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International Diploma Animal Feed

(IDAF), 2012
Pilot Project Proposal

Establishing of New Feed Mill at Mekelle City

Tigray Region

Ethiopia

By
Alemayehu Tadesse
PTC+, Barneveld
The Netherlands

MAY 2012
ACKNOWLEDGEMENT

First and foremost, I would like to extend my sincere appreciation and deepest gratitude
to The Netherlands Fellowship Programme (NFP) for awarding me this scholarship to
participate in the short course of International Diploma Animal feed.

My deepest gratitude and appreciation is also extended to International Animal Feed

Training staff members for their unreserved, kind, and experienced knowledge and skill
sharing and patience during the training as well as guiding how to write Pilot Project
proposal on animal feed mill establishing.

Last but not least I would like to extend my appreciation for Mekelle University for
permitting me a study leave to attend this course.

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Contents
ACKNOWLEDGEMENT 2

1 DESCRIPTION OF THE PRESENT SITUATION 5

1.1 Introduction of the Country 5
1.2 Important Species of Livestock 5
1.3 Regional situation (Tigray Region) 7
1.4 Present Feed Mills 7
1.5 Challenges Regarding Feed 10
1.6 Work Description 11
1.7 Conclusions and Recommendations 12

2 STARTING POINTS FOR THE FEEDMILL 13

2.1 Location 13
2.2 Livestock Species 14
2.2.1 Cattle 15
2.2.2 Poultry 17
2.2.3 Calculations 19
2.3 Capacity of the mill 19

3 NUTRITIONAL ASPECTS 20
3.1 Raw Materials 20
Table4.Lists of locally available raw materials and their prices 21
3.2 Ration formulation 24
3.2.1 Ration Formulation for Chick Feed 27
3.2.2 Ration Formulation for Grower Feed 28
3.2.3 Ration Formulation for Layer Feed 29
3.2.4 Ration Formulation for Dairy Cattle Feed 30
3.2.5 Ration Formulation for Beef Cattle Feed 31

4 TECHNICAL ASPECTS 33
4.1 Block flowchart and flow diagram 33
4.1.1 Block flow chart 33
4.1.2 Flow Diagram 34
4.2 Required Equipment List 35
4.3 Determination of Grinding Percentage 36
4.4 Time schedule 37
4.5 Energy Consumption 38
4.6 Total Surface Area for Storage and Equipments 39
 4.7 Total Required Investment 41

5 ORGANISATIONAL ASPECTS 42
5.1 Labour 42
5.2 Job Description of Permanent Employee 42
5.3 Collection of the raw materials 43
5.4 Production Planning 44
5.5 Distribution of Final Product 45
5.6 Record Keeping 45
5.6.1 Raw materials 45
5.6.2 Finished products 46

6 ECONOMIC ASPECTS 48
6.1 Technical and Financial Starting Points 48
6.1.1 Technical starting points 49
6.1.2 Financial Starting Points 50
6.1.3 Calculation of Break-Even Production 54

7 CONCLUSION AND RECOMMENDATIONS 61

7.1 Conclusions 61
7.2 Recommendation 61

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1 DESCRIPTION OF THE PRESENT SITUATION

1.1 Introduction of the Country

Ethiopia is the largest country in East Africa and covers approximately 1,221,900 square
kilometer. Its growing population of nearly 80, million growing at rate of 3% per annum,
that makes it the second most populous country in Africa. The majority of the population
(85 percent) is rural and engaged in subsistence agricultural production. Livestock
production is an integral part of the country’s agricultural production system. The country
has five traditional agro-climatic zones, including alpine (Wurch), temperate (Dega),
subtropical (Woina Dega), tropical (Qolla), and desert (Berha).

As a landlocked country, Ethiopia shares boundaries with Eritrea to the north, Kenya to
the south, Somalia and Djibouti to the east, and Sudan to the west. It lies within the
tropics between 3o 24’ and 14o 53’ North and 32o 42’ and 48o 12’ East. The Great Rift
Valley runs from the northeast to the southwest and separates the Central and Eastern
Highlands. Altitudes range from 110 m below sea level at Dallol in the northeast to over
4,600 m at the Semien Mountains in the northwest. Surrounding the highlands, which
constitute 56 percent of the total area of the country, are extensive lowlands with altitudes
of less than 1,000 m. Most economic activity takes place in the highlands. There are four
seasons in Ethiopia, from December to February is the long dry season known as the
Bega, this is followed by a short rainy season , the Belg, in March and April. May is the
hottest and dry month preceding the long rainy seasons(Kiremt) in June, July and August.
Heavy rain falls in these three months. ‘Tseday’ or spring includes the months from
September through November. The coldest temperature generally occurs in December or
January.

1.2 Important Species of Livestock

Livestock in Ethiopia perform important functions in the livelihoods of farmers,
pastoralists and agro-pastoralists. Livestock are sources of food (meat and milk), services
(transport and traction), cash income, manure (for soil fertility management and fuel),
and serve as store of wealth and hedge against inflation. The livestock population of
Ethiopia is the largest in Africa and the 10th largest in the world. According to CSA (2008
survey, the country possesses 49.3 million cattle, 46.9 million sheep and goats, 8.7
million pack animals, and 38.1 million poultry. Reports indicate that these numbers are
increasing, and the livestock sector currently accounts for about 30 percent of the
agricultural GDP and about 16 percent of the total GDP of Ethiopia. This sector is
primarily driven by the hide and skin industry, but livestock is also a major source of
food, with an annual per capita production of 24 liters of milk, 10 kg of meat, and 40
eggs.

Currently, Tigray region is estimated to have nearly 3.1 million cattle, 1.4 million sheep,
and 3.1 million goats, accounting for 11 percent of the country's total livestock
population. Although livestock populations are large, farmers in the region use traditional
animal husbandry methods and, as a result, there are significant opportunities to increase
efficiency and facilitate sector growth. Numerous investment opportunities exist to
introduce commercial practices in livestock breeding, meat and leather production, and
milk, egg, and animal feed processing.

Table 1. The estimated livestock population in Ethiopia and Tigray region

Animal Population in the Population in Tigray Population in project area of

species country Region (project area) Eastern Tigray zone

Cattle 49,297,898 3,103,468 361,073

Sheep 25,017,218 1,376,961 572,819

Goat 21,884,222 3,107,994 229,345

Horse 1787,211 5,427 -

Donkey 5,421,895 463,492 79,210

Mule 373,519 7,694 -

Camel 759,696 32,552 5,197

Poultry 38,127,504 3,829,788 1,229,666

Total 142,669,163 11,927,376 2,477,310

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In Ethiopia from the total cattle population about 99.28 % are indigenous breed and the
remaining 0.72% belongs to the hybrid and exotic breed. Similarly from the total poultry
population 96.4% are indigenous breed and the remaining 3.6 refers to the hybrid and
exotic breeds.

1.3 Regional situation (Tigray Region)

Mekelle is a rapidly developing city in northern Ethiopia, is located about 783 km from
the capital, Addis Ababa. Over the past two decades, Mekelle has experienced rapid
growth as the capital of the Regional State of Tigray. Due to long-term business
development plans aimed at creating optimal market conditions, the city has become the
home for many industries, agro-processing companies and educational centers. With an
educated work force and a significant manufacturing base, the city is poised for
sustainable economic growth.

Mekelle has a population of 215,546, which is one of Ethiopia’s largest cities and among
the closest to the ports of Djibouti, which are used for nearly all of Ethiopia’s import and
export trade on the Red Sea. The city is located at the hub of a road system that connects
all major cities in the region. The recently constructed Alula Aba Nega International
Airport provides for cargo and passenger needs. In addition, road rehabilitation and
development projects are creating additional links to nearby cities and agricultural areas.

1.4 Present Feed Mills

According to Birhanu et al. (2008) There are about 15 feed mixers and millers in the
country. However, only five of them are manufacturing purely for sale. The rest produce
primarily for own consumption, with occasional sales when there is excess production
over their own demand. The mixers and millers produce feed mixes for poultry, dairy and
beef, in that order of importance based on volume. Small ruminant feed mixes are also
produced. However, there is variation from plant to plant in the type of feed being
focused on.
The five big commercial feed mixers and millers are located in the towns of Adama,
Mojo, Bishoftu, and the Addis Ababa subcity of Akaki and Kality. The aforementioned
feed mills are located about 800-900 km far from Mekelle city. The mixers and millers
sell mixes directly to users; no traders are involved in the sale of feed mixes. Prices of
manufactured feed are increasing over time. Mixers and millers reported that they face
increasing supply shortage of the agro-industrial by-products used in feed formulation.
The capacity and type of five major feed mills at the country level are indicated below.

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Table 2. Major Commercial feed mixers and millers in Ethiopia

Name of feed mill Capacity of Type of feed produced Average monthly Major type of raw materials Remark
the feed mill production used in the feed mill
(tons)
Mojo Animal Feed 40 ton/h poultry beef, dairy, 300 corn, wheat screening, fine The production depends on
Mixer and Miller sheep, and goats and coarse wheat bran, the amount of orders the plant
PLC linseed cake, noug seed receives
cake, salt, limestone and
premixes
Bora Animal and - Poultry feed accounts - corn, noug and linseed The factory sells the feeds
Poultry Feed 90% of the total feed cakes, fine wheat bran, mostly to governmental
Processing PLC production and the wheat screenings, soybean, poultry farms
remaining dairy, fish meal, molasses, lime
fattening, shoat and and broken biscuits
pig feeds accounts
10%
Kality Feed Mixer - poultry, dairy, beef, 200-300 - 50% of dairy and poultry feed
and Miller PLC sheep, goat and swine mixes are sold to government
feed institutions. Small farms also
buy feed from the plant. The
factory formulates pig, sheep,
goat and broilers
feed on order basis.
1.5 Challenges Regarding Feed
The major feed resources in the country are crop residues and natural pasture, with agro-
industrial by-products and manufactured feed contributing much less. The importance of
natural pasture is gradually declining because of the expansion of crop production into
grazing lands, redistribution of common lands to the landless and land degradation. In the
Ethiopian highlands crop residues are the major feed resources. In highland zones, high
population growth and density are causing a shortage of grazing areas for livestock. In
the lowland areas, the shortage of feed and water during the dry season forces animals to
trek long distances in search of food. The quality of feed also deteriorates during the dry
season due to inadequate storage options.

The use of crop residue is limited by its poor digestibility and low feeding value due to
low nitrogen, deficiency in some minerals and vitamins, and disproportionately high
lingo-cellulose content. Agro-industrial by-products produced in Ethiopia include by-
products from flour milling, sugar factory, oil processing factories, abattoir, and
breweries. These products are mainly used for dairy, fattening and commercial poultry
production and the scope for their wider use by smallholder producers is low due to
availability and price

Currently in Tigray regions there are around 16 flour factory which are producing wheat
bran and wheat middlings, the production capacity of this factories ranges from 600-
1920 tons of the aforementioned wheat by-products. Besides , the region is one of the
potential area of the country for growing of oil seeds like seasame, sunflower, cotton etc.
there are also small scale oil seeds processing plants and they are producing oil seed
cakes for livestock producer at affordable price.

In Mekelle city most of the compounded feeds for poultry and cattle are purchased from
the feed mills located in Addis Abeba and Bishoftu town which is far about 783 - 833 km
from Mekelle city. Thus, including the transportation costs the feed price become too

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high for the livestock producers and this has a significant impact for the emerging sectors
of the market-oriented livestock production in urban and peri-urban areas. Due to high
prices of the compounded feed in Mekelle city most of the livestock producers depends
on feeding of straw and hay for cattle which has low nutritive value and it is not
satisfying the animal requirement and this limits the genetic production potential of the
animal. For instance the current prices of feed for different livestock species are shown
in Table 3.

Table 3. Feed Prices for different livestock species

Type of feed Layer Grower Chick feed Dairy cattle feed Beef cattle feed
feed feed
Prices (birr/100 kg) 788 777.06 808 480 512.9

1.6 Work Description

I am working as Lecturer at Mekelle University. My job description include teaching,
conducting research and rendering community services. I am teaching the undergraduate
programme of Principles of Animal Nutrition and Applied animal Nutrition courses. In
addition I am involved in the research activities related to assessing the nutritive value of
locally available feed resources and conducting of feeding trial on animal performance.
Moreover, I am involved in the community services via preparation of training manual
for livestock farmers and agriculture development agents regarding the feeding
management of cattle, sheep and goat. Now I have acquired sufficient knowledge and
skills from the three month short course of International Diploma Animal Feed which can
help me to deliver practical-oriented teaching for the animal nutrition courses and also to
render community services in terms of formulating low-cost ration for different livestock
species from locally available feed resources, also I can participate in provision of
technical advices for feed mills.
1.7 Conclusions and Recommendations
Ethiopia has a large livestock population and diverse agro-ecological zones suitable for
livestock production and for growing diverse types of food and fodder crops. However,
livestock production has mostly been subsistence oriented and characterized by very low
reproductive and production performance. On the other hand, market oriented livestock
production has been gradually emerging in recent years. However, poor nutrition is the
major impediment to market oriented livestock production. It leads to slow growth rate in
growing animals and low production and reproduction performance.

In Mekelle city, the commercial livestock agriculture is emerging at faster rate because of
high demand for animal products (milk, egg and meat). Though, the market-oriented
livestock sector has faced critical problems in terms of quality feed supply for different
livestock species. In Mekelle city there is no any feed mill and most of the compounded
feeds are transported from the feed mills which are located at a distance of more than
800 km, this results in increasing of the production costs for livestock products.
Therefore, in order to have sustainable market-oriented livestock agriculture, quality feed
should be available throughout the year for the livestock farmers at affordable price.
Hence, it is highly recommended to establish a new feed mill at Mekelle city to
encourage market oriented-livestock production, reduces the transportation cost of the
compounded feed, and supplying of quality feed throughout the year at reasonable price
for various livestock species

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2 STARTING POINTS FOR THE FEEDMILL

2.1 Location
The feed mill will be established in Mekelle city which is the capital city of Tigray
region. Mekelle is located at 13032’N latitude and 39028’E longitude with altitude ranging
from 2150-2300 meters above sea level. Total area of the city is estimated to be about 74
km2. Like, the other districts, livestock are dependent on crop residues, harvested grass
hay, and aftermath grazing.

Location of
feed mill

Source: http:www.lib.utexas.edu/maps/
 The reason for choosing of Mekelle city for establishing the new feed mill is due to

1. There is a rapid growing demand of animal feed due to commercialisation of

livestock and poultry production system in Mekelle city and its surroundings
2. There is no feed mills in Mekelle city and its surroundings.
3. There is sufficient availability of raw materials in the region. And cheap cost.
4. There is good access for infrastructure accessibility including road,
telecommunication, electricity, water etc
5. The regional government policy is encouraging for investment in animal feed
processing areas by provision of good incentives such as credits access, low
lease price for land rent and exemption from custom duty and exemption from
income and profit tax.

2.2 Livestock Species

The livestock species which are reared for commercial purposes in Mekelle city and its
environ include poultry, dairy cattle and beef cattle. The feed mill will produce
compounded feed for dairy cattle, beef cattle, chick feed, grower feed and layer feed. For
the calculation of the feed mill capacity only crossbred dairy cows and exotic and hybrid
of poultry breeds were considered because for local breeds of milking cows and poultry,
farmers are not supplementing concentrate. Thus, the feed mill is taking into
consideration only those farmers which owns crossbred animals and involved in market-
oriented livestock production. With regards to beef cattle it considers only the local
breeds , because the beef cattle fattening practices are carried out through
supplementation of compounded feeds.

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2.2.1 Cattle
A. Dairy cattle

 Time of dry season-------------------------------------------------------------- 8 months

 Time of wet season ---------------------------------------------------------------4 months
 Average number of crossbred cows present in the city and its surroundings-----
2000
 Mortality of cow per annum (1%)-------------------------------------------------------20
 Number of survived animals--------------------------------------------------------1980
 Calving percentage -----------------------------------------------------------------80%
 Number of Milking days per year---------------------------------------------------300
 Dry season roughage quality ----------------------------------poor (no milk
production)
 Wet season forage quality --------------------------------------medium (5 kg
milk/day)
 Actual milk production in dry season----------------------------------6kg/day
 Actual milk production in wet season ---------------------------------14 kg/day
 Amount of concentrate given for milking cows in dry and wet season is 1kg
concentrate for 2kg milk production.

 For steaming up of 80% calving percentage--30kg concentrated required per cow

NB. In the new feed mill area farmers are not supplementing concentrate for heifers
and calves.

Calculation

 It is anticipated that the number of dairy cows will increase by 2% per annum and
after 5 years the dairy cow population in the project area is expected to be 2178.
  In the first year it is expected that the feed mill will satisfy 10% of the dairy cow
feed requirement and with an increase of 10% per year after 5 years the feed mill
can supply for 50% of the dairy cows population (1089 cows)

Milking cows concentrate requirement after 5 years

Dry season (1089 cows * 8/12 months * 300 days*3 kg) ______735.1 tones/year.
Wet season (1089 cows * 4/12 months * 300 days * 4.5 kg) ______367.5 tones/year.
Feed for steaming up, 80% x1089 cows x30kg/cow__________________26.1 tones/year

The total concentrate required by dairy cows at the fifth year is 735.1 + 367.5 + 26.1 =
1128.7 tones

Beef Cattle
 Total number of beef cattle reared per batch in the city and its surroundings---700
 The fattening period of one batch-----------------------------90 days(3 months)
 Number of fattening batches per year----------------------- 4
 The total number of beef cattle fattened per year-----------2800
 Mortality rate of the animal per annum (1%)------------------28
 Number of survived animals-------------------------------------2772
 Amount of concentrate given is 3kg/day/animal for 3months

Calculation

 It is anticipated that the number of beef cattle will grow by 2% per annum and
after 5 years the beef cattle population in the project area is expected to be 3049.

 In the first year it is expected that the feed mill will satisfy 10% of the beef cattle
feed requirement and with a growth of 10% per year after 5 years the feed mill
can supply for 50% of the beef cattle population (1524 beef cattle).
Beef cattle concentrate requirement after 5 years
The number of beef cattle per year (four batches) is 1524. The number of beef cattle
fattened per batch is 381 cattle.
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381 beef cattle* 3kg/animal/day* 3 months fattening * 4 batches______411.5 tones/year.

2.2.2 Poultry
Most of the farmers buy commercial layer day old chicks from Mekelle city, Bishoftu
town and rear their own chicks for egg production purpose. This process includes
brooding, rearing and keeping layers. The compounded feed is supplemented only for
exotic and hybrids of poultry. Local chickens are reared under traditional management
system like supplementation of grains and free scavenging system.
I. Chicks
Number of chicks per batch ____________10500.
There is 2.36 batches per year therefore the number of chicks per year---------24780
Mortality of chicks during rearing is 10%-----------2478
Average number of present chicks per annum --------------------- 22302
Chicks consume an average of 2kg feed during rearing period.

Calculation
 It is anticipated that the number of chicks will grow by 10% per annum and after
5 years the chick population in the project area is expected to be 33453.
 In the first year it is expected that the feed mill will satisfy 10% of the chick feed
requirement and with an increase of 10% per year after 5 years the feed mill can
supply for 50% of the chicks population (16727 chicks).

Total amount of feed required for chicks after 5 year is

16727 chicks* 2kg= 33.5 tonnes/year

II. Growers
Number of chicks per batch ____________10500.
There is 2,36 batches per year therefore the number of chicks per year---------24780
Mortality of growers during rearing is 10%-----------2478
Average number of present growers per annum --------------------- 22302
growers consume an average of 8kg feed during rearing period.
Calculation

 It is anticipated that the number of growers will grow by 10% per annum and after
5 years the growers population in the project area is expected to be 33453.

 In the first year it is expected that the feed mill will satisfy 10% of grower feed
requirement and with a growth of 10% per year after 5 years the feed mill can
supply for 50% of the grower population (16727 chicks).

Total amount of feed required for growers after 5 year is

16727 growers* 8kg= 133.8 tonnes/year

III. Layers
Average number of layers per annum ---------------------------10,000
Mortality-------------------------------------------------------------5%
Average number of layers present per year----------------------9975
Laying period-------------------------------------------------------52 weeks
Feed consumption per bird during laying period----------------------------------------45kg
Calculation
 It is anticipated that the number of layers will grow by 10% per annum and after 5
years the layer population in the project area is expected to be 14963.
 In the first year it is expected that the feed mill will satisfy 10% of the layer feed
requirement and with an increase of 10% per year and after 5 years the feed mill
can supply for 50% of the layer population (7482 layers).

Total amount of feed required for layers after 5 year is

7482 layers* 45kg= 336.7 tonnes/year

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2.2.3 Calculations
The total amount of animal feed to be produced by the feed mill at the 5th year is
Dairy cow feed---------- 1128.7 tones
Beef cattle feed---------411.5 tones
Chick feed---------------33.5 tones
Grower feed-------------133.8 tones
Layer feed-----------------336.7 tones
Total-------------------------- 2044.2 tones

2.3 Capacity of the mill

The feed mill will be established by considering the following assumptions
 Working days per week---------- 5.5 days
 Working hours per day----------- 8 hours
 Efficiency of machinery------------ 65%.

Therefore capacity of the machine will be calculated as follows:

Production/day = total tones produced = 2044,2 tones = 7.15 tonnes/day

total days 286 days

Production in ton/hour = Production/day = 7.15 = 1.37 tons/hour~ 1.4 tons/hour

0.65* hours/day 0.65*8
 3 NUTRITIONAL ASPECTS

3.1 Raw Materials

Most of the raw materials which are used to formulate the compounded animal feed are
available in the local market of Tigray region. The micro ingredients including general
premix, lysine, methionine, and dicalcium phosphate will be purchased from Addis
Abeba. Whereas the dried brewer grain will be procured from brewery factory in
Kombolcha town. The molasses will be transported from Metehara Sugar factory.
Transportation of raw materials will be carried out by the freight agencies. The raw
materials which are locally available can be categorized into three groups

 Cereals and cereal by products. From cereals like; maize, wheat, barely, Soya
beans and by-products like wheat bran, wheat middling, maize bran etc.
 Plant protein sources; like Noug (Niger) seed cake, rape seed cake, cotton seed
cake, , brewery dried grain, sun flower cake, sesame cake etc.
 Animal protein sources: The Abergelle Meat processing plant which is located
in Mekelle city will start sooner the production of meat and bone meal

The price of raw materials fluctuates among the seasons, during harvesting time most of
the cereal and their by-products are available at cheaper price. Whereas during the rainy
season most of the cereals and their by-products will escalate their price. The price of the
raw materials which is indicated in Table-- is the average price of the overall seasons.
The nutritive value of different raw materials which are locally available and imported
items are also indicated (Table 4).Five types of animal feeds will be produced in this feed
mill based on locally available ingredients. The feed types include: Chick feed, Grower
feed, Layer feed, Dairy cow feed and beef cattle feed. The formulations of the cattle feed
is considering the quality of the roughage. In addition the nutrient content for the dairy
cow was formulated accordingly the recommended standard for normal concentrate
nutrient content for dairy cattle, regarding the beef cattle the nutrient content of the
compounded feed was determined by considering a 550 lb weighing animal with a daily
average weight gain of 2.5lb.

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Raw material ME (poultry) CP Lys % M+c Meth Fat Fiber Ca P Price Availability
kcal/kg % % % % % % % (ETB/kg)

Maize 3340 8.7 0.22 0.35 0.20 3.6 2.1 0.04 0.30 5.00 Local
Sorghum 3260 10.0 0.23 0.35 0.16 3.1 2.1 0.03 0.30 4.50 Local
Barley 2790 10.6 0.38 0.42 0.20 2.4 4.5 0.07 0.36 5.50 Local
Brewer grain (dry) 2510 24 - - - - - 0.07 0.12 2.00 local
Wheat 2980 12.1 0.35 0.48 0.18 1.8 2.2 0.07 0.35 6.00 Local
Wheat middlings 1710 15.2 0.61 0.58 0.25 3.5 10.7 0.19 1.27 3.00 Local
Wheat bran 1000 7.0 0.34 0.26 0.13 7.0 24.0 0.08 1.60 3.00 Local
Maize bran 2520 12 0.49 0.49 0.23 5.8 6 0.10 0.50 3.00 Local
Soybeans (full fat) 3310 35.5 2.27 1.03 0.51 18.8 5.8 0.23 0.52 10.00 Local
Soyabean meal 45/46 2180 43.5 2.65 1.26 0.61 2 6.1 0.3 0.65 5.00 local
Sesame cake 2480 44.3 1.11 2.17 1.24 10.4 6.3 1.68 0.94 4.50 Local
Noug cake 2700 36.1 1.18 1.37 0.67 2.8 20.7 0.7 1.3 5.00 Local
Rapeseed cake/meal/ 2030 34.8 1.74 1.60 0.73 5.8 10.8 0.68 1.07 3.50 Local
Soybean oil 9300 - - - - 99.5 - - - 24.00 Local
Limestone - - - - - - - 38.0 - 1.50 Local
Salt - - - - - - - - - 2.50 Local
Molasses (cane) 1800 4.0 0.02 0.02 0.02 - - 0.67 0.05 2.50 Local
Premix general (layer) 12.6 26.50 imported
Dicalcium phosphate - - - - - - - 24 18 20.00 imported
L-Lysine 3730 94.5 78 - - - - - - 100 imported
Methionone 4360 58 - 99 99 - - - - 30 imported
Bone meal 2830 50 2.4 1.05 0.6 14 8 3.9 6.00 local
 Table4.Lists of locally available raw materials and their prices

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Table 4 Total amounts of raw materials required for the feed mill at the 5th year with 2% loss estimate.

Beef cattle feed

Chick feed Grower feed Layer feed Dairy cattle feed Total raw Annual
materials price of raw
Total with 2% materials
Type raw material 33.5 133.8 336.7 1128.7 411.7
loss (ETH Birr)
% Tons % Tons % Tons % Tons % Tons

Maize 24 8.04 24 32.11 36 121.21 - - - - 161.36 164.66 823285.71

Maize bran (37% starch) - - - - - - 30 338.61 40 164.68 503.21 513.48 1540438.78
Sorghum 30 10.05 30 40.14 20.5 69.02 - - - - 119.21 121.65 547408.93
Brewer grain (dry) - - - - - - 30 338.61 17 69.99 408.57 416.90 833806.12
Soya bean meal 45/46 23 7.71 17 22.75 11.5 38.72 - - - - 69.17 70.58 352915.82
Rape seed meal 2 0.67 2 2.68 2 6.73 3 33.86 14 57.64 101.55 103.62 362682.14
Wheat middling 9 3.02 13 17.39 10 33.67 14 158.02 17 69.99 282.05 287.81 863424.49
Wheat bran - - - - - - 6 67.72 3 12.35 80.07 81.70 245103.06
Sesame meal (expeller) 6 2.01 8 10.70 8 26.94 3 33.86 5 20.59 94.09 96.01 432027.55
Molasses 2 0.67 3 4.01 - - 9 101.58 3 13.57 119.85 122.29 305730.87
Soybean oil - - - - 1 3.37 - - - - 3.37 3.44 82457.14
Limestone - - 0.5 0.67 7 23.57 1.3 14.67 0.5 2.06 40.97 41.80 62707.04
Bone meal 2 0.67 1.2 1.61 1.2 4.04 1 11.29 17.60 17.96 107773.47
Mineral mixture for cattle - - - - - - 1.7 19.19 19.19 19.58 509066.73
 Salt 0.2 0.07 0.3 0.40 0.3 1.01 1 11.29 0.2 0.82 13.59 13.87 34664.54
Premix General 1 0.34 1 1.34 1 3.37 - - - - 5.04 5.14 136285.71
Dical.Ph 0.6 0.2 - - 1.4 4.71 - - - - 4.91 5.02 100302.04
DL-Methionine 0.1 0.03 - - - - - - - - 0.03 0.03 1025.51
Lysine 0.1 0.03 - - 0.1 0.34 - - - - 0.37 0.38 37775.51
Total
100 33.5 100 133.8 100 336.7 100 1128.7 100 411.7 2044.2 2085.92 7378881.17

3.2 Ration formulation

The ration were formulated by using Feed Win software for chick, grower, layer, dairy cattle and beef cattle from the local available
feed resources.

24
 25

3.2.1 Ration Formulation for Chick Feed

3.2.2 Ration Formulation for Grower Feed

26
 27

3.2.3 Ration Formulation for Layer Feed

3.2.4 Ration Formulation for Dairy Cattle Feed

28
 29

3.2.5 Ration Formulation for Beef Cattle Feed

 31

4 TECHNICAL ASPECTS

4.1 Block flowchart and flow diagram

4.1.1 Block flow chart

Transport of raw material

Reception of raw material

Storage of raw material

Blending Adding fines and micro

ingredients

GRINDING

Mixing

Bagging

Storage

Transport
4.1.2 Flow Diagram

T WB1 S1 WP1 Filling

A VM VMI WP S2 T

32
 33

4.2 Required Equipment List

Name of machines Measurements

Code (equipment) Power Capacity Price Remark
birr

VM Vent mill 22.5kw 2400kg/hr - 136,860 Imported

V Mi Vertical mixer 4kw 1500kg Ø 1 420mm 74,133 Imported

H = 4 400 mm
WP Weighing Platform 0-100 kg - 68,430 Imported
WB Weighing Bascule 10-50 kg - 18,000 Locally
available
EW Electronic weighing 0 - 10 kg 2500 Imported
scale
A Augur 1.5 8t/hr 5 m length 25091 Imported
C Cyclone 600 1.60m 11405 Imported
WC Wheel cart - 1000 Local

N. B. The Venti mill set include hopper, feeder, stone trap, magnet, pipe to the vertical
mixer and filter bag
4.3 Determination of Grinding Percentage

Grinding percentage
Ingredients
Chick feed Grower feed Layer feed Dairy cattle Beef cattle feed
% % % feed % %
Maize 24 24 36 - -
Sorghum 30 30 20.5 - -
Brewer grain - - - 30 17
Rape seed meal 2 2 2 3 14
(expeller)
Seasame meal 6 8 8 3 5
(expeller)
Total 62 64 66.5 36 36

Estimating grinder capacity

In order to determine the batch size, first the mixer and grinder size should be
computed. Thus , the mixer and the grinder size can be estimated as follows. The
production capacity of the feed mill is 1.4 ton/hour, thus the mixer size should
accommodate this capacity and the mixer size of the feed mill is assumed to be 1.5 t/h.
The grinding percentage is taken by considering the higher amount of feed to be grinded,
i.e. layer’s feed (66.5%).
 Mixing time is 15 minutes.
 Emptying (or bagging) time is 15 minutes.
 Grinding time should be ≤ 30 minutes.
 Size of mixer is 1.5t/hr
 Grinding capacity within 30 minutes; 1.4 ton* 66.7% = 0.934 ton. Hence, the
minimum capacity of the grinder should be; 0.934x2 ≈ 1.87 t/hr.
 From the toolbox, the grinder is chosen with the power of 22.5kw, which can
grind 2200-2400kg of maize per hour by 3mm screen.

Therefore, by considering the average grinding capacity of the grinder is 2300kg/h, then
grinding time for the 934 kg of the feed can be estimated as follows. Grinding time=
(934kg/2300kg)*60 minutes= 25 minutes

34
 35

4.4 Time schedule

Time schedule for layer feed, batch size1400 kg/hr. Screen size 3mm maize, grinding percentage 66.5%
process Min 10 30 50 70 90 110 130 150 170 190

Blending 20

45 75
Grinding 25

Filling
micro-
5
ingredients
and fines
45 8 115 155
Mixing 15

75 185
Bagging 15

 Batch size 1400 kg -----------------(a)

 Cycle time 55 minutes (130-75)------ b
Maximum capacity per hour (60/b) x a = 60/55x1400 = 1527kg/hr = 1.52ton/hr, is the actual capacity of the feed mill.
 38

4.5 Energy Consumption

Batch size (a), 1400kg
Type of feed, layer feed (as representative)
Grinding percentage 66.5%
Screen size, 3mm maize
Code Name Power in kW Running time per Electricity consumption
batch in minutes per batch
(p) (r) In kWh (Kilowatt hour)
E = p x (r/60)
VM Vent mill 22.5 25 9.35 Kwh
V Mi Vertical mixer 4 55 3.67 Kwh
A Augur 1.5 11 0.28 kwh
Sub Total 13.3Kwh
miscellaneous 10% (lamps, starting up/ stopping down 1.33

Total energy consumption per batch 14.66

Total energy consumption per batch (b)

 Running time of grinder, with an average capacity of 2300kg/h is 25 minutes.
 Mixer with capacity is 1500kg/hr can run for 55 minute per batch.
 Running time of mixer per batch is then 55 minutes.
 Total energy consumption per batch in kWh (b) 14.66 kwh
 Batch size in tonnes (a) 1400kg (1.4t/hr)

Energy consumption pre tonne, 14.66/1.4= 10.47 kWH/ton

Cost of electricity is 10.47 KWH* 0.47 birr/KWH =4.92Ethiopia Birr per ton
 39

4.6 Total Surface Area for Storage and Equipments

The total area required for storage of raw material, finished products, and milling and
mixing equipment can be calculated as follows:

Total production (ton/year): 2044.2

Total raw materials required including 2% loss (ton/year):2085.92
Total raw materials required including 2% loss (ton/week):40.1
Storage time for raw materials: 4 weeks
Storage time for finished products: 1 week
Storage space required for raw materials: 1ton/m2
Storage space required for finished products: 0.75ton/m2

Calculations


Storage space required for raw materials= 4 weeks *40.1 = 160.4 m2
1ton/m2

Storage space required for finished products= 1 weeks *39.31 = 52.4 m2
0.75ton/m2

Space required for equipment like vent mill, scale, vertical mixer, etc ------- 30 m2

Space required for office, toilet and canteen --------------------------------------36m2

Total space required for the building ---------------------------------------------- 278.8m2

By considering the further expansion of the feed mill it is suggested that a total of 1224
m2 of land is required.
40
 41

4.7 Total Required Investment

The total amount of money required for construction of feed mill house, purchase of
materials, and other different machineries is presented in the following table.

Unit price Total price Remark

No Description of Unit Q nt. (ETH
materials Birr)
1 Vent mill Pcs. 1 136860 136860 Imported
2 Vertical mixer Pcs. 1 74133 74133 »
3 Weighing platform Pcs. 2 68430 68430 »
4 Weighing bascule Pcs. 1 18000 18000 Local
5 Augur Pcs. 1 25091 25091 Imported
6 Small electronic Pcs. 1 2500 2500 »
scale
7 Cyclone 600 Pcs. 1 11405 11405 »
8 Wheel cart Pcs 3 1000 3000 Local
9 Other small 5000 Local
equipments like
scoop etc
10 Land (estimated) m2 1224 1.5 1846 Renting land from
government.
11 Building m2 278.8 1500 418200 Constructed by
(construction) contractor
12 Paved road m2 152 100 15200 Paved on both sides of
feed mill
13 Fence m 140 200 28000 Wire Fence
Sub total 807665
10% contingency 80766.5

Grand total 888431.5

 42

5 ORGANISATIONAL ASPECTS

5.1 Labour
The feed mill will have 4 casual labourers working on daily basis. The labourers will be
paid on daily basis. The causal workers will also perform the work like blending,
weighing, filling the augur, filling micros and fines, bagging, storing and cleaning of the
feed mill and organizing the raw materials and finished products. The loading and
unloading of raw materials and finished products will be performed by other people on
contractual basis, the mode of payment is effected per ton of feed. The contract workers
are informed by the feed mill regarding the date of loading and unloading..

5.2 Job Description of Permanent Employee

The feed mill will have five permanent workers including: one manger, one
administrative staff, one feed mill supervisor and two guards. The manager is involved in
feed formulation, planning, budgeting, and evaluating the performance of the feed mill,
marketing of the finished products and ordering the raw materials for the feed mill. The
administrative staff will be responsible for financial control, incharge to collect money
from the clients, send a message to clients (may be orders of raw materials, transportation
trucks), receive orders from customers, and keep the balance of the raw materials as well
as finished products and work on behalf of manager during his absence. The feed mill
supervisor will organize job in the feed mill unit with unskilled workers (reception,
storing and blending, grinding, mixing and storing).The guards are responsible for the
security of the feed mill.
 43

Required Qualification and salary for employees of the feed mill

S.N Personnel Required Qualifications Salary(Ethiopian birr)
number Monthly Year
1 Manager 1 BSc degree and minimum 2500 30000
3 year experience
2 Administrator staff 1 Diploma and minimum 1300 15600
one year experience
3 Feed mill 1 Certeficate and experience 1200 14400
supervisor in feed mill at least for one
year
4 Guard 2 Read and write 750 18000
5 Labourers* 4 Read and write 43680
Total 121680
*the payment for labourer is effected on daily basis

5.3 Collection of the raw materials

The raw materials will be collected from the local market and the wholesalers and
cooperatives, which are responsible to sale locally available ingredients to the feed mill.
Some contractual agreement will be signed between the whole sellers, cooperatives as
well as the feed mill to supply the raw materials especially cereals. The contract will be
dependent on the current price of the raw materials in the market. But the ingredients like
oil cakes, wheat bran, maize bran, brewer grains, molasses and the like will be purchased
directly from the factories. Local freight agencies will perform transportation of the raw
materials and finished products. The transportation cost varies according to the distance
the raw material is brought from. The feed mill will cover the transportation cost. There
are organizations assigned in such transportation duties in the region and the country.
 44

5.4 Production Planning

The production of different feed types will be carried out in a well-organized and
planned manner during 5.5 working days. The feed production planning of the feed mill
will be summarized as follows.
Total feed production of fifth year = 2044.2 tons
 Dairy cattle feed ____________________ (55.2%).
 Beef cattle feed ______________________ (20.1%)
 Layer feed ________________________ (16.4%)
 Grower feed____________________ (6.6%)
 Chick feed--------------------------------- (1.7%)

As indicated above, the highest share is contributed by the production of dairy cattle feed.
feed. Within a week by considering 5.5 working days, the schedule for the Production of
different feed types are computed as follows. :
 Dairy cattle feed (1128.7 tons/2044.2 tons) * 5.5 days= 3.04 days
 Beef cattle feed (411.5 tons/2044.2 tons) * 5.5 days= 1.11 days
 Layer feed (336.7 tons/2044.2 tons) * 5.5 days= 0.90 days
 Grower feed (133.8 tons/2044.2 tons) * 5.5 days= 0.36 days
 Chick feed (33.5 tons/2044.2 tons) * 5.5 days= 0.09 days

Hence, the feed production schedule of the feed mill for different types of feed per day
or in 8 hours basis is outlined below:

Day Type of feed Time (hours) Number of days

Monday Chicken feed 0.72 0.09
Grower feed 2.88 0.36
Layer feed 4.40 0.55
Tuesday Layer feed 2.8 0.35
Beef cattle feed 5.2 0.65
Wednesday Beef cattle feed 3.68 0.46
Dairy cattle feed 4.32 0.54
Thursday Dairy cattle feed 8 1
Friday Dairy cattle feed 8 1
Saturday Dairy cattle feed 4 0.5
 45

5.5 Distribution of Final Product

The feed produced by the feed mill will be distributed to the farmers by the feed mill at
Mekelle city and its surroundings districts. 50% of the product will be distributed to
wholesalers and cooperatives by hiring vehicles from freight agencies and this cost will
be covered by the feed mill. Whereas the remaining 50% of the finished product will be
sold at the feed mill for customers.

5.6 Record Keeping

The feed mill will be equipped with necessary record books (sheets), which are important
to know the current status of the feed mill’s operation. In this case, balances of raw
materials, fine products and the finished products can be known and decision to order the
raw materials or not will be decided in advance.

5.6.1 Raw materials

Each raw material will have a separate record sheet on which the amount utilized every
day and purchased is recorded. The record sheet will be analysed weekly. Since the raw
materials will stay up to 4 weeks in the store, the raw material record sheet format is
indicated in the following table.

Example: maize (in tones)

Amount Amount Balance (in Remark

Date utilized purchased store)
 46

For each raw material such record sheet will be developed and utilized in the feed mill.

5.6.2 Finished products

Like the raw materials, each final product (finished product), will also have its own
record sheet, so that the amount produced every day will be recorded and known in
advance. The record sheet will be prepared on weekly bases. The record sheet format will
look like the following.

Record sheet for finished products (in tones)

Production Tones in Orders Sold from the mill To produce
date store Expected Real sales
sales
Day 1
Day 8
Day 15
Day 22
Day 29
Day 6 next
month
47
 48

6 ECONOMIC ASPECTS

6.1 Technical and Financial Starting Points

Investments (ETH Birr)

Land -------------------------------------------------------------------------1224m 2 = 1846

Building ------------------------------------------------------------------278.8m2 = 418200

Paving------------------------------------------------------------------------152 m2= 15200

Fence---------------------------------------------------------------------------140m =28000

Office equipment’s---------------------------------------------------------------------30000

Installation of machines---------------------------------------------------------------22,000

Sub-total--------------------------------------------------------------------------------515246
Contingency (10%)--------------------------------------------------------------------51524.6
Total-----------------------------------------------------------------------------------566770.6

Equipment Investment (ETH Birr)

Vent mill --------------------------------------------------------------------------136860.00

Vertical mixer ----------------------------------------------------------------------74133.50

Weighing platform -------------------------------------------------------------------136860

Bascule ----------------------------------------------------------------------------------18000

Augur ------------------------------------------------------------------------------------25091

Small electronic balance -------------------------------------------------------------- 2500

Cyclone (600) ---------------------------------------------------------------------------11405

Wheel carts--------------------------------------------------------------------------------3000

Other small equipment cost like scoop etc.--------------------------------------------5000

 49

Sub-total -------------------------------------------------------------------------------------412849.5

Contingency (10%)-------------------------------------------------------------------------41284.95
Total----------------------------------------------------------------------------------------454134.45

Cash in hand (provided for operation cost) -------------------------------------------50000.00

Raw materials in store (160.4 ton) ----------------------------------------------------567410.8

Feed in store (41.4 ton) -----------------------------------------------------------------139058.1

Total -------------------------------------------------------------------------------------756468.90

Total investment ---------------------------------------------------------------------1777373.9

6.1.1 Technical starting points

Exchange rate-----------------------------------------1€=22.81 Ethiopia birr

 Tons to be produced ---------------------------------------------------2044.2ton

 Capacity of the feed mill -------------------------------------------1.4 ton/hour

 Types of feed to be produced

 Dairy cattle feed ----------------------------------------------1128.7tons

 Beef cattle feed ---------------------------------------------- 411.5 tons

 Layer feed -----------------------------------------------------336.7 tons

 Grower feed---------------------------------------------------133.8 tons

 Chick feed-------------------------------------------------------33.5 tons

Distribution and transport system

 Raw materials to the feed mill ----- trucks will be rented from freight agencies
for collection of raw materials from wholesalers, factories or from cooperatives.
All the transportation cost will be covered by the feed mill.
 50

 Finished products -----------------50% of the product will be distributed to

wholesalers and cooperatives by hiring vehicles from freight agencies and this
cost will be covered by the feed mill. Whereas the remaining 50% of the
finished product will be sold at the feed mill for customers.

Manpower needed

 Permanent workers---------------------------------------5

 Casual workers--------------------------------------------4

Average storage period for raw materials -------------------4 weeks.

Tones of raw materials permanently in store -------------- 160.4 tones

Average storage period for finished products ----------------1 week.

Wastage during production process ---------------------------- 2%

Tones of finished products kept in store ------------------------ 39.31 tones.

Average energy consumption per tone of feed ----------------10.47KWH

Type of packing material ---------------------------------------sacks made of nylon bags.

6.1.2 Financial Starting Points

Interest rate ------------------------------------------------------- 7.5%

Electricity cost per kWh -------------------------------------------- 0.47

Demand charges ---------------------------------------------------3000.00

loading & unloading per ton ----------------------------------------30

Packing cost per ton) ------------------------------------------------80

Man power costs (permanent) -------------------------------------78000.00

Transport cost of raw materials per ton/km------------ ---------------1.04Birr

51

Insurance cost -------------------------------------------------------2% of investment.

Administration ------------------------------------------------------- 20000.00

Depreciation of buildings --------------------------------------------4%

Depreciation of equipment------------------------------------------ 6.67%

Depreciation 0f paving road------------------------------------------ 4%

Depreciation of fence-------------------------------------------------6.67%

Rate of maintenance of building ---------------------------------- --2%

Rate of maintenance of equipment --------------------------------- 5%

Rate of maintenance paving road and fence------------------------2%

Building

 Second hand (scrape value) --------------------------- 0

Economic lifetime -------------------------------------25 years

Paving second hand value------------------------------0

Economic life time--------------------------------------25years

Fence second hand value----------------------------- 0%

Economic life time--------------------------------------15years

Equipment

 Second hand (scrape value) ---------------------------- 0%

 Economic lifetime ---------------------------------------15 years.

Calculation of Fixed Costs (for the whole mill) ------A

Land

Interest on land --------------------------------------------7.5%*1846 Birr = 138.45

Buildings
 52

Depreciation --------------------------------------------4%x418200= 16728

Interest rate of building --------------------------(418200+0)/2x0.075)=15682

Maintenance ---------------------------------------------(418200x0.02) =8364

Paving Depreciation-------------------------------------- (4%x15200) =608

Paving interest-------------------------------------- (15200+0/2) * 0.075)= 570.40

Paving maintenance---------------------------------- (15200x2%)=304.00

Fence Depreciation-----------------------------------------(6.67%x28000)=1867.6

Fence interest----------------------------------------- (28000/2x 0.075) =1050

Fence maintenance------------------------------------ (28000x2%)=560

Sub-total---------------------------------------------------------------------------------45872.45

Equipment

Depreciation --------------------------------------------------(412849.5 * 0.0667) =27537.06

Interest -------------------------------------------------------(412849.5/2) *0.075 = 15481.86

Maintenance ----------------------------------------------------412849.5 * 0.05 = 20642.48

Insurance cost building equipment and stored (RM and FP) 1777373.9*2% = 35547.48

Demand charge -----------------------------------------------------------------------------3000.00

Administration/office cost70% fixed---------------------------------------------------14000.00

Advertisement cost -----------------------------------------------------------------------15000.00

Labour costs (permanents)---------------------------------------------------------------78000.00

Raw materials (interest only) ---------- (567410.8/2) x 0.075) ----------------------21277.89

Finished products (interest only) ---------- (139058.1/2x0.075)-----------------------5214.68

Cash in hand (interest only) ------------------- (50000.00/2)*0.075)-----------------------1875

53

Total fixed costs are (A) ------------------------------------------- =283448.9

Total fixed costs = -----------------------283448.9/2044.2 = 138.66 Eth. Birr

Total tons produced

Calculation of variable costs (per ton) ----- B

Cost of ingredients (see ration) -------------------------------------------------------7378881.17

Transport of raw materials ---------------------------------------------------------------200016.1

Transport cost of finished product (50%=1022.1ton)----------------------------------53149.2

Loading and unloading costs (2044.2*30.00) -----------------------------------------61326.00

Energy cost (10.47kwh/t x2044.2t x0.47birr) -----------------------------------------10059.30

Cost of packing materials, a bag size of 25kg for 2044 tons a total of 81768 bags are
required ( [81768 bags *2 birr +5% of this cost) -------------------------------------171712.8

Man power costs (causal, 4 person*6 days*52 weeks*35 birr per day) ---------------43680

Feed sample analysis--------------------------------------------------------------------------10920

Administration0ffice cost30%-----------------------------------------------------------------6000

Total variable costs ---------------------------------------------------------------------7935744.5

Variable costs per ton (B) ----------------------------------------------------------------- 3882.07

Calculation of cost price

Total fixed cost (A) ---------------------------------------------= 283448.9

Total variable cost (B) ---------------------------------------- = 7935744.5

 54

Cost price -------------------------------------------------- = 8219193.3

Cost price per ton ----------------------------------------- = 4020.74

Calculation of selling price

Cost price of feed at the feed mill is 8219193.3+10% mark up (821919.33) is 9041112.6

Selling price/tone (9041112.6/2044.2) = (4422.81 birr per ton)

6.1.3 Calculation of Break-Even Production

Total fixed costs = 283448.9 =524.19ton

Selling price per ton minus variable cost per ton 4422.8–3882.07

As mentioned above the feed mill can make profit after producing of 524.19 tons (i.e
after achieving 25.6 % of the total production capacity)
55

1. Calculation of break-even production for dairy cattle feed

Calculation fixed cost dairy cattle feed(A)

Total fixed cost 55.2%X283448.9=156463.79

Total fixed cost/ton=156463.79/1128.7=138.62 Ethiopia birr

Calculation of variable cost (B)

Cost of ingredients with2%loss --------------------------=3583623

Transport of raw materials (200016.1 *55.2% )------------=110408.88

Transport cost of finish product (53149.2 x55.2%)----------=29338.36

Loading and unloading costs (61326 *55.2%)--------------------=33851.95

Packing cost (171712.8* 55.2%)-------------------=94785

Energy cost (10059.30 x55.2%) ------------------------------ =5552.73

Man power cost (43680x55.2%------------------------------------------------ 24111.36

0ffice cost 6000 x55.2%----------------------------------------------------------3312

Feed sample analysis (10920*55.2%)------------------------------------------ 6027.84

Total variable cost -------------------------------------------=3891011.4

Variable cost per ton(B)----------------------------------------=3447.34

 56

CALCULATION OF COST PRICE.

TOTAL FIXED PRICE (A)-----------------------------------156463.79

TOTAL VARIABLE COST(B)-------------------------------- 3891011.4

COST PRICE---------------------------------------------------4047475.1

C0ST PICE PPER TON------------------------------------------=3585.96

Calculation of selling price

Cost price of feed at the feed mill is 4047475.1+10% mark up (404747.51)

Selling price/tone (4452222.6/1128.7 = (3944.56 birr per ton)

Calculation of break-even production

Total fixed costs = 156463.79 = 314.68 ton

Selling price per ton minus variable cost per ton 3944.56–3447.34

As mentioned above the feed mill can make profit after producing of 314.68 tons (i.e
after achieving 27.9 % of the total feed to be produced for dairy cattle)
57

2. Calculation of break-even production layer feed

Calculation fixed cost layer feed(A)

Total fixed cost 16.4%X283448.9=46485.62

Total fixed cost/ton=46485.62/336.7=138.06 Ethiopia birr

Calculation of variable cost (B)

Cost of ingredients with2%loss --------------------------=1751184

Transport of raw materials (200016.1 *16.4% )------------=32802.64

Transport cost of finish product (53149.2 x16.4%)----------=8716.47

Loading and unloading costs (61326 *16.4%)--------------------=10057.46

Packing cost (171712.8* 16.4%)-------------------=28160.9

Energy cost (10059.30 x16.4%) ------------------------------ =1649.73

Man power cost (43680x16.4%)------------------------------------------------ 7163.52

0ffice cost 6000 x16.4%----------------------------------------------------------984

Feed sample analysis (10920*16.4%)------------------------------------------ 1790.88

Total variable cost -------------------------------------------=1842509.6

Variable cost per ton(B)----------------------------------------=5472.26

 58

CALCULATION OF COST PRICE.

TOTAL FIXED PRICE (A)---------------------------------------- 46485.62

TOTAL VARIABLE COST(B)-------------------------------- 1842509.6

COST PRICE---------------------------------------------------1888995.2

C0ST PICE PPER TON------------------------------------------=5610.32

Calculation of selling price

Cost price of feed at the feed mill is 1888995.2+10% mark up (188899.52)

Selling price/tone (2077894.7/336.7 = (6171.35 birr per ton)

Calculation of break-even production

Total fixed costs = 46485.62 = 66.5 ton

Selling price per ton minus variable cost per ton 6171.35 – 5472.26

As mentioned above the feed mill can make profit after producing of 336.7 tons (i.e after
achieving 19.8 % of the total feed to be produced for layer)
59

3. Calculation of break-even production beef cattle feed

Calculation fixed cost Beef cattle feed (A)

Total fixed cost 20.1%X283448.9=56973.23

Total fixed cost/ton=56973.23/411.5=138.45 Ethiopia birr

Calculation of variable cost (B)

Cost of ingredients with2%loss --------------------------= 1238699

Transport of raw materials (200016.1 *20.1% )------------=40203.24

Transport cost of finish product (53149.2 x20.1%)----------=10682.99

Loading and unloading costs (61326 *20.1%)--------------------=12326.53

Packing cost (171712.8* 20.1%)-------------------=34514.27

Energy cost (10059.30 x20.1%) ------------------------------ =2021.92

Man power cost (43680x16.4%)------------------------------------------------ 8779.68

0ffice cost 6000 x16.4%----------------------------------------------------------1206

Feed sample analysis (10920*16.4%)------------------------------------------ 2194.92

Total variable cost -------------------------------------------=1350629

Variable cost per ton(B)----------------------------------------= 3282.21

 60

CALCULATION OF COST PRICE.

TOTAL FIXED PRICE (A)---------------------------------------- 56973.23

TOTAL VARIABLE COST(B)-------------------------------- 1350629

COST PRICE---------------------------------------------------1407602

C0ST PICE PPER TON------------------------------------------=3420.66

Calculation of selling price

Cost price of feed at the feed mill is 1407602+10% mark up (140760.2)

Selling price/tone (1548362/411.5 = (3762.73 birr)

Calculation of break-even production

Total fixed costs = 56973.23 = 118.57 ton

Selling price per ton minus variable cost per ton 3762.73 – 3282.1

As mentioned above the feed mill can make profit after producing of 118.57 tons (i.e
after achieving 28.8 % of the total feed to be produced for beef cattle)
 61

7 CONCLUSION AND RECOMMENDATIONS

7.1 Conclusions
The selling price of dairy cattle feed at the market is about 4800 Birr per ton. The selling
price of the dairy cattle feed in the proposed new feed mill is 3994.56. The price
difference is about 805.44 Birr per ton. Likewise the current selling price of layer feed
in the market is 7880 birr per ton. The selling price of the layer feed in the proposed new
feed mill is 6171.35 Birr per ton. The price difference is about 1708.65 Birr per ton.
Similarly, the current selling price of beef cattle feed at the market is 5129 birr per ton.
The selling price of the beef cattle feed in the proposed new feed mill is 3762.73 Birr per
ton. The price difference is about 1366.7 Birr per ton. The production breakeven point
percentage of the dairy cattle feed, layer feed and beef cattle feed is 27.9, 19.8 and
28.8%, respectively. This indicates that for the aforementioned feed types beyond the
above production break-even point percentage profit can be achieved. Hence it can be
concluded that in the proposed new feed mill the selling price for dairy cattle feed, layer
feed and beef cattle feed is cheaper by 16.8, 21.7 and 26.6%, respectively as compared
to the current selling prices at the market.

7.2 Recommendation
Based on the financial calculation, it is highly recommended to establish the new feed
mill in Mekelle city. This new feed mill is producing quality feeds with cheap price as
compared to the current market price. In addition the establishment of this feed mill will
have a paramount role for speeding-up the market-oriented livestock production in the
region. Besides, there is no any feed mill in Mekelle city and this provides additional
advantage to the feed mill to maximize the profitability. Moreover, the livestock farmers
can get quality type of feeds throughout the year. In addition the Tigray region has also
highlighted the animal feed manufacturing sector among the top prioritized investment
options in the region. For the establishment of the feed mill, the Ethiopian Development
Bank can give a loan at optimum interest rate for this investment.