- ✓Build the accounts of a finished flock, fixed costs included
- ✓Read the cost per kilo and compare it with the selling price
- ✓Compare flocks with one another and decide
The flock accounts
Take the one-page balance sheet from the end of the flock (level 2) and fill in the following lines with your real figures:
| Line | Where the figure comes from |
|---|---|
| Chicks | NEXTEKCI invoice (price of the day × number) |
| Feed | Bags taken out of the store × price per bag, by phase |
| Health | Vaccines, vitamins, disinfectants, veterinarian visits |
| Litter, energy, water | Litter, gas or charcoal, electricity, water (bill or estimate) |
| Labour | Wages and bonuses for the duration of the flock, including your own time if you work on it |
| Transport | Partner carriers when the chicks arrive; transport of the chickens to the sale |
| Fixed costs of the flock | Share of the rent or of the depreciation of the house and equipment (see below) |
| Chicken revenue | Sales sheet: kilos or head × actual price paid |
| Other revenue | Litter sold, empty bags, tail-end of the flock |
Gross margin = revenue − (chicks + feed + health + litter/energy/water + transport + labour). Net margin = gross margin − fixed costs of the flock. The gross margin tells you whether the management is good; the net margin tells you whether the business is viable.
Fixed costs: do not lie to yourself
A poultry house and its equipment wear out. Their cost is spread over their lifespan: a house estimated at 10 years → one tenth per year; feeders and drinkers at 3 years → one third per year. The annual share is divided by the number of flocks in the year (for example 5 flocks of white broilers). Many “profitable” farms do not actually cover the renewal of their house: it is the net margin that tells you.
The cost per kilo
Cost per kilo live weight = total costs ÷ kilos sold. This is your cost price. Compared with the average selling price per kilo (revenue ÷ kilos sold), it gives the margin per kilo, and it is the figure that lets you answer a buyer in one second: “below this price, I lose money”. If you sell per head, do the same calculation per chicken.
Break down the cost per kilo: the share of feed (often 60 to 70%), of chicks (10 to 20%), of the rest. The heaviest line is the one where a one per cent improvement brings in the most.
Compare and decide
A single flock tells you nothing; three flocks tell you everything. Put them side by side: mortality, FCR, average weight, cost per kilo, selling price, net margin. You will see straight away where the difference is made (often: the FCR and the selling price). Then decide: a single improvement action per flock (feeders, date of sale, buyer, density), measured in the next flock. The calculator from level 1, lesson 5 is also useful after the sale: enter the real figures.
And keep one cash rule: before each flock, the money for all the feed is available, and you never finance a flock with a loan shorter than the cycle.
For the entrepreneur
- ›Do the accounts of every flock in the week after the sale, while the figures are fresh, and compare with the previous one.
- ›Count your fixed costs and your own work: a margin that ignores them is an illusion.
- ›One improvement per flock, measured; that is how the farm progresses without scattering its efforts.
For the technician
- ›Provide accurate figures: bags taken out by phase, weights sold and weighed, deaths, treatments and their cost.
- ›Take part in the flock accounts: knowing where the margin comes from makes the instructions obvious.
- ›Propose the improvement for the next flock from what the record sheet shows.
The 3 questions to ask your technician this week
- How many bags per phase were consumed in the last flock, and how many kilos were sold?
- Which item weighs the most in the cost per kilo, and what can lighten it in the next flock?
- What is the single improvement we are keeping for the next flock?
Key points
- •Gross margin = revenue − variable costs; net margin = gross margin − the flock’s share of fixed costs.
- •Fixed costs (house, equipment) are spread over their lifespan and then over the flocks of the year.
- •Cost per kilo = costs ÷ kilos sold; compared with the selling price, it is the negotiating threshold.
- •Feed weighs 60 to 70% of the cost: that is where one per cent brings in the most.
- •Three flocks side by side; one improvement per flock; cash for all the feed before starting.