Issue No. 38
1. Introduction
2. Six Ways to increase your Income
3. Information on the Internet
4. Ancient Ostrich Eggs found in Israel
5. Contributions
1) Introduction
This month’s newsletter has two major topics to discuss and each is longer than normal. For that reason as we deliver the newsletter by email to prevent the emails becoming too long, we are splitting the newsletter into two sections.
2) Six ways to increase your income include
Many of you will have read Alan Stable’s last news letter and the 6 ways he gave to increase income. It all sounds excellent advise, but how can we apply this advice to our ostrich businesses? I believe this makes an excellent topic for discussion.
2.1 Increase your transaction size
In any transaction there are always certain administrative activities that have to be carried out regardless of the size of the order. A certain volume is required to ensure sufficient margin to cover these and other fixed costs. The greater the volume clearly reduces these costs per unit of sale. Currently this is a critical issue with ostrich production as our volumes are so very low. At every stage of the production chain there are few economies of scale yet being achieved.
One example is skins. Skin buyers will pay better prices if handling container loads. When only selling a few hundred skins, there are significant additional transport and handling costs when it is necessary to consolidate loads in a central collection point.
Whatever the product, the paper work and administration is the same if a shipment is a container at 15 tonnes or a pallet at 1 tonne. So increasing your transaction size will not only increase revenue, it helps the margins as well.
2.2 Increase your margin
The margin in this instance is of course the difference in the selling price (total revenue received) and cost of production. Increased margins can be achieved by increasing revenue and reducing costs through improving production efficiency. With ostrich we have opportunities to benefit significantly from both.
Increase Revenue
Revenue can be increased in two ways – by increasing the price of the products and by increasing the yield.
Increasing the price is the area of good marketing to differentiate your product over your competitor. Our industry is currently in a position of lack of supply, so our ability to increase the selling price in some markets should be excellent for a number of years. Increased prices can only be expected if production systems ensure absolute consistency of supply and consistency of product.
Product grading is the next tool to achieving increased prices. Grading for skins has been used to differentiate price for many years, with significant variation between Grade 1 and Grade 4. The difference per skin at US$16.50/sq ft Grade 1 and Grade 4 is around US$100.
Similar price differentiation can be achieved for meat. However, the meat is a new product and our grading system requires education, both for our customers and producers. Marketing the meat on grade to provide product differentiation is one method to increase the selling price of the meat.
Reduce Costs of Production
There are a number of ways to reduce the current costs of production very significantly. Increasing yield and reducing the age to slaughter are two key factors. With ostrich we have very significant savings achievable in this region.
Cost of Chick: The greater the number of slaughter birds produced per hen the lower the breeder cost of chicks. The knock on effect of increasing the number of chicks per hen that survive to slaughter are reduced incubation costs, stronger chicks that convert feed more efficiently and have increased survival. Stronger chicks also require less heat in the early weeks.
Cost per Kilo Meat: With ostrich significant savings can be achieved by increasing yield and reducing the time to slaughter over current averages. Key savings when reducing time to slaughter are reduced feed consumption, less infrastructure required, less labour and not only less working capital but also the cost of that working capital is reduced. The cost of working capital is reduced as it is recovered more quickly.
Cost of Processing: The size of a bird does not affect the cost to slaughter a bird. Therefore, as the graphic below clearly demonstrates, significant savings on processing costs per kilo can be achieved with increased meat yields.
Figure 1 - Influence of Meat Yield on Costs of Processing
Skins: Worthy of note when discussing processing costs; it costs exactly the same to tan a Grade 1 skin as it does to tan a Grade 5 skin. So clearly far greater margins are achievable the better the grade as the costs of production are identical.
Early slaughter also reduces the costs of producing quality skins. A study carried out by the scientists at the experimental farm in Oudtshoorn clearly demonstrated the increased number of grade 1 skins when slaughter was at a younger age.
For too long there has been the belief that skins from young birds have immature follicles. A number of us have proven very clearly that when production systems are correct, younger birds can also produce skins of acceptable quality.
2.3 Increase the frequency of transactions
Many products in food production are determined by season. One way to increase frequency of transactions is to extend the season. A knock on affect of introducing production methods that reduce the costs of production as suggested above, will be an extended breeder season and elimination of the “end of season” chick syndrome. Chicks hatched towards the end of the season have often been considered weaker than those hatched at the beginning of the season.
2.4 Increase consistency of purchasing
The following are processes in the production chain. Some may be involved in only one process, others several or all of the processes.
|
Producing Feed |
Producing Fertile Eggs |
|
Producing Day Old Chicks |
Producing Slaughter Birds |
|
Producing Breeder Birds (Genetics) |
Slaughtering Ostrich |
|
Processing Meat |
Tanning Ostrich Skins |
|
Sorting and Cleaning Feathers |
Manufacturing Processed Meat Products |
|
Manufacturing Leather Products |
Manufacturing Pharmaceutical Products |
|
Manufacturing Cosmetics |
Dying Feathers |
|
Manufacturing Feather Dusters |
Decorating Eggs |
|
Wholesaler |
Retailer |
The customer of every single process is dependent on being supplied with a consistent product; the customer maybe just another department of the same farm or company or it maybe a totally independent commercial concern.
Consistency in purchasing is essential and if any one of those processes fails to deliver a consistent product, it will impact on the profits of those further up the chain. If delivery is unreliable in supply, the customer will fail.
In this discussion the most important customer is the user of the product – our final customer. That leads into the final two items on Alan’s list.
The final two items were “Increase longevity (keep your customers longer)” and “Improve conversion of new prospects to customers”.
My suggestion is that to reverse these two items may be more appropriate for our fledgling Ostrich Industry?
2.5 Improve conversion of new prospects to customers
Globalisation of agriculture has resulted in the livestock production industry becoming a highly competitive market that has become leaner and increasingly efficient over the past few decades.
The Ostrich industry is a new livestock production industry, so what do we have to do to gain customers in such a competitive market?
A major complaint with buyers of ostrich meat is inconsistency of supply. There are many markets we cannot enter as we lack volume. The first step is to have sufficient volume on a consistent basis. Producers who can achieve consistent supply will have overcome the current production challenges of low numbers of eggs laid, low conversion of egg to chick and high chick mortality. If scheduled to deliver birds to slaughter, ensure they are delivered on the day.
Figure 2 - Comparative South African Slaughter Figures
The graph in Figure 2 shows the tremendous variability in slaughter numbers, not only from month to month, but the significant variability in the same month each year. This makes supplying markets extremely challenging as actual product available is clearly unknown and extremely inconsistent.
2.6 Increase longevity (keep your customers longer)
The ability to guarantee supply efficiently, at a market related price and saleable product is a most important issue to not only win over new customers but to keep them also.
The processors – slaughter plants, meat processors, tanneries, leather good manufactures and feather companies can only win over new customers and keep their customers provided they have a reliable and consistent supply of raw material.
3) Information on the Internet
Have you used the Internet to find information on Ostrich?
I believe we can all answer yes to that question. I recently did a Google search on Ostrich and Ostriches to see how much old information that was produced during the initial breeder market is still published. There was very little known about Ostrich production during that time and the information published is now seriously out of date and misleading.
My focus was on Academic Institutions and Government information web pages. The information I found still there can be described as irresponsible from institutions that are considered respectable and readers trust as accurate and verifiable data.
Some brief examples of information I have found to illustrate how damaging the information published by these sources has been to our industry:
a. The North Dakota State University Extension Service has a published document on Ostrich that I found on two separate web addresses. This document was produced in 1993. Reference is made to the cost of eggs as $1,250 each, breeders between $50,000 and $75,000. When discussing the fact that it is currently a breeder market the following comment was made:
Quote: People currently in the industry believe the ostrich industry will reach maturity in four to seven years, and, at that point, 12 to 14-month-old 100 pound birds should be selling for $800 to $1,000. End quote
A 45kg bird in 12 months – clearly an error!!! The high price was based on assuming a high skin prices. Skin prices have dropped from over US$40/sq foot for a Grade 1 finished skin to around US$16 square foot today.
The production information in this document, if followed, would explain why many producers failed to achieve success and why 13 years later we still do not have a mature industry. Some of that misinformation is still quoted to us today as people believe it to be accurate.
This document can be viewed at http://www.ext.nodak.edu/extpubs/alt-ag/ostrich.htm.
b. The Scottish Agricultural College has a modern web site, but their document on ostrich farming has not been updated and is full of misleading production and economic information. One example to discuss:
Quote: Ostriches are a grazing bird with a staple diet of grass, or preferably Lucerne supplemented with grass-type nuts and poultry-type feeds without additives……………………….
This means a breeding trio can be expected to raise 30 - 50 birds per year. End quote
Our Chairman, Stan Stewart, followed the advice that grass was the staple diet when he started as that is exactly the advice being given in the early 1990s in Britain. He specifically set out to purchase a grassland farm.
Ostriches are browsers, not grazers and even well managed grass is unproductive forage for ostrich by comparison to Alfalfa. Any producer following the advice above, all of which is unscientific, conflicting and breaking some basic rules of good animal husbandry, would not achieve 30 to 50 slaughter birds per year per hen.
This document can be viewed at: http://www.sac.ac.uk/consultancy/farmdiversification/database/novellivestock/ostrichfarming
c. Agriculture and Agri Food Canada produced a very detailed document under the heading of Profile of Canadian Ostrich, Emu and Rhea industries. The tables in the document suggest that it was published around 1999 as the Canadian industry was on the downturn. Many of the facts are now out of date and the links provided either no longer working or still quoting the high values of the early 90’s. One paragraph in the conclusion is very accurate and applies to many countries:
Quote: When the industry started and entrants were making a lot of money, there was a good deal of cooperation among producers. Associations flourished and with them seminars, conferences, joint exhibitions and Newsletters. Now that 'times are tough' and there is even more need to work together, many producers have withdrawn from the associations, have become protective of their own markets and interested only in furthering their own operations. A strong industry is not one in which producers are working in isolation or against each other, but one where they work together, pool information, pool resources and together succeed. end quote
The whole document can be viewed at: http://www.agr.gc.ca/poultry/prindrat_e.htm
Searching Ostrich and Ostriches and exploring just the first 10 to come up on each search resulted in more than 18 links to academic and government papers that are out of date, many more than 10 years old. These papers that can be considered to be providing information that today is having a negative influence on our industry development for the reasons discussed.
Over the years producers, nutritionists, potential industry entrants and other support specialists (e.g. vets, scientists) from every country that has tried to produce ostrich have communicated with us, thus indicating how many use the internet for information. This is one reason we have had continued publication of such a high level of misleading information.
So what can we do positively to change the situation? As a starting point we would suggest any one coming across data that is clearly out of date writes a polite note to the web master.
4) Ancient Ostrich Eggs found in Israel
An interesting piece of ostrich related news, though not too relevant to commercial production today, is the discovery of four ostrich eggs that are estimated to be thousands of years old. They were discovered by a farmer in the Sharon region of Israel.
Figure 3 - One of the eggs 'Laid thousands of years ago'
(Photo: Yaniv Levi, Israel Nature and Parks Authority)
The eggs have been sent to the Israeli Sea Turtle Rescue Centre in Michmoret for examination. Lab tests are also being conducted as it is considered that the eggs are many thousands of years old.
The full article can be viewed at: http://www.ynetnews.com/articles/0,7340,L-3240850,00.html
5) Contributions
As always we ask for contributions. As we have said before, communication is particularly important at this time while H5N1 Avian Influenza is spreading and Ostrich producers are asking for information. The WOA offers the best channels of communication within our industry at this time for all participants to enable our fledgling industry to share experiences and develop strategies.
Any comments or suggestions, please post either to the members list [email protected] or Craig at [email protected]
Ask not only what the WOA can do for you but also what you can do for the WOA.
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