May 2011 Newsletter

Included in this edition:
Avian Flu in South African Ostrich
Farmer Slaughter Bird Payment Systems
How do Buyers of Slaughter Birds verify the Age of Birds?
What is the percentage Value of Ostrich Meat in the Overall Value of the Bird?

Avian Flu in South African Ostrich
This month has seen a fresh outbreak of Avian Flu – H5N2 in a flock of South African ostrich. An official press release was published on 14th April by the South African Government Communication and Information System under the title of “SA bans ostrich meat exports”.

Searching for information to learn more about the outbreak there is one item that caught my attention in several reports:

Each month South Africa exports 108 million rand ($15.9 million) of ostrich meat. The country accounts for 80 percent of world ostrich production. About 90 percent of exports go to Europe and 3 percent to East Asia.

Closer examination of these figures raises some interesting questions relating to their accuracy.

Focusing on the opening two words – EACH MONTH – it states they export the same value month on month. The first statement to establish accuracy: “are the sales similar every month”?

Historically South African slaughter numbers vary dependent on the season. The variation for the lowest months ranges between 4% to 6% of the annual total and peaks with a range of 10% to 14% of total annual total. The peak month is usually November with the build up to supplying the Christmas markets. There may be some meat held in cold storage at peak times that may balance out supply, but generally the export ostrich meat sales are far from identical month on month.

The next question to test is that value of those exports. Establishing value of export earnings obviously includes any value adding to the raw meat, packaging and shipping costs. At their peak, South Africa only achieved total slaughter numbers around 350,000 birds per annum. Today the numbers are reported much lower than at the peak and possibly as low as 50% of that number. Whilst it may be possible that the odd month may reach close to the monthly value stated, is it really month on month and truly reflective of the annual total?

Farmer Slaughter Bird Payment Systems
This month I had reason to revisit some of my old test data when discussing farmer payment systems for ostrich slaughter birds. This seems a good time to refresh all our memories on the importance of understanding the pros and cons of producer payment systems.

Slaughter Bird – based on live or deadweight:
The farmer is paid a price per bird, usually based on liveweight. Over the years this has proved unsuccessful and rarely used today. Currently liveweight is of limited guide as to the meat yield or quality of that ostrich meat. Some birds carry an extensive amount of fat and others no fat. Genetics are also extremely variable at this time. As the ostrich skin is paid on a grading system, there is no way to assess the quality of that skin while the bird is alive. This method of farmer payment does not reward the quality bird adequately to encourage or support production of high yielding birds producing quality meat and skin.

All other payment systems currently used separate the payment of the skin and the carcass for assessing the value of the farmer payment. The skin may be retained by the farmer to sell directly or the slaughter facility will pay the farmer directly. In some slaughter facilities where volume is sufficient, the feathers will be valued independently, but usually they are included in the price paid to the farmer for the carcass and meat.

Carcass weight: WOA Ostrich Benchmark Production Targets provides the definition of a carcass
Payment by carcass weight maybe a set amount at the same weight per kilo for all birds, or it may be split into different weight classifications for a tiered payment structure. The latter is preferable as it is much fairer to the good farmer. It also encourages production of birds carrying higher meat yields, which are cheaper to process and return more revenue as discussed in Newsletter 77.

Boneless meat yield: WOA Meat Yield Classifications provides the WOA standards
This payment is based on the weight of the saleable meat removed from the carcass. If offered payment in this way, the producer should ensure there is a very clear definition of all that is included and how it is calculated. Payment on boneless meat yield will also have a weight classification system to enable a tiered payment structure to pay according to the yield class.

This tiered payment structure passes on savings made in the processing back to the farmer as he produced a better quality bird.

The left hand carcass in the photo yielded 38% more meat, therefore 38% increased meat revenue and will have cost the same to slaughter and process.

Apart from weight the other difference in these birds is the days they took to reach this stage. Clearly the increased yield was achieved as the bird was fed for 60 more days and that adds additional costs for the producer. Another good reason for paying an increased price to represent the savings made on the kilo processing costs.

Carcass Grade: The WOA Carcass Grading System provides definitions for the different grades
In addition to payment structure based on yield classification, carcasses should be graded for quality. Grading will consider Bird Age, Fat Colour, Muscle colouration, Heart Condition, Liver Condition, Presence of any Disease and any other condition that is not acceptable – such as bruising. Carcass grade can be applied to any of the above payment systems. This also helps differentiate the age of the birds to ensure older birds are not slipped into a batch of slaughter birds.

This discussion relates to payment systems for payments to the producer of birds by buyers of slaughter birds to encourage the production of better quality birds. Many of the South African slaughter plants were owned by the producers. These test birds were slaughtered in such a slaughter plant of which I was a farmer member. Whilst the managers the farmer’s employed to slaughter and market their birds could see these benefits, the challenge was the getting the farmers to understand the benefits and how to achieve the improved production.

How do Buyers of Slaughter Birds verify the Age of Birds?
The answer to this question currently is very simple. The supplying farm must have verifiable records that record the date of hatch.

Ostrich do change their feathers at particular stages of growth. The diet the birds are fed and the management of the birds influence the stages of growth and these can be extremely variable.

In the mid 1990s some South African scientists produced data based on bone development as a means of verifying the age of birds. However bone development is also diet dependent, so is not a reliable method to determine bird age accurately without comparative studies.

What is the percentage Value of Ostrich Meat in the Overall Value of the Bird?
The carcasses used above were produced from my own production birds when farming in South Africa. Shortly after that the South African processors started to quantify the difference and introduced a payment system that graded carcass weights according to weight. My slaughter plant manager told me “now your vision that the meat would be valued more than 50% of the total income is coming true”. That was early 2002.

This is a quote from the South African industry web site this month when reporting the current loss of export revenue from ostrich meat as a result of the stopping of ostrich meat exports as a result of the Avian Influenza:

“Ostrich meat currently contributes about 62% of income for the ostrich industry and for every month of the duration of the ban, South Africa will lose R108 million per month in direct income”, Kruger said.

For nearly a decade there is no evidence of this change in value coming as a result of improved farmer production systems adopted by South African producers to help them to increase meat yields, but rather as a result of further collapse in the price of ostrich skin prices.