The graph in
figure 2 is a comparison between the rand value and the dollar value of
a bird paid to the producer based on average dollar exchange value in
each year. The figures for the gross value per bird, after value
adding, are not included in the report. This of course is
impossible to establish accurately as the gross value depends on
markets serviced - retail, wholesale, domestic, International etc. and
any value adding, these will vary from processor to processor.
Prices paid to producer also vary between processors, these are
workable averages.
Figure 2 - SA Comparative Producer Bird Revenue - Rand
and US Dollar
Values as per table 2 on Page 32 [Note: 2004 values average
to 30th August]
The graph in figure 2 is a
comparison between the rand value and the dollar value of a bird paid
to the producer based on average dollar exchange value in each
year. The figures for the gross value per bird, after value
adding, are not included in the report. This of course is
impossible to establish accurately as the gross value depends on
markets serviced - retail, wholesale, domestic, International etc. and
any value adding, these will vary from processor to processor.
Prices paid to producer also vary between processors, these are
workable averages.
Figure 2 shows the US Dollar revenue per bird peaking in value in 1995
and moving to a low in 1998, where the value has remained virtually
constant. By contrast the Rand value per bird peaked at higher
than the 1995 value in 2002. Figure 1 shows the 2004 Rand value
at 60% of the 2002 value - a significant drop that must have had an
impact on producers and processors. The rand values in the
report were 2002 values, with an average of Rand 10.50 to
USD1.00. By the time the report was first published the Rand had
firmed to Rand 7.13 to USD1.00 - that is nearly 50% drop and changes in
producer Rand value revenue were already being felt.
Subsequently the Rand has firmed further to a low in August of Rand
6.02 to one USD 1.00. The firmest it has been this year is
Rand 5.83 to USD1.00 around 20th July.
What does this mean?
The majority of the South African bird revenue is achieved in Export
revenue - hard currency (Euros and/or US Dollars). When bird
revenue was R1,800.00 the US Dollar value was $176 per bird at an
average R10.50 to USD1.00. This was the lowest Dollar value since
1998, when the Rand value of a bird was R6.11 to USD1.00 average.
Worthy of note is that during this time the value of the skins dropped
and the value of the meat increased, resulting in similar total bird
value.
Assuming there has been no change in the US Dollar value of the
products today a South African bird is worth R1,060.00 - if prices have
dropped, then the dollar and rand value will be lower again. The
question to ask - have local production costs come down in line with
the strengthening rand or are the South African support industries slow
to respond to the firming rand? Are producers aware that
whilst there has been a significant drop in the Rand value of a
slaughter bird, the US dollar value has changed very little in 5 years?
During 2000, I went on record to warn the SA producers to watch the
hard currency (Dollar/Euro) value of their bird revenue and input costs
rather than the Rand value. The majority of input costs in
livestock production are sensitive to world markets and therefore
sensitive to local currency variations. The movement in the rand
value over the past 5 years has been extreme and it can be very
dangerous to observe costs only in local currency terms under these
conditions. The above graphs demonstrate the need to pay
attention to these costs and revenue in hard currency values.
3. Increasing Revenue per
Bird
Worthy of note is that during this time period discussed above,
the value of the skins dropped and the value of the meat
increased. This had the net effect of increasing the proportion
of meat revenue to skin revenue.
Page 29 of the NAMC Report states:
[Quote] "For many years meat was a
by-product of ostrich processing in South Africa. In 1993,
ostrich meat accounted for only 15% of the income from a slaughter
bird. Today this percentage is between 30% and 45% and ostrich
meat therefore plays an integral role in the survival/sustainability of
the South African ostrich industry. The current average carcass weight
of a South African produced ostrich is 43 kg (live weight approximately
95 kg) at 12 - 14 months (the same weight is achievable at an earlier
age, but with negative effects on the skin quality). An average
carcass yields 24 kg of meat (16 kg of prime steak and fillet cuts and
8 kg of trimmings)." [End Quote]
There are a number of very key factors in this statement that are
fundamental to increasing revenue, reducing costs and positively
changing the economics of raising a bird. The 'myth' of younger
skins from all birds having negative effects on skin quality has to be
eliminated as it is a False statement. Skins from poorly
raised birds should remain unacceptable at younger age, but skins from
well raised birds are acceptable which is a True statement and
thoroughly proven.
Increased Revenue comes from:
Increased Meat Yields: Methods of
production required to produce quality skins at younger age also
produce birds with increased meat yield. Increased meat yield
will produce increased revenue.
Improved Grade Meat: Younger age
slaughter and faster grown muscles reduces the incidence of dark meat,
multi-coloured muscles and yields a greater percentage of tender
muscles. Improved grades, combined with good marketing, will
yield increased revenue.
Improved Grade Skins: Younger slaughter
is proven to yield a greater percentage of Grade 1 finished
skins.
Consistent Fat: A further benefit is
greater consistency in fat type/quality and yield
Cooperation:
Page 40 of the NAMC Report states:
[Quote] "South Africa has a large
number of independent role-players in its ostrich industry.
Fierce competition prevails amongst them in order to market their
products. Due to the fact that ostrich products are regarded as
niche products, the industry as a whole and the different role-players
individually has an approach to protect the industry in different
ways. This inter alia led to an “each for himself”
approach. Unfortunately it also resulted that there is no
coordinated approach to work together or to provide important functions
for the benefit of the whole industry, e.g. functions relating to
product development, generic marketing, research, etc. On the
international market each processor sells its ostrich products
independently of other processors. This led to the undercutting
of prices in order to sell larger volumes. It has also a negative
effect on monitoring of quality standards, which led that optimum
income levels could not be realized for ostrich products."
[End Quote]
The dynamics discussed in this paragraph are very important to
understand and are not specific to the South African processors and
marketers in particular - it is a problem throughout an industry that
in livestock production terms is very, very small. Within
the South African context, of course, there will always be a hope to go
back to "single channel marketing". Single Channel
Marketing has connotations of "Control" and "mafia" type
tactics. Co-operation of the right type enables each to
remain independent, but working in cooperation with each other, all can
grow irrespective of International boundaries .
4. Chick Mortality
Page 33 of the NAMC report states:
[Quote] "Chick mortality is a serious
destroyer with devastating and varied financial
implications. For the last two decades, in all surveys and
opinions polls, the vagaries of chick mortality have been listed as
enemy number one." [End Quote]
The severity of the chick mortality problem in South Africa has not
been fully realized or understood by many. These chick mortality
difficulties are not new at all. They are just getting worse rather
than being an improving situation. Reports on the South
African industry back in the early 90's also make reference to the high
level of chick mortalities being used as a method of production
control. There is no mystery as to why chick mortalities are such
a major industry problem when the causes are fully understood by those
paying close attention. The mystery lies in continual replication
of the causes rather than implementing the required management systems
to reduce and eventually eliminate poor hatchability and high levels of
chick mortality.
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]
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Last modified on Friday, March 10, 2006