Nov 29, 2024
Photo: Richard Hilson
Words by Lynda Gray
Uncertainty around market access of New Zealand frozen velvet and China-led stockpiling, followed by the cheaper selling of product by a large-scale importer, has created headwinds this velvet selling season, but the future is positive, says Tony Cochrane, DINZ board velvet and co-products representative and PGG Wrightson national deer and velvet manager.
He fully understands the frustration of velvet producers needing cash flow but notes the benefits of restored market access, underpinned with defined protocols and procedures, is a huge longer-term benefit to our industry.
“The future is bright, but in the meantime, it’s a matter of weathering the storm we’ve got right now.
“We have official access for the first time ever for New Zealand velvet into China, and that’s going to present some real opportunities going forward.”
Early season indicators were good, with ‘tentative offers’ close to last season’s prices for Korean grades, he says. However, the actions of a trader had eroded values. There has been a price drop in China’s wholesale market, but the overall price paid by end users is reported to be stable.
“In some cases, the speed of consumer sales has been impacted by weakened economies but certainly not the end value.”
The wholesale price drop in China has been mirrored in New Zealand by some buyers aligned to the Chinese importer in question offering prices below last season’s across-the-board average of $105/kg, or part-payment for velvet supplied, topped up with a final payment when the velvet is sold. Growers entering part-payment arrangements need to ensure they fully understood the conditions of supply, Cochrane says.
“By holding back stock, we hope to achieve a sale price that creates competition and starts stocks moving freely so we don’t have a stockpile heading into the tail end of the selling season.”
If possible, velvet producers should hold firm on price and keep in close contact with their bankers about extending any overdraft facility.
“I think a lot of velvet producers are shutting the door of their freezers and refusing to sell until they get a decent price, and you have to commend those people.
“It makes an industry stronger when people feel they’re on the same team.”
Provelco’s Ross Chambers says the 2024-2025 velvet sales season is proving to be a difficult one.
“There’s a lack of clarity, and business isn’t flowing because the China issue around the certification of processing plants isn’t quite sorted. When you add to that slower consumption and stocks in the market, it’s difficult,” he says.
(DINZ update: On the issue of Chinese importers needing to pass local inspections, DINZ is hearing that most importers have passed their audits, with only one or two remaining, and some have received their import permits already. The last couple are making the necessary changes as we speak and should be good to go imminently.)
There is still uncertainty on the level of buying and price, but that was nothing new in the history of the velvet industry.
Chambers notes, “The stakes are higher now because the volume from New Zealand is bigger, and our reliance on China is greater. We’re very much reliant on them to be strong purchasers.”
The market hiatus has meant lost opportunity for Chinese buyers and ultimately NZ exporters and growers.
“They [Chinese importers] want to get the product in and turn it over, selling it in the northern winter, but as that season progresses, that opportunity is lost…the success of China’s importers is really important to the success of the New Zealand velvet industry, and we need to remember that.”
He adds that China is becoming more discerning on the velvet bought, which means that producers need to cut shorter, quality velvet.
“They want to buy what constitutes good quality…they’re looking for AS and good Super A Traditional, sticks around three kilograms or lighter, but not necessarily big Super. This is what the market wants. The reality is there is now a limited tolerance for large, non-traditional velvet.”
