Archive for Ostrich Markets

Strategic Analysis of the Ostrich Industry

A meeting held in Pretoria in 1999 carried out a full strategic analysis of the industry the supplement to Newsletter No. 15 provided a full report.   Industry immaturity was identified as the primary cause of the problems.  As this study related to every stage of the process and delegates were from all aspects of the value chain, this can be viewed as a fair analysis.    The problems and solutions identified during this meeting remain accurate today.

All present at the strategic analysis sessions, under the guidance of 2 academic professors, were first asked to identify the problems as they saw them.   The idea was to list the problems and divide them into sectors and order of importance.  That created the “Problem Tree” as in Figure 1.  Then we discussed each problem asking the question “what action is required to overcome each of those problems?”   That enabled the construction of the “Objective Tree” as in Figure 2.

Note there are 4 major sectors with their problems and actions required listed below.

Figure 1 - Ostrich Industry Problem Tree
Problem Tree

Looking at the Problem Tree in Figure 1, it is clear why our industry was struggling.  All looking at it can identify with most of the items listed and every one of those items relates to immaturity – maybe a better word is inexperience.  Over the past 15 years many new countries have started up before any previous country has successfully transitioned to commercial production, therefore we have had ongoing inexperienced newcomers and loss of the experience gained by those let down by the lack of development.

Each one of those items has to be in place as laid out in figure 2 in order to have a sustainable market.  The buyers are there, but they can only buy when the product is produced consistently, at the right price, consistent in quality and in the adequate volume.

Figure 2 – Ostrich Industry Objective Tree
Objective Tree

The industry, for the most part, remains inexperienced.    Why is this?

The history of the industry to date is a high turnover of involvement with many around for only 3 or 4 years before failing to make money and then leaving the industry.   The result is a lack of continuity.   Figure 3 is an illustration of the cycle experienced that started in the latter part of the 1990s.

Figure 3 - Current Cycle of Ostrich Industry
history

As the early producers and processors were finding their feet in the transition an important event took place that had a major role to play in the reasons why the production problems became severe.  At this time a South African scientist achieved a PhD in ostrich nutrition and went to many countries lecturing.  A video from one of these presentations was widely distributed.  Many developing rations for ostrich used the work as the foundation of their rations.  In 1999 he wrote:  “± 80 % of the total ostrich industry is based on nutritional guidelines presented by my work”.

Figure 4 provides the comparison of the production problems and the objectives required to overcome those issues copied from Figures 1 and 2.   Proof that South Africa has failed to introduce any of the improvements in their technologies and production systems lies in the fact that they are experiencing continued export restrictions for their meat as a result of health issues within their industry.

Figure 4 - Comparative Production Problems and Objectives

problem objective production comparison

As identified, in order to deliver consistent delivery of a consistent product at commercial and profitable levels of production, it is essential to improve production efficiency and to achieve consistent good health of the livestock. Ostrich are proven to the have significant production potential, but to achieve that potential requires a totally new approach that has yet to be applied on a commercial scale.

Supplying Local and Export Markets

A frequent question asked by those starting out in ostrich farming is for information regarding export requirements.   Our response is always:  “there is no direct answer as regulations are dependent on the veterinary health and disease status of the exporting country and the requirements of the importing country”.  Each country or region, such as the EU, set their own requirements.

The drivers for the different regulations are of course disease control and meat hygiene.

Regarding disease control the OIE (The World Organisation for Animal Health) has developed systems referred to as WAHIS (World Animal Health Information on-line reporting System).  WAHID (The World Animal Health Data Base) is the resource that stores this information.

This article is focusing on recent developments in these new information systems.  Whilst they are a great resource, they also illustrate the importance of focussing first on developing the local markets.

Animal Disease Control Resources
The ever increasing international trade of livestock and meat have meant that controlling disease is increasingly important when trading across international borders.  This web page of the OIE summarises the current reporting systems for notifiable diseases throughout the world.

For those not only new to ostrich production but also new to livestock production, the message to get from Figure 1 is the important role of the government veterinary services.   National Veterinary services are the government veterinary services required to monitor diseases, report outbreaks, put in place and monitor control systems when any disease outbreak occurs that carries the risk of rapid transmission to other farms.

Figure 1 - Risk Notification Systems [Large Version]

113-notification-processes-sm
The national veterinary services of the country with infected livestock are responsible for notifying the OIE of such outbreaks.  The OIE then issue alerts to notify any regions, such as neighbours and trading partners that are at particular risk to enable those countries to take appropriate action to protect their domestic livestock.

It is this process that the South African industry has undergone during their various disease outbreaks in the ostrich flock over the past decades and the most recent outbreak still causing a ban on the export of their meat.

The World Animal Health Data Base (WAHID) provides an excellent resource to gain a better understanding as to why it is impossible to have a set of rules for a single species regardless of the importing and exporting country.

This system is under development, but still able to provide a helpful tool:  Countries Sanitary Situation Comparisons.  That link enables the visitor to type in an exporting country and importing country to obtain lists the Probable Disease Hazards, the Possible Disease Hazards and the Diseases that are unlikely to pose any hazards to the importing country as they are currently unknown in that particular country.   It illustrates well just why import and export regulations vary from country to country and why it is impossible to have a “one size fits all” approach.

Figure 2 is the OIE’s illustration to show the interactions between the different processes.

Figure 2 - WAHID and WAHIS [large version]
WAHID interface

The Benefits of Developing the Local Market
The motivation given for exporting when starting out in ostrich farming is usually because there is no established market in their country.  Is this a valid reason?

In general the basic regulations required for health and hygiene at the slaughter plant are standardised across the all species, such as requirements for a Hazard Analysis Critical Control Program (HACCP), residue testing procedures and so on.  These requirements should be available from your national veterinary services.  A slaughter plant must be operational to enable certification.   This is just one good reason for ensuring the business plan for a new ostrich business is not solely based on exporting meat.

If there is no plan to develop local markets, then the business plan must include the costs of slaughtering birds with limited or no revenue from those birds slaughtered during the certification process.

Another reason for developing the local markets is to ensure that there is a market for the meat in the event export markets are shut down for any reason.  A factor to remember is that an outbreak of a disease that impacts ostrich, such as Avian Influenza or Newcastle Disease, breaks out in any other poultry specie it affects the export status of all avian species of the country of that outbreak.  It was an outbreak of H5N1 Avian influenza in poultry that stopped the export of the Israeli ostrich meat production even though the ostrich were not affected.  They had not developed any domestic markets for their ostrich meat.

The main reason there is no developed ostrich meat market in most countries is lack of commercial levels of production.  If there is no commercial production, there is no way to supply the market.  Many newcomers look to the export market assuming those markets are already established in other regions.  The answer is they are not because to date the industry has failed to supply.  It is the inability to supply that remains the barrier to market development not the lack of demand.

The scope of the market is illustrated here.  The challenge is firstly understanding the time taken to build volume and the secondly the investment required to achieve that volume.

Today’s meat markets are dominated by the efficient mainstream industries that over the past few decades have improved their production systems extremely successfully.  They have addressed many management issues, including genetics, to reduce their production costs.   Starting production with just a few birds to test the market cannot work as small numbers are inefficient and expensive to produce and process and inconsistent in taste and appearance.   Newsletter 65 discussed some major production cost items that are influenced significantly by volume.

Building a business plan based on export adds even more costs to meet the requirements of the importing country.

Research May Give Ostrich Industry New Wings

This article published in January, discusses how the quality of ostrich feathers is a key indicator to healthier chicks.  Ostrich feather quality is a key indicator to health in the same manner the sheen on the coat of all livestock and pets indicate overall health.  Good Health and production potential is all down to good management with the most important element – adequate nutrients fed.

Having lived and farmed ostriches in South Africa, the problems in the South African Ostrich industry have come as little surprise.  A few quotes from the article:

Quote: research from Stellenbosch University shows that the brighter the white wing tip, the better the bird. End Quote

Quote:  The finding points the way to breeding chicks that are more resistant to disease — possibly even to the avian influenza that has severely curbed the industry, causing losses of up to R1.5bn since the European Union (EU) stopped importing raw ostrich meat. The EU used to import about 80% of South Africa’s ostrich meat. End Quote

Quote:  Stellenbosch University behavioural ecologist Maud Bonato said there is "potential" to breed birds that are more resistant to avian influenza, although proving this is difficult as "you can’t just inject birds with avian flu". End Quote

Quote:  the finding is "quite exciting, it’s quite powerful … it has significance for the breeding of chicks better able to resist disease". End Quote

The peer-reviewed published research  was reported to show Quote:   "the coloration of the father’s white feathers … (predicted the offspring’s) immune response to typical avian diseases such as diphtheria, while the coloration of both the father’s white feathers and bill predicted offspring growth rate". End Quote

Quote: The scientists also proved that ostrich hens laid heavier eggs when mated with males with brighter feathers. End Quote

Quote:  “less than 100,000 birds would be slaughtered this year, down from 250,000 birds in 2011.”

While writing this article I put “Ostrich Production” into our search engine.  This is the list of the articles it produced on just the first page. I had the option to go further – but I think this list illustrates just how low level that area of research is in comparison to the real evidence?

Optimising Genetic Performance in Ostrich Production

World Ostrich Production Statistics

Establishing Bench Mark Targets for Ostrich

Purchasing Ostrich Eggs and Chicks

Purpose of the World Ostrich Association

Guidelines to Evaluate Ostrich Bird Size and Development

The Ostrich Financial Cycle

Ostrich Growth Curve Discussion

Growth Curves of Ostrich

The Ostrich Value Pyramid

The photo below is a great bench mark illustration of how brilliant healthy ostrich feathers can look.  This is a Red Male in the US around 1995.  The farmer holding those feathers alongside the bird is 1.9m (6ft 3”).

Bird114 1

Purchasing Ostrich Eggs and Chicks

Over the years many of us have regularly received enquiries from newcomers to the industry to supply eggs and/or chicks. All too often the numbers requested are simply too small to be a viable proposition – not viable for either the seller or the buyer.   There are a number of reasons for this, but fundamentally the reason is the additional costs encountered when supplying eggs or chicks across international borders.

When purchasing from within one’s own country, it is possible to go to another farm and purchase a few eggs or chicks.  Depending on the country there may be some regulations regarding crossing county, state or provincial boundaries, but these are usually minimal by comparison to the regulations required for shipping across international borders.

Importing eggs or chicks from a foreign country requires strict veterinary protocols.  These protocols usually include certain testing of the breeder birds and meeting quarantine regulations.  These regulations can vary from country to country.   Any handling of breeders is stressful for those birds and can impact on their breeding activity.  Therefore ostrich farmers can only undertake such activity when there is sufficient volume involved supported by a contract for regular supply and guaranteed payment to justify that disruption and costs.

exporting eggs

Figure 1 - Procedures required for exporting fertile ostrich eggs

Local state veterinarian departments are unwilling to undertake the work when numbers of exports are insuffienct to support the costs.  Costs are simply too high when numbers are low.   To put his statement into perspective, poultry production batches of chicks are usually measured in hundreds, but more frequently today in thousands. Increasing numbers of units have batches in excess of 10,000 chicks.   The photos in Figure 1 illustrate the work required of a state veterinarian in the export process.  As can be seen, this is a major operation.  Each importing country has different criteria and different forms to complete.

With ostrich the minimum number of eggs a supplier is interested can be as low as 108 per shipment, but more usually 250 is the minimum and for many unless there is a longer term contract in place for regular deliveries, farms are not interested or able to supply.

The next issue to consider is that of the viability of the eggs.   Eggs need to be handled carefully, maintained within certain temperature ranges and ideally incubated within 10 days of the date they were laid.   For export they require specialist packaging (see figure 1).  During shipping you are dependent on the airline looking after the boxes correctly.  If they have to undergo a change of plane en route or delays, airlines will not guarantee that the boxes may not spend time on the hot tarmac at the airport.  When this happens the viability of the eggs can be destroyed and in the case of chicks the stress is far too great and the chicks succumb.

Finally, unless there are a large number of chicks in the new area, there is a problem of achieving adequate nutrition to support the growth and development of the chicks.  In the domesticated situation the birds must have adequate nutrients and rations specifically designed for ostrich.  It becomes exceedingly costly to produce this when working with only a limited number of birds.  Unless fed correctly, ostrich are not a viable animal to introduce to commercial farming.

Many countries require specialist quarantine facilities when incubating and hatching imported eggs.  For this reason it is simply not viable for any farmer in any country to import just a few eggs. These economics and practicalities of importing eggs also apply to importing day old chicks.

Therefore, when introducing ostrich to a new country it is essential that the project is:

  • Of a sufficient scale to support the full infrastructure.
  • Supported by a full business plan that ensures it covers the full production cycle (see newsletter 74 & 75) and you understand that business plan
  • If specialising in just one sector (e.g. farming is there a supply of food of proven standard for ostrich, is there someone to slaughter the birds?  What are the contracts?
  • Is there sufficient cash for the project to be successful?
financial cycle

Figue 2 - Financial Cycle

Guidelines to Evaluate Ostrich Bird Size & Development

Over the years many photos of ostrich were taken with some sent to us.  Recently there was reason to discuss the issue of how to visually judge bird development.  These illutrations were put together with several photos side by side as a single illustration. For this illustration all photos include men alongside the birds as a guide to their size.

Photos A, B and C in figure 1 are birds from the Blue Mountain benchmark weight gain trial carried out in 1996 and discussed here and here. Using the fence and the man with these birds as a guide, it is possible to see how large these chicks were at the time of weighing.  They were from good genetic origin, but good genetics still require the correct nutrients to achieve their optimum growth, health and performance.    Observing these chicks one can tell they are young by their feathers and the faces.  They were around 195 days (27 weeks) and weighed around 85kgs liveweight.

men-illustrating-size-ostrich

Figure 1: Men Illustrating the Size of Ostrich

Photo D is an illustration of a scientist in the Netherlands scanning a breeder as part of a study to understand why the breeders were not breeding well[1].   The scientist is kneeling and as you can see the bird looks very small alongside him.  Note the very tiny body size.  This study was carried out in 2002.

Photo E is a photo of some proud owners showing off their new breeders that they published on their website in 2003.  These owners were part of an investment group starting an ostrich production business in Brazil.  As new entrants to ostrich production, they had no idea that this bird was severely undersized.   The head height of the bird is hardly as high as the men – her feather colouring confirms she is a mature bird and not a chick as in photos A, B and C.

The birds in photos D and E are severely stunted in their growth – this is not simply poor genetics, it is also poor diet during the growth period.   Clearly, if a bird has failed to thrive during the development stage, their reproductive organs will not be able to develop adequately and this will impact on future production potential.

Our president Daryl Holle took a few photos of his own birds to provide bench mark guidelines to enable producers to gauge their own bird’s development.  Always remember that benchmarking is about setting a base-line to judge one’s own bird performance and aiming to improve on.  Figure 2 illustrates the measurement points and provides the figures for a fit and productive 4 year old breeding hen.

ostrich measurment points

Figure 2: Ostrich Measuring Points

Body Height
Height measurements need to be read with care…there are many tall birds with poor frames. The height must be accompanied with good depth, width and length of frame.  This hen measures 1.5m (59 inches, which is 1 inch short of 5 feet) from the ground to the highest point on her back.

Body Depth
A quality bird should have good depth.  Take the measurements from the top most part of back to the bottom of her fat pan area just behind the legs.   The measurements on this hen:  68.7cm (27 inches)

Body Length
Take the measurement from the base of the neck to the very base of the tail.  This hen measures 1.14m (45 inches) from the very base of neck to the very base of her tail.  Take the measurements from where the neck goes into the back and exactly where the tail begins to rise from the back.

Body Width
Take an imaginary line (shown in green) from outside the drum muscles and measure straight across the back.  The measurement on this hen is 66.04cm (26 inches).

Figure 3 provides a few more photographs of birds taken during the 1990s when there were some good genetics around supported by adequate nutrition.  The men in Photographs A, B and C were all around 1.9m tall (6ft 3”) and taken in the United States.  Photo D was taken in Australia.  I don’t have any information on the size of these men, but it is evident from their comparative size to the fencing that these were strong men of reasonable build and height. The bird they are handling is an 18 month old bird.

The bird in Photo A is a 16 month old Bird that Daryl Holle purchased as a 3 month old bird in the early 1990s.   Photo B is a Red Male – observe the amazing size of those feathers.  At that time Reds were believed to produce poor feathers.  This photo proves that when they have the adequate nutrition they not only are very large birds, they also can produce magnificent feathers.

ostrich size comparisons

Figure 3: Comparative Size of Ostrich - Photos taken of Domesticated Ostrich in mid 1990s

The immature feathers of the birds in Photo C illustrates how well slaughter birds can grow when fed and managed correctly.   It was this photo that first caught my attention when seeking information on work carried out outside South Africa.  At the time I was based in South Africa and aware that local farmers were seeking information.  The internet as a source for information was in its infancy.  Photo D, taken in Australia, illustrates the size of this bird.

These photos were taken at the start of the industry as it attempted to develop outside South Africa.  They provide evidence of the underlying genetics.  Achieving commercial success depends on producing birds to this standard as the starting point.

World Meat Consumption Projections

The FAO recently published “World agriculture: towards 2015/2030”.  The publication confirms the ongoing demand for meat.

Figure 1 illustrates the ever increasing dominance of pig and poultry meat.  Note how poultry consumption is growing at a far greater rate than pig meat.   Why is this?  The answer is most probably because the increases in meat consumption are in areas where many are unable to eat pig meat.

Figure 1 - World Average Meat Consumption per Person
world meat consumption

Pig and poultry have several advantages over ruminant meat producing species.  The main reasons are that they are monogastric and produce multiple births during the year, but why is this important?

At best some ruminants may produce twins or triplets, but most produce single offspring.  A breeding sow will produce 20 plus surviving piglets in two litters in a breeding season.  Commercial chicken produce in excess of 300 eggs per season.

Multiple births from the same genetics enable producers and nutrition specialists to minimise the variables when evaluating and developing genetics, rations and management systems.  This is one reason why pigs and poultry producers have become so successful at improving production and feed conversion over recent decades.   Thus enabling them to produce quality meat protein at ever reducing cost - not only financial but also on use of our prescious resources.

Ostrich have this ability and their meat can be consumed by populations unable to eat pig meat...thus providing those population groups with greater choice.

Product Differentiation

Our last blog discussed the need to develop product differentiation to maintain/increase value as volumes increase.   The following are examples of ways to create product differentiation.

Quality Marks and Standards:
At its simplest the grade of your skin and meat represents different values in the market place.  The WOA have guide grading standards for Leather and Meat as the relate to Ostrich

Country or Region of Origin:
- Red Tractor Scheme assures certain welfare standards as well as guarantee raised in UK
- Canadian Salmon, Cold Water Prawns, whilst not certification schemes, they indicate source of supply.
- Melton Mowbray Pork Pie and Champagne are examples of produce that the region of production has created very specific differentiation with the regional name protected by law when marketing.

Best Practice vs Good Practice
- Best Practice is leading edge thinking, practically applied which brings competitive advantage
- Good Practice is valuable and important but is becoming too big to bring competitive advantage with the mainstream agriculture. It provides a first step for ostrich producers in product differentiation.

A practical example in meat production of Good Practice and Best Practice is the introduction of Vitamin E Beef.   When this technology was first introduced those that implemented Vitamin E technology to control meat colour had the competitive advantage producing better meat colour with a longer shelf life.  Today that has become common good practice in beef production.  It is available in Ostrich production, but not yet implemented as common practice.

Certification Schemes
These include membership of certification schemes that provide further differentiation in the market place such as:

Summary
There is a cost to implementing these various quality marks and standards, costs that are more easily met when working with sufficient volume to support those costs.   Producers working in collaboration can work together to clearly defined standards.

The Ostrich Value Pyramid

Newsletter No. 95 Item 3

A speaker from the Klein Karoo Kooperasie (KKK) discussed a value pyramid during a presentation at The International Industry Strategic Analysis held in 1999 and reported here.  The speaker was suggesting that it was important to keep the price of the product high using DeBeers as an example in the way they maintained the high value of diamonds.  They achieved this by very strict control of the supply of product to the consumer.  Subsequently they have discovered this does not work so well for ostrich as it is not so easy to switch production on and off with livestock and retain profitability in a similar manner.

In this case discussion related to the value of the skins as the KKK's vision was limited as to the full profit potential of ostrich viewing the meat as of little value and only a by product.  The fear was witnessing ostrich become a high volume, industrial meat production industry where the meat and skins would become commodities and thus low in value.  Which business model creates real value, sustainable employment and the ability to growth the business?

The illustration below is a value pyramid as it can apply to ostrich and other agricultural products. The area in blue in the pyramid illustrates the value Pyramid as presented by the KKK. It illustrates the high value achieved when volume is low and how value reduces when volumes increase. At the bottom end products are sold as a commodity where any competitor can undercut prices.

ost-value_pyramid

Ostrich Value Pyramid

To increase volume whilst maintaining value is achieved through product differentiation utilising methods to encourage buyers to come to you rather than a competitor.  The areas in green represent examples of some ways to add value.

Animal Cloning & Animal Genetic Modification

Newsletter No. 91 - Item 2

At the time of publication (October 2010) these two topics were actively discussed in the press.  Whether or not they are safe for human consumption is not important when it comes to marketing our products it is “consumer perception” that is important.   These extreme efforts to improve genetic performance are driven by the need to produce food ever more efficiently.   The traditional species have  reached their extremes through natural selection and now seeking assistance from biotechnology.

A major advantage for Ostrich is the fact that no meaningful genetic improvement using natural selection has yet been applied to production ostrich, thus offering signficant opportunities.

The European Food Safety Authority has issued an Update on the State of Play of Animal Cloning which can be read here:  http://www.efsa.europa.eu/en/scdocs/scdoc/1784.htm .

The discussion on Genetic Modification in meat production was in the news announcing Genetically Modified Salmon.  Whether approved or not, from a marketing viewpoint the current reports are that the FDA in the US may not approve labelling to enable consumers to make choices on what they buy  - and how this decision could have a serious impact on the whole industry - Genetically engineered salmon, if approved by FDA, could destroy the salmon industry.  As this news item hit in October 2010, several of the articles provided in this newsletter are no longer available to read, thus the links are deleted.

Both these issues emphasize the opportunities for ostrich once production is put onto a full commercial basis with genetic improvement by natural selection.  Produced under commercial conditions, Ostrich can provide a red meat cost effectively.

Drivers of Food Consumption Trends

Newsletter No. 86

This newsletter discussed the FAO publication "The State of Food and Agriculture - 2009" publication that focused on livestock as it contained some interesting data.

The data illustrated the increasing consumption of meat in developing countries as a percentage of total food consumption.  Interesting to note in Figure 1 is the total consumption of cereals has moved very little, with consumption of roots and tubers having fallen marginally.  The significant increases have come from eggs and meat.

Figure 1 - Comparative Consumption of major food items in developing countries

Comparative Consumption of major food items in developing countries

The report states economic growth as the driver for this growth in consumption of animal products.  Whilst this is certainly true, another driver discussed in some depth are the improvements that have been seen in production methods of pigs and poultry in particular.  These improvements in efficiencies, which include development of genetics, have meant meat is produced at significantly lower cost than 50 years ago.   Chicken, for example, used to be a treat, today it is an everyday source of low cost meat protein.

Another important driver for increased meat consumption and helps in establishing measurable levels of meat consumption is the increasing urbanisation of populations.  When living in a rural situation, families are able to maintain poultry and livestock in their backyard – sufficient to feed their families.  Clearly it is not possible to accurately record production or consumption of livestock reared in this way.  However, it is possible to measure the increase in population movement to the urban environment to illustrate the increased demand for commercially produced animal protein.

Technological change is the single most important factor in expanding supply of cheap livestock products. (page 18)

These technological changes have come at every stage of the production chain from crop productions, food production, livestock management systems, genetic improvements, animal processing, packaging and distribution to sophisticated retailing outlets.

To meet the increasing demand for commercially produced animal protein, developing countries have been able to buy turnkey operations and/or develop joint venture partnerships to provide production locally.  We have witnessed developing countries attempting to approach ostrich production in a similar manner. The challenge with our industry at this time is that turnkey solution do not yet exist. Our industry still requires a company or companies to provide this leadership, developing commercial levels of production with the necessary proven primary production systems in place, including genetics, in the same way the pig, poultry, beef and dairy producers have achieved.  Our first hurdle is to achieve primary production efficiently, with reliability and cost effectively.  The markets for our products are there - once the industry is able to supply the right volumes with uninterrupted supply and at the right price.  Adequate financial backing of such systems currently remains the barrier to forward progress and the opening up of the significant market potential for Ostrich production.  Ostrich meat can supply quality meat protein to a large population base unable to consume pig meat.