POULTRY PRODUCTION

Business Type and Nature

Feasibility Factors and Indicators
The demand for animal protein is always increasing along with the increase in th
e size of the population, and the demand for quality chicken meat and egg is not
exceptional to this. On the other hand, farmers in most of the districts visite
d didnâ t practice poultry in both its traditional and modern sense. The culture in
this regard is very weak.
Accordingly, the consulting team believes that poultry production in the Program
districts in general and in agro pastoralist districts in particular is highly
viable for the poor households to engage in. First, business venture into poultr
y production could be started by incurring small costs and on very small plot of
land relative to other animal production undertakings. Moreover, the return on
costs is fast as the chickens attain the required weight within 2-3 months.
There are various improved chicken breeds with very good reputation in their egg
and meat production potential provided they are under ideal management and good
plan of nutrition. Nonetheless such chicken breeds require high level of manage
ment in every respect (concentrate, health, water supply etcâ ¦).
Second, in both the mixed farming and pastoral production areas, the consumption
of chicken meat and egg is widely known, which implies that the venture is like
ly to become high-income earner. The market is wide; they could be sold in Jijig
a, Harer, Diredawa, Alemaya and other towns located at proximal distance to prod
uction areas. Even there is high potential to export it to Somali Land, Djibouti
, Yemen and other Middle East countries. Addis Ababa can also be a good market p
rovided that there is market linkage assistance from the Program.
Third, feed is easily available among the farmers themselves and also in the mar
ket in district towns.
Fourth, technical assistances in terms of production, feeding, watering, storage
and marketing can be acquired from DAâ s in respective kebeles and districts.
The major machineries and equipments required for the established of the poultry
production venture includes feeders, drinkers, perches, community laying nest,
egg trays and plastic stock. These equipments and machineries are all available
in the market in Addis Ababa and other major regional cities like Harer and Dire
dawa. There are also situations where the groups may receive training and techni
cal assistances from TVET Schools, District Agriculture and Rural Development an
d SME offices in respective districts.
Investment Requirement
Costs of machinery and equipment: The total investment required for machineries
and equipments to establish poultry production establishments with a capacity of
handling 1,000 chickens and producing 100,500 eggs a year is estimated to be Bi
rr 46,100. The type and quantity of machineries and equipments required with the
ir associated costs is provided under the table below.

S/N Type of machinery/equipment Unit of measure Quantity Unit cos

t in Birr Total cost in Birr
1 Feeders No 40 40 1,600
2 Drinkers >> 40 40 1,600
3 Perches (150cm@75cm) >> 10 50 500
4 Community laying nest >> 40 45 1,800
5 Egg trays (50 eggs capacity) >> 20 30 600
6 Parent stock >> 1,000 40 40,000
Total costs 46,100
Costs of business premise construction: Assuming that the establishment will use
its own business premise (poultry house) to be constructed as an integral part
of the project, the total cost required for material (bricks, corrugated iron sh
eetâ ¦etc) and skilled labour is estimated to be Birr 30,000. The community (the I
GG) is expected to handle the unskilled labour requirement of the construction.
Total Investment Requirement: The total investment required to establish a poult
ry production venture is estimated to be Birr 105,100 including Birr 76,100 for
capital investment and Birr 29,000 for working capital purposes. The detail is g
iven in the table below.

Investment Item Required investment in Birr

Capital Investment
Business premises construction( poultry house) 30,000
Machinery and equipment 46,100
Sub Total 76,100
Working Capital
Raw materials purchase 14,000
Operating expenses/overhead (250 Birr/day for 60days) 15,000
Sub Total 29,000
Total Initial Investment Required 105,100
Annual Operating Expenses
Assuming the establishment handles 1,000 chickens and produces 100,500 eggs a ye
ar and 1,250 quintal of poultry litter per year, the total annual operating expe
nses to smoothly run the centre is estimated to be Birr 154,431 .The detail is g
iven in the table below.
S/N Types of Expense Amount in Birr
1 Raw material purchase feed(275Qt/year@150) 41,250
2 Salary expense (Br 600 @12 months @ 10 people) 72,000
3 Drug/vaccine expense (500Br@12month) 6,000
4 Telephone expense(Br100@12 months) 1,200
5 Water expense (200Br@12month 2400
5 Depreciation (20% of the capital equipment every year) 15,220
6 Interest expense 11,561
7 Other expenses (Br 400@12 months) 4,800
Total expense 154,431
Potential Income and Profitability
Potential Income: Assuming that the business venture will operate for 360 days
in a year and sell whatever it produce, the annual potential income is estimate
to be Birr 351,125. The detail is given in the table below.
S/N Type of product Unit of measure Quantity Unit price in Birr
Total Income in Birr
1 Chicken No 1000 38 38,000
2 Egg >> 100,500 1.25 125,625
3 Poultry litter Qt 1,250 150 187,500
Total income 351,125
Profitability: Taking the annual operating expenses and annual potential income
estimated above the business venture is expected to generate Birr 164,206 net pr
ofit after tax, annually. Refer the table below for the calculations of profitab
ility.
Item Amount in Birr
Gross Sales 351,125
Less: Return and allowance (1% of gross sales) 3511
Net Sales 347,614
Less: Operating expenses 154,431
Operating Profit 193,183
Less: estimated income tax (15% of operating profit) 28,977
Net Profit after Tax 164,206
Risk and Risk Management
The success of production depends on many factors including the presence of vete
rinary services and poultry drugs. Moreover, as meat and egg consumption is entw
ined with the major Christian and Muslim holidays, market seasonality and the re
spective decrease in the demand for poultry production will affect the income of
poor households. Accordingly, the Program needs to plan to intervene through t
he value chain and train beneficiaries with respect to planning for risk managem
ent.
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