Note:  The following presentation was given by Fiona Benson at the 1999 European Ostrich Assn World Congress, November 5-7, 1999.

Mr. Chairman, ladies and gentlemen - good morning.

The subject of this presentation is 'The Current Situation of the Global Industry'. The number of countries represented here today is a reflection of just how global our industry now is. 

There are now Ostriches in over 75 countries - with at least 55 now farming the birds. Products are sold into at least 105 countries - and judging from the Ostriches on Line Newsletter people in excess of 150 countries now aware of Ostrich.

When I was asked to talk a bit on this subject my thoughts were wonderful - there is so much to tell. Then came the task of quantifying the critical points as the industry is so complex and at a most interesting stage of its development. We have all become involved because we see Ostrich as The Livestock of the Next Millennium. Is it possible to achieve that? My belief is most definitely YES.

So where are we today?

We can split the countries farming ostriches into a number of different sectors - defined by their current stage of development. 

Group 1 have been in the industry the longest - with of course South Africa the perceived experts - only because of the time they have been farming ostriches. The others in that group all benefited from the high export prices in the late 80s and early 90s and are now processing birds. The industries in all these areas have gone through the recession as have those in Group 2.

Group 2 paid the very high prices for foundation breeding stock and it is fare to say that for all it has not been an easy decade with many failing to survive the pioneer stage.

Group 3 are just entering the production phase and are encountering the same difficulties experienced by the first two groups as processing commences. 

Group 4 remain in their breeder phase

There have been many stories of people leaving the industry and too many having lost a considerable amount of money. Lots of theories are given - when analysed carefully (Politics apart) the 'Learning Curve' can clearly be defined as the fundamental cause. 

That will be my main focus today. Later this morning I will be reporting in detail on the Strategic Analysis session that was held in June. The session was held to analyse the industry in depth to understand the current position as best we could. The first objective was to establish the route cause of the perceived problems. The answer became very clear that Industry Immaturity was the underlying cause. 

When we take a look at the whole Production Chain - it is easy to see how many different skills are required to achieve success. With the Euphoria of this new industry - it was overlooked that the skills to achieve success simply were not there. These have to be learnt and that takes time as skills are developed from experience at EVERY stage of the production chain. 

As a new industry it is fare to say that every one becoming involved had NO previous experience with Ostrich at any stage of the production chain. A few farmers entered the industry - but in general most came from outside agriculture and/or the meat or leather industry. The experience of those South Africans who were in the industry only related to feathers and hides and was operated in a 'controlled monopoly environment' where over production was feared and meat was a by-product. Farming for production totally unknown.

With the export of the birds to new areas developed a number of 'experts' as there was a 'demand' for knowledge. This Golden Bird had great opportunities but it was necessary for new entrants to seek advice -which resulted in plenty of people willing to provide that advice- but clearly could be no more 'expert' than those seeking the answers. This resulted in much mis-information being provided. Some have gone on to learn through the 'school of hard knocks' - many of these 'experts' have now left the industry. 

Politics apart this 'lack of experience' I would suggest is the single most important factor for the Industry to be floundering. Through modern communication I believe we will have proven to have saved 10 or even 20 years of development time and are now ready to move forward as Strong Livestock Production Industry. We have a bird whose production potential and products are second to none in Livestock Farming- if we produce them correctly. Within a few years of being farmed outside South Africa, it has been proven that production can be doubled. What other livestock industry has achieved that is so short a time?

Every stage of the production chain influences the next stage and ultimately the final product, how cost effective it is to produce and process. 

A few aspects that highlight just some of the skills that have had to be developed as I believe it explains a great deal.

We surely all know that the quality of the end product is determined by what is fed. Much work has been done over the last 50 years on nutrition of Cattle, Sheep, Pigs and Poultry - but no work had been done on Ostrich. It was generally assumed that this work had been done with Ostrich in a similar manner as they had been farmed during the time that other livestock rations have been improved upon. 

Feed companies being unable to find any data would simply put rations together based on data from other species - most generally the poultry industry. It takes time to recognise, through communication, that breeders were not laying as expected and chicks, if surviving, not achieving good growth and feed conversion rates. Incubation techniques, chick rearing techniques etc. all new skills to be learnt - and it takes time to achieve sufficient data to establish trends.

The Breeder phase came to an end for groups one and two - birds were now being slaughtered. This coincided with deregulation in SA when a number of small groups came into processing. Processing techniques have to be learnt - one of our SA processors told me quite honestly that when they look back on what they did at first they shudder to think in the light of their current knowledge gained from experience. Remember this was the first time that the carcasses were being seen as a result of the previous monopoly that operated in a cloud of secrecy. The condition of the carcasses provides many 'clues' to the success or failure of feeding programs.

The meat was marketed and the complaints and observations on the many inconsistencies being seen were reported - again it took time to establish this as a general trend and not specific to any one processor. It has also taken time for many to understand that Ostrich CAN produce meat to the same standards as the best Red meats - multi coloured muscles, high ph levels, etc.- are controllable.

The muscles needed identification and classification - this took time to evaluate, document and distribute. Many still unaware of the existence of this work.

Low volume is expensive to market and we had a virgin market. There is a noticeable movement forward - from having to explain to every one you meet just what Ostrich is - to now people having heard about it - and then asking to buy. 

As the processing started - another new skill to be developed was that of deskinning a bird correctly. When the hide price collapsed there were many reasons given - hide dumping and market manipulation as a couple of examples. No doubt there was plenty of that - but after the dust settled and through communication it became apparent that there were some very poor hides around. Badly scarred, poor deskinning, poor treatment, handling and storage after slaughter were some of the causes - as a result of inexperience. Another trend became clear - an average of only 20% first grade hides - even in South Africa were being produced and tremendous inconsistencies making tanning difficult. Tanning being another skill to be learnt.

Small volumes of early slaughterings make handling expensive. Customers generally buy by the hundreds or 1000s per month and not by the 10s, which makes the movement of hides in the new producing areas more costly in their early years of slaughtering.

There was a hide industry, but this was small -within 2 years of deregulation production had more than doubled in SA alone. Farmers and new hide dealers established themselves to sell the hides - and have had to learn the product. Buyers have to be educated and they in turn, if new to working with ostrich, have to learn how to cut up a hide to optimise yields. This comes through experience and experience takes time. 

When analysed in this way I would suggest things become clearer.

There remains a conflict as to which of our major products will drive this industry. Originally it was feathers and more recently hides. Most of us here believe it will be the meat - but that we must do all we can to retain the value of the hides. 

The message at the Leather Session of the IOA meeting in June - was that production should be controlled in the same manner that the Crocodile Industry achieved to maintain Ostrich Leather as an 'Exotic' leather. To retain the 'Exotic' leather status it is believed that production should be limited we heard at this conference in Hengelo 2 years ago - to around 200000 birds per annum.

The Ostrich leather industry is currently put at around 90% the Japanese Ladies handbag market. This is supplied by selling hides to manufacturers mainly based in the Far East - but some into Europe who manufacture the products and onward sell to the Japanese markets. Following this policy, if that market were to collapse - there would be no industry. Most will agree a very short sighted approach to be dependent on just one market sector and one product? We have a unique leather - that I would suggest most of the top 1% of world's wealthy consumers do not yet recognise - how can they ask to buy if they do not recognise the product?

We could spend many hours discussing the possibilities with Ostrich leather. It is interesting to note that during the 'slump' prices did not drop below the pre boom prices. I would suggest that creative marketing could retain the 'exotic' leather status well beyond the 2m hides and retain a similar price? 

Most have no doubt that meat will become the driving product. This requires producers understanding how to produce the 'healthy red meat' and processors how to recognise the 'healthy red meat' that we currently claim it to be. This knowledge is now available. So long as we continue to be producing for the most part birds which fall into the Utility Grade Class, which we will be discussing tomorrow, and so long as we are putting Animal Protein Products into their feeds - we must consider carefully if Ostrich Meat the is truly the 'Healthy Red Meat' we all know it can be. 

With consistent meat production it is proven comes far greater consistency in hide quality as a result of the improved nutrition required for high quality meat production.

A brief word on Oil and Feathers. Ostrich Oil is proving to have some excellent benefits and could prove to provide a significant contribution to the overall revenue from the birds. There should always be a market for the feathers, but their earnings potential per bird is limited due to high handling costs and limited yield. These products are unlikely to drive the industry but rather be seen as valuable by- products. 

Earlier I mentioned market manipulation. There is no doubt that there has been a certain amount of this with hides being seen as the driving force and little focus on how to achieve the quality at production level. There have been a number of perceived 'health' issues regarding the movement of meat - especially to the EU. 

Many complaints about the low prices of SA Ostrich Meat. The new SA processors following deregulation had to compete with the KKK who most know did not take the loss of their control lightly and the Leather session made it clear that there is still an element who believe production needs to be controlled.

The production downturn demonstrated in the graphs, has been as a result of a number of issues. The perceived need to take the heat out of the growing meat market and the perceived oversupply of hides. This check has provided a second opportunity to rebuild now that hides are moving more easily.

If handled well we now have the opportunity to improve the quality of the birds produced while the hide market remains strong. If we can achieve this then the meat revenue should be improved per bird - not only from increased yields but also improved quality and therefore price. If this is not done, then I believe that we will have another slump in a couple of years?

One producer/processor mentioned to me the other day, and I agree with him totally, that production is so small that we should be combining our marketing to be able to supply the bigger contracts. This being preferable to competing in the market place on price undercutting each other. Combining marketing can work well for those producing to the same quality and consistency of both hides and meat. Production is too small to be restricting growth through competition by price cutting.

One aspect that I would like to cover is the problems created by lack of harmonisation and trade barriers. We all know that meat manages to cross International Boarders - if legally - correct controls can be in place. The moment barriers come up - there will always be those beating the system - they make the money at the expense of the farmers and other legitimate marketers. The quality also suffers as a result of longer shipping times and lack of adequate controls. Maintaining barriers to protect local production does not work if the product is not right. This has been proven in the US where no fresh meat could be introduced - yet they still failed to develop their market. 

It is very difficult to achieve accurate figures for production. The SA Slaughter birds doubled in three years following deregulation - going for 80000 - 90000 slaughter birds to an estimated 400000 slaughter birds (including bush slaughter). It is considered that there were probably a further 100000 outside South Africa - making the peak at 500000. Meat tonnage went from around 100 tonnes to 6000 tonnes and there is no meat currently in cold store.

The drop in meat exports was a result of the health issues I referenced earlier. The second incident saw the start of the SA industry recession - with the meat not exported for 6mths into Europe. At the beginning of 1998 NOPSA held an emergency meeting to discuss the crisis in the industry with regard to prices and market - particularly for the hides. The processors agreed to only slaughter those birds for which there was a market for their hides. The quotas for the KKK farmers were slashed. The results of this are now being felt in SA - production this season reported to be around 180000. Forecast for next season is targeted to be 250000. However, late breeding, low fertility and high chick mortality currently being experienced as the season gets going make it questionable if this target will be achieved.
 

SA PRODUCTION CAPACITY
Export Abattoirs	8	Capacity 500000
Domestic Abattoirs	4	Capacity ? Multi Specie
Tanneries	10	Capacity 500000
Tannery Under Construction	1	Capacity ?
Slaughter Birds	1999/00	180000
Slaughter Birds	2000/01	250000

In South Africa we have 8 Export Abattoirs with a total capacity of 500000 slaughter birds - well under-utilised at this time. There are 4 domestic abattoirs that I am aware of - there may be more. The actual numbers from these are not known accurately.

There are now 10 tanneries with a combined capacity of around 500000 hides and one further tannery under construction. Many hides are now being imported for tanning due to the local shortages.
 

WORLD PRODUCTION
Australia	25000
Israel	25000
Zimbabwe	32000
Namibia	30000 est. 1999/2000
USA	50000?
UK	5000?
Northern Europe	20000?
Southern Europe	20000?
Others	20000?

All Group 1 and Group 2 countries report a consolidation of their industries with many small producers and those who came in with little of no agricultural background having now left.

It is always difficult to get accurate information from any country. The slaughter figures mentioned above are reported to contain a high number of breeder birds as producers leave the industry. Australia and the US are reporting some processors now establishing contracts. In Australia the reports are generally still hide driven. The method of payments being offered were indicating a lack of knowledge of how best to fairly reward all and the basis of bird weights indicates a lack of understanding of the production potential and indicative of the type of birds that for the most part are being produced. The highest grade being 90-110kgs liveweight and 3 grades lower. Any lighter weight birds will have hides that are generally too small for the market.

Israel currently slaughters in two plants. One was on the point of being replaced, but with the recession the plans went on hold. Zimbabwe has two central processing plants - COPRA and Royal Ostrindo. Namibia has two plants that closed down and a new plant that opened in September. There is at least one further domestic abattoir producing 1000 birds/annum.

Most of the other figures are estimates of production. When the US Breeder market collapsed - no effort had been made to develop markets and response was too slow to the recognition in all areas of the variations of carcasses coming through. There are now small pockets of producers and processors working hard to do things in the right way - and there are now reports of producers willing to set eggs again next season. 

From all I have learnt it is clear to me that the main problems are as a result of the basic bird production being wrong. Once it is understood that the type of rations that these birds perform well on, all see the type of carcasses generally presented for slaughter compared to what we know to be achievable - it becomes very clear just where the fundamental problems lie.

We all should know that our consumers drive our market--no matter what ostrich product we have to sell. We should also realize that WE are all consumers no matter where we are in the production chain. The producer is a consumer of the feed company, the processor is a consumer of the producer, the housewife is a consumer of the meat, and the leather mfr is a consumer of the hides

As a consumer of the feed company, the producer must ensure that his nutritional program will provide him with the right quality bird for the Processor - cost effectively. If the program he has chosen is not performing and does not meet the specs required - then changes must be made. 

One example: We need to ensure that there are NO Animal Protein Products, growth stimulants, antibiotics etc.. in our feed programs. We have proven that the Producer (the consumer of the Feed Companies) has the power to change this through encouraging their feed company to make the change or refusing to purchase and move to another company. For a greater part this has now happened in the US. The Housewife - OUR end user does not want these things FED to the animals producing their meat and our greatest marketing tool is 'The Healthy Red Meat' - it is our responsibility to ensure that it is healthy in ALL aspects.

Control your nutrition and learn everything you can about it. Take BSE, the recent Belgium problem and more recently the French situation. All 3 events have been incredibly costly not only to the farmer - but the industry all the way up the chain and the tax payer in those countries affected. All THREE events were caused by the Animal Feed Companies. 

What we feed our birds and how we feed it determines the quality of the end product and our profits..

The Processor is the consumer of the Producer - he needs to understand what constitutes a quality bird, demand that quality bird - and be prepared to pay for that bird. How he can do that we will cover tomorrow.

There is clearly an upturn in the market - with reports of contracts now being placed. In the US where the industry almost collapsed there are now farmers prepared to set eggs next year once more. Emphasis on this rebuilding is now based on the knowledge learnt as to what constitutes a quality bird, how it can be produced and prompt farmer payment.

Negotiations of contracts are being reported in Australia between processors and producers with education now starting on the production of quality birds. 

SA is once again increasing production - though the message is still being sent to producers to take it slowly to enable the markets to be developed. 

We have a New Ostrich Industry that has passed the 'crawling' stage and is now moving into the new millennium with a New set of proven standards to work towards and improve upon. 

Production Standards 
 

Carcass Standards
 

We are a very small industry in terms of volume - the consumer of our meat and hides does not yet differentiate the source of our products - simply that it is Ostrich. It is the responsibility of all involved to ensure that we understand what constitutes quality and produce that quality - for us all to be able to grow together and achieve our goals.