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:
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 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.
Summarising the different components that working in a collaborative enterprise of small farmers to build a complete value chain:
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.
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.