Tamil Nadu Emu Scams and its aftermath

 

In continuation with my last post Shake-up in Tamil Nadu, I am going to analyze some of the outcomes of this episode, created by Susi Emu Farms, and KG Bright, etc.

There are 36,000 farmers, with an average investment of Rs.1,50,000/-, have been duped as per the Government of Tamil Nadu reports. The scam amount is very high, approximately, Rs.600 Crores. The largest ever in India in the history of Agricultural Commercial Sector.

Mr. Guru, MD of Susi Emu Farms

 
These events are currently happening in Tamil Nadu:

1. The feed for the birds is supposedly to be provided by the Contracting companies. These    companies has folded up, and No feed is received by Farmer. Farmers, as they used to grow animals in their backyard, couldn't tolerate the hunger of Emu birds. They are spending from their own pocket. The cost of feed is Rs.20/Kg per bird per day, which is unsustainable for a Farmer.
2. Farmers wanted to cash-out their Emu birds, since they are left with that as their only collateral against this scam. Everyone wants to sell, which we see the prices for Emu Birds are crashing like anything. An Adult Emu bird of 18 months is now available really cheap.
3. Many farmers unable to find buyers to sell the birds, they are slaughtering the birds for big functions like Marriages, festivals, etc. This trend has already started in Erode, Salem and Tirunelveli Districts. Again, the birds are sold at far cheaper price than imaginable.
4. Government of Tamil Nadu, has announced that it will feed the birds until they are grown up, and will sell to encash and return the deposits to Farmers. Government is selling Emus..???? Strange..!!!

The repercussions are:

• Price of Adult Emu Bird will continue to crash.

•  The price of Emu chicks will be unimaginably cheaper, this season.

•  Many hatcheries may not be functioning this time, hence, thousands of Eggs are going to be available at a far cheaper price.

•  Emu Meat will be popularised, as it is going to be available at a cheaper cost to common public.

After reading upto this, are you optimistic or pessimistic about emu farming?

YOU NEED TO BE OPTIMISTIC. Why?

• If you want to set up the Emu Farm, this is the good period to buy Adult Emu birds with cheapest initial investment. Buy 18-month birds or less, hence, you wouldn't have to face the issue of handling the eggs this season.

• If you have more funds, you can set-up hatcheries, and buy up Eggs in the market at cheaper price. I forecast the cost of chicks will come down this time heavily, hence, you might have to keep all your hatched emu chicks for future use (Meat Industry). Feeding them for atleast one year is going to cost a good amount of money.

• Emu Meat is now widely consumed, as it is cheaper than Mutton and Beef. Once people accustomed to it, and taste buds are happy, you have good times ahead. A whole new segment of Meat Market is going to be open.

Time and again, I have strongly advocated about the survival of Emu industry is relied only on Emu Meat and its Oil. This is becoming a reality now.

Be clear that, this year is a shake-up period for Emu Industry. Only strong players will remain hang on to the sport. Weak players will fall off sideways. The Industry will start flourishing from the next season onwards, because of strong demand for Emu Meat and its Oil. Hold tight...!!!

The shake-up begins in Emu Farming in TN - Part I

The largest contract Emu Farming Company in Tamil Nadu, failed to fulfil its commitments, and flashed in Media for a whopping Rs.250 Crores Scam. Scams in Emu Industry is albeit not new. The extent of the scam and the amount involved is really big this time.

Susi Emu Farm is being accused of duping the Emu Farmers to the tune of Rs.250 Crores, and complaints lodged with Police and District Administration. Unverifiable sources are confirming that 12 persons are already arrested and being interrogated, including the People behind Susi Emu Farms. It seems the assets and bank accounts are frozen, and Passports are impounded for all those involved, until the investigations are completed.

To sum of what kind of scam is inolved in this business, let me briefly explain it to you. 

Susi Emu farms started initially with the intention of selling the emu chicks as the core business.  There was a time that Emu Farm owners find it difficult to market their chicks at a reasonable or profitable basis, because of competition. It was like a dog-eat-dog, and undercutting the prices of the chicks were norms of the trade in 2008/2009. Some of the people involved in Emu Farming, with ingenious plans devised by Auditors, came up with a marketing scheme to quickly and profitably sell all the chicks produced, perhaps in demand.

The ingenious plan works like this: A (Emu) Farmer deposits Rs.15,000/- per pair of 3-month old emu chicks, with a minimum lot of 10 pairs to the Emu Farming Company (EFC), which is Rs.1,50,000/- for 10 pairs. In turn, the EFC constructs the shed with fencing & utensils in Farmer's backyard, and provides 10 pairs of 3-month old emu chicks. The feed is given by the company at no cost. Periodical visit by the EFC to check the health of the birds also done, and Medication is provided if needed to the Birds at no cost to the farmer. Farmer just lends some space, and look after the bird by feeding them. Feeds are indeed provided by the EFC. Farmer gets Rs,600/- per pair as holding charges per month, which works about Rs.6,000/- per 10 pairs every month. The contract is for 5-year period, and the deposit of Rs.1,50,000/- will be refunded at the end of 5 years without interest, and the Birds shall be returned to the EFC. Every year EFC takes back the one-year old birds from the farmer, and replaces it with another batch of 3-month old chicks. The adult birds are taken to the EFC's farm, where they will collect the eggs and produce more emu chicks for sales.

The economics for the EFC is very simple: A chick is produced at Rs.1,600/-, Cost of feed for one year would be around Rs,6,000. The miscellaneous expenses would be Rs.400/-. Hence, the total cost accrued for EFC is Rs.8,000/- per bird, which is Rs.80,000/- per 10-pair lot. EFC collects Rs.1,50,000/- in advance. EFC can pay back Rs.72,000/- per farmer per year, which means, they are returning the deposit amount on a month-by-monty basis with no interest. There is a fibonacci theorem that can tell exactly when this would burst, which would be few years from now.

Farmers are attracted to the scheme, as there is no one providing Rs.72,000/- return on the investment of Rs.1,50,000/-, which is 48% per annum. Farmers have to just feed the Birds and fill the tubs with water.  This is really mouthwatering for the farmers.

Factually, the rate of return is huge, except someone gambles, no other business is easy to get this much of returns. EFC's were thriving on the deposit amount, as they were able to give monthly pay-outs regularly to everyone, which begets more farmers queueing up with hard-cash in hand. The number started growing rapidly. Susi Emu Farm has to procure tens of thousands of emu chicks every year from Andhra and Maharashtra to cater to the needs of Tamil Nadu.

The nature of the scheme has such a deep pocket, the burst wouldn't have come so soon. An Agricultural fortnightly magazine has organized a Farmers Congregation to discuss about "Contract Farming - Good or Bad". The main topic was Emu Farming in that congregation. There were debates, Questions & Answers with Agri-Veterinary officials, etc. There was a strong message as a outcome of the congregation that current method of Contract Farming is evil, and farmers who have invested in it should be cautious, and new investiments are strongly discouraged.

As an outcome of the above congregation, happened to be organized in the same town as the HQ of Susi Emu Farms located, Farmers started flogging to the office of Susi Emu Farms asking for the refund of the Money. Offices were closed and people behind have disappeared.

It has been estimated that there are 12,500 such farmers were affected by this, which works out to be of Rs.250 Crores (Rs.2 Lakh average per farmer).

But there is a good side of the story, which in turn is going to help this industry to grow. I will continue it in the next part.

The recent spate of scam claims in Tamil Nadu

There are recent newspaper reports stating that one company from Gopichettipalayam has duped hundreds of farmers with Rs. 14 Crores. People behind the company has disappeared, and Police is investigating the case now.

The reports are attached here (thanks to Junior Vikatan and Pasumai Vikatan Magazines):

There was another report, in a leading Agricultural Magazine, Pasumai Vikatan, which is as follows:

The advertisements, which caused many people to flock into these bogus farms, are interestingly offering exhorbitant incomes. The advertisements (thanks to Daily Thanthi) listed below are all found in one Leading Tamil Daily, Daily Thanthi, on the same day, Sunday.

One company offers even Cars and Bikes as a promotional gifts for the customers. People are often get confused that is there such money in this business.

As we have discussed earlier in several blogs, these are just selling dreams, and creating a black hole, where money legally ends at and dried up.

If there are more than 5 companies does that, there will be a crash in the Emu Prices, which will see a big shake-up in the Emu Market. It will take atleast few years to recover. When it recovers, only handful of big companies will remain, and they will be the real winners, and real Emu Farm Companies.