What are the key focus areas for a Pig Farming Business Plan?

Pig farming is a dynamic sector which has undergone enormous changes in recent years. Globalization means that the pork that ends up on our plate can come from anywhere in the world. The stringent demands imposed by retailers have put pig farmers’ margins under pressure and are forcing them to make savings by using economies of scale. This trend towards ever bigger farms means that production costs and optimizing efficiency have become key concepts in modern pig farming.

High production costs, lack of liquidity, bureaucracy for licensing and intervention in the unit, criminalization of arrears, high energy costs, inability to promote products, technical difficulties in the classification of pig meat are some of the pathogens in the industry. If any businessman is looking to create a Business plan for a piggery project the first thing that should be looked at are the challenges.

Key Challenges

• Insufficient infrastructure and technical equipment of the units
• Poor organization - unit management
• Deficient health support resulting in increased mortality and reduced fertility
• Lack of control of the feed and production network
• Lack of accreditation and quality promotion system for pork
  

However, the opportunities presented overshadow the challenges of the business and make many entrepreneurs plunge into opening a pig farm. There is a great demand for pork in Europe and that has made many people to start-up modern pig farms. The snapshot below gives a clear picture of the production and marketing channel of a pig farm. 

Production and Marketing Channel of the Pig Farm

The important question now is to how to structure your piggery farming business plan?

Based upon the work that we have done in this sector, the market study should focus on the buying behavior which includes what type of meat products do customers prefer to buy, cost of production, legislation or Government initiatives, bank support for pig farms, import and export data etc. If you have this data in hand, it will help to you to get a better understanding of the market.

The entrepreneur should also do a micro level analysis on Strength, Weaknesses, Opportunities and Threats (SWOT) of the business. The strength of the business is in the fact that pork is one of the staple meat products in Europe, US in some regions of Asia and Africa and Australia and New Zealand. Therefore, in these regions the consumption of fresh and processed meat is high which provides a big opportunity for pig farmers.

Some of the weaknesses of the business include farm modernizations and investments, financial costs, taxation, bureaucratic costs, the use of by-products in animal feed not available quickly in many regions and the quality of pork produced.

Piggery business is capital intensive. Therefore before planning the project, the initial expenditure items of land lease, the cost of animals and the follow-up working capital expenses such as feed, employees, marketing cost, transportation etc. A brief snapshot of a sample Profit & Loss account is given below. The figures below should give you an idea of the proportion of revenue and expense, taxes and profit and loss figures. As we see below, the business will run in a loss for the first 2 years and break-even from the 3^rd year onwards. Therefore, there should be adequate equity and debt funding to cover the cash-flow deficiency in the first 2-3 years. 

Conclusion

After taking care of all operational aspects of the business, the business owner should focus on the key factor of the distribution plan that depends on the products to be marketed e.g. live pigs or processed pork.  The pork and processed meat are sold to the retailers with whom the farm has a co-operating partnership. They can also sale directly to large distributors who in turn sells to other traders or consumers. The number of people involved in the distribution chain from farm to fork directly affects the profit margins. 

If you want help in creating a pig farming business plan please write into info@intelligentq.co.in