Red deer : the economic valuation

Abstract

With the current downturn in traditional livestock farming investment New Zealand a great deal of interest is being shown in diversification. It is becoming increasing apparent that few options are open to many farmers. Deer and goats are the two most quoted livestock alternatives, but both are constrained by biological factors. Goats are still in a feral updating phase, but the era of feral deer recovery is possibly over. Those deer required to build the herds of the future are predominately domesticated livestock. This last season (1985/86) has seen a dramatic decline in the value of female deer. Controversy exists as to the causes of this decline, as changes to the livestock taxation system were announced during the season. The declared intention of these livestock tax changes has been to obtain neutrality of the taxation system across investment decisions. It is not the purpose of this paper to address the taxation issue, and we will assume that neutrality has been achieved. Weaner hind prices have declined from a forward sale value of some $2,600 in November 1985 for March to May 1986 delivery to some $800 to $1,200 for the same animals at sales over the March-June 1986 period. (See Appendix 1).Declines of weaner values of this nature will have very little impact upon the future time path of the New Zealand deer herd. Until such time as some female weaners are culled for meat, the expansionary phase of the industry will continue. The major impact the decline will have on herd growth is via an expected decline in live capture animals. These animals are becoming less and less important to the New Zealand deer herd, so this effect will be minimal. The most important effect of the decline in values is that of equity. Those farmers in deer farming before the decline in values have seen the value of their animals drop dramatically. For those selling this has been a real loss, for those building up herds the drop has been a substantial paper loss. Gainers have been those buying at the reduced prices and those contemplating purchasing deer. The purpose of this report is to examine the determinants of the economic valuation of female deer and to obtain a valuation to aid those contemplating investing in red deer. Specifically, adult and weaner hind values will be calculated and some sensitivity analyses conducted around the base assumption used.