Business Plan « Feed processing »

by youth groups in Doyogena , Ethiopia

Udo Rudiger, Jane Wamatu and Muluken Zeleke

December 20

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 Table of Contents
1. Objectives and justification....................................................................................................................... 3
2. Promoter ................................................................................................................................................... 3
3. Production of compound feed .................................................................................................................. 3
3.1 Description of final product ................................................................................................................ 3
3.2 Production capacity and monthly production .................................................................................... 4
3.3 Description of proposed procedure .................................................................................................... 5
3.4 Feed manufacturing ............................................................................................................................ 5
3.5 Description of site and equipment ..................................................................................................... 5
4. Economic analysis ..................................................................................................................................... 6
4.1 Purchase of raw materials .................................................................................................................. 6
4.2 Sale of feed (including marketing strategy, demand, distribution channels) ..................................... 6
Distribution ........................................................................................................................................... 6
Marketing strategy................................................................................................................................ 6
Consumers / Direct beneficiaries .......................................................................................................... 6
4.3 Profitability of the Project ................................................................................................................... 7
4.3.1 Operating costs ................................................................................................................................ 7
4.3.2 Working Capital Fund (FR) ............................................................................................................... 7
4.3.3 Investment (InV) .............................................................................................................................. 8
4.3.4 Depreciation..................................................................................................................................... 8
4.3.5 Financing/Funding............................................................................................................................ 8
4.3.6 Cost-effectiveness of the project ..................................................................................................... 9

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1. Objectives and justification
The objective of the project is to produce valuable compound feed by a youth group in Doyogena,
valorizing their own agricultural production. The youth group uses a large amount of expensive
imported concentrates to fatten their sheep. Through the production of their own compound
feed using a feed-producing chain, feeding and production costs will be reduced, and income
increased.

Several basic arguments support the respiration of such a project:

1. The lack of sufficient forage resources, shortage of local animal feed sources and high prices
of imported feed
2. The abundance of by-products like “spent grains” of the nearby beer factories that can be
valorizes for feeding livestock
3. Improve feed quality as imported concentrates are often of poor quality
4. The very advantageous cost of the feed produced by the unit
5. Provide inexpensive and quality feed in times of shortage of fodder resources or when they
are very costly or interrupted in the local market.
6. Need to create employment for youth

2. Promoter
Name of promoter: Sarara Bokata Male and female mix sheep fattening cooperative
Address : Kambata Tamibaro zone, Doyogena District.
District Level: Gebriel Binchamo (+251913704896), Head of Livestock office District.
Kebele Level: Alemu Bufebo (+251 920992019) and Desalech Markos (+251973526378) Data
collectors.
Group Level: Halefe Handiso (+251 931612558), Sarara Bokata sheep fattening cooperative,
Chairman.
The cooperative has 50 members but is collaborating with other eight groups, so targeting about
450 organized youth and farmers being engaged in sheep fattening and or breed improvement
cooperatives.

3. Production of compound feed

3.1 Description of final product
The final product is compound feed based on several combinations of cereals, legumes and by-
products. The product will be served directly to small ruminants as a rich supplementary feed.

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Depending on the availability of crops and by-products in the promoter region and the specific
need of small ruminants at different stages (ages), the following formulas will be used along the
year:
A1 for growing sheep (more than one year): 40% oil seed cake, 10% faba beans, 20% wheat
bran, 10% sorghum, 10% vetch, 6 % barley, 1 % salt, 3% premix.
A2 for breeding ram: 30% oil seed cake, 10% tree lucerne, 20% wheat bran, 20% enset leaves,
10% lupines, 6 % barley, 1 % salt, 3% premix.
A3 for ewe flushing: 30% oil seed cake, 40% wheat bran, 10% enset leaves, 10% faba beans, 6 %
barley, 1 % salt, 3% premix.

3.2 Production capacity and monthly production

The machine has a production capacity of about 2 tons per day (250 kg / h). Assuming 25
working days per month a production capacity of 50 t / month will be used for basic
calculations. It is planned to convert 520 tons of primary materials into about 500 tons of feed
per year.
Table 1: Monthly use of primary materials (in tons)
Formula J F M A M J J A S O N D Total
A1 15 25 25 25 25 25 25 25 25 15 15 15 260
A2 10 15 15 15 15 15 15 15 15 10 10 10 160
A3 5 10 10 10 10 10 10 10 10 5 5 5 100
Total 30 50 50 50 50 50 50 50 50 30 30 30 520

Table 2: Ingredients per month in tons

Ingredients J F M A M J J A S O N D Total
Barley 1.8 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 1.8 1.8 1.8 31.2
Wheat bran 6 10 10 10 10 10 10 10 10 6 6 6 104
Sorghum 1.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 1.5 1.5 1.5 26
Faba bean 2 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 2 2 2 36
Oil seed cake 10.5 17.5 17.5 17.5 17.5 17.5 17.5 17.5 17.5 10.5 10.5 10.5 182
Tree lucerne 1 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1 1 1 16
Ensel leaves 2.5 4 4 4 4 4 4 4 4 2.5 2.5 2.5 42
Lupines 1 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1 1 1 16
Vetch 1.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 1.5 1.5 1.5 26
Premix 0.9 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 0.9 0.9 0.9 15.6
Salt 0.3 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.3 0.3 0.3 5.2
Total 29 48 48 48 48 48 48 48 48 29 29 29 500

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Table 3: Cost of ingredients per year (in ETB)
Products unit Average price Quantity per Total price
per unit (Birr) year (t) (Birr)
Barley t 35,000 31.2 1,092,000
sorghum t 30,000 26 780,000
Wheat bran t 19,000 104 1,976,000
Faba bean t 40,000 36 1,440,000
Enset leaves t 6,000 42 252,000
Tree lucerne t 8,000 16 128,000
lupines t 60,000 16 96,000
Oil seed cake t 50,000 182 9,100,000
Vetch t 25,000 26 650,000
Salt t 13,000 5.2 67,600
Minerals&vit t 15,000 15.6 234,000 3.3
Total 500 15,815,600
Description of proposed procedure

Barley, wheat bran, faba bean and other feed cresources are either brought by farmers to the
processing unit or the cooperative collects it at farmers site and local and regional markets.
Transport to local markets will be done by donkey chart. For long distance a lorry will be hired.

3.4 Feed manufacturing

The products (cereals, legumes) are crushed by a
grinder (hammer mill) and are transported by a
conveyer screw to a mixer where additives like
vitamins and minerals are added. The appropriate
proportions (depending on the formulas) will be
mixed thoroughly and leave the mixer through an
opening where 50 kg bags are attached. The bags
will be closed by a hand operated stitching
machine, labeled, and stored.

3.5 Description of site and equipment

For this type of project, the site must include:
• At least 200 m2 covered with a height of 4 m (metal frame). The flour must be cemented, and
the walls can be from corrugated iron sheets or bricks. The entry door must be wide enough to
allow easy flow and movement of bags carrying employees. Proper locking of the building must
be assured (security). The building must be well ventilated as the production process is very
dusty. Access to water (mainly for cleaning purposes) and to 220 V must be guaranteed.

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• The equipment must include:
• A hammer mill (grinder)
• A conveyor screw
• A feed mixer

4. Economic analysis
4.1 Purchase of raw materials
Depending on each technical formula (appropriate proportions of each type of feed), raw materials will
be bought from farmers or on the market (salt, mineral and vitamin supplements, barley, Faba bean,
wheat bran, etc)

4.2 Sale of feed (including marketing strategy, demand, distribution channels)

The reference prices of sales of the compound feed to be produced is estimated at 34,000 Birr / ton. This
price is lower than the price of industrial concentrate in Ethiopia which currently the ton fluctuates between
34,000 and 36,000 Birr/ton
Distribution
• via sellers of cattle feed (point of sale), retailers
• at the production point
• creation of some own sales outlets
• distribution to other cooperatives

Marketing strategy
• Distribution of free feed (of a limited quantity) at the beginning to make known and appreciate
the new product by the livestock farmers of the area.
• Prepare and distribute the technical sheets on the feed, leaflets and posters
• Advertising in local radio and other media, including social media
• Awareness Days and announcement at public meetings

Consumers / Direct beneficiaries

• Short term: Minimum 750 livestock farmers (including two sheep fattening youth groups) in
the Doyogena district and 8,000 sheep
• Long term: Livestock farmers in the other nearby districts.

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 4.3 Profitability of the Project

4.3.1 Operating costs

This item includes staff costs, inputs and overhead (for one year)
Designation Unit Quantity Unit price Total Total
BIRR BIRR
1 – Labor costs
Producing and stocking compound feeds (# Manpower 36 1200 43,200
workers and months), including social costs / month (3 man x
(CNSS), evtl distributing 12
month)
Total Labor costs 43,200
2 – Purchase of primary materiel (ingredients for feed like barley, etc)
Barley t 31.2 35,000 1,092,000
Sorghum t 26 30,000 780,000
Wheat bran t 104 19,000 1,976,000
Faba bean t 36 40,000 1,440,000
Enset leaves t 42 6,000 252,000
Tree lucerne t 16 8,000 128,000
Lupines t 16 60,000 96,000
Oil seed cake t 182 50,000 9,100,000
Vetch t 26 25,000 650,000
Salt t 5.2 13,000 67,600
Minerals & vitamins t 15.6 15,000 234,000
Total Primary materiel 15,815,600
3- Other costs
Maintenance of Equipment (machine, soap, etc) Flat rate 5,000
50 kg bags bag 10,000 30 300,000
Water liter 1,000 1 1,000
Energy (electricity) for feeding unit kwh 36,000 2.124 76,464
(300 days x 8h/d x 15kw)
Management costs (stationery, etc) Flat rate 1,000
Transport of products (ingredients) and final feed, day 50 400 20,000
rent a lorry
Marketing and communication (flyer, etc) Flat rate 2,000
Total other costs 405,464
TOTAL operating costs 16,264,264

4.3.2 Working Capital Fund (FR)

For this project, working capital is estimated at 25% of operating costs.
FR = 0.25 * total operating costs = aprox 4,000,000 Birr

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4.3.3 Investment (InV)
In addition to working capital, some investments like construction of a store and office,
acquisition of means of transport and equipment, and approach costs might be necessary.

Designation Quantity Unit price Total Total

(BIRR) (Birr)
1 – Civil engineering
Construction of building 200 m2 lumpsum 400,000 400,000
Total Civil Engineering 400,000
2 – Means of transport
Donkey with chart 1 20,000 20,000
Total Means of transport 20,000
3- Equipment
Feed processing unit 1 620,000 620,000
Scale 1 8,000 8,000
Small materiel lumpsum 4,000 4,000
Fire extinguisher 1 1,200 1,200
Palettes 2 1,700 3,400
Total Equipment 636,600
4- Other costs
Transport and installation of feed 1 35,000 35,000
processing machine
Total Approach Costs 35,000
TOTAL INVESTMENTS (InV) 1,091,600

4.3.4 Depreciation
Designation Amount Depriciation rate Depriciation
Civil engineering 400,000 5% 20,000
Equipement 636,600 10 % 63,660
(including feed
processing unit)
Means of transport 20,000 20 % 4,000
Other Costs 35,000 25 % 8,750
TOTAL DEPRICIATION 96,410

4.3.5 Financing/Funding
Designation Amount
Own funds 10,000
Long term loan from Omo MFI 360,000
(2 year, 9% interest rate/year for
4,000,000)
TOTAL FINANCING/FUNDING 370,000

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4.3.6 Cost-effectiveness of the project

Désignation Amount
1 - Costs
Operating costs 16,264,264
Financial costs 370,000
Depriciations 96,410
Total Costs 16,730,674
2- Turnover
500 tons final product x (34,000 BIRR 17,000,000
/ ton)
Total Sale 17,000,000
Net income before tax (RNAI) 269,326

Profitability calculation
1. Economic profitability ratio= (Total sales - income taxes) / (own funds + financial debt)
17,000,000 – 0 / 4,010,000 = 4.2
2. Financial profitability ratio= (Total sales - income taxes - interest paid to financial debts) / (own
funds) = 17,000,000 – 360,000 / 10,000 = 1,664
3. Profitability threshold = (Depreciation of fixed costs) / [(Turnover - variable expenses) / Turnover]
96,410 / (17,000,000 - 16,264,264)/ 17,000,000) = 2,242,093
4. Break-even (in days) = (Profitability Threshold) / (Annual Turnover / 365)
2,242,093 / 46,575 = 46,14

The entrepreneur begins making profit from the 47th day onwards.

Note: No tax as it is an agricultural product (exonerated)

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