Ostrich Trade

Ostrich Farming (Ostrich)


     Case Number  : 289
     Case Mnemonic: Ostrich
     Case Name    : US Ostrich Farming


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A. Identification: 1. The Issue: The ostrich market is now experiencing large growth increases, due to the breakup of a South African ostrich monopoly. This breakup has caused the worldwide price of ostrich products to decrease, and these goods are now beginning to become affordable to the common man in both Europe and the US. In order for ostrich products to continue to become affordable, more breeders must be distributed worldwide distribution of ostrich ranches increases, it will cause governments of nations with ostrich farms concern that the imported ostriches may carry with them the deadly heartwater fever virus. This virus is extremely contagious within the chicken, turkey, and cattle ranching industry, and if unchecked, can wipe out entire populations of these animals. The governments of the US, New Zealand, and Australia, which all contain large ostrich ranches, have agreed on a thirty day quarantine on each ostrich imported from South Africa, so that the heartwater virus will not be allowed to be introduced into native livestock farming within those countries. 2. Description There is a new and exciting market worldwide for ostriches and the products from them. These ostrich products include the likes of boots, handbags, jewelry, feather dusters, as well as red meat, and these products are beginning to gain global attention for their ultra-fine quality. Ostrich ranchers both in the US and South Africa are beginning to turn over high profits. However, the industry is not without its problems, and these include the introduction of a deadly bird virus into existing populations of US, Australian, and New Zealand birds, from imported ostriches coming from South Africa. Another problem is found in that the prices of ostrich meat, and the other associated ostrich goods, are extremely high, due to the lack of ostriches available for slaughter. Background: The Ostrich is a type of bird known as a "Ratite," which means that it is a flightless bird, having underdeveloped wings, and a breastbone without a keel. Even though the ostrich and its ratite relatives cannot fly, it did descend from flying ancestors. These ancestors, known as Struthionidae originated on the Asiatic steppes sometime between 40 to 50 million years ago. Later, the ostrich broadened its range to encompass Africa, and it has currently evolved into four sub-species which roam freely throughout the African continent. The ostrich is the largest of all birds, and an adult may stand 3m or 10 feet tall, and may weigh more than 400 pounds.1 Due to this large frame, the ostrich's legs are quite long, and they allow the animal to achieve strides of up to 12 feet in length, along with the ability to run at 30 MPH for up to 15 minutes or more if need be, and the top speed of an ostrich is quite fast, in that it may reach up to 43MPH.(2) Advantage of the Ostrich: Many observers of the ostrich industry believe that the time is right for the business of ostrich farming to boom. These optimists believe that ostrich meat, as well as other ostrich products, such as its leather and feathers, will exceed the beef cattle market in the years to come, and they give some compelling reasons for this. The first advantage to ostrich farming is that the birds do not require an enormous amount of land to graze upon, which is unlike cattle or sheep. Only 1/3 of an acre of land is required to raise a pair of ostriches, and if a third bird is added, then only 1/2 of an acre would be required.(3) A second advantage to ostrich farming is that they breed extremely earlier and more regularly than traditional animals such as beef cattle. For example, the female ostrich may begin to produce eggs at the age of 2, and can produce anywhere from 30 to 90 eggs per year.(4) Due to these figures, the potential for the ostrich market is enormous, in that the meat tastes similar to beef, however, it is much healthier than beef due to the fact that it is very low in fat and cholesterol. Since this "red" meat has been proven to be quite healthier than traditional red meat, many health conscious consumers throughout the world, who are worried about the risk of heart attacks, high bloodpressure, and heart disease, would be interested in the purchasing of ostrich meat. Another benefit to the ostrich rancher is that when an ostrich is slaughtered, very little is wasted in the slaughtering process. When an ostrich is brought to slaughter the meat is sold to distributors and restaurants, the hide is sold for the production of high quality leather products, the feet are ground into a fine dust and sold to the far east as an aphrodisiac, the feathers of the ostrich are sold to automobile manufacturers and are used in the final stage of painting new automobiles, and lastly, the eyes are sold to research facilities to perform studies to gain more knowledge on human cataracts. Some of the other advantages to the ostrich industry are that it currently has access to buying and breeding programs On-Line, and ostrich farms can communicate with each other from the US, Australia, and New Zealand via the inter-net. Ostriches On-Line can do all of the husbandry for the prospective farmer, which includes incubation, hatching, boarding, sales of eggs and chicks, and even the taking of the birds to slaughter. Ostriches On-Line, predicts that the ostrich market could be in for a huge increase in demand in the near future. The potential is there for this growth, if the industry can possibly gain a 1% share in the US 28 billion pounds of beef, pork, chicken, and turkey consumed annually.(5) If this 1% goal is reached, then 3.5 million ostriches would be needed for slaughter, even though the current population is at 400,000-700,000, which includes prime breeders that would not be slaughtered.6 Therefore, many more birds are needed in order for the burgeoning market to flourish. Currently, the largest problem with ostrich meat is that there are not enough birds, and the meat is too expensive. Therefore, it is recommended that producers come together in alliances, or Coops, to provide the ostrich packers with a consistent supply of meat, so that the packers may be able to find restaurants and retail outlets to provide meat to at an affordable price. The Ostrich Industry: Commercial ostrich farming began in South Africa approximately 150 years ago, and South Africa has had a virtual monopoly on the industry up until the 1980's. Then, a group of US cattle farmers began to import breeder ostriches into the US in the early to mid 1980's with the idea of eventually ranching the bird. These breeders were being exported from South Africa, and with these exports, South Africa was concerned that it would eventually lose its monopoly on the ostrich industry. Therefore, the Apartheid driven South African government put a ban on the birds being exported, due to the possibility of South Africa losing its monopoly on the ostrich. Another problem was also looming from the exports of South African ostriches into various countries, and that was the heartwater fever virus. Heartwater fever is a virus which has the potential to spread to other birds which are raised as livestock, such as chickens or turkeys, in which the virus contains the possibility of killing off entire populations of ranched animals. However, once the ban on ostrich imports was lifted by the South African government, the US, New Zealand, and Australia began a 30 day quarantine program to ensure that the ostriches being imported into their countries did not carry the virus. Currently, between 400,000 and 700,000 birds are being ranched on US farms as livestock, however it is estimated that three million more are needed to be raised before the demand in the global market can make the bird profitable, and thus, it can begin to be brought to slaughter. The premium strain of ostrich is the "African Black," which originated on the ranches of South Africa through various forms of selective breeding. These quality birds live an estimated life span of between 20 to 30 years in the wild, and domestically may live up to 50 years of age. The "Blacks" reach an adult height and weight in approximately 18 to 20 months, and they reach sexual maturity between the ages of 2 and 3 years of age.(7) The "African Blacks" are the strain of ostrich with the highest quality hide for leather goods, greatest amount of oil for skin lotions, and most amount of lean red meat. For example, one "Black" hide can produce 14 square feet of leather, which in turn can produce about three pairs of boots at a price of approximately $800 per pair.(8) This leather is not only utilized for boots, but it can also be found in clothing, and expensive upholstery. Another quality product which is obtained from the "Black" are the oils from its lard. These oils may be extracted, to produce fine skin lotions, which may be purchased at very high prices. After these oils are extracted, then the meat may be butchered, and a 250 pound "African Black" ostrich may yield up to 130 pounds of red meat, which may then be processed into(see table 1) tenderloin, choice, and ground, which all demand extremely high prices on the world market. Once these products are taken from the ostrich, they are produced into various goods in the high fashion cities throughout the world. These cities include Paris, New York, and London, which are all known for their influences on the fashion community. The butchering and processing of the ostrich meat is produced in various regions throughout the world also, and occurs where the animal is ranched. The areas include South Africa, Texas, London, Paris, and Lisbon. TABLE 1 Current Prices of Ostrich Meat CUT DESCRIPTION PRICE PER POUND(US$) Tenderloin $14.95 Choice $8.95 Ground $3.95 Source: American Ostrich Association According to the American Ostrich Association (AOA), ostrich farming is the fastest growing agri-business in the US today, and is currently found on 3,000 ranches in the US, and this figure is increasing rapidly. The reason for this high growth rate in ostrich farming is that first, the ostrich is a fairly easy animal to farm, requiring little land and small amounts of feed. Second, the ostrich reproduces and grows extremely quickly, thus their profitability is increased. Third, the price of the ostrich market is currently extremely high, and can be quite profitable if a rancher involves himself with some intelligent investors, and this profitability (US$) in which the ostrich has maintained is shown in Table 2. The initial price of getting into the ostrich market can be extremely high, but once firmly anchored in the market for five years or longer, the rancher can see a considerable gain in profitability. TABLE 2 Years to Obtain Profitability for Ostrich Ranch Age of Birds(months) Year 1 2 3 4 5 Number of yearlings sold 12 24 36 48 60 Owner's gross revenue 0 0 20 50 50 Owner's expenses 0 0 5000 12500 12500 Owner's income 11340 4140 6840 6840 6840 Return on total costs 11340 4140 1840 5660 5660 Source: American Ostrich Association In table 3, current market prices for the "African Black" ostrich are shown. It should be noted, that as the age of the bird increases, so does the ostrich price, due to the high mortality rates of the chicks and younger adults. The safest investment is the purchase of a proven adult breeding trio, however this is the most expensive choice of birds to purchase. TABLE 3 Current Prices for Breeders Current Market Prices for Ostriches (US$) 6 month old pair 3000 yearling pair 5000 yearling trio 9000 coming two year old pair 15000 proven breeder pair 15000 proven breeder trio 25000 Source: American Ostrich Association The ostrich is an extremely versatile bird in that one animal can produce so many varieties of high quality goods. What must now be accomplished, is that the ostrich farmer must market this versatility and variety, and meet the challenge of a changing world marketplace. Currently, ostrich products are extremely expensive, and can only be marketed to the elite upperclass in both Europe and the US. However, with the breakup of the South African monopoly on the birds, and their ever increasing agri-numbers, their price is sure to fall to a reasonable level. Once this drop comes to fruition, the benefits of healthy, lean ostrich meat, and fine ostrich leather will surely have a bright future in the existing global marketplace. 3. Related Cases: CROCODILE Case MIGRATE Case BEAR Case WALLEY Case NUTRIA Case EASTANIM Case Keywords: (1) Ostrich Farming (2) South Africa (3) Infestation 4. Draft Author: Jason R. Miller B. Legal Cluster 5. Discourse and Status: AGReement and COMPlete Since it has been realized that the Heartwater Virus is the culprit of so many livestock deaths, the agreement to quarantine all ostriches entering into the US, New Zealand, and Australia from South Africa has reduced the likelihood that the fatal disease will spread. 6. Forum and Scope: USA and MANY This case may fall under the jurisdiction of many legal areas throughout the world, as well as the states involved in the industry have come together in a multilateral manner to attempt to control the spread of the Heartwater Virus. 7. Decision Breadth: 4 [USA] 8. Legal Standing: Non Government Organization The quarantine has been brought about and is currently monitored by the governments of the states involved, however it was aided in its existence by the fact that there is the American Ostrich Association, which put pressure on the governments involved to create the quarantine in the first place. C. Geographic Filters 9. Geographic Locations: A. Geographic Domain: Africa B. Geographic Site : South Africa C. Geographic Impact: USA 10. Sub-National Factors:NO 11. Type of Habitat: DRY STEPPES AND DESERTS [DRY] The desert is the natural environment of the ostrich, however it is quite a hearty animal, and can survive quite well being ranched in cold, wet temperate climates. B. Trade Filters: 12. Type of Measure: Import Standards [IMSTD] 13. Direct Vs. Indirect Impacts: DIRect The quarantine delayed the number of ostriches allowed into each importing country, and the ostriches, which were shown to carry the heartwater virus, had to be destroyed. This measure all but eliminated the chance that the virus would spread throughout the ranching industry of the countries involved. 14. Relation of Measure to Environmental Impact: a.Directly Related :YES OSTRICH b.Indirectly Related :NO c.Not Related :NO d.Process Related :YES INFESTATION 15. Trade Product Identification: Ostrich 16. Economic Data The price of ostrich leather, meat, and oil has been steadily decreasing over the past five years. This is due in part to the increasing breeding partners available, as well as the breakup of the South African Ostrich monopoly. Currently, ostrich products are becoming ever more affordable, and this is extremely beneficial, because ostrich leather is considered to be of the finest, and most durable in the world, as well as ostrich meat is very low in fat content as well as cholesterol. The current US population of ranched ostriches is between 400,000 and 700,000. The American Ostrich Association estimates that it will require approximately three million ostriches in the US, in order to make the industry both profitable for the rancher, as well as economically beneficial to the consumer. The price tag of entry into the ostrich farming market is quite high, however with the extremely high birthrate of the animal it is quite possible to turn over a healthy profit within five years. Generally, it costs around $3,000 for a six month old pair of chicks, $5,000 for a yearling pair,$9,000 for a yearling trio, and this price can swell to $25,000 for a proven breeding trio. The value of buying the proven trio is that they are sure to breed often and fairly successfully, and therefore their price is quite high. Conversely, the unproven yearlings are much more inexpensive due to the fact that they could die, or become unsuccessful breeders. 17. Impact of Measure on Trade Competitiveness: LOW 18. Industry Sector: FOOD The entire Ostrich is utilized once it is brought to slaughter. The hide is used to produce fine leather goods, the feet are ground up and sent to Asia as an aphrodisiac, the feathers are used for feather dusters, as they are also used in the costumes of Las Vegas show-girls, and GM car manufacturing utilizes the feathers for a final brush down before painting its cars. Also, the lard is processed and utilized in the production of fine skin oils, and the meat is processed, packed, and sent to gourmet grocers and restaurants. 19. Exporters and Importers: USA and MANY V. Environmental Clusters 20. Environmental Problem Type: INFESTATION The environmental problem involves the threat of the importation of ostriches without a thirty day quarantine. If there is no quarantine, the threat of the heartwater virus being introduced into the populations of ranched animals becomes greatly increased. 21. Name, Type, and Diversity of Species Name :Ostrich Type :Animal, Vertebrate, Ratite Diversity :NA 22. Impact and Effect: Low and PRODuct With the quarantine firmly in place within the states involved in the ostrich importation, the heartwater virus has been controlled, and all but virtually wiped out. 23. Urgency and Lifetime: LOW and 50 years 24. Substitutes: LIKE Many other products could be substituted for ostrich goods. In place of ostrich leather, cattle leather could be utilized. Also, ostrich meat can easily be replaced by chicken or beef, as well as the feathers are not a vital product, and can be reproduced synthetically. 25. Culture: NO 26. Human Rights:NO 27. Trans-Boundary Issues: NO 28. Relevant Literature HTTP:/WWW.Ostrich-Emu.Com/Links.html HTTP:/gallus.Tamu.edu/edu/1h/ratite/ostrich.html HTTP//www.Achiever.Com/ostrich/invest.1.html Decker, Edith. "A bird of a different feather: Ostrich Meat catching on with local gourmets." Grants Pass Daily Courier 19 Sept. 1995. Munk, Nina. "The Beauty in the Beast." Forbes 23 Oct. 1995: 77-80. Parker, Penny. "The next big thing in poultry? Ostrich popping up more and more on diner's plates." Denver Post 26 Sept. 1995. Stone, Judith. "Poultry in Motion." Discover Sept. 1990: 38-43. Sutherland, Billie. "Investors say ostrich investment laid egg." San Diego Business Journal 13 Nov. 1995. van Zyl, Pieter. "The Costs and Risks of Ostrich Farming in South Africa." American Ostrich Feb. 1996: 30-44. Zmirak, John Patrick. "A Taste of Exotics." Greater Baton Rouge Business Report 22 Aug. 1995. References 1. HTTP://gallus.tamu.edu/1h/ratite/ostrich.html 2. Penny Parker, "The Next Big Thing in Poultry? Ostrich Popping up more and more on Diner's Plates," Denver Post, 26 Sept. 1995. 3. HTTP://gallus.tamu.edu/1h/ratite/ostrich.html 4. HTTP//www.Achiever.com/ostrich/invest.1.html 5. HTTP//www.Achiever.com/ostrich/invest.1.html 6. Peter van Zyl, "The Costs and Risks of Ostrich farming in South Africa," American Ostrich, Feb. 1996, pp. 30-44. 7. HTTP//www.Achiever.com/ostrich/invest.1.html 8. HTTP://gallus.tamu.edu/1h/ratite/ostrich.html

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April 30, 1996