Business Plan for Sheep-Fattening Farm

The Future-Feedlot Enterprise

Business Plan for Sheep-Fattening Farm

July 19, 2012

Holeta Town

+251-921 780580

kidast2004@gmail.com
 Business Plan for Sheep-Fattening Farm

Table of Content

Page No
Executive Summary

Table of Content

1. Project Profile.............................................................................................................................. 1
2. Project Description and Justification...........................................................................................2
3. Vision and Mission Statement of Business..................................................................................4
4. Objective of Business.................................................................................................................. 4
5. Location of Enterprise..................................................................................................................5
6. Market Review.............................................................................................................................6
6.1 Industry Analysis....................................................................................................................6
6.2 Market Potential..................................................................................................................... 7
6.3 Market Entry Timing..............................................................................................................8
6.4 Target Customers................................................................................................................... 9
6.5 Determinant Factors for Fattening....................................................................................... 11
7. Product Review..........................................................................................................................12
8. Competitor Review.................................................................................................................... 13
9. The key to Success.....................................................................................................................14
10. SWOT Analysis....................................................................................................................... 16
11. Marketing Strategy...................................................................................................................17
12. Operation and Management.....................................................................................................18
13. Financial Plan (Marketing budget plan)...................................................................................19

i
Executive Summary

ii
 Business Plan for Sheep-Fattening Farm

The Project Profile

Livestock production is an integral part of Ethiopia’s agriculture sector and plays a vital role in
national economy. At present, livestock is contributing about 27-30 % to the agricultural sector
and 16 per cent to the total GDP (MoARD, 2007). Its net foreign exchange earnings are about 13
percent of the overall export earnings of the country (MoARD, 2007). The role of livestock in
rural economy is assessed by the fact that 65% of the total rural population is engaged in
livestock farming.

The annual total national mutton and goat meat production is 77 and 62 thousand metric tons,
respectively. The per capita consumption indicates a growing demand of meat in the years to
come. (ESGPIP)

Livestock production is growing rapidly as a result of the increasing demand for animal
products. In a Food & Agriculture Organization (FAO) study: Livestock to 2020: The Next Food
Revolution, it is suggested that global meat production and consumption will rise from 233
million tons (2000) to 300 million tons (2020), and milk from 568 to 700 million tons over the
same period. Egg production will also increase by 30%. These predictions show a massive
increase in animal protein demand, needed to satisfy the growth in the human population.
In Ethiopia, fattening sheep and goats culture is not better. All livestock are, not so often fed on
concentrated feed and fodder produced from the agricultural land. This poor feeding situation is
main cause for majority of small ruminants to be yield minimum meat production output.

There is high population of goats and sheep in the country. But the total meat output is far below
their potential [Amha Sebsibe, 2006] when compared with neighboring countries that have small
ruminant populations’ 50–75% less than Ethiopia Therefore, if the sheep fattening projects are
carried out in the country then the domestic demand of meat could be more fulfilled. As the
fattened animals have higher meat contents (55%) as compared to grazing animals (48%).

1
Project Description and Justification:

In Ethiopia, livestock is an important sub-sector of agriculture as it contributes 27-30 percent of

agriculture value added and 16 percent of the total GDP. Ethiopia is home for diverse indigenous
sheep and goats populations, numbering above 25 and 21 million respectively (CSA 2009). At
the national level, sheep and goat account for about 90% of the live animal/meat and 92% of skin
and hide export trade value [FAO, 2004].

The annual total national mutton and goat meat production is 77 and 62 thousand metric tons,
respectively. Sheep and goats, respectively, contribute some 21 and 16.8% of the total ruminant
livestock meat output (ESGPIP).

Despite its significant contribution mentioned above, the present meat production output of
sheep and goats are far below their potential [Amha Sebsibe, 2006] when compared with
neighboring countries that have small ruminant populations’ 50–75% less than Ethiopia. In the
same vein to support the above assertion, the annual meat production is estimated at 3–3.5 kg per
animal per year in the population and 8–10 kg per animal slaughtered. A major cause
contributing to such low meat yield is that animals are commonly slaughtered at immature body
weights, 18–20 kg for sheep and 16–18 kg for goats. (ESGPIP)

On another hand, Ethiopia owns large and diverse livestock resources which are genetically
diverse. Some of the breeds have special merits that meet the requirements of certain incentive
markets and bring premium prices. There is also high demand for live animals as well as meat
from small ruminants by consumers in the Middle East and North and West African countries
due to the geographical proximity of Ethiopia to those regions and their taste preference for our
indigenous animals. In addition, domestic demand for sheep and goat meat production has been
rising due to the factors of population growth, urbanization, income growth, and a preference for
eating meat. Further, Ethiopia government is promoting and expands the leather industry than
ever before to improve quality of leather-related export items so as to boost returns [Plan for
Accelerated and Sustained Development to End Poverty, www.et.emb- Japan.go.jp/ECO-
research].

2
However, this diverse genetic potential of livestock and high demand of both foreign and
domestic for live animals and meat is not yet adequately exploited. As a result, the levels of
foreign exchange earnings from meat industry are also much lower than would be expected,
given the size of the livestock population [Berhanu et al. 2007].

Similarly, in Finfinee Surrounding Special Zone of Oromia, Holeta town and areas, the
livestock resource is not well exploited as compared to current existence of high demand and
expansion of leather and leather footwear industry. In the areas most farmers purchase sheep and
goats for breeding and slaughter and sale at any time when immediate income is required. Only
few framers are purchasing small ruminants for fattening purpose. They do not sale large animals
for urgent needs because acquiring back them is not easy. In general, the sheep and goats are
serving as a living bank and provide security in bad crop years for many farmers in the areas.

Though, the farmers use small ruminants so to serve them as a living bank and security, there is
infrequent fattening sheep and goats culture. The general feeding practice by producers is to
graze all livestock together on communal or privately owned grazing land. All animals are
subjected to similar constraints imposed by grazing inadequate and overgrazed pastures. This
poor feeding situation is main cause for majority of small ruminants to be marketed at average
live weights of 20 kg which in turn create minimum meat production output (ESGPIP).

Keeping in view the factuality described in the preceding paragraphs, there is an urgent need to
make consistent, sustainable and coordinated efforts to augment the per unit animal productivity
(overall edible meat production including the proportion of carcass contents) as well as the
current live weight requirement at slaughter of some export markets in the Middle East by
actively involving all the stakeholders.

3
Vision Statement of Business

 To be the first choice in the business of small ruminant fattening. The first choice is the
best choice, and being the best is what The Future-Feedlot enterprise to work hard at
being—every day!

Mission Statement of Business

It is The Future-Feedlot enterprise’s mission, to supply healthy fattened small ruminants
with high live weight to meet customer needs beyond their expectation at a reasonable
price through relationship marketing to improve the sector that promote a strong
economy and healthy environment.

Objective of Business

The overall objective of the project is aiming to increase the production of red meat i.e. healthy
fattened-sheep on sustainable and cost-effective basis and to save slaughtered sheep at immature
body weights. The specific objectives are drawn as follows:

To deliver healthy and fattened sheep that possibly yields high carcass weight for the
target markets.
To provide offering with reasonable price.
To maintain identified target customers and attract new customers.

The proposed Business legal Status

The business can be started as sole proprietorship. Hence, comparatively fewest

complications are involved in forming, administering and running the sole proprietorship
businesses.

4
Location of Enterprise

Location is very pertinent for the success of any business established as well as business going to
be planned. To this effect, the location of the business is a Holeta town area which is 4km to
north direction on the road to Mugar Cement Factory. The selection of site is guided by four
main criteria which considered as prerequisite:

The area is very helpful to acquire the nutrition for sheep- finishing purpose.
There is an international livestock research center in the location. Thus, the planned firm
can have opportunities to get scientific knowledge and advices in the process of fattening.
Absence of strong competitors in the sector.
Enough fattened sheep are not available in the areas. Thus both business customers and
consumers are travel 15-20km to purchase products.

5
Market Review

This section of the Plan attempts to analyze business industry, market potential and identify
groups of customers who have similar needs for fattened sheep.

Industry Analysis
In Ethiopia, Sheep and goats dominate a strong position in the live animal and meat export trade
to countries in the Middle East with future high market opportunities. This is partly because
Ethiopian meat can be categorized as high quality, organic meat as it is not exposed to industrial
pollutants like in industrialized nations [Haramaya University, 2009].

However, the current levels of contributions of the livestock sector in Ethiopia, at either the
macro or micro level is below potential. The levels of foreign exchange earnings from livestock
and livestock products are also much lower than would be expected, given the size of the
livestock population (Berhanu et al. 2007). Particularly, sheep and goats’ carcass weight is 10kg
on average which is low and limits potential for export as well as the availability of meat to
fulfill the increased domestic demand. Further, such carcasses have poor conformation and
quality, which results in a low price given in the competitive market. Efficient fattening or
finishing programs will improve the animal body condition, carcass conformation and quality so
as to be more competitive in local and export markets.

As the survey made for the success of this project development, almost all farmers of Holeta and
the neighboring towns utilize small ruminants as the security of bad crop years and living bank to
generate immediate cash. The red meat production system is both traditional and inefficient due
to different multi-faceted problems. Most farmers are unable to feed their animal proper and
balanced diet due to lack of scientific knowledge and finance. The feeding practice of small
ruminants is highly based on private or common owned grazing land. In addition, the farmers are
not systematic on breed selection for maximum meat output and kill animals at immature weight.
They rear animals coming from end of career or poor quality animals. Under these prevailing
conditions, producers cannot raise required live or carcass weight for domestic and foreign
markets. Consequently, this and other problems call for investment and improved management in
many aspects of sheep production in order to improve the productivity on a sustainable basis.
6
Market Potential

Food & Agriculture Organization (FAO) study suggests that the global livestock meat production
and consumption at 2020 is expected to be 300million tones as compared to 233million tones of
2000. This numerical data show increasing of meat consumption at rapid rate in coming years.

In Ethiopia, the meat industry is an important segment of agricultural sector. Recently, the
increasing of population, income and consumption habit have together contributed to an increase
in domestic demand. For instance, the total population growth rate in Ethiopia is 2.9% per
annum, while that of the urban population growth rate is 4% per annum. The consumption of
meat by the rural population is expected to increase as a result of higher income. Hence, in order
to estimate the probable level of future demand, present demand is assumed to increase by a
slightly higher rate than the urban population growth rate, i.e.5% per annum. Further, Economic
Commission for Africa's (ECA) "Economic Report on Africa (2002)", acknowledged the average
growth rate of Ethiopian export over the period 1991-2000 were 4.8% per annum. Accordingly
the future export market demand for the product is assumed to grow by 4.8% per annum.

In general, the challenge in Ethiopia now is to produce maximum meat output (only 82,000 tons
annually with 10kg average carcass weight) as compared to largest livestock population size and
existing demand of both global and domestic.

7
Market Entry Timing
Foreign and domestic demand for sheep meat production has been rising in Ethiopia due to
different factors. Not only sheep is eaten readily and appreciated and considered to be edible
commodity, the rich man’s food, it is also contributing to the religious practices of our country.

The demand increases especially before occasions like Christmas, Eid (Eid-ul-Fitr and Eid-ul-
Azha) and Easter. These festivals are celebrated in Ethiopia during December, November and
April respectively. That’s why the animals in such occasions are sold at a bit higher prices as
compared to other days.

The proposed business, therefore, can be started before these occasions or any time throughout
the year. Since the EID/x-mass had been coming in the months of November and December, the
time of June/July will be most suitable to start and make the fattening operational. For the other
festival like Easter October is right time for undertaking purchase of animals to start fattening in
November/december. Having this, projected commercial sheep fattening farm established in the
area fulfill the daily need of target markets.

8
Target Customers
The pre-feasibility suggests selling the sheep in the urban market. The buyers could be the
business buyers e.g. hotels and exporters. The big metropolitan cities like Addis Ababa can also
be considered for selling the sheep. The sheep will be sold on live weight basis. The price of
fattened sheep varies between 1200-1600 birr depending upon the supply and demand of meat in
the market. The Future –feedlot Enterprise targeted the business customers and consumers found
in nearby towns (Holeta) including the capital city of the country Addis Ababa. There are two
types of target market. These are terminal and distributive market.

Terminal markets are markets in which the majority of the animals are bought for consumption.

Target #1- Business customers (Hotels and Restaurants)- In targeted towns (Holeta, Ejere,
Ginchi) excluding Addis Ababa there are 15 standardized Hotels and 10 modern
Restaurants.
Target # 2- All consumers during festival and special occasion- The total Population of targeted
towns (Holeta, Ejere, and Ginchi) is estimated to 300,000 people as per Statistics
found from these towns.

The second types of target customers are distributive markets. These markets are markets in
which the majority of the animals are bought for resale and consumption.

Target # 3- Wholesalers (Traders) and Meat retailers- There are more than 25 meat retailers in
the targeted towns. The projected enterprise again targeted meat retailers if they buy
fattened-sheep at reasonable price.
Target # 4- Export abattoirs (slaughterhouse)-This market is targeted to solve the current
underweight live small ruminants which are exported to Middle East countries.
Independent, locally-based private enterprises: example LUNA, ELFORA, SAFI
and MODJO slaughter houses are the major targeted slaughterhouses.

9
Product Review
The project intends to offer fattening of small ruminants based on breed and age types that give
high carcass weight. Particularly, the main course of fattening is focused on sheep farm. The
project will also undertake all necessary arenas to offer the healthy fattened sheep that being
attractive by target market.

Competitor Review
In the area there is no any firms organized in such kind of business (fattening management of
small ruminants).However, only smallholder, who sell the sheep for the immediate cash are
considered as competitors of planned business. The major difference between products supplied
by the project and those supplied by competitors (local farmers) is that the product supplied by
the project will be well managed, free of diseases and at the age and quality demanded by
customers.

The key to Success/Practical Tips for success

Sheep Breed

The breed characteristics affect the weight gaining ability of the animal. If properly fed,
most Ethiopian small ruminant breeds could meet the current live weight requirement of
some export markets in the Middle East. However, under this project only selected breed
giving good meat i.e. the sheep of Horro, Boranna, and Afar and Middle Rift Valley rams
should be kept at the farm for fattening. It is difficult to collect a these breed from one
market. Hence, the supply side of the sheep must be given priority and some agreement with
the sellers should be made for the regular supply of animal at the time of animal induction.

Animal health

10
 Animal disease affects the feed conversion ability of the sheep kept at the farm. Sometimes
severe disease attack may cause the mortality of the animals. To control these threats, proper
vaccination and medication must be done right after purchased and at the end of fattening.

Reasonable Selling Price

Selling price is another limiting factor for the determination of the profitability of this
business. The livestock marketing structure of Ethiopia follows a four-tier system. The main
actors of the 1st tier are local farmers and rural traders/rural assemblers who transact at farm
level. Those small traders from different corners bring their animals to the local market (2nd
tier). Traders/wholesalers purchase a few large animals or a fairly large number of small
animals for selling to the secondary markets. In the secondary market (3 rd tier), both smaller
and larger traders operate and traders (wholesalers or retailers) and butchers from terminal
markets come to buy animals. In the terminal markets (4th tier), big traders and butcher
(wholesalers or retailers) transact larger number of mainly slaughter type animals.
Consumers get meat through purchase of the animals from terminal markets and slaughters
at home or they may get meat from markets or they may access from butchers who process
the meat via abattoirs.
Having this, most targeted market in this business (Business customers, consumers, Traders,
Export abattoirs, Meat retailers) are the actors of 3rd and 4th tiers. In these tiers the price of
animals are high from the former two tiers. The objective of the projected business is to sell
sheep directly to all targeted markets. The direct channel is; therefore, solve the high price
adjusted in 3rd and 4th tier due to the involvement of rural traders /small traders in the market
structure. On another way the targeted markets of this business are able to purchase sheep
without the intervention of middlemen at reasonable price (without margins added by
middleman).

Relationship Marketing

11
 The business applies the relationship marketing with targeted business customers to avoid
the risk of price fluctuations happened. Because linking the project with the export abattoirs
and business customers (Hotels and Restaurants) will assure good returns on the business.

Considered Factors at the purchase of sheep

Age:
Animals can be placed on intensive feeding at any age, usually after weaning. But, it is advisable
to select sheep between 2 and 4years (from six to eight months for Lambs and kids) of age for
fattening. The project avoids animals that are too old and teeth are not sound because it has
implications on feed utilization.

Weight:
Weight of animals at the start of the feeding operation governs the duration of feeding and the
types and amounts of feedstuffs needed. Lightweight (15-20 kg) animals can use more roughage,
whereas heavier lambs (>25 kg) require more concentrates and a shorter feeding period. Light
weight sheep and goats are more desirable for conditioning based on a larger proportion of
roughage, whereas heavier animals perform best where high concentrate diets are used. It is
therefore best to use sheep and goats with weights ranging from 20-25 Kg for the fattening
operation to take advantage of the two situations.

Skeletal frame:
This project is mainly focused on the animals that have a large skeletal frame and good body
condition.

Condition:
Animals that are healthy and have no visible physical defects will be selected. Emaciated
animals are not selected because they often take a long time to recover. Animals with medium
body condition (Body condition scores of 2.25-3.0) are mainly targeted.

12
Sex:
At all weights, females tend to be fatter than ram lambs under similar management. Females can
do well in feedlots, but often have lower growth rates partly because they reach carcass finish at
an earlier age. As a result it is better to purchase equal proportion of sex.

SWOT Analysis

Strength and Weakness- Evaluation of Internal Environment

Strength
Enough feed resources (nutrition) in the site of project.
Availability of adequate knowledge and advices for fattening management form the area
international livestock research center.
Relationship marketing Programs
Strong marketing communication

Weakness
Inadequate research & extension programs in the production, processing, marketing of
meat and fattening management

Opportunities and Threat- Evaluation of External Environment

Opportunities
High and increasing demand both in domestic and foreign countries.
High livestock population and diverse genotypes.
The expansion of agro-industries and the increase of by-product feed.
Increasing number of export abattoirs.

Threat

13
 Increasing of illegal exporters
Diseases of livestock that may not treated by animals health center
Lack of a grading system to provide incentives to producers and to assist in the
development of sector. In most markets, there are no weighing facilities, and animals are
subjectively sold according to appearance and size.

Marketing Strategy

Product Mix

The farm would focus on the rearing of sheep for fattening. Sheep (lambs and kids) from 6-8
months and 2-3 years of age will be purchased and resold in the market after a fattening period of
90 to 100 days. Additional raw materials produced would be compost which would be sold in
local markets to agricultural farmers.

Promotion mix

14
Operation and Management

The Future-Feedlot Enterprise plans to fatten for four rounds in a year. The completion of each
round should be planned in such a way that it coincide with public holidays when the sale prices
of fattened sheep and goats is highest. One can plan for four rounds of fattening in a year with
duration of 90 days for each round. For each rounds preparation to avail inputs, cleaning and
disinfection of the premises are made effectively.

Operation Arenas for each round

1. Purchasing of sheep for fattening purpose based breed, age, sex, etc- for first round
operation
2. Purchasing of feeds
3. Providing training for employees on fattening management
4. Checking of animal health and providing necessary Medicine
5. Monitoring
6. Identifying prospect from target market
7. Checking whether the fattened sheep are adequate for required body weight
8. Sales

15
The owner is primarily responsible for the management and coordination of The Future-Feedlot
enterprise. The project will have its own independent staff possessing technical as well as
managerial skills. As the farm expands more employees will be hired and involved in the farm
operation. The project also requires collaboration with stakeholders like International livestock
research center, Veterinary clinics, Medical stores and Suppliers of sheep etc.

Financial Plan (Marketing budget plan)

Fixed costs:

Land Requirement:

Land Required 25m length *4m wide Cost of land per M2 Total Land Cost
Total - - -

Cost of Housing (shed)

No Type of raw material Unit Quantity Unit Price Total Price Remark
1 wood bunch 25 100birr 2500
2 Stone 300birr
3 Nail kg 1 30birr 30
4 Grass for the roof bunch 250 5birr 1250
5 cement Quintal 4 200bir 800
6 Labor cost Per/day 2 persons 50birr/day 200
Total cost 5080 ETB

 The cost of wood, stone and roof grass are free

*Shed is built on the land with 25m length and 4m width. The width of the shed is separated in to 2m so
that it is possible to manage fattening purpose of one sheep on 1m length*2m width land area.

16
 4m
25m

2m
2m

1m

- Shed layout –
Variable costs:

Cost of sheep (1ST Round- Started on August for three months)

No. of sheep cost per sheep total sheep cost

50 650 ETB 32,000 ETB

Number of sheep is the same for each remaining rounds. Hence the annual total cost
is=128,000ETB.

Raw material cost for fattening purpose

No Type of raw material Unit Quant. Unit Price Total Remar

Price k
1 Grains Kg 400 8ETB 3200
2 Grain byproducts (Residue of wheat, kg 600 3ETB 1800
maize ,barley, oats, sorghum, beans etc)
3 Oilseed Cakes (Noug seed cake) Kg 300 3ETB 900
4 Sweet potatoes kg 100 5ETB 500
5 Meal ( a rough powder of seeds) kg 200 4ETB 800
6 Grass and hay bales 200 15ETB 3000
Total 10,200
Liquid feedstuffs
7 Molasses lit
8 Brewery (local brewery) byproducts lit 1200 0.50ETB 600
8 salt /powdered kg 100 4birr 400
9 Medicines/vaccines(veterinary cost) birr Per/sheep 25 1250
10 Labor cost for handling fattening purpose birr - - 2100
Total cost 14,550

Yearly total cost of Raw material (4- Rounds)

No Raw material cost Amount of Expense in Birr Yearly Raw material Remark
cost
Round -1 14,550 4*14,550= 58,200

17
 Total Cost 58,200

Other yearly operating expenses (e.g. sales expenses, taxes, etc.):

No Types of Expense Amount of Expense in Birr Remark
Sales and marketing expense
Taxes
Contingency Capital
Total Cost

Yearly Project Cost:

Amount Remark
Land 0ETB
Housing (Shed) 2000ETB
Cost of sheep 128,000ETB
Raw material (Feed and Veterinary) Cost 58,200ETB
Other yearly operating expenses 2000ETB
Total 190,200ETB

18
Yearly Sales Plan

Product to be marketed/year Unit Quant. Unit Price Total Price Remark

Sheep Birr 200 1400 280,000ET
B

Yearly profit and loss plan:

Profit + Loss Statement Format:

Particular (in Birr) Amount (in Birr)

I. Receipts (Sales Revenue) 280,000
II. Total Expenses 190,200
III. Net farm income 89,800

19