Chicken business

[gump]

I am wondering if anyone here has started or has known someone who started a chicken business, as in signing a contract to supply one of the majors with chickens.

My friend talked to me about it over the weekend and he has spent time around chicken farms. He would like to get in and is convinced it can be a lucrative deal. I don't know much about the business but I asked about:

1) Do prices fluctuate as they do in the open market or do you lock in a price prior to the harvest?
2) Are they fair prices given the clout a major corp can have over a small supplier?

He does have the land covered (which tends be the biggest upfront expense) and is somewhat interested in buying more land - maybe later - to diversify the supply/lower the risk & increase production. He did show me copies of a W2 for a supplier his cousins bought out - grossed over $300k and net was $55k + about $75k in depreciation. For those not familiar with depreciation is a non-cash expense that can be used to reduce the taxable income & it supposedly accounts for wear/tear on equipment. So the cash net was really closer to $130k in his pocket. Sold his biz for nearly a mil. My friend's acreage could cover the same number of chicken houses as the guy's business used to own. From a numbers perspective it looks good but I wonder if this is a case of results may vary.

My friend is pretty business savvy. We went to b-school together and he thinks he can open even more doors with the business - like keeping the chicken manure and selling it to farmers. He told me it is a very valuable fertilizer. Again I am clueless when it comes to the ag world.

Any ideas or feedback would be greatly appreciated. Thanks.

Gump

[antonio]

gump, i have never personally been involved in the chicken business, but my wife's relatives raise broilers in north arkansas. it has been a few years sense i talked to them about their operation but they told me that a chicken house cost about $90.000. i belive they have a contract with con-agra. they provide the housing and pay for the utilities and con-agra provides the chicks and the feed. when the chickens are ready for market(about 6 weeks), the company comes and picks the chickens up. you are payed by weight. the more they weigh, the more you make. as soon as you get your houses cleaned and disenfected, you call them and they bring you more. the name of the game is to be as eficient as possible. keep them healthy and eating. at that time, i believe the company offered financing on the houses, set up on a ten year plan. they told me that you need at least 4 houses.(2 to make payments and 2 to live on) it would be a good idea to talk to some local growers. i hope this will help you some. antonio

[gump]

Thanks antonio. *What you described sounds exactly like the deal he is tinkering with except it is a different company.

I believe his goal is to set up 8 houses and maybe more later.

[judah_maccabee]

Hey Gump,

Do you know which co. your friend is going with? Is it Pilgrims Pride? They bought out Conagra. Thanks

[jim]

A much cheaper alternative might be to go with "Free Range" chickens the way Joel Salatin does. Just move a mesh fence around open ground behind cows (two cash crops) and feed them some grain to round out their diet. You'd need at least 50 acres to raise around 500 chickens that way.

jim

[annabella1]

When I worked for Tyson's in North Arkansas the average grower was grossing over 200,000 per house per year. The houses were built to Tyson's specifications and all the chickens and feed came from Tyson's. It took about 10 years to pay for the houses. Two to pay for the expense and two to live on was what they said then. But Tyson's were very picky about the land they allow the houses to be built on. They also required a certain number of houses per grower. Also if something is wrong with a crop of birds you can take a big hit.