Archive for Ostrich Markets

Certification Schemes – EU Impact Assessment

Newletter No. 78 - Item 4

We regularly discuss the use of certification schemes that increasingly form part of the marketing strategies of our potential buyers.   The EU published a document entitled:  “Agricultural Product Quality Policy: Impact Assessment.  Annex D, Certification Schemes for Agricultural Products and Foodstuffs.”

Whilst the document is produced by the EU, the issues raised are increasingly reflected in conditions for servicing most export meat markets today.   This is an 87 page document that provides an insight into consumer concerns that influence current marketing strategies, assurance schemes and some of the legislation.  The following is Table 4, page 28 and 29 of the document.

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78_table4_2

A full study of the document provides a good insight into these issues that influence the marketing and acceptance of products.  The document illustrates why it is so important to know your markets prior to commencing production to ensure that all procedures required to satisfy your market requirements are in place.

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:

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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.

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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.

Frozen Meat Markets

Newsletter No. 72 - Item 4

An article entitled “Frozen foods benefiting from recession” discusses the increase in popularity of frozen foods as one method consumers are using to help reduce food costs in the recession.  This can be considered encouraging news for Ostrich with the current limited, irregular and seasonal supplies.  It is simpler to supply a frozen product than a fresh meat product.  However, care must still be taken to ensure the product is of the highest quality.

Reading the article reminded me of an email that came from a consumer based in the US earlier this month (Feb 2009):

“Hi! I recently took out a couple burgers from the freezer. After defrosting, I cooked one on Friday night, and saved the other for Saturday.   However, when I took the other out to cook, it had gone bad!  I could tell because it developed a strong smell.  I should mention that I kept both burgers in the freezer until bringing them out to cook. Also, I believe that both were all natural and therefore had no nitrates.   So I was just wondering if it's fairly common for ostrich meat to go bad that quickly or perhaps was it just because they were untreated.”

It does not matter which specie, the principles that determine the keeping quality are the same for all meats.  There are two major factors that influence keeping quality, one is the diet the animal was fed in the months prior to slaughter and the other is the slaughter processes including hygiene at slaughter.  If there is a failure in these factors there will be an impact on the keeping quality of the meat.   The challenge we still have with ostrich is that the low volume does not yet enable most production units to provide adequate nutrients to the birds to ensure a reasonable shelf life of the meat.

Our Chairman, Stan Stewart, has slaughtered ostrich from different feed and management regimes over the years as he slaughtered not only his own birds, but also birds of other producers.  He observed variations in the keeping time of meat that were quite significant, from as little as 5 days to in excess of 5 weeks.  These observations made under the same slaughter and hygiene conditions.  The variable was the different nutritional program of the different farms.

When working to establish a new product in the market place it is regrettable that such experiences happen.  Through communication producers, processors and marketers can be kept aware that there is this problem (it has been around for many years), and then steps can be taken to fix the problem.  It is more difficult to fix when working on the very small scale we still experience with ostrich by comparison to other specie because of the higher costs associated with lack of economies of scale.

This communication provides a timely reminder to remember the document “The World Ostrich Association Factors that Influencing Meat Quality”.

Food Labelling and SMEs

Newsletter No. 72 - Item 3

The laws relating to the labelling of our foods are becoming increasingly stricter.

Wearing the hat of a consumer, the more I know about the ingredients that are in the food I eat, the happier I am, because of the ever increasing number of ingredients not naturally in our foods.  These ingredients have been developed and progressively introduced into the manufacturing process over the years.  Adding value to basic ingredients by processing foods has enabled companies to increase profitability.  To achieve this requires foods to taste good after undergoing industrial scale cooking and have extended shelf life.  This has led to the introduction of less than desirable ingredients added to our foods not only to meet those criteria mentioned but all too often to bulk the food up with low cost and nutritionally inadequate ingredients to increase profits.

Wearing the hat of a small company producing and marketing produce, this presents additional costs of production that will cost the same per product regardless of the company’s turnover – thus increasing the unit production costs for the smaller company.  This article “Labelling Law Costs for SMEs raise concerns” suggests that the cost is Euro400 per individual product.  The impact of these costs is significantly greater for Small and Medium Sized Enterprises (SMEs) with limited turnover when compared to the multi-nationals and large enterprises with high volume numbers of individual products.

 A quote from the article:

 “Food and drink make up the largest manufacturing sector in the EU, with a turnover of €913bn in 2007. Only 0.9 per cent of companies are classified as ‘large’, with 250 employees and over, but they provided 51.5 per cent of turnover”.

This is another cost that must be recognised by any wishing to market into the EU or any other region with strictly enforced labelling regulations in place.

Ostrich Meat Nutritional Value

Newsletter No. 72 - Item 1

This newsletter published in 2009 reported a request to the British Domesticated Ostrich Association (BDOA) received for the nutritional value of Ostrich Meat.  Quoting the words:

“I have seen the energy, fat and protein figures on the BDOA website. By any chance do you also have figures for carbohydrate and sodium? I am analysing some ostrich recipes we are using in our business and the food tables I use have no information on ostrich. Any further information would therefore be appreciated”.

The writer is a nutritionist from a very large catering organisation covering high end corporate entertainment, restaurants, company catering and canteens.   Companies of this size, as you can see from the message, normally obtain the nutritional information from published food tables.  Ostrich have insufficient volume to yet be included.  Ensuring this type of information is in the public domain and reliable, is a service an industry association, such as the WOA can provide.  However, to achieve the funding required to support such a service requires adequate support from the commercial members from the industry the association represents – they have to work in partnership.  Our industry has some way to go before we have sufficient volume of commercial companies of any size to achieve that – but that must be our goal.

Meat does not contain any meaningful levels of carbohydrates.  Carbohydrates are found in grains, fruit and vegetables at levels that are important and can be very high.  I checked the different scientific papers I have with meat sodium levels.

To answer her question on sodium levels I found the lowest sodium figure was 43mg/100g and the highest recorded was 80mg/100g and many values in between those extremes.  One of the papers was published by Jaroslaw Horbanczuk and James Sales under the title of “Characteristics and Nutritive Value of Ostrich Meat with some references to the already recognised effects of feeding” that made this statement:

“The low sodium content of ostrich meat (43mg/100g) as compared to beef (63 mg) or chicken (77mg/100g (Sales and Hayes 1996) would be advantage for people who have to consume a low sodium diet..................”

Some years ago I found similar variations in papers on cholesterol levels in ostrich meat published by the same scientist.   When I asked the author the reason for these variations, he was not sure as he accepted using data from other papers as well as his own work.  He did comment that the variations can be dietary and that some was cooked meat and other was not.

This identifies the problem of papers that report results, but fail to qualify the details of the studies producing the referenced results.  This is true with many such documents and not confined to ostrich, but extremely prevalent in papers related to Ostrich because there are so few studies and many variables that influence the results.

Meat Supply Chain

Newsletter No. 67 - Item 3

Figure 1 is taken from a slide 18 in a presentation by Rabobank at the World Meat Congress of 2008. The presentation is no longer available on line.  This presentation discussed the impact of biodiesel on the ruminant livestock sector. The graphic is simplistic, yet illustrates well the processes from farm to plate.

meat supply chain

Figure 1 - meat supply chain [Source: Rabobank International]

Understanding the many factors that influence the price of our products is an important issue to the success of any business. Slide 5 (see Figure 2) of the same presentation by Rabobank included an excellent illustration quantifying the different factors that impact on commodity prices.

Figure 2 - Factors influencing agricultural commodity prices

Figure 2 - Factors influencing agricultural commodity prices

Click here to view enlarged version

Global Meat Trade Flows

Newsletter No 67 - Item 1 & 2

This newsletter opened with the dominating news in that week October 2008.   That news was the unfolding of the banking crisis.  The report went onto comment: At the time of writing there is continued uncertainty as to how these events will affect the global economy. As at April 2013 the full effects are still unclear.

The newsletter went onto discuss a report on the World Meat Congress that took place  in Cape Town in early September of that year. Thepoultrysite.com has a number of reports published on their web site. This link http://www.thepoultrysite.com/articles/1153/world-meat-congress-2008 has access to a number of interesting articles commenting on some of the presentations:

  • Providing a Sustainable Industry
  • Call for Action on Food Prices
  • Livestock Industry Warned over Climate Change
  • Appeal for Trade Talks to Resume
  • Emerging Animal Diseases and International Trade
  • Traceability and Quality to Meet Consumer Expectations
  • China, Russia and Brazil Lead the Way for Pig Meat (on ThePigsite)

The presentations are no longer available for down load but did conatin some interesting data relevant to our industry if it is to become established as a major meat production industry. Following are a few examples that were reported in this newsletter..

The past decade has witnessed increasing consolidation of the meat supply companies as margins are continually squeezed by the major buyers. Figure 1 illustrates the top global meat companies and their growth through mergers and acquisitions (M&A). World Soya, Fats and Grains are also controlled by a very few companies, with Cargill also in the top 3 of both grain and fats. Tyson reported last week that it had purchased three poultry companies in Brazil and earlier this month concluded a Joint Venture deal in China.

Top 10 Meat Companies

Figure 1 - Top Global Meat Companies [source: Richard Brown - GIRA]

Richard Brown from GIRA gave several presentations. Figures 2 and 3, also from Richard Brown’s presentations, illustrate the trade flows of beef and sheep meat.

Sheep Trade Flows

Figure 2 - Sheep Trade Flows [Source Richard Brown GIRA]

Meat Beef Flow

Figure 3 - Beef Meat Flows [Source Richard Brown GIRA]

The importance of this information to our industry remains understanding the tremendous volumes involved within the meat industry, the efficient production systems they have in place, the quality of their genetics achieved over many decades and just how much work Ostrich producers need to do to become competitive suppliers in this market place.

South African Avian Influenza

A new case of avian influenza was reported this week (April 2013) in South Africa.   To put this outbreak into context it maybe helpful to provide a reminder of the situation over the past couple of years as it has had a major impact on all working to build their business based on ostrich, no matter where they are positioned in the supply/value chain.

Avian Influenza resulted in the South African Ostrich Industry closing their borders to exports of their meat, eggs, chicks and live birds in April 2011, when H5N2 was first identified as officially reported to the OIE (World Organisation for Animal Health) here.  Over the months since then, their veterinary services have filed 13 follow up reports with the last filed in October 2012.

In February 2012 an intitial report for an outbreak of H7N1 was filed - that report is available here with no follow up reports yet filed.   This is the strain reported in the media this week as found on one farm.  To date the follow up report relating to this new outbreak is not yet filed with the OIE as it is early days.

The May 2012 newsletter reported on how the South African ostrich industry were overcoming the export ban on raw meat to Europe by developing heat treated meat as the ban relates to raw meat only.  The press reports state that provided the meat is pre-cooked for 3 seconds at 70 degrees centigrade, it is stated as acceptable for export.  They report that whilst the price is lower than raw meat, the products ensure uninterrupted exports.

The continuation of Avian Influenza in their flock however, does delay the ability for export of eggs, chicks and breeder birds thus opening up opportunities for all with ostrich outside South Africa.

Size of Ostrich Meat Market

Newsletter No. 57 - Items 2 - 3

This newsletter contained signficant data on meat consumption in all regions to illustrate the market potential for ostrich meat and attempt to answer the question "what is the size of the ostrich meat market?"

World Meat Consumption Data

The FAO have been updating their database system and providing improved data, with a greater breakdown of the alternative meats, the market that Ostrich are sold into when doing a request for consumption of all meat.  Previously we had Bovine, Pigs, Sheep and Goat, Poultry and other meats.  Today, Turkey and Chicken meat have separate categories.  Duck, Goose and Guinea Fowl also have their own separate category. Ostrich, because of the low levels of production, currently fall into ‘Other meats’, not elsewhere classified (inc. Camel and game).

We are continually asked about the size of our markets.   Therefore this month’s newsletter will focus on publishing the data with further discussion on how to establish the size of the market.  I have downloaded some of the most relevant consumption data and graphed it for easy analyses.  I have printed them in a pdf document and can be viewed here.  That document formed a supplement to this newsletter. The statistics are not direct comparisons to those published in earlier newsletters as the format in which they are now presented and the country groupings have changed with the new database.

Market Size

There are two aspects when discussing market size.

a.         Existing Market
The ostrich meat has been available for sale for no more than 15 years, with limited production and sales slow to develop as a result of such things as :

  • Low volume
  • Inconsistent quality
  • Inconsistent supply
    • Aggravated by interrupted exports from South Africa as a result of Avian Influenza, Newcastle Disease and Congo Fever
  • Fragmented supply
  • Limited marketing

b.         Potential Market
Understanding the potential market should be the area of focus in order to develop a sustainable industry, provided there is production to support the development and the meat produced to an acceptable quality, consistently supplied and at the right price.

Figure 1 confirms the continual rapid growth of meat consumption that continues to be driven by increasing wealth in developing countries.  The total meat market (excluding fish) has grown from in excess of 150 million tonnes in 1990 to 240 million tonnes in 2005.  That is a growth rate of almost 60% in 15 years, thus confirming the predictions of significant growth in meat consumption.

World Meat Consumption

Figure 1 - Size of Ostrich Market

The consumption of all other meats Rabbit, Equine, “Duck Goose and Guinea Fowl” and “Meat Not Elsewhere Classified (including camel and game)” - as illustrated in Figure 1 - is a very small percentage of the total consumption.  The major reason for this is the lack of efficiencies in production of those species that make up that group.  However, it is still a group showing rapid growth, moving from just short of 8 million tonnes to in excess of 13 million tonnes over 15 years (Figure 2).

meat consumption by region

Figure 2 - Meat Consumption by Region

Figure 2 illustrates the regional distribution of consumption of other meats.   A PDF supplement to this newsletter contains a number of graphics as detailed in Table 1.   We are a World Association, therefore it is important to reflect the variations in consumption by region as our markets are all different.  Slide 6 illustrates the consumption of other meats in the different regions and, when studied, readers will be amazed at the significant variations from region to region.   No two regions are the same.

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Table 1 - Supplement Index

So what is the size of the potential size of the market?  To capture just 1% of the world 2005 alternative meat market requires nearly 3m slaughter ostriches/annum.

What is the size of your market potential?

The answer to that question depends on a number of factors - such as:

  • Location
    • Local Market
    • Export market
      • If export market, which market and can you meet the protocols required
  • Identifying your target market
    • Red meat market
    • Low fat meat
    • Cheap meat – commodity market
      • Buyers on open market with limited (if any) supplier loyalty
      • Low price
    • Exclusive Meat – low supply seeking product differentiation
      • Seeking specialty product
      • Recognises need to pay premium price
      • Requires confirmed consistency of supply
  • Production costs
    • Influence selling price required for profitability
  • Ability to supply consistently
    • With Ostrich this requires production systems that ensure:
    • Consistent egg laying
    • Consistent hatchability
    • Minimal mortality
    • Consistent days to slaughter required to achieve meat yields
  • Quality of product for target market
  • Selling price sufficient to sustain consistent supply

Understanding fully the controlling influences of that final point is the key to progressing this industry and to date remains the barrier to progress.