So You Want to Start A Food Business * What you Need to Know

Report
1Dee
Singh-Knights, 2Alexandria Straight, 3Nola Wilson
1Extension Specialist, 2Extension Agent, 3NESARE Outreach Leader
West Virginia University Extension Service
WIA Educators Conference, Indianapolis, Indiana, April 2-3, 2014
Value-Adding
and Direct
Marketing
Market
Analysis
Financial
Management
Partnership
Sustainable
Production
Practices
Risk Management
(Farm and Food Safety)
Business
Skills
Building
Networking
 $8.9
b spent on food in WV - Reducing leakages is
important to sustaining local communities
 Growing interest in the availability of affordable
local food in West Virginia for reasons of health
and supporting the local economy
• 39% more farmers are targeting local customers
• West Virginia restaurants and hotels increased purchases of
local products by 360%
• West Virginia Department of Education this year committed
$250,000 in school food funds for local purchases
• More than two dozens county school systems report buying
directly from West Virginia farms

Short-course with several modules: Help limited
resource producers assess feasibility, grow,
process and market pastured poultry
◦ Production - Can it be done?
◦ Marketing - Can you sell it?
◦ Profitability - Will it make money?
◦ Processing - Can you process it efficiently and safely?
Working H Farms, WV

Ritchie County
Preston County


Kanawha County
Summers County

104 existing and aspiring
small-scale poultry
producers attended 1 of
4 (3-hour) workshops
Workshop covered
business and feasibility
planning, food safety
regulations and
recommendations, and
production systems,
nutrition and processing
considerations.
Participants participated in
a hands-on poultry
processing demonstration
session
Five sessions planned for
2014

Strong demand for pastured poultry exists

Potential for extra farm income/new farm income

Low capital investment required to get started

Can start small and grow

Can be run by one person

Kids can help

Provides sustainably produced meat

Chickens build soil fertility

Chickens attract customers for other products

RainbowFarmsWV.com
Proposed rule change to expand on-farm processing
exemptions for poultry slaughter to 20,000 birds





Very labor intensive--especially on-farm
processing
Usually seasonal, unless the producer builds
substantial housing
Limited support system of suppliers,
contractors and retailers
Working H Farms, WV
Weather-related stress, predation, picking up
diseases from wildlife are issues
Reliable processing facilities remain hard to
find
WVUES Workshop


Production information and experience –
choose production system
Requirements for
◦ Land, Water
◦ Building and facility
◦ Equipment and machinery
◦ Management and labor
RainbowFarmsWV.com
◦ Supply sources for chicks, feed, equipment

Additional considerations:
◦ Supply, timing, specifications
◦ Breeds, quality and production rate
◦ Business size

Legal, Regulatory and Liability Issues
◦ Currently… 1000 bird limit per calendar year without
inspection. Proposed increase to 20,000 in 2014
◦ Must be slaughtered where they were raised
◦ Slaughtered under sanitary conditions; not adulterated
◦ Must be correctly labeled - add poultry exemption number
◦ Cannot cross state lines
◦ Can be distributed in-state to household consumers,
restaurants, and hotels.
◦ Must keep adequate records (slaughter, sales)

Label Requirements –
Mandatory Features
◦
◦
◦
◦

• Stored, transported in
a clean sanitary
environment to keep
products wholesome
Product Name
Net Weight/ Unit
Safe Handling Statement
Address Line
Bone Creek Farm
1815 Bone Creek Rd
Berea, WV 26327
304.349.5660
Whole Duck
Product Handling
• Kept solidly frozen

Permits
◦ Meat and Poultry
Distributors License
($5.00) permit give the
WVDA the right to
inspect your freezers
◦ Food Handling Permit
($50)

Have you assessed your Market?
◦ Target market descriptions – who are your
customers
◦ Marketing options – where can I sell my products
◦ Existing market demand – how many do they want,
when do they want it, what exactly do they want
◦ Expected price – what can I expect to sell it for –
what will customers pay
◦ Expected sales volume – how many can I sell
◦ Marketing Considerations: Farm/food safety and
labelling issues, and rules/regulations for direct
marketing;
Market Potential – Everything but the ‘Cluck’
Product Sold
Price/Unit
Product Sold
Price/Unit
Whole
$
3.75
Carcasses
$
1.00
Cut-Up (whole)
$
3.75
Liver
$
4.50
Boneless Breast
$
8.50
Hearts
$
4.50
Tenders
$
8.50
Gizzard
$
4.50
Wings
$
4.00
Feet
$
1.00
Leg Quarters
$
2.75
Heads
$
1.00
Necks
$
1.00
Manure
$
5.00
Backs
$
1.00
Average cost to process a chicken on farm was $1.15/lb.
Average cost to slaughter and process a bird off farm was $1.60/lb.
Highest prices: farmers’ markets (5lbs, 8 wks.), restaurants (3.5lbs, 6 wks.)
Highest farm revenue – from parted-out birds
Highest proportion of sales – On-farm
Break-Even Price per Bird
Sold
Break-Even Price per
Pound Sold
◦ Price needed to cover the
cost per bird
◦ Price needed to cover the
cost per pound sold
Total Expenses = $1,130
Number of Birds 100 birds
Total Expenses = $1,130
Total Lbs. Sold
450 lbs.
= $11.30/bird
= $2.50/lb. sold
(minimum price)
(minimum price)
Use these numbers to determine if your should go ahead with this enterprise:
 Can you clear this price in the market you want to sell in?
 Can you find another market that will clear this price?
◦ $$ Capital costs – what are my start-up costs?
◦ $$ Operating costs – what are my day-to-day
costs?
◦ $$ Income Statement – have I looked at the
potential costs and returns?
Working H Farm, WV
◦ $$ Break-even analysis – cover your costs first
◦ $$ Sensitivity Analysis – have I looked at how
simple changes may impact my bottom-line
(Effects of changes in feed costs, finishing age,
processing equipment, buildings, etc)
Estimates Costs and Returns per Bird (5 Farms, 2013)
Size of Farm
< 100
100-500
> 800
> 800
> 800
Farm 1
Farm 2
Farm 3
Farm 4
Farm 5
Total Revenue/Bird
$
11.86
$
21.33
$
23.94
Feed Cost
$
8.44
$
22.64
$
1.51
$
5.27 $
3.72
Other Var. Costs
$
11.73
$
5.64
$
6.03 $
3.36 $
0.36
Annual Fixed Costs
$
5.71
$
2.95
$
0.69 $
3.01
$
1.21
Labor
$
25.60
$
7.77
$
9.70 $
2.87 $
2.17
Net Returns To Labor
and Management
$
(14.02) $
(9.90) $
1.52
$
8.15
Net Income
$
(39.62) $
(17.67) $
(1.35) $
6.03
15.72
$ 13.17 $
$
6.02 $
13.43
Production Costs by Farm Size
Feed Cost
Other Var. Costs
Annual Fixed Costs
Labor
100%
80%
60%
40%
20%
0%
< 100
100-500
> 800
> 800
Farm Size (No. of Birds)
> 800
◦ Scale-appropriate processing
equipment and processes
◦ Hands-on demonstration of
appropriate processing
equipment, set-up and actual
steps for processing &
evisceration.
◦ Food Safety and GHPs
considerations
o
o
Curriculum and Supporting
Materials available at
o
◦ http://anr.ext.wvu.edu/sustai
nable-ag/sare/sustainable-ag.
o Good Manufacturing
Practices
Small-Scale Poultry
Processing Video:
o Standard Operating
practices
 http://anr.ext.wvu.edu/sustaina
ble-ag/sare/sustainable-ag.
o
Cost-of-Production
benchmarks (based on
actual case studies in WV)
o Hazard Analysis Critical
Control Points Plan
o
o
Scale-appropriate
processing equipment
Producer/grower - 100 Bird
Limit Exemption
Record –Keeping
o Sample Flock Record Log
o Financial Analysis Templates
o
Food Safety
o Sample Slaughter Record Log
o
Egg Production as further
income diversification

Profitability would depend on:
◦ Scale of operation
◦ Processing equipment used
 More equipment requires large scale of
operation
 More equipment reduces labor cost/bird
◦ Feed cost management
 Producers considering purchasing
cooperatively
◦ Improvements for 2014
 Include egg production for further income
diversification
 Include GHP, GMP in preparation for the
FSMA
RainbowFarmsWV.com

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