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.

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?

Emu Salughtering - a Franchise Model ?

Emu Slaughtering is the lifeline for Emu Farming Industry. If it is not established soon, the industry will be waning.

Here it comes a new concept on Emu Slaughtering - on Franchise Model.

Emu Slaughtering has to be approved by Animal Husbandry Ministry, which it takes its own time to approve and hence this is one major reason emu slaughtering houses are getting delayed to start their operation. But an approval is not required for a Butcher, except getting sanitary certificate from the local municipality. 

Instead of relying on few big Slaughtering Houses to procure emu birds on live-weight basis in large numbers, there is a new thinking of franchising the slaughtering house model to Butchers in cities. 

How does it work?

Concept:  

The emu slaughtering is not so popular in retail level, because, Butchers do not know how to process this bird and also how to handle the byproducts and biological wastes originating from them. The Butchers are need to be invited to join a free program, where they will be systematically trained on the emu slaughtering in their shops. Systematically here means, teaching & training them on how to do the following: removing the skin with out knifing, removing the feathers without leaving holes in the skin, separating the fat without blood stains, and  handling the biological wastes, etc.

1. Butcher will pay for 3 birds average live weight cost @ 40 Kg x 275 x 3= 33,000/-. It can be arranged with a bank to grant unsecured micro lonas to the butchers. As banks provide the money to the franchiser directly, whereas the butcher owes money to bank.
2. The Emu birds will be given to them on a daily basis, the butcher will sell the meat and be settling the money on the same day evening and along with that, the fat, feathers, and skin also will be collected by the franchier.
3. A Delivery van, with cages for each bird to be built and used to deliver the birds. The birds are expected to be delivered before 6 am in the morning.
4. A Collection van with refrigeration facilities and a safe vault (to keep money), to be visiting each butcher around 4 pm in the evening to collect the money and FAT.
5. The big farmers are to be signed agreement to supply birds @ 250/kg live weight at their farm gate. 
6. An arrangement with Emu Fat processing units (one is already running in Pondicherry) will give you a regular market for the fat. Same applies for Skin and Feathers. There are consumers for it.

Let's look at the cost aspects:

• What does Breeder get?

A Emu bird will reach 40 Kgs at 10th month by changing the feed combination. The purpose made feed combination will help the bird to store lot of fat at the age of 10th months. The selling cost at the 10th month for each bird is: Rs. 10,000. you have spend Rs.4500(feed)+Rs.2500 (chick production cost+labor), which costs you around Rs.7,000/-. You get Rs.3000/- per bird. If your farm is producing 1000 birds every year, you get 30,00,000/- as profit, whereas your sales, is Rs.1,00,00,000. It's a good 30% margin. Breeder gets his money on cash and carry basis.

• What does the Franchiser get?

The Franchiser who does running the distribution network, virtually starts up with very small investment, compared to the Emu Breeder. A bunch of people, several custom-built lorries, and a systematic approach and sincerity to the business are enough to make the big success. Apart from the investment in the infrastructure, Franchiser makes Rs.2000/- per bird straightaway. If the lorry carries 60 birds at a time, it is 60,000/- per trip as total Gross Profit. The advance money is paid by the butcher, as this money is coming from Banks (Citi, HSBC, SCB, etc) as an unsecured Microfinancing Loan. Government is forcing the banks to disburse microfinancing loans as a percentage of their total capital requirement. Actually, these banks are looking for a reliable opportunity and partner to work with. The advance money is with Franchiser to pay in cash to the breeder. Breeder gets his money on cash and carry basis. The fat collected is at Rs.1000/Kg from Butcher and is sold to the Emu oil processing unit at Rs.1,200/Kg, which makes an another Rs.60,000/- per trip of 60 birds (60 birds @ 5 Kg x Rs.200 [1200-1000=200] = 60,000). Each butcher can sell atleast two birds a day (25 Kg meat for each bird) and you can easily find 30-50 butchers in a city to market your product. To increase your sales numbers, you need to advertise periodically about the health aspects of emu meat in Papers and TV. 

• What does the butcher get?

Butcher initially deposits Rs.33,000/- to the franchiser for 3 emu birds at 40 Kg live weight at the rate of Rs.275/Kg, and the money is given by bank as microfinancing loan with no collateral. Butcher sells 25 Kg of meat per bird(with bones, albeit) @ Rs.300-325/Kg, sells 5 Kg of fat to the franchiser at Rs.1000/Kg, and Skin is selling at Rs.500/Skin. The total sales is Rs.13,000, against the bird cost of Rs.11,000/-. The net revenue is Rs.2,000/bird. If he sells two birds, he can make Rs.4,000/day on emu birds. Butcher is not sparing the money from his packet to pay the advance, which he can settle over a period of 3 years to the bank. And also, he is delivered with birds at his doorstep, and the fat is sold at his doorstep to the franchiser on the same day. It's no-pain business for him.

In general, Emu industry will be flourishing if this model gets implemented. If you need further clarification/information/suggestion on this, please email to me at jm.emufarm-at-g.mail_com.