Ostrich Farming (Ostrich)

Case Number : 289

Case Mnemonic: Ostrich

Case Name : US Ostrich Farming

About TED Categories and Clusters

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.