately, suggesting there had been a problem with the water. Salinity would have to be the most likely explanation.
It would be interesting to know how many other deer farmers with weaner ill-thrift problems are using saline water sources. In NSW and SA many rivers now have high salinity, not just the groundwater. Without water quality testing you can’t really be sure you have not got a problem (unless you are using rainwater!)
New deer co-products project funded by RIRDCFollowing on from a good response to our question about the need for co-product research in the last R&D Newsletter, the Deer R&D Advisory Committee recommended to RIRDC that a project aimed at developing local markets for deer co-products be funded.
As a result an R&D contract for $45,850 in the year 2000/2001 has been awarded to Bilby International Pty Ltd, now the major deer processor in Australia, for a project BII-1A "Development of domestic markets for value-added Australian Velvet Antler and Deer Co-products". The project will develop appropriate deer co-product preparation techniques and packaging for local markets.
Johne’s Disease updateUnfortunately, there is no good news on this subject. Since the last report on JD in Victoria, there have been several more cases of JD in young deer on the property where this disease was first detected. Extensive testing has also found infection on a second Victorian property.
A number of herds spread across all states in Australia have purchased deer from one of these infected properties.
Johne’s disease is now clearly a priority issue for the industry.
Australian animal health authorities have been fairly relaxed to date about the movement of deer between different Johne's disease control zones. However, with these recent diagnoses of JD in Victorian deer, it is quite likely that tighter movement restrictions will be introduced in the near future, especially for movements across state borders.
As with other species, movements between disease control zones will probably require a whole herd test in an approved program. At the present time however no diagnostic test has been approved by the national Veterinary Committee for use in deer to permit movements of deer between different zones.
The Deer R&D Advisory Committee intends to fund a project to develop and validate a JD diagnostic test for use in deer. This will be an essential first step for establishment of an Australian Deer Market Assurance Program (ADMAP). This project does not require the development of a new test. What is required is an evaluation of the tests currently used for JD in other species to determine how these tests perform in deer. This evaluation is necessary to calculate, for example, the number of deer it will be necessary to test for entry to the Market Assurance Program.
New RIRDC five-year planAt the AGM of the Deer Industry Association of Australia in August 2000, three resolutions were carried that directly affect the RIRDC five-year plan for deer R&D. These motions were:
1. The DIAA seeks to achieve an equitable use of levies for both venison and velvetThe draft Deer Industry Research and Development Plan 2000-2005 released in May 2000 has been amended to reflect these motions passed with strong support at the DIAA AGM.2. The DIAA recommends to RIRDC that the number one priority for R&D expenditure in the five year plan be "To increase profitability for all stakeholders in the industry as a means of developing the critical mass necessary for sustained viability".
3. Levies be revised as follows and set for the next three years:
i. Venison slaughter levy reduced from $0.18 to $0.14.ii. Domestic and export velvet levy reduced from 5% to 4%
iii. Live export levy reduced from $10 to $9.50 per animal
The four main purposes of the Five Year Plan are:
- To present the rationale for the Deer Industry R&D Program managed by RIRDC for industry and the Commonwealth.
- To provide clear direction regarding Deer Industry R&D needs and priorities for the period 2000 to 2005.
- To encourage and support discussion and interaction between RIRDC, deer industry stakeholders and the wider research, development and extension communities.
- To ensure the needs of the deer industry are identified and incorporated into immediate and long term planning decisions.
The dangers in using spreadsheet models for enterprise comparisonsA recent article in the Victorian rural newspaper, "The Weekly Times" by David Mackenzie (October 11, 2000 at page 9) that reports results from a comparison of the profitability of eleven new agricultural enterprises against wine grapes and Treasury Bonds has upset more than just a few deer farmers in Australia, and rightly so in the view of the Editor of this newsletter.
This enterprise comparison by Hassall and Associates Pty Ltd appears to show that red deer farming has the lowest profitability of the 11 new industries, with only a 7% internal rate of return compared to 8% for persimmons, 10% for South African proteas, 12% for alpaca, 13% for wine grapes, 16% for sesame and jojoba, 23% for medicinal herbs, 25% for durian, 27% for emu, 28% for dairy goats and a massive 46% for culinary herbs.
The analysis, however, is quite misleading and easily subject to incorrect interpretation - for two distinct reasons.
Firstly, the results are presented as though these enterprises are alternatives for farmers, which they are not. The soil and climatic requirements for many of the 11 enterprises are quite different. Durian, for example, can only be grown successfully in a small area of tropical Northern Australia. Other horticultural products such as ginseng have specific cultivation requirements and are not in any way alternative enterprises to deer farming on the land where deer farming is currently conducted. In fact, on much of the land currently used for deer farming, none of the other enterprises would even be possible.
For many of these new industries the financial analyses are very speculative - reminiscent of the forecasts for deer farming in the 1980’s when profits of 35% p.a. were being achieved. Comparing the deer industry today with the deer industry 20 years ago is like comparing chalk and cheese. Comparing a mature industry like deer with sunrise industries is little more than crystal ball gazing.
Forecasting profitability from deer farming today is backed by 20 years experience in established markets. This experience is simply not available for most of the other industries compared.
Production costs and emerging production problems such as disease remain uncertain. Whilst potential market size can be estimated, the rate of increase in supply and the impact of rapidly increasing supply on product prices are more problematic.
RIRDC’s own website warns of instability in these industries, particularly their product price sensitivity. The profitability of culinary herbs, for example, is so sensitive to over-supply that only 5% of producers are expected to survive in the long term.
Whilst the Hassall study may have some value for a city-based investor looking to sink funds into agriculture if the only criteria for enterprise choice is profit, in fact most investors are restricted by their existing locality or locality determined by other factors. Not everyone who wants to farm can go off to North Queensland to grow durians or to the alpine forests to grow ginseng.
More importantly, an examination of the spreadsheet models developed by Hassalls for this new enterprise comparison shows that their profitability estimates are very sensitive to the inbuilt assumptions, as would be expected. For example, the model for red deer is very sensitive to the value used for the price obtained for cull animals. The value used by Hassalls is very low. Chris Tuckwell has shown that simply using a realistic value for culls ($3/kg) increases the internal rate of return from 8% to 14%.
But there is an even more fundamental error in the Hassall analysis. Hassall’s red deer enterprise is only 50 hinds, with all hinds purchased at the beginning. This enterprise is simply too small to be economic, as most deer farmers would well know.
Chris Tuckwell has used the Hassall spreadsheet to show that starting with 50 hinds and building up to 300 hinds increases the internal rate of return from 8% to more than 30%, making red deer the most profitable of the eleven enterprises compared, apart from culinary herbs which is subject to some serious warnings about the impact of over-supply on profitability.
Oh dear!! It just goes to show that your average economist can prove almost anything with a computer and spreadsheet model!
The Deer Industry Company ReportQuality Assurance
There has been little activity related to QA during July and August.
There have been two property signs purchased and erected on properties in WA and NSW. The signs are impressive and well advertise the QA status of properties choosing to purchase signs. Any person whose farm achieves level-two accreditation status can now order a property QA sign from the Deer Industry Company. Signs have a guaranteed outdoor life of seven years and measure 1000mm x 1200mm. To ensure that signs are only used by people eligible to use them, they can only be purchased from the Deer Industry Company. They cost $180 plus freight and plus GST.
All applications for Quality Assurance Marks submitted by the Deer Industry Company have now been accepted by IP Australia. The four applications accepted by IP Australia relate to QA assured deer farms, QA assured deer transporters, QA assured venison, QA assured unprocessed velvet antler and QA assured processed velvet antler. Final approval for each Mark relies on acceptance of associated documentation by the Australian Competition and Consumer Commission (ACCC).
The ACCC is examining supporting documentation to ensure the Industry’s QA program does not unfairly discriminate against any sectors of the industry. Any changes required by the ACCC are likely to be minor - to remove any inadvertent opportunities for unfair discrimination from the QA manual.
All business involved in the Australian Deer industry will be encouraged to adopt the Marks and use them proudly, as a guarantee of Quality Assured product of the Australian Deer industry.
The industry will certainly encourage domestic and international business to preferentially source product form those business that are quality assured by the Industry’s programs.
Venison sales
Average venison prices (across all species and weight ranges) continued to rise from $2.66 in June to $2.70 during July and to $2.83 in August. The average price for fallow deer venison (price per kg hot carcase weight, less the industry levy, delivered to the abattoir) rose from an average price of $2.55 in June 2000 to $2.61 in July and back to $2.50 by the end of August 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) dropped from $2.78 to $2.76 during July and then recovered to $3.01 per kg HCW by the end of August.
For the months of July and August 2000 a total of about 4,000 deer were processed by cooperating processors, while during the same period last year, only about 6,500 were processed (approximately 40% decrease).
Body Condition Scoring Charts
The last newsletter advised the availability of the new Australian Deer Industry Body Condition scoring charts. The body condition scoring is based on visual live animal assessment and carcase assessment for red and fallow deer. They will assist producers better prepare animals for sale and so improve returns to growers and improve average quality and objective assessment of venison quality available to the market.
Charts are available for no cost from the deer industry bookshop.
Venison Price Schedule Calculator
The spreadsheet (Excel) price schedule calculator developed by Chris Tuckwell and provided for no cost for interested processors is based on the classifications described by the Body Condition Scoring Charts.
Chris Tuckwell, Deer Industry Development Manager
FALLOW x x x x RUSA x x x x RED x x x x Weight Category
MAY 00
JUN 00
JUL 00 AUG 00 Weight Category
MAY 00
JUN 00
JUL 00 AUG 00 Weight Category
MAY 00
JUN 00
JUL 00 AUG 00 less than 20 $2.17 $2.38 $2.30 $2.08 less than 20 $2.22 $2.02 - $1.62 less than 30 $2.26 $2.17 $1.82 $1.82 20 to 22.9 $2.41 $2.62 $2.58 $2.60 20 to 24.9 $2.16 $202 - $1.62 30 to 34.9 $2.15 $2.16 $1.82 $1.83 23 to 25.9 $2.93 $2.85 $2.76 $2.64 25 to 29.9 $2.36 $2.26 - $2.62 35 to 39.9 $2.17 $2.34 $2.05 $1.89 26 to 28.9 $3.23 $2.88 $3.48 $3.01 30 to 34.9 $2.58 $2.45 - $2.62 40 to 44.9 $2.87 $2.90 $2.59 $2.56 29 to 31.9 $3.26 $3.56 $3.53 $3.19 35 to 39.9 $2.84 $2.76 - $3.12 45 to 49.9 $2.51 $2.52 $2.81 $2.86 32 and over $3.07 $3.52 $3.18 - 40 to 44.9 $3.16 $2.90 - $3.42 50 to 54.9 $2.99 $3.02 $3.10 $3.26 Maximum $3.32 $3.80 $3.57 $3.51 45 to 49.9 $3.14 $2.66 - $3.62 55 to 59.9 $3.23 $3.18 $3.30 $3.39 Minimum $2.04 $2.20 $1.82 $1.82 50 to 54.9 $3.26 $2.62 - $3.82 60 to 64.9 $3.45 $3.48 $4.10 $4.21 Average $2.65 $2.55 $2.61 $2.50 55 to 59.9 $2.53 $2.62 - - 65 to 69.9 $3.01 $3.03 $4.22 $4.47 x x x x x 60 and over $2.67 $2.42 - - 70 to 74.9 $2.52 $3.68 $4.02 $4.19 x x x x x Maximum $3.26 $3.22 No $3.82 75 to 79.9 $2.02 $3.22 $3.62 $3.53 x x x x x Minimum $1.57 $2.02 Sales $1.62 80 to 84.9 - $4.12 $3.62 $3.96 x x x x x Average $2.97 $2.53 - $2.73 85 to 89.9 - $3.32 $2.72 $3.29 x x x x x x x x x x 90 to 94.9 - $3.32 - $3.76 x x x x x x x x x x 95 to 99.9 - $3.32 - $4.22 x x x x x x x x x x 100 and over - - - $3.93 x x x x x x x x x x Maximum $3.84 $4.12 $4.22 $4.47 x x x x x x x x x x Minimum $1.57 $1.82 $1.80 $1.82 x x x x x x x x x x Average $2.81 $2.78 $2.76 $3.01 Graph 1 below demonstrates the change in average prices for all venison sold by the cooperating processors and the average price of venison for Red (and hybrid), Fallow and Rusa deer. Graph 2 shows the variation in volume of venison processed by the processors providing data to the Deer Industry Company.
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