Managing Risks and Returns in Emerging,

Higher-Value Markets - WV Small-Scale, Pastured Poultry Short Course

1Dee Singh-Knights, 2Alexandria Straight, 3Nola Wilson1Extension Specialist, 2Extension Agent, 3NESARE Outreach

LeaderWest Virginia University Extension Service

WIA Educators Conference, Indianapolis, Indiana, April 2-3, 2014

NESARE PD Program Training Modules“Sustaining Family Farms and their Communities by Building Capacity to Enter and Compete in Local

Markets”

Business Skills Building

Financial Manageme

nt

Market Analysis

Risk Management

(Farm and Food Safety)

Sustainable Production Practices

Value-Adding and Direct Marketing

Partnership

Networking

$8.9 b spent on food in WV - Reducing leakages is important to sustaining local communities

Growing interest in the availability of affordable local food in West Virginia for reasons of health and supporting the local economy• 39% more farmers are targeting local customers• West Virginia restaurants and hotels increased purchases of

local products by 360%

• West Virginia Department of Education this year committed $250,000 in school food funds for local purchases

• More than two dozens county school systems report buying directly from West Virginia farms

Rationale: Building Capacity to Enter and Compete in Local Markets

Short-course with several modules: Help limited resource producers assess feasibility, grow, process and market pastured poultry◦ Production - Can it be done?

◦ Marketing - Can you sell it?

◦ Profitability - Will it make money?

◦ Processing - Can you process it efficiently and safely?

Managing Risks and Returns in Emerging, Higher-Value Markets – WV Small-Scale, Pastured Poultry Short

Course

Working H Farms, WV

Ritchie County

Summers County Kanawha County

Preston County

WV Small-Scale, Pastured Poultry Short Course

104 existing and aspiring small-scale poultry producers attended 1 of 4 (3-hour) workshops

Workshop covered business and feasibility planning, food safety regulations and recommendations, and production systems, nutrition and processing considerations.

Participants participated in a hands-on poultry processing demonstration session

Five sessions planned for 2014

Pastured Poultry Pros Strong demand for pastured poultry exists Potential for extra farm income/new farm income Low capital investment required to get started Can start small and grow Can be run by one person Kids can help Provides sustainably produced meat Chickens build soil fertility Chickens attract customers for other products Proposed rule change to expand on-farm processing

exemptions for poultry slaughter to 20,000 birds

RainbowFarmsWV.com

Pastured Poultry Cons

Very labor intensive--especially on-farm processing

Usually seasonal, unless the producer builds substantial housing

Limited support system of suppliers, contractors and retailers

Weather-related stress, predation, picking up diseases from wildlife are issues

Reliable processing facilities remain hard to find

Working H Farms, WV

WVUES Workshop

Production information and experience – choose production system

Requirements for◦ Land, Water

◦ Building and facility

◦ Equipment and machinery

◦ Management and labor

◦ Supply sources for chicks, feed, equipment

Additional considerations:◦ Supply, timing, specifications

◦ Breeds, quality and production rate

◦ Business size

Module 1: Production – Can it be Done?

RainbowFarmsWV.com

Legal, Regulatory and Liability Issues◦ Currently… 1000 bird limit per calendar year without

inspection. Proposed increase to 20,000 in 2014

◦ Must be slaughtered where they were raised

◦ Slaughtered under sanitary conditions; not adulterated

◦ Must be correctly labeled - add poultry exemption number

◦ Cannot cross state lines

◦Can be distributed in-state to household consumers, restaurants, and hotels.

◦Must keep adequate records (slaughter, sales)

Module 1: Production – Can it be Done?

Label Requirements – Mandatory Features◦ Product Name◦ Net Weight/ Unit◦ Safe Handling Statement◦ Address Line

Product Handling• Stored, transported in a

clean sanitary environment to keep products wholesome

• Kept solidly frozen

Permits◦ Meat and Poultry

Distributors License ($5.00) permit give the WVDA the right to inspect your freezers

◦ Food Handling Permit ($50)

Module 1: Production – Can it be Done?

Bone Creek Farm1815 Bone Creek Rd

Berea, WV 26327304.349.5660Whole Duck

Have you assessed your Market?◦ Target market descriptions – who are your

customers

◦ Marketing options – where can I sell my products

◦ Existing market demand – how many do they want, when do they want it, what exactly do they want

◦ Expected price – what can I expect to sell it for – what will customers pay

◦ Expected sales volume – how many can I sell

◦ Marketing Considerations: Farm/food safety and labelling issues, and rules/regulations for direct marketing;

Module 2: Marketing – Will it Sell?

Market Potential – Everything but the ‘Cluck’

Product Sold Price/Unit Product Sold Price/Unit

Whole $ 3.75 Carcasses $ 1.00

Cut-Up (whole) $ 3.75 Liver $ 4.50

Boneless Breast $ 8.50 Hearts $ 4.50

Tenders $ 8.50 Gizzard $ 4.50

Wings $ 4.00 Feet $ 1.00

Leg Quarters $ 2.75 Heads $ 1.00

Necks $ 1.00 Manure $ 5.00

Backs $ 1.00 Average cost to process a chicken on farm was $1.15/lb.

Average cost to slaughter and process a bird off farm was $1.60/lb.

Highest prices: farmers’ markets (5lbs, 8 wks.), restaurants (3.5lbs, 6 wks.)

Highest farm revenue – from parted-out birds

Highest proportion of sales – On-farm

Break-Even Analysis per Batch of 100 Broilers

Break-Even Price per Bird Sold

◦ Price needed to cover the cost per bird

Total Expenses = $1,130

Number of Birds 100 birds

= $11.30/bird (minimum price)

Break-Even Price per Pound Sold

◦ Price needed to cover the cost per pound sold

Total Expenses = $1,130

Total Lbs. Sold 450 lbs.

= $2.50/lb. sold (minimum price)

Use these numbers to determine if your should go ahead with this enterprise: Can you clear this price in the market you want to sell in? Can you find another market that will clear this price?

◦ $$ Capital costs – what are my start-up costs?

◦ $$ Operating costs – what are my day-to-day costs?

◦ $$ Income Statement – have I looked at the potential costs and returns?

◦ $$ Break-even analysis – cover your costs first

◦ $$ Sensitivity Analysis – have I looked at how simple changes may impact my bottom-line (Effects of changes in feed costs, finishing age, processing equipment, buildings, etc)

Module 3: Profitability – Will it Make Money?

Working H Farm, WV

Estimates Costs and Returns per Bird (5 Farms, 2013)

Size of Farm < 100 100-500 > 800 > 800 > 800

Farm 1 Farm 2 Farm 3 Farm 4 Farm 5

Total Revenue/Bird $ 11.86 $ 21.33 $ 23.94 $ 13.17 $ 13.43

Feed Cost $ 8.44 $ 22.64 $ 1.51 $ 5.27 $ 3.72

Other Var. Costs $ 11.73 $ 5.64 $ 6.03 $ 3.36 $ 0.36

Annual Fixed Costs $ 5.71 $ 2.95 $ 0.69 $ 3.01 $ 1.21

Labor $ 25.60 $ 7.77 $ 9.70 $ 2.87 $ 2.17

Net Returns To Labor and Management

$ (14.02) $ (9.90) $ 15.72 $ 1.52 $ 8.15

Net Income $ (39.62) $ (17.67) $ 6.02 $ (1.35) $ 6.03

< 100 100-500 > 800 > 800 > 8000%

20%

40%

60%

80%

100%

Production Costs by Farm SizeFeed Cost Other Var. Costs Annual Fixed Costs Labor

Farm Size (No. of Birds)

◦Scale-appropriate processing equipment and processes

◦Hands-on demonstration of appropriate processing equipment, set-up and actual steps for processing & evisceration.

◦Food Safety and GHPs considerations

Module 4: Processing – Can you Process it Efficiently?

o Curriculum and Supporting Materials available at ◦ http://anr.ext.wvu.edu/sustain

able-ag/sare/sustainable-ag.

o Small-Scale Poultry Processing Video:

http://anr.ext.wvu.edu/sustainable-ag/sare/sustainable-ag.

o Cost-of-Production benchmarks (based on actual case studies in WV)

o Financial Analysis Templates

o Scale-appropriate processing equipment

o Producer/grower - 100 Bird Limit Exemption

o Food Safetyo Good Manufacturing

Practices

o Standard Operating practices

o Hazard Analysis Critical Control Points Plan

o Record –Keepingo Sample Flock Record Log

o Sample Slaughter Record Log

o Egg Production as further income diversification

Resources Available

Profitability would depend on:◦ Scale of operation

◦ Processing equipment used

More equipment requires large scale of operation

More equipment reduces labor cost/bird

◦Feed cost management Producers considering purchasing

cooperatively

◦ Improvements for 2014

Include egg production for further income diversification

Include GHP, GMP in preparation for the FSMA

Summary

RainbowFarmsWV.com