Wednesday, May 28, 2014

Small Flock Cost of Production ("COP")

The skeptics at BetterFarming wanted my COP (Cost Of Production) info, as they don't believe that Small Flockers can compete (nor should they be allowed to compete) against the SM Chicken Mafia.

I present this data on a break-even basis, so the debate of a "reasonable profit level" is removed.

Here is the data (Data Revised: 2014/05/30 11:07 Hrs.), updated from the previous version,

Figure1:  Comparison of Small Flocker Cost Of Production ("COP")
for various flock sizes
In Figure 1, the blue vertical bars show the break-even cost of the eviscerated chicken meat produced on a $/kg basis by me, a Small Flock farmer.  Break-even means there is no profit margin included in these costs.

If Ontario's millionaire SM Chicken Mafia must be allowed to earn a "reasonable profit", should small flockers be allowed to earn a reasonable profit?

If yes, what should that reasonable profit be?

Note that as the flock size increases, the cost on a $/kg basis drops dramatically.  At 2,000 birds per year, it is almost equal to the April 2014 retail prices of $4.37/kg.

Speaking with some local abattoirs that process chicken in Northern Ontario, I was informed that their small flock farmer customers generally charge $8.25/kg (ie. $3.75 per lb.) for fresh, eviscerated chicken sold at farm gate.

The red horizontal line shows $4.37/kg which is the typical April 2014 retail price for chicken in Ontario.

The green horizontal line shows the typical price for small flock chicken at the farm gate in Northern Ontario ($8.25/kg).

The purple horizontal line is the average US chicken price in Mid-West, as reported by US Bureau of Labor Statistics converted to $CA at the average exchange rate in April 2014 ($CA 0.9099 per $US 1.00) as reported by Bank of Canada.

Most economists will also compare pricing on a "marginal cost" basis.  This is where the producer is already making "X" units per year, but has the opportunity to sell just one additional unit.  What does that one additional unit cost to make?  I have not yet done that analysis.

In Figure 2, the detailed cost breakdown is provided for my operation at the average flock size of 57 birds per year.
Figure 2:   COP Breakdown for flock size of 57 Birds (Average Small Flock size in 2013, per CFO)

Note that due to the small flock size, and the long distance to the nearest abattoir that does custom poultry processing, the slaughter process adds an additional 30.03% to the cost structure.  This is a 378 km round trip for me, adding significant costs of transport, whether I carry 1 bird or 300 birds.

Hopefully this explains why I need the 2,000 bird limit if I want to supply safe, nutritious, affordable, locally produced chicken for my remote community.

Other small flockers have similar challenges, but may have significantly different cost structures.

In Figure 3 is a summary table of the various fresh, whole, retail chicken prices, and a comparison between the different prices:

Figure 3:  Summary table of retail chicken prices, fresh whole chicken, April 2014
Based on these data, will you support our cause to get the increase from 300 to 2,000 birds per year on what CFO permits Small Flockers to raise?

No comments:

Post a Comment

Off-topic commercial spam that's posted so as to help sell your wares will be deleted.

On-topic comments, where you behave yourself and play nicely, will remain posted; whether they are pro or con. Everybody needs to fully understand all points of view so that we can find a solution that encompasses everybody's concerns. Give it your best shot.

If you decide to post, your posting becomes part of the public record, and SFPFC has full rights to use it (or not) in any reasonable manner or medium that suits our purposes.

Before posting, please proofread, and correct as necessary. If you subsequently discover a need to fix your previous posting, make an additional posting that refers to the original posting, then set the record straight.