May 11
23
Financing Ostrich Farming Production
“No raw material – no industry” are the words stated at the first South African ostrich farming conference back in 2002 by a frustrated South African marketer of tanned ostrich skins. He was successful in developing his markets having taken a very specific targeted market route, but frustrated by the lack of supply. He was also frustrated by the lack of consistency in the supply available to him.
Successful marketing of ostrich products starts on the farm as discussed in “Designing an Ostrich Farming Marketing Plan“.
For any starting ostrich farming today the challenge remains obtaining adequate finance, especially for the production at farm level. The demand for ostrich meat remains strong, but all too often financiers are willing to support the processing and/or market development, but fail to recognize that the marketing starts on the farm. If there is no raw material to feed that slaughter and meat processing plant, then there can be no sales. If there is no raw material, there can be no business.
One of the reasons many financiers are not fond of supporting primary production is the time taken to turn over the cash. Livestock production has to take a certain amount of time to reproduce and grow. This is a drain of cash flow, which has to be financed, until the product is sold. All too often today payment terms are 60 and 90 days with the larger buyers (like the supermarkets), yet their business is virtually all cash at time of sale.
However, everyone needs to eat and these buyers are dependent on supply of product produced on the farm. When starting in livestock production of the mainstream livestock specie, it is not usually necessary to build and finance the complete infrastructure, including the slaughter and processing facilities. These can be separate businesses independently financed, but still need to work in collaboration.
There is a further issue when financing the start up of ostrich farming that needs remembering. This is the limited livestock currently available. The good news is that current stock, under the right management has proven to have performance potential to match the mainstream meat producing poultry and pigs. The production potential with identification and improvement of the best genetics is very exciting as is the profit potential.
The implications of this, when talking about to financiers, is the time taken to profitability once commencing ostrich farming based on a sound business plan. Whilst improved production will be witnessed fairly quickly, the time required to build a strong breeder base of significant size to scale up to good commercial volumes should be put at 5 years – once at this stage, the business is in a position to scale up rapidly showing very different profit potential by 10 years.
Factors that will also influence profit potential of ostrich farming are the area of operation which determines markets available and supply of feed ingredients of the correct quality at the best prices.
