Western Cape Business News

Send  Share  RSS  Twitter  07 Apr 2010

VENTURES: Egg Dancing In Mossel Bay


Recent Western Cape Business News

OSTRICH farming always had the allure of easy money – especially so in the early years of the previous century when their feathers brought untold riches for some.

When the feather fashion fad came to an abrupt end this meant woeful times for farmers and especially traders in Oudtshoorn, the then ‘ostrich capital’ in the Little Karoo.

Yet the ostrich business remains a not insignificant economic activity in the Southern Cape.

Should one look at the wellbeing of the Mosstrich Group in Mossel Bay, a picture unfolds of much money doing the rounds but, alas, it also takes much wringing to turn the efforts to decent profits.

The Mosstrich Group belongs to some 190 ostrich producers in the Southern Cape and adjacent Little Karoo regions. Abattoir and tannery workers own some 7% of the venture.

Most all of the group’s production of meat (95%), leather (85%) and feathers (95%) are exported – mainly to markets in Europe. And herein lies the rub, as for all South African exporters. If the rand is weak and overseas economies are booming, Mosstrich flies high, so to speak.

But when these trends turn, as they have during the past financial year, it requires an egg dance to keep the financial figures looking good, as MD Francois de Wet attests.

Perhaps more than most any other exporters Mosstrich has a much bigger downside potential to the changing trends. For one, it has little of the local market to fall back on. Also, its leather products experienced a steep downward trend in the overseas luxury goods market.

All exotic leather articles were effected negatively. Sales of crocodile leather for instance were down dramatically and ostrich leather was thus not alone at drawing the short stick. Today it’s clear that the recovery in desirability will take time and that a tough 2010 lies ahead. Lower US dollar prices will not stimulate the demand and we will thus have to have patience in the future”, de Wet says.

The luxury exotic segment provides greater margins than venison but considering that this represents almost 60% of the ostrich product mix income, here too are problems.

De Wet says the export of venison went slowly during 2009. The most important factors were that the volumes of New Zealand venison exported to Europe increased markedly and that the price of venison in Europe went down significantly.

Maybe the 2010 Soccer World Cup will increase the desire for these markets to showcase our products again and lead to higher prices”, he says.

Nevertheless, the Mosstrich Group turned in good results for the year ending September 2009, with annual turnover up from R305 million in the previous year to R324 million. Profits before tax increased from R30 million to R35 million.

Although the strong rand negatively affected our income during the second half of 2009, the exchange rate was positive for exports at the start of the year. The price of carcasses was raised to its highest levels in 12 years, but then again, the producer prices for leather are the lowest in ten years. Ostrich feathers achieved good prices last year and about 12% of the realisation of profits from the slaughter of ostriches currently derives from feathers. This is significantly higher than a few years ago”, de Wet says.

All in all, it seems like a tough dance to keep pace with.

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