Emu farming


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Step by step guide to start a emu farm.

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Emu farming

  1. 1. Date: 1st September 2010<br />1737360278130<br />Final Project<br />In partial fulfilment of the requirements of the course <br />“Project Management" of MBA (Full Time)<br />Submitted To:-<br />Prof. H.K. Shrivastav<br /> <br /> Submitted By:-<br /> Tanesh Gagnani <br />Roll No. 081121<br /> TOC o "1-2" h z u <br />Introduction PAGEREF _Toc271337128 h 2<br />Emu PAGEREF _Toc271337129 h 2<br />What is Emu Farming PAGEREF _Toc271337130 h 3<br />Why Emu Farming PAGEREF _Toc271337131 h 3<br />Scale proposed for Start-up PAGEREF _Toc271337132 h 3<br />Resources Required PAGEREF _Toc271337133 h 3<br />Cost of Building and interiors PAGEREF _Toc271337134 h 7<br />Rationale PAGEREF _Toc271337135 h 10<br />Why I am choosing Emu Farming PAGEREF _Toc271337136 h 10<br />Industry outlook PAGEREF _Toc271337137 h 10<br />Establishing PAGEREF _Toc271337138 h 11<br />Operational Process PAGEREF _Toc271337139 h 12<br />Cash Flow Projections and Break-Even Analysis Money is not raised through loan PAGEREF _Toc271337140 h 14<br />Only Eggs are sold PAGEREF _Toc271337141 h 14<br />Eggs and meat both are sold PAGEREF _Toc271337142 h 16<br />Cash Flow Projections and Break-Even Analysis Money is raised through loan and further refinanced by NABARD PAGEREF _Toc271337143 h 18<br />Only Eggs are sold PAGEREF _Toc271337144 h 18<br />Eggs and Meat are sold PAGEREF _Toc271337145 h 20<br />Risks PAGEREF _Toc271337146 h 21<br />Risk Assessment PAGEREF _Toc271337147 h 21<br />Exit Strategy PAGEREF _Toc271337148 h 22<br />Introduction<br />Emu<br />The Emu, Dromaius novaehollandiae, is the largest bird native to Australia and the only extant member of the genus Dromaius. It is also the second-largest extant bird in the world by height, after its ratite relative, the ostrich. The soft-feathered, brown, flightless birds reach up to 2 metres (6.6 ft) in height. It can survive in almost any climate; it has very strong immune system which means it requires very little care.<br />Emus are birds of very docile and calm nature and live in flocks with a flock size ranging between 16 to 20 Emus. In captivity it is prescribed that each bird should have a minimum area of 400 to 500 sq Ft. Emus breed mostly in monogamous pairs with 1 male for 1 female. In some rare cases the ratio may go up-to 1 male for 2 females. Emus live for about 45-50 years.<br />What is Emu Farming<br />Emu farming is a branch of poultry in which Emus are domesticated and farmed; much like farming of chickens. Only differentiating factor in my opinion is though chickens are farmed for direct consumption i.e. for their meat and eggs which are consumed and their consumption is very common whereas Emu derivatives have mostly medicinal value and their meat is not very popular, Possibly because it is not easily available.<br />Why Emu Farming<br />The main reason for considering Emu Farming is <br /><ul><li>Low start-up capital
  2. 2. Very high Return on Investment
  3. 3. Low risk</li></ul>Scale proposed for Start-up<br />For start-up I would suggest a of farm with 160 birds. These 160 birds can be divided into 8 flocks which would require a total area of 2 acre or 87120 sq Ft (approx). <br />Resources Required<br />Emu farming does not require huge amount of resources, resources here have been separated into two broad categories i.e. capital expenditures and working capital.<br /><ul><li>Capital Expenditures: It is the money spent on purchasing/acquiring fixed assets
  4. 4. Land: Here land is the most significant of all costs, although land required for Emu farming is of very low quality i.e. flat baron land on which nothing grows and on which water must not stay i.e. rain water should flow away from it. Also there is no concern over the location of farm since Emus can survive almost any temperature range (0°C to 52°C) only constraint is it must not be in region of heavy rainfall or mountains/ hilly regions).
  5. 5. Cost: Absolutely baron lands can be acquired anywhere in Rajasthan, Gujarat, western Madhya Pradesh (this is in the order of my personal preference) will cost anywhere between Rs.1.5Lakh to Rs.1.7Lakh per acre. We are estimating cost of land to be Rs.1.7Lakhs. The location will be either in outskirts of a city or in a village; whichever is available.
  6. 6. Procurement: It will be procured on the basis of my convenience meaning how accessible it is and lowest cost land which fulfils the criteria required will be procured.</li></ul>all individual sections are of almost square shape and each of edge 101 ftRoadFlock 1 (Open area)Flock 2 (Open area)Flock 3 (Open area)Flock 4 (Open area)211 ft totalFlock 1 (Shade)Flock 2 (Shade)Flock 3 (Shade)Flock 4 (Shade)Internal RoadFlock 5 (Shade)Flock 6 (Shade)Flock 7 (Shade)Flock 8 (Shade)Flock 5 (Open area)Flock 6 (Open area)Flock 7 (Open area)Flock 8 (Open area)422 ft total<br />Floor plan of Emu Farm (Building is not shown)<br /><ul><li>Land Improvement: land will be divided into 8, each of which will house one flock of Emus.
  7. 7. Fencing: A 6’ high and 1870 ft long meshed fencing would be required to fence entire farm. Fence’s purchase and installation cost I am estimating to be Rs. 100000.
  8. 8. Shelter (Shade): Emu will need shelter to protect them from rain. I will be installing a shade made of thick cloth and plastic which is flexible. Shade here will be 10 feet wide and spread across the length of farm. Total material required will be about 8500 sq ft. Here again purchase and installation cost I am assuming to be Rs. 100000.</li></ul>Land ImprovementObjectCostdimensionsFencing1000006' high and total length 1860 ftShade100000total area 1840 sq ft<br /><ul><li>Emu Chicks: I will be purchasing a total of 160 Emu chicks which are currently sold in the market at Rs. 1200 per chick. They can be bought from nearest Emu farm. Total expenditure on procurement of Emu chicks will be Rs.192000 only.</li></ul>ParticularsCostParticularsEmu Chicks192000160 Emu chicks @ 1200/chick<br /><ul><li>Building and interiors: Building space can be divided into two categories
  9. 9. Office Space: Office space required will be very less but for my own convenience I would like it to be of dimensions 12’x12’.
  10. 10. Personal Space: There will be times when I will be staying there for days or weeks at a time so I will need my own kitchen, bedroom, bathroom and toilet. The building material and interiors will be procured at prevailing market rates.</li></ul>Cost of Building and interiors<br />ObjectCostdimensionsDetailsOfficeConstruction7200012'x12'Rs. 500 per sq-ftInteriors20000fan, office table, 4 chair, stationary, computer needs will be fulfilled by my own laptopTotal92000Personal BedroomConstruction7200012'x12'Rs. 500 per sq-ftInteriorsBed15000Normal market priceTV + Tata sky15000Normal market pricecooler + ceiling fan8000Normal market priceTotal38000KitchenConstruction560008'x10'Rs. 700 per sq-ftInteriorsStove5000Normal market priceutensils2000Normal market pricerefrigerator8000Normal market pricetotal71000Room for caretakersConstruction7200012'x12'Rs. 500 per sq-ftInteriors600010'x10'fan, bed, 3 plastic chairstotal78000toilet and bathroomConstruction448008'x8'Rs. 700 per sq-ftGrand total323800676 sq ft<br /><ul><li>Incubators (optional depending upon the scale): For now I am not going to install incubators but if I expand at a later stage (at least 5 years from now) we will install incubators.
  11. 11. Training: To better understand Emu I will undergo a 5 day training following Emu Farm organizers they will also provide me with technical information in the form of books, CDs, etc. During training I will also gain firsthand experience.</li></ul>Sree Sakthi Farms, 486, G.V. Residency, Sowripalayam, Coimbatore - 641 028. Telephone: 0422- 2577989/2590924 Mobile: 09363127989/098658-97989 / 098658-96969, E-mail: rk@tamilnaduemubird.com<br /><ul><li>Working Capital
  12. 12. Emu Feed: These Birds are Omnivorous and eat leaves, vegetables, fruits, insects, worms. At farm mineral mixture and shell/ stone grit can be fed to them along with sprouted desi Chana and Methi during layer season. During summer season chopped vegetables like cabbage, carrot, beetroot, etc can be fed. They can also be fed ‘Modified Poultry Feed’. With feed on an average costing Rs 12 a kg, feed costs per mature emu is Rs 3,000 per year. Total expenditure on feed for 150 birds will be Rs 450000 per year. </li></ul>Feed Cost201120122013 onwardsFeed Cost yearly (per Bird)250035004000Feed Cost yearly (total)400000525000600000salaries expense210000220000230000<br /><ul><li>Vet costs: Chlorinated water is to be given and deforming is needed to be done twice a year. No regular doctor check-up is required.
  13. 13. Caretakers: 3 care takers will be hired and their training will be done at locally either by me or at other Emu farm. Salaries will be paid to them depending upon region. My estimate is I would be paying them Rs 5000 per month, upon including bonuses their total salaries would come out to be Rs 70000 per year per person. Total expenditure on salaries will be Rs 210000 per year. Further details are available in future cash-flow projections.</li></ul>Rationale<br />Why I am choosing Emu Farming<br />Once the farm is setup it does not require complete attention all the time and if I get placement at a non metro or preferably a small city then I will be able to operate an Emu farm while working elsewhere also. The birds are low maintenance having a long life during which period they contribute more than 27 lakhs in eggs alone. Being hardy animals they are not prone to many diseases and have a low mortality rate.<br />The business apart from having a very high return on investment will also give me the flexibility to pursue my career as a professional which will help me gain necessary exposure to run a business if the venture turns out to be expandable.<br />Industry outlook<br />Emu farming started very late in India in 1996 with just 1 farm and now there are an estimated over 1000 emu farms. Emu farming has picked up at a low rate in India even though it is a very low risk and highly profitable business. There is an excellent opportunity in this business therefore with a intent to encourage Emu farming NABARD has started a scheme to refinance loans for Emu business at 5% interest rate.<br />Establishing<br />Operational Process<br />A single Emu bird lays 20 to 40 eggs in a year and hatching takes anywhere between 43-50 days. Emu takes about 12 months to grow to full size and 18 months to reach reproduction maturity age.<br />Farm may sell<br /><ul><li>Eggs: Rs. 1000 per egg.
  14. 14. Chick new born: Rs. 1200 per chick.
  15. 15. Emu Meat: Rs. 400-700 per Kg depending upon region.
  16. 16. Emu Fat: Rs. 1700 per Litre
  17. 17. Emu hide: Rs. 1000 per mature Emu
  18. 18. Bones, feathers, empty shells, un-hatched shells, nails, and beaks are sold depending upon demand, prices are tough to estimate.</li></ul>Farm’s decision on how many Emus to slaughter Emu, how many chicks and eggs to sell will depend upon the number of Emus in the farm compared to maximum capacity also the mortality rate of Emus, percentage of eggs hatching. The obvious idea kept in mind for these decisions will be to maximize profitability.<br />Cash Flow Projections and Break-Even Analysis Money is not raised through loan<br />Only Eggs are sold<br />Cash Flow If Only Emu Eggs are Sold without loan20112012201320142015Capital ExpenditureBuilding3958000000Land Improvement2000000000purchase of Emu Chick1920000000Working Capital InvestmentCaretaker Salaries210000220000230000230000230000Feed400000525000600000600000600000Maintenance00200050005000Misc Expense10000070000500005000050000RevenueNet Sales01125000187500018750001875000TaxAgriculture income is Tax FreePAT-1497800310000993000990000990000Net Cash Flow-1497800-1187800-1948007952003283000<br /><ul><li>Break-Even is achieved in 4th year of operations.
  19. 19. Here I have taken an assumption that I will not slaughter the bird. I will only sell its eggs.
  20. 20. Cost of building, land improvement and caretaker salaries have already been discussed in resources required.
  21. 21. Feed here I have taken an assumption that when birds are young will eat less and hence the feed cost will be less. It has not been taken very low because Emus grow very fast.
  22. 22. I am assuming there will be no maintenance in 1st and 2nd year of operation since everything will be new but maintenance will be incurred 3rd year onwards.
  23. 23. Miscellaneous expense will be highest in 1st year of operation since business will be new and since there will be a lot of learning from 2nd year onwards I will be able to avoid a lot of miscellaneous expense but at 50000 it will stabilize, hence the figure Rs 100000 in 1st year, Rs70000 in 2nd, Rs 50000 in 3rd and 4th year.
  24. 24. No eggs will be produced in 1st year hence no sales.
  25. 25. 160 Emus purchased 10 will not survive till 2nd year.
  26. 26. During 2nd year eggs are only produced at an average rate of about 15 eggs per Emu (pair) and since each egg is sold for Rs 1000 the total is Rs 1125000.
  27. 27. From 3rd year onwards eggs will be produced at an average rate of about 25 eggs per Emu (pair) and since each egg is sold for Rs 1000 the total is Rs 1875000.
  28. 28. As already written agriculture income is tax free, this will be a huge advantage.</li></ul>Eggs and meat both are sold <br />Eggs and Meat both are sold Without Loan20112012201320142015Capital ExpenditureBuilding3958000000Land Improvement2000000000purchase of Emu Chick1920000000Working Capital InvestmentCaretaker Salaries280000293000293000293000293000Feed400000525000600000600000600000Maintenance00200050005000Misc Expense10000070000500005000050000SalesMeat0750000750000750000750000Eggs0975000975000975000975000Fat0225000225000225000225000Hide075000750007500075000Everything Else0112500112500112500112500Total Sales02137500213750021375002137500TaxAgriculture income is Tax FreePAT-15678001249500119250011895001189500Net Cash Flow-1567800-31830087420020637003253200<br /><ul><li>Here break-even is achieved in 3rd year of operations.
  29. 29. Here I have assumed that I will from second year onwards I will slaughter only half the birds.
  30. 30. The only additional expense here is hiring of a butcher, I have estimated his salary to be Rs 5000 per month, upon including bonuses his cost to farm will be Rs 70000 per year for 1st year and Rs 73000 from second year onwards.
  31. 31. Fat derived from every bird will average out to be of Rs. 3000.
  32. 32. Meat selling price I have taken a conservative estimate of Rs 500 per Kg and assuming each bird will provide 20Kg of meat.
  33. 33. Hide is sold for Rs. 1000 per bird.
  34. 34. Everything else bones, feathers, empty shells, un-hatched shells, nails, and beaks I have assumed will be sold for Rs 1500 per bird which is a conservative estimate.
  35. 35. Of every 15 eggs produced 13 will be sold and 2 will be hatched to replace slaughtered birds.</li></ul>Cash Flow Projections and Break-Even Analysis Money is raised through loan and further refinanced by NABARD<br />Only Eggs are sold<br />Loan DetailsParticulars% approvedTotal AmountApproved amountInterest RateLoan approved by cooperative bank80%2972800237824012%Loan approved for Refinancing by NABARD60%237824014269945%<br />Cost of DebtParticularsInterest rateWeightCooperative bank12.00%0.4NABARD5.00%0.6Cost of Debt7.80%1Annual Loan PaymentsRs. 3,06,799.57<br />Particulars2011201220132014201520162017Capital ExpenditureBuilding395800000000Land Improvement200000000000purchase of Emu Chick192000000000Working Capital InvestmentCaretaker Salaries210000220000230000230000230000230000230000Feed400000525000600000600000600000600000600000Maintenance0020005000500080008000Misc Expense100000700005000050000500005000050000RevenueNet Sales0112500018750001875000187500018750001875000TaxAgriculture income is Tax FreeLoanLoan Issued1426944000000Loan Repayment0-3,06,800-3,06,800-3,06,800-3,06,800-3,06,800-3,06,800Profits and Cash FlowPAT-1497800310000993000990000990000987000987000Cash Flow-708563,2006,86,2006,83,2006,83,2006,80,2006,80,200Net Cash Flow-70856-67655.6618544.9130174519,84,94626,65,14633,45,347<br /><ul><li>Here loan is taken for 7 years from a cooperative bank. In case of Emu farms prevailing market rate for loans is 12%.
  36. 36. It is estimated (conservative) that I will be able to get loan on 80% of the net capital expenditure and working capital needs.
  37. 37. It is estimated (conservative) that I will be able to get 60% of the loan refinanced through NABARD.
  38. 38. Rest of the estimates and explanations are same as in section ‘only eggs are sold section of Cash Flow Projections and Break-Even Analysis Money is not raised through loan’.</li></ul>Eggs and Meat are sold<br />Eggs and Meat both are sold without Loan2011201220132014201520162017Capital ExpenditureBuilding395800000000Land Improvement200000000000purchase of Emu Chick192000000000Working Capital InvestmentCaretaker Salaries280000293000293000293000293000293000293000Feed400000525000600000600000600000600000600000Maintaince0020005000500080008000Misc Expense100000700005000050000500005000050000SalesMeat0750000750000750000750000750000750000Eggs0975000975000975000975000975000975000Fat0225000225000225000225000225000225000Hide0750007500075000750007500075000Everything Else0112500112500112500112500112500112500RevenueTotal Sales0213750021375002137500213750021375002137500TaxAgriculture income is Tax FreeLoanLoan Issued1426944000000Loan Repayment0-3,06,800-3,06,800-3,06,800-3,06,800-3,06,800-3,06,800Profits and Cash FlowPAT-1567800124950011925001189500118950011865001186500Cash Flow-1408569,42,7008,85,7008,82,7008,82,7008,79,7008,79,700Net Cash Flow-14085680184416875442570245345294543326465212346<br /><ul><li>Here loan is taken for 7 years from a cooperative bank. In case of Emu farms prevailing market rate for loans is 12%.
  39. 39. It is estimated (conservative) that I will be able to get loan on 80% of the net capital expenditure and working capital needs.
  40. 40. It is estimated (conservative) that I will be able to get 60% of the loan refinanced through NABARD.
  41. 41. Rest of the estimates and explanations are same as in section ‘eggs and meat are sold section of Cash Flow Projections and Break-Even Analysis Money is not raised through loan’.</li></ul>Here it can be clearly seen that taking a loan and getting refinanced and raising the bird for meat and eggs both is the most profitable option. I am going to implement that option.<br />Risks<br /><ul><li>Budget overshoot: The cost estimates given for constructing building may overshoot.
  42. 42. Since I will investing most of the money by raising loan and considering the very high ROI and knowing my own capacity I will be able to bear some extra cost.
  43. 43. Contractors leaving: Contractors contracted for construction of building and land improvement may ask for more money or may leave the job unfinished.
  44. 44. In this case project will be delayed
  45. 45. Emus may die of disease: This is a very high risk which can kill the entire project.
  46. 46. This is highly unlikely since Emus have very strong immune system.
  47. 47. Caretakers may Quit: It’s a low skill job so new caretakers can be hired and trained within a week.
  48. 48. New caretakers will be hired and trained on the job by me.
  49. 49. I may fail as a Manager: I may not have the heart to make money out of slaughter of Emus.
  50. 50. If this happens then nothing can be done besides selling off the business.</li></ul>Risk Assessment<br />Risk EventLikelihoodImpactDetection DifficultyWhenRisk ValueBudget overshoot432implementation24Contractors leaving333implementation27Emus may die of disease153Start15Caretakers may Quit234anytime24I may fail as a Manager252Post-implementation20<br />There is actually very little risk involved with this and this is one of the biggest reasons of me being attracted towards this business.<br />Exit Strategy<br />I will sell off the entire business piece by piece. All of the money invested will be recovered and more by this method if it happens after 2 years of procurement of Emu chicks. if not then I will somehow sustain the business for 2 years and then quit. <br />Each pair of breeding Emus are sold for anywhere between Rs.40000 to Rs. 45000. Therefore total money recovered by selling Emus will be 33.75Lacs upon taking conservative estimate of Rs 40000 per pair.<br />I will still make profit. All I have to do is keep the birds alive.<br />