Poultry Production and Processing Economics Jeff May, Regional Manager, Dawes Laboratories Jeannette Beranger, ALBC Research & Technical Program Manager

First things first…. Define your mission

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Which species do you want to produce? Industrial breeds or standard breeds?

What kind of system will be used to raise the birds? Living Environment Indoors Enclosed yards Free range Pasture Feed All vegetable feed Organic Anti-biotic free Custom blend

Calculating Operational Costs Primary expenses include: 1. Feed – Cost dependant on the feed prices and feed conversion of the birds. 2. Chicks – Cost dependant on species, breed, and numbers of chicks ordered. 3. Fuel – Cost dependant on heating needs for brooder and vehicle fuel prices. 4. Housing – Cost dependant on expenditures for set up & clean up.

Feed Conversions based on Good Shepherd Data Corn/Rock Cross 2 lbs of grain / lb of weight gain with 5-6 weeks of age for grow out Standard breed 4 lbs of grain / lb of weight gain with weeks of age for grow out

per bird per pound of product $ 0.62 $ 0.18Chick (bought or produced) $ 1.32 $ 0.38Feed $ 0.24 $ 0.07Fuel (propane) $ 0.12 $ 0.03Housing $ 0.01 $ 0.00Water medication, vaccination, disinfection $ 0.01 $ 0.00Depreciation Equipment $ 0.01 $ 0.00Depreciation Building $ 0.03 $ 0.01Property Taxes (current assessed value multiplied by 1.5%) $ 0.02 $ 0.01Electrical $ 0.10 $ 0.03Building Cleanup and Setup $ 0.01 $ 0.00Operating Loan Interest $ 0.02 $ 0.01Water Sanitation $ 0.01 $ 0.00Flock Insurance $ 0.02 $ 0.01Building Insurance (Buildings) $ 0.01 $ 0.00Business Interruption Insurance $ 0.01 $ 0.00Farm Equipment (truck, tractor, bobcat) $ 0.01 $ 0.00Repair & Maintenance $ 0.01 $ 0.00Supplies & Misc. $ 0.02 $ 0.01Farm Fuel $ 0.13 $ 0.04Hauling to processing plant ($1.25 per mile + fuel) $ 2.73 $ 0.78Total Average Costs of Production with Hybrid Cross Chickens

per bird per pound product $ 1.42 $ 0.47Chick (bought or produced) $ 1.54 $ 0.51Feed $ 0.24 $ 0.08Fuel (propane) $ 0.12 $ 0.04Housing $ - Water medication, vaccination, disinfection $ 0.01 $ 0.00Depreciation Equipment $ 0.01 $ 0.00Depreciation Building $ 0.03 $ 0.01Property Taxes (current assessed value multiplied by 1.5%) $ 0.02 $ 0.01Electrical $ 0.10 $ 0.03Building Cleanup and Setup $ 0.01 $ 0.00Operating Loan Interest $ 0.02 $ 0.01Water Sanitation $ 0.01 $ 0.00Flock Insurance $ 0.02 $ 0.01Building Insurance (Buildings) $ 0.01 $ 0.00Business Interruption Insurance $ 0.01 $ 0.00Farm Equipment (truck, tractor, bobcat) $ 0.01 $ 0.00Repair & Maintenance $ 0.01 $ 0.00Supplies & Misc. $ 0.02 $ 0.01Farm Fuel $ 0.13 $ 0.04Hauling to processing plant ($1.25 per mile + fuel) $ 3.74 $ 1.25Total Average Costs of Production with Standard Breed Chickens

Processing Your flock size will be limited by the capacity of the processing plant. A good working relationship with the processor will be key to the farm’s ultimate success with poultry.

Product Pricing Don’t undercut the market. Familiarize yourself with current prices for comparable product on a regular basis.

General Rule of Thumb for Setting Price Cost of production x 1.2 plus the cost of processing equals your total cost. Your cost plus ~20% equals the baseline price for the product. This price needs to be re-evaluated often as costs for various aspects of production can fluctuate as will the market price for comparable products.

Value-added Considerations Advantages Can increase profit margin is some cases Can utilize product that may otherwise have little to no value Can diversify the farm’s offerings to the public Pitfalls May be difficult to have access to value-added processing The cost of the processing may be high The profit margin could be very low

Food For Thought on Value-Added products In the case of heritage turkey hotdogs, the cost of turkey production equals the cost of creating the product. Since the cost of creating the hotdogs is high, mark- up and profit margin of the product is extremely low in order to be successfully priced to the public. However…

…without the hotdog product, the farm may be stuck with meat that has little to no market value. The point is that you have to have balance. Moving product is equally as important as your profit margins.

Good Shepherd Ranch Hatchery & Production Model Farmers with Good Shepherd Lines recovered standard chickens provide eggs to Frank who incubates the eggs for $0.50 per chick. The chicks cost the producer $3.74 to raise up to market weight. Grown birds that pass inspection and are ~3 lbs are purchased from the farmers by Good Shepherd for $6.00 per bird giving the producer a profit of $2.26 per bird. Birds that do not pass inspection (but are not condemned) will be purchased for a minimal price of only ~$1.00. The cost of processing for whole birds is $2.00 each. The total cost to Good Shepherd Ranch for a 3 lb processed whole bird is $8.00

The processed whole standard breed bird is sold to the public for $11.00 The profit per bird for the producer is $2.26/bird The profit per bird for Good Shepherd Ranch is $3.00