Issue No: 16
1. CL Report from Spain
2. Ostrich Leather, What is the Problem?
3. Selling Chicks in South Africa
4. Email Address
5. Contributions
1. Latest Developments in the Spanish Industry from Alan Stables
The cycle of the ostrich industry has been the same throughout the world. High breeder prices during the breeding phase and when the commercial phase starts, the prices drop dramatically. So breeder prices in 1995/1996 were around 4000 euros, and as more breeder birds came onto the market they dropped to 1500 to 2000 per breeder bird in 2000. And then the big drop came. They dropped in 2001/2002 to as low as 300 euros per breeder bird - if you could sell them.
Also of note is that some sellers were unscrupulous in offering buy-back schemes. "If you buy my breeders, I'll buy back your eggs" etc. ALL OF THESE FAILED. Indeed it was simply a "Con" to get big money for the breeders. Yet in part I have little sympathy for the buyer because the buyer often failed to get references and did not listen to solid advice. Buyers accepted what they wanted to believe (the good news) and blocked out all warnings (bad news).
During 2001/2, various processors came on board to market meat. Many farmers did their own thing, and competed against each other. Variable product was put on the market causing ostrich meat to have a bad name. Follow up orders failed to materialise and when they did, farmers could not supply. Consistency of product, quality of product and service were severely lacking.
Regional groups were formed normally in the form of cooperatives. None of the cooperatives worked, leading to much disharmony, disgust and bankrupt farmers. The farmers within the cooperatives expected to get high earnings and put all their faith in one or two people to get it running. The cooperative idea was sold to the farmers based on unrealistic earnings. Yet again the farmers did not do their homework. The cooperatives were ran unprofessionally with a complete disregard to see the whole ostrich picture, preferring to compete against one another instead of working for the benefit
of all.
The early processors took advantage of the situation and purchased birds very cheaply for slaughter. The survivors were the processors that managed to get good meat accounts - operating in volume. During 2003, there was a sudden change in that farmers could sell their birds, but usually at a low price 100 to 150 euros per bird. At the beginning of 2004, all the slaughter birds had been culled and there was a shortage of birds. Demand for meat had increased.
Processors are now trying to tie-in farmers to breeding exclusively for them, and offering contracts. Very few farmers are loyal and will sell to a competitor who is offering more money - regardless of the contracts they have signed. The harm done by this is that a processor is unable to plan - he goes to collect 30 birds for slaughter from farm A, only to find that he has none - yet he has to supply meat to his clients or he loses them. All the processors are trying to get birds, and have no shame in trying to get birds contracted out to others. It's a scramble and a big mess.
Slaughter bird prices in Spain are typically 180 to 200 euros per bird, and look to be set at this rate for the near future.
In the short-term the farmer gets more money, but the disloyalty of farmers will cost them dearly. The whole ostrich industry in Spain, and in almost every country I see, is so unprofessional it is frightening.
Farmers are acting completely blind in that they do not know their costs per chick, costs per slaughter bird and assessing yields per bird is non-existent. The most they know is the performance indicator of number of eggs per breeder park. There is no traceability as chick identification is non-existent. Nutrition is not taken seriously either, and is seen more as an expense as opposed to a way of cutting unit costs. Processors also have not encouraged traceability leaving the responsibility totally on the farmer, and do not provide meat and skin yields per bird. Taking the step further - average meat yields and skin yields per breeder pen is therefore impossible. The farmer does not care, nor does the
processor.
The large meat buyers are vultures. They go for price per kg at every stage, and the small meat buyer is a high risk for non-payment. The majority of meat products I have seen have poor packaging leading to a poor image. Those that have had good packaging have had in some cases low quality product. The marketing of ostrich meat in Spain has however improved in the last couple of years - indeed it has had to improve in order to get access to supermarkets. These processors still exist.
So in general, the demand for ostrich meat in Spain has increased, and can be found in most of the major distribution chains - Makro, El Corte de Ingl�s, Euroski to name a few. Ostrich meat is not seen in your general butcher and nor does it appear commonly on restaurant menus. Much of the ostrich meat production in Spain goes to France and Germany, and is sold at low prices. The farmer however is in the best position he has ever been in. He can choose which processor to align himself and at 180 to 200 euros per slaughter bird, is able to plan more confidently.
Our thanks to Alan Stables for the above report.
2. Ostrich Leather - What is the Problem?
Frik Kriek Sales Director of SCOT (South Cape Ostrich Tanning) recently wrote an article with the above title. The full article can be viewed at http://www.ostrichsa.co.za/products.php?action=get_article&id=11 The article is too long to publish in this newsletter, but is well worth reading. I will pick up on a few quotes as Frik has raised some excellent points for discussion.
The opening statement:
Quote: Ostrich leather is currently a problem for the industry as it is not generating the expected income, this despite the fact that it is a unique, exotic leather with a wide range of applications. The question is, should we not look closer to home as a first step to tackle the current situation we are experiencing? end quote
Frik discusses several issues:
a. Stability
Frik acknowledges the fact that prices for leather will inevitably fluctuate from year to year as the leather is a fashion product. He suggests that there needs to be an averaging of prices in payments to farmers to even out the good years and the bad years and goes onto state:
Quote: Farmers who align themselves with organizations that follow this practice should realize that they will not receive the highest returns when markets are good, but they will also not receive the lowest returns in bad times. Difficult decision for a farmer ! It is not fair for the farmer, who continually makes a contribution, building up reserves during the good years to then have to support his neighbour, (who was chasing the highest price) during bad times. This is a speculative activity and the industry must ensure that the "long term" farmer is compensated for his commitment. End Quote
We must never forget that our industry is a new industry everywhere. Producers, processors and marketers do need to work together for sustainable growth and at the same time remember that we need to optimise the revenue from the whole bird.
b. Information
Quote: Ostrich farmers require timeous information regarding the following:
i) How many birds can be slaughtered
ii) What price can be expected
iii) Product requirement /specification, weight of birds and skin size as well as various factors relating to quill size, etc.
End quote
It is worth noting here that our industry has the ability to produce birds with absolute knowledge of weight, skin size and quill size and in a commercially viable finishing time. The reason this is not currently being achieved is that few records have been kept and the production potential of the birds are not understood by too many of the support specialists whose task it is to assist producers to achieve commercial levels of production, resulting in outdated management
systems being adopted.
Quote: Considering that the production cycle is between 14 and 20 months, the most critical time for the farmer is at the beginning of the cycle, to enable him to make a decision regarding what his investment in slaughter birds should be. Currently the decision is taken in an "information vacuum". Prices for day old chicks are determined mainly by the current market rather than the future market. The situation is further compounded by the fact that the marketing people have no idea of the market conditions expected in 18 to 24 months time. End Quote
Maintaining a slaughter age of 14 months will always put the industry under pressure as it is unsustainable unless unrealistically high prices are paid for the products. Once ALL the aspects that control production are understood -
Nutrition, Feed Management, Farm Management and Genetics all working together
-it is possible to halve the current slaughter age and still have skins that are acceptable to the market, or slaughter in 2/3rds of the time with in excess of 50% greater meat yields.
c. Product Quality
Quote: I have already indicated that the farmer must produce the correct product, complying with market requirements. End Quote
This is a cry I have been hearing from processors and marketers since I joined the industry 10 years ago. It really does not matter how much a bird has cost to rear, if it is not suitable for the market, it has no value. I recently was told of a situation where an arrangement was made for regular slaughter of birds for a farmer. There was a market for the meat and a market for the skins. The farmer had been informed about the dangers of feeding only Alfalfa and the impact on the meat. Well the meat buyer could not accept the meat as it was just too dark in colour. Everyone has lost. The meat buyer is short of meat, the skin buyer is short of skins and the farmer is left with no market for his birds.
d. Product Development
Quote: Fashion markets in which we are active, are consistently changing and they are continually looking for new textures. It requires initiative and creativity to keep up with these demands and deliver something new to the market on time. Tanneries will be required to do what they have never done before and if they do not comply, and only do as they have done in previous years, they are in a dead-end situation. End Quote
There are a few of us who have been saying this for a number of years now. One of the aspects that tanners will tell you that makes Ostrich a challenge to tan has been the variability in skins from producer to producer. In order to carry out creative new finishes it will be very much easier if skins have far greater consistency than is currently the case.
Quote: The South African ostrich industry should be more sensitive to fashion /market trends and pool their resources to maximize the generic exposure of ostrich leather to its potential market . At present, the fashion houses are aware of ostrich leather, but they are not continually using it. We as an industry must work harder to change this. End Quote
e. Markets
Quote: There is a different interpretation, or expectation of generic and trademark promotion in the industry. Different promotional techniques are required for different market situations. Generally we think ostrich leather is over supplied in the world. This is not the case, it is over supplied in the traditional markets and we need to expand from there . Trademark promotion, promoting the uniqueness of a specific companies product will for instance, be done in Japan, where ostrich leather is generally well accepted. Companies who want to increase their market shares do this on their own, by way of branding their product. End Quote
There are markets that cannot be accessed as we have insufficient volume to enter those markets.
f. Ostrivision
Quote: This is where the Ostrivision project comes in, to create an industry structure that must deliver certain pre-determined results that will contribute towards a stable and profitable industry. This to me is the answer for solving the "problem". End Quote
The Ostrivision Project is specific to the South African Industry, but I think all would agree with the principles of requiring an industry structure.
There has been a comment posted in response to this article. It has been posted by Stefan Maree, Chairperson of the South African Producers Association and The South African Business Chamber. He states:
Quote: Frik is right in his article about our industry. The present serious talks on the situation in our industry are now of cardinal importance on the climate of working together to set up what is necessary. The focus must be on business solutions for our problems and not theories and ostrich politics. Strong leadership is necessary to bring business solutions to the fore and to get our industry steadily on the path toward development and stability. It will require people with strong will and perseverance. End Quote
3. Chick Purchases in South Africa
Most members are probably subscribers to Alan Stables' regular news letter and will have read this message:
Quote: Most new farmers want to do the full cycle - have breeders, do incubation, and rear chicks to slaughter age. As ostrich farming develops, farmers become more specialised. In South Africa, it is normal to buy day old chicks on contract to resell them again at say 3 months of age.
An advert placed in South Africa's Farmers Weekly, offers 3 to 4 months chicks weighing 40 to 50 kgs at 18 South African Rand per kilo liveweight. Using an exchange rate of 6.615 rands to 1 US$, this works out to be US$108 (87 euros) to US$136 (110 euros) per chick.
The interesting thing here is that the chicks are sold on weight, thereby rewarding the chick grower for
growing his chicks out. End Quote
It has been a practice in South Africa for some years now for chick rearing to 3 or 4 months to be done by specialists. Some buying in and selling on and others rearing on contract for the larger breeders. A comment I hear from feed lot operators was how the chicks seemed to stop growing and some even go back when they arrived in the feed lots. Why is this?
Feed:
We all know that the chicks in the early weeks put on weight very quickly. Some chick rearers I have visited were changing to a maintenance ration from 2 months. The chicks maintained good weight gains, but this is not quality weight gain, as the rations are very low in nutrients and especially vitamins and minerals required for development of strong frames. Feedlot owners are not aware that the chicks have been taken off grower rations. These rations carry a low per tonne cost, the chick rearer makes a good profit and the feedlot operator is left with chicks that are slow to develop and all too often are going backwards.
Moving Chicks:
It is our experience that when chicks are moved they will take a knock in feed conversion, even when the rations are of the correct nutrient levels and the birds are eating the correct amount.
4. Email Addresses
A reminder again to any of you who change your email address to please inform Craig so that we can keep our records up to date. When notifying Craig ,[email protected], please give your name, old email address and new email address.
5. Contributions
As always, I ask for contributions from Country Liaisons and other members. A sharing of your experiences, what is happening in your area - anything you believe that would be of interest to other members. Any contributions for inclusion in future news letters please send to Fiona at [email protected].
Any comments or suggestions, please post either to the members list [email protected] or Craig at [email protected]