Velvet co-op competes with PGG-Wrightson pool

25 September 2007              
 

 
Velexco, the velvet marketing co-operative, will this season be offering deer farmers the opportunity to sell their velvet .using a variety of different selling options .
 
The co-operative will provide a new amalgamated tender as an alternative to the PGG-Wrightson pools which have had a monopoly on pool selling since the Velpool and Wrightson pools merged two seasons ago.
 
“Velexco was set up by producers eight years ago to reform the velvet selling system, and has been selling velvet year-round to the all-important Korean market for the last six seasons,” says chairman James Guild.
 
“We have been successful in doing this. We now market around 10 -12 per cent of NZ velvet production and by cutting out the middleman we have each year achieved price premiums for suppliers of 10-15 per cent.”
 
He says the co-operative, having established a credible in-market reputation, now needs to build its throughput so it has the critical mass needed to influence the way velvet is sold to Korea.
 
At present, velvet is a classic commodity that generally loses its New Zealand identity as soon as it leaves the country. Like all commodity markets, prices tend to fluctuate wildly every three or four years.
 
In line with co-operative principles, Velexco is unique in averaging out its sales over the whole year to give its shareholders the same average price per kilo which reduces the risk from intra-seasonal fluctuations, which can be substantial.
 
“However, farmers need cash flow in the spring and summer when velvet is harvested and an improved tender system will provide this. We also plan to provide an on-farm selling option where we have contracts for the supply of a specific grade or quantity of velvet,” Mr Guild says.
 
“We expect many suppliers will put some of their velvet in our weekly tender and then put the balance through our whole-season profit-share option. Smaller suppliers may opt to sell on-farm, because they know that every kilo that comes our way contributes to market reform.”
 
In another change designed to make it easier for farmers to support Velexco, the co-op has decided to reduce its new shareholder entry level.
 
Farmers now need to pay only $1000 in their first year as shareholding suppliers, with this sum deducted from their returns. Any balance is deducted in subsequent years of supply.
 
Mr Guild says Velexco is wholly producer-owned and is the only New Zealand operator with year-round representation in the Korean market.
 
“We have responded to requests from farmers to provide a better mix of selling options and conditions for shareholding to make it easier for them to sell through us as an alternative to the traditional trading methods.”
 
ends

© Scoop Media