From feathers to funny colours, but the future is the same
I see a dangerous situation in our local game farming industry. I maintain that high-value game species are outrageously expensive. Currently they are a fashion investment, running on the hype created by failed ostrich investors in an effort to find an alternative revenue stream that supposedly, will provide extraordinary returns on the game farmers’ investments. Investment in high-value game species is the vogue, in other words, it is loved by everybody who thinks there are good profits to be made. High-value game displays all the textbook elements of an asset bubble, or if you like, a rather primitive form of a Ponzi scheme. It is only kept alive by eager new entrants hoping for fast profits.
One of the first elements one has to consider to determine how a pyramid grows, is to realise that it is irrational. Mark to market events in the game industry are rare. Earlier this week, in discussion with a game farmer, we battled to find ten significant game auctions for this year. It means the so-called floor price for game is tested only infrequently, and then, at these auctions, demand is usually not determined by utility value, but by unreal expectations of future profits.
Following some recent high-profile game auctions in South Africa, I noted that, over a period of several years and at various auctions, game farmers regularly buy from one another. This may sound like a dumb statement – where else are game farmers supposed to get stock but from other game farmers? But that misses the point. Not every farmer is a game farmer and not every game farmer aims to breed the one animal that would fetch its owners anything between N$5milion and N$20million.
High-value game is in a classic asset bubble, and that bubble will either burst or deflate somewhere in future. I do not claim to predict when the bubble will pop although with certain species, I am more confident than with others, that it will be within five years.
As I argued in earlier analyses, the game farming community is relatively small as a percentage of bona-fide commercial farmers. This is a contributing reason why the same game farmers feature as buyers at almost all the auctions. But it underscores the point, that game, as a commodity, has only two end-users; other game farmers, and hunting outfits that buy game (or specific individual trophy animals) for foreign hunters with thick wallets to come and shoot. But this fraternity is even smaller than the game farming community, and not every hunter has a thick wallet. The value chain is extremely limited, and once every game farmer has an adequate stock of a certain species, the price falls.
This has happened with tsessebe, giraffe, bontebok, black wildebeest, eland, and even to a limited extent, lions (although there are different policy dynamics to consider). Within the next five years, it will happen to sable, roan, waterbuck and perhaps nyala. Within ten to fifteen years I predict many of these species will be as common and as abundant as any type of plain game, and at current prices each animal will be worth between N$2000 and N$3000. Not much of a return on investment there!
In the meantime, high-value game like rhinos, buffaloes, sable, golden wildebeest, golden gemsbuck, black-nose impala. Livingstone’s eland and roan, are displaying the typical wobbly nature of asset prices that are determined by sentiment, ego, and false expectations. So-called Matetse sable can already be bought for less than R10,000 so only the Western Zambian subspecies still has remarkable commercial value. Of the giant Palancas Negras I am not even talking about.
Golden wildebeest and golden gemsbuck are also an indication of the desperate search for value by game farmers.
Less than five years ago, these genetic anomalies sold for around N$100,000. Today they approach the one million mark (or has recently) but the catch is, these animals are all so-called splits, i.e. genetically they are mixed so the recessive gene may or may not produce a golden offspring. It is not in the control of the farmer. By a process of selection, farmers are trying to develop more stable bloodlines, like is happening with sable, but this is a slow (and potentially dangerous) process. It interferes with the natural genetic pool and it weakens the species over the long run.
So, the game farmers may not like what I say but I would advise them not to give up goats and cattle too soon.
(Elsewhere in this edition is part one of a very sober article by renowned vet and game breeder, Dr Ulf Tubbesing. Read it.)