Archive for February 2013

Interpreting the Trends in Meat Consumption – Other Meats

Newsletter No. 40 - July 2006, Item 2d

Probably better known in the market place as “alternative meats”, Ostrich currently falls into this sector as defined by the FAO.

The important factor in this discussion is the fact that Ostrich, raised correctly, can be produced with similar and in time, maybe even greater efficiency than pig or poultry.

The following graphic illustrates the 2006 distribution of consumption of other meats (Alternative Meats).  It can be seen that Europe currently consumes around 30% of this category.

Comparative Consumption of Meat Other

Comparative Consumption of Meat Other

Alternative meats include Venison, Crocodile, Zebra, Wild Boar, Kangaroo, Camel, Horse, Rabbit as well as Ostrich and Emu.  All different specie of deer and antelope fall under Venison and includes springbok from South Africa, Elk and Moose from North America and the many different types of deer.    Horse and Rabbit meat has been common in some European countries, but are not accepted by all European markets.  The venison sourced from wild sources will always be limited in supply.  Deer and Antelope are ruminant and not as feed efficient as many monograstric specie.

Ostrich on the other hand is proven under the correct management systems to be extremely feed efficient and a very viable “alternative meat” to supply the volume market.  This is particularly beneficial for those unable to eat Pig meat to provide more variety of meat.

Interpreting the Trends in Meat Consumption – Type of Meat Consumed

Newsletter No. 40 - July 2006, Item 2c

Understanding the trends related to type of meat consumed is a key factor to understanding why the growth in meat consumption has been so high, population growth and wealth apart.  It is also the key to appreciating the opportunities for Ostrich production in the different regions (markets).  Ostrich benefits the different markets in different ways.

When examining Figure 2 note the growth of pork and poultry consumption by comparison to Beef and “Mutton and Goat”.  The combined total of the pig and poultry sectors has taken increasing market share in every region but with significant variations in the proportion of pig and poultry from region to region.

The pig and poultry industries have become extremely efficient.  These efficiencies have significantly reduced the costs per kilo of meat making these meats now available to people from lower income groups.   Ostrich provide an additional meat that can be produced to similar levels of efficiency and therefore costs.

Taking region by region, pig meat has been dominant over poultry in Europe, China and until recently in the UK.  The remaining regions show poultry as the dominant type taking the larger market share.

Goat and Sheep meat are included in the same category.  The UK, New Zealand and Australia are major producers of lamb as well as major consumers of lamb meat, as indicated in these graphics.

The majority of the goat meat will be consumed in Asia and also in the Arab nations, a region that consumes a significant proportion of lamb, as the Moslem population are unable to consume Pig meat.  Ostrich offers variety by making available a meat that can be raised to the same efficiencies as pig and poultry meat.

Comparative Consumption of Meat Other

Figure 4 - Comparative Consumption of Meat Other

It will take a decade or two from the introduction of productive systems to achieving the volumes and efficiencies of production required to support the meat consumption in the high volume markets.  During the development phase, it can be seen in Figure 4 that Europe currently consumes around 30% of all other meat.  Europe has a higher net wealth customer seeking alternative meats. It can be expected that the European consumer will pay a premium for ostrich meat while volumes are low, but only if the meat is available on a consistent basis.

Interpreting the Trends in Meat Consumption – Tonnage

Newsletter No 40 - July 2006, Item 2b

Tonnages in Europe and North America are amazingly similar for the period, see Figure 3 (below)

Oceania’s tonnage at only 10% of European tonnage is proportionate to the differences in population in the two regions.

“South Asia” and “East and South East Asia” combined was 4million tonnes, 26% of European consumption in 1961, increasing to 28m tonnes, 58% of European consumption by 2001.

In contrast, Asia as a group recorded consumption of 9million tonnes, 52% of European consumption in 1961.  By 2001 this tonnage had increased to 97million tonnes, 281% of European consumption. Examined more closely, it can be seen that when China is separated from the rest of Asia, the remainder of Asian tonnage in 2001 is very similar to that of Europe and North America, with China dominant in the region at 66million metric tonnes, 190% of European consumption.

Figure 3 - Regional Meat Consumption as a % of European Meat Consumption

Figure 3 - Regional Meat Consumption as a % of European Meat Consumption

Europe and the US combined by 2001 have fallen from 50% of world meat consumption in 1961 to only 30% in 2001, but their total tonnage consumed has more than doubled in the same period.

These figures clearly demonstrate consumption increasing faster in the developing regions, with China showing the fastest growth.

World Ostrich Association Publications

The World Ostrich Association (WOA) has a number of publications available to support its members.   All are available free to members of the association and most are also available to download in PDF format.  These are important docucments to support producers, processors and the buyers of Ostrich Products.

WOA Ostrich Carcass Grading processors and meat buyers

WOA Ostrich Yield Payment  processor farmer payment

WOA Factors Influencing Ostrich Meat Quality producers and processors

WOA Ostrich Skin and Finished Leather Grading producers, processors and buyers

WOA Ostrich Feather Structure and Quality producers, processors and buyers

WOA Ostrich Benchmark Performance Targets producers

WOA Ostrich Welfare Guidelines producers, processors and buyers

WOA Guide to Valuing Ostrich Buying, Selling or Insurance claim – how do you value an ostrich?   Available to members only

Ostrich Farming Business Planning Planning Profitable Ostrich Farming from ‘Farm to Plate’   Available members only

Understanding the Productive Value of Alfalfa
This is not a WOA production, but as it is of significant importance in ostrich production, it is included.  It is a link to an external web site.

Interpreting the Trends in Meat Consumption – Rate of Growth

Newsletter No 40 - July 2006, Item 2a

This blog is discussing Figure 2 in Global Trends in Meat Consumption.  Click here to view the graphic under discsussion

Examining  the differences in rate of growth in the industrialised regions by comparison to the developing regions is very marked.  Note how the UK consumption has changed very little over the period and actually went down in the decade between 1971 and 1981 that was before BSE was identified.

The UK and Europe show a drop in beef consumption when BSE was at its height.  BSE generated interest in alternative meats, a demand that simply could not be satisfied, as the alternatives were not produced in sufficient volume.

In contrast, Asia has shown a huge increase in consumption over the period.  It can be considered that some of this increased consumption is due to improved recording systems, but there is also clear evidence of significant growth due to the improving economies in the region.  The consumption of meat in China is a significant proportion of the growth in meat consumption in Asia and is therefore shown independently.

Global Trends in Meat Consumption

Newsletter No. 40 - July 2006 Item 1 & 2

The rapid growth of meat consumption since 1961 and projected growth to 2025, as we discussed here, highlights the high proportion of the growth coming from the pig and poultry meat industries.  This illustrates the tremendous efficiencies that these industries have achieved over the past few decades.  Figure 1 illustrates those changes.

Global Meat Production by Type

Figure 1 - Global meat Production by Type. 2025 Projected

Figure 2 illustrates the breakdown of the type of meat consumed in the different regions of the world.  The distribution of the growth is not available but the majority of the projected increased production will come from the developing countries rather than simply population growth.

The regions are set alongside each other for ease of comparison as they show clearly the trends in the different regions; trends in total consumption and the variations in type of meat consumed in the regions.

Meat Consumption by Region and Type

Figure 2 - Meat Consumption by Region and Type (sources of data)

There are several important elements to observe when viewing these graphs, which will be discussed over the next few postings:

a.    Rate of Growth over the period
b.    Total Tonnage (left axis of graph), as these do vary from graph to graph
c.    Variation of type of meat consumed in the different regions
d.    Other meats, shown in green, is the sector into which Ostrich meat currently falls

Influence of Government Nutrition Advice on Markets

Newsletter No. 39 - Item 5

Heart disease, diabetes and obesity are major health issues in first world countries.  This is leading to advice on diet; recently there has been an increasing shift on the advice given and this does have an impact on the demand for particular foods.  The various industries then have to respond to those changes in consumer demand.

The British Domesticated Ostrich Association (BDOA) can report a direct experience on this.  The BDOA recently published an article in a magazine read by the British government ministers and senior advisors.  On the day of publication we were approached to write a further 2 page article for a wide circulation review publication.  They ordered the article to be placed alongside a report from DEFRA (The Department for Environment, Food and Rural Affairs) that will be discussing healthy eating and agricultural related environmental issues.

The reason for the approach is that our government recognise Ostrich as fitting into their current nutritional advice to eat unprocessed food and low fat meat and would like to encourage increased consumption of ostrich.  In addition they recognise the environmental benefits as a result of the feed efficiency of Ostrich and alfalfa, which is a major component of their diet.

Malnutrition in Asia and The Pacific
The WOA has a number of members from this region.  All are driven by belief in the potential of ostrich to be an efficient producer of meat protein.  At the other end of the scale the FAO (Food and Agriculture Organisation of the United Nations) has recently called for redoubling efforts and investments to overcome malnutrition in Asia and the Pacific.   The full report article can be viewed here.

The article references quotes from the FAO referencing 35% of the world’s undernourished population residing in South Asia, with the prevalence of underweight, stunting and wasting the highest in the world today.

The article states that the developing countries in the region now have the world’s highest growth rates for the production and consumption of food derived from livestock.   They quote the growth in food and agriculture production helping to raise the incomes of farmers and the wages of unskilled labourers.  The graphic outlining an agriculture cluster is discussed here, illustrates how a strong agriculture economy can benefit many people.

Quote:  “Only nine years separate us from 2015, the date by which the world's leaders pledged to halve hunger and extreme poverty. Despite this commitment, the state of hunger and malnutrition in the world remains as distressing as in 1996, when the World Food Summit was held. At this half-way stage, it now seems that unless we redouble our efforts in the next years, our objective will not be attained until 2150”, concluded Dr Diouf.  End quote
[Source: Food and Agriculture Organization of the United Nations (FAO) - 20th May 2006].

Ostrich production does have a contributing role to play in helping to provide meat protein efficiently.

Can we meet the challenge to gear up production to produce sufficient volume to provide a meaningful contribution in both these situations?

Animal Protein Consumption

Newsletter No. 39 - Item 4

The report discussed in our last post and referenced here discussed the increasing demand for animal protein that we have discussed in earlier news letters.

Quote:  The demand for meat and other animal based foods is largely related to income and consumer tastes and preferences.  Two fundamental trends affect demand for animal based products:

•    income growth
•    demographic changes

In developed countries, consumer tastes and preferences change, but total demand grows relatively slowly – see chart below. While the demand has shifted for specific products, total demand has grown at about the rate of population growth.

The changing demand for specific meat products results from concerns about diet and health, functional characteristics of products such as convenience, food safety, and perceived values associated with the place or techniques of production.  39fig1
More dynamic growth in demand for animal based protein results from the fact that incomes are rising in many developing economies with large populations. The rapid increase in per-capita income, particularly in China, has generated a significant increase in per-capita meat consumption. Similar income and consumption trends are occurring in India, Indonesia, Chile and other developing countries of Asia and Latin America.  End quote

Economics of Production, Processing and Marketing

Newsletter No. 39 - Items 2 and 3

The Future of Animal Agriculture in North America is the title of a long report that has been produced by The Farm Foundation.  The report discusses agriculture in Mexico, The United States and Canada.  The report has been put together by a very large team made up of industry, government and academic leaders and can be viewed here.

This report details the challenges facing the existing livestock industries in North America.  The Farm Foundation initiated this project to compile a comprehensive look at the opportunities and challenges facing animal agriculture in North America today. They also emphasise that it will be how industry, government and academia use the information that will help shape the future of this industry in North America.   So if this document is aimed at the North American animal agriculture, why is it of interest to Ostrich producers around the globe?

To be successful in Ostrich production, the issues discussed in this document need to be understood as we are operating in a global market today.  The document provides an excellent insight into the industry we are working in – livestock production.  Many of the points covered have been covered by our newsletters over the years and this document confirms their importance.

There are a number of factors discussed under this heading that are important for our fledgling ostrich to understand and the discussions raised are not confined to North American Agriculture:

Major Structural Change

Quote:  Every facet of the animal food chain – from genetics to retail and food service outlets – is adjusting to the rapid pace of change. End quote

This sums up the messages our newsletters have been highlighting and important as the development of the Ostrich industry has taken place during this rapid transitional process.

Quote: Production once dominated by independent, family-based, small-scale firms is now led by large firms that are tightly aligned across the production and distribution chain. Contracts and other types of marketing arrangements are increasingly important across nearly every market level— from input supply and seed stock to finished food product markets. End quote

The development of the larger production and distribution chains has been driven by the need to produce food at lower prices to service volume customers that are extremely demanding in their requirements.  The volume customers are the large supermarket chains and food service chains whose market share has grown dramatically over the last 10 – 20 years.   These same chains are now increasing their presence in developing countries.

Smaller and independent family-based farms and firms have been increasingly battling to achieve economies of scale to remain competitive.  In many countries the development of ostrich production has been dominated by the sale of small numbers of birds to start up operations without any infrastructure to support these small operations.

Quote: The traditional production and marketing firms and linkages still exist, but are gravitating to niches for differentiated products that may command a premium from some consumers. As the industry has become more industrialized, specialized and managerially intense, location options have expanded beyond traditional production regions.  End Quote

Some examples of niche markets in livestock production are:

Angus Beef
Free Range
Kobe Beef
Parma Ham

Ostrich, while our production volume is low, can only supply small niche markets.  The success of operating in niche markets is to ensure that the product is of the highest quality in order to achieve that premium price Niche markets are willing to pay.  That additional price is required when unable to operate to economies of scale that are possible for the mainstream specie and larger operators.

Six Ways to Increase Income

Newsletter No. 38 May 2006 - Item 2

Many of you will have read Alan Stable’s last news letter and the 6 ways he gave to increase income.  It all sounds excellent advise, but how can we apply this advice to our ostrich businesses?

Increase your transaction size
In any transaction there are always certain administrative activities that have to be carried out regardless of the size of the order.  A certain volume is required to ensure sufficient margin to cover these and other fixed costs.  The greater the volume clearly reduces these costs per unit of sale. Currently this is a critical issue with ostrich production as our volumes are so very low.  At every stage of the production chain there are few economies of scale yet being achieved.

One example is skins.  Skin buyers will pay better prices if handling container loads.  When only selling a few hundred skins, there are significant additional transport and handling costs when it is necessary to consolidate loads in a central collection point.

Whatever the product, the paper work and administration is the same if a shipment is a container at 15 tonnes or a pallet at 1 tonne.  So increasing your transaction size will not only increase revenue, it helps the margins as well.

Increase your margin
The margin in this instance is of course the difference in the selling price (total revenue received) and cost of production.  Increased margins can be achieved by increasing revenue and reducing costs through improving production efficiency.  With ostrich we have opportunities to benefit significantly from both.

Increase Revenue
Revenue can be increased in two ways – by increasing the price of the products and by increasing the yield.

Increasing the price is the area of good marketing to differentiate your product over your competitor.  Our industry is currently in a position of lack of supply, so our opportunities and ability to increase the selling price in some markets remain excellent for a number of years.  Increased prices can only be expected if production systems ensure absolute consistency of supply and consistency of product.

Product grading is the next tool to achieving increased prices.  Grading for skins has been used to differentiate price for many years, with significant variation between Grade 1 and Grade 4.  The difference per skin at US$16.50/sq ft Grade 1 and Grade 4 is around US$100.

Similar price differentiation can be achieved for meat.  However, the meat is a new product and our grading system requires education, both for our customers and producers. Marketing the meat on grade to provide product differentiation is one method to increase the selling price of the meat.

Reduce Costs of Production
There are a number of ways to reduce the current costs of production very significantly.  Increasing yield and reducing the age to slaughter are two key factors.  With ostrich we have very significant savings achievable in this region.

Cost of Chick: The greater the number of slaughter birds produced per hen the lower the breeder cost of chicks.   The knock on effect of increasing the number of chicks per hen that survive to slaughter are reduced incubation costs, stronger chicks that convert feed more efficiently and have increased survival. Stronger chicks also require less heat in the early weeks.

Cost per Kilo Meat:  With ostrich significant savings can be achieved by increasing yield and reducing the time to slaughter over current averages. Key savings when reducing time to slaughter are reduced feed consumption, less infrastructure required, less labour and not only less working capital but also the cost of that working capital is reduced.  The cost of working capital is reduced as it is recovered more quickly.

Cost of Processing:  The size of a bird does not affect the cost to slaughter a bird.  Therefore, as the graphic below clearly demonstrates, significant savings on processing costs per kilo can be achieved with increased meat yields.

Influence of Meat Yield on Costs of Processing

Figure 1 - Influence of Meat Yield on Costs of Processing

Skins: Worthy of note when discussing processing costs; it costs exactly the same to tan a Grade 1 skin as it does to tan a Grade 5 skin.   So clearly far greater margins are achievable the better the grade as the costs of production are identical.

Early slaughter also reduces the costs of producing quality skins.   A study carried out by the scientists at the experimental farm in Oudtshoorn clearly demonstrated the increased number of grade 1 skins when slaughter was at a younger age.

For too long there has been the belief that skins from young birds have immature follicles. A number of us have proven very clearly that when production systems are correct, younger birds can also produce skins of acceptable quality.

Increase the frequency of transactions
Many products in food production are determined by season.  One way to increase frequency of transactions is to extend the season.    A knock on affect of introducing production methods that reduce the costs of production as suggested above, will be an extended breeder season and elimination of the “end of season” chick syndrome.  Chicks hatched towards the end of the season have often been considered weaker than those hatched at the beginning of the season.

Increase consistency of purchasing
The following are processes in the production chain.  Some may be involved in only one process, others several or all of the processes.

Producing Feed Producing Fertile Eggs
Producing Day Old Chicks Producing Slaughter Birds
Producing Breeder Birds (Genetics) Slaughtering Ostrich
Processing Meat Tanning Ostrich Skins
Sorting and Cleaning Feathers Manufacturing Processed Meat Products
Manufacturing Leather Products Manufacturing Pharmaceutical Products
Manufacturing Cosmetics Dying Feathers
Manufacturing Feather Dusters Decorating Eggs
Wholesaler Retailer

The customer of every single process is dependent on being supplied with a consistent product; the customer maybe just another department of the same farm or company or it maybe a totally independent commercial concern.

Consistency in purchasing is essential and if any one of those processes fails to deliver a consistent product, it will impact on the profits of those further up the chain. If delivery is unreliable in supply, the customer will fail.

In this discussion the most important customer is the user of the product – our final customer.  That leads into the final two items on Alan’s list.

The final two items were “Increase longevity (keep your customers longer)” and “Improve conversion of new prospects to customers”.

My suggestion is that to reverse these two items may be more appropriate for our fledgling Ostrich Industry?

Improve conversion of new prospects to customers
Globalisation of agriculture has resulted in the livestock production industry becoming a highly competitive market that is leaner and increasingly efficient over the past few decades.

The Ostrich industry is a new livestock production industry, so what do we have to do to gain customers in such a competitive market?

A major complaint with buyers of ostrich meat is inconsistency of supply.  There are many markets we cannot enter as we lack volume. The first step is to have sufficient volume on a consistent basis.  Producers who can achieve consistent supply will have overcome the current production challenges of low numbers of eggs laid, low conversion of egg to chick and high chick mortality.   If scheduled to deliver birds to slaughter, ensure they are delivered on the day.

Figure 2 - Comparative South African Slaughter Figures

Figure 2 - Comparative South African Slaughter Figures

The graph in Figure 2 shows the tremendous variability in slaughter numbers, not only from month to month, but the significant variability in the same month each year.  This makes supplying markets extremely challenging as actual product available is clearly unknown and extremely inconsistent.

Increase longevity (keep your customers longer)
The ability to guarantee supply efficiently, at a market related price and saleable product is a most important issue to not only win over new customers but to keep them also.

The processors – slaughter plants, meat processors, tanneries, leather good manufactures and feather companies can only win over new customers and keep their customers provided they have a reliable and consistent supply of raw material.