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Klein Karoo International in bid to persuade ostrich farmers to restock

1st Oct 2012 , S&V African Leather

Raw meat exports not vital for your survival, KKI tells farmers

KKI hosted a meeting for farmers on September 6 to persuade them to begin the new cycle of breeding and raising ostriches. Over 100 producers from around the country listened to MD Johan Stumpf [right] outline his high- and low-road scenarios for the industry.

This is a meeting about investing in the future of the industry – one person sees opportunity, another doesn’t. Many people believe that without a resumption in the export of raw ostrich meat to the EU soon, there will be no industry. This isn’t so, and this meeting is to give you information so that you can make decisions which are appropriate to your circumstances.

Sometimes we don’t acknowledge things that are going right; who would have thought, a year ago, that the price of skins would double? We want to show you how you can make money from farming ostriches even if you can’t export raw meat.

The domestic meat market: Domestic meat sales have become very important, and our long-term strategy is to have a sustainable local market.

This year domestic sales of raw meat are about 15 tons a week – 70% more than 2 years ago – and our target is 30 to 40 tons a week. We’ve are continuing our promotionof ostrich meat through the main retailers as well as the restaurant and catering industry, with the main aim to broaden the consumer base. The annual upswing in consumption of meat seems to have started earlier this year.The domestic retail price of ostrich meat is now on par with premium beef.

Ostrich meat is now sold through 1 041 chain retail outlets (Checkers, Fruit & Veg City, Pick ‘n Pay, Spar, Woolworths) and 541 wholesalers and other categories. Distribution is expensive, and we can’t be everywhere, but KKI has the most comprehensive meat distribution operation in South Africa, as our products are distributed from one point on a national basis.

Par-cooked meat for export: While some people feel that the export market for par-cooked ostrich meat would fall away if raw meat exports resumed, par-cooking is an effort to stop the fluctuation in exports, because we feel the risk of relying on raw meat exports is too high.

Our decision to develop par-cooking is a commercial decision. It doesn’t have anything to do with government or anyone else. We’re now producing 2-3 tons a day – double when we started – and we’re fully booked to the end of November – yes, it’s working. Currently we’re exporting 1 to 1.5 containers a month andare planning to ramp this up to 1 container a week.

Par-cooked meat has a number of selling points – it’s healthy, convenient, has a long shelf life, is safe and innovative.

Meat prices: At the moment, we’re paying producers R16.50 per kg for meat. Over the past 10 years (2003-2012), our average income from meat has been R27 per kg, consisting of periods with high pricing (during times we exported), and very low pricing when we could not export. In the longer term KKI believes that par-cooked meat could result in grower payments of R35 per kg, with the main difference being that it will be a stable price, as the industry will not be exposed to volatility as a result of AI.

If we sell all of the stocks of meat we hold, raw locally or par-cooked for export – and we think we will be able to achieve that by June 2014 – we will average R24 per kg. By June 2015, we think that will be close to R30 per kg. If we had done this 5 or 6 years ago, we would already be at R30. This strategy is taking out the risk.

Skins: At one stage, ostrich leather was as big as crocodile leather, and it can be again. The skins are now much more valuable than the meat, but when meat exports were going well, we stopped promoting ostrich leather. Whether we export fresh meat or not, we need to maximise and protect the leather. We will continue to do everything we can with the meat, but the quicker and easier way to increase income is via the leather.

Feathers: We’re finding price resistance to the wing feathers, but the market for dusters is still good. There’s no expectation that prices will rise in the short or medium term, but we want to remain the world’s number 1 feather business.

Deciding on investing: You have to decide whether to invest in day-old chicks to slaughter in 12 months.

At current average prices, you would receive R519 for the meat, R1 012 for the skin and R400 for the feathers – R1 931. In the next 12 months, I expect meat to rise by R1 to R3 per kg, and skins by R100 to R200. There will be no increase in the feather price. These will take the take the average price per bird to R2 100.

Taking various risks and income scenarios into consideration, we forecast that the absolute minimum income per bird would be R1 500 in 12 months’ time, with the maximum price, without raw meat exports, that could be as high as R3 400. Should raw meat exports resume, that income could be as high as R4 000. KKI also implemented a price increase on meat and leather, which already brings producer income close to the R2 100 mark.

We’re used to being pessimistic, but there are many things about the current scenario which are good.

We’re trying to create a long-term industry by reducing risks, and the picture now is much better than it was a year ago. There’s a big future for ostrich, and KKI has the skills to realise this.

We have one of the best exotic leather tanneries in the world, and in 2 or 3 years time, ostrich leather will be a big industry again. - [Tel: +27 (0)44 203 6200, email: jstumpf@kleinkaroo.com]

 

 

 

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