Transcript Development of a Feasibility Template for a Small Multi

DEVELOPMENT OF A
FEASIBILITY TEMPLATE FOR A
SMALL MULTI-SPECIES MEAT
PROCESSING PLANT
Rodney B. Holcomb
Kyle Flynn
Philip Kenkel
Oklahoma State University
Food & Agricultural Products Center
2011 Food Distribution Research Society conference
Portland, OR
WHY A FEASIBILITY TEMPLATE?
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Converging – and conflicting – activities in the meat
processing industry
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Loss of small meat processors, especially those with USDA
inspection
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Growth of the local food movement and “process verified”
meat demand
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HACCP, family not returning to the business, costs of upgrades
and maintenance, switch to “custom exempt”
OK went from 225 establishments in 1983 to 157 in 2000 to an
estimated 100 in 2010 (Ward & Holcomb, 2003)
“Locavores” and “Know Your Farmer, Know Your Food”
Natural, organic, grass-fed, forage finished, free range, humane
production, humane slaughter, religious slaughter, etc.
Result: demand niches for small producers, but a
bottleneck at the slaughter/processing stage
WHY A FEASIBILITY TEMPLATE? (PART 2)
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Scheduled slaughter for small inspected plants now
extends into months
3-6 months for surveyed small OK plants
 Less time/space for dry aging or storage
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The OSU Food & Agricultural Products Center
(FAPC) regularly receiving requests for help
examining small plant feasibility
Various plant sizes
 Varying locations
 One or multiple species
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Result: Demand for feasibility studies and business
plans, but little planning funds for hiring consultants
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And even less understanding of meat business operations
(Coleman, 2008)
WHY A FEASIBILITY TEMPLATE? (PART 3)
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Little/no publicly available information on small meat
plant costs: construction, start-up, or operating costs
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Exception: the occasional “scrubbed” business plan or
feasibility study found on the Internet
But, some recent publicly available information on
plant design, food safety compliance, and even
humane handling designs for holding pens
Guide to Designing a Small Red Meat Plant (ISU)
 Applying for Federal Grant of Inspection for Meat and
Poultry Plants (USDA-FSIS)
 Humane Livestock Handling (Grandin)
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Give producers a preliminary analysis tool for “what
if” evaluations before committing time/money
TEMPLATE DEVELOPMENT
Based on a generic feasibility template developed
by Kenkel and Holcomb (2003)
 Incorporate information on small plants from
Kyle Flynn and other plant owners/operators
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FAPC’s meat processing facilities
 Oklahoma-Texas Meat Processors Association
 Contacts with cold storage construction companies
and equipment suppliers
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Create a spreadsheet with password-protected
formula cells
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Prevent user “abuse”
Users enter information in color-shaded cells only
TEMPLATE DEVELOPMENT OBJECTIVES
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Have estimated costs/considerations for a facility
that meets current USDA-FSIS requirements
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Include a basic equipment list for a generic, small
meat processing plant
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Including a livestock handling area that meets
recommended humane handling specifications
And suggestions/recommendations for additional
equipment for further processing
Provide a flexible financial template that can be
used for varying scale plant designs
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Estimate profitability, cash flow, and returns on
investment under various operating conditions
TEMPLATE COMPONENTS
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Introduction
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Basic info on the template, “how to use” imbedded PDF file
with suggestions
Operating Assumptions
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Breakdown of processing assumptions (species, retail)
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Base case: beef, pork, lamb/goat/deer, retail
No. head/week, “smoked/processed” options for hogs
Utilities, maintenance, waste disposal, taxes, insurance,
expense inflation rate, preferred discount rate for NPV
Plant, Property, & Equipment
Enter info on facilities, refrigeration system, holding pens,
equipment (detailed list given), and even delivery truck
 Enter debt financing assumptions
 Depreciation calculations
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TEMPLATE COMPONENTS (CONT’D)
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Personnel Expenses
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Employees, positions, salaries, benefit assumptions, and
overtime/bonus assumptions
Expense Projections
Pulls from user defined operating costs and calculated
depreciation and interest expenses
 Also includes area for user-defined “other” costs
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Loan Amortization (just calculations)
Market Projection (just calculations)
Operations Summary
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Supplies and Miscellaneous (accounting, legal, fuel, etc.)
10-year profit/loss and annual cash flow projections
Return on Investment (just calculations)
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NPV, IRR, ROA, ROE, Payback Period
TEMPLATE POTENTIAL
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Easy-to-use, basic model for a small multi-species
meat plant
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Comes with “base scenario” plant information
Lets users play “what if” and see impacts of
changes in operating assumptions
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Determine breakeven production levels
Good starting point for dealing with requests for
assistance
 Will be available as a free download from OSU’s
FAPC website
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At http://www.fapc.biz/services/agribusiness.html
Listed under “Resources”
QUESTIONS?