Exchange rate knocks ostrich export industry

It’s a harsh reality that as successful as ostrich meat has become, and continues to be despite depressed conditions, ostrich skin exports have taken a knock, ascribed to a general falloff in demand for luxury goods, including high-fashion leather handbags, boots and gloves. In good years, the annual export revenue split between meat and skins would be 50/50 for South Africa’s R1.2 billion a year ostrich export industry, around R600 million each, but Dr Francois de Wet, MD for Mosstrich, a leading ostrich exporter, points out that demand for leather is down at least 20% over the past year. What is more, much like South African exporters, the ostrich sector has had to struggle against a relentlessly strong rand currency which shows no sign of relaxing in the foreseeable future. “We tend to forget that in September last year we had budgeted for R11.40/euro because the rate at that stage was R11.50/euro. “As we know, the rate went down to R9.30/euro and then up to around R9.50/euro, so percentagewise we are between 15% and 20% down on bottom-line.” De Wet explains that the unsatisfactory exchange rate notwithstanding, the industry is obligated to pay a rather high price for meat in order for the producer to remain on the farm rather than quitting and taking up another farming pursuit. “We buy the whole bird from the farmer and pay according to carcass weight and skin quality but because the demand for luxury leather goods has dropped drastically, we are probably paying 40% less for skins than two years ago.” Given that ostrich feathers only realise about 10% of export revenue and the depressed leather market, that leaves only meat, for which Mosstrich is still paying based on an exchange rate of R11.40/euro. “That,” says De Wet, “is our predicament. Even though international demand for ostrich meat has remained strong over the past two years and the euro prices earned are stable, when we convert euros to rands, we are earning far less. Mossel Bay-based, Mosstrich, won the ‘Open’ category of the Absa Cape Regional Chamber Exporter of the Year Award last year. In 2008, its tenth anniversary, the company had increased export turnover by 67%, which was to increase by another 7% to R325 million in 2009. Among its export achievements is individually packed special ostrich steak portions for big restaurant groups in Europe, packing for the French retailer, Picard and supplying such Belgium retail chains as Delhaize and Makro. The company has diversified its export meat range to also include South African game meat such as springbok, blesbok, kudu, wildebeest and eland, springbok kebabs going down particularly well with Swiss retailers. The European meat market requires very strict quality and hygiene controls and Mosstrich has in he past few years been audited twice by EU inspectors, with positive feedback. As overseas supermarkets have become more insistent on quality and hygiene certification, Mosstrich has achieved full HACCP accreditation and become the first ostrich/game abattoir with A-grade BRC (food safety) accreditation, thereby strengthening its position as a preferred supplier. Jimmy Wright, Mosstrich’s marketing manager for ostrich meat, points to the importance of having good logistics partners to enable it (Mosstrich) to extend the high service levels to ensure total customer satisfaction. Mosstrich has forged relationships with Morgan Cargo, which handles all air shipments, Röhlig Grindrod, which is charged with seafreight forwarding and Safmarine which handles the ocean freight. “Our successful partnerships with these logistics companies entails a thorough understanding of each other's business procedures, good working ethic, solid personal relations, knowledge of our ostrich and game industry and sound communication,” says Wright. “They are our long-term partners and act as an extension of our company, doing the job of getting our cargo to our customers in superb condition, at the right place and on time every time.”