1. Developing Markets
Market development is the single most important issue to achieve a successful transition from breeder markets to commercial production. Over the years, I have personally received a number of messages from people and companies starting out in Ostrich. One of their first statements references: “as ostrich is new to our country, there is no market, so we plan to export our meat.” Many assumed there are mature markets in other parts of the world, when in fact Ostrich meat is a new meat everywhere. Most ostrich meat is currently consumed in the EU, but when measured against the mainstream meat industries ostrich production remains very low and fragmented.
Many of you will have seen the diagram in Figure 1, at the end of this newsletter. This diagram illustrates that total world production of ostrich meat in 2003 was only 30% of the production of an average beef feed lot. See Newsletter 7 Item 3 for full details. We do not have accurate ostrich production figures today, but looking at that chart, we can all recognise that it no longer is an accurate representation of current world production, which is probably only 50% of the figures at that time. There are many reasons for this, but one is dependency on export markets rather than building local markets first to provide a sound foundation. This month’s newsletter will discuss the experiences of a few countries.
2. South Africa
Single channel marketing of Ostrich products in South Africa was the main driver for the development of Ostrich production outside of the country. The marketing organisation strictly controlled production for the supply of skins to the exotic skin market as the primary product. Therefore no market for the meat was developed. This led to the distribution of Ostrich and the development of breeder markets, at first in Israel, the United States, Northern Europe - including the United Kingdom - and Australia, before extending to almost every country in the world today as these countries floundered in the transition from breeder market to commercial production.
The first country to market the meat actively was Israel. Until deregulation and break up of the single marketing system, South Africa exported only the Fan Fillet, with most meat sold to Switzerland. The local meat processing companies purchased the secondary cuts and trim to use the meat as meat was a by-product to the skin industry, exporting finished leather mainly to Asia and the US.
Many South African producers pushed for deregulation of the industry to have an opportunity to increase production and grow the markets. Deregulation took place in 1994, with the European market targeted for the meat, rather than develop their domestic market first.
There was limited knowledge about the meat and no import protocols were in place. New slaughter facilities require the necessary approvals. Farm production systems were unproven and many remained using extensive systems, resulting in huge variations in meat quality from one farmer to another. No meat charts or muscle identification were in place. These all had to be developed and that takes time and money. All these factors are essential to marketing and apply to all countries, not only South Africa.
Building new markets requires sustainable, consistent supplies. Consistency of supply is achieved by incorporating production methods that ensure production is not disrupted by low egg production, poor hatchability, high mortality etc. and the ability to service the market without interruption.
South Africa suffered a number of bans on exporting the ostrich meat, initially because of outbreaks of Newcastle Disease and then at the end of 1996 Congo Fever became an issue blocking exports for 6 months. Protocols for handling such events take time to develop with a new industry, as there were no parameters in place to make judgements. These export bans caused disruption in supply to their markets and the value of the bird paid to farmers.
The Congo Fever ban took the heat from the developing production, with many leaving the industry. With no development of local markets for the meat, the industry put in place a policy to cut back production at the beginning of 1998 to enable the skin market to recover, as the skin market remained the primary product. The foot and mouth outbreak in the UK in 2000 put pressure on demand for alternative meats, with high demand for ostrich. Production grew until Avian Influenza hit and once again stopped the flow of meat exports. The industry today probably is half the size it was before Avian Influenza. That is due to a combination of heavy culling and poor producer returns.
Had South Africa focused on the local meat market first, it would be possible to develop it free of such interruptions; however growing the industry did not suit an industry focusing on the exotic market for skins as the driving product.
3. United States of America
In 1996 the US was at the end of the Breeder market needing to change fast to make a successful transition to commercial production. In that year, Daryl Holle gave a presentation to the Central United States Ostrich Association in Omaha, Nebraska, with most of the major players present and all clearly aware of the positives of these amazing birds.
His presentation that day covered 8 points required to successfully convert from a breeder market to slaughter industry and create the awareness that this had to be actively pursued with a sense of urgency:
Point 1: Generate awareness of the need and open discussions on how to achieve
Point 2: Generate understanding of ingredient costs versus ingredient value
Point 3: The need to produce uniform quality of product for the consumer
Point 4: Understand the need to produce feed of higher production output as essential to economic ostrich production and success
Point 5: Market Ostrich for what it is - a 99% lean, boneless, highly nutritious, red meat that commands a premium price
Point 6: Invest in creating a local market for all products
Point 7: Build business plans based on development of local markets, not export markets
Point 8: Put together a large group of dedicated people to create a system that will:
- ensure uniformity of product
- develop high volume output at the lowest cost possible per unit
- put in place adequate financing
- run on sound business lines
The presentation concluded with a prediction that if these things did not happen, the ostrich industry was likely to fail in the U.S. History tells us what happened; none of those points were followed resulting in the near total collapse of the US industry and many countries since have followed the same route.
A report on the Australian industry written by Chris Tuckwell, published by the RIDC (Rural Industries Research & Development Corporation) states 120,000 ostriches farmed in Australia in 1997, with projected slaughter numbers of 100,000 by 2,000. You can review the report at http://www.rirdc.gov.au/pub/handbook/ostrich.html. We know now that the Australian industry did not achieve those slaughter numbers.
The Australian Ostrich Association set up the Australian Ostrich Company (AOC) as the marketing arm for their new industry as they recognised the need for a central organisation. Their marketing focus was the export market. Newcastle Disease in poultry in the country shut down the export market for a considerable length of time and lacking a strong domestic market developed for the meat, there was no market for the meat.
The company also ignored the importance of ensuring consistency of product and producer production methods that ensured high production, cost effective output. This is demonstrated in “Benchmarks for New Animal Products Emu & Ostrich Production” published by the RIDC, http://www.rirdc.gov.au/reports/NAP/00-136.pdf, illustrating again the tremendous variation in production from farm to farm.
Israel led the way in marketing of the meat as a source of valuable revenue for the bird, but the value of the skins was the foundation of their industry. The Jewish religion is the only religion that does not allow Ostrich meat to form part of the diet, as it is not Kosher and hence not possible to develop a local market. Therefore, when the recent Avian Influenza outbreak in the region prevented the export of the meat, this has resulted in severe problems for their industry.
Please welcome Dr. Asli Artvinli as the Country Liaison for Turkey. Dr. Artvinli has written a detailed report on the current situation in Turkey. The report will form a supplement to this newsletter.
7. Projections of Global Meat Production - 2050
Dr. Thomas Elam published this article in August 2006. The article discusses the doubling of meat demand by 2050 and what is required to achieve it. You can read the full article by clicking on this link. http://www.cgfi.org/cgficommentary/ProjsGlobalMeatProd82106. Below is the discussion on the implications. His focus is improving understanding of the need to make current agricultural land more productive to achieve the additional meat. Ostrich can contribute to this given their efficient use of feed, when that feed contains productive ingredients and ration design enables them to optimise the utilisation of those ingredients. Point 2 and point 4 in Item 3 USA, reference the need to understand these two important factors and their importance in commercial production.
An additional, very important factor with Ostrich in this discussion is the high lucerne (alfalfa) content of their diet. Not only is lucerne highly productive containing many nutrients, it is also a valuable crop in any crop rotation program. Lucerne fixes nitrogen in the soil, helping the soil to remain productive whilst limiting the requirement for artificial chemicals.
Quote: Implications: With no more, and perhaps less, productive farmland available over the next 50 years, this projected growth in meat production represents a major challenge to both farmers and the environment. More meat means more feed and forage will need to be produced, and more land will be required for housing the additional animals that will be on farms. In addition, more production of all crops will be needed, including those used for direct human consumption and for industrial uses.
To support the higher animal product production level of 2050 it is required that feed crop yields will need to more than double if we are to increase meat production in line with increases in GDP and population that will almost certainly happen over the next 45 years. To achieve this level of yield increases implies that agricultural research aimed at increasing feed crop yields should be a high priority.
Failure to substantially increase crop yields in line with the meat production projections will result in increased pressure to push crop production onto more of the world’s fragile lands that are not being farmed today. If feed crops production is pushed onto marginal land the result will be a degraded environment, increased soil erosion, increase water pollution, reduced wildlife habitat, and increased use of chemical and fertilizer inputs.
The only environmentally responsible way to accommodate the world’s increasing demand for meat is to produce increased amounts of feed crops without using more land. The only way to accomplish that is to substantially increase yields. End quote
Every member of our association is concerned about how to develop their markets and make a successful transition to a prosperous commercial slaughter industry.
Attempting to build our industry based only on exporting product, experience has proven is disastrous because disease can shut down exports overnight. When an industry is buoyant based on local market supply, then export markets can enhance market opportunities.
Disease outbreaks never shut down the US industry from exporting, so why then did it still fail? The industry failed to pay attention to uniformity of product or consistency of supply in a unified manner to develop the national market. Instead, it became fragmented into low volume preventing any from making fair returns. Processing companies purchased birds regardless of age and quality to slaughter and export the meat.
There will be some readers suggesting that they have to export because prices are too low in their country. While volumes are low, costs are inevitably higher in whatever country we are operating; operating in low volume requires higher selling prices.
At this stage of our industry, Ostrich meat is not a commodity. Ostrich meat is a niche product in very limited supply. Our target markets is high-income consumers willing to pay good prices provided the product is quality and worthy of the higher prices. Most all countries have these potential customers. They are demanding customers, requiring top quality consistent product. As volume increases, economies of scale help reduce costs to enable prices to come down and expand the range of the target markets.
9. Comparative Annual Meat Tonnage
Figure 1 - Comparative Annual Meat Tonnage Global Ostrich Production vs Single Average US Cattle Feed Lot – as at 2003
Go to Turkey Report