Joel Salatin a.k.a. Chicken Man is both an experienced broiler farmer and businessman. Here he shares some of his economic wisdom and the nitty gritty of farm finances. Read and learn lots.
The Gross Margin
Pastured broilers were my ticket into fulltime farming. For that and many more reasons, I’m still in love with pastured broilers. In this article, I’m going to drill down on the nitty gritty economics of the enterprise. These are my numbers so if they look weird, all I can say is: these are my numbers. You’ll gradually figure out your own numbers based on your expenses, where you live, the cost of labor, and feed.
Here is a rough expense budget
Production Labor 1.50
Processing Labor 1.50
Propane, depreciation .40
Bags, freezing .40
Total expense 9.00
Sale price of dressed bird 15.75
Gross income per bird 6.75
What does this all mean? Well, if each dressed bird sells for $15.75 and the cost of raising that bird was $9.00, then the income from each bird is $6.75. But this isn’t all cream (net income) because there are still farm expenses such as insurance and property taxes. We run a big farm and provide birds for markets, restaurants, and retail stores, so we operate with 10,000 broilers (this doesn’t count egg layers). You’ll need to figure out how many birds you’ll need to sell to meet both the cost of housing, feeding, and processing them as well as general facilities costs.
Now let’s examine this budget and see why these numbers are what they are for us. Chick prices vary based on source and volume. The more you buy, the cheaper they are. This is one place where some scale can be a big advantage. If you’re only getting 50 chicks, you won’t get them for $1 each. We use Cornish Cross chickens. As soon as you move to something more exotic, you’ll pay more.
Every decision and action has a bearing on the bottom line. If you’re buying more expensive chicks, realize that that choice will affect your bottom line. Do good reasons exist for buying expensive chicks? Sure. But it will always affect your business viability, so weigh those decisions carefully.
We use locally produced and GMO-free (but not organic certified) feed. If you’re buying regular conventional feed from a large feed store, it’ll be a lot cheaper. If you’re buying certified organic, it’ll be a lot more expensive. Did I say your decisions affect your bottom line? I’ll go out on a limb. I despise GMOs. But if I couldn’t get GMO-free feed and had to pay 50 cents a pound more for organic, I’d definitely chose to go with conventional feed that uses industrial farm GMO crops. Because our chickens are raised on grass, I’d trust the chlorophyll in the grass to do the detox work. In marketing, the price of each component matters, but you have to be flexible. You can’t ignore pricing. Business is visionary, yes, but it’s also practical.
If you don’t work to avoid it, wasted feed is the most common issue in a pastured broiler enterprise. For my calculations, I’m assuming 14 pounds of feed per bird over 8 weeks for a final 4.5 pound carcass weight. One pound on the ground doesn’t look like much. But we move our birds every other day. If we were leaving a pound of food lying around every time we moved a coop, we’d lose 35 pounds per coop before the birds reached maturity. That would add up fast. So we use feeder systems that limit food waste.
Production Labor Costs
Production labor assumes some benchmarks. Here at Polyface, our benchmarks are moving 75 birds in each 12 X 10 X 2 ft. shelter in 60 seconds. That means one person, without starting an engine and using only the customized dolly, can move 4,500 broilers in one hour. Feeding and watering adds another 90 seconds. The last two weeks, the birds need feed and water in the evening too, adding another 90 seconds.
At 4 minutes per shelter per day, divided by 70 saleable birds per shelter, that’s 3.5 seconds per bird per day. If they’re on pasture for 35 days, that’s a smidgen more than 2 minutes per bird. Add in the 3 weeks in the brooder, and it’s 2.5 minutes, which is 24 birds per person hour. At a labor cost of $1.50 per bird, that’s a labor rate of $36 per hour. I can work with that.
We’ve achieved these efficiencies over time with a lot of trial and error. When I visit other farms or chat with folks, the most common issue I see it that the shelters they are using are too big, too heavy, or too cumbersome. Be creative, but remember that sometimes you can go too wild. If you’re running machinery or lumbering along with 400-lb. shelters your labor costs may be higher because you’ll have to spend more time moving each coop. No one’s numbers are going to be the same. These are our numbers; yours will be different. What’s important is that the numbers are as efficient as possible for your overhead and profit.
Processing Labor Costs
The “$1.50” mentioned above in the rough budget assumes several things: that you are doing the work yourself (rather than farming it out), that you are highly experienced at processing bird carcasses and that you have efficient equipment such as a rotary killing cone set up, rotary scalder, and effective automatic feather picker. Our benchmark is 20 birds per person hour. When Teresa and I started and worked by ourselves, we ran 25 birds per person hour. That’s from kill cone to plucked carcass in the cooler.
One of the biggest problems in this business is people want profitability too soon. You can’t expect to make good money while you’re learning. No vocation offers that opportunity. Until you develop mastery, you cannot afford to be disappointed with the lack of efficiency or the profitability. The only way to make the enterprise fly is to endure the slog. Every successful business has its slog time.
Areas of Expected Variation
Two areas that vary widely are equipment depreciation and cost of propane. The more expensive your capitalization, the higher your depreciation. One of the advantages of the small modular shelters that we start with and still use, is that you can “get in” or raise your starter flocks cheaply and scale up as your disposable cash flow increases. If you spend $7,000 for a shelter and need a $10,000 tractor or truck to move it, suddenly your depreciation goes through the roof. At Polyface, our entry flocks requires only a $300 initial shelter and no equipment except a shop-made dolly.
Ditto with processing equipment. Buying more capacity than you need only means you’re overcapitalized. Buy only what your scale needs; you can always upgrade. Embryos are birthed more easily when they’re small.
Heat and Cold
Chick brooding in the summer in North America should not require large amounts of heat. By staying seasonal, our broiler program keeps us away from those cold winter brooding days. Most of the time when the Cornish chicks are a week old they need no supplemental heat, even at night. They’re much harder than most books describe. We’ve had 3-week birds handle 20 degrees F quite handily as long as they’re in groups small enough not to suffocate but big enough to provide enough body heat (75 degrees F seems ideal).
We use a lot of ice to keep the processed bird carcasses at 40 degrees F. We buy it by the pallet and it’s not terribly expensive. Owning and operating an ice machine, especially if you have hard water, can be a headache.
The same truck that delivers ice to Wal-Mart also comes to the farm. Same truck, same price. We buy 2-4 pallets at a time and put them in our walk-in freezer. Having an inventory on hand also allows us to sell it to customers (at a mark up) if they want ice. From a capitalization standpoint, this leverages our walk-in storage that we need anyway to store the chickens. That eliminates additional infrastructure capitalization. Ongoing costs of ice are simply a a real time expense like buying feed or chicks.
One area that can easily cost you is sloppy processing. Three critical spots exist.
The first is the neck. If you slit the jugular too far up the neck, you’ll lose a couple of neck vertebrae when you pull the head off. That can easily be an ounce of carcass weight and consequently price.
Second, the fat around the gizzard. On our farm, we compost the gizzards because nobody wants them anymore. In the time it takes us to clean them, we can process 10 times as much value in chicken. They just don’t pay. But they have a big hunk of fat attached to them. Make sure that stays with the carcass.
The third critical area is the vent. Cutting into the abdominal cavity as close to the vent as possible preserves all the skin between your cut and the breast. Further, when cutting out the vent, cut as close as possible to protect the two globs of fat on the pubic bones. These three areas can easily add up to a potential 3 ounce loss per bird if done sloppily. If you’re selling chicken for $3.20 per pound, that’s 20 cents per ounce; a 3 ounce loss is 60 cents. If you’re doing 10,000 birds, that’s $6,000. The takeaway? It really is all about the details.
Our average carcass weight is 4.5 pounds at 8 weeks. That’s the benchmark. If we’re not hitting that, something is wrong. To be sure, if we have an insufferably hot spell, the big birds don’t grow as well because they don’t eat as much when it’s hot. But the batches that have perfect growing conditions make up for the ones that don’t. The nuances of getting that weight and all the opportunities to miss this benchmark will be the topic of a future article.
I will mention here that because these birds grow so fast, every day is equivalent to half a year in human development. And this is magnified in infancy. So the brooder is critical. A day of discomfort there will change the trajectory of weight gain for the whole 8 week period.
Other inefficiencies are hauling water and hauling feed. We use portable dip tanks and portable feed bins that move along near the shelters. Nothing is far away and we don’t have to haul stuff out to the chickens every day. All we have to do is walk out and do chores; that simplification and proximity bear dividends on daily maintenance.
We haven’t addressed mortality but my figures assume that we lose 5 of the original 75 birds we put in a shelter. You’ll never save them all and the law of diminishing returns kicks in early for chickens. You can’t afford to babysit something worth only a few dollars. Cut and run; put your attention on the ones that are doing well and you’ll be ahead of the game.
One final point
We use one acre of grassland for 500 birds. This means that for each acre, we’re grossing $7,500 per acre and netting around $3,000. The beautiful part is that the chicken grazing, bug eating, and manure improves grass for the cows. Moveable chicken shelters on grassland creates a symbiotic , not competitive, environment with other animals on our farm. That creates a world of opportunity.
Joel Salatin took over his parents’ 550-acre farm in 1982 and now runs Polyface Farms. He regularly writes and speaks about nitty-gritty how-to for profitable regenerative farming, as well as cultural philosophy on farming and life. You can follow Joel on his blog.