WOA Logo
   
Mission Statement
"To Represent The International Ostrich Industry Through Communication, Dissemination of Information and Provision of Industry Standards"
 
 

Contact Details :

Craig Culley, Secretary
World Ostrich Association
33 Eden Grange
Little Corby
Carlisle, UK CA4 8QW
Tel +44 1228 562 923
Fax +44 1228 562 187
Email:


 


World Ostrich Association Newsletter No. 77

August 2009

 

Included in this edition:
1. Cutting Costs and Adding Value
2. Defining the Whole Chain
3. Efficiencies in the Ostrich Chain
4. Welfare in the News


1. Cutting Costs and Adding Value

With meat production becoming increasingly competitive, companies continuously seek ways to become more efficient as the best method of cutting costs.  Although produced in 2003, the study produced by The Red Meat Industry Forum (RMIF) based in the UK illustrates the benefits.  The study also includes several case studies of individual operations.

The focus of the approach is reinforcing a message we have repeated regularly through our newsletters about the importance of understanding the interdependence of every stage of the production chain when producing meat products for the consumers (our customers).   The full document can be downloaded from the RMIF web site by clicking here. This newsletter will focus on a few of the aspects raised in the document as they are relevant to Ostrich Meat Production.

2. Defining the Whole Chain
Simplifying the chain, the RMIF have subdivided the stakeholders into 4 clearly identifiable sections.

Table 1 - Stakeholders

Chain Context

Producers

Farmers

Supplier

Customer

Processors

Abattoirs, retail packers, butchers, wholesalers, food processors

Supplier

Customer

Point of sale

Supermarkets, restaurants, food service

Supplier

Customer

Consumers

The end user

 

Customer

 

The purpose of this particular study was illustrating the cost savings possible when the stakeholders work in collaboration. The study identified the following areas for cost savings and satisfying the customer: 

  • Carcass Classification:
    Only 50% of animals classified by MLC (Meat and Livestock Commission) meet the target specification for multiple retailers.

 

The Ostrich industry still has to start meaningful genetic selection and production systems to achieve consistency in carcass size and shape.

  • Abattoir Efficiency:
    Only 60% of operator time in abattoirs/boning plants typically is spent adding value

 

This is a major issue with ostrich while volumes remain low and will be discussed in more detail in section 3.

  • Packaging Failures:
    A 2% fault rate is common for vacuum packing machines in meat processing plants.

 

This is just one example of the influence of packaging failures in lost revenue. 

  • Sales Forecasts:
    Retail sales forecasts for red meat, three days in advance, are typically only 65% accurate.

 

 

Estimating sales forecasts is always a challenge.  However, with Ostrich, I have heard an endless complaint from slaughter plants on the failure of farmers to deliver birds when promised, birds not achieving the meat yields or hugely variable meat yields.  This failure from the producers results in inability to supply the markets consistently and meet orders.

  • Distribution:
    Food distribution trucks spend only 28% of their time on the road and 20% of vehicle miles are empty.

 

Ostrich production, especially when first starting slaughtering, generally has very small volumes, thus making distribution challenging and costly.  If the output can be consolidated with the distribution network of another meat type, this can help reduce distribution costs.

  • Retailer Shrinkage:
    Retailers lose about 1.5% of their revenue through ‘shrinkage’, i.e. theft and damage. This is roughly equal to a third of their profits.

 

Restaurateurs have told me of losses from poor quality ostrich meat delivered and inconsistent quality resulting in significant wastage as some of the meat was unusable. 

 

Their approach is underpinned by the following principles:

I. Think of Red Meat as a Value Chain
For our industry we are referring to Ostrich Products including all our products, but meat has to be the core/driving product. Working in collaboration every section of the chain must maximise the value and minimise the costs.

Figure 1 - Ostrich Whole Chain

Ostrich Value Chain

II. Put Consumers First
The shoppers who select our products from the shelves (meat, leather goods or any other products) provide the revenue that must pay all the costs incurred throughout the whole production chain and provide them with a fair return on their investment. It is the consumer decision to purchase that determines the REVENUE. With ostrich meat, it must look attractive, be consistent in taste and texture appropriate to the cut and reliable on availability/delivery. Therefore consumer needs must be a priority – if the consumer is not attracted to the product at the right price, they will not purchase the products. At this point in our industry, our competition is the products produced by the other species with well proven production systems, excellent track records of consistency, ability to deliver and keenly priced. The following are some of the attributes in meat the report identified that influence the choices that consumers make and willing to pay for.

  • Texture, taste and aroma
  • Convenience
  • Shape, size and flexibility
  • Packaging
  • Service
  • Information and advice
  • Reassurance and traceability
  • Local production
  • Storability (e.g. shelf life, freezability)
  • Animal Welfare
  • Nutritional Content

 

It is recognised that because each animal/carcase may supply several very different end markets because not all muscles are identical in shape, size and degree of tenderness. So a balance and compromise between target markets is needed. But the general principle of identifying value, maximising it and minimising cost remains.

III. Work in Partnership
Trust is given as a vital element when working in a collaborative manner. Figure 1 illustrates the activities of the whole ostrich chain. Each activity is adding value to the end product and the greater efficiencies of each element, the lower the overall production costs. Two quotes from the two largest UK based supermarkets that illustrate the benefits of developing a collaborative approach: 

“I see great opportunities for improved relationships and partnerships between farmers, processors and retailers. Once you have established trust, everyone in the chain can focus their energies on improving their businesses and working together more effectively.”   Matt Simister,  Tesco

‘This exercise is the first time we have seen the whole chain in detail and really started to appreciate each other’s operational challenges and the problems we create for each other in the current way we do business.’  Chris Brown, Asda

 

IV. Systematically Identify and Reduce Every Form of Waste
In this context, the definition of waste is as any activity that adds costs without adding at least as much value. The approach focuses on wasteful activities and considers how to reduce or eliminate the waste, preferably without any major expenditure. There is currently a tremendous amount of waste in ostrich production that we will discuss in section 3.

3. Efficiency in the Ostrich Chain

Low volume is our industry’s worst enemy as not only does it increase operating costs from the inability to achieve economies of scale, it limits the ability to do many things that are required to increase our efficiency.  This web page provides a number of case studies where groups of producers have consolidated to work as a collaborative chain.   The report on LincPork’s operation provides an example of how a group of pork producers worked in collaboration with their processor and were able to gain a premium price for their product in what is a highly competitive market place by satisfying the needs of their customer. 

We will discuss this at each level of the chain illustrating where we have significant room to cut our production costs from their current levels.

Consumer
The buyers determine what is required of the production chain. Some markets will have concerns over the way their meat animals are reared (see section 4); some markets require certain veterinary regulations, with many buyers now requiring traceability and so on. Many newcomers to ostrich start producing birds before establishing their markets and addressing all the consumer requirements. There have been producers who have their markets but then unable to supply through things like, lack of approved processing facilities, inconsistent production and not meeting delivery targets.

Processing
Whatever the size of the plant, a slaughter plant is a production line, with fixed costs that have to be paid regardless of the numbers of animals slaughtered and operating costs that will vary according to the numbers slaughtered. Therefore to optimise the time slaughter plants need to keep their production lines with consistent daily throughput. 

The following are complaints processors have passed onto me over the years with ostrich production as they add significantly to the costs of processing the birds:

Inconstancy in bird weights:
Birds yielding as little as 18kgs of saleable meat to in excess of 40kgs – this means it takes more than double the number of birds to achieve the same weight of meat. Not only are the processing costs of the lightweight birds significantly more costly per kilogram (figure 2), but their muscles are smaller and less usable. Additionally the slaughter plant may run short or have excess meat for their budgeted throughput. There is room to reduce processing costs significantly by increasing meat yields.  

Figure 2 - Comparative Processing Costs based on boneless meat yield

[Note how as meat increases, processing costs reduce]

Ostrich Meat Processing Costs

Volume:
When numbers are very small as has happened regularly in our industry, birds are slaughtered in multi-specie plants. The slaughter plant owners need reliable throughput, however when the numbers are too small ostrich become a nuisance to the plant. If they will handle the birds, the work force is less familiar with ostrich, thus extending the processing time and increasing the processing costs further. The design of the plant also influences costs. Clearly a high throughput purpose built plant will have lower costs than a low volume and/or multi-specie plant.

Seasonality:
Ostrich is currently seasonal in production. In order to achieve regular throughput farmers either keep some birds longer (adding costs) or the processor shares the slaughter line with other species. 

Food Provision
The rations we feed our animals are the foundation of any commercial livestock production business as they control the health of the animal, the level of production and the end product quality. The ration has a number of elements and all are influenced by volume:

a. Feed Ingredients
These must be consistent and to the best quality to achieve optimum production. When working in low volume not only is there a premium on the tonnage price one pays for the ingredients (if not grown on farm), it can be more challenging to obtain the quality required. This is especially true of lucerne (alfalfa). Working as a consolidated group increases numbers and therefore the ability to have control over the purchasing of the raw materials.

b. Premix
This is the engine of rations. If starting in main stream species such as pig, poultry or cattle, there are a large number of premixes available to meet all production requirements. This is not the case with ostrich. Premixes are specialist products to manufacture. Low volume is significantly more expensive to manufacture and transport. There needs to be a minimum volume before manufactures will be interested in developing such products. Using premixes designed for other species results in considerable loss of potential production and extended time to reach slaughter weights thus increasing costs. As it leads to low productivity and high mortality it remains a major cause of the failures mentioned above.

c. Manufacture
The accuracy of manufacture is essential. Errors such as inaccurate ingredient analysis can impact of production and therefore increase costs. Low tonnages carry higher manufacturing costs, where produced on farm or under contract to a commercial mill. Many commercial mills have minimum tonnages they can handle in a run.

Breeding and Incubation
This is an area where we have very significant scope for reducing costs. Ostrich are very capable of producing 80 to 100 eggs per annum and greater numbers were regularly recorded in the United States in the early 90s, when higher volumes of birds were maintained. Eggs must be fertile and produce strong chicks to grow quickly to slaughter. Today many farms produce no more than 10 slaughter birds per hen, very few achieve greater than 40 slaughter birds per hen. 

The stronger the eggs and the higher fertility and hatchability the lower the incubation costs per chick hatched. As can be seen improving breeder efficiencies will yield significant reductions in costs of a chick. It requires far fewer breeders, less land, less breeder feed and reduced labour. 

Chick Rearing and Finishing
Reducing chick rearing costs starts with strong chicks that are able to grow well from day 1. Improvements in feed conversion, increasing meat yields and reducing days to slaughter are all ways to reduce costs. Improving genetics is also required to improve performance and achieve greater uniformity of carcass. However, to achieve meaningful genetic improvements requires high volume.

Historically when ostrich meat is first presented on the shelves in a new area starting production, the price is very high.  The high price reflects the high costs involved of working in low volume, but unfortunately the product is usually of poorer quality and inconsistent.  There are a number of reasons for this including the following:

  • Variable age birds due to delays in commencing slaughter in the region
  • Inexperience of the abattoir and processing staff in handling ostrich meat
  • Poor slaughter techniques
  • Variable feed regimes
  • Variable genetics


Summary
As can be seen, the Ostrich Industry has many areas where we can increase efficiency and need to for the industry to become commercially viable. 

4. Welfare in the News
The European and North American markets have ever increasing demands placed on them, with varying assurance schemes, traceability, veterinary requirements and welfare. This is another reason for the importance to recognise the whole chain as an interdependent infrastructure. 

This month has seen several news items relating to welfare that can be read by clicking on the title below.  This trend cannot be overlooked, even if these discussions relate to other species – they indicate the way the market is moving and the customer demands. 

 

Copyright © of the World Ostrich Association, All Rights Reserved
World Ostrich Association is a Company Limited by Guarantee Registered in England No. 4531253