1. INTRODUCTION

2. EXECUTIVE SUMMARY

3. SASKATCHEWAN SPECIALTY LIVESTOCK PRODUCTION AND MARKETING

4. CANADIAN PRODUCTION AND MARKETING

5. SPECIALTY LIVESTOCK SECTORS

6. RED MEAT CONSUMPTION IS DECLINING

7. DISTRIBUTION CHANNELS ARE CHANGING

8. RECOMMENDATIONS AND CONCLUSIONS

1. MARKETING BIBLIOGRAPHY

2. MARKET PROFILES OF SELECT COMPANIES

3. CANADIAN IMPORT-EXPORT DATA

4. US IMPORT-EXPORT DATA

5. SELECT FOREIGN IMPORT-EXPORT DATA

6. GAME EXPORT REGULATIONS

7. HUNT FARMS

The Saskatchewan Specialty Livestock Marketing Study was undertaken for the Agri-Food Investment Fund by PPD Technologies Inc. The study was completed over the months of June to October 1997, was limited to the specialty livestock sectors currently produced in Saskatchewan. This project was sponsored by the Canada-Saskatchewan Agri-Food Innovation Fund.

The specialty livestock sectors covered by this study include: bison, ostrich, emu, rhea, rabbit, game birds, horses, elk, white tailed deer, fallow deer, wild boar and sheep. However during the course of the study, some of the specialty livestock groups either elected not to participate (elk) or, more often the case, were in organizational turmoil as commodity groups and were not capable of continued participation (emu, rhea, game birds).

The study is aimed primarily at marketing specialty livestock, but discusses when necessary, production and organizational issues.

The Saskatchewan Specialty Livestock Industry is at a crossroads. It must meet the new market realities while facing the ever constant problems of production. The following sections briefly summarize the more serious concerns, issues and future directions.

Specialty livestock products have had a difficult time making inroads with the Canadian consumer. Canadian consumers have, at the home and professional HRI (hotel, restaurant, institutional) level, expressed concerns with:

Cooking the product - the overall lean nature of all of the specialty livestock meats has made cooking difficult. If the low fat, low calorie product characteristics are to be maintained, cooking is truly challenging. If the meat is over-cooked, it can become extremely tough. Most recommendations are to cook the meats to a rare or medium-rare level, however most consumers prefer meat to be cooked medium to medium-well-done. The specialty meats are unforgiving if overdone or underdone.

High product cost - is not going away in spite of the poor markets. Most specialty products are selling for 2 to 3 times the price of beef. The high price, combined with difficulty in cooking, compounds the marketing problems.

Inadequate promotion and food preparation training - is not being addressed. Most of the specialized livestock commodity groups are underfunded, disorganized or incapable of adequately mounting a consistent and continuing promotion program. Product appears to move off shelves when customers and chefs are given in-store demonstrations along with recipes and instruction. These attempts at promotion, however, have been sporadic.

Need to build greater convenience into the product. In an age of working wives, it is extremely difficult to find families who can take the time to prepare foods which are difficult or fussy. The same is true for HRI. It is difficult to find chefs who have sufficient labour and spare time to experiment and understand the preparation nuance of the specialty meats.

Overall trend in meat consumption is down. While red meat consumption has been declining in Canada, white meat consumption has been increasing. Nonetheless, total per capita meat consumption has declined from 70.1 kgs. in 1986, to 58.6 kgs. in 1996. This means that existing red and white meat sellers are trying harder than ever to market their products by - pricing sharper, adding convenience, better quality, etc. By providing better value, they are making it tougher for any of the new specialty meats to enter the marketplace.

Consumers are in a difficult position when it comes to specialty livestock. First they must go out of their way to find product to buy and when they find it; it is expensive, hard to cook, with little information about how to prepare it. In contrast, the competitive meats are readily available, becoming cheaper and being made more and more convenient.

For most specialty livestock categories there are few opportunities to export. In cases such as fallow deer, and ratites, potential importing countries have purchased breeding stock and have entered production. This means that unless we have:

Unique comparative advantage in a certain animal’s production, our market entry will be short and fleeting. We do have some advantage in animals such as bison, white-tailed deer, and elk as these indigenous species have not been widely disseminated as breeding stock abroad.

Niche markets are often too specialized or small to bother. Many markets are too small to make an industry but are large enough for an individual producer. An example of this is horse meat exports.

Insufficient volumes to get export economies. In many cases the niches are too small to be able to handle the basic standard of international commerce, i.e. a 20 ft. container or 20 tonnes. If niche markets are smaller than this, higher product values are required so that the next lower volume level of international freight, an LD3 air shipping container can be affordable. Chilled fresh venison from New Zealand is shipped to US wholesalers in LD3’s.

Need export approval of processing plants. This is a serious problem in getting product exported into EU markets. The requirement for an EU approved processing plant is both stringent and political. The lack of approved plants and the cost of getting EU approvals has hindered sales of specialty livestock. There are few packers and processors willing to spend the money necessary to get approval when export volumes are small.

Export is, for the most part, difficult for all but a few specialty livestock products.

Specialty livestock production is extremely troubled. A number of factors are involved, such as:

The industry is too capital intensive. Many producers invested too much money into their breeding stock. They have clearly overpaid to get into the business. This appears to be the case in all of the specialty livestock categories. For some livestock, such as ratites, producers appear to have considerably overpaid for breeding stock. In addition to the cost of the breeding stock, it appears that considerable investment has been made in purchasing equipment and refurbishing buildings.

Industry infrastructure does not exist. Other than in the case of bison, in which existing livestock infrastructure is useable, most production and marketing infrastructure has had to be created from scratch to meet arising needs. The quality and efficiency of the infrastructure is improving, but has a long way to go.

No production standards, weights, conformations. This is extremely difficult in an industry which starts with a breeding stock frenzy. Everyone appears to be interested in breeding any females, to any males just to increase the livestock numbers. Little concern has been paid to size, conformation, rate of growth, and especially to the fact that the livestock will eventually have to be marketed as meat, fiber, or hides.

Farmers and non-farmers jointly participated in the industry. In many ways this is a first for agriculture. It is the first time in which non-farmers have joined with farmers to develop an industry. While it is good to have non-farmers bring new equity into agriculture, it has also brought misunderstanding, instability, and discontent.

Production units are generally too small. Most producers have sufficient livestock numbers to make their operation more than a hobby, but not sufficient to make it a business which would require investment in infrastructure and management. Most specialty livestock producers are only dabbling. Few producers are at a stage where they have production economies in feed purchase, haulage etc.

Production has not specialized. Current producers are trying to do everything themselves. They act as pure bred breeders, commercial breeders and commercial producers. For example, we know of no cases in which their are solely pure bred breeders living alongside commercial breeders such as in the cattle and hog industry. Everyone is trying to undertake the whole range of integrated production. This is typically a sign of industry infancy or retrenchment.

No substantive comparative advantage accrues to Saskatchewan. For virtually all of the specialty livestock species there are no real advantages to production in Saskatchewan. Fallow deer, bison or ostrich produced in Montana or Ontario are at no real advantage or disadvantage to Saskatchewan. Every other jurisdiction appears to be facing the same problems. The only advantage Saskatchewan has is that other areas such as Ontario and the Maritimes may be slightly behind the current stage of development in Saskatchewan. For example, there are producers in Newfoundland who are just buying their first ostriches, and fallow deer.

Production in Saskatchewan has faced very difficult start-up problems, and is now maturing as producers move from the euphoria of selling breeding stock, into the daily business of selling specialty livestock meats.

D. DISTRIBUTION CHANNELS ARE CHANGING

The distribution channels for both live animals and slaughtered products are changing. These changes at the producer, wholesale and retail level are due to a number of factors such as:

Farmgate selling is not an adequate way to develop an industry. Many of the specialty livestock sectors are selling a considerable portion of their product farmgate. While it is adequate for an individual, it is no basis for an industry. Specialties such as fallow deer, ostrich and emu are marketing in this manner. Other specialties such as bison, formed the North American Bison Co-operative to introduce market discipline and reduce the amount of farmgate marketing going on.

Retail shelf space in the chilled and refrigerated counters is at a premium. There is severe competition in the meat case. The ability to keep space allocated to specialty livestock is a function of both inventory turnover and margin - profit per square foot of counter. In this context most specialty livestock have not fared well. Products such as ostrich, when given space in the meat counter, have not managed to keep it. Inventory turnover of up to 1.5 turns per week is required.

Marketable volumes have been too small. There is inadequate production in most species to consistently supply a medium to large food retail chain. Most chains like to have, at minimum, regional product coverage and, for unique specialties, to have local coverage. In the case of specialty livestock, there are problems in getting enough product into the system to provide local coverage. On occasions when meat managers have accepted specialty products into local stores, difficulties have arisen due to factors such as:

product supply problems - unavailability of requested volumes

no product selection - unavailability of desired cuts, or inability to adjust to consumers requirements

distribution - poorly packaged and presented

inconsistent quality - no discernible grading

Need for more value-added products in the marketplace. Product which is pre-cooked, sliced, trimmed, and packaged.

New food security rules in terms of traceability back to source. Although there are no requirements for this in Canada, some export markets such as the UK now have programs in place.

Growth in the foodservice sector starting to rival grocery stores. The foodservice sector in Canada is responsible for almost 40% of total food sales. In the United States it is almost half and half.

The foodservice market is being driven by fast-food. The fast-food restaurants are continuing to expand while the high end, white table cloth restaurants serving higher priced specialty meats are declining. More importantly there is not a single fast-food chain which features specialty meat. Fast-food restaurants feature beef, chicken, and seafood; but none feature pork, lamb or any other specialty.

The newest area of foodservice is Home Meal Replacement (HMR). Home meal replacement is the preparation of entire take-home meals. Both restaurants and grocery stores have entered this market.

These changes in distribution channels are making it more and more difficult for specialty livestock to make inroads.

Specialty livestock transport is currently an art. Not enough is known about the optimal techniques and methods of transport. For example, no one is certain about how to prepare emu or fallow deer for the stress of transport; or, what is the maximum transport time. Can they be transported for 2 hours or 10 hours before the animals start to suffer weight loss etc. Live animals are currently being shipped from Saskatchewan to Ontario to be slaughtered.

A number of other transport problems exist such as:

High shrink, dark cutters, bruising are typical problems caused by shipping. They affect both the quality of meat as well as the marketability of the meat. Little research has been undertaken in the area of transport.

Insufficient volumes have kept specialized livestock handlers from developing. Moreover, since no specialist haulers have developed, most producers have had to buy their own trailers to haul livestock, further adding to the overcapitalization of the industry.

High cost of shipping loads that are LTL (less-than-load). This is a problem for both live animals as well as for processed products. There are insufficient volumes of specialty livestock such as ostrich, bison etc. being slaughtered to make a minimum container load of 20 tonnes.

The transport issues affect both the live, as well as processed sale of specialty livestock. In the end, transport problems tend to reduce the producers profitability and the product’s palatability.

Processing is a problem because of the need to slaughter small numbers of livestock. The processing industries have for cost and health sanitation standard reasons moved to higher volume processing. Specialty livestock slaughter requires a regression back to abattoir level slaughter. Slaughter that runs to a maximum of 100 animals per day is required. These low volumes automatically translate into high slaughter costs, and eliminate the potential for a by-products (hides and oils) business. Slaughter costs ranging from $40 - $200 per animal are being paid. Volume throughput is a problem but there are other issues such as:

A lack of standards for wholesale and retail cuts. There are in only a few species defined retail cut standards. There are some wholesale cut standards for ostrich but nothing for retail. Bison does have retail cut standards since the same cuts as beef are being used. Other specialty livestock are not as fortunate, there are no existing standards.

Higher phyto-sanitary standards are coming into effect. There is greater concern about E-coli, salmonella, etc. being introduced into plants by these short runs of specialty animals, and as a result, higher costs are being charged in order to cover subsequent plant clean-up.

Few federally inspected small abattoirs exist. The high cost of building for federal inspection have caused most small plants to remain provincial or locally licensed. Federal inspection is required in order to market across inter-provincial borders and for most export, but there are exceptions.

Difficult to do value-added processing when volumes are small. The equipment necessary to undertake value -added processing such as smoking, cooking is not possible when volumes are too small. Minimum threshold batch sizes are required.

The whole issue of slaughter and processing will become increasingly important as more commercial animals begin to be marketed.

The producer associations have with two exceptions (Sheep and Horse) shown little organization. This lack of industry organization is currently hurting the specialty livestock sectors.

There are problems related to the following:

No external support - is available to producers or marketers of product. The existence of a need is understood, but unfortunately the provincial associations have not been able to develop or offer producers much direction. There are cases of producers going from province to province looking for association support. For example, there are Saskatchewan producers who are members of Alberta associations and in some cases, even Ontario commodity groups while their Saskatchewan association is languishing.

Lack of association funding - this is clearly a problem related to the fact that producers do not feel they are getting any benefit from their membership dues paid.

Lack of inter-industry coordination - this is more of a problem on the processing and marketing side than for production. There is need for transport and marketing to be better coordinated in order to make-up truck loads, or to take advantage of marketing and sales economies which develop from the foodservice industry.

Nature of producers - producers do not feel the need to co-operate until they are seriously pressured to do so. The mix of farmers and non-farmers in the industry may be compounding the problems.

The problems of specialty livestock associations are beyond serious, they are tragic. It is of such import that a parallel study is devoted to this issue.

The specialized livestock industry is very much in it’s infancy and will go through major changes before it matures. The problem for all livestock species is marketing. Those species with secure markets will do fine, those that are currently struggling to find markets may not survive. Some will find that there are sufficient local and/or export markets for an individual producer to do well, but there may not be a sufficiently large niche to allow an industry to develop. These market led industry adjustments are currently taking place.

These market adjustments will for some specialties be almost terminal. Some specialties such as ratites will require serious individual producer and species wide marketing, if they are to survive at all. Other specialties such as elk and white tail deer, which have established and mature markets, will face minor problems. Others such as bison, which have been slower developing will need to start looking seriously for future high volume markets.

In broad terms, market areas with growth potential are:

Preparation and sale of deli meats. Specialty livestock are in many ways "made for the deli counter." The deli meat counter offers specialty meats several advantages:

Visibility - every meat counter has a sign stating the product name i.e., roast bison, or smoked ostrich etc. This gives customers name recognition with each species.

Properly prepared meat - considering the preparation difficulties of these lean meats, pre-cooked deli product solves this issue.

Minimizes the high cost of meat - you can buy slices, or 100 gms. at a time. Clearly a price of $3.00 per 100 grams is more salable than having to pay $13.50 per pound, at a meat counter.

Lets consumers experiment - Deli counters sell small quantities so consumers can experiment and try the product. It is a no risk purchase by the consumer, as compared to a high risk purchase of a bison fillet entrée at a restaurant for $25, and finding you don’t like it.

Not a high volume business for retailers - lets retailers take a chance on buying a piece of a new meat to try. If the product does well in the deli, there is more interest in trying it in the fresh meat counter.

Not a high volume business for producers/processors - deli sales don’t require tonnes of meat, at most 5 pounds per store. For these small quantities, it is easy to find enough slaughter animals to supply all the deli counters for retail stores in Saskatchewan, (to gain visibility) while it would be impossible to supply the larger volume requirements of the fresh meat counters.

Can contract existing deli meat companies to prepare and distribute your new meat - there are a number of specialist deli meat processing companies that can prepare and distribute. Little investment is required.

Prepared deli type ostrich, venison, bison roasts, and smoked meats, and meat loaves are a low cost consumer introduction to the many types of specialty livestock meats.

The high end HRI trade. The cost of most specialty livestock meats has forced these meats to be sold in small volumes in the white-table cloth restaurant trade, and to gourmet food stores. While these markets are small in restaurant and foodservice terms, they are large enough to take up the entire production of small specialty producers such as Saskatchewan. The problems are not market size, but market access. The HRI issue is whether foodservice suppliers will put Saskatchewan product on their product supply lists, as opposed to Ontario, South Africa or New Zealand product. For some product such as venison, imported New Zealand product is preferred to domestic Canadian.

The HRI trade in the domestic and export markets will be the biggest outlet for specialty livestock product. The absolute size and growth of the high end restaurant trade is fed by the growth of tourism and business travel. These tourists may not be steady consumers of specialty livestock meats, but there are a sufficiently large number that if 1% of all tourists ate bison or ostrich, a nice business could be developed. The tourism based HRI markets in North America, Japan and Europe are clearly the destinations for the current small volume of Canadian specialty livestock exports.

A potential new market area for specialty livestock is in the domestic and US home meal replacement or HMR market. This is the sale of prepared ready to eat meals for home consumption. These meals are sold at retail stores, or are branded product sold by restaurants. The rationale for HMR is the very real difficulties in preparing specialty livestock meats for the table. The very strength of the product, it’s leanness, is also its major drawback. Lean meats are difficult to prepare at the home and restaurant levels. When this difficulty is combined with the de-skilling which has taken place in the home and restaurant kitchens, pre-made meal entrees may be one solution. HMR is one of the fastest growing food industry trends. Foodservice suppliers are currently selling product into retail stores and restaurants. Specialty livestock must find foodservice companies prepared to develop specialty meat entrees. To date we have not found any foodservice companies marketing prepared specialty livestock meats.

More importantly small volume HMR products can be sold to commercial foodservice and catering firms. For example, while there may not be enough goat meat to supply Safeway stores, nor enough to supply Air Canada airline meals, there may be enough to supply only the first class meals on Air Canada’s international flights to the Caribbean. The primary notion is to try to minimize any technical difficulties with the product by precooking, while trying to match any market inroads, to a stable and realistic volume of farm level production. And, should production ramp-up quickly, larger whole meal markets can be pursued.

Hunt farms will become an outlet for older breeding stock. We expect that hunt farms will become a larger part of the Canadian, American and European originated tourism traffic. Hunt farms are part tourism and part agriculture. They will become outlets for mature elk, bison, white tailed deer, as well as wild boar and fowl such as pheasant. Ratites however will probably not be found on hunt farms, since they are neither traditional hunt stock nor are there any trophy standards.

Coordination between various government departments such as agriculture, tourism, natural resources, environment will be needed in order to make the hunt experience the best possible. It will need changes in regulations regarding hunting seasons, types of weapons (bows etc.), export of meat, tourism advertising.

In summary, the primary problems of specialty livestock are an overall lack of markets, and the slowness to undertake concerted or effective and creative marketing. Some of the traditional native livestock with established markets have greater long term potential, while newly introduced specialties will face severe competition in the few markets which become available. Many of the later specialty livestock sectors are unlikely to survive in their current formats.

The following section outlines the accompanying investment requirements to fulfill these opportunities.

The investment initiatives necessary to meet specialty livestock’s future market requirements are:

Cost share with producer/processor groups to develop deli products suitable to the meats of each species. For example, lean meats typically do not smoke as well, as fattier meats.

Cost share with producer/processor groups research to enhance the utilization of the poorest quality and toughest cuts.

Cost share with producer/processor groups, research into the combining of meats of various species. This may be the preparation of deli meats such as bison and ostrich meat loaf. The advantage is to take the best of ostrich i.e. high iron content in the meat to supplement nutrient content of bison meat.

Cost share with processors and producers groups the cost of developing sample products for the HRI trade.

Cost share with producer/processor groups research into the preparation of entrée and whole meal recipes

Cost share with a yet to be formed hunt farm association, the preparation of a multi-language tourism related hunt farm brochure, showing farms, accommodations, regulations, tour packages and features of quality stock available from Saskatchewan.

It is premature to make anything more than soft investment into the specialty livestock industry. Only when the industry stabilizes and develops serious production volumes, should capital investment be considered.

Specialized livestock appear to be undergoing a rebirth in North America. While many of these livestock sectors have been developed in the past, they had died away, and have only begun a comeback in the past 20 years.

There are a number of reasons for this rebirth in specialized livestock. Some of the more important include :

A changing lifestyle. The "baby boom" generation of North Americans is the first in recorded history to have been flooded with information regarding health, diet and body image. People are interested in lowering their fats and cholesterol intake. This has led to a common denominator for all specialized livestock species - carcass leanness.

A restructuring of agriculture. The changing nature of agriculture which once faced instability created by the normal ebb and flow of commodity cycles is now being affected by trade reform. Many producers in Western Canada are unable to make adequate returns from current field crop production and are looking for other sources of farm income.

New ‘farming" entrants. The last 30 years has seen a growth in part-time farmers. Many of these part-time farmers are urban income earners who are called "sundowners." These are people who come home from their non-farm jobs to begin their farm work at sundown. Sundowners have flocked to the breeding aspects of the specialized livestock industry.

In addition to sundowners there is a new group of "early retirees." These are individuals almost all of them formerly employed in large organizations such as the civil service, or large private sector firms, who have received pension buy-outs. Their relatively early retirements coupled with sufficient monies to permit them to buy "dream" properties in the country - small underutilized estates of 1 - 50 acres have been drawn to specialty livestock.

The high values of the animals, and the need for relatively small land areas, are ideally suited to sundowners and retirees. Both groups have the required money, land and time. Equally important is the knowledge factor; since no one else has raised these specialty animals before, none of the local full-time farmers has any bragging rights or production advantage.

Immigration has changed the North American ethnic mix. Both Canada and the United States have experienced a vast change in ethnic structure. In the past 30 years, immigration to North America has switched from Northern Europeans, to Southern Europeans and Asians. In the case of Canada, we have a larger number of immigrants from Asia than from Northern Europe. This is shown in Exhibit 1. Prior to 1961, 50% of immigrants came from the United Kingdom, Italy and Germany. In terms of recent immigration, the bulk have been from Hong Kong, China, India and the Philippines. The Exhibit shows the United Kingdom has fallen from being the number one source of immigrants to number ten; while Hong Kong/PRC have moved from number 10 to number one. This change in ethnic mix has a major effect on meat marketing.

The United States is experiencing a massive immigration inflow from Latin America. This change in immigration has seriously affected food consumption patterns. Southern Europeans, Caribbean, Middle Eastern and Latin Americans immigrants have revived goat and sheep production. In fact, the Iranian and Arab community in Los Angeles have single handedly revived the live sheep industry. (The animals are sold live to consumers, and the animals are ceremonially butchered in the home.)

Some of these changes are production oriented while others are clearly market lead. The following sections will look more closely at the status of specialty livestock production.

Exhibit 1

Top 10 places of Birth for Total Immigrants
Immigrants Arriving before 1961, and recent immigrants to Canada, 1996 Census

IMMIGRATED BEFORE 1961

RECENT IMMIGRATION  

Source: Statistics Canada

The two major species of specialty livestock raised in Saskatchewan are sheep and horses. These two traditional livestock classes are often not considered to be specialty livestock, but for the purposes of this study, they are included. Exhibit 2, shows the livestock numbers based on 1966 Census data, modified by provincial agriculture data.

More interesting than the production data are the slaughter data. The slaughter data gives a better indication about the markets and marketability of livestock. Apart from lambs, horses and rabbits very few animals were indeed marketed. Some 50,000 lambs and culls, 4,000 horses and some 22,000 rabbits were sent to slaughter.

The only other specialty showing any significant marketing activity are elk and white-tailed deer. Antler velvet is marketed.

Slaughter for many animals was undertaken at either local or provincial plants for farmgate sales, or sent out of the province in order to get Federally inspected slaughter to permit interprovincial trade or export.

Exhibit 3 shows the market destinations for Saskatchewan produced specialty livestock.

The bulk of species are being slaughtered and sold:

Farmgate. Volumes are not large, but are adequate to provide individual producers some control over their own marketing. Most fallow deer, goats, ratites and a small portion of sheep are sold farmgate.

Out-of-province. Livestock such as sheep and rabbits are for the most part exported to other provinces for slaughter and sale. Sheep have been slaughtered in Alberta or Ontario. Rabbits have been slaughtered in Ontario and British Columbia.

Export. Species such as elk (velvet), bison, horse, and wild boar are virtually all exported. The bulk of these sales are in Europe and Asia. Bison, horse and wild boar have been slaughtered in Federal and EEC approved plants in Alberta. Velvet is handled on-farm.

Farmgate and local selling comprise the bulk of sales, since production volumes are insufficient to justify the cost of a Federal inspected slaughter facility. For most specialty slaughter plants, the cost of getting these small plants up to Federal standards is too expensive in a fixed and variable cost sense. As production increases, it is expected that greater numbers will be sold out-of-province, and in the export markets. This will increase the need to custom slaughter more animals in existing Federally inspected plants.

Saskatchewan ranks third in most specialty livestock categories. Alberta ranks highest in five of nine specialty categories - horses, llama, sheep, ratites, and bison. Ontario ranks highest in two - goats and rabbits, and British Columbia in one - elk/deer. Saskatchewan is the major Canadian producer of wild boar. This is shown in Exhibit 4. (It should be noted that this Census data may not agree with Provincial or other sources of data. Census data is taken at a point-in-time and does not necessarily compare to year-end data. Ratites are an example of this, Provincial data shows 5,800 birds when Census data shows 3,500.)

E. NOT ENOUGH VOLUME TO JUSTIFY

Saskatchewan does not have enough livestock to justify slaughter in any of its specialty livestock categories. For example, if all the 45,347 bison (Exhibit 4) in Canada were to be slaughtered in one plant, it would amount to a volume of less than 200 animals per day, a slaughter volume which is hardly economic in livestock slaughter terms. A minimum economic beef cattle plant size is about 750 per day. But since the values of most specialty livestock such as bison are currently 2 to 3 times higher than cattle, the plant scale can be proportionately reduced, and the cost per kill increased. Should prices of bison fall to the level of beef, normal beef industry economics would apply.

This inability to find an economic sized slaughter or by-products processing (tanning) facility which can:

Charge a reasonable price, (prices of custom kill range from $40 to as high as $200 for ostrich and fallow deer; tanning from $11+ per sq. ft. and 3 -6 month delivery,)

Process for domestic or export sale (Federal or EU approved,)

is a problem. Current custom slaughter volumes are so small, that kill is scheduled for one or two days per month.

This leads to the further problem of transport. This is discussed in the following section

F. SPECIALTY LIVESTOCK TRANSPORT IS A SERIOUS PROBLEM

The lack of production volume in Saskatchewan is forcing livestock to be trucked to other provinces, primarily Alberta and Ontario as well as across the border into North Dakota, for slaughter. Transport is a problem, but the knowledge of how to handle and prepare animals for transport is a major one. For most of the specialty livestock species there is little knowledge about:

How to properly load and unload

Loading density of live animals to minimize injury and weight loss

Winter and summer transport standards

Causes of bruising

Cause of dark cutters

How to minimize shipping shrink

In addition, the industry does not seem to have sufficient knowledge about transport economics to determine factors such as :

The optimum loading for each type of livestock truck and trailer configuration. This is an area in which there have not been enough numbers to allow experience to be built up.

The optimum temperatures for transport and storage of fresh meat, or whether mixed loads of fresh meat are possible. Haulage of frozen meats is a different matter.

Until this type of data are known, it will remain very expensive to make LTL (less-than-load) shipments of live animals or meats, in the domestic and export markets.

Marketing of specialty livestock is relatively undeveloped. The primary distribution channel is farmgate sales, or through "drovers". There are few establishments wholesaling and retailing specialty livestock meats in Saskatchewan. The typical marketing channels are shown in Exhibit 5.

1. Most Producers Market - Farmgate

Most producers of specialty livestock are marketing on a farmgate basis. The livestock is custom slaughtered, cut and wrapped. In most cases the producer personally markets his products to retail and foodservice outlets. Producers of bison, deer, goats, sheep, ostrich and emu are marketing some, or all, of their animals in this fashion.

The other variant of farmgate marketing is the "road side" stand, in which consumers drop by the farm to purchase, a goat or lamb etc. to take home.

While cash sales, such as these can be time consuming, they can also be lucrative. Nonetheless, very little volume is moving. Some producers marketing emu reported sales reaching $1,000 per month on a farmgate basis. Most do considerably less sales than this, since sales are very much location dependent. This dollar amount belies the fact that only 2 to 3 birds per month are being marketed.

Until volumes increase, and better marketing organization is developed, many sectors will have no alternative to marketing in this fashion.

2. Use of Drovers is Common

The second largest volume of livestock are currently sold through drovers (who are often other producers) and specialty livestock buyers. In this case, buyers often go to the producers farms to buy stock. This stock is then consolidated into a load for transport to a Federal or Provincial approved slaughter facility. From this point on there are two variants:

The first is the traditional case in which the drover sells animals to a Processor. The Processor then does distribution to the wholesale trade for further distribution into retail or export markets.

The second is the case in which the drover or specialty buyer, has animals custom slaughtered only, retaining the carcasses for further wholesale or export sales. This is the case of wild boar, where Saskatoon Specialty Meats buys animals from other producers to add to their own production for custom slaughter. The animals are then specially cut and wrapped for export requirements.

In the case of specialty livestock, most processors are not interested in marketing the products, and wish to only custom slaughter.

 

3. Selling Through Auction

In a few cases, commercial grade specialty livestock are being sold at auction. (Breeding stock such as elk, bison, and ostrich, are sold at auction.) This is the case of horses. Many horses entering the meat trade are sold through auction to horse buyers from Alberta. Typically these are spent horses which are being auctioned.

The only other specialty livestock case in which animals are sold at auction are distress sales and dispersal. More recently, there have been cases of western produced ratites being sold at the Cookstown, Ontario livestock auction, at the end of regular weekly sales. The birds sold for virtually nothing. Auction is not an appropriate method for selling many specialty livestock since there are not sufficient buyers to establish a competitive market situation.

H. NEED TO EXPORT CREATES ADDITIONAL START-UP PRESSURES

Part of the reason for the low production rates and lack of supply is the overall need to export, since the local Saskatchewan market is too small. Virtually every order is an "export" order. This means:

Production volumes have to be larger - truckload or full container is minimum economic quantity to make export possible.

Exportable product is more expensive than non export product, since it must pass through a Federally inspected plant. This adds further costs to an allready expensive product.

Better management is needed, because it requires greater industry and market knowledge in order to sell in other markets, than it does to sell locally. The learning curve is more difficult and expensive since producers cannot incrementally market and cashflow.

Greater overall capital requirement, since you can not grow slowly or incrementally, when the minimum export volume size is one container/truckload.

Requirement is to vertically integrate and perform the entire range of production, from breeding through to slaughter and marketing, since there is little external infrastructure.

Other considerations which affect sales include breed characteristics - conformation. This is a problem since no one specialty livestock breed has isolated the best quality animals for meat, hides or fiber sale. This means each species has extremely variable quality. Moreover since most producers do not have enough animals to make a truck load, any quality of animals are purchased to fill out a load.

Having to export, to find a market, adds to the producer pressures created by a lack of overall industry infrastructure - in production, processing and marketing.

I. CURRENT STAGE OF SPECIALTY LIVESTOCK GROWTH

Exhibit 6 summarizes the current production and market status of specialty livestock produced in Saskatchewan. For convenience we use 6 categories. These are:

Market - outlines whether the majority of sales are local or out-of-province. Most sales are export, the exceptions are goat, pheasant, alpaca and llama. The later two specialties are quite new and are still in the breeding stock stage of development.

Processing - determines what value added services are required. In most cases, some form of slaughter is required for meat, or in the case of elk and white tailed deer, the animals are de-horned for velvet.

Major and minor products - these are the end products of processing. In most cases the major product is meat, although in the case of elk and white tailed deer the prime market is velvet, llamas for riding/packing and alpacas for wool. The minor products vary considerably from pelts and hides to fats for emu. The third level products become even more diverse such as feathers for ostrich, pharmaceuticals for rabbits etc.

Stage of development - this is a subjective rating of the level of maturity of each of the specialty livestock sectors. Some are just beginning such as alpaca. Other sectors such as emu and ostrich have moved to the realization that they can no longer sell breeding stock, but that they are in the meat business. For simplicity we denote the stages of development in 3 basic stages.

Stage 1 - industry is too new to be able to determine their needs. The industry is marketing breeding stock as live animals. Minimal value added processing is going on. Alpaca are at this stage.

Stage 2a - industry is mature. Production, processing and marketing are established. Specialties such as rabbit and goat are in this stage.

Stage 2b - although the industry is mature, no secure marketing or processing has been achieved. Emu, ostrich and fallow deer are in this category.

Stage 3 - the industry is secure, most producers know how and where they are going to market, and have a number of processing options. Livestock such as sheep, horse, bison, elk, white tailed deer are in this category

Over time, there will be a shifting of livestock though development stages as production and marketing are better understood and the producers adjust their production to meet market demands. Most of the specialty livestock in the Stage 2a and Stage 2b categories will likely have to shift up to stage 3 in the next year, or will be severely down sized as a production sector.

Source: PPD

The marketing system needs to be better understood, so that the role and function of each in the marketing channel is better known and understood. Exhibit 7, shows the roles and interrelation of each of the participants in the marketing channel and the changing information requirements for each specialty livestock group at each stage of development.

The basic requirements of the marketing system for specialty livestock have not been systematically developed, but have organically happened. For example the basic requirements for a specific species such as emu or deer are not known. This lack of standards makes it hard for any one in the marketing channel to maximize their returns. When there are no standards it is hard for:

Processors to pay producers for their animal’s marketable attributes.

Producers to determine which breed is the best, what animals to cull, and what feeding regime is best.

Producer associations to function since they are uncertain as to their role, in helping their membership.

Governments to get involved since there are no grades to enforce, or any consensus on product development or marketing.

At each stage of livestock development, the marketing system requirements vary. These are shown in Exhibit 7. One of the problems in the Stage 1 development is the lack of development from stock breeds. In the case of deer, emu, ostrich, bison and others, there has been virtually no breed selection process at all. Animals were used because they were the only animals available from zoos, game preserves, orphans etc. These animals were then bred to get commercial volumes. Since there has been a hurry to get animal numbers to increase, virtually all female animals were kept in the breeding program, and only surplus male calves were fed out for slaughter. Clearly there has been a greater emphasis on increasing animal numbers as opposed to quality of meat. Hence many animals of poor conformation are now entering the meat market. Partly because of this poor genetic material, excessively high costs in processing have resulted, as well as placing relatively poor, inconsistent quality product in front of consumers.

SASKATCHEWAN SPECIALTY LIVESTOCK MARKETING SYSTEM REQUIREMENTS

BASIC STANDARDS

MARKET INTELLIGENCE

MARKETING

STAGE 1 LIVESTOCK

STAGE 2 LIVESTOCK

STAGE 3 LIVESTOCK

Source: PPD

K. ACCEPT CURRENT MARKET SITUATION FOR WHAT IT IS

For Saskatchewan, which is neither a large producer nor a destination market, there is little which can be done to improve the market situation. The major market constraints include:

No local markets - this means there must be Federal inspection at the outset (with few exceptions) to market anything.

Short supply - local production volumes do not justify building a specialty livestock slaughter facility.

Regulations - other than those for interprovincial trade, there are no processing or licensing requirements.

No industry infrastructure - everything must be done on ones own.

In spite of the constraints there are solutions. These include:

Concentrate on the US market. Try to stimulate production by selling into the US. Take advantage of the lower dollar to sell.

Use existing packers and infrastructure so as to not duplicate investment.

Organize production, by organizing only those producers who wish to be organized, no matter which Province they live in. Develop your own regulations by setting your own grades and standards.

Concentrate on selling by-products, and let quality meat sales take care of themselves. Sell meat for whatever it brings. Maximize the leather market by making jackets, etc.

Exhibit 8 summarizes some of the major constraints and potential solutions.

In this chapter we looked at the Saskatchewan specialty livestock industry. The following chapter will give a broader perspective by briefly outlining the Canadian situation.

Source: PPD

In this chapter, we outline basic statistics on the Canadian specialty livestock industry and provide information on select other provinces.

A. CANADA NOT A MAJOR SPECIALTY LIVESTOCK PRODUCER

Exhibit 9 shows 1996 Canadian livestock production as well as imports and exports. The Exhibit shows Canada is not a major producer, importer or exporter of stock. In only one category - horses, does Canada have sufficiently large volumes to justify a dedicated processing plant. Some of our production and trade highlights are outlined below.

1. Canada is not a large consumer of game meats

Exhibit 9 shows that the domestic market is not a big consumer of game. For example, in the case of bison, 1,766 animals were slaughtered, 327 tonnes were exported, and only 6 tonnes imported; this leaves very little meat for the domestic market to consume. (If bison dress out at 225 kgs. each, this translates into 401 tonnes of meat.) It implies domestic consumption to be 80 tonnes or 4 container loads.

Venison consumption amounts to about 125 tonnes.

Some of the export highlights include:

Horse is Canada’s largest specialty meat export. Almost 18,000 tonnes of horsemeat are exported from Canada to Europe and Japan. The bulk of this production is shipped from Alberta. The sole Canadian exporter is Bouvry from Calgary.

Canada’s second largest specialty exports are Game Birds. Canada has developed a large market in pheasant