Agriculture Ostrich
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Ostrich Description of the Industry
The Ostrich is an endemic bird of African origin. It is characterised by its ability to survive in temperatures ranging from two to fifty degrees Celsius; it can be reared on barren land and mainly feeds on Alfa-Alfa, Lucerne and water. It is therefore considered a resilient bird and much suited to be reared in areas of the Cacadu District Municipality.
The ostrich has largely been regarded as a single-product animal in the past, with the focus of market interest passing through several phases, from feathers, to hides and then meat. It is in the last few years that the multi-product nature of the ostrich has been fully recognized and its economic necessity appreciated. Essentially, the ostrich can be raised for meat, leather and feathers; however the main focus within the CDM is that of the export of meat, whereby the leather, eggs and feathers are the by-products of the meat production. There are currently only 7 export ready commercial ostrich farmers, where the main market for ostrich meat is that of the export market.
The ostrich industry is a growing economic sector that is gaining popularity within the market as recognition is given to the characteristic low fat and cholesterol content of the meat which makes it the healthy alternative to other red meat. There are approximately 13,000 ostriches within the Cacadu District (4 months old and above); despite this there is currently an undersupply of ostriches within the CDM, and as a result the abattoirs are not operating at their full capacity. Opportunity therefore exists for ostrich farming within the district. The most cost effective stage of production is in the raising of the chicks aged up to 3 months old, as this stage is the most cost-effective to start an emerging farming business because of its minimum cost.
Except for the coastal areas, the rest of the CDM shows good potential for the production of ostriches. Ostriches are more suited for the inland, which is characterised by dry and warm land and climatic conditions. There are roughly 5 tanneries in the Eastern Cape namely: Exotan, Moris Levy, Any Woods, Ostrimark and Philipe Tannery.
Value Chain
Ostrich farming can be divided into the following four phases:
§ Incubation which consists of handling and hatching of chicks
§ Raising of the ostrich from day-old chicks until they attain the age of 3 months
§ The third stage is the age of 3 - 12 months until the bird is ready for slaughter
§ The last group includes the processing part until it reaches the consumer
Down the value chain there are only 2 abattoirs in the Eastern Cape and 5 tanneries. There are a number of small value added manufacturers in the country. While the abattoirs are fully functional they are not being used to full capacity, thereby indicating that there is an undersupply of ostriches in the region, this indicates that the gap in the market is the breeding and rearing of ostriches to prepare them for slaughter.
Figure 1: Ostrich Value Chain  The value chain starts with the rearing of birds in the incubation phase where eggs are hatched in incubators to produce 12 000 birds per 42 day cycle. Feathers are plucked from the age of 6 months, and slaughter takes place at the age of 12 to 14 months. When slaughtered the adult bird weighs approximately 90kg, after de-skinning and de-feathering the carcass is reduced to 45kg. The next stage is de-boning which leaves only 17kg of meat that can be cut. Meat is cut into 17 different cuts consisting of fillets and steak and either exported or sent to local retailers for sale to customers.
From the abattoir the skins are sent to the tannery for further processing. After finishing, the skins are measured (average skin measures 16) and listed as finished stock. The finished stock is moved into a warehouse from where it is shipped to retailers and then wholesalers, where the main wholesalers are those within European countries that use the ostrich leather for the fashion industry.
Global and National Market Trends
The characteristic low fat and cholesterol content of ostrich meat makes it the best alternative red meat available in the world, as it is regarded as a very healthy meat to consume. In 2003 there were approximately 500 000 commercially-bred ostriches worldwide, South Africa dominated the market by contributing roughly 350 000 of these, thereby holding 95% of the global ostrich production.
In 2006 South Africa had approximately 600 export-registered ostrich farms, with roughly 300 000 ostriches slaughtered in the country each year. The industry employed roughly 20 000 workers, where the total investment in production and processing was R2.1 billion per annum. The European Union is the largest consumer of South Africa's ostrich meat, while Asia is also a major export destination.
Ostrich leather is the biggest chunk of South African ostrich exports; meat is only a small part of it. The local market for leather is relatively small because it is too expensive to buy locally. South Africa has extensive knowledge of leather work, which gives South Africa a competitive advantage over other countries.
Unlike bovine hide, ostrich skin is not a by-product of the meat industry but rather the ostrich meat is a by-product of the skin. June 2005 prices show that farmers get around R954 for a skin whereas they obtain R13, 30 per kg for meat. Once processed, a fully tanned first grade skin is worth R2600, whereas a low grade tanned skin will still sell for R1500. Currently the average price producers receive from ostrich feathers is R100 per bird.
Area Identified
Within the Cacadu District, Ostrich farming and production has potential in nearly all of the local municipalities within the district, except for Ndlambe and Sunday’s River Valley or those areas that are located near the coast. The map below illustrates the areas with the most potential for the development of an ostrich farm. These areas are characterised by private, municipal and state land ownership.
Figure 1: Potential Ostrich Farming Areas in CDM
 Source: Cacadu District Municipality
Industry Associations
The two largest players on the South African market are Mosstrich and the Klein Karoo Landbou Kooperasie (KKLK). The largest processors in the Eastern Cape are Syd Birch and Ash Davenport. The KKLK does joint marketing for a number of ostrich farmers/breeders but increasingly some farmers are conducting independent marketing.
Land and Climatic Characteristics
The ostrich industry thrives in the Cacadu district since these animals prefer dry, humid climates with little rainfall. The ostrich is not adapted to cope with areas that receive high rainfall as their wings are not waterproof, and they are easily susceptible to the cold. The land suitability is not critical since the ostriches are not grazing animals.
Infrastructure
The required infrastructure for ostrich farming is not extensive; the most crucial requirement is that of adequate fencing to enclose the ostriches, where the fencing should be free of any hooks or barbs which are likely to puncture the ostrich hide. Electricity and access to water are essential; electricity is especially critical in the breeding of ostriches, which is required for the incubation of the eggs.
Human Resources
Within the district there is an abundance of labour available, and the ostrich farms will require unskilled labour. Labour can be further trained on ostrich specific farming methods by attending various mentorship programmes which will ensure that local people are soon equipped with the basic skills necessary for the ostrich farming practises.
Expected Return on Investment
Based on data relating to 2010 prices the expected rate of return is as follows: since the potential exists within the industry for breeding and rearing of birds, the assumption made in that a profitable size farm should acquire 200 birds for breeding purposes, these birds will produce 2800 chicks in the space of 1 year. The price per chick is approximately R280 weighing at roughly 2.8kg. Therefore, provided that all chicks survive the income received from the sale of the chicks is R784, 000.00. It is to be noted that the start-up costs associated amount to approximately R2 million, this can be found as Annexure 1. The operating costs amount to roughly R320, 000.00, which is outlined in Annexure 2. The sale of eggs is a further source of income at R80 per egg sold.
Key Constraints
§ There is lack of knowledge of the ostrich industry within the region, it is essential to possess the correct skills when entering this industry.
§ Ostriches are easily stressed animals, and therefore farmers must ensure that they provide a stress free environment that is conducive to this.
§ It is a highly competitive industry that is experiencing a high demand with a limited supply.
§ The local market is a very small market that is not yet as lucrative as that of the export market.
Opportunities:
A producer/investor can start an ostrich business at any of the above stages in the following ways:
§ The producer/investor can purchase and incubate eggs. This method minimizes establishment cost, but is risky. Ostrich eggs are white and easily candled; their fertility can be guaranteed once incubation is started. However, a sound knowledge of ostrich egg incubation is required for a successful hatch.
§ The producer/investor can purchase chicks more than three months old (the highest mortality rate is from one day to three months). Although it is more expensive than purchasing eggs or hatchlings, the purchase of chicks at this age will probably prove more cost-effective because the mortality rate is greatly reduced after the age of three months.
§ The producer/investor can purchase yearlings or young adults. While yearlings are more expensive than chicks, yearlings should be productive within two years.
§ The most costly method is the purchase of proven breeders, pairs of birds that have produced fertile eggs together. This method of buying will allow production to begin in the next season.
§ It is not difficult to raise ostriches successfully. As with traditional farm animals, the critical time is the first period of the ostrich's life.
Useful Contacts:
References:
University of the Free State, Business Plan for Ostrich Farming in CDM, 2006
Cacadu District Municipality, State of the Environment Report, 2005
Grey van der Hoff, Value Chain Report on Ostrich Project, 2006
Personal communication with Siya Green Village, 2010
Information Indemnity
§ All information contained within this profile was accurate at time of publishing.
§ The information contained within this report is intended only as an industry profile and does not assume to take the place of information contained within a business plan, pre-feasibility study or feasibility study.
§ The Cacadu District and service providers are not liable for any damages caused by the use of the information contained within this report.
§ The purpose of this profile is to both promote the area for investment and inform investors of relevant issues. It is advised that investors, who wish to pursue an investment within Cacadu DM, should use this profile as a basis to conduct further research.
Annexure 1
The following costs incurred and income received is based on a case example; which outlines the potential budget for an ostrich enterprise. This functions to provide investors with broad categories of costs experienced, however further research in terms of feasibility studies and business plans will need to be carried out in order to determine the relevant costs and income according to the specific enterprise entered into.
Assumptions
Approximately 2 hectares are required to rear 200 birds. This section presents the standard capital requirements for setting up an ostrich business in 2010. The assumptions are presented in Table 1 below.
Table 1: Ostrich pricing and quantity assumptions
Capital Costs
The start-up costs are presented in Table 2 below.
Table 2: Capital Expenditure
Annexure 2
Operating Costs
The operating costs are presented in Table 3 below.
Table 3: Operating Expenditure
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