Pakissan.com; PRE FEASIBILITY STUDY : CALVE FATTENING FARM

Beef fattening project is an agricultural enterprise where young calves of average ten to fifteen months age are reared for a period of three months (90days). The live-weight of the animal is around 160 kilograms. Animals are fed on high protein ration with a mixture of green fodder or silage. The average daily weight gains vary between 0.6 - 1.2 kg depending on the feed nutrition, health and breed of animal.

1.2 Opportunity Rationale

Meat is still one of the few articles of food that reaches the consumer anonymously But this situation will not continue to exist in the years to come. The consumers are becoming more health conscious and their concern about the origin and method of production of every thing they eat is increasing every day. At the same time, the consumers seem to have increasing doubts about the image and reliability of meat and meat products that are being sold in the market. This trend calls for additional quality guarantees throughout the chain of production. An obvious example in case of Pakistan is branding of poultry meat.

1.3 Economic Size

On average a herd of 90 animals can be kept for one quarter. The production of calves then will be 360 animals per annum.

1.4 Proposed Capacity 90 animals for three months.

1.5 Total Project Cost Rs 600,000 per quarter.

2 CURRENT INDUSTRY STRUCTURE

The state of meat industry as a whole, from livestock farming to marketing of beef and mutton is in the un-organized sector. Livestock farming has remained least commercialized and survives under subsistence conditions. Beef yield has remained low due to the following constraints:

- Animals are kept for social rather than commercial reasons.

- Despite immense potential, breeding has not been done for increasing productivity.

- Feeding methods are primitive with hardly any of the feed management practices are being followed. Despite abundant fodder production, there is always a shortage between seasons. This shortage is met by "bhoosa" (wheat straw) which has no nutritional value. Quality feed concentrates from existing by-products are not being used efficiently.

- Large-scale livestock farming has not been practiced due to the total manual procedures adopted in feeding and herd management. Reliability of manual labour is low especially in view of illiteracy and poor farmer education on the subject.

Year	Buffalo	Cattle
1997-98	3,472	3,284
1998-99	3,571	3,344
1999-00	3,674	3,844

Year	Beef	Mutton	Poultry
1997-98	940	617	283
1998-99	963	633	310
1999-00	985	649	322

Marketing is the critical component for this project's success. The demand for a quality animal is being driven by demand for quality meat, which is increasing rapidly in urban areas because of awareness about meat-related intestinal and bacterial diseases. Marketing directly to the consumers involves a separate intermediary business enterprise requiring processing, packaging, marketing infrastructure etc. Apart from the considerable investment in processing machinery and marketing structures, such an enterprise requires its own separate corporate and management entity.

Initially the animals will be sold off at the farm to the contractors on live weight basis. Later on this project can also go in to direct marketing of live animals to the animal markets situated in major cities within the proximity of the project i.e. Lahore, Peshawar, Rawalpindi, Faisalabad and Sargodha etc.

3.1 Total Market Size and Growth

The total production of meat (beef, mutton and poultry) in Pakistan during 1999-00 was 1,957,000 metric tons. Meat demand is growing at almost 6% per annum while supply is growing at 1.8%, according to the economic survey of Pakistan. Thus there is a wide gap of 4.2%. This gap is likely to grow in the prevailing circumstances. The deficit is being taken care of through meatless days instead of increasing production. The growing world meat market is presently valued at US$81 billion per annum. Pakistan remains miles away from this market primarily because of lack of supply and absence of modern meat processing systems.

4 Farm Inputs

Land is used for growing fodder for the animals. Normally one acre of land is sufficient for producing fodder for 6-8 calves. The fertility of land is determines the cropping pattern for fodder cultivation.

Lease is a better option for a new investor. Land on lease is available in rural areas for a period of 5-15 years. On an average, a good agriculture land is available on Rs 5000 per acre per year. A few years of lease rent in advance will have to be paid up front.

Water source is necessary for animals at the farm and for irrigation purposes.

Power is required to run the tubewells and fodder chopping machines at the farm.

Climate of the site is also very important for determining the housing requirement of the animals. Frost-free areas are suitable for getting fodder crop in harsh winter seasons.

Feed ration is the fodder supplement for the animal-fattening farm. Calves are fed on high protein feed, which is formulated under a specific formula mix. The nutrients include cotton seed cakes, corn gluten, wheat bran, cotton seed cake, molasses, and choker. The quantity of feed per animal varies according to the intake capacity of the animal.

Fodder crops vary according to the season. In winter, berseem, millet, and lucern are grown and for summer, maize & hybrid sorghum are recommended.

Daily fodder requirement per animal changes with the weight gain of the animal

Wheat straw/turi is used as roughage component of animal feed. Its price varies between Rs 15 to Rs 30 per 40 kg through out the year with lowest price during wheat threshing season in early May.

Ancillary Structures: Building for office, feed mixing plant, stores for feed stuff / raw material, concentrate feeds, hay, straw, equipment, molasses pits and silage pits are required at feedlot facility.

4.1 Feedlot operations

Feedlot means feeding of the animal on a special feed formula of concentrates for a fixed period of time. Feedlots are mainly used for the fattening of the calves for beef production. Standard practice of a feedlot operation is done through feeding calves (age 10-15 months) for 90 days. Feedlot operations are common in countries with formal agricultural economies. The details of the feedlot operations are outlined below:

4.1.1 Procurement of Calves

The enterprise will purchase calves on live weight basis with average age of ten to fifteen months from the rural areas or animal mandies. The purchase price of the animal will depend on the health characteristics of the animal and thus will vary between Rs 20 to Rs 25 per kilogram. On average, the animal weight at purchase time will be around 160 kg.

Agreements will be made with contractors for regular supply of animals to the farm. By the time the first lot of animals arrive, all infrastructure and feeding system will be ready i.e. fodder crop, water, sheds, electricity and manpower etc.

Synchronization of these activities is critical: These will depend upon timely provision of funds which must be made available before the growing season.

4.1.2 Calve Quarantine

A quarantine yard will be made for new animal handling, weighing, marking and vaccination etc. The newly purchased animals will get the de-worming medication and other necessary vaccinations in this yard. Only the disease free animals will proceed to the feedlot from the quarantine sheds. Quarantine arrangements will minimize the chances of disease spread in the main farm by ensuring that the new animals do not carry any germs before they are taken to the main sheds. This seven-day period will also be helpful in acclimatizing the new animals before they enter the main feedlot sheds. The behavior of the animal will be watched during these seven days and then its requirement of feed will be calculated accordingly before sending it to the main feedlot.

4.1.3 Calve Feeding - feedlot

Feed management is one of the most critical factors in meat production. This project will use Total Mixed Rations (TMR), which is based on a mixture of green fodder and supplementary nutrients. Feed tables will be developed and applied for optimization of locally available feed materials to obtain the best nutrient/cost ratio. The daily feed given to the calves will be equal to 3% of their body weight. This feed will include 67% fodder and 33% concentrate mixture. The concentrate mixtures are high protein rations specifically constituted for weight gaining. These rations will include different grains (corn, wheat, gram etc) and mineral mixtures. The feasibility is based on an average weight gain of 0.8 kilogram on daily basis. Our local breeds have a natural tendency to gain weight as the trials conducted by the Punjab Livestock department have shown the weight gain daily to be up to 1.1 kg per day.

4.1.4 Feedlot Housing sheds

The building comprises sheds for housing animals and the necessary ancillary facilities like stores, vaccination yards etc

Animal sheds should be located with long axis north to south, to get direct sunlight and yet face away from the direction of prevailing winds, whenever possible. Tree plantation can be carried outside the pen to provide natural shades and these trees will also act as windbreakers.

Apart from providing sufficient floor space in animal houses, care will be taken to provide manger and water troughs in such a way that all animals in the pen have free access to these.

Feeding / watering space specification:	Units
Drinking Space per animal (sq. ft)	.064
Total manger length in a pen for 100 animals(ft)	196
Total water trough length in a pen for 100 animals(ft)	19.6
Width of manger / water trough(ft)	1.96
Depth of manger / water trough(ft)	1.3
Height of the inner wall of the manger / water trough (ft)	1.6

Dimensions of water troughs will be the same as that of feed mangers and water will be available round the clock. Generally all the animals may feed at the same time in a pen, but not all animals drink water simultaneously. Thus, while the length of the mangers should be sufficient to provide feeding space for all the animals in the pen, it will suffice if the length of water troughs is sufficient for about 10 percent of the animals in the pen.

5 MANPOWER REQUIREMENTS

6 FARM MACHINERY

6.1 Farm Equipment

7 LAND & BUILDING

7.1 Total Land Required (Area)

In feed lot operations animals are kept in closed pens and fed on high protein diet. Fodder is only given as roughage part of the feed. Fodder grown on an acre can sustain 6 animals. About 15 acres of land is required to grow fodder for feeding 90 animals.

7.2 Recommended Mode for Acquiring Land

Land lease is a better option for starting a livestock farming business. Once the business takes off, land can be purchased later on.

7.3 Suitable Locations

The suitable location for a fettering farm would be where costs of fodder growing are lesser, labour is cheap. Sites in rural areas are most suitable for this project. Only thing should be kept mind that, the village is connected with the roads for transportation of animals to the animal markets.

7.4 Animal Housing

7.5 Infrastructure Utilities / Requirements

8 PROJECT COST

8.1 Fixed Investment

8.1.1 Building Rs 244,000

8.1.2 Machinery Rs 58,000

8.1.3 Animal cost Rs 331,000

8.1.4 Total Fixed Investment Rs 301,000

8.1.5 Working capital Rs 200,000

8.1.6 Total project Cost Rs 600,000

9 FINANCIAL ANALYSIS

9.1 Costing

9.1.1 Average sale price/kg Rs 30/Kg

9.1.2 Average unit contribution margins Rs 7/Kg

9.1.3 Fixed cost per kg Rs 0.6/Kg

9.1.4 Variable cost per kg Rs 22.9/Kg

9.1.5 Total product cost per unit (variable + fixed) Rs 23.41

9.2 Break Even

9.2.1 Break even sales(Vol.) 24 heads

9.2.2 Break even capacity 27%

9.3 Profit & loss statement

Total sales / quarter

9.3.1 Gross profit Rs 142,714

9.3.2 Salaries Rs 23,760

9.3.3 Depreciation Rs 8,110

10 REGULATIONS

Animal fattening farm can be started in rural and peri urban areas. There is no requirement of getting license from the government.

There is no price regulation governing the trade in live animals. However, such trade is indirectly regulated by the price controls imposed on mutton and beef. The Commissioner of a district fixes the maximum price of beef and mutton that can be charged by any retailer in the district.

11 KEY SUCCESS FACTORS

The success of the fattening farm is dependent on the breed of animal. The breed characteristics effect the weight gaining ability of the animal. Only selected breeds giving good beef should be kept at the farm for fattening. Under good nutrition conditions the calves of Sahiwal, Baghnari and crossbred gains good weight. Calves attaining about 800 grams daily weight are categorized among good breeds.

Selling price is another limiting factor for the determination of the profitability of this business. In Pakistan, the beef business is controlled by the informal sector. The are no organized markets for the beef sale and purchase. It is is in the hands of a community called butchers or Kassab.

After feeding animal in feedlots, only the premium price can make the operations profitable. Only fetching good price can justify the costs incurred on rearing animal in feed lots.

The selling price of fattened animal should be higher than the average animals because of its higher meat recovery and good quality.

To avoid the risk of price fluctuations, certain buy back agreements with institutional buyers will be a good approach for the success of this business. Linking the project with the live animal export or beef exports will assure good returns on the business.

A good quality animal is difficult to collect from one market. For the fattening purpose, the supply side of the animal 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. Contract should be made with the suppliers to supply the 10-15 months old animals on pre-decided prices.

Animal disease effects the feed conversion ability of the calves kept at the farm.

Some times severe disease attack may cause the mortality of the animals. To control these threats, proper vaccination and medication must be done.

Hygienic conditions should be assured at the farm by adopting proper sanitation and drainage techniques.

12 THREATS FOR THE BUSINESS

Sudden death of animals due to epidemic disease or gaseous inflammation in the intestinal tract.

Butchers, who don't pay premium price for the good quality animals, dominate our country's beef markets.

The proposed project is based on certain assumptions, prices and regional considerations. The mentioned figures and numbers are estimated and may vary with the change of any of locations.

July 27, 2001 Version II

Small and Medium Enterprise Development Authority
GOVERNMENT OF PAKISTAN
43-T, Gulberg II, Lahore 54660, Pakistan.
UAN: 111 111 456 Fax: 575 3545 & 575 3587
http://www.smeda.org.pk

1.1 Project Brief