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:

Organic
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.

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