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.”