South African Ostrich Farmers Face Ruin From Bird Flu

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Photographer: Mike Cohen/Bloomberg

An ostrich stands in a pen on the Cango Ostrich Farm near Oudtshoorn.

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Photographer: Mike Cohen/Bloomberg

An ostrich stands in a pen on the Cango Ostrich Farm near Oudtshoorn. Close

An ostrich stands in a pen on the Cango Ostrich Farm near Oudtshoorn.

Photographer: Mike Cohen/Bloomberg

Saars Jonker, one of the world’s biggest ostrich farmers, whose company had to cull more than 6,000 birds, said in a June 5 interview, “I’m very concerned about the future of the industry.” Close

Saars Jonker, one of the world’s biggest ostrich farmers, whose company had to cull more than 6,000 birds, said in a... Read More

Photographer: Mike Cohen/Bloomberg

More than 43,000 ostriches have been culled in South Africa since the H5N2 avian flu virus was detected on farms in the Eastern Cape in April last year. Close

More than 43,000 ostriches have been culled in South Africa since the H5N2 avian flu virus was detected on farms in... Read More

Photographer: Mike Cohen/Bloomberg

Bags made from ostrich leather are displayed in a shop operated by Klein Karoo International Ltd., the world's biggest ostrich products processor, in Oudtshoorn. Close

Bags made from ostrich leather are displayed in a shop operated by Klein Karoo International Ltd., the world's... Read More

Danie Kok kicked his boots in the red dust swirling through empty wire pens at the farm he manages near Oudtshoorn, the world’s ostrich-farming capital. No ostriches were to be seen.

“We’ve been through some bad times but nothing comes close to this,” said Kok, 55, who has worked at the Van Wykskraal farm east of Cape Town for 30 years.

Last year more than 1,600 of the farm’s birds were taken away and killed after a strain of bird flu was detected in the flock. Such outbreaks, detected on 43 farms, led the government to ban all fresh ostrich-meat exports from South Africa, which had supplied 70 percent of world demand. The ban won’t be lifted until farmers meet new hygiene and registration requirements and the country has been disease-free for three months.

About 740 ostrich farms, as well 20,000 jobs in farms, slaughterhouses, tanneries and feather-processing plants, may be at risk in an industry that dates back to 1864. Feathers from the flightless birds were only outranked by gold, diamonds and wool among South African exports before World War I.

More than 43,000 ostriches have been culled in South Africa since the H5N2 virus was detected in April last year. While farmers have received 50 million rand ($6 million) in government compensation, the industry had been earning $115 million a year from meat exports.

Racing Birds

About 70 percent of meat, valued for its beef-like texture and its low cholesterol and fat content, was exported. Carrefour SA (CA), the world’s second-largest retailer, Aldi Group, Germany’s biggest discount food chain, and Edeka Group’s Netto stores, were among the largest buyers, according to Johan Stumpf, managing director of Klein Karoo International Ltd., the world’s biggest ostrich-products processor.

“You have the same expenses but no income,” said Jack Klass, 78, the owner of Van Wykskraal, who has been farming since 1958. “It’s going to ruin the business.”

The government now requires ostrich farmers to re-register their farms, chlorinate water and improve fencing and access controls.

“When they took our birds, they said we could restock in three weeks,” said Arenhold Hooper, owner of the Highgate Ostrich Show Farm. He lost 1,500 ostriches, 49 of them trained to take part in daily races and give rides to tourists. “We’ve effectively been closed as a farm and a tourism operation for more than a year now. It‘s been a battle.”

South Africa is a member of the World Organization of Animal Health, which requires all birds to be culled on farms where avian flu is detected.

Unseen Changes

The government has done everything required of it to have the ban lifted and farmers now have comply with the new rules, said Mpho Maja, health of animal health at the Department of Agriculture.

“Progress on the side of the industry is however disappointing,” she said in an e-mailed response to questions. “The re-registration of farms is stalling, the farming practice has not changed, or at least we have not seen the proposed changes and how they intend implementing them.”

The outbreak of the disease, unrelated to the H5N1 type of bird-flu that has killed at least 357 people worldwide, is the latest animal health crisis to affect South African farmers.

Tens of thousands of pigs were slaughtered after the country’s biggest-ever African swine fever outbreak last year, while horse exports were restricted for more than four years, after an outbreak of African horse sickness. South African wool producers lost access to their biggest market, China, in 2010 when Rift Valley fever swept through their flocks.

Export Markets

Ostrich farmers spared from the culling because the disease wasn’t detected in their flocks are also struggling. Without export markets to sell to, the price for adult birds has plunged about 40 percent to 1,700 rand -- roughly what it costs to feed them for a year until they are old enough to slaughter.

Prior to the ban, South Africa slaughtered between 250,000 and 300,000 of the birds a year. Ostriches can reach a height of 8 feet and weigh 300 pounds. Smaller competitors to South Africa include China, Zimbabwe and Australia.

Meat normally generates about 60 percent of revenue from ostriches, while leather used in handbags, shoes and belts made by companies such as Hermes International (RMS) SCA, Prada SpA and PPR SA’s Gucci brand account about 35 percent of sales and feathers the balance.

Ostrich Boom

“There is so little research done on the H5 strains in the ostrich industry that we are guessing” how best to handle the outbreak, Piet Kleyn, the acting chief executive officer of the South African Ostrich Business Chamber, said in a June 5 interview in Oudtshoorn. It lies on the southern tip of the arid Karoo region and is the center of an area that accounts for more than two-thirds of the national ostrich-farming industry.

The C.P. Nel Museum in central Oudtshoorn tells the story of the industry’s fluctuating fortunes. The plumage’s popularity among European nobility fueled industry booms in the late 1800s and early 1900s, with the price of the highest-quality feathers peaking at $71 a kilogram in today’s money by 1913.

Feathered Hats

In 1914, the market collapsed due to the start of World War I, overproduction and the popularity of open-topped cars, which made ostrich feather hats impractical. The number of domesticated ostriches plummeted to 32,000 by 1930, from 314,000 at the end of the war. The industry recovered slowly after the end of World War II as new markets for leather and meat opened.

The European Union suspended ostrich-meat imports in 2004, following an avian flu outbreak. The ban cost South Africa 600 million rand in lost exports and resulted in the slaughter of about 26,000 birds. While most farmers recovered, the effect of the current ban may be more lasting.

“I’m very concerned about the future of the industry,” Saag Jonker, one of the world’s biggest ostrich farmers, said in a June 5 interview in Oudtshoorn. His company had to cull more than 6,000 birds. “A very small number of farmers supply the industry with chicks. Those farmers are sitting back and are not sure if they are going to re-enter the industry.”

The shortage of birds also will affect factories that depend on ostrich farming.

Meat Prices

“The big challenge for the processors will be in a year,” Klein Karoo’s Stumpf said in a June 4 interview in Oudtshoorn. “We expect production volumes in South Africa to more than halve.”

Some farmers are seeking to beat the export ban by exporting heat-treated meat, a process that kills the virus but also reduces prices. Efforts are also being made to increase local demand where the meat sells more cheaply than in Europe. Ostrich meat ranges from 184 rand per kilogram (2.2 pounds) for fillet to 60 rand for mince at Woolworths Holdings Ltd. (WHL) supermarkets in Johannesburg.

A clear plan for dealing with avian flu is lacking, said Ranger Gerebe, manager of the Cango ostrich show farm, which was spared from avian flu while birds from all neighboring properties were slaughtered.

“We are so worried,” he said, as he fed a bucket of corn to six jostling black-and-white ostriches. “We don’t really feel there are leaders standing up to help the farmers and say ‘Boys, this is the way we need to go.’”

To contact the reporter on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

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