Khanya Eggs Business Plan — Feed Strategy
Feed as the dominant cost line, the procurement approach as volumes grow, and the point at which milling on site becomes worth considering.
Feed Strategy
Jump to section
- Overview & contents
- i. Important Notice
- 1. Executive Summary
- 2. The South African Egg Market
- 3. Avian Influenza: The Risk That Defines This Business
- 4. SWOT and Competitive Position
- 5. The Five-Stage Roadmap
- 6. The Funding Ladder
- 7. Flock Performance
- 8. Feed Strategy
- 9. Point-of-Lay Pullet Sourcing
- 10. Biosecurity
- 11. Route to Market and Pricing
- 12. Operations and People
- 13. Regulation and Compliance
- 14. Unit Economics
- 15. Capital Expenditure
- 16. Financial Projections
- 17. Break-Even
- 18. Sensitivity and the Grant Question
- 19. Risk Management
- 20. Implementation Roadmap
- 21. Returns
- 22. Key Performance Indicators
- 23. Key Assumptions
- 24. Conclusion
- A. Appendix A: Consolidated Financial Summary
- B. Appendix B: Stage Capital Schedules
- C. Appendix C: Debt Schedules
- D. Appendix D: Risk Register
- E. Appendix E: Funding Application Checklist
- F. Appendix F: Glossary
- 8.1 Why feed dominates
- 8.2 How feed is bought at each stage
8.1 Why feed dominates
Feed is R0.97 of the R2.17 it costs to produce an egg, 44.7 per cent of the total cost and 56.2 per cent of direct cost. A ten per cent movement in the feed price is worth R597 000 of Year 5 EBITDA, which is more than the entire Stage 2 capital programme.
|
R’000 |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
|---|---|---|---|---|---|
|
Feed |
88 |
356 |
1 083 |
2 755 |
5 973 |
|
Point-of-lay pullets |
68 |
238 |
670 |
1 542 |
2 901 |
|
Vaccination and health |
6 |
26 |
83 |
222 |
504 |
|
Packaging |
9 |
40 |
133 |
361 |
833 |
|
Power, water and litter |
5 |
22 |
70 |
187 |
424 |
|
Total direct cost |
176 |
683 |
2 038 |
5 067 |
10 635 |
|
Feed as a share of direct cost |
50.0% |
52.1% |
53.1% |
54.4% |
56.2% |
|
Feed as a share of revenue |
34.4% |
33.7% |
33.5% |
33.1% |
32.4% |
|
Feed cost per egg, R |
1.01 |
0.99 |
0.98 |
0.97 |
0.97 |
8.2 How feed is bought at each stage
|
Stage |
Purchasing basis |
Effective position |
Why |
|---|---|---|---|
|
Stage 1 |
Bagged retail from a local agent |
Highest cost per ton |
500 birds consume roughly 20 tons a year; no supplier will quote bulk terms |
|
Stage 2 |
Bagged, with a standing monthly order |
Modest discount |
2 000 birds consume roughly 80 tons; volume begins to matter |
|
Stage 3 |
Bulk delivery into the feed store and bin |
Meaningful discount |
6 000 birds consume roughly 240 tons; ex-mill collection becomes viable |
|
Stage 4 |
Bulk delivery, contracted quarterly |
Better terms and price certainty |
15 000 birds consume roughly 600 tons; forward contracting becomes possible |
|
Stage 5 |
On-farm milling from bought ingredients |
Lowest cost per ton |
30 000 birds consume roughly 1 200 tons; the R620 000 mill is justified at that volume |
The on-farm feed mill installed at Stage 5 costs R620 000 and mills roughly 1 200 tons a year. On the difference between compound feed at retail and milled feed from bought maize, soya and premix, a mill of that size is normally justified somewhere between 800 and 1 200 tons a year, which is precisely why it appears at Stage 5 and not earlier. Building it at Stage 3 would consume a third of that stage’s capital to serve a quarter of the volume needed to justify it.