Profit & Loss - A Transparent Look at Pasture Raised Chicken Cost and Profits at Farmcraft
Business owners generally don’t know or won’t tell what their actual costs and profits are. I think accurate and precise profit & loss accounting is some of the most important, and most lacking, information to share with people interested in, or part of, the world of local food, pasture-based husbandry and small farms. I also think that the customers deserve to receive full transparency. And I think it is interesting and entertaining. So here goes:
In 2022 we took 3 groups (of 165 each) Cornish Cross chickens from chicks in the brooder to chickens on the pasture to packaged chicken in the freezer. The chicken is all for sale to our customers via delivery and on-farm pickup. The price is $24 for on-farm pickup and $26 for monthly delivery. Chicken average weight is 5 pounds (actually came out to 5.1 pounds), so that makes for about $5 per pound of whole, frozen pasture-raised chicken. (To simplify online sales, all of the chickens that weigh between 4.0 and 5.5 pounds are $24 on-farm/$26 delivered. Sometimes customers get a relatively smaller chicken, sometimes a relatively larger chicken – it averages out to 5.0 pound chickens and $5 per pound). We keep good records, so below I have been able to calculate our costs per chicken in 2022.
Here are our costs and how we set the price for the 5-pound chicken - $24 on-farm, $26 delivered:
Shown in the above calculation table, the enterprise break-even price per chicken is $17 on-farm, $20 delivered.
Farm Costs and Profits
Above are the “Enterprise” costs. That would be the final pricing if the "Meat Chicken Enterprise" existed in a vacuum. But it doesn’t. The enterprise does not exist on its own, and It cannot exist on its own – the enterprise relies on many Farm assets. These include:
Land - the actual real estate. 80 chickens use at least 6,000 square feet of pasture over their time in the field. 1000 chickens use 60,000 square feet, or about 1.5 acres. The Farm has a cost to this land - it could be rented out for crops at $150 an acre, or used to make hay for sale or to support a different enterprise that would pay at least $150 per acre.
Pasture - the pasture - the grasses and clovers - took time and money to establish, and they take time, money and management to maintain. The chicken enterprise could not exist without using this Farm asset.
Tractor - a tractor is needed to get pens to where they will be used, to move crates of chickens from the field to the processing area, to take delivery of feed and for myriad other chores.
Electrical Infrastructure - materials and labor were invested by the Farm to provide electrical supply for the brooder and processing equipment.
Water Distribution - materials and labor were invested by the Farm to provide water supply - hose bibs, surface pipes, buried pipes - for the brooder, pasture pens and processing equipment.
Water Supply - a well pump and casing, a pressure tank, various valves and electrical devices provide a supply of water for the brooder, pasture pens and processing equiopment.
Storage - the chicken enterprise stores all kinds of things in buildings owned by the farm. This storage space has a cost - the space could be rented to other enterprises or could be rented to the community for storage fees.
Power Tools - the chicken enterprise uses the Farm's power tools to build pens and brooders.
Hand Tools - the chicken enterprise uses the Farm's hand tools to fix the things that break every other day.
Website – the chicken enterprise uses the Farm’s Facebook, Instagram, email and website. And the Farmcraft business name and cumulative marketing efforts to date. All marketing and sales are made by the Farm, not the chicken enterprise.
The Farm has all kinds of assets that the Meat Chicken enterprise uses. And the Farm has arranged those assets in a productive fashion. That is what businesses do - they arrange assets and labor in a way to provide value, to create something, an arrangement that is more productive than random or poorly arranged assets. On our Farm, it is an arrangement that primarily supports the production, storage and direct-to-consumer sale of high-quality pasture-raised meats. Businesses are paid for this rearrangement of assets and labor in profits, if they do it well and the customer finds value in the products and prices. Our Farm needs to earn enough profit to pay for the assets, the labor it took to arrange the assets, and the labor it takes to re-arrange and repair the assets. Additionally, it needs to earn profits to cover costs of marketing and sales efforts. Finally, it must make a further margin of profit to compensate for its known and unknown risks - freezers stop working and the product is wasted, well pumps seize and must be replaced, sales become slow, employees leave, tractors tip, yard hydrants get bent, brooders burn and tools get lost. And everything wants to eat a chicken - hawks, owls, rats, racoons, skunks, possums and fox. A few chickens or a whole pen can be wiped out. These costs are complicated to calculate and more complicated to allocate. I feel that $5 per chicken - $5000 per year for 1000 chickens - is the absolute minimum the farm should be willing to earn for its investment, support and risk incurred via the Meat Chicken Enterprise. A $7 or $8 Farm profit margin would be much more comfortable and feel more economically viable to sustain the business in the long-term.
The Enterprise Costs for a 5-pound meat chicken is $17 on-farm pickup, $20 delivered.
The retail price is $24 on-farm, $26 delivered. That's a $6-7 Farm profit margin per chicken. That's in the middle of the range of what the farm needs to earn for Meat Chickens to be an economically viable and long-term enterprise.
Thanks for reading. For now, I don't have any further commentary on if that's a reasonable price for a chicken, if the nutritional quality makes the price a bargain, what chicken has cost historically, if the price is too low, what other farms charge, things we could do to cut cost, relative prices of conventional/soy-free/organic feeds, if greater scale is a good or bad idea, the disseminated costs of industrial vs pasture-based chicken.... Maybe another time. For now, I just wanted to share where our prices come from and provide full transparency of our costs.
Soon, I would like to write about (and get your feedback) the relative prices for 4-pound vs 5-pound vs 6-pound vs 7-pound chickens. The cost per chicken will increase as the weight increases, but the price per pound will decrease for the larger chickens. I want to calculate the exact costs, see what Farmcraft would need to charge, and gather your preferences on what size/price combination you find most attractive.
Thanks friends, be well :)