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Investing in Poultry Farming in Uganda

So you want to do business in Uganda investing in poultry farming and “Mavi ya kuku”?

For starters, I am not abusing anyone like Uganda’s Colonel Kahinda Otafire and his shall I call them “famous euphemisms” including the “Mavi ya Kuku” statement. For the uninitiated, “Mavi ya kuku” is a Swahili word to refer to chickens and when you deal with chicken you will literally have to dig your feet deep in chicken s%*t (literally) but I will tell you about these are. money makers later. I present my analysis of investment in the poultry sub-sector in Uganda.

THE CONSULS FIRST (OF COURSE)

1. Too many so-called “chicken experts”

The beauty about chicken farming is that almost every Ugandan knows something about it; oh some part of it anyway, almost every “Kampala person” who went to their village for Christmas most likely got a gift of chicken and likewise those of you who are “traditionalist men” know that in your home you are the only one . one was entitled to eat “nkoko nkulu”. The “Nkoko Nkulu” is the chicken gizzard and it is traditionally served to the head of the house or in many cases to a special visitor (usually male) as a sign of respect and a special welcome to that household.

Ugandans know everything because chicken is an integral part of the DNA of Ugandan life. Despite this, having almost everyone know about some form of chicken farming can however also be a potential investor’s worst enemy especially if you are looking to do it on a commercial basis. You see, while every “Tom, Dick and Oryem” will claim that they have experience in chicken farming, most of it is with indigenous chicken farming, which is not the same as commercial farming, the purpose of this article.

A local Ugandan chicken for example produces only 40 eggs a year (a little over 1 egg a month!) compared to an exotic chicken (like the razor brown variety) which produces about 300 eggs a year (that’s almost one egg a day!)

If you don’t get the right person and choose to listen to every “Tom, Dick and Amerit”, immediately you know that your entire stock has been wiped out by coccidiosis.

2. Marketing and Distribution bottlenecks

Uganda is still very much a “localized retail” based sector for the chicken/poultry sector. For example, you may have to sell your eggs shop by shop or to neighboring towns because there may not be many “supermarkets” or “wholesale buyers” that provide a ready market to absorb the product and therefore you may have to rely on middlemen. coming from afar. That in itself gives rise to price extortion by these middlemen. These bottlenecks are because so far there is no formalized large-scale transport distribution network to get your product from the poultry production area (mainly Northern and Eastern Uganda) to the key market (mainly Central Uganda). In addition, our transport network is not well developed due to the state of roads. You will therefore need to establish the market and distribution logistics for your product early as this can affect your profitability.

3. Cost of nutrition

Chicken nutrition is perhaps one of the most important aspects of ensuring profitability of your poultry business. It was estimated to cost between 60 and 70% of the total cost of production. You need to make sure you are getting the best quality feed because of course that means you will have a healthy chicken (and good quality eggs).

The high food situation is quite serious in Uganda and from recent news (August and October 2011) many Ugandan poultry farmers are driven out of business and so before you invest, you must consider this very carefully. This high feed price is driven by an increase in corn bran prices. Corn bran composition is about 52% of chicken feed. Coupled with high Maize bran prices is the fact that fish stocks in Uganda seem to be running out quickly (fish is about 10-20% of the chicken feed composition).

4. Illness

I touched on this briefly when I mentioned coccidiosis earlier. There are, however, other chicken diseases such as New Castle disease, which can wipe out the entire poultry. I have not however classified this risk at the top of the CONS, as any serious investor will hire a competent and suitably experienced farm manager to prevent disease threats and also have access to a good vet/doctor and this should further reduce this threat.

5. Cost of capital

Sustainable commercial chicken farming requires a lot of capital especially since layers last about 17 weeks before they start producing eggs and so for this period there is no income. The investor will therefore have to provide working capital for this period of about 4 months before he can expect any income. This working capital includes the key cost of chicken feed.

According to my estimates (I’ll come to that later) you need about Shs 26m as start-up capital for a 1000 chicken farm (shaved brown variety). I will cover the details in the section below.

AND NOW THE PROS

1. Chickens are here to stay

Chicken has been around for a long time and in the developed world chicken is cheaper than beef. The reverse is true in Uganda and chicken is usually reserved for special days (like when I passed my P.7-PLE exams and got accepted into the school of my first choice). In Uganda, however, this will change especially as our population grows and more people emerge from poverty. Recent studies show that we increased egg consumption by 28% and chicken consumption by 60% between 2000 and 2006.

Ugandan girls really love Chicken (and fries)! [This last statement is “tongue in cheek” in reference to the fact that many a Ugandan man seeking to impress a girl, perhaps a Univeristy student will often buy her Chips and Chicken from the many “takeaways”in urban areas especially around Kampala and its suburbs including the popular takeways in Wandegeya which is in the proximity of Makerere University.]

I can further expect that with the continuing East African community expanding and us working towards regional integration, there will remain a continued demand for eggs and chicken.

2. Excellent profitable return on capital

Despite the several articles talking about the cost of chicken feed crippling the industry, I believe that this industry sector still offers some of the best returns on investment. According to my estimates below, it has a return on investment of 1.09 years! I present my assessments below. The estimates are based on a sustainable investment of 1000 layers of the shave brown variety. All figures are in Uganda Shillings. The exchange rate in November 2011 is approximately I USD = Shs 2,700

Summary 1: Initial capital

A: Fixed costs (first)

1. Chicken house and related items: Shs 3,450,000

2. Electricity and water (connection): Shs 1,000,000

3. Legal and other start-up costs: Shs 700,000

4. Training: Shs 42,000

Subtotal: Shs 5,192,000

B: First 4 months (week 1-17)

1. Day-old chicks (1000 of them): Shs 4,500,000

2. Chicken feed (starter): 13,043,836

3. Other incidental costs: 220,000

Subtotal: Shs 17,763,836

C: Work (week 1-17)

1. Farm supervisor: Shs 800,000 (200k per month)

2. Farm Manager: Shs 1,200,000 (300k per month)

3. Farmers: Shs 720,000 (Estimated at 3 hands each earning 60k per month)

4. Veterinary office Shs 90,000 for 3 visits.

Subtotal: 2,810,000

D: Occurrence (10%): 2,576,584

TOTAL START: 28,342,419

Summary 2: Profit and Return on Investment

INCOME (for 8 months)

The income is estimated at 1,000 hens with a mortality rate of 7% so 930 hens net. It is estimated that each hen lays 292 eggs per year. This is estimated over an 8-month period to comprise the first financial period (as 4 months are in which the chicken matures). In Uganda, eggs are sold in trays of 30. It is estimated as of August 2011 that each egg cost Shs 300 thus meaning that a tray costs Shs 9,000.

Based on above, Income during the period will be:

1000 hens less 7% mortality: 930 hens * 292 eggs each = 271,560 eggs = 9,052 trays

Each tray is Shs 9,000 so 9,052 *9000 = Shs 81,468,000 per year (or 292 days during an annual period when the hens lay)

Professional estimates the annual income to the 8 months is an income of Shs 54,834,231

COSTS (Monthly for 8 months)

1. Chicken feed: 24 261 534. This is estimated at a hen consuming approximately 37 kg per year.

At August 2011, layer meal (which a chicken eats mostly from 17 weeks of growth) cost Shs 75,000 per 70 kg bag. Based on the above, a chicken consumes about 108.7 Shs of feed per day.

The total cost for the 8 months is therefore Shs. 24,261,534

2. Transport to market: Shs 5,400,000 (estimated at Shs 15,000 daily)

3. Labor (on the same basis as labor costs in first 4 months but for 8 months): Shs 10,940,000

4. Utilities (water and electricity): 720,000

5. Miscellaneous: 1,800,000

Subtotal: Shs43,121,534

Operating profit: Shs 11,712,697

Other income:

1. Sale of chicken (after their productivity cycle ends): 6,510,000. I guess each chicken will be sold for Shs 7,000 the market price in August 2011.

2. Less: Costs to market: 200,000

3. Chicken droppings: 8,035,510

(estimated on 11479 kg of faeces produced on the basis that is 1/3 of food). Each kg being sold at Shs700.

NET Profit (incl. other income): Shs 26,058,207

Return on capital: 1.09 years.

As you can see from above, In 1 year you can expect to recoup your cost! I don’t think there is anything more to say about this sector, but for those who are, well there is a third reason this is good.

4. Benefits of social responsibility

Charities and other NGOs recognize the impact that poultry farming has on rural communities especially on women and several studies show that this is the next social revolution.

SUMMARY AND THE FINAL WORD

First the numbers

Based on my analysis:

* Capital investment (A): Shs 28,342,419

* Income per year (including other income): Shs 69,179,741

* Profit per year (income (including WIFI) and excluding all expenses) (B) is Shs 26,058,207

* Return of capital (years to recover capital or A/B) is 1.09 years

Now the basics you need to get right before investing.

* Working capital. As I said at the beginning, for about 4 months you will continue this business without any income, you must therefore secure the necessary funds especially for chicken feed. You cannot compromise on feed quality or quantity when cash flow is lacking, as this will ultimately affect the quality of eggs and chicken.

* Agricultural support and training. This is a sector that the government, NGOs, donors have put in a considerable amount of money and so there is no excuse not to use support facilities right from NAADS to district support projects, NGO supported projects, even many of the daily chicken suppliers. provide courses.

* Market/distribution network. There are significant bottlenecks in Uganda and it’s all well and good to develop capacity for 1000 birds but if you can’t get them to market it’s a waste. Therefore, it will be important that wherever you choose to locate your property, you consider how you will get it to market.

* Earth Now you will notice that I did not consider the cost of land in this analysis. The reasons are multiple. When I thought about this business venture and from my research, an investor can get the land for free in exchange for example hiring local people, relatives in rural areas and the like.

That’s why I didn’t consider it a big deal. Besides chicken usually does not require a lot of land and if necessary this land can be “rented” cheaply in many rural areas in Uganda. Of course you should not choose to invade the land at Mabira forest or maybe in a wetland because then my “friend” Col Otafire might ask you if you are a frog!

A FINAL WORD

As I said, this sector is going nowhere and there will continue to be demand for agricultural products. Furthermore, as the developed world becomes more willing to pay for “organic” products, Ugandan poultry will continue to be highly valued.

I promised to emphasize about “Mavi ya Kuku” in more detail and you will notice that in my analysis of income, this sh%*t really brings in money because because the agricultural sector continues to expand and because fertilizers continue to be more expensive. , farmers will look for alternatives. Chicken poop can be that future and so yes, “Mavi ya Kuku” together with “Nkoko Nkulu” is our future!

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