AfricaFoundation ChickenCo Opproposal15092011 PDF

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A proposal for poultry production at the iThemba Agricultural Centre of

Excellence - building bridges to the mainstream economy through a
community based training programme
Technical Report · September 2011
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AFRICA FOUNDATION FOR SUSTAINABLE DEVELOPMENT
Africa Foundation for Sustainable Development (Proprietary) Limited
(Registration No: 2008/00616/07)
Incorporated in the Republic of South Africa
Africa Foundation is a majority owned and managed black entity with a certified Level 3 B-BBEE status
2nd Floor, Building A, Ballyoaks Office Park, 35 Ballyclare Drive, Bryanston Ext. 7, 2191 (GPS 26° 4'27.70"S - 28° 1'53.44"E)
Contact: +27 (11) 463 8900 (office) or +27 83 380 4991 or +27 (86) 553 8489 (fax) or SD@africa-foundation.co.za
Directors & Associates: H.C. Keown *Ajay *Craig Padayachee *Khetiwe McClain
*Riah Phiyega *Prof Shirley Zinn *Terry Booysen **Thelma Munhequete (Mozambique) (*non-executive **Associate)
is proposing to establish a Community Based Education and Training

capital of our Country. It is within this context that Africa Foundation
Africa Foundation has a vision to create jobs and develop the human
According to Albert Einstein, “Insanity is doing the same thing over and over
Economy through a Community Based
“Building Bridges to the Mainstream
PRODUCTION AT THE ITHEMBA
SUSTAINABLE JOB CREATION & SKILLS DEVELOPMENT

A PROPOSAL FOR POULTRY
AGRICULTURAL CENTRE OF
Training Programme”
EXCELLENCE
again and expecting different results...”
Programme.
11/09/2011
Doing it for ourselves
1. INTRODUCTION
In keeping with the objectives of the iThemba Farm – Agricultural Centre of Excellence, the
notion of establishing a small-scale poultry farm has been researched, and forms the basis of
this proposal.
2. THE POULTRY VALUE CHAIN

The poultry industry in South Africa consists of three distinct and separate divisions:
 The day-old chick supplier industry,

 The broiler industry and
 The egg production section of the industry
In addition, there are internal linkages between egg and broiler producers and the suppliers
of day-old chicks so that the industry is integrated upwards and the downwards from the
feed suppliers and the chick suppliers through to the to the broiler and layer producers.
2.1. Incubation Farm ( Day-old Chick Production )

In the incubation industry, day-old chicks are produced in hatcheries, and then sold off, or
reared into point-of-lay hens. The process is highly skilled and mortality rates could reduce
chicks considerably.
2.2. Broiler Farm ( Meat Production )

The purpose of the broiler industry is to rear birds only for their meat. This involves rearing
day-old chicks, into adult birds until they have reached their required weight, and readiness
to be culled and sold off.
2.3. Layer Farm ( Egg Production )

In the layer industry, specialist chick producers raise birds to the point-of-lay and then
supply them to egg producers, which are normally situated within fairly close proximity to
the feed suppliers and the markets.
3. EGG PRODUCTION CYCLE

 You can buy day-old chicks and rear them, but this is expensive and often the chicks
die if they do not receive good care.
 It is better to buy young hens, called point-of-lay pullets (18–19 weeks old) which are
ready to start laying eggs.
 The hens you buy must be of very good quality and be fully vaccinated against all
known poultry diseases.
All information remains the property of Africa Foundation for Sustainable Development +27 83 380 4991
Saturday, 19 November 2011 Page 2 of 13 SD@africa-foundation.co.za
 The best layer breeds to buy are: Amberlink or Hy-line laying hens—these hens will
start laying within 2 weeks after being bought (20–21 weeks of age).
 First (pullet) eggs are small, but gradually become larger after about 2 months.
 The number of eggs laid also peaks halfway through the year and then starts dropping.
 The hens should be kept for one year and then sold as cull hens. If the feed is very
cheap, the hens can be kept up to 2 years.
 If you keep the hens for longer than one year, they will start laying fewer eggs until
they stop altogether.
 They will, however, eat the same amount of food, so profits become less and the
enterprise eventually uneconomical.
 Before selling the hens for slaughter, you must order new pullets. Do this at least four
months ahead of time.
 You can only start selling your old hens once the new hens are in production, especially
if you have standing orders with clients and do not want to disappoint them.
 The money made from the old hens will pay for the new hens.
4. GRAIN FED VS FREE RANGE OPTION

Grain fed rearing of hens has always been the traditional way of poultry farming. However,
instances of discovering steriods in the feed has tarnished the image of this traditional
approach. This together with clever marketing has led to the growth of the free range option
which dictates a heavy pricing premium, sometimes as much a 40%. Our research reveals that
for a new entrant, the traditional grain fed option is the less risky. Additionally, the markets
that we wish to sell in, will not pay the premium price commanded by the free range option.
However, once the grain fed poultry farm has been established, the free range option is
something that can certainly be considered for further expansion into the future.
5. KEY SUCCESS FACTORS

The following success factors remain critical :
 Combating high input costs through efficiencies;
 Ability to control the Newcastle disease and Avian influenza with proper bio-security;
 Ability to maintain a disciplined operation;
 Obtain better prices through marketing to local channels;
 To be successful, contract growers must be among the lowest cost producers.
6. KEY RISKS
Most of the financial risks involved in poultry production lie on the supply side. These risks
include :
 Feed price rises;
 Imports;
 Diseases;
 Theft and
 Price wars.
7. PROPOSAL
A phased approach to the introduction of poultry farming at the iThemba Farm – Agricultural
Centre of Excellence, is proposed as follows :
 An initial focus on the egg laying component of the value chain, by pilot-testing
with 2 X 400 layer units. There are several companies offering turn-key, ready to
operate fully installed layer units, together with training for operational staff.
Operation of these units will provide the initial training ground to achieve the
necessary skills and competencies in operations and marketing, until we are ready
to expand.
 Expansion could be achieved after a year’s pilot testing. Different options could be
considered. More (larger) layer units could be installed thus ramping-up production
to more profitable measures. Alternatively, the option of erecting a brick & mortar
structure could be considered.
 It may even be possible, that success at this stage could lead to expansion into the
other components of the value chain ( day-old chicks & broiler production ).
8. ECONOMICS
EGG PRODUCTION MODEL
FINANCIAL
ASSUMPTIONS
Lifespan of Installations Years 5

Vat % 14%
INPUTS - CAPITAL
Installation & Equipment 75000

Egg Grader 2500
Total 77500
INPUTS - OPERATIONAL
Unit
Number of Production Units 2
Number of Hens per unit 400
Initial Cost per Hen Rands 50
Feed Consumption per Hen per
day Grams 100
Cost of Feed per 50 kg bag Rands 150
Length of 1 cycle Days 380
Excluded - to be recovered as
Labour Cost per unit per month Rands training costs
Packaging Cost for tray of 30
Eggs Rands 0,15
Medicine Cost per cycle Rands 500
Electricity Cost per cycle Rands 500
Transport Cost per cycle Rands 500
Average Price per Egg Rands 0,67
Average Price per Hen Rands 20
Mortality Rate % 5%
Production
Decline/Shrinkage/Breakages % 5%
Sawdust per R50 kg bag Rands 20
Miscellaneous Rands 500
OUTPUTS
Amount
Capital Volume Price in R
2 77500 155000
Amount
Turnover Volume Price in R
Eggs 273600 0,67 182400
Hens 760 20 15200
Total 197600
Amount
Expenditure Volume Price in R
Hens 800 50 40000
Feed 30400 3 91200
Packaging 9120 0,15 1368
Medicine 2 500 1000
Electricity 2 500 1000
Transport 2 500 1000
Sawdust 380 20 7600
Miscellaneous 2 500 1000
Total 144168
Vat 20183,52
Total 164351,52
Profit Before
Depreciation 33248,48
Depreciation 31000
Profit After Depreciation 2248,48
Indications are that the pilot-test units will break-even at a selling price of eggs at 67
cents/egg. The pie-graph illustration below reveals the models sensitivity to Feed; Hen prices
and egg price :
 A 15g increase in feed consumed per hen/day results in excess of R 15 000 increase in
costs over the production cycle.
 An additional 8 cents obtained on average per egg sold leads to an increase in profits in
excess of R 21 000 over the production cycle.
Egg Production - Cost Structure

Excl. Labour Costs
Miscellane
Electricity Sawdust ous
Medicine Transport
1%
0% 1% 5% 1%
Packaging Hens
1% 28%
Feed
63%
9. OPERATIONS
It is envisaged that 2 full time workers would be employed to run the pilot-units, with usage of
surplus hands from the vegetable production assisting with peaks/troughs.
NB : The labour costs related to the pilot-units are excluded from the calculations
10. CHANNELS TO MARKET

The following channels to market would have to be researched:
 Spaza Shops in Thubelihle
 Community (individuals)
 Thubelihle Clinic
 Wholesaler in Thubelihle (Bakiso)
 Dairy Shop in Kriel
 Butcher in Thubelihle
 Sale to Mine Workers
 Mine Hostels in the greater Kriel vicinity
 Supply to Farm Stalls
11. APPROVAL
Indicative costs appear in the annexed quotes. Indicative costs for the turnkey installation of
2 X 400 layer units are as follows:
CAPEX - 2 Laying Units including start-up costs R 200 000,00

OPEX - Operating Expenses for 1 year R 150 000,00
10% Contingency R 35 000,00
Total R 385 000,00
Assumptions:
1. Will add value by selling egg sandwitches to mine workers
2. Offer eggs to mine workers at cost plus margin
3. Surplus eggs sold within Thubelihle and Kriel
Exclusions:
1. Excludes VAT
2. Excludes the cost of Market Research
3. Excludes Training Costs
12. ANNEXURE
QUOTATION Qt No. : YD1233
To : Danny Date : 23.08.2011
Attention : Danny
From : Shaun Erasmus
Re : Price requested on a 9m x 4m Layer house for 240 to 336 Layers
We thank you for the opportunity to quote on the following equipment or spares.
Our new Layer house for small emerging poultry farmers is specially designed to suite the needs
of small broiler producers ,it is constructed of Galvanized 0.3mm corrugated sheets and ventilation
spaces are covered with 550gsm pvc curtain material. The house structure is manufactured of 30mm
steel angle iron and the ventilation opening is covered with 15mm bird wire
No Equipment Description Quantity

1 9m x 4m Galvanized Poultry House with structure and roofing 1
2 9m x 1.6m Complete curtain system with winching equipment 2
3 2 Tier layer cage ( Starter 112 birds per cage ) 1
4 2 Tier layer cage ( Follower 112 birds per cage ) 2
5 100lt Main header tank with all overhead piping 1
6 Min/Max Thermometer -40 to 40 degrees 1
7 23Lt. Foot bath for bio-security 1
8 Delivery 1
TOTAL PRICE PER BROILER UNIT = R 46 768.61

PRICE EXCLUDES VAT
(Price includes installation and erection)
Quote Validity : 14 Days
CHICKEN SHACK TERMS AND CONDITIONS APPLY AND ARE AVAILABLE ON REQUEST THESE MUST BE
SIGNED PRIOR TO THE COMMENCMENT/START OF INSTALLATION
I trust that this will meet your favorable consideration and look forward to your reply
Thank You.
Regards
Shaun Erasmus Banking Details

084 6060 131 First National Bank
Four ways (251 655)
Acc. No. 504 100 386 20
Chicken Shack Agencies (cc) Ck 1988/006555/23
P.O.Box 258 Laezonia 0026 Tel: (012) 669 9908. Fax (012) 669 9910.
E-Mail: info@chickenshack.co.za & sonia@chickenshack.co.za
XMT Report from fax Phone Number Confirmed fax received by:
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See discussions, stats, and author profiles for this publication at: https://www.researchgate.

A proposal for poultry production at the iThemba Agricultural Centre of

Technical Report · September 2011

The user has requested enhancement of the downloaded file.

is proposing to establish a Community Based Education and Training

SUSTAINABLE JOB CREATION & SKILLS DEVELOPMENT

again and expecting different results...”

2. THE POULTRY VALUE CHAIN

 The day-old chick supplier industry,

2.1. Incubation Farm ( Day-old Chick Production )

2.2. Broiler Farm ( Meat Production )

2.3. Layer Farm ( Egg Production )

3. EGG PRODUCTION CYCLE

4. GRAIN FED VS FREE RANGE OPTION

5. KEY SUCCESS FACTORS

Lifespan of Installations Years 5

Installation & Equipment 75000

Egg Production - Cost Structure

10. CHANNELS TO MARKET

CAPEX - 2 Laying Units including start-up costs R 200 000,00

QUOTATION Qt No. : YD1233

To : Danny Date : 23.08.2011

From : Shaun Erasmus

Re : Price requested on a 9m x 4m Layer house for 240 to 336 Layers

No Equipment Description Quantity

TOTAL PRICE PER BROILER UNIT = R 46 768.61

Quote Validity : 14 Days

Shaun Erasmus Banking Details

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