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 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.

Ponzi Scheme..?? - An article by Economic Times...

There is an article published by Economic Times on Emu... The article could have been deeper, however, this article has raised a concern over whether the Emu Schemes are moving..

The link is below:

http://articles.economictimes.indiatimes.com/2012-03-20/news/31214799_1_investment-scam-ponzi-circular-trading

(Thanks to Economic Times):

Investment scam: Cases of circular trading of Aussie bird emus rising in Tamil Nadu

Sangeetha Kandavel, ET Bureau Mar 20, 2012, 12.46AM IST

Tags:

• ponzi scheme|
• Flightless bird|
• EMUs|
• EMU|
• circular trading|
• Aussie bird

• 

CHENNAI: In Tamil Nadu, a highly literate and industrialised state with a propensity to fall for ponzi schemes, one more investment scam seems to be brewing. This time it centres around the emu, a large, flightless bird native to Australia and reputed to have as many uses as the wonder drug aspirin.

Across the southern state, indications are that there is a steady build-up of what is essentially circular trading of emus, something that is usually a precursor to an eventual collapse. Advertisements on television, Internet and pamphlets are touting the bird as the ultimate in investment.

Among those who fell for the spiel is Arjun, a 30-year-old software engineer from Chennai who bought 10 pairs of chicks investing Rs 2 lakh. He got his money back in two years, but now says there is something fishy about the whole scheme. "If everyone is selling the bird not to the end consumer but to people who are getting into farming, it doesn't sound good," he says.

Investment schemes for emus look remarkably similar to the ponzi rackets that have operated in the past. For an initial investment of, say, Rs 2 lakh for 20 pairs of chicks, an investor is promised total income of Rs 6.5 lakh in five years-essentially a tripleyour-money scheme. All an investor is supposed to do is return the 20 pairs to the company promoting the scheme every year and take a new set.

Emu farming is supposed to have debuted in India in the mid-1990s after emu slaughtering was banned in its home in Australia. Now, those in the business say there are 3,000 farms in the country, largely in Tamil Nadu, Punjab, Maharashtra, Kerala and Gujarat.

It is in the past two years that the hype has grown. Afarm owner near the hill station of Kodaikanal boasted that he has sold over 1.5 lakh emus so far. No order below 25 pairs of chicks is worth his while and payment has to be upfront.

Doubts Over Mkt's Existence

Among those contributing to the buzz is Susi Emu Farms in Perundurai, near Erode, which calls itself one of the largest emu farms in India. Its sales pitch is that "it fulfils dreams of people who are in search of projects providing quick profits on investments in this competitive world".

For Senthil, who relishes quick profits, emus are just what he was looking for. Recently, he paid Rs 1.2 lakh for five pairs of chicks from a farm just outside Chennai. In two years, he believes, each emu will be worth Rs 45,000.

Emus can grow to be as tall as humans and weigh up to 60 kg. Related to ostriches, they can live for 40 years and are fertile for half that period. Those peddling emus say it is a golden goose-its meat, eggs, feathers, toenails, skin and even oil are all valuable.


While software engineers and farmers alike are being lured to emu schemes, they are not asking if there is a real market for emu products. Such concerns have arisen once in a while but formal complaints have not been made. VK Shanmugam, the collector of Erode district, says the emu business is a matter of "serious concern" but since there are no complaints, no action can be taken.

Shanmugam says he is also intrigued by the fact that he doesn't see any of the birds though people seem to be investing in them. "I hear that people are depositing money but are not able to get receipts for that," he says.

The administration recently had a meeting with top police officials about the emu problem. Tamil Nadu has a rich history of ponzi schemes. Among the more notable ones is the collapse in 1998 of the Anubhav group which duped investors who put money in a teak plantation scheme of around Rs 400 crore.

Last year, a PTI report said the Maharashtra government ordered a CID inquiry into a likely Rs 200-crore emu farming scam in Nashik district.

The controversial scheme, run by a private company, involved a promise to triple investment in 45 days. Farm owners in Tamil Nadu estimate the number of emus in the state at around five lakh, or one bird for every 130 people in Tamil Nadu. Sceptics such as Shanmugam, however, don't buy that number.

V Rajapandi, the general secretary of the Tamil Nadu Emu Association, said to be registered under the Societies Act and having 300 members, defends his business.

He says emu farming is a genuine business "if you do it in the right manner." "It has a huge market. Just because a handful of people say so, you cannot say the business is a ponzi scheme," he adds. 

(Thanks to: The Economic Times)

Contract Emu Farming - Some Warnings

Recently some distasteful news in the Media about Emu Business from Maharashtra, which was disheartening. 

There are two sides to a coin. One side is the people who simply ready to be duped with tons of ignorance and Money, and the Other side is the People who design their schemes such that most appealing to a common man to part with his Money and Confidence. This applies to Finance Companies to Forex Companies, and Emu Business is not an exception to this White-Collar Crime.

Before someone new to this industry end-up in a similar scam, there are some valid points to look for before investing in Emu Schemes, whether it is Contract Emu Farming or MLM-type Schemes. We will be seeing them here.

In any Business, there has to be a product. In Emu Business, Meat & Oil are the products (Eggs are only for reproduction and is not a product). These are the two main reasons for which, Emus have to be culled. Culling for reasonable economic values is the essential key to this Business. If there is no culling and no regeneration, the cycle never completes. 

Before you invest and Sign a contract with a Contract Emu Farming Company, please look into the following aspects.

I put them into pointers:

• In an Emu Contract Farming Business - Check whether they have processing plants to produce Meat and Oil. Emu Processing Unit (EPU), as they are called, are setup to cull birds hygienically, and cut meat as required by Market. If the Emu Contract Farming Company does not have EPU and proper Marketing Arrangements to market the meat, do not invest your money with them.

•  If the Emu Contract Farming Business offers you more than Rs.350/- per month per bird, double check their past history, and also check whether they already have the EPU. It might be possible that they need more birds for their busy EPU, so they offer higher premium. If not, they are luring you and your money, because it is simply not viable to run at this cost for long-term.  This also applies to giving Gold Coins as an Incentive to join. Simply, doubt them.

• If the Emu Contract Farming Business is based on the Multi-Level-Marketing mode, never involve into this. You will earn only bad reputation for yourself, because you are false-promising many people into that.  Stay away from these kind of schemes.

With the advent of few big names in the industry doing Emu Contract Farming in large scale has raised concerns for many. Because the amount involved is running into Crores of Rupees. The tipping point for this industry will flower once the Emu Meat is well liked by the end-users. For that to happen, Emu Meat must be freely available on the market first.

Emu business will sustain and grow only when there is a usage, that means, a Market for Meat. This can be achieved only through selling its Meat for consumers and Oil for Pharmaceutical Industries. That day is not too far.

Status of Emu Slaughtering Houses in Tamil Nadu

I spoke to few big emu farm owners last week. I got good news on the emu slaughtering houses with some concrete plans.

Jeevan Emu Farm is expected to start operation in their Slaughtering House by early weeks of August 2011. The Plant location is near Saanarpatty, Dindigul (TN). Jeevan has already started their Contract farming in a large scale last year. I have mentioned in detail about their scheme in my earlier post.  Mr. Rajapandiyan, CEO of Jeevan Emu Farms has indicated that they will shortly commence the operation in the Emu Slaughtering house tentatively in first week of August 2011.

The big player, Susi Emu Farms (SUMU), has their slaughtering house is on the cards before Dec 2011, after signing a consultancy agreement the past weeks. The Marketing for emu meat and fat will be done by an Industry Veteran (name withheld by request). I understand from that Friend is that they have secured a Meat Order from Overseas, which requires to cull 850 adult birds a month to produce the required quantity.

Also, Susi Emu farm has started expanding their business in Southern Districts after opening up branches under their umbrella.

The other two parties waiting in the sideline to pick up the slaughtering house business are VC Emu Farms, Salem, and MMT Emu Farms, Karur. I do not have an idea about these two, but, they have potential since they hold large quantities, in Tens of Thousands, of Emu Birds under their Contract Farming business.

It's very clear that the Emu Industry is finally kick starting in Tamil Nadu.

It's a good news, isn't it?

Good News on Emu Slaughtering Houses

I recently had discussion with few industry veterans about the upcoming emu slaughtering units in and around Tamil Nadu and AP. They were very positive and confident about the slaughtering business, and I noticed that they are bit worried too, for not going to get enough stocks for the Slaughtering house. This will initiate a supply/demand gap, possibly in the coming year 2011/2012.

The Good News is that, Vileena Emu (AP) will be starting their Slaughtering House in July, same goes for Jeevan Emu Farm, Dindigul (TN). In addition to these two, I understand that another few units are coming up, and I am getting more details about them. Soon, I will bring those information here.

The price offered are Rs.250/Kg live bird weight at the Slaughter House Gate. This seems to be pretty standard rate. I believe this rate will go up once the Emu Meat Market demand is picking up.

The Bright lights are started showing up in Emu Farming Industry in India. It's a good news, indeed.

Some Clarifications on Emu farming

There was a thread in www.agricultureinformation.com about emu farming. The following questions were raised in that thread:

1. where to sell the emu meat, emu eggs and etc....
2. who is regulating/controling the rates of emu products.
3. Do we have processing units to extract the emu oil, emu meat, other stuff.
4. Do we have gov regulated exporting system for emu to other countries.
no body does have perfect answer to this emu farming. 

I have discussed the above questions in this blog in the previous entries. Let's look it again:

1. where to sell the emu meat, emu eggs and etc....

Obviously emu meat has to be sold to the consumer's like you and me in India. Currently there is no supply chain to carry emu meat to consumer's kitchen. The closely held market is in several Non-Veg Restaurants in Major Cities, which is offering Emu Meat based dishes and being received well. Unfortunately, we have only leg-bend emus for culling. No healthy herd just for culling purpose, because of sheer numbers. 

Please read this blog entry for knowing more about discussing this issue.

Eggs have to be sold to Hatcheries. If you couldn't find one nearby, set up one. It doesn't cost much. 

 
2. who is regulating/controlling the rates of emu products.

Market force, i.e, Demand and Supply will decide this rate. Once the adoption is high, and when the demand is exceeding supply, the rates for the birds will go up. This is very simple market calculation.

Regulating the rates for emu birds' is definitely not  the Government's business. If that's the case, we won't be having general price rise across India in commodities. 

In the near future, it will be the Slaughtering House Owner's will decide the rate for emu birds. Unless you have a integrated farming, i.e., you grow your own feed for emus, and buy only the essential medicines across the counter. This will save you a lot in feed costs. Other costs seems not having any variable portion at the most, i.e. quite static expenses. 


3. Do we have processing units to extract the emu oil, emu meat, other stuff.

Emu processing units are coming up, in Andhra Pradesh, and Tamil Nadu. If my guess is correct, there will be 4 units in South India by end of 2011. These units are mainly focusing on slaughtering. Emu Oil processing requires special permissions, hence only few in the entire country will be able to do it, commercially. One of my friend in Tamil Nadu, already got this license from Central Government.

4. Do we have gov regulated exporting system for emu to other countries.

Govt does regulate  hygiene aspects of this trade, as is happening to other meat product exports. Emu Meat is neither a rare item, nor a regulated/controlled item like deer meat. Hence, this question doesn't arise. In general, while exporting, it is the buyer's terms & conditions that rules. 

Commercial Emu Farming

In our previous post, we have seen contract emu farming is picking up in TN. Here're more details about it, from Jeevan Emu Care, Dindigul.

Commercial INTEGRATION farming of emu

PLAN - A (Commercial Integration Farming of Emu) 

 

1. All Emu chicks supplied by the company are of export quality. 
2. The security deposit for the chicks worth Rs.3 lakhs is just Rs.2 lakhs only. 
3. The company will deliver 20 Quality emu chicks for this. 
4. Feeds &  Medicines for Emu chicks will be delivered to Farm directly by company. 
5. The agreement period is 5 years. 
6. During 5 years, 20 Emu chicks will be supplied once in 12 months. 
7. Company supervisors will inspect the farm once in a week and inspections reports will be maintained by the company. 
8. 12 months is treated as one Integration period. 
9. The company will pay Rs.4,000/- for each chicks in every Integration period(Totally Rs80000/- for 20 chicks). 
10. Company will bear the Insurance premium amount also. 
11. The total market worth of Emu 20 birds is Rs.3,00,000/- 
12. The company agrees to pay Rs.10000/- as bonus per batch as per the calculation of FCR per year. 
13. At the end of 5th year, the company will pay the brought up amount (Rs.4,000/-per bird) along with the invested amount. 
14. All the conditions apply.

Income (Per 20 Birds)  First Year : Rs 90,000/-* Total Income : Rs 6,50,000/- Second Year : Rs 90,000/-* Investment : Rs 2,00,000/- Third Year : Rs 90,000/-* Forth Year : Rs 90,000/-* Net Profit : Rs 4,50,000/-* Final Year : Rs 2,90,000/-* (Just in 5 Years) *Conditions apply

(Thanks to Jeevan Emu Care India Pvt Ltd)

 If you look at the price, they are selling (or getting deposits) @ Rs.20,000/- for each 3-month chick. If you look at their PLAN B, they are buying 3-months old emu chicks @ Rs.3,000/- from you, and too, this is before their Marketing charges kicking in, I assume.This explains how they offer "free feed and Medicines, and periodical visits". It's all included in that. The expenses for running the office covered by this, legitimately.

Guess what ?  You have steady cash-flow, and banks have to beg you to take loan from them, because you are cash-rich. Also, your deposits are refundable at the end of fifth year and NOT taxable at the hand of Income-Tax and again interest-free in the eyes of Taxmen.