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The 40K Plan

7/27/2013

7 Comments

 
This will be the last in my series of economics centered posts for a while, but I wanted to finish up my thoughts from the last two posts with a sample business plan that gets me to 40k per year. Without futher ado.
Amazingly, when I started working on this, I didn't set out to hit 40k on the mark, but rather to put together a diversity of operations scaled up to a size that I thought could keep me busy full time while obtaining maximum efficiency for a small scale operation. Whether it be luck or fate, I hit very close to 40k on the first try.

This plan is a scaled up, optimized version of all the things I'm doing right now. I keep the vegetable production at about the same scale as now, as intensively cultivating more than 1 to 1.5 acres is more than I can handle. If I can develop a market for the more easy to grow and harvest vegetables, like squash and pumpkins, then I can probably do a bit more acreage with my labor alone. I like those crops because they store well and can be fed to the pigs (and include a reasonable amount of easily digestible calories) if they don't sell. Honey production is capped at my five current hives, as I'm not sure how many hives my area can sustain. Pigs are expanded to a breeding herd of 2 boars and 14 sows. This has been my target number for a while, as it gives me the security of having two boars while keeping my boar to sow ratio at a relatively efficient spot. I can comfortably house these animals in my current barn space over the winter. I put in a two tiered sales for butcher pigs based on partial direct market and partial wholesale based on my theoretical inclusion in a local meat co-op. I'd also be selling a ton of weaner pigs, which probably would be hard for me to market, especially since they all would be ready in the fall. Lastly, the big money maker is the cattle, which I'm estimating based on 30 head bought in the spring and butchered in the fall. I figure I'd need to rent about 20 acres of land to provide enough grass, which I can probably rent from my neighbor who has a 40 acre parcel. If the buy in the spring-sell in the fall scheme doesn't work out, I'd need to look into the costs of keeping a breeding herd. Thanks for the comments on recent posts which have helped me to fine tune some of these assumptions.

So, what is the big takeaway from this? First, marketing. It's easy to run the numbers and figure out what you can produce, but it's so much more difficult to find buyers for everything. Inclusion in the co-op is key as it allows me to get a reasonable wholesale price for beef and pork. I don't think I could ever direct market 112 pigs. There is still a lot of uncertainty in the marketing, though, which is a major hurdle to scaling up. I want to grow into the demand, not try to chase down buyers. Secondly, I'd need an awful lot of cash on hand to get through the year. I'd basically need twice the amount of my yearly profit to buy all the feed, weaner cattle, insurance, rent, and other expenses. I'd be maximizing my production efficiency by working with the seasons instead of against them, but most of my cash would come in a very narrow time frame (summer to late fall).

So, will this ever become a reality? I hope so, but as they say, I won't be quitting my day job any time soon!

7 Comments
George
7/27/2013 10:01:50 am

20 acres for 30 head.... stocking rates vary a lot, I stick with 1500lbs of animal to the acre. Also, you have to assume you have good pastures already seeded and established for those 30 head, I do not see any reseeding costs in that plan, that is unless it is already set up to pasture.... I'm enjoying following your plans lately :)

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Jeff
7/27/2013 10:16:03 am

Not sure if you think my estimate is too high or too low (or just right). Right now it looks to me that I can get away with two steers/acre on the mostly unimproved pasture on my land. I should have included some seeding costs, but I'm also hoping to reduce the feed costs for the pigs on the same pastures by seeding higher protein plants. Experimenting a bit with that this year and the jury's still out. The biggest issue for pastures in my immediate area is drainage.

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George
7/27/2013 10:11:22 am

Also, nothing in there about transportation and butchering costs.. and your plan has no room for losses. All those piglets might not survive, calves die, etc etc.

Trying to shoot more realism into your plan !

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Jeff
7/27/2013 10:23:43 am

Transportation and butchering are free under the coop model as it's an on-farm slaughter, and the butchering costs are passed onto the customers under the direct market model, and the prices I quoted for the wholesale are directly from a presentation I found from the coop business plan.

I did plan for 2 calf deaths (perhaps I should have planned form more?) and estimated 8 piglets surviving per litter (which accounts for some piglets not surviving birth/the first couple weeks). I probably should have included some feed costs for piglets that survived after farrowing but died before reaching butchering age.

Thanks for bringing the realism! As I've said before, it's hard to not be biased to over-optimism.

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Jeff
7/27/2013 10:31:07 am

That first paragraph didn't make much sense. What I meant to say was was that the coop model has a USDA inspected on-farm slaughter vehicle, so I don't need to worry about livestock transportation. The co-op will still charge you for butchering/slaughter fees if you choose to direct-market, but those can be paid directly by the families buying the whole/half pig/steer (that's what I'm currently doing). If I were to sell individual cuts at the farmers market, I would raise the price to capture those costs. Lastly, if I sell to wholesale through the co-op brand, I understand that there is no cost and I would receive about $2.25/lb hanging weight.

bruce king link
7/28/2013 06:48:28 am

This is a nice outline of a business; it's a useful exercise for anyone doing a business to make a plan and then check back periodically to see how their results are vs their plans.

The pig feed issue is a bit of a problem; you've either got to go get the food, and the costs will be a bit higher for bags, or you've got to have it delivered, usually with a 2 to 6 ton minimum, which means you've got to have a place to store at least 2 tons of feed until use. A used feed bin (silo) can be had for $500-700; new ones run about $2k. Sometimes the feed companies will give you one, but you're locked into that feed company in return, like with your propane tanks.

I think your feed consumption numbers are low. I'd budget 700lbs on the low end, 800lbs of feed per pig on the high end, from wean to market. I think you're budgeting 500lbs. I'm going to be planting alfalfa this coming year (2014) as a pasture crop that the pigs can eat to supplement their feed. I've seriously considered planting a few acres of pumpkins just for the pigs. Doesn't require much care, pigs like them, and the pigs can just go and hog them down - no harvesting cost. Same is true for acorn squash that the pigs seem to particularly like.

With pasture farrowing and new sows, I'd expect something between 4 and 6 pigs to be weaned per litter. If you do better than that, great, but I'm basing this number on my experience in this area. You can improve your weaned by using farrowing pens, or improve it more with farrowing crates, but as you scale up your enterprise you'll find that your number weaned drops -- you have less time for direct attention, and that means lower survival. You will have pigs that wean 14. you'll also have pigs that wean 0.

It takes about a year to go from weaned pig to first possible litter, so you'll feed that gilt about what you would feed a butcher pig and then about half again that amount. Call it 1200lbs of feed before you get the first litter. Figure that 75% of your sows will farrow; not a terrible loss; the ones that don't are fine butcher pigs.

To sell 112 weaner pigs you won't have to do much different, but you'll get a better price if one of your weanings is in the early spring (feb/mar wean.) You'll work less if all of your pigs are doing the same thing at the same time; eg if all of your sows farrow at the same time. Having random or near-random farrowing means that you'll have pigs of all ages at all times, and you'll have to have separate pens for each size of pig. Even pigs born 3 days apart will cause problems if the sows are housed together. The older pigs will out-compete the younger on their sow and move between and suck up all the milk on both.

When they're weaned it's less of an issue, but to get good growth you'll want to pen the 60lb pigs separate from the 30lb and from the 120lb pigs. It's this sort of issue that causes the 4H and FFA classes to focus on bringing a pig to weight on a given date and uniformly. If all of your pigs are raised in batches, you can pen and feed each batch and call for farm kill or delivery for each batch = less work for you.

I'm going to use 120 pigs production and expand on this a little; if you are finishing 10 pigs a month, you''ll have 12 pens of pigs that are a month or so different in age and development. You can mix different sizes, but the risk on doing so is that the bigger will outcompete the smaller and retard their growth. scuffles between different weight classes can injure the smaller pigs, too.

And finally, biosecurity. If you are housing pigs of the same age in the same place continuously it's a perfect environment for disease retention and spread. With batches, you can clean the pens between. If your pens are sized right, the pigs can live their entire span in their enclosure, and you've got a little bit of a firewall between that batch and your other batches in case of contagion.

Substitute "pen" with "pasture" or "barn", same idea.


"continuous" vs "all-in, all-out"

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Jeff
7/30/2013 01:31:54 am

Great info, Bruce. I've definitely taken a lot from your blog and your comments. I'll give an update on the plan next year as I continue to learn and (hopefully) make less mistakes!

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