ERIC MUGUME'S EGG PRODUCTION ENTERPRISE

ERIC MUGUME’S EGG PRODUCTION ENTERPRISE: Business Plan Corporate Document

1.0 INTRODUCTION

1.1 Project Brief

This Business Plan details the establishment and long-run continuous operation of a medium-sized poultry egg production facility with a starting layer stock of 2,000 Hy-line Brown or Shaver breed layers. One of the most attractive and potent economic reasons for engaging in poultry egg production business in Uganda is the fact that it is one of the most proven routes to homestead-based economic empowerment as well providing a stable and assured source for improved standards of living and food security. Hence, this is the primary motivator that has inspired the project’s principal promoter – Mr. Eric Mugume to give first-line priority consideration in setting up this poultry egg production enterprise as a home-based enterprise that will be located at ------------------- in ------------------ District.

Besides, there are other reasons why raising chickens in Africa makes good sense. For one, as the population increases, available land decreases, yet farmers don't need a lot of land to raise chickens. Grazing cattle in a changing climate is also unpredictable, but chickens can cope with drought and flood far better than cows. Chickens also turn grains into high value protein, fast. But perhaps most importantly, unlike growing cash crops or milking dairy cows, poultry doesn't mean a lot of extra work for already overburdened home-based labour.

Looking at commercial egg production in Uganda, Shaver and Hy-line birds continue to be the most popular, with both day-old chicks and fertile eggs imported and hatched domestically. The majority of Ugandan producers prefer to keep their birds in production for up to one and a half years. To them, this is usually more profitable and cost-effective than culling after one year. On most layer units in Uganda, the mean annual production per bird stands at 230-240 eggs, and the farm gate price stands at 100-160 shillings per egg ($0.05-0.08). According to size, this usually leaves the farmer with a profit margin of about 10-12% per egg.

The purpose of this Business Plan is to solicit for a 3-year loan facility that will be applied to purchase the initial chicken layer stock, put up the requisite chicken housing and other relevant infrastructure at the proposed project site, acquire the necessary poultry farm production equipment and machinery, and set aside a sizeable intitial working capital budget for purchase and inventory stock-up of feeds, vaccines and drugs, plus payment for labour and other vital farm-use utilities and inputs.

However, the over-arching strategic purpose of the proposed poultry egg production enterprise is for it to emerge as one of the key exponents in providing domestic consumers with a a steady and reliable source of lean protein, as well as stimulating the local economy by adding value to agricultural activities.

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Layer farm business is a Live Stock based project. The major portion of the cost in operating a poultry egg production business is on poultry feed.

Day old chicks of Layers are initially reared for a period of 5-6 months. On completion of 5-6 months, the birds then start laying eggs for a period of next 52 weeks (12 months). On an average, one layer lays about 230-240 eggs per laying season of 52 weeks.

After the completion of laying period, the layers are sold in the market as culled birds. The selling price of these birds is determined on per bird basis.

1.2 Opportunity Rationale

Layer farming is a vital source for providing high quality animal protein ( Eggs)which is daily requirement of the human body. Animal Protein is more valuable than that of plant protein.

The Ugandan population of over 30 million people is comprised of 75% Christians and 25% Muslims and non-religious denominations, such as animists. The country's positive economic growth and development, which has been in the range of 5-8% over the past 10 years, has also been reflected in the continuing positive growth trends in production and consumption of poultry products in the country. From 2000-2006, egg consumption per capita increased considerably (28%) and poultry meat consumption rose by over 60% (Table 1).

Table 1: Per capita egg and poultry meat consumption in Uganda from 2000 to 2006.

Year Eggs (number) Meat (grams)2000 25 1,4002002 28 1,8002004 29 2,2002006 32 2,300

Fast food outlets

Poultry meat and eggs are, of course, not the only livestock products consumed in Uganda. Rising levels in the consumption of poultry products, however, can be partly attributed to the rapidly rising number of fast food outlets selling ready-to-eat poultry meat and eggs in a clean attractive environment. This is encouraging more people who had previously been eating poultry products only occasionally, to now consume them on a more regular basis. These fast food outlets serve the needs of the growing number of young middle-class people who often don’t have time to cook for themselves. In addition, the price of poultry dishes served from these fast food outlets is usually pocket-friendly, making them affordable for those even in

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lower income levels. These fast food chicken and other poultry products outlets are also popular with the ever increasing number of tourists visiting Uganda every year.

Modern breeds available

Although the meat and eggs from village birds continue to be well liked by many Ugandan consumers, who prefer the longer grown, hardier meat and eggs with a much deeper yellow yolk, the biggest supply of poultry meat and eggs to households, hotels, restaurants, and other catering units, and the retail and wholesale sectors of the market in Uganda continues to come from the modern bird breeds – which are increasingly being reared by commercial farmers and a variety of other poultry growers on semi-commercial and commercial poultry production sytems throughout the country.

In summary, it can be herewith stated that in proposing to establish this egg poultry production business/facility, the major motivations of Mr. Eric Mugume can be summed as follows:-

(a) Tap the fast-growing market opportunities and increasing popularity for poultry products throughout Uganda.

(b) Generate a strong farm-based income that will lead to fast growth of cash flow and exponentially improve on the enterprise’s rate of return (ROI) and profitability.

© Utilize the existing land and natural resources to the best commercial advantage of the enterprise by using good farm and environmental management practices for sustainable productivity and growth of the farm.

(d) Provide employment opportunities for locals within the area.

(e) Make the farm a model poultry egg production project that will grow to inspire other up-and-coming poutrly farming enterprises within the area by serving as a self-sustaining demonstration unit for agricultural inspiration and on-farm training.

1.3 Total Project Cost

The proposed poultry egg production facility will start off with a bird population of 2,000 birds in an operator/promoter-owned land (valued at approx. Ushs. 20 million) requires a small capital investment of about Ushs. 2.98 million for purchasing farm machinery and equipment. In addition to this, a sum total of UShs. 16.988 million is required as start-up working capital, which will be used for purchasing Hy-line or Shaver layer stock (as day-old-chicks), plus raw material (feed & vaccines) etc., and finacing the project start-up operating costs (that include brooding expenses, labour expenses, utility bills, and transport expenses) for the

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first 4 – 5 months of the project. When all the requisite mixed farm set up inputs are factored into the project, the total capital cost of the project amounts to UShs. 64.588 million.

1.4 Proposed Capacity

2,000 layer birds are a viable starting economic size to operate a robust poultry farm, where the operational and fixed costs are justifiable. These birds (the layers) are kept for eighteen months, which includes a rearing period of 5-6 months and laying period of 12 months.

Table 2: Summary of Total Project Cost

Account Head Total Cost (UShs.)

Land 20,000,000

Farm Buildings & Structures 4,620,000

Farm Machinery & Equipment 2,980,000

1 Pick-up Vehicle 20,000,000

Purchase of 2,000 Layer DOCs (Day Old Chicks) @ 2,250/= 4,500,000

Total Fixed Costs 52,100,000

Raw material inventory 5,218,399

Initial operating costs 7,270,000

Total Working Capital 12,488,399

Total Project Cost (UShs.) 64,588,399

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2.0 EXECUTIVE SUMMARY

ERIC MUGUME’S EGG PRODUCTION ENTERPRISE is a sole-proprietor mixed farming enterprise based at ------------------- in --------------- County of ---------------- District with a special interest on poultry egg production that is designed to meet an unsatisfied and growing marke demand need for quality poultry products in the mostly urban areas of Uganda. The close proximity of the ERIC MUGUME’S EGG PRODUCTION ENTERPRISE to the Kampala City will ensure that the egg-production facility assumes a fast and steady growth character owing to the concentration and proximity of households, hotels, restaurants, other catering units, as well the highly significant retail and wholesale segments of the Ugandan market. ERIC MUGUME’S EGG PRODUCTION ENTERPRISE objectives are to develop a product-based enterprise whose goal is to exceed customer's expectations, increase production efficiency by 10% a year, and lastly, and develop a sustainable farm business, able to survive off their cash flow.

Products

ERIC MUGUME’S EGG PRODUCTION ENTERPRISE’s main output product will be eggs weighing on average 50 – 55 grams per unit that are major consumption item on the domestic poultry products market.

The Market

ERIC MUGUME’S EGG PRODUCTION ENTERPRISE is essentially focusing its market outreach for the poultry eggs on principally four (4) market channels, which include: (i) the local hotels and restaurants within the hospitality industry and catering to a rapidly-growing domestic and tourist market segment; (ii) the institutional egg-consumption market comprising of large governmental as well as private sector institutions including universities, some urban schools and hospitals –

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which have a more uniform demand and can be regular customers; long-term contracts are possible. Delivery and service are important to this channel.; (iii) the retail and wholesale market segment that comprises of local market vendors/retailers and large chain supermarkets (e.g. Uchumi, Nakumatt, Shop Rite, Capital Shoppers, etc.); and finally, (iv) export traders – who have secured steady export market egg-supply contract to countries such as South Sudan, DR Congo, etc.

In accessing and negotiating poultry egg supply deals with these markets, ERIC MUGUME’S EGG PRODUCTION ENTERPRISE will mostly use the method of negotiating and securing spot and forward egg-supply contracts – especially the supermarket that have the deep pockets, consistency of demand, and business organization to offer long-term supply egg-supply contracts, as well the logistics capacity to collect eggs from proximally-situated egg-production-and-supply farm units.

Competitive Edge

ERIC MUGUME’S EGG PRODUCTION ENTERPRISE will employ two competitive edges that will help them maintain strong growth rates, increasing their market penetration. The first edge will be quality ERIC MUGUME’S EGG PRODUCTION ENTERPRISE pride itself on the high quality of poultry egg products. Poultry egg products and pigs that do not meet ERIC MUGUME’S EGG PRODUCTION ENTERPRISE high standards of quality will be rejected as imperfects and go to a not-for-profit food bank. ERIC MUGUME’S EGG PRODUCTION ENTERPRISE's second competitive edge is its flexibility. The entire farm will be set up in such a manner as to allow it scale existing poultry production output to meet demand. This is a highly unusual business phenomenon as most livestock farms are unable to scale up their productivity output at a short moment’s notice.

Management

ERIC MUGUME’S EGG PRODUCTION ENTERPRISE was founded and is headed by Eric Mugume. Eric is a well-educated, outgoing, dynamic and energetic agricultural entrepreneur who draws special inspiration and livestock-rearing instincts from his strong farming family background. Eric’s main advantage is that he has had a previous background exposure to livestock farming projects in Mbarara District though at a much more limited scale than what he projects to do. The additional motivator is the fact that he already has a reasonably-sized poultry farm space (at his present residential location) as well as some personal savings and financial capital (equity) that he has purposefully set aside and earmarked for setting up the poultry farming infrastructure and other related production facilities.

2.1 Objectives

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The objectives for the first three years of operation include:

1. To create a product-based egg-production enterprise whose goal is to exceed customers' expectations.

2. To utilize the existing land and natural resource base to the best commercial advantage of the enterprise by using good farm and environmental management practices for sustainable productivity and growth of the farm.

3. To increase the efficiency of our production by 10% a year. 4. To develop a successful and sustainable enterprise farm, surviving off its own

cash flow.5. Achieve positive cash flow once the layers begin their production cycle.6. To become an active agent in the reduction of food insecurity and

malnutrition in Uganda – especially in children, by providing an adequate and reliable supply of eggs to local markets.

7. To stimulate the local economy by adding value to local agricultural production and providing an expansion strategy to facilitate a transition towards commercial production.

8. To develop the local economy with the introduction of scale-optimized egg production

2.2 Mission

ERIC MUGUME’S EGG PRODUCTION ENTERPRISE’s mission is to provide the highest-quality poultry egg products. The farm exists to attract and maintain customers. When the ERIC MUGUME’S EGG PRODUCTION ENTERPRISE adheres to this maxim, everything else will fall in to place. ERIC MUGUME’S EGG PRODUCTION ENTERPRISE’s services will exceed the expectations of our customers.

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3.0 ENTERPRISE SUMMARY

ERIC MUGUME’S EGG PRODUCTION ENTERPRISE is a scale-optimized poultry egg production enterprise specializing in the production of marketable eggs targeting the fast-growing domestic Ugandan market and tastes for exotic chicken poultry products. ERIC MUGUME’S EGG PRODUCTION ENTERPRISE is located ----- kms off Kampala – Entebbe highway at --------------- village in ------------------------- County of ------------------ District. ERIC MUGUME’S EGG PRODUCTION ENTERPRISE will principally sell its poultry eggs to four domestic market channels that include – the local hospitality industry hotels and restaurants; the urban institutional conumer market; the retail and wholesale market; and the poultry egg export market represented by egg-exporters.

The farm business will be based out of Mr. Eric Mugume’s home at the farm site at --------------------------.

3.1 Enterprise Ownership

ERIC MUGUME’S EGG PRODUCTION ENTERPRISE is a sole proprietorship with Mr. Eric Mugume as its founder and promoter. Eric proposes to finance the poultry egg production enterprise through both his own cumulative personal savings and future re-current financial inputs and loan facilitations to be covered under a farm-support credit finacing facility for a three-year period.

3.2 Start-Up Summary

ERIC MUGUME’S EGG PRODUCTION ENTERPRISE will use the existing land and other basic infrastructure on site as the start-up investment platform of the project as proposed in this Business Plan. These existing structures on site can easily be

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transformed into poultry housing units (coops) – with some modification and improvements – and should as such count as a significant equity capital base towards the total investment cost of the project.

Other project inputs that will be contributed by the principal project promoter – Mr. Eric Mugume will include a transportation pick-up vehicle (valued at about UShs. 20 million) for moving feeds, raw materials, and other essential production inputs to the farm, while at the same time transporting out poultry eggs to the market – during the laying period

The short-term credit facility will specifically be designated to financing the completion of poultry housing infrastructure; purchase and installation of poultry production equipments and machinery; purchase of the initial stock of 2,000 day-old Hy-line Brown or Shaver chicks; acquisition of raw materials for egg-production; while also meeting the initial operating costs of the business – for the first four (4) months of the project in the run up to the full laying period.

4.0 CURRENT INDUSTRY STRUCTURE

4.1 Poultry Production Systems

4.1.1 Background Information

The high growth rate of the Ugandan population and increases in urban migration have increased demand for food. These factors have put pressure on land and other resources for food production and other necessities. This has led to a focus on farming systems and/or enterprises that maximize yield per unit area and input and poultry production has been identified as one of the enterprises that falls within this category. Meat consumption in Uganda is low and is estimated at 5.6kg compared to 50kg recommended by FAO and WHO. According to 1994 figures, there was a meat consumption gap of 800,000 tons. The annual rate of increase is projected to be 7.4% for beef and goat meat, 3.32% for pork and 4.87% for chicken.

Chicken production is the main type of poultry production in Uganda. Turkeys, guinea fowls, ducks, pigeons, geese and ostriches are also kept. Poultry production in the country is conveniently categorized into two; namely; commercial or free-range. There are wide variations within these two systems in terms of numbers, types of birds, bio-security and management. The commercial system covers production with improved hybrid breeds (and recently also with local breeds) under intensive confined management of uniform stocks and age-groups primarily for commercial purposes. Categorization may also be based on management systems i.e. intensive, semi-intensive and extensive or free-ranging system. The intensive system, which is based on specialized breeds, constitutes less than 20% of the total poultry population in Uganda. This system is found mainly in urban areas, where there are markets for eggs and chicken meat. Producers in this production system

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aim at using the recommended standard practices, such as breed of choice depending on production objectives, appropriate housing, feeding and health and disease control programmes.

Table 3: Characteristics of Poultry Production in UgandaCharacteristic Commercial Free-range

(extensive)Intensive Semi-intensiveBreed and flockSize

Specialized breeds (exotic or indigenous): 500 – 5,000

Specialized and dual purpose breeds: 50 – 500 or more

Local indigenous type: <50

Housing Modern housing, generally with concrete walls and regulated internal environment

Varies from modern housesto simple housing madefrom locally availablematerials

Varies from bespoke houses,owner houses, trees, tonothing at all

Feed resource Commercially compounded feeds either by self or by millers

Commercially compounded,home-made mixtures andfree-range

Scavenging and occasionalfeeding with home grains andhousehold refuse

Health programme

Standard and regular poultry health programme

Disease control and healthprogramme at varying levels

No regular health programmeof disease control measuresin place

Markets Varying from organized cold chain system for input-output distribution to informal

Input and output distributionis based on existing tradingcentres

No formal marketing channels

Infrastructure Water, electricity Modest Under-developed

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and communication available

infrastructuredepending on proximity tourban centres

infrastructure

Product storage and processing

Varies from refrigerated facilities for dressed birds and table eggs to none

Occasional dressing of birdsdepending on marketingchains

No refrigeration, sales of livebirds and eggs

4.1.2 Sector 1: Industrial and Integrated Production

Intensive poultry farming was introduced in Uganda in the early 1950s, with the establishment of two government farms at Entebbe and Mbarara. The industry registered rapid development during the 60s, and the country had started exporting poultry products. However, it experienced a sharp decline during the late 70s and early 80s due to civil strife and political turmoil. Although the industry has not yet fully recovered, some progress has been achieved during the last ten years (UBOS, 2002). The map in Section 11 shows the distribution of exotic chickens in the country by 2002 projections with high densities around the capital city Kampala in the central region.

Currently only one farm (Ugachick) has the very high bio-security measures that qualify it to be classified as Sector 1 according to FAO. Ugachick is located near the capital city of Kampala and has major outlets in other main towns such as Jinja and Mbarara, where they also have “outgrower’ farmers.The birds are housed and have no contact with other domestic or wild animals, the farm manufactures their own feed and has a well qualified veterinarian and a number of animal husbandry experts. They process and/or package their products for both export (DOC) and urban markets (DOC, poultry meat products, eggs and feeds). They are however dependent on the open market for inputs, including medicines and vaccines.

4.1.3 Sectors 2 and 3: Other Commercial Production Systems

This system is characterized by a complete indoor housing system with commercial feeds from either feed suppliers or self-mixed.

The system can be classified into the following categories based on scale of production:

Small-scale units categorised under FAO Sector 3. Mainly household/family owned farms of 100 – 500 layers or broilers or indigenous chickens. It is not uncommon to find one farmer keeping different types on the same farm in different houses. These farms are usually run by women with one or two assistants and much of the labour is supplied by members of the family.

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Medium-scale units owned by individuals, companies or farmers’ groups, with a capacity of between 500 – 5,000 layers or broilers and therefore more specialised in terms of production. This category also includes farms with a small parent breeding stock and hatching facilities. Bio-security levels are not high at these units and they would also be categorised as FAO Sector 3.

Large scale units which are mainly breeders with hatching facilities and a capacity of over 5,000. Currently, there are about three in this category, and only one – Ugachick – would qualify as Sector 1 while the other two (Biyinzika and Bukomo) would be categorised as FAO Sector 2.

Breeding farms (hatcheries) whose main commercial activity is keeping parent stocks and selling of DOC. Almost all of them will also be involved in keeping commercial layers or broilers as well.

Breeding stocks and hatching eggs

The main commercial activity of breeding farms (hatcheries) is keeping parent stocks and selling DOC; almost all of them will also be involved in keeping commercial layers or broilers. The present national setting capacity for the hatcheries is 510,000 eggs per week. Table 4 lists the major hatcheries and their operational capacities.

Most of these eggs come from parent stock farms owned by the hatchery operators. However, contract hatching eggs production is becoming popular. In addition, due to the huge demand for DOC, several companies still import DOC and sell directly sell to farmers.

Table 4: List of hatcheries and their operational capacitiesName Installed

capacity (per week)

Current % utilization

No. of chicks (per week)

Ugachick Magigye

120,000 100% 90,000

Bokomo 40,000 100% 48,000Biyinzika Seeta 90,000 30% 24,000Kigo Prisons 40,000 15% 6,000LES – Entebbe 16,800 40% 5,000Bulemezi Mukono 13,000 60% 7,000Kiyita Kasangati 24,000 40% 8,000Nsambya Catholic 12,000 60% 6,000Senda – Mukono 11,000 67% 6,830Kagodo Makindye 40,000 75% 23,000Walusimbi Kiira 12,000 45% 4,800Kiwanuka Kabowa

4,000 50% 1,600

Gesica Namugongo

12,000 58% 6,000

Others 9,000 _ _

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4.1.4 Sector 4: Village or Backyard Production

Chickens

Indigenous poultry are found all over the country though the majority of these birds are found in the Eastern parts of Uganda (Ssewanyana et al., 2001).

Under free-range management systems, the birds scavenge for their food and seek shelter in the natural surroundings in trees and bushes. Others are provided with different forms of housing that vary from staying with the owners in the family houses to kitchens, in small shelters specifically made for them or roosting in trees.

Indigenous chickens are predominant in villages despite the introduction of exotic and crossbred types, because farmers are not able to afford the high input requirements of introduced breeds. In most villages, the birds have no regular health control programme, may or may not have shelter, and scavenge for most of their nutritional needs. They form part of an indigenous and integral part of the farming system, with short life cycles and quick turnovers, low-input production systems with outputs accessible at both inter-household and intra-household levels and a means of converting low-quality feed into high-quality protein.

Poultry in traditional village poultry systems provide scarce animal protein in the form of meat and eggs, and are available for sale or barter in societies where cash is not abundant. They are generally owned and managed by women and children. Village chickens also fulfill a range of other functions for which it is difficult to assign a monetary value. They are active in pest control, provide manure, are required for special festivals and to meet social obligations, they are essential for many traditional ceremonies (such as slaughter for important guests) and traditional treatment of illness. Any cost-effective strategy that increases the productivity of these birds will assist in poverty alleviation and the improvement of food security. The increased availability of village poultry and eggs should result in an improved intake of protein by the population and increased access to cash and other resources. Poultry are often essential elements of female-headed and poor households. This is a particularly important contribution in areas where child malnutrition is common.

Households keep flocks of between 6 and 20 chickens per household excluding chicks and growers, with very few keeping over 50 birds. Chicks are hatched and reared by the hens. There are variations in numbers during the year because of the occurrence of certain diseases such as Newcastle disease, which wipes out 60-100% of the birds when it strikes. Farmers therefore sell many of the birds prior to such disease occurrence in order not to incur losses during outbreaks. This creates differences in the flock structures at different times of the year and thus the flock dynamics. Due to the vulnerability of the chicks to several problems of disease and management, the flock characteristics change the desired flock ratios. These are also influenced by egg production.

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The hens produce about 2-4 clutches a year each of about 10 – 12 eggs (Byarugaba et al., 2002, Ssewanyana et al., 2003). While egg production and chick survival are the major determinants of flock productivity, chick mortalities account for very high losses in most villages (Kirunda and Mukiibi-Muka, 2003). Management practices that minimise chick losses therefore could be used to increase output from the scavenging chicken. Egg production also reflects the proportion of mature laying hens in the flock. The proportion of laying chickens in some studies was on average 24% of the flock. If the proportion of laying hens can be increased, this would increase egg production and hence output. The hatchability of the scavenging chicken has been considered to be low. Studies have shown hatchability of between 45-75% (Byarugaba et al., 2002) and this falls within the range reported on other countries. Some have even reported up-to 100% hatchability. Improved management such as provision of appropriate nests for laying could help achieve optimal hatching potential of these birds.

Women and children play a key role in their day today management (90%) with very little male participation (10%). Supplementary feeding is sometimes given in the form of leftovers from household surplus although the broad range of the available feed resources and in different periods of the year has not been documented in Uganda. One of the major constraints to village poultry production in Uganda is undoubtedly the existence of various diseases (Ojok, 1993). The problem of diseases in village chickens is compounded by the interaction of different entities that are of significant importance to disease epidemiology. There are uncontrolled contacts in the villages between birds from different households as well as frequent introduction of birds from markets, gifts or other purchases. Such birds bought from markets and wild birds may be a source of infection.

Among the diseases most commonly recognised is Newcastle disease, which has been ranked the most important (Mukiibi-Muka, 1992). Besides Newcastle disease, there are also parasites - both external and internal - which are well recognised by the farmers (Kiddu- Makubuya, 1998, Lubwama, 2002). Some of the parasites such as stick tight fleas are known to cause serious losses especially in the chicks. In these villages, local remedies are usually used to treat many of these diseases such as use of paraffin to clean off external parasites and many herbs for internal parasites (Kirunda and Mukiibi-Muka, 2003). Because of the virtual lack of extension services, there is very little modern medicine used in disease control. As a result, Newcastle disease has continued to wipe out many of the chickens when it strikes, although vaccines are available. Rearing losses are very severe. It is estimated that the mortality of indigenous poultry under scavenging conditions is 70% and above in chicks up to 8 weeks of age (Kirunda and Mukiibi-Muka, 2003). These high cumulative levels of mortality influence the structure of the flocks whereby 30-50% of flocks are normally chicks. Efforts to increase productivity through improvements in health, feeding, housing, genetics and management have been minimal.

Semi-intensive production system (backyard system)

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In recent years there has been a development in the extensive system with improvements in management, housing and flock size, especially in the urban and suburban middle class. These farmers also follow intensive-based health programmes for vaccination against common diseases and the general disease control methodologies practised in the intensive system. In this semi-intensive system, the birds are housed but have a wire mesh open enclosure where they can free-range for food. In addition, these birds are provided with good quality water and supplementary commercial feed. This has become popular with indigenous breeds which are targeted for the preferential market of indigenous breeds. The average numbers kept per household in this system are much larger than those kept under the free-range system per household. Several farmers have organized themselves into an association called the Uganda Local Chicken Farmers Association (ULCFA) that helps the farmers in hatching DOC as well offers training in improved management. The association currently has about 6,000 members in about 14 districts all over the country. The breeds under this vary from the indigenous breeds to cross bred as well as pure breeds. There are also variations in management under this system. Some still leave the birds to scavenge without restriction but provide them with supplementary feeds, while others partially release them under enclosed wire mesh-enclosed compounds. Flock sizes in the semi-intensive production system are normally from tens to hundreds of birds.Other species

Some households will also keep other poultry such as turkeys, ducks, geese, pigeons and guinea fowls. Ostriches are also very popular in the north-eastern areas of Karamoja.

4.1.5 Poultry Value Chain Analysis

The marketing of poultry in Uganda is not streamlined. Although the objectives of the PMA focus on increased incomes and market share and directly highlight the need for an efficient marketing system to enable farmers to gain from increased productivity, this has not yet been achieved.

Chicken meat

Marketing of local poultry

Whereas free-range poultry meat and eggs are generally perceived to taste better than broiler meat and commercial layer eggs, their prices are often higher and this may mean that consumers select from other protein sources available. There are several other sources of animal protein which compete more favourably in urban and suburban areas in terms of prices, for example beans, beef, broiler and fish.

Table 5: Prices of free-range chickens in different marketsMarket type Average Hen prices Average Cock prices

Ug Shs USD Ug Shs USDFarm-gate price

7,000 3.68 10,000 5.26

Primary 9,000 4.74 12,000 6.32

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marketSecondary market

11,000 5.79 14,000 7.37

Urban market 14,000 7.37 17,000 8.95

All male and female members of the household are involved in the marketing of free-range chicken. The women are involved more at farm gate level while the trade is mainly male-dominated in markets and in towns. Although there is a weight and size consideration both at sale and purchase, there is no established means of verification. Chickens are usually sold live to fellow farmers, retailers or consumers. The marketing chain (Figure 1) is simple and undeveloped with no market infrastructure apart from for some stalls in towns. The main marketing channels are from farmer to farmer or consumer (informal marketing), another is from farmer to retailer and then to consumers (primary marketing). Some farmers sell direct to restaurants while others sell to traders who take to secondary markets and urban areas.

Figure 1: Simple chicken marketing chain

Consumers

Traders (Wholesalers – Retailers)

Consumers Farmer Retailers Consumers

Restaurants

Consumers

There have been a few studies that have examined the gross margin analysis and the various beneficiaries in the marketing chain of chickens. The price competitiveness of the different poultry species and types with other available alternative sources of protein in the country has also been studied (Mukiibi-Muka and Kirunda, 2005). The quantity of chickens supplied and sold in the markets is known to be elastic and to vary significantly with sex and the month of the year. More cocks than hens are supplied in the markets and large quantities of free-range chickens are sold in holiday seasons as well during ND outbreak seasons when

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farmers prefer to sell them off than lose them to disease. Middlemen play a major role in the local chicken marketing chain and earn more profit of the total income generated in the local chicken marketing chain. It is however known that the profit margins realized by farmers and middlemen were significantly influenced by the months in which both parties sold chickens and the sex of the chickens, with cocks earning higher profits than hens.

Factors affecting the marketing of local chicken in Uganda

Seasonal availability of birds

The seasonal effects of price fluctuations depend on festive seasons, crop activities and disease outbreaks. Thus in a season when crops are likely to be destroyed by chickens or in a period when ND strikes, most farmers will sell most of their chickens (Mukiibi-Muka, 1992). At festive seasons such as Christmas the prices will be higher due to increased demand.

Transportation

Since there is no specialized transport of live chickens, the birds are bundled together either on strings or baskets and are transported on different means of public transport available such as motorcycles, lorries, buses or mini-buses together with passengers. Such kind of transportation is a risk factor for possible transmission of zoonotic infections.

Retailer output

When the retailer is selling roasted pieces of chicken, all pieces cost the same irrespective of the original size of the hen or cock. The output of the retailer will determine the type of chickens such retailers will buy.

Disease outbreaks

This affects both farmers and middlemen. When disease breaks out in an area, farmers will panic and sell their chickens cheaply. Similarly, the middlemen who buy the chickens cheaply may also lose a number of them due to disease.

Lack of information on prices

The farmers depend on information given to them by traders and often the traders will want to maximize their own profits by offering as low a price as possible.

Lack of streamlined marketing channels

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Although farmers get information that chickens may fetch high prices in towns or if they sold to institutions, they lack the capacity and economies of scale to gather enough stock for such a transaction.

Marketing of commercial poultry and their products

The marketing of commercial broilers or eggs as well as other products is more complex. Some of the broiler and layer farmers have over time established reliable clientele such as hotels, restaurants or roadside roasted chicken sellers or middlemen who will always pick the products from the farms and transport them to the consumer points or to secondary retailers. Others also deliver the products directly to their clientele.

Some more organised companies such as Ugachick have introduced a contract farming scheme whereby farmers are given either broiler or layer DOC and pay as they get the returns back. Such systems help establish a clientele for the company and the farmers are also given support for their business in terms of training in poultry management and vaccinations. Some even sell their products back to the company for processing and subsequent marketing. Previously, the company produced all their broilers which they processed and packaged for sale but they introduced the contract farmers system as they realised that they would not sustain the rearing business. At the moment, the contract farmers take over 20,000 chickens per month. Besides the extension services provided by the company (such as visits by company veterinarians) the farmers are also assured a ready market for their produce.

5.0 TRADE, MARKETING AND MARKETS

5.1 Trade, Marketing and Markets for Poultry in Uganda

5.1.1 Domestic Market

Types of markets

Informal markets

These operate within the villages involving farmer to farmer or to retailers. Although the main purpose of selling is to raise income, sometimes fellow farmers who need a certain hen or cock for breeding may demand the purchase from a neighbor. Some farmers give their chickens to children to take to the roadside for sale in areas where there are main trunk roads. Often chickens are bartered for larger animals such as goats.

Primary markets

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These are generally formed by several villages within a local area and are held on gazetted days of the week. They are often in fenced areas with few or no facilities. Traders may purchase chickens from several adjacent primary markets and transport them to destinations within or outside the country. This is where the majority of the rural farmers go to sell their chickens and also to buy various household items from the income.

Secondary markets

Secondary markets normally have a larger throughput than primary markets but also lack proper weighing, loading and hygienic facilities. Traders often come with trucks to buy a full load of chickens for immediate transportation to large centres such as Kampala. Animals are sold according to size, age and appearance through negotiations between sellers and butchers/traders/farmers. The number of farmers at secondary markets is small and is comprised of those who are close to the market. The level of taxes and those involved is also increased at this type of market. Sometimes the sellers are disadvantaged because there may only be a few traders present with whom to negotiate and because they normally do not know the prices of livestock in the urban centres. In addition, they are often selling under pressure, such as the need to meet an immediate cash need and they do not want to risk losing a sale. However, in the districts where large numbers of animals are available for sale and more traders exist, sellers are better able to bargain for fairer prices.

Urban markets

These are in larger towns and cities and there are often designated areas where makeshift chicken stalls are erected. Suppliers to such markets are traders who buy from secondary markets, place chickens on trucks and take them to towns. Consumers from such urban markets are hotels, restaurants and some affluent city dwellers. An ordinary farmer or consumer is not likely to buy from such a market because the prices are higher except on festive days like Christmas.

5.1.2 Import

All the hatcheries import their parent DOC from outside Uganda, as there are no grandparent stock farms in the country. These are imported from various countries including Holland, Mauritius, Kenya, Zimbabwe, UK, USA, France and Germany. Imports from a number of these countries especially in Europe such as UK and Germany, France, Holland were temporarily banned during the peak of HPAI H5N1 in Europe to prevent entry of the virus through imports. These import restrictions have since been lifted but there is continuous monitoring and the ban may be imposed at any time. MAAIF periodically reviews the countries from which imports are allowed and issues import restrictions which are implemented through requirements for import permits of poultry or poultry products enforced by law.

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5.1.3 Slaughtering Facilities

In terms of processing, only Ugachick has a slaughter plant. The rest of the slaughter is carried out in make-shift small slabs or in households or restaurants. The products therefore may not be professionally handled, resulting in a lack of grades and standards, inadequate market information and un-standardized products being presented to consumers.

5.1.4 Poultry Feeds

Poultry feeds under the commercial system constitute the highest cost of production, accounting for 60–70% of costs, particularly in intensive production systems. Several feed millers provide the farmers with already mixed feeds. However, because of the lack of sufficient regulatory policies, there have been issues with quality and most farmers have therefore resorted to buying the ingredients and mixing the feeds themselves. This is also usually a cheaper option. Besides the commercial feed factories there are several up-and-coming small-scale feed producers which are not mechanized but nonetheless play a large role in supplying feed to the various categories of poultry farmers.

Table 6 below shows the major feed mills producing poultry feeds for commercial purposes.

Table 6: List of commercial feed factories in UgandaName Installed Capacity Present ProductionCreda Africa 40 mt/wk Not knownLiberty Trading Co. Ltd. 200 mt/wk ClosedFormula Feeds 40 mt/wk 15 tons per weekCatholic Secretariat 42 mt/wk 6 tons/wkEngano Millers Ltd. 60,000 mt/wk 1,100 MT/annumBulemeezi Farm Enterprises

32 mt/day 5 tons/day

Ugachick Poultry Breeders

10 MT/day 6-7 MT/hr

Kagodo Farm 45 tons/day 20-22 tons/dayHill Top 1.5 MT/hr 1.5 MT/hr

While poultry feed production has increased from 32,000 MT in 1993 to the current production of 80,000 MT, the present capacity utilization is still low at around 40 -45% of installed capacity. Most feed factories are located in and around Kampala and Jinja far from areas of high cereal and other input production. Since most inputs and poultry feeds themselves are bulky, transport makes the final products

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expensive. The output of feed mills varies considerably from season to season, resulting in irregular supplies and prices for farmers. Quality is inconsistent between various manufacturers and also within the same company from season to season. Generally, there is a lack of technically qualified staff in feed processing and laboratory facilities for regular quality monitoring. The feed regulatory act has not yet been enacted by parliament.

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6.0 FARM MANAGEMENT

6.1 Poultry Farm Management

6.1.1 Day Old Chicks

The chicks that will be purchased by ERIC MUGUME’S EGG PRODUCTION ENTERPRISE for the purpose of setting up the farm will be of uniform size, active, alert and bright eyed. The shank or leg covering (skin) of healthy chicks appears bright and shiny. These improved and high yielding chicks will be purchased from reputed farms.

6.1.2 Space Requirements

Coop design necessitates 2 square feet per bird. Therefore, a 2000-bird flock would need two (2), 2000 square foot (186 square meter) coops. building design calls for a building 20 feet wide and 100 feet long, plus an additional 5 to 10 feet in length for a storage room. The length storage room can be tailored to needs of the location.

6.1.3 Scope

The poultry operation will consist of an initial coop capable of housing 2,000 birds (pilot project unit). Subsequent coops will be capable of housing 500-to-600 birds. The two tiers allow the project to experiment with different levels of risk. The issues of disease management, temperature control, and predator theft (human and animal) are key in this design decision.

6.1.4 Brooding

Proper brooding temperature is required to keep the chicks in comfort during rearing period when they are sensitive to cold and need some artificial heat source to maintain their normal temperature. Charcoal or sawdust is burnt for supplying heat at the stage of brooding in the poultry farm.

The Business Plan has taken a brooding expense at UShs. 100 per bird during the rearing period.

6.1.5 Feeding

The requirement of feed during lying depends on the rate of egg production and the body weight of layer birds. The actual feed consumption may be influenced by several factors as follows:

Body weight of the bird. Rate of egg production. Season and weather condition. Health and physical condition of the bird.

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Feed quality such as protein contents, caloric value of feed, etc.Generally the feed intake increases with an increase in egg production.

Feed should be distributed simultaneously to the entire flock. Otherwise, birds lower in the pecking order will be crowded out and will not get enough feed, while large birds will over-consume.

6.1.6 Housing

The poultry house has been designed and constructed so as to be well ventilated, cheap, durable, comfortable and safe. Each bird has been provided a floor space of about 1.5 to 2 sq. ft. The calculations in the Business Plan are based on an area of 1.75 sq. ft. per bird.

Coop Architectural Designs

The three (3) diagrams shown below display the design concept that is considerd most appropriate for this level of poultry egg production facility.

Figure 2: Standard Chicken Coop (Front View)

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Figure 3: Standard Chicken Coop (Rear View)

Figure 4: Standard Chicken Coop (Basic Plan Diagram)

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6.1.7 Feeders

It is essential to provide adequate feeder space. Ideally, two pan type feeders are sufficient for 50 birds. Therefore, for a total of 2,000 birds, 40 feeders are enough.

6.1.8 Nests

Birds need privacy when laying the eggs. The glistening and shiny appearance of the wet egg can trigger cannibalism against the egg and against the hen laying the eggs. 4 birds can share a nest; each nest is about 2 ft x 2 ft. A 2000 bird flock would need 500 nests. Nests can be double-stacked and run along both the sides and center of the coop.

6.1.9 Lighting

Light affects growth and reproduction of birds by different physiological actions.The duration of the light period should not be decreased during laying period. Adequate lighting boosts up egg production by 5 to 10 percent. Lighting encourages the birds to eat more feed, more of which will lead to better growth and more eggs production. Irregular lighting results in drop in egg production.

Young birds need dark conditions, while mature birds lay more eggs with increased light. The birds sense light through their skulls, not just their eyes. The maturation process is enhanced by managing the light. Due to these factors, the ability to control light is desirable and should be incorporated in the design and construction of the barns.

6.1.10 Temperature Control

Natural ventilation and cooling is critical in considering temperature control through coop design. In cold climates or higher elevations, temperature control will require heating systems. (Heating systems are also required for the arrival of day-old chicks.)

6.1.11 Insulation

To hold down the roof temperature and prevent heat radiation during sunny days, it is necessary to insulate the roof to an R-value of 5. Material like 1-inch-thick foam-type insulation with hard fiberglass (or similarly durable material) glued to the lower side should prevent birds and other critters from pecking or chewing away material from the underside of the roof. A thatched roof could provide an effective R-value.

6.1.12 Ventilation

An effective method for ventilation would be a continuous 6-inch-wide ridge opening running the length of the building. To prevent rain from entering the coop, the ridge opening should be capped with a small roof-type structure that is 12 or 14 inches

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wide, located 12 inches above the ridgeline. This will allow warm air to exit the opening without being restricted by this ridge cap.

6.1.13 Drinkers

Adequate drinking space should also be provided to the birds. It is necessary to provide extra water during extremely hot weather. The drinker should contain fresh, clean and cold water.

A continuous supply of water is vital for layers. Nipple drinkers are ideal for preventing disease; a ratio of 1 nipple per 15 hens is preferred.

Capturing rainwater reduces labor and may be essential if the coop is located far from a well. Rain barrels will collect and hold water from the roof during storms. This storage tank will be connected to an interior nipple drinker system. Excess water could also be channeled into a drip irrigation system for a garden around the coop.

6.1.14 Litter

Litter is spread on the floor to prevent the direct contact with the floor. Straw, coffee-husk and sawdust are generally used for making the litter. It should be dry and free of moulds. Caked or moldy material should be removed and refilled with fresh materials. Extensively wet and dusty litter should also not be used. Using new litter for each flock is good for raising disease-free broilers and layers. Litter can also be resold in the market.

6.1.15 Vaccination

Vaccination can be applied to chicks through injections. The medicine can also be mixed in the water and also through eye drops. Vaccination is provided to the birds once in the rearing period and once in the laying period. Average vaccination cost per bird usually varies between UShs. 200-400. The Business Plan has taken vaccination cost at UShs. 300 per bird.

6.1.16 Fumigation & Spraying

It is essential to check all equipment and walls of the broiler house carefully that they are clean, and washed with disinfectant solution, and dried. The rooms should be white washed and sprayed before the arrival of birds.

Disinfectant solution can be prepared with Phenol, Potassium Permanganate, Carbolic Acid and Formaline. A solution of Sodium Hydroxide/Caustic Soda with warm water can also be used to clean the house.

To sanitize the broiler and layer houses from germs and insects, they are fumigated with Formaldehyde Gas, which is produced by putting Formaline on Potassium

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Permanganate. The rooms are first vacated and then sealed for 30 minutes after the fumigation so that the gas infiltrates in every corner of the room.

In the Business Plan report, the cost of fumigation has been taken as UShs. 200,000 per flock.

6.1.17 Floor

Concrete is the preferred flooring material for coop designs. A separate roost area helps manage the waste products. It is preferable to avoid hard woodchip floors.

6.1.18 Isolation

Coops should be in a relatively isolated part of the village, as isolation is imperative for mitigating the risk of disease outbreak. Therefore, it is advised to keep the coops in the back of the village, away from roads, paths, and other highly trafficked areas. Human traffic should be limited to as few people as possible; ideally only 2 or 3 people would ever have access to the coops. In addition to limiting human traffic, it is vital to limit the exposure to wild animals. Sturdy building, as well as tree-trimming above the coop, will reduce the chances a wild animal will enter or contaminate the coop. Finally, ventilation is an important consideration; building the coop in an open area will facilitate natural ventilation.

6.1.17 Culling

Culling is the procedure of selection and rejection of unproductive and poor producers. Culling is a very important job for running layer farm profitably. Poor layers should be culled to minimize the cost of production. The birds that have laid well for short period but have stopped laying for one reason or another should be culled out. Sales price varies in a range of UShs.3,500 to 5,000. In the feasibility study the culled birds are sold at a rate of UShs. 4,000 per bird.

6.1.18 Rearing and Laying Schedule

The cycle of one flock of layer farm is divided into two distinct phases, the rearing phase and the laying phase. During the rearing phase of 6 months, the birds consume feed and are non-productive. After the rearing phase is over, the birds start laying eggs and remain productive for the next 12 months. So, the revenues and costs occur in the form of cycles. The schedule for this calculation for the first ten years of operation of the farm is shown in Table 7.

Table 7: Schedule for Calculation of Revenues and Expenses (1 – 2 Years)

Year

Rearing Months

Laying Months

Frequency per year

Birds Sale

Birds Purchase

d

Litter Sale

Litter Purchase

d

Spray Cost

Vaccination Cost

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1 6 6 0 1 1 2 2 2

2 5 6 1 1 2 2 2 2

7.0 MANPOWER REQUIREMENTS

Semi skilled workers are needed to look after the feeding, vaccination and cleaning operations at the farm. A single person can handle 1,000 birds easily. Two people will therefore be hired to manage the operations of a layer farm of 2,000 layer birds. Each attendant will be given a monthly salary of UShs. 100,000. Hence, the reason why the total monthly labour cost is indicated as UShs. 200,000 per month.

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8.0 OPERATIONS

8.1 Bird Selection

Day old chicks are readily available through a number of local breeders – Ugachic Poultry Breeders, Bokomo, Biyinzika Seeta, Kigo Prisons, Livestock Experimental Station (LES) Entebbe, Bulemezi – Mukono, Nsambya Catholic, etc. as well as from the neighboring Kenya.

8.2 Feed Supply

The availability of feed is perhaps the most integral factor impacting the success of any poultry egg production project. It is critical to have a dependable source of high-quality feed. Often, local feed mills will produce a variety of feeds and can advise as to which local variety is best for the current lifecycle of the bird. In terms of operational profitability, it is essential to analyze and control the cost of feed.

In addition to price, quality is very important, with heavy emphasis on the protein content. Ideally, feed should have about 20% protein; other minerals and vitamins can also enhance the feed performance. Gold’n Plump can do testing of feed nutrients.

Ideally, the project would do well to have its own feed mixing model, which will reduce the cost of feeds by about 25%.

Feed consumption will increase as the birds age.

8.3 Veterinary Care

There is na imperative need for this project’s management to cultivate and maintain strong working relationships with both private and government veterinarians and extension workers. Locally available veterinarian care services are crucial in caring for the chickens. An experienced vet is a valuable asset for maintaining bird health and training. The vet should be capable of procuring and administering vaccines.

8.4 Training

Comprehensive training successfully addresses brooding practices; feed and feeding practices; factors impacting growth and development of chickens; factors impacting the egg production; disease recognition and management; molting

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management; and record keeping and accounting principles. These areas are covered in this document, but firsthand training will greatly help the success of the project.

9.0 PRODUCTION PLAN

9.1 Land, Buildings and Facilities

9.1.1 Land Availability

The chicken coops will be built on property currently owned or available to the principal project promoter – Mr. Eric Mugume. The existing land and structures on it will be a useful starting point for the implementation of this project and are entirely out of the efforts and hard work of the project promoter – Mr. Eric Mugume.

9.1.2 Existing and Planned Structures

Table 9 below provides a breakdown of area (in square feet) and corresponding value (in UShs.) of the existing and planned poultry farm structures at ERIC MUGUME’S EGG PRODUCTION ENTERPRISE.

Table 8: Space dimensions and financial value of existing and planned poultry farm structures

Particulars Specifications Physical Units (Sq.

ft.)

Unit Cost

(UShs.)

Total Cost (UShs.)

Management building 180 sq. ft. 180 sq. ft. 10,000 1,800,000

Store room 70 sq. ft. 70 sq. ft. 6,000 420,000

Shed space for layers 2 sq. ft./bird 4,000 sq. ft. 600 2,400,000

TOTAL 4,250 sq. ft.

4,620,000

Building Cost Estimates

Obviously, the construction costs should be minimized. Effective ways of doing this is by the use of local material and traditional construction techniques. The building plans put forth in this document are mainly to outline design elements Therefore adapting the design to local build customs is appropriate.

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9.1.3 Infrastructure Facilities

Poultry's farming needs to be handled tactically, right from the selection of the site to the final stage when the birds are sold. That being the case, the selection of the farm at Kichwamba was done in such a way to ensure that the transportation of birds and feed can be always be easily handled.

The entrepreneur will try his level best to ensure that the following things are available at the farm site before gearing up to full production parameters:

Electricity connection Drinking quality water Road access Drainage of rain water

9.2 Farm Equipment

Various types of farm equipment are needed for feeding, drinking and handling the birds. List of the required farm equipment is given in Table 9:

Table 9: Farm Equipment for LayersLayer Farm Equipment Unit Unit Cost

(UShs.)Total Cost

(UShs.)Brooders 20 20,000 400,000Drum Heaters 2 40,000 80,000Nipple Drinkers 140 6,000 840,000Feeders 40 4,000 160,000Nests 500 2,000 1,000,000Shifting Box 10 50,000 500,000TOTAL 832 2,980,000

9.3 Location

The precise location of the ERIC MUGUME’S EGG PRODUCTION ENTERPRISE is ------- kms off the Kampala – Entebbe main road makes it suitable for setting up an enterprise of this nature since an isolated place will minimize the risk of disease outbreaks among the piggery hear and poultry flocks on the farm.

Also, given the farm’s close proximity to the main road and Kampala City and Entebbe town will enable the enterprise to have a quick communication with the market for the purchase of farm inputs (feed, drugs, etc.), and the selling of marketable poultry eggs.

On balance therefore, the relative isolation of the poultry egg production farm as well as its proximity to the highway and major urban centres in Central Uganda reduce the risk of disease and also facilitate the fast acquisition of farm inputs and marketing of its outputs at the same time.

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10.0 EXPANSION

This section specifically highlights on the deliverables and tracks the variables to be expected on the planned route for expansion of this poultry egg production enterprise over the medium- to long-term course.

10.1 Phase 1

Construct a modern and viable poultry egg production facility capable of housing a flock of 2,000 birds. The goal of this phase is to test hypotheses formed from the poultry experience that the principla project promoter already has in the field. This phase also includes the cost of training and refining operations. The cash flow model and development goals will be re-evaluated based on the output of this experiment.

Estimated cost for Phase 1 = Ushs. 64.6 million

10.2 Phase 2

The goal of this phase is to expand the scale of operation by the construction of four additional coops and further enhancements. The rate and scale of this expansion depends on the results from Phase 1. As these questions are answered, the plan can be adjusted and modified as the operation is expanded.

Greater production capacity can be achieved by constructing multiple coops,which will enable the economies of scale to drive down production costs. Redundant coops will also allow the project to more reliably serve its customers, especially as older flocks are replaced—or in case a flock dies due to disease outbreak. Phase 2 allows the main project beneficiarie to scale up poultry production by building multiple coops and to focus on this as a major economic activity.

This phase could, in part, be financed by cash flows from the first coop, orperhaps the manager could take a loan.

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Estimated cost for Phase 2 (per coop) = Ushs. 24.0 million – Ushs. 36.0 million

10.3 Phase 3

Phase three focuses on incremental improvements in laying performance. This can be achieved through additional investments in barn equipment, specifically by adding automated lights and feeders. Strict lighting and feeding programs can greatly increase laying performance. Additional investment can be made in effective ventilation, which helps to reduce bird stress. The cost of Phase 3 is highly variable and is to be implemented as a continuous improvement campaign.

10.4 Phase 4

The success of this proposed poultry egg production project and its promoting entrepreneurs will represent qualified business partners and investment opportunities for established poultry ompanies seeking to expand their international operations. This success should therefore present any egg-production international company a filtering process allowing it to develop a relationship before investing large amounts of time or money in the enterprise.

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11.0 PROJECT ECONOMICS

Table 10: Project Economics

Account Head Total Cost (UShs.)

Land 20,000,000



1 Pick-up Vehicle 20,000,000

Purchase of 2,000 Layer DOCs (Day Old Chicks) @ 2,250/= 4,500,000

Total Fixed Costs 52,100,000



Total Working Capital 12,488,399

Total Project Cost (UShs.) 64,588,399

Table 11: Financing Plan

Initial Financing UShs. In Actuals

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Loan 37.92% 24,488,399

Equity (Personal Contributions) 62.08% 40,000,000

Table 12: Loan Disbursement Plan

Project Investment Item Loan Financing Amount (UShs.)



Purchase of 2,000 Layer DOCs (Day Old Chicks) 4,500,000



TOTAL 24,588,399

12.0 KEY SUCCESS FACTORS

Farm Management

Layers

Professional farm management is the key success factor to increase the birds’ productivity. The farm labour is experienced enough to look after the biological/disease matters of the farm. Timely feeding and vaccination is only possible if some person is available at the farm 24 hours a day.

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Market Information

Layers

Sale price of eggs may sometimes fluctuate during a year. The entrepreneur should be well aware of this price fluctuation. This will help the entrepreneur to negotiate well the sale price of eggs.

Vaccination and Medication

Layers

Mortality is the most critical component in determining the viability of a Layer farm. Some times the epidemic diseases results in heavy mortality of up to 25%. Proper vaccination and medication is very helpful to reduce the mortality loss up to 10%.

Mortality Losses

Mortality can only be controlled if the farm conditions are hygienic. Mortality losses should be kept below 8% by timely vaccination & medication.

13.0 THREATS FOR THE BUSINESS

Price fluctuations in the market

Layers

Egg prices are determined by supply and demand phenomenon in the market.

Disease Epidemics

Layers

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Mortality is the most alarming threat to the viability of the farm. In this regard, Bird flu is considered to be the most fatal issue, according to a study, during Bird Flu 40% of the investors withdraws their investment from the industry.

Shelf Life

Layers

Egg is a perishable commodity and cannot be stored for a long time at the room temperature. It needs to be either sold within short time or has to be stored at a cool temperature.

14.0 PROJECT FINANCIAL ANALYSIS

14.1 Liquidity

The project’s liquidity position of ERIC MUGUME’S EGG PRODUCTION ENTERPRISE is found to be of a generally sound performance. The poultry egg project’s cash inflows and outflows are shown in its 3-Year Net Income Statement (Annexure 1). The Projected Net Income Statement (Annexure 1) also indicates a viable and lively liquidity position – especially from the second year of the poultry egg production project.

14.2 Profitability

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From Annexure 1, the profitability position of the project is found to be quite robust and healthy with a steadily rising Cumulative Retained Earnings position building up from UShs. 15,959,623 [Month 12] to a good cumulative retained earnings position of UShs. 51,405,798 million by the end of the 36th Month of the projected period.

14.3 Overall Financial Viability

As already indicated by the project’s 3-Year Net Income Statement, and also based on projections drawn against conservative and prudent assumptions, ERIC MUGUME’S EGG PRODUCTION ENTERPRISE would be a worthwhile investment that is bound to be profitable, liquid and secure – and therefore worth its every dime in credit support.

The highlights of the mixed project farm’s viability can be enumerated as:

o Very profitable and stable (especially in the second year after it has gained production and market stability)

o Medium – High real returns

o Healthy cash flows

o Easy operations with low overheads

o Good improving balance sheet14.4 Cash Flow Model Assumptions

Our cash flow model makes a few material assumptions as listed below.

1. The cash flow is after factoring variable costs, such as labour, transportation, supplies, and weekly savings.

2. No consumption factor by the project promoter was factored into the analysis.

3. A typical layer, in conditions of the Project, will produce 4 or 5 eggs per week, averaged over its lifetime. Actual performance will decline with age. See Appendix (Layer Performance Graph, Page 43).

4. The layers should be sold once cost of feed for the hens amounts to more than the revenue produced in eggs, typically occurring at about 80 weeks.

14.5 Internal Accounting and Audit Controls

Ensuring: Both accounting and auditing internal control systems will be pursued by this

mixed farming enterprise to their accuracy and correctness.

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Documents leading to the receipt and the release of both financial and non financial data will be released timely and regularly.

Internal audit systems have been put in place. Money collected will be banked intact. Making use of financial institutions’ facilities. Restrict unnecessary use of funds/extravagance and giving credit facilities to

suppliers.

Financial Projection Summary

It is important to know the total amount of cash that is needed before the birds start laying eggs, because if the beneficiaries do not have adequate funds to purchase feed or veterinary care, then the long-term performance of the flock could be compromised. It is imperative to keep the following factors in mind:

1. To maximize cash flow, feed cost needs to be minimized and egg price needs to be maximized.

2. Feed quality cannot be sacrificed, Long-term, it would be wise to investigate methods for creating feed supplements. (For example, sunflower mash has excellent potential to be used as a feed component and would dramatically reduce the feed costs).

3. Theft and excessive yield loss are major risks to the operation.

14.6 Conclusion and Recommendation

ERIC MUGUME’S EGG PRODUCTION ENTERPRISE project’s profitability status is found to be good with a sound and fast-improving liquidity position. This project will offset all it financial obligations and responsibilities without any financial difficulties.

ERIC MUGUME’S EGG PRODUCTION ENTERPRISE is thus found to be technically feasible, financially viable, socially and economically desirable and beneficial and thus deserves all the support that it can muster to realize its commercial goals and objectives.

15.0 KEY ASSUMPTIONS

Table 13-1: Production AssumptionsMaximum Capacity Utilization 100%Number of Birds in Layers Foundation Stock (1 – 6 months) 2,000Number of Birds in Subsequent Layer Flocks (7 – 36 months) 2,000Number of Flocks per Year (Layers) 1Total Mortality Rate 7.3% Mortality Rate (Rearing Period) 2% Mortality Rate (Laying Period) 5.3%

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Total Mortality Loss (Birds) 146Total Number of Birds Laying Eggs (Foundation Stock) 2,000Total Number of Birds Laying Eggs (Subsequent Flocks) 2,000Length of Rearing Period (Months) 5Length of Laying Period (Months) 13Lag time between the Flocks (Weeks) 4

Table 13-2: Economy Related AssumptionsElectricity growth rate 10%Wage growth rate 5%

Table 13-3: Expense AssumptionsAdministrative overheads (% of Sales) 0.5%Raw material price growth rate 5%DOC Cost (Day Old Chicks – Layers) – UShs. 2,250Weight of Feed Bag (Kg) 100Rearing Period (0 – 8 weeks) Feed Consumption/Bird/Month (Kg) 1Rearing Period (0 – 8 weeks) Cost of Feed/Bird/Month– UShs. 350Rearing Period (9 – 20 weeks) Feed Consumption/Bird/Month (Kg) 2.33Rearing Period (9 – 20 weeks) Cost of Feed/Bird/Month– UShs. 817Laying Period (21 – 75 weeks) Feed Consumption/Bird/Month (Kg) 3.0Laying Period (21 – 75 weeks) Cost of Feed/Bird/Month– UShs. 1,050Vaccination Cost per Bird – UShs. 300 (layers)Spray Cost per Flock – UShs. 200,000Utilities (Electricity + Water) Expenses per Month– UShs. 500,000Brooding Expense per Bird – UShs. 100Transport Expense per Month – UShs. 300,000Packaging Materials Cost (per Tray) – UShs. 500Sales & Marketing Expenses per Month – Ushs 300,000Miscellaneous Expenses per Month – UShs. 400,000Buildings depreciation factor 5%Poultry equipment depreciation factor 10%

Table 13-4: Revenue Assumptions:Number of eggs laid/Bird/Month 22.5Production Output in Year 1 (Trays) 10,855Production Output in Year 2 (Trays) 10,633Production Output in Year 3 (Trays) 17,091Eggs selling price (per Tray) 4,500Off-layers selling price (UShs./bird) 4,000Litter selling price (per Flock) 100,000Sales price growth rate 10%

Table 13-5: Cashflow Assumptions:Raw Material Inventory (Days) 40

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Accounts Receivable Cycle (Days) 30

Table 13-6: Financial Assumptions: Loan 37.92%Equity 62.08%Short-Term Financing tenure (Years) 3Minimum Cash Balance 2,000,000

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ERIC MUGUME’S EGG PRODUCTION ENTERPRISE: Business Plan Corporate DocumentAnnexure 1: ERIC MUGUME'S POULTRY PROJECT - PROJECTED NET INCOME STATEMENT (USHS) – YEAR 1

MONTH

Item 1 2 3 4 5 6 7 8 9 10 11 12

Total Chickens (1st Flock) 1,995 1,987 1,978 1,969 1,961 1,953 1,944 1,936 1,927 1,919 1,911 1,902

Total Chickens (2nd Flock) 0 0 0 0 0 0 0 0 0 0 0 0

Egg Sales (Trays) 0 0 0 0 736 1,465 1,458 1,452 1,445 1,439 1,433 1,427

Off-layer Sales (Nos.) _ _ _ _ _ _ _ _ _ _ _ _

CASH INFLOWS

Start-up Working Capital20,000,00

0 0 0 0 0 0 0 0 0 0 0 0

Egg Sales (Ushs) 0 0 0 03,312,0

006,591,3

756,561,0

006,534,0

006,503,62

56,476,62

56,449,62

56,419,25

0

Off-layer Sales Ushs) 0 0 0 0 0 0 0 0 0 0 0 0

Total Inflows20,000,0

00 0 0 03,312,

0006,591,

3756,561,

0006,534,

0006,503,6

256,476,6

256,449,6

256,419,2

50

CASH OUTFLOWS

Purchase of Layer DOCs 4,500,000 0 0 0 0 0 0 0 0 0 0 0

Feeds (Layers) 698,250 695,4501,616,0

261,608,6

731,602,1

372,050,6

502,041,2

002,032,8

002,023,35

02,014,95

02,006,55

01,997,10

0

Brooding Expenses 200,000 0 0 0 0 0 0 0 0 0 0 0

Admin. Overheads 0 0 0 0 16,560 32,957 32,805 32,670 32,518 32,383 32,248 32,096

Labour (Production Staff) 200,000 200,000 200,000 200,000200,00

0200,00

0200,00

0200,00

0 200,000 200,000 200,000 200,000

Vaccination Cost 600,000 0 0 0 0 0 0 0 0 0 0 0

Spray Cost 200,000 0 0 0 0 0 0 0 0 0 0 0

Utilities (Electricity + Water) 500,000 500,000 500,000 500,000500,00

0500,00

0500,00

0500,00

0 500,000 500,000 500,000 500,000

Transport 300,000 300,000 300,000 300,000300,00

0300,00

0300,00

0300,00

0 300,000 300,000 300,000 300,000

Packaging Materials 0 0 0 0368,00

0732,37

5729,00

0726,00

0 722,625 719,625 716,625 713,250

Sales & Marketing Expenses 300,000 300,000 300,000 300,000300,00

0300,00

0300,00

0300,00

0 300,000 300,000 300,000 300,000

Interest

Financial Charges

Miscellaneous 400,000 400,000 400,000 400,000400,00

0400,00

0400,00

0400,00

0 400,000 400,000 400,000 400,000Insurance (6% of Flock Costs) 270,000 0 0 0 0 0 0 0 0 0 0

Depreciation of Assets 54,917 54,917 54,917 54,917 54,917 54,917 54,917 54,917 54,917 54,917 54,917 54,917

Total Outflows8,223,16

72,450,3

673,370,

9433,363,

5903,741,

6144,570,

8994,557,

9224,546,

3874,533,4

104,521,8

754,510,3

404,497,3

63Net Profit 11,776,8

33-

2,450,3-

3,370,-

3,363,-

429,612,020,

4762,003,

0781,987,

6131,970,2

151,954,7

501,939,2

851,921,8

87

43

ERIC MUGUME’S EGG PRODUCTION ENTERPRISE: Business Plan Corporate Document67 943 590 4

CASH BALANCE B/F 011,776,8

339,326,4

665,955,5

232,591,9

332,162,3

194,182,7

956,185,8

738,173,48

610,143,7

0112,098,4

5114,037,7

36

NET CASH BALANCE11,776,83

3

-2,450,36

7

-3,370,9

43

-3,363,5

90

-429,61

42,020,4

762,003,0

781,987,6

131,970,21

51,954,75

01,939,28

51,921,88

7

CASH BALANCE C/F11,776,83

39,326,46

65,955,5

232,591,9

332,162,3

194,182,7

956,185,8

738,173,4

8610,143,7

0112,098,4

5114,037,7

3615,959,6

23

Annexure 1: ERIC MUGUME'S POULTRY PROJECT - PROJECTED NET INCOME STATEMENT (USHS) - YEAR 2 MONTH

Item 13 14 15 16 17 18 19 20 21 22 23 24

Total Chickens (1st Flock) 1,894 1,886 1,878 1,869 1,862 1,854 0 0 0 0 0 0

Total Chickens (2nd Flock) 0 0 0 0 0 0 1,995 1,987 1,978 1,969 1,961 1,953

Egg Sales (Trays) 1,421 1,415 1,409 1,402 1,397 1,391 0 0 0 0 736 1,465

Off-layer Sales (Nos.) _ _ _ _ _ 1,854 _ _ _ _ _ _

CASH INFLOWS

Start-up Working Capital 0 0 0 0 0 0 0 0 0 0 0 0

Egg Sales (Ushs) 6,392,2506,365,25

06,338,25

06,307,87

56,284,25

06,257,25

0 0 0 0 03,312,00

06,592,50

0

Off-layer Sales Ushs) 0 0 0 0 07,416,00

0 0 0 0 0 0 0


06,365,2

506,338,2

506,307,8

756,284,2

5013,673,

250 0 0 0 03,312,0

006,592,5

00

CASH OUTFLOWS

Purchase of Layer DOCs 0 0 0 0 0 04,500,00

0 0 0 0 0 0

Feeds (Layers) 1,491,5251,485,22

51,478,92

51,471,83

81,466,32

51,460,02

5 698,250 695,4501,616,02

61,608,67

31,602,13

72,050,65

0

Brooding Expenses 0 0 0 0 0 0 200,000 0 0 0 0 0

Admin. Overheads 31,961 31,826 31,691 31,539 31,421 68,366 0 0 0 0 16,560 32,963

Labour (Production Staff) 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000

Vaccination Cost 0 0 0 0 0 0 600,000 0 0 0 0 0

Spray Cost 0 0 0 0 0 0 200,000 0 0 0 0 0

Utilities (Electricity + Water) 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000

Transport 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000

Packaging Materials 710,250 707,250 704,250 700,875 698,250 695,250 0 0 0 0 368,000 732,500

Sales & Marketing Expenses 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000

Interest

Financial Charges

Miscellaneous 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000

44

ERIC MUGUME’S EGG PRODUCTION ENTERPRISE: Business Plan Corporate DocumentInsurance (6% of Flock Costs) 454,560 0 0 0 0 0 0 0 0 0 0 0



33,979,2

183,969,7

833,959,1

693,950,9

133,978,5

587,953,1

672,450,3

673,370,9

433,363,5

903,741,6

144,571,0

30

Net Profit1,949,03

72,386,0

322,368,4

672,348,7

062,333,3

379,694,6

92

-7,953,1

67

-2,450,3

67

-3,370,9

43

-3,363,5

90

-429,61

42,021,4

71

CASH BALANCE B/F15,959,62

317,908,6

6020,294,6

9222,663,1

5925,011,8

6527,345,2

0237,039,8

9429,086,7

2726,636,3

6023,265,4

1719,901,8

2719,472,6

14

NET CASH BALANCE 1,949,0372,386,03

22,368,46

72,348,70

62,333,33

79,694,69

2

-7,953,16

7

-2,450,36

7

-3,370,94

3

-3,363,59

0 -429,6142,021,47

1


020,294,6

9222,663,1

5925,011,8

6527,345,2

0237,039,8

9429,086,7

2726,636,3

6023,265,4

1719,901,8

2719,472,2

1321,494,0

85

Annexure 1: ERIC MUGUME'S POULTRY PROJECT - PROJECTED NET INCOME STATEMENT (USHS) - YEAR 3 MONTH

Item 25 26 27 28 29 30 31 32 33 34 35 36

Total Chickens (1st Flock) 0 0 0 0 0 0 0 0 0 0 0 0

Total Chickens (2nd Flock) 1,944 1,936 1,927 1,919 1,911 1,902 1,894 1,886 1,878 1,869 1,862 1,854

Egg Sales (Trays) 1,458 1,452 1,445 1,439 1,433 1,429 1,421 1,415 1,409 1,402 1,397 1,391

Off-layer Sales (Nos.) _ _ _ _ _ _ _ _ _ _ _ 1,854

CASH INFLOWS

Start-up Working Capital 0 0 0 0 0 0 0 0 0 0 0 0

Egg Sales (Ushs) 6,561,0006,534,00

06,502,50

06,475,50

06,448,50

06,430,50

06,394,50

06,367,50

06,340,50

06,309,00

06,286,50

06,259,50

0

Off-layer Sales Ushs) 0 0 0 0 0 0 0 0 0 0 07,416,00

0


06,534,0

006,502,5

006,475,5

006,448,5

006,430,5

006,394,5

006,367,5

006,340,5

006,309,0

006,286,5

0013,675,

500

CASH OUTFLOWS

Purchase of Layer DOCs 0 0 0 0 0 0 0 0 0 0 0 0

Feeds (Layers) 2,041,2002,032,80

02,023,35

02,014,95

02,006,55

01,997,10

01,988,70

01,980,30

01,971,90

01,962,45

01,955,10

01,946,70

0

Brooding Expenses 0 0 0 0 0 0 0 0 0 0 0 0

Admin. Overheads 32,805 32,670 32,513 32,378 32,243 32,153 31,973 31,838 31,703 31,545 31,433 68,378

Labour (Production Staff) 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000 200,000

Vaccination Cost 0 0 0 0 0 0 0 0 0 0 0 0

Spray Cost 0 0 0 0 0 0 0 0 0 0 0 0

Utilities (Electricity + Water) 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000 500,000

45

ERIC MUGUME’S EGG PRODUCTION ENTERPRISE: Business Plan Corporate DocumentTransport 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000

Packaging Materials 729,000 726,000 722,500 719,500 716,500 714,500 710,500 707,500 704,500 701,000 698,500 695,500

Sales & Marketing Expenses 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000

Interest

Financial Charges

Miscellaneous 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000Insurance (6% of Flock Costs) 466,560 0 0 0 0 0 0 0 0 0 0 0



24,546,3

874,533,2

804,521,7

454,510,2

104,498,6

704,486,0

904,474,5

554,463,0

204,449,9

124,439,9

504,465,4

95

Net Profit1,536,51

81,987,6

131,969,2

211,953,7

561,938,2

911,931,8

311,908,4

111,892,9

461,877,4

811,859,0

881,846,5

519,210,0

06

CASH BALANCE B/F21,494,08

523,030,6

0325,018,2

1626,987,4

3728,941,1

9330,879,4

8432,811,3

1534,719,7

2636,612,6

7238,490,1

5340,349,2

4142,195,7

92

NET CASH BALANCE 1,536,5181,987,61

31,969,22

11,953,75

61,938,29

11,931,83

11,908,41

11,892,94

61,877,48

11,859,08

81,846,55

19,210,00

6


325,018,2

1626,987,4

3728,941,1

9330,879,4

8432,811,3

1534,719,7

2636,612,6

7238,490,1

5340,349,2

4142,195,7

9251,405,7

98

46


Appendix 1: Layer Performance Graph

The graph above shows a hen’s daily production over its lifetime. The actual performance will vary due to many factors: breed, bird health, light, feed, water, and temperature all affect production, and results will probably be much lower in actual project applications. If the birds laid an average of 5 eggs per week, that would equate to a 70% daily performance, which is the level of output occurring at week 80 on the above graph. For the sake of this project, daily production values of 4, 5, and 6 eggs per bird per week should be tested.

47


Appendix 2: Feed Consumption

Body weights and feed requirements of leghorn-type pullets and hens

Age (weeks)

Body Weight (g) Feed Consumption

(g/week)

Typical Egg Production (hen-

day %)0 35 45 _2 135 90 _4 270 180 _6 450 260 _8 620 325 _

10 790 385 _12 950 430 _14 1,060 460 _16 1,160 460 _18 1,260 460 _20 1,360 460 _22 1,425 525 1024 1,500 595 3826 1,525 665 6430 1,725 770 8840 1,815 770 8050 1,870 765 7460 1,900 755 6870 1,900 740 62

48