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Venison production show healthy Gross Margins

Venison production show healthy Gross Margins

There’s money in farming deer in New Zealand.

Some venison enterprises are offering the best returns for investment on New Zealand farms at present.

A comprehensive Gross Margin analysis comparing relative profitability across all major New Zealand farm enterprises, produced by Southland farm consultant Graham Butcher from Rural Solutions, shows returns from finishing purchased weaner deer topped farming options.

Finishing weaner deer returned 22.64 cents/kg/DM, compared to 11.90 cents for a Southland dairy farm conversion, 15.10 cents from an existing Southland dairy unit, and 13.68 cents for bull beef rearing.

His in-depth breakdown has produced some revealing data on the best options for land use in the region at this point in time, challenging perceptions on farming investment

It’s a very robust analysis that takes all direct costs into account, truly reflecting what it costs to grow farmed animals.

The most profitable land use options are finishing weaner deer, followed by summer and winter lamb trading, then bull beef rearing ahead of all dairy enterprises, then finally breeding cows and ewe enterprise options.

The returns from dairy farming are likely to be lower than many would expect, but the analysis has taken into account all of the direct expenses associated with each enterprise type to truly compare bottom lines.

“The reality is that it takes more grass to graze dairy heifers relative to the returns.”

The complete and detailed results represent direct income less the true direct costs of production by including all management and pasture production expenses.

Considered analysis of the relative returns for future land use across New Zealand is crucial
and Mr Butcher is urging farmers to take a long and critical look at all the figures as they weigh up their long-term options.

The analysis is a starting point to critically examine how to make more profit from drymatter produced.

“Understand what is needed to produce the best profit from your land type, before deciding on land-use and livestock changes. There are opportunities for improving production, and improving returns from existing land classes, so objectively comparing gross margins on all livestock types is very important for farmers and their bank advisors to ensure any decisions are based on solid data.“

“For example, farmers will likely increase pasture production by converting an existing sheep, beef or deer farm to dairying. But if the farm is capable of growing substantially more grass, they should sit down and look at how that extra drymatter can be best used.”

“It may be that utilising existing deer fences and restocking provides the returns farmers will be looking for in the current economic climate.”

Mr Butcher believes it’s very easy to be swayed by attractive milksolids payout figures, but there are considerable extra direct costs and increases in other farm expenses to factor in on dairy in day-to-day management, compared to all other landuses. There’s also more debt servicing and compliance costs involved with a dairying conversion.

“Analyse carefully - take into account debt loading and how comfortable farmers are with debt along with lifestyle preferences. Don’t base the decision solely on gross income.”

Based on current costs, these returns show deer farming, and in particular finishing weaners, is profitable. Buying an existing deer farm, restocking or even converting sheep & beef to deer are options to consider.

Long-term vision for venison now paying dividends
Overseas demand for New Zealand venison has increased, while venison production rates highly as a competitively profitable farm use.

Deer Industry New Zealand chief executive Mark O’Connor says not only does recent analysis conducted by Graham Butcher of Rural Solutions demonstrate investing in deer farming produces better profits, it also shows conversion to deer with breeding hinds and finishing weaners is cost-effective.

Purchasing an existing deer farm, converting from sheep and beef to deer, or restocking existing deer paddocks are all valid profit-making options for New Zealand deer farmers.

“Graham has provided some hard data backing deer farming as profitable and gives sensible advice indicating that farmers need to look at how they can grow the most dry matter for the right enterprise. This takes it to the essence of how to make money from their business,” he says.

This comes at a time when venison returns have strengthened, but more importantly, the long-term outlook for deer is positive, on the back of planned growth programmes in consumer demand for New Zealand venison and coinciding with a period of a lower supply of farmed deer in New Zealand.

“Steadily rising schedules back this, but crucially, the markets which have expanded over the past five years can allow those better returns to continue,” Mark points out. “The industry collectively has done a lot of work to ensure it is a viable, long-term player, and it’s now paying off.”

About the Gross Margin analysis
Mr Butcher’s detailed Gross Margin analysis of sheep, beef, dairy and deer enterprises presents a return based on cents per kilogram of drymatter consumed, an accepted practice for comparing completely different uses of farm land. While it is a relative rather than absolute approach as individual farms’ costs will differ, it is never-the-less a good guide for profit.

Basing his assumptions on standard New Zealand farm models using Farmax™ and StockPol, the analysis presents relative profit objectively, comparing only the direct costs from each of the different production systems. Income is based on current schedules.

Costs of management, feeding and animal health that are inherently the same are not included in the calculation.

This takes into account direct income, and direct expenses on stock, feed, animal health and management and the capital costs of stock and improvement specific to the production system, but not farm loans or drawings.

It also gives profits from finishing and from purchasing deer with no conversion costs and then compares with the conversion factored in.

All of the comparisons are regionally based to ensure benchmarking is valid, but the conclusions from his Southland analysis could be applied across New Zealand farms, with relevant local factors taken into account.

The analysis is a current snapshot based on current returns and expenses, but farmers also need to examine long-term trends and market volatility.

Schedule venison prices in this Gross Margin analysis are based on an $8.00 AP grade seasonal average. Average price/kg received for weaners ranged from $3.80 for 52 kg liveweight average hinds, to $4.25 for 56 kg liveweight average stags.

Although purchased weaner deer finishing returns are very positive, the profit on selling weaner hinds is relatively poor, reflecting a current disparity between weaner selling prices in 2008, and the profit returned from finishing those weaners this season as the venison market firmed strongly.

ENDS


Enterprise c/kgDM consumed
Purchase weaner deer, finishing (above average) 22.64
Purchase weaner deer, finishing, with conversion costs 20.23
Summer lamb trading 19.34
Winter lamb trading 17.92
Terminal Sire ( Elk wapiti) crossbreeding and early finishing 16.88
Southland dairy (established) 15.10
Terminal Sire crossbreeding & early finishing with conversion 13.88
Bull beef, rearing 13.68
Breeding Red hinds, finishing 12.93
Bull beef, 100kg purchase 12.86
Dairy cows, winter at 13 kg/$30 12.81
Dairy heifer grazing 12.21
Southland dairy, with conversion 11.90
Breeding Red Hinds, finishing with conversion costs 10.81
Breeding ewes [140 percent, 50 percent hogget mating] 9.29
Autumn-purchase steer calves 9.19
Red Hinds, selling weaners 9.15
Breeding cow, finishing 8.95
Breeding ewes [135 percent, no hogget mating] 8.38
Breeding cow [calving year 2, sell weaners] 7.37
Breeding ewes, store [135 percent, no hogget mating] 7.06
Hinds, selling weaners with conversion costs 6.43

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