Date post: | 03-Jan-2016 |
Category: |
Documents |
Upload: | ann-medina |
View: | 53 times |
Download: | 0 times |
Meat Goat Economic$
GEOFF BENSON, PhD Extension Economist
Dept. of Ag. & Resource Economics
N.C. State University
August, 2009
G. A. BENSON, ARE-NCSU 2
Outline
Why do you want to have goats?Who will buy your goats or goat
meat?How will you produce your goats or
goat meat?Are goats a good fit for your farm
and family?Will it be profitable? -- Running the
numbers
G. A. BENSON, ARE-NCSU 3
WHAT IS SUCCESS?
“WHEN THE MOST IMPORTANT FAMILY AND BUSINESS GOALS ARE BEING MET”
How will meat goats contribute to
your definition of success?
G. A. BENSON, ARE-NCSU 4
1. Why Have Goats?
OR
FUN OR MONEY?
G. A. BENSON, ARE-NCSU 5
Why Have Goats?
Are Goats a Good Fit With:
Your Personal Goals
Your Business Goals
Goals of other family members
Why Have Goats?
How much money do you want to make from selling live goats or goat meat?
How much time and money are you willing to invest?
Write it down!Your answer helps determine the
size and type of enterprise
GEOFF BENSON, ARE, NCSU 6
G. A. BENSON, ARE-NCSU 7
Income Potential
There is little published information from actual meat goat operations To base planning decisions on To use as benchmarks for evaluating
farm performance
Several Universities have developed goat enterprise budgets
G. A. BENSON, ARE-NCSU 8
Meat Goat Enterprise Budgets, $ per Doe per year
Does Rev. Cost Neta
S. Carolina 180%
Head
50
$
91
$
116
$
-25
Ohio:1.5 X 130% kid 25 123 132 -9
Ohio:1.5 X 170% kid 25 165 135 30
Ohio:1.5 X 210% kid 25 207 138 69
Kentucky-Low Int. -- 77 75 2
Kentucky-Med Int. -- 95 98 -3
Kentucky-High Int. -- 111 124 -13
aNet = Returns to Land, Management, Risk, & Farm Overhead
G. A. BENSON, ARE-NCSU 9
Why the differences?
Based on different production systems
Differences in animal performanceDifferences in the cost categories
includedThere is no standard budget
methodology – user beware!
Farm Financial Performance Varies from Farm to FarmNet Returns over Total Expense,
Minnesota FINBIN data Cow-Calf, per cow, 2008:
Top 20% = +$46, Bottom 20% = -$688 Stockers, per head, 2007:
Top 20% = +$65, Bottom 20% = -$223Dairy Net Farm Income per cow,
Cornell University, 2007 Top 10% = $1,985, Bottom 10% = $67
GEOFF BENSON, ARE, NCSU 10
G. A. BENSON, ARE-NCSU 11
Size & Income
Larger farm operations may be truly profitable
Smaller operations can Depend on non-farm income – either from
choice of lifestyle or financial necessity Get bigger
More of the sameDevelop “value added” activities
All sizes -- Manage for profitability if net income is the primary motivation, especially cost control
G. A. BENSON, ARE-NCSU 12
Economies of Size
If you double the size of your goat herd It doesn’t take twice as much time to feed or
move goats from one field to the next, time and expense to take your goats to market, fencing, equipment, facilities, etc.
You spread your fixed costs & overhead You might get volume discounts on purchases But there can be diseconomies too, especially
in marketing your product(s)Prediction – Meat goats will become
more like other commercial farm enterprises
G. A. BENSON, ARE-NCSU 13
Value-added?
Sell meat or meat products instead of the live goat Wholesale Restaurants Direct to consumer
Farmers MarketsOn-farm salesEvent CateringCSAs, etc.
G. A. BENSON, ARE-NCSU 14
Value-added
There are also Added Costs! Processing Wrapping, packaging, labeling Storage Sales and distribution costs Record keeping, office, etc. Cost of complying with regulations More of your time or cost of extra hired
help An opportunity, not a magic bullet! Run the numbers!
G. A. BENSON, ARE-NCSU 15
Other Financial Benefits
Tax advantages for farmers Preferential sales tax rates “Agricultural Use” property tax rates Farm income tax rules
All farming tax advantages have qualification requirements Do you qualify as a farm/farmer
(acreage, gross income)? Are you farming for profit? Do you “materially participate”?
GEOFF BENSON, ARE, NCSU 16
2. Lots of Market Opportunities
People: NC = 9.2 million, VA = 7.8 mil. Personal Income: NC = $318 bil., VA = $333 bil. Consumer trends:
Buy less on price, more on convenience Care how food is produced – no GMOs, no added
hormones, no antibiotics, organic, “natural,” Value special characteristics –locally produced,
sold direct, “fresh”, type or variety, “heritage”/nostalgia, etc.
Demographic trends: Changing racial & ethnic mix, population growth, aging, more two-wage earner families, single head of households, etc.
GEOFF BENSON, ARE, NCSU 17
Who Are Your Customers?
GEOFF BENSON, ARE, NCSU 18
Know Your Customers
When planning a new enterprise: Helps you identify opportunities and
challenges more clearly Helps you develop your product & a
marketing strategy to sell your product to the consumer
Helps you develop a farm production plan For an existing business:
Helps you see new opportunities, see if your operation is meeting, exceeding or falling short of your customers’ expectations, helps you fine tune your marketing efforts
Know Your Customers
Live Sales Where will you sell your animals? What kind of animals does this market
want? What premiums are available for certain characteristics – frame size, weight, fleshiness, breed, sex, kosher or halal, number of head, etc.
When does the market want them – is there a seasonal pattern to prices? Are their ethnic holiday opportunities?
G. A. BENSON, ARE-NCSU 19
Selling Meat – Who are Your Customers
Four Characteristics: They want or need your
type of product They have the ability to
buy what you are selling They have decision
making power over purchases
They have ready access to your product or service
GEOFF BENSON, ARE, NCSU 21
Selling meat – Some Key Questions
1. What type of person will buy my product?
Race or ethnicityAttitudes towards food, health,
production methods and animal welfare
IncomeAgeMarital StatusEducation
GEOFF BENSON, ARE, NCSU 22
Selling meat – Some Key Questions2. What are their buying habits?
Who makes the purchasing decisions?
Where do they make their purchases? How often do they buy? How much do they buy? What form of product do they prefer—
live, meat package size, type?3. How much can or will they pay?
GEOFF BENSON, ARE, NCSU 23
How many potential customers are there in my market area?
GEOFF BENSON, ARE, NCSU 24
More Marketing Questions
5. Who is my competition? Operations selling the same product Sellers with a similar product in a
different market channel Sellers of a competing product that is
a substitute6. How will I compete?
Price Product Service
Quantity X Price = Your revenue
GEOFF BENSON, ARE, NCSU 25
Competitor Analysis
“If you don’t have a competitive advantage, don’t compete”
Jack Welch Former CEO of
General Electric
GEOFF BENSON, ARE, NCSU 26
3. How will you produce goats, meat?
Revenue Type and number of animals Sale weight and form Time(s) of year
Operating expenses Feed – forages and supplements Health care Labor Processing &/or Marketing Other – utilities, repairs, services
GEOFF BENSON, ARE, NCSU 27
How will you produce goats, meat?
What will you invest? Animals – does, bucks, kids Buildings and facilities – feeding, shelter &
handling, storage Fencing, water, lanes
Cash flow – is it feasible? Operating income and expenses New investments and asset sales Borrowing and debt repayment Non-farm income and family living needs New operations -- Make quarterly estimates
through the start-up phase
GEOFF BENSON, ARE, NCSU 28
Fitting the pieces together
Customers & Markets
Resources
Marketing, Distribution
$ $ $Production
GEOFF BENSON, ARE, NCSU 29
Planning for Success
“Suck it and see”This can work if the
business venture is small in scope and the cost of failure is not significant…if not, then more effort is required
“Experience is the name everyone gives to their mistakes” -- Oscar Wilde
G. A. BENSON, ARE-NCSU 30
Planning for Success
=
“If you can’t make a profit with a pencil, you can’t make a profit with a plow”
Anonymous
G. A. BENSON, ARE-NCSU 31
Revenue Sources & Amounts
Kids sold live and/or as meatKids sold for breedingCull does & bucksDoes & bucks sold as breeding
stockValue of inventory changes, +/-
Calculate revenue per doe based on number of does exposed to the buck
G. A. BENSON, ARE-NCSU 32
Goat Enterprise ExpensesOperating or Variable Costs (Vary
with scale of production) Feed Costs -- Pasture & hay,
Supplements -- (Number of head X days fed X lb./day X cost/lb.)
Health care -- (No of head X no. of treatments X cost per treatment)
Hired labor -- (hours per day X 365) Processing &/or Marketing -- (time,
travel, advertizing, etc.) Other – utilities, repairs, office,
professional services
G. A. BENSON, ARE-NCSU 33
More Expenses
Fixed or ownership costs – annual charges to recoup your investments in your goat enterprise, including buildings, equipment, facilities, fencing, pasture improvements, and breeding livestock Depreciation, Interest Property taxes Insurance
G. A. BENSON, ARE-NCSU 34
Fixed or Ownership Costs
Average annual depreciation charge =
[New Cost - Salvage Value]
Years of life
Average annual interest charge =
[New Cost + Salvage] X Interest rate
2
G. A. BENSON, ARE-NCSU 35
More Expenses
Overhead Expenses Specific to goats, e.g., goat association
memberships and subscriptions Farm overhead -- general to farming, e.g.,
accounting and tax preparation, legal, land cost (ownership cost or rent), etc.
Value of your and your family members contributions (opportunity cost) Chore labor time Management time Money you invested in the goat enterprise
G. A. BENSON, ARE-NCSU 36
Expenses & Decision Making
Fixed or ownership costs to be recouped Will these be new investments? If you have existing equipment & facilities, do
they have alternative uses or value? Land cost – who pays?
Lifestyle farm – your cost Land as an investment – your cost Farming for profit – farm enterprises must justify
the land investment or land rent Profit v. Cash Flow
Budgets do not consider cash flow issues, such as how to finance new investments, make debt principal payments and family living withdrawals
G. A. BENSON, ARE-NCSU 37
Consider Risk
Probability or chance of an eventExposure – financial impact if an
event occursSources:
Production Prices and market risk Financial Legal, Business, regulatory, etc. Human, including the 5Ds
G. A. BENSON, ARE-NCSU 38
What Are Your Figures?
G. A. BENSON, ARE-NCSU 39
Are Goats a Good Fit? Lifestyle or
supplementary farm enterprise Fitting and showing,
pleasure Controlling brush and
weeds Using underutilized
pasture species, e.g., with cattle
Farm Income Breeding stock production Commercial meat
production – live or meat sales
Income Goals Gain tax advantages Cover Cash costs Make a true profit
G. A. BENSON, ARE-NCSU 40
Once your are in production, Is it working?
“Controlling” -- Evaluating the results
Set standards or targetsMeasure performance – keep
records!Compare actual performance to
target or benchmarkTake corrective action promptly if
performance is below target
G. A. BENSON, ARE-NCSU 41
Summary
Why have goats – what are your family business and personal goals?
Who are your customers, Where will you sell, what do they want, how much do they want, what will they pay?
Develop a farm production and marketing plan geared to your market
G. A. BENSON, ARE-NCSU 42
Summary
Develop projections based on realistic expectations of farm and financial performance Profitability Cash flow
Are goats a good fit for your operation?
Monitor and evaluate how your farm and business plan is working Production performance Financial performance
G. A. BENSON, ARE-NCSU 43
Summary
“If it’s easy, fun or can be done from the seat of a tractor, there ain’t no money in it”
Anonymous Cowboy
G. A. BENSON, ARE-NCSU 44
Remember the Economic$
$
$$
$
$ $
Photo courtesy of the Department of Animal Science, Oklahoma State University, Stillwater, Oklahoma.
G. A. BENSON, ARE-NCSU 45
Geoff Benson
Phone: 919.515.5184Fax: 919.515.6268E-mail: [email protected] page:
http://www.ag-econ.ncsu.edu/ faculty/benson/benson.html