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Meat Goat Economic$. GEOFF BENSON, PhD Extension Economist Dept. of Ag. & Resource Economics N.C. State University August, 2009. Outline. Why do you want to have goats? Who will buy your goats or goat meat? How will you produce your goats or goat meat? - PowerPoint PPT Presentation
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Meat Goat Economic$ GEOFF BENSON, PhD Extension Economist Dept. of Ag. & Resource Economics N.C. State University August, 2009
Transcript
Page 1: Meat Goat  Economic$

Meat Goat Economic$

GEOFF BENSON, PhD Extension Economist

Dept. of Ag. & Resource Economics

N.C. State University

August, 2009

Page 2: Meat Goat  Economic$

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

Page 3: Meat Goat  Economic$

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?

Page 4: Meat Goat  Economic$

G. A. BENSON, ARE-NCSU 4

1. Why Have Goats?

OR

FUN OR MONEY?

Page 5: Meat Goat  Economic$

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

Page 6: Meat Goat  Economic$

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

Page 7: Meat Goat  Economic$

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

Page 8: Meat Goat  Economic$

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

Page 9: Meat Goat  Economic$

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!

Page 10: Meat Goat  Economic$

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

Page 11: Meat Goat  Economic$

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

Page 12: Meat Goat  Economic$

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

Page 13: Meat Goat  Economic$

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.

Page 14: Meat Goat  Economic$

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!

Page 15: Meat Goat  Economic$

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”?

Page 16: Meat Goat  Economic$

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.

Page 17: Meat Goat  Economic$

GEOFF BENSON, ARE, NCSU 17

Who Are Your Customers?

Page 18: Meat Goat  Economic$

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

Page 19: Meat Goat  Economic$

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

Page 20: Meat Goat  Economic$

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

Page 21: Meat Goat  Economic$

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

Page 22: Meat Goat  Economic$

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?

Page 23: Meat Goat  Economic$

GEOFF BENSON, ARE, NCSU 23

How many potential customers are there in my market area?

Page 24: Meat Goat  Economic$

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

Page 25: Meat Goat  Economic$

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

Page 26: Meat Goat  Economic$

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

Page 27: Meat Goat  Economic$

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

Page 28: Meat Goat  Economic$

GEOFF BENSON, ARE, NCSU 28

Fitting the pieces together

Customers & Markets

Resources

Marketing, Distribution

$ $ $Production

Page 29: Meat Goat  Economic$

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

Page 30: Meat Goat  Economic$

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

Page 31: Meat Goat  Economic$

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

Page 32: Meat Goat  Economic$

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

Page 33: Meat Goat  Economic$

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

Page 34: Meat Goat  Economic$

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

Page 35: Meat Goat  Economic$

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

Page 36: Meat Goat  Economic$

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

Page 37: Meat Goat  Economic$

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

Page 38: Meat Goat  Economic$

G. A. BENSON, ARE-NCSU 38

What Are Your Figures?

Page 39: Meat Goat  Economic$

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

Page 40: Meat Goat  Economic$

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

Page 41: Meat Goat  Economic$

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

Page 42: Meat Goat  Economic$

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

Page 43: Meat Goat  Economic$

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

Page 44: Meat Goat  Economic$

G. A. BENSON, ARE-NCSU 44

Remember the Economic$

$

$$

$

$ $

Photo courtesy of the Department of Animal Science, Oklahoma State University, Stillwater, Oklahoma.

Page 45: Meat Goat  Economic$

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


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