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Chapter 6
Possible entry strategies for farmers and entrepreneurs in developing countries

Introductory remarks

In spite of fancy packaging and advertising that contains words such as "exotic", "premium" and "healthy", the market for bird food is predominantly a commodity market. Most small grains that are traded for bird food, such as millets, sorghum, sunflower, groundnut and maize, are available worldwide. These crops are also grown widely in the most important market for bird food, the United States of America. The market for bird seed is very volatile because grains are readily substituted according to availability and the current market price. This is more the case for the wild bird food sector than the caged bird food market. For example, sunflower seed can be diverted from the oil sector into the bird food sector and vice versa depending on the price. At the same time, packers of bird food will use products that are below food grade for human consumption, for example maize and rice chippings, or sunflower hearts which were dehulled during transport. There is also a substantial part of low-germinating seed that is diverted to bird food uses.

The only grains that are exclusively used for bird food in the industrialized countries are canary seed and Niger seed, and these two grains have greater price elasticity as they are not easily substituted. As bird food retailing becomes more competitive and consumers become more aware of the quality attributes of different grains, for example which one has the best chance of attracting birds into their gardens, the image and presentation become important. As a consequence, manufacturers and packers are less likely to substitute one grain for another as they strive to maintain brand image and to produce a uniform product throughout the year.

For caged and companion bird food, consistency in formulation is a must, especially when manufacturers make claims about the nutritional value on the label. The caged and companion bird owners have become sophisticated consumers, and general notions of animal welfare increase demands for quality.

Production of commodity grain

Given the commodity nature of the market, there are no specialized birdseed growers (with the exception of canary seed producers and some specialized producers of spray millets). Dedicated production of small grains to supply the bird food markets of the developed countries is not recommended. Supply routes are long and expensive which makes competition with domestic suppliers in the United States of America and other countries almost impossible.

Commodity brokers who do not have their own cleaning facilities will demand a high standard of grading and cleaning in the country of origin, which could mean the need for substantial investment in these countries. The demand for transparency in the food and feed industry requires more and more traceability and certification, which might not be possible in many developing countries.

The nature of the commodity market is that there are shortages of some grains in certain years and as a consequence the price varies dramatically from year to year. For instance, in 2002 and 2003 many packers in the United States of America lowered the proportion of proso millet in the seed mixes because supplies were low and prices high. At such moments there may be opportunities for traders in developing countries to offer commodity grain for the bird food market. Traders in developing countries need to be aware of existing or upcoming shortages, which is difficult, because few of the commodities used in bird food formulations are quoted on futures markets. The websites of some of the leading commodity brokers regularly publish updates on the market for bird food (see Appendix 2). Alternatively, specialty commodity brokers or packers/wholesalers may be contacted directly.

The only ingredient of bird food mixes that is 100 percent imported from developing countries is Niger seed. India supplies the bulk of this commodity and, at the moment, little is sourced from Ethiopia, Myanmar and Nepal. The reasons for the decline in exports from these three countries are not known, but could be as a result of political instability and/or low yields. Niger seed is a premium bird food and there may be potential for this crop to expand in African countries such as Sudan, Malawi and Uganda where Niger seed is traditionally grown, but on a limited scale.

Currently, the total production of canary seed is for bird food. Canada is the world's leading producer and the major importing countries are Argentina and Mexico, Belgium and the Netherlands. It would appear that there is potential to produce and market canary seed closer to the destination countries. Traded canary seed is almost exclusively from Canadian origin. Some of the brokers contacted in the preparation of this report expressed an interest in accessing alternative sources of canary seed.

Non-grain ingredients

In many cases exotic companion bird food contains non-grain ingredients such as desiccated tropical fruits. Popular ingredients are banana, mango, papaya and pineapple. Currently, little is sourced directly as desiccated product from tropical countries. Statistics on the use of these ingredients are not available, but it may be worthwhile for entrepreneurs in tropical countries who already operate fruit drying installations, to make contact with the larger bird food packers.

Manufacturing and selling of prepared bird food

The manufacturing and selling of complete bird food mixes should be aimed at domestic or regional markets. The substantial increases in Canadian exports of canary seed to Mexico over recent years indicates a growing bird food market in that country with possible opportunities for regional producers to participate with other small grains such as proso millet. There are also several indications that the keeping of companion birds is on the increase in other countries around the Pacific Rim and in Asia. This has the potential to provide markets for regional suppliers and manufacturers. Statistics on the use of other pet food in, for example, China, Japan and Malaysia, indicate a steady growth in expenditure on prepared foods for dogs and cats. Although exact statistics are lacking, it can be assumed that the use of prepared pet foods increases with the disposable income of the urban middle classes.

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