Question of the Week
Can you direct me to some resources for finding financial analysis information for a value-added food processing enterprise?
You had asked about sources of financial analysis information (cash flow, breakeven, pro forma) for a value-added food processing enterprise.
As far as templates, here are some good ones. The Canadian one at
www.agf.gov.bc.ca/busmgmt/budgets/value_added.htm is especially good as it features some sample enterprises.
Some others can be found here:
http://kaic.psu.edu/resources/EvalFeasibilityValAdEnt.pdf (PDF/752 KB)
As far as actual financial information, naturally, that is harder to come by. At www.cfap.org/afs_temp3.cfm?topicID=275, you can find some financials on shared-use kitchens.
This project, focused on value-added dairy, collected financial and production information from existing value-added producers:
http://aem.cornell.edu/research/researchpdf/rb0607.pdf (PDF/1.46 MB)
Here is some more on dairy: http://jds.fass.org/cgi/reprint/90/5/2506.pdf
Here is a study from K-State on profitability of various food and agribusiness firms:
http://www.agmanager.info/agribus/econissues/mf2487.pdf (PDF/95 KB)
The info at www.ibiblio.org/farming-connection/foodsys/addval.htm#summaryD
may be useful.
This is actually a Finnish study entitled "How do small rural food-processing firms compete?" but I think it is useful:
http://ethesis.helsinki.fi/julkaisut/maa/talou/vk/forsman/howdosma.pdf (PDF/2.92 MB)
For related information see the following ATTRA publications:
Agricultural Business Planning Templates and Resources
Enterprise Budgets and Production Costs for Organic Production
Keys to Success in Value-Added Agriculture
Answer: I am pleased to provide you with information on uses of excess whey from cheese production.
Whey is a byproduct of cheese production and contains mainly lactose, minerals, and water (6-7% total solids). Approximately nine pounds of whey are produced and a gallon and a half of water is used for every pound of cheese produced. In some regions a market has been developed for the whey, but most producers find the whey to be a liability, with costs associated with shipping for land application as much as $30 to $40 per ton. There are some alternatives, and they all require the development of some new type of farm infrastructure. This letter will describe some work that has been done looking at whey as a cattle feed, a pasture fertilizer, and as a biogas feedstock.
Feeding Liquid Whey to Cattle
Direct feeding of liquid whey: Liquid whey can be fed to cattle much the same way water is delivered to cattle in dairy stall barns. A closed, gravity fed system would work well as it combines a simple, low-input system with the benefits of fly control. Whey has a low pH (around 3 or 4) and this helps to prevent spoilage as well.
Cattle drink liquid whey much the same as any liquid feed supplement, but will consume as much as 80 to 100 pounds of free-choice whey per head per day. It is important to substitute whey for other concentrates because large consumption of whey can reduce forage intake. Always change cattle rations slowly, as bloat or acidosis may result. Although a liquid, whey is nutrient dense and will not replace water in the diet. Provide clean, free-choice water at all times (Shaver, no date).
Whey silage: Another feeding method mix whey with chopped low quality forage in a feed mixer to make whey silage for cattle. After about a month the silage is completely fermented and stable, as long as it remains covered and protected. Whey silage has a dry matter of 30 to 40%, and crude protein (CP) of around 11 to 13% (ZoBell and Burrell, 2002). The energy content is usually 98% of the energy value of ear corn.
Application to Pasture as a Fertilizer
See New Zealand Journal of Dairy Science and Technology article, "Utilization of Whey as a Fertilizer Replacement for Dairy Pasture." Of particular interest is Table 1, which contains a chemical analysis of three kinds of whey: lactic casein, suphuric casein, and cheese; and Table 2, which lists the approximate amount of plant available nutrients in kilograms per hectare contained in the recommended application rate of 40,000 liters/ha [4278 gallons per acre]. The New Zealand authors concluded that whey can replace conventional fertilizers in dairy pastures, and provide suggestions for application equipment and storage pits.
Biogas from Anaerobic Digestion
Organic matter can be decomposed by bacteria in an oxygen-free environment, yielding methane that can be used as an energy source. Just about any organic substance will do, but some feedstocks are more efficient at yielding methane than others. It so happens that whey is an excellent feedstock for producing methane, and has some potential for contributing to the energy needs on the farm.
According to the European Anaerobic Digestion Network (2005), “the digestion process takes place in a warmed, sealed airless container (the digester) which creates the ideal conditions for the bacteria to ferment the organic material in oxygen-free conditions. The digestion tank needs to be warmed and mixed thoroughly to create the ideal conditions for the bacteria to convert organic matter into biogas (a mixture of carbon dioxide, methane and small amounts of other gases).
“There are two types of AD processes:
Mesophilic digestion: The digester is heated to 30 – 35 degrees C [86 – 95 degrees F] and the feedstock remains in the digester typically for 15-30 days. Mesophilic digestion tends to be more robust and tolerant than the thermophilic process, but gas production is less, larger digestion tanks are required and sanitization, if required, is a separate process stage.
Thermophilic digestion: The digester is heated to 55 degrees C [131 degrees F] and the residence time is typically 12-14 days. Thermophilic digestion systems offer higher methane production, faster throughput, better pathogen and virus ‘kill’, but require more expensive technology, greater energy input and a higher degree of operation and monitoring.
“During this process 30-60% of the digestible solids are converted into biogas. This gas must be burned, and can be used to generate heat or electricity of both. It can be burned in a conventional gas boiler and used as heat for nearby buildings including farmhouses, and to heat the digester. It can be used to power associated machinery or vehicles. Alternatively, it can be burned in a gas engine to generate electricity. If generating electricity, it is usual to use a more efficient combined heat and power (CHP) system, where heat can be removed in the first instance to maintain the digester temperature, and any surplus energy can be used for other purposes. A larger scale CHP plant can supply larger housing or industrial developments, or supply electricity to the grid.
“As fresh feedstock is added to the system, digestate is pumped from the digester to a storage tank. Biogas continues to be produced in the storage tank; collection and combustion may be an economic and safety requirement. The residual digestate can be stored and then applied to the land at an appropriate time without further treatment, or it can be separated to produce fiber and liquor. The fiber can be used as a soil conditioner or composted prior to use or sale. The liquor contains a range of nutrients and can be used as a liquid fertilizer which can be sold or used on-site as part of a crop nutrient management plan.
“AD products can, therefore, help farmers reduce their requirement for non-renewable forms of energy such as fossil fuels, and the digestate, if correctly used, can reduce demand for synthetic fertilizers and other soil conditioners which may be manufactured using less sustainable methods” (The European Anaerobic Digestion Network, 2005).
Amaral-Phillips, Donna M., and R.. W. Hemken. 1997. Using Byproducts to Feed Dairy Cattle. University of Kentucky Cooperative Extension.
Balsam, John and Dave Ryan. 2006. Anaerobic Digestion of Animal Wastes: Factors to Consider. Butte, MT: ATTRA, the National Sustainable Agriculture Information Service.
European Anaerobic Digestion Network, The. 2005. AD Basics; How Does it Work.
McGinnis, Laura. 2007. New Uses for Dairy Byproducts. Agricultural Research, May/June.
MDA. 2005. Opportunities, Constraints, and Research Needs for Co-digestion of Alternative Waste Streams with Livestock Manure in Minnesota. Minnesota Department of Agriculture, Agricultural Resources Management and Development Division.
Radford, J.B., D.B. Galpin, and M.F. Parkin. 1986. Utilization of whey as a fertilizer replacement for dairy pasture. New Zealand Journal of Dairy Science and Technology. Vol. 21. p. 65-72.
Shaver, Randy D. No date. By-Product Feedstuffs in Dairy Cattle Diets in the Upper Midwest. College of Agricultural and Life Sciences, University of Wisconsin -Madison
ZoBell, D.R., and W. C. Burrell. 2002. Producing Whey Silage for Growing and Finishing Cattle. Utah State University Extension.
Answer: I am pleased to provide you with information regarding business plans and production on your new farm enterprise.
Please refer to the ATTRA publication “Market Gardening a Start-up Guide.” This publication provides an overview and an extensive resource list to spring-board you into finding more information on the topic of starting a farm. In the appendix of this publication is a list of different equipment needs for different farm sizes (in acres) this will help guide you to determine the start-up costs of your enterprise. In this letter I will outline some considerations for starting your farm as well as a list of further resources to help you in this endeavor.
I would advise you to assess your goals, land, and the resources on your land. Some considerations that may help direct your research and save time and much needed energy for starting your new enterprise are as follows:
• Identify your own personal values
o E.g. Do you want to have a certified organic farm?
o Do you want to spend more time with your family
o Do you want an enterprise that will equal your current salary,
o Or is a mellow lifestyle your goal?
• What are your personal goals and vision for your property
o While this is closely related to the above bullet, you can create your goals for your property based on your personal values.
o This is often left out of business planning templates, but can be an important component in your assessment.
o It is something that you can, and should, come back to when there is a question about what direction you want your business to go.
• Assess your property
o Consider size, location, soils, resources on your property
o E.g. You are on very little acreage, so you will most likely need to grow high value crops such as lettuce, flowers and tomatoes.
o Soil is an often overlooked aspect of farming enterprises, but it is a very important one. Optimum soil will give you more production options, but certain crops or livestock give you more flexibility with soil quality.
o Water access is an issue in many areas of the country. If you have an adequate source of water, this will not be an issue for you.
• Market assessment
o Marketing is an often overlooked aspect of developing a new enterprise.
o Location, your personality, and production interests are things to consider in this assessment.
o E.g. Are you in a rural area? Do you enjoy interacting with people? If you are in a rural area with little market potential, you may need to consider wholesaling or value added enterprises over the internet. If you are close to an urban area and enjoy working with people, a Farmer’s Markets might be a good and safe venue to sell your products.
• Once you have an enterprise in mind, develop a business and production plan.
There are many workbooks that are very helpful in working through the myriad of considerations, which I have briefly outlined, in evaluating a rural enterprise. Listed below are some additional resources to help guide you. I have found that there are many different strategies; some being goal based and others being enterprise budget-based.
The two that I have found most helpful in my own personal situations are:
The Minnesota Institute for Sustainable Agriculture has recently developed a goal based workbook and resource list. The workbook, titled "Building a Sustainable Business: A Guide to Developing a Business Plan for Farms and Rural Businesses" is quite helpful in taking the reader through the steps that I outlined above. They are both available to read and print from the internet and are listed below under resources.
The University of Kentucky has developed a tool for evaluating new enterprises for a farm or family business titled “A PRIMER for Selecting New Enterprises for Your Farm.” It is a resource that works more from enterprise budgets and is based on worksheets used to evaluate the "Profitability, Resource requirements, Information needs, Marketing decisions, Enthusiasm for, and the Risk associated with a new enterprise."
There are also training opportunities in evaluating and planning an agricultural business. The nXLevel course titled “Tilling the Soil of Opportunity” might be helpful for you. The materials are specifically designed for the individual who is searching for innovative ideas and enhanced marketing opportunities in the area of agriculture. This 10–session course is often delivered over an 12-week period.
The two written resources I would recommend are as follows:
A great periodical for market gardeners is “Growing for Market.” It provides excellent practical production information for small-scale farmers, often times written by farmers. “Sustainable Vegetable Production from Start-up to Market,” by Vern Grubinger is an excellent book for start-up information. It has extensive production and marketing information.
You also requested information on enterprise budgets for specific crops. Listed below are enterprise budgets for strawberries, watermelon and raspberries. This should give you an idea of the different costs and income associated with some different fruit crops. If you would like enterprise budgets on other crops let me know and I will print it off for you.
Bachmann, Janet. 2001. Market Gardening: A Start-up Guide. NCAT/ ATTRA Publication # IP 195.
Anon. Building a Sustainable Business: A guide to developing a business Plan for Farms and rural Businesses. Minnesota Institute for Sustainable Agriculture. 2003
Woods, Tim and Steve Isaacs. A PRIMER for Selecting New Enterprises for Your Farm. University of Kentucky. Agriculture Economic Series. 2000
O’Dell et al. 2001. Selected Costs and Returns Budgets for Horticultural Food Crops Production/Marketing. Virginia cooperative Extension. Virginia State University. Publication Number 438-898
Bolda, et al. 2003. Sample costs to Produce Organic Strawberries in Central Coast California. University of California Cooperative Extension. Publication # ST-CC-03-01.
nXLevel “Tilling the Soil of Opportunity” Class information:
Adirondack Economic Development Corporation
60 Main Street, Suite 200
PO Box 747
Saranac Lake, NY 12983
Voice 518-891=5523 x 16
Growing for Market
P.O. Box 3747, Lawrence, Kansas 66046
Toll-free Phone: 800-307-8949
Grubinger, Vern. Sustainable Vegetable Production from Start-Up to Market
Publication number: NRAES-104
Length: 280 pages
Date of Publication: August 1999
To order a copy: (607) 255-7654
Answer: Thank you for contacting ATTRA for information on plants that are toxic to goats.
Listed below are several articles that discuss plants that are toxic to livestock and specifically goats. It is quite interesting that goats seem to know what plants are toxic and what plants aren't. If they have plenty of other forages to eat, goats generally won't consume toxic plants. There are also many plants that may be toxic, but only at certain levels. I've heard anecdotal evidence of goats consuming toxic plants, with no ill effects. They can tolerate some levels of the toxins. However, goats are not immune to plant toxicity! It is always good to be aware of the plants you have and make note of those that may be toxic.
Ace, D.L. , Hutchinson, L.J. n.d. Poisonous Plants. Extension Goat Handbook. 5 p.
Kates, A.H., Davis, D.E., McCormack, J., and Miller, J. 1980. Poisonous Plants of the Southern United States. 28 p.
DiTomaso, J. n.d. List of Plants Reported to Be Poisonous to Animals in the United States. 12 p.
Toxic Plants and the Common Caprine. 2001. 8 p.
Poole, T., Fultz, S. n.d. Pasture Management Common Plants Poisonous to Livestock in Maryland. 4 p.
Jennings, J., Boyd, J. n.d. Common Arkansas Plants Poisonous to Cattle. 2 p.