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Poultry Study
Poultry Study
02. INTRODUCTION 3
02.01 Project Background
02.02 Objective of Study
02.03 Methodology
INTRODUCTION
Project Background
In terms of specific output, the livestock sub-sector can be broken into product
sub-groups such as, poultry meat, goat meat, lamb/mutton, beef, pork, milk and
eggs.
However, it is noteworthy that the livestock sector has not provided sufficient
volumes and the capacity to meet the demand of teeming Nigerians for protein.
The annual growth rate has been low for most of the products, particularly for
poultry and eggs sub-group, whereas, the sub-group, if properly managed, could
impact greatly on the income and quality of life of the citizenry. This is because
poultry production is a socio-economic activity that has high rating for the reason
that the net return on investment is relatively higher than that of other animal
species and its contributing role to national economy cannot be overemphasized.
Thus it is the major source of high quality protein that is necessary for the
continued survival of the fast growing human population of the developing
economy.
Objective of Study
This feasibility report will, thus provide the necessary guide, to not only the
project promoters in evaluating and carrying out their investment proposal, but
also to the financiers to enable them determine the viability and feasibility of the
project.
Overview
Nigeria, with a population of about 130 million is grossly underprovided with the
essential food component, which is protein. For example, data from the FOS,
CBN, and FAO indicate that from cattle, less than 2kg of beef is available to an
average Nigerian per year and just mere 4kg of eggs per annum is available to
each Nigerian. In fact, milk production has been nose diving or at best has
remained constant since 1994.This scenario is compounded more so when the
volume of egg supply is very low, being 10.56g per person per day as compared
with the usual recommendation that an egg should be consumed by an adult per
day. This recommendation would imply a crate of 30 eggs per month. This story
also holds for other meat products including, chicken.
To ameliorate this problem of low-level of protein intake, there is the need for
concerted effort, among the various stakeholders to bring about the massive
production of protein based food items at competitive costs so that they would be
Poultry Products
The main products of the proposed project include eggs, day-old chicks and
poultry meat, which will be generated from, culled birds (i.e. layers and
breeders), and broilers. Poultry by-products such as poultry droppings, poultry
offal and hatchery wastes will also provide additional income to the project.
Poultry dropping can be used as manure for vegetable gardening and feed
ingredient in fish farming.
Day-Old Chicks
Poultry droppings
Poultry Offal and other hatchery wastes.
PROPOSED CAPACITY
5000 – Birds per production cycle is the minimum economic size to commence a
poultry farm, as the operational and fixed costs are justifiable. This is even more
relevant for a non-automated poultry farm. For a fully automated and integrated
farm, the recommended minimum economic size is between 8,000 and 10,000
birds.
In the poultry section, the ratio of layers to broilers is proposed as 70%: 30% or
7: 3, while 40% to 60% is proposed for the hatchery section.
B roilers
30%
Birds
Layers
70%
Layers
4,000- 6,000 Chicks 40%
3000- 4000 Chicks
B
Broilers
60%
Generally, there are few taboos, religious or cultural practices that prohibit the
use of poultry products in human diet. Hence, nearly all members of the Nigerian
populace are potential consumers of poultry products.
Specifically, there is sustained high demand for live birds for home consumption
or as gifts at the time of festivals such as Christmas, New Year, Easter, Id El-Fitri,
Id-El Kabir etc. Also fast food operators such as hotels, restaurants, and
supermarkets also have very high demand for poultry products.
Egg, in its own case, has a wide variety of utilisation. Thus, it is used in the
preparation of products such as chicken burger, scotch eggs,salad, and egg soup
Poultry farmers, especially the ones specializing in broiler and layer production,
are the potential consumer’s of the day-old chicks produced by the hatchery
section. Point of lay for egg production involves the raising of the pullet chicks
from 0 – 18 weeks. Such chicks must be obtained from reputable hatcheries.
But the Nigerian poultry market had seen more prosperous times for the two
decades after independence in 1960; poultry production grew substantially,
peaking in 1982, with 40 million commercially reared birds. Since then, the bird
population has dipped steadily, to an estimated low of 6 million in 1997. The new
political dispensation has brought about a little improvement to poultry farming.
Hence, the poultry population increased to 20 million in 2003.
LEVEL OF SUPPLY
In the course of our survey, we observed that production figures for poultry
are not properly maintained by government agencies that are charged with the
responsibility. Hence, we came across varieties of production figures from
different sources. However, we are able to come out with an estimated supply
level by conducting a mini survey, and aligning the results with data from reliable
sources such as the Federal Office of Statistics (FOS), Central Bank of Nigerian
(CBN) and Food and Agriculture Organisation (FAO)
On the basis of the foregoing methodology we are able to estimate the supply
level of poultry products in the country as follows:
50 million birds per annum
60 million eggs per annum
60 day old chicks “
Considering infrastructural constraints and other limiting factors, we may
estimate the projected level of supply of poultry products to increase by 5%.
Hence the projected level of supply from 2003-2008 is provided hereunder:
(‘Million)
2003 2004 2005 2006 2007 2008
There are very few taboos prohibiting the consumption of poultry products in
Nigeria.
Hence, nearly all the 129 million Nigerian are consumers of poultry products, in
one form or the other.
It should, however, be noted that the households are not the only consumers of
chicken and poultry products. The other consumers include Fast Food
Companies, Hotels and other food processing companies. Let us conservatively
assume that demand from these groups is about 60 million chickens per annum.
This brings the total estimate demand for poultry chicken to 500 million per
annum. If we further assumed that this demand increase by 2.00% per annum,
the projected demand for chicken is as follows:
(‘million)
COMPETITION
Competition is not so keen in Nigeria‘s poultry markets. The reasons for
this is obvious:
1. Poultry products, in their present forms, are not branded products.
Hence, what is essential in this respect is the effective positioning of
the distribution outlets, at the appropriate times.
2. As a result of the substantial shortfall in supply, Nigeria’s poultry
market is a sellers’ market.
3. Large proportions of the production are being sold through informal
channels. However, some degrees of competition exist between the
locally produced poultry products and the imported ones. A strong
indication of this is the phenomenal rise of poultry products shipped in
container’s from the United States to Nigeria between 1995 and 1999
(see chart below)
In this wise, the marketing practices of the operators in the market can be
considered under the headings of quality of service, promotion, and pricing.
(a) In the area of distribution, poultry farmers sell directly to operators in the
informal sector.
These include
Butchers
However, a few big operators sell their farm products directly to operators in the
formal market. Members of this group include
Big retail outlets
Wholesalers
Franchise stores
Broiler processing plants
Egg processing plants
Exporters (Occasionally)
(b) Pricing: Pricing in the informal sector of the industry is relatively stable.
However, price determination greatly depends on the grade of the
products. In the case of eggs, they are classified to the following three
grades.
Grade 1
Grade 2
Under grade
CONTRACTING
The farm may enter into a contract with medium or large-scale broiler users
to supply stipulated number of chickens or eggs at specified periods. This will,
hopefully, provide a steady market for the farm
The proposed project, which is to be sited in the Lagos urban periphery, will be a
fully automated and integrated poultry production farm, which will be made up of
the following units.
Hatchery Unit,
Broiler grow-out facility,
Layer/breeder grow-out facility,
Table eggs production unit,
Broiler/culled birds processing plant,
This is the unit where fertile eggs will be incubated to produce Day-Old Chicks
(DOC). The proposed hatchery Unit is expected to have a brooding capacity of
a) A Setter Incubator
b) A Hatchers Incubator
There are some essential requirements for growing broilers successfully. All
these requirements will be put in place before the proposed project commences.
Adequate housing
Excellent brooding equipment
Feeding equipment
The modern watering equipment
Miscellaneous equipments
The proposed farm is expected to produce between 7,000 and 14,000 breeders
per production cycle
The basic requirements for a typical breeder grow out facility are similar to that of
broiler grow out facility.
This involves the rearing of birds to sexual maturity, and then keeping them in lay
for a year. The eggs produced are infertile and are called table eggs. In Nigeria,
some producers begin their production process by raising the day – old pullets,
while other buy point – of – lay pullets (e.g. 20 to 22 week old pullets) that are
ready to begin production.
The proposed project would depend on its day-old pullets for egg production.
Since an average layer produces 2 eggs every 3 days, the table egg production
capacity of the farm will depend on the number of layers deployed in the farm.
Setter Incubator
The setter incubator would have a minimum capacity of 40,000 Eggs. The
dimension of a typical one, “Chick Master 102” is 22’length,12.6’ Width
and 8.7’Height
Hatchery
The Hatchery that will be utilized will have a minimum of 30,000 Day -old Chicks
per hatching cycle
Drinking systems
A low-pressure drinking system is ideal for adult birds. The water flows through
the nipples only when they are touched or pecked. Poultry quickly learn how to
operate the system. Drinking nipples are more hygienic and use less water than
open troughs.
Feeders
In deciding which feeder should be used, it important to put into consideration the
type and the class of chicken that is being reared.
One hanging ‘tube’ feeder with a pan 400 mm in diameter will provide about
1200 mm of feeding space, enough for 15 hens.
Bulks feed storage are also a necessary part of the feeding equipment. The
bins (Silos) are located outside the house.
A set of poultry slaughtering and broiler processing that has the capacity to
package 5000 broilers per day will be put in place.
4.4 HOUSING
The first requirement for growing commercial poultry is adequate housing. This
is because broiler/layer production is essentially a chick brooding operation.
Hence the house should contain necessary equipment so that such factors as
temperature, moisture, air quality and light can be controlled easily. It should
also provide for efficient installation and operation of brooding, feeding, watering
and other equipment.
Three types of houses are utilised in the commercial production of broiler, layer
and breeder. Thus birds are transferred to the various houses depending on
their age in the production cycle. These houses include:
Brooder House
This is the house where a day-old chick stays until the first 8 weeks of the chick’s
life. Brooder house must be maintained properly and kept warm always.
Installation of brooder’s guards to confine chicks, flat feeders, drinkers and feed
mash must always be available.
Grower House
After the first 8 weeks, chicks are transferred to the grower house. The purposes
of this transference are to protect them and make them comfortable so that they
can develop optimally. A well ventilated housing accommodation will suit the
growers with enough floor space for the number of growers involved. The
recommended floor space for a flock of 250 birds is 125 square metres.
Cage
a) Water Supply,
b) Supplementary Electricity supply,
Water Supply
Clean water supply is a sine qua non of poultry business. Hence, there should be
provision for an alternative source of water since constant and clean water
supply can only be ensured through provision of an internal borehole and, a
minimum of, one overhead water tank of 5000 litres capacity.
Electricity Supply
Since public power supply is not reliable, provision will be made for a 250 KVA
generating set to supplement National Electric Power Authority supply, and
ensure uninterrupted supply of electricity.
Drugs
Vaccines
About 90% of these inputs are imported. These is why poultry production is
highly sensitive to foreign exchange fluctuation In Nigeria
CHAPTER FIVE
MANAGEMENT
Diseases control,
Housing and equipment ,
Feeding,
Genetic improvement,
Marketing,
Consequent upon the medium size of the farm, the management structure will
not be too elaborate. Since a promoter will finance the farm, the composition of a
board of directors may not be necessary, although it is advisable that this be put
in place. The overall management functions, which will include broad policy
formulation, approval of budgets and strategic plans, will fall on the promoter who
will also function as the Managing Director and Chief Executive Officer of the
farm, although a lot of assistance and value can be derived from the constitution
of a board of Directors.
PERSONNEL REQUIREMENT
The farm will to be a fully automated and integrated farm. Hence, there would not
be need for too many staff. In this wise, the farm will require the following
personnel:
The total estimated annual salary and allowance for the six staff and the
Managing Director is N 600,000.00. If it is assumed that the salary would
increase by 10% per annum, then the salary for the next 5 years is as follows:
N 600,000.00--------Year 1
N 660,000.00--------Year 2
N 726,000.00--------Year 3
N 798,600.00--------Year 4
N 878,460.00--------Year 5
ORGANISATION STRUCTURE
The farm will be structured into four broad departments. The heads of these
departments will report to the General Manager, who will serve as the overall
Farm Manager of the integrated farm. He will report to the Chairman / Managing
Director.
Hatchery Manager, who will supervise the hatchery operations of the farm, will
head the Hatchery unit.
The Business Development Manager will head the Marketing and sales
Department. He will be responsible for implementing marketing and sales
strategies of the farm.
Chairman/CEO
The cost of the project are estimated under two main headings, viz:
Capital/initial cost and operating/maintenance costs.
Based on the estimates gathered during the market survey as well as internet
searches, the principal cost component of the project are [1] land/building &
Infrastructure, [2] Plant & Machinery, [3] office furniture, [4] delivery vehicles and
[5] the pre-operational expenses. These are summarized below:
Sub-Total 1,435,000
d. Audit expenses
These have been pegged at N250, 000 in the first two years, then it moved to
N350,000 as from the third year.
2.4 Depreciation
Depreciation is estimated at N7, 304,625 on a straight-line basis on an annual
basis, given a 10% salvage value, as indicated below: (note that building/poultry
equipment is depreciated over a ten-year period).
REVENUE PROJECTION
ii) Revenue from the sale of eggs is based on projected number of layers,
which constitutes 70% of total bird count, the layers’ life cycle of 90 weeks,
the laying period of 52 weeks, the ability to lay 2eggs in every 3 days
during the laying period, and given the assumed mortality rate earlier
stated above as well as the growth in bird count over the planning period.
The total estimated revenue from this segment should be N6.899million
for a 5,000 bird capacity, N13.80million for a 10,000 bird capacity and
N27.6million for a 20,000 bird capacity on an annual basis. The average
industry growth rate is 15% per annum.
iv) Revenue from sale of day old chicks is based on estimated availability of
hatchery systems, government policy on the importation of day old chicks
and given the mortality rate of the day old chicks, among others.
Therefore, it is estimated that N12.408million, N18.612million and
N24.816million respectively will be realised on a capacity of 40,000,
60,000 and 80,000 day old chicks. The estimated growth rate in sales
should be 15% per annum.
FINANCING PLAN
Traditionally, any projects that have been found to be commercially viable are
financed through equity contribution of sponsors and loans – term loans and
bank overdrafts. Our various discussions with the promoter show that the
financing structure and pattern should follow above path. Consequently, the
Poultry facility’s capital cost of N68.135 million is recommended to be financed
as follows:
N’Million %
i) Equity Contribution 15.027 20.00
ii) SMIES Loan 50.000 66.55
iii) Start-up funding 10.108 13.45
Total N75.135 100.00
i. Equity contribution will cover the cost of initial acquisition of land and as
well as for the construction and completion of the Poultry facility building.
The sum should also cover the construction and part-furnishing of the
administrative office and store rooms.
ii) SMIEIS Loan of N60.00 million will be used to finance substantial part of
the automated poultry and hatchery equipment and start-up operational
expenses.
It is our view that the project will not have difficulties in securing term loans that
can be achieved through Loan syndication with one of the leading commercial
banks as a lead banker. United Bank for Africa (UBA), Union Bank of Nigeria
(UBN), First Bank of Nigeria (FBN), Afribank and Wema Bank. The other buoyant
commercial/merchant banks should be willing to participate.
Another viable source of financing the project is by lease finance. Once the
viability analysis has indicated project acceptance, the question of whether to
The SMIES loan is expected to reduce the pains of servicing a regular bank
revolving loan with periodic interest and principal repayments.
STATEMENTS OF CASH
FLOWS
All figures are in Millions of
Naira
Year 1 2 3 4 5
Variable Costs
10,274,50 14,997, 19,944,50 29,164,5 39,284,
Material & Labor 0 000 0 00 500
Commissions - - - -
10,274,50 14,997, 19,944,50 29,164,5 39,284,
Total Variable Costs 0 000 0 00 500
0.392 0.509 0.432 0.562 0.492
Fixed Costs (calc as % of sales)
Fixed Cost of Goods & Services 0.000% 0.000% 0.000% 0.000% 0.000%
Sales & Marketing (w/o
Commissions) 2.500% 2.500% 2.500% 2.500% 2.500%
G & A (without Depreciation) 2.500% 2.500% 2.500% 2.500% 2.500%
Total Fixed Costs (calc as % of
sales) 5.000% 5.000% 5.000% 5.000% 5.000%
Analysis
Income from Operations
Contribution Margin 0.608 0.491 0.568 0.438 0.508
12,126,44 15,490, 18,119,73 24,523,4 22,148,
Break-Even Sales 9 437 5 28 242
Sales Volume Above Break- 14,059,05 13,968, 28,047,26 27,414,4 57,753,
Even 1 251 5 47 758
STRATEGIC DIRECTION
To finance growth, the Company requires N50 million SMIES term financing in
the first quarter of 2005, as well as N10.108million start-up expenses funding.
This financing would enable the Company to develop a world-class Poultry
facility, to strengthen the management team and to provide for:
1. The projections include actual results from a 12-month time span, beginning
early 2005 through to early 2006.
2. Turnover will range from N26.2 million to N79.9million, over the 5-year
planning period, assuming gross turnover remain steady, on a growth path of
13% per annum.
3. The cost of turnover is expected to peak at 68% of the sale price of the
Poultry facility products and services, leaving 32% of revenues to cover
4. The focus on revenue from sales of mature birds and eggs is expected to
increase such that a significant portion of the total revenue should be
generated from these sources. The projection is that up to 80% of revenue
should be from the sale of mature birds and eggs, leaving the balance of 20%
to be from sales of day old chicks and manure/litters.
4. Headcount should increase from 2 to about 5 within the planning period. The
high degree of automation makes the need for new hires to be minimal.
5. Annual salaries (except sales staff) increase 10% annually beginning 2005.
2. There are no provisions for further bank loans, accounts receivable financing
or additional loans from stockholders after the first operating cycle, beginning
in 2005.
EXPENSE ASSUMPTIONS: