Archive for June 2013

Performance Data Drives Improvement

Newletter No. 78 - Item 2

The following is the opening statement of an article on The PigSite:

A willingness to try new techniques is integral to Kevin Gilbert’s approach to improving pig production at Womblehill, Aberdeenshire. A recent visit to the unit demonstrated Kevin’s willingness to trial new tools, evaluate performance and then either adopt or discard them based on careful measurement of results. This approach can be seen from the farrowing house to the fattening and finishing barns.

The approach discussed in this article is not new to top managers in commercial livestock production. Following this approach over many decades has enabled their industries to become increasingly efficient.  However these efficiencies have been driven by increasing volume production to provide a strong data base essential to providing meaningful evaluation of the results.

The article concludes:

Mr Gilbert admits that sometimes the changes he makes are not always right, so he’ll try something different until it is right. Ultimately, collecting data on performance helps him make the right decisions on the type and quantity of feed, the right vaccines to use and gives him an accurate picture of the return on his investment.

When developing such a data base to form meaningful judgements, it is essential to eliminate all variables that can influence results.  Pig and poultry producers are able to do this, working with genetic material in their batches with only one “variable” changed at a time to enable them to record the variance and build their data base.   This is more difficult for ostrich producers at this time as we still require large scale production, consistent supply to markets and total cooperation at all stages of production.

Talking Genetics

Newsletter No. 75 - Item 4

The quality of genetics plays an increasingly important role in the commercial viability of livestock production.  The genetics influence such things as:

  • Breeder efficiency
    • Number of progeny
    • Reproductive ability
    • Longevity
  • Efficient Feed Conversion
  • Days taken to slaughter
  • Size of carcass
  • Fat levels

An article in the current issue of Pig International is discussing how to achieve 30 pigs per sow per year.  To put this into perspective, the current Farm Management Pocket Book has the average at 21.6 and high production at 24.7.  Therefore 30 represents nearly 40% more pigs per sow per annum than the UK average.  High performance genetics can only produce at their optimum when they are supported by adequate nutrition and very high standards of management.

The BBC in England recently showed a program on Television called “Mud, Sweat and Tractors”.  The program was particularly interesting as it showed old cine film footage and photographs going back even as far back as pre WW2.  Some photographs were Victorian times.  The program on Beef illustrated just how the pure breeds have changed to meet the modern market demands.

Pigs and Poultry can bring about genetic changes more quickly than ruminant animals because of the high number of progeny produced per year and the ability to raise batches from the same parentage.  A major factor when developing genetics and/or rations is to eliminate any variables.  That enables the effect of a single change to be clearly identified.  Ostrich has the same potential, but only when we have sufficient turnover of volume.   In contrast cattle usually produce only one progeny per annum and sheep twins or maybe triplets.

The potential for ostrich production to improve significantly is tremendous as no genetic work has yet been carried out.  However, as can be seen, it requires volume production to support the development work.

The Missing F Word

Newsletter No. 75 - Item 3

A blog published recently on the World Poultry web site suggested that there is a missing F Word in the frequently used phrase “from farm to fork”.  He suggests that missing important F word is FINANCE, suggesting that if we want to cover the whole food chain in one sentence, we have to include the money part.  The writer suggests that "from farm to fork to finance" makes much more sense, but then goes onto ask “which should come first – Farm or Finance?”    He suggests that it is a little like the chicken and egg situation.

Figure 1 is a simplistic cycle of the money.  Nothing can start without the required financing in place to build the infrastructure required to run the business and provide sufficient working capital to cover the production processes.  This is true for any business.   At the end of the cycle the sales to the Consumer provide the revenue.

Figure 2 - Financial Cycle

Figure 1 - Financial Cycle

Funding for the cycle maybe achieved with many different players adding value throughout the process operating as independent companies.  It maybe a single vertically integrated company funding every step of the production chain.

What is important is that the final sales cover all the costs along the way with sufficient profits to support the next year’s working capital requirements.

Figure 2 illustrates the production cycle in a little more detail, to illustrate the many components that can operate as independent companies, each independently funded.  The key issue is the dependence on every stage of the production chain to sell the end products to consumers at a price that enables all processes to operate at a profit and consumers will buy.  If any activity throughout the production chain fails, then all in the chain fail as there is total interdependence on each other. Whilst farmers sell crops to feed mills (can be on farm mill or commercial feed mill), feed mills sell feed to farmers, farmers sell eggs to growers, growers sell birds to slaughter plants, only those products in RED (dark red our core product and pale red our by products) produce revenue that brings cash into the industry to support production costs.

Figure 2 - Ostrich Production Chain

Figure 2 - Ostrich Production Chain

There may be times when bank overdraft or similar finance may be required to cope with short term cash flows, but overall profitability is totally dependent on the end product sales.

When establishing a new business based on mainstream livestock, it is possible to purchase proven stock and enter established markets at competitive prices.  Ostrich do not yet have this luxury.  Over recent years many breeder birds have been slaughtered leaving a small pool of breeders remaining.  The result of this is that it will require a greater investment to rebuild the breeder herd and develop the genetics capable of producing meat competitively priced.

Defining Volume

Newsletter No. 75 - Item 2

What do we understand by “volume” in today’s markets?   When discussing volume with two managers of a pig unit we calculated the annual tonnage of pig meat they produced on their 200 hectare farm.  The farm was a closed production unit, so included boars, breeding sows and rearing all production to slaughter.  The farm had their own feed mill, with the slaughter pigs shipped to the owner company’s slaughter plant.  They bought in all their feed ingredients.  Their total annual meat tonnage from their pigs shipped from that farm related to the total annual volume of ostrich meat from all South African production.

To quantify this in numbers of slaughter Ostrich, in 2004, South Africa slaughtered 208,000 ostrich.  At 25kgs meat per bird, average South African meat yield, this relates to 5,200 tonnes of meat per annum.  Reared under improved production systems, ostrich have the ability to produce in excess of 40kgs of meat per bird.  That improvement relates to annual tonnage of 8,320 tonnes from the same number of slaughter birds, an increase of more than 3,000 tonnes – 60%.

You will note that Farmer 3 here mentioned working for a multi-national large poultry operation.  Once we explained the volume issue, with his background the writer understood the challenges.

Getting an Ostrich Business Started

Newsletter No. 75 - Item 1

When the internet first became a popular means of communication in the mid to late 1990s, there were a number of forums and mailing lists dedicated to ostrich.  The communication came from many countries and asking questions that are basic knowledge in commercial livestock production.  The forums remaining today still receive these very basic questions. We (WOA, BDOA, AOA and Blue Mountain) continue to receive communication asking for help from people expecting to start farming ostrich or already farming on a very small scale and looking for assistance.  The countries are blanked out as over the years we have received the same type of communication from almost every country that has started to farm ostrich.

These are a few recent examples:

Farmer 1:

I have started ostrich farming in ….. I have 210 ostriches of different ages: 58 days, 69 days and 90 days old. I am having problem in feed because no one has it so please mail the price detail of feeds - e.g. 50 kg bag with CNF for all feed.  I imported 320 chicks one day old out of which 47 died, what is mortality ratio in them.

Farmer 2:

I am poultry farmer in .....,  now I want to start ostrich farming so, I need some kind of help, such as from where I can get ostrich chick and how can I keep them.  I hope you will give me positive answer and favour.

Farmer 3:

I am currently working for a large poultry company and have a master’s degree in poultry science.  My problem is all my poultry experience is with turkeys and chickens.  My best friend has currently purchased a large farm and is only using up a small proportion of this for free range egg production.

I have been aware of the small increase in Ostrich farming in the .... and has been an interest of mine for a while.  Now I have access to a lot of land I am researching ostrich farming and the pros and cons of it.  Could you please get in touch with any information on the subject you have.

Also is it profitable?  Is it viable in ....?  And is it easy to get a buyer for the various products that come from ostrich etc?  I will look forward to your response.

Farmer 4:

I'd like to set up an Ostrich Farm business. I wonder if you could send me some information about this and if your company provides services regarding this matter, please forward some details and contacts.

Farmer 5:

We currently have an ostrich farm of about 500 head.  We now only sell their meat for human consumption.  We were introduced to your website for more information on skin preservation and possibilities of prospective buyers.  Please provide us with information about this matter as soon as possible.  Your help would be greatly appreciated, thank you.

Reading these examples when put in the context of the all our articles, it helps explain why, even now - 2013 - it remains a challenge for the industry to make the transition to full commercial production where we can supply the markets on a professional level.

Ostrich Value Chain – 3

Newsletter No 74 - Financial Plan

Once the infrastructure required to supply the targeted markets is defined, it is then possible to establish the capital investment and working capital required for the various sectors of the value chain.  In this structure funding the collaborative approach enables the small farmers to operate independently, but still have a stake in the processing business.   The business model discussed here and here, with farmers operating on a small scale requiring movement of chicks and feedlot birds introduces certain management aspects adding additional management costs and biosecurity risks.

In that model all operations are independently owned and financed, with the central trust assisting with the business plan and funding applications.  Currently in South Africa there are special funding schemes to support the development of farmers from the previously disadvantaged communities as a result of Apartheid.  Each country will have different challenges and opportunities to structure their ostrich projects.

The advice of the World Ostrich Association to any new comers is to ensure the business plan incorporates all aspects of the value chain with the finances in place prior to commencement.  We still find a few people being tempted with offers of buy-back schemes prior to the development of the infrastructure and markets.  The wording of these schemes needs to be viewed extremely carefully.  Do not join any scheme that is based on selling birds to other producers.  Production for slaughter birds must be the objective.

Ostrich Value Chain – 2

Newsletter 74 - Infrastructure

This section discussed just why the development of a collaborateve infrastructure is so enssential in today's market place that is dominated by global supermarket and hospitality industry global brands.  The excellent graphics produced by the project managers illustrate well the aspects to support a group of small farmers and explain why it is extremely difficult, if not impossible for those producing small volume to work alone:

74_onefarmer

Figure 1 - One Farmer Working Alone

Figure 1 illustrates how one farmer working alone produces less volume than many farmers working in collaboration to build volume – figure 2.  This principal applies to all aspects of agriculture and not simply ostrich production.   However, because ostrich production is new, usually there is no infrastructure already in place to enable new entrants to simply slot into.

Figure 2 - Many Farmers Working in Collaboration

Figure 2 - Beneftis in Collaboration

Figure 3 illustrates the various aspects required to provide support and achieve economies of scale that are impossible when farmers are working in isolation.   Another benefit is the ability to program production through the slaughter and processing plants to enable them to maintain regular throughput.

Small Farmer Support

Figure 3 - Small Farmer Support [copyright Khula Sizwe South Africa]

Summarising the different components that working in a collaborative enterprise of small farmers to build a complete value chain:

  • Markets
    • Where to sell
    • When to sell
    • Product Quality
    • Transport
    • Risks
  • Training
    • Technical
    • Business
    • Practical Support
  • Inputs (ostrich)
    • Chicks
    • Feed
    • Veterinary
    • Identification
    • Records
  • Opportunity
    • Business Type
    • Available resources
    • Practical Support
    • Confidence and Vision
  • Business Planning
    • Contracts to supply
    • Security of inputs
    • Budgets and Financial Controls
    • Funding Requirements
      • Capital for Infrastructure
      • Working Capital
  • Social Support
    • Health
    • Community
    • Communication

The structure of this particular enterprise has been developed to support the development of small farmers, with all the farmers operating as independent enterprises that also have share ownership in the processing company. There are many ways to structure the different elements of a value chain.  The important factor is that to start ostrich production, all elements must be in place from the start.  If not there must be provision in the business plan to build all these elements and ensure adequate resources for capital investment and working capital before commencement of the project is in place.  If there is insufficient capital, as is continually proven over the past two decades, the operations fail.  In today’s markets it is very difficult to operate on a small scale in a sustainable manner in many livestock businesses.  Another reason for failure is failing to meet the production targets laid down in the business plan.  In this plan any farmer suffering mortality of greater than 30% and a feed conversion ratio greater than 3:1 at 50kgs will be removed from the scheme.

74_valuechain_gen

Figure 4 - Generic Ostrich Value Chain

Figure 4 is a generic Ostrich Value Chain, illustrating the components that need to be in place.  Some elements, such as crop production can be outsourced.  Every single member of the chain is interdependent on the other for the success of the whole.  The success of the whole is essential for each member to optimise their return.

Ostrich Value Chain – 1

Newsletter No. 74

The items in this newsletter discussed a new develpment that provided a great practical example of a value chain and the importance of working in a collaborative manner.  For ease of reading in the blog environment, we will split the segments over several blogs.

Introduction
We receive many emails from people asking for assistance when wishing to join the industry – usually as a farmer.  The first question we always ask is “what is the scale you wish to enter?” and "is there an infrastructure in place to slip into?".  If the answer is no sufficient resources are required to build the infrastructure, volume required for viability and market development.

Unfortunately as our industry has developed over the last couple of decades, the approach has generally been to sell a trio or a few chicks to new farmers before the building of sufficient infrastructure to support new producers.   Earlier newsletters have discussed the principals and importance of value chains.  A new initiative came into being in March (2008) that incorporates those principles and illustrates one route to accomplish them.

Developments in Southern Africa
Many of you will be familiar with the ostrich operation run by Peter Cunningham in Bulawayo, Zimbabwe.  In recent years a project based on this operation has been developed to help small farmers into viable ostrich production in South Africa.  They have recently published their business plan and presentation on the internet, the company started trading under the current infrastructure in March.  The home page is http://www.khula-sizwe.com (web site no longer active).  The plan addresses many of the issues required to provide sufficient infrastructure to support small producers.  They list the following key points as barriers to entry for small farmers:

a)   Lack of infrastructure & collateral for production loans

b)   Lack of Industry and market information

c)   Lack of technical knowledge and experience

d)   High Industry entry costs

e)   Inability to supply high volumes demanded by the industry

f)    Inability to comply to quality standards and registration requirements for market access

The above list can be consolidated into 3 major areas that we will discuss in this newsletter.

Markets
Before investing in ostrich farming or an ostrich project, it is extremely important to know the markets to be serviced as different markets have different requirements relating to such things as:

a) State Veterinary Requirements
b) Buyer Veterinary Requirements
c) Type of Meat Cuts, Skin, Fat etc.
d) Traceability
e) Residue Testing

This business plan illustrates just how important knowing your markets is before building the infrastructure.  For example their target market is the EU and to supply that market the supplying farms require registration by the EU, so it will be essential to know the regulations prior to construction. You will note the requirement of quarantine pens.  These are required in Southern Africa to satisfy the EU in relation to Congo Fever, a tick born infection.

Even when supplying domestic markets only, it will still be essential to know the requirements of the local veterinary authorities and local buyers.  Do your buyers require you to be part of an assurance scheme, if they do, what are the requirements?  Assurance schemes are discussed here and here.

Vitamin Variability in Feed Ingredients

Newsletter No. 73 - Item 3

Originally Roche, but now DSM, irregularly produce interesting nutritional fact sheets with excellent information.  The article Nutrition at Work – Vitamin Variability (no longer available), discussed the dangers in modern nutrition of dependency on average or theoretical levels.  The article explained this very simply, including a discussion recognising that even if an ingredient samples at a certain level of vitamins, they may not be available to the animal.

This table illustrates the variability with Vitamin E comparing average and the significant range.  These variations are seen in all the vitamins and many minerals.  Today leading nutritionists supplement all the required vitamins with any vitamins contained in the ingredients taken as a bonus.

vitE_levels

Comparative Vitamin E Conten of Various Feed Ingredients

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