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