Full Report

Pastured Poultry COP Calculator

Acknowledgements

We would like to thank the six producers for their participation in this project. This document would not have been possible without their valuable contributions and cooperation. 

This project was funded in part by the Canadian Agricultural Partnership (the Partnership), a five-year federal-provincial-territorial initiative.

The views expressed in the report and associated materials are the views of the Organic Council of Ontario and do not necessarily reflect those of the Canadian Agricultural Partnership.

We would also like to acknowledge the support of the Canadian Organic Growers in producing these materials, as well as our advisory committee, including Hugh Martin, Rob Wallbridge, Eric Payseur, and Norm Hansen. 

About the Authors

Thorsten Arnold and Brenda Hsueh work with the Grey Bruce Centre of Agroecology co-operative on the analysis, design, and revitalization of agroecological food systems. Both authors are active market gardeners during summer and consult during the winter. Thorsten holds a PhD in integrated modelling of human-ecological interactions and agricultural economics and has worked on knowledge management, food system solutions for regenerative products, business planning, education, and holistic management. Brenda works as a financial analyst, editor, facilitator, and accountant.

Introduction

Scope

This document is part of the 2020 series of organic cost of production (COP) models prepared by the Organic Council of Ontario. This particular model focuses on the organic production of pastured poultry, specifically pastured chickens, and is based on financial data from 2018. This COP model can be adapted to determine COP for other pastured poultry production such as turkeys or ducks, however the average cost benchmarks listed in the budget are for chicken production specifically.

Who is This Resource For?

The cost of production for pasture-raised meat poultry has not been studied in Ontario, because this production method only reached regulated commercialization in 2015 when the Chicken Farmers of Ontario small flock program (cap on 300 birds per year, now renamed ‘family food program’) was expanded into the ‘Artisanal Chicken’ program. This artisanal program creates production licenses for farmers interested in raising between 600 and 3,000 chickens annually for local markets. 

This COP study for the first time estimates production costs in this newly emerging market. The accompanying budget tool can assist producers in estimating their own costs and profitability, to help with planning and financial decisions.  The objectives of this study are to: 

• assist new entrants to the organic livestock industry
• inform conventional farmers considering the transition to certified organic production
• and improve management practices of organic farmers by providing a benchmark compared to average industry performance

Reliability Disclaimer

The estimates provided do not necessarily indicate recommended practices. Given the sample size of six producers, the COP model may not be statistically significant. Yet, we believe that it provides a relatively accurate representation of this diverse industry sector. Samples were drawn from a variety of operations of varying sizes, geography, management and operational styles. 

Furthermore, every farm is different in terms of climate, region, soil conditions, farm size, crop rotations, infrastructure, resources, debt level, and management style. Therefore, the model represents no farm in particular and operations could see a considerable variance from the model. There could also be further variations depending on the animal breed and poultry type as users may wish to apply this COP to pastured turkey and duck production as well.

Environmental Scan

This portion of the COP is a separate download with a comprehensive overview of other resources. It is recommended that the reader review it.

Methodology

Participant Overview 

Data was received from six participant farms, that ranged from hobby scale (100 meat birds) to early commercial size (1000 meat birds) from the 2018 season. The costs presented in the budget model are based on the white rock broiler chicken. Data before 2018 was often incomplete, as producers are using these early years of this production method to gain experience and slowly build capacity and markets. All participating farms were very small compared to typical commercial operations, with revenues ranging between $50,000 and $250,000 per year. In all farms, pastured poultry only contributes a small percentage to total farm revenues, ranging between 5% and 25%.  All producers are planning to increase their production volumes over time and utilize economies of scale. 

Detailed Assumptions

Initial financial production data was collected via producer financial statements and personal tax returns. Given that this enterprise was relatively new to all farmers, production methods still evolved considerably and bookkeeping was neither consistent among farmers nor across years. 

In some cases, missing data were estimated using other responses from study participants:

• The percentage of birds not returned by the abattoir: Most farmers only recorded the number returned from the abattoir. A calculated average of all farmers that reported both numbers was used to reconstruct losses.
• Labour details: Especially during the latter pasture stage, farmers could not clearly attribute time to moving chickens because often, other chores were carried out at the same time. This situation is typical for complex, stacked enterprises on a highly diversified farm. Therefore, we attributed the time for daily labour spent during the brooder and pasture stage as one full hour, the average of most farmers.
• Organic certification costs: Several participants did not obtain organic certification for their pastured poultry flock, however all of them used organic feed, and otherwise no major deviation from organic practices were identified. The main reasons that producers cited for not certifying include the difficulties finding an abattoir that is certified organic, no perceived benefit as a direct marketer with long-established customer relationships, and additional labour in record keeping. 
• Marketing costs: All farmers leveraged existing customer networks to sell their pastured poultry, selling a considerable share directly to consumers, and the remainder directly to restaurants. These networks ranged from large and long-established customer networks that were faithful buyers, to restaurants and an online farmers market. The marketing cost estimates do not take into consideration the cost of establishing these networks. 

Further Considerations

The following benefits from pastured poultry production do not appear in the budget tool because it is difficult to attribute a monetary value to these activities, however they are worth consideration. 

• Fertility benefit: All participants indicated that, next to the harvesting and commercialization of chicken meat, farmers utilized pastured poultry as a means to rejuvenate and improve pasture quality as part of their larger livestock operation. The benefits from this improvement of pasture quality were not monetized due to a number of methodological difficulties, in particular, that no comparable commercial rejuvenation method is accessible to these farms. 
• Animal welfare: Due to the short life span that is inherent to any modern meat bird breed, pastured poultry practices aim to provide more natural living conditions, given the limitations of modern meat bird production. Pasturing practices provide significantly improved animal welfare compared to the dominant production process of indoor confinement. Aspects include fresh air, fresh grass on healthy pastures that gives chicken some access to browsing on soil life, a more natural immune system development as animals are exposed to the outdoor microbiome, and benefits from comparatively good space and regular movement.

Farm Revenue & Expenses Special Considerations

Unpaid Labour

Regardless of whether labour was performed by the owner-farmers, by unpaid family members, or by employees, farm labour was always estimated at a fixed cost of $18.00 per hour.  This assumption was made because the cost of production is not intended to show a lower cost of production for farmer owners compared to farmers who employ labour. Reasonable estimates, including tax and employment insurance, may range between $16/h and $20/h, depending on individual arrangements. Study participants were not putting an explicit cost on their own time when purchasing feed, so time was estimated and costs attributed according to fixed labour costs.

We believe that labour is the biggest production constraint for those farmers that are most likely to utilize the Artisanal Chicken production model, which are small and diversified farms. Still, we believe that labour requirements vary vastly with farm design, size, landscape, etc.  The offered examples can only provide general guidance and farmers must carefully consider their personal production context.

Management Wages

Given that all producers are new to this production approach and that farms are generally small, management costs were not recorded or even estimated by a single farm.  Management costs include any form of office planning, workflow design and implementation, learning, training staff, farm maintenance, etc.  

Land Cost

Given the production context of farmers, pastured poultry was never a reason to expand the land base of any one of the assessed farms. All farmers integrated pastured poultry in their larger production system, valuing the fertility benefits for their pastures or fields, as much as the additional revenue from meat sales.  Thus, no land cost was attributed to chicken production.

Initial Capital Costs

Initial capital costs for pastured poultry are low. All farmers built their chicken tractors at home with varying degrees of reused materials, so costs could not be estimated with great accuracy. A standard design was utilized to estimate building costs, with the assumption that all components were purchased new (see COP Calculator “Fixed Costs Reference” tab). 

After interviews, two “scavenging scenarios” were set up: one where building materials were estimated at 50% of new costs, and another where building materials were estimated at 25% accordingly. Screws and other non-reusable items were estimated at full cost in all scenarios, while roofing sheet metal was assumed free of cost in both scavenging scenarios. Farmers were then allocated to the scenario that best fits their description.

Some farmers utilize a small tractor to move their chicken tractors over the field. This tractor was included as capital cost. It is difficult to attribute an accurate value to tractor use, because; (1) the tractor is a farm asset regardless of poultry production, 

(2) poultry is a comparatively small share of the overall farm business,

(3) the initial purchase of the tractor is a considerable investment and can easily dominate the cost of other capital costs.

Analysis and Observations

The initial goal was to evaluate the changes in costs of production since the Artisanal Chicken Program was established. However, it quickly became clear that all farmers felt new to this production method and had little experience in producing at this scale. This had various implications, ranging from strategies for marketing, feed purchasing (volume discounts), preferred processor, driving costs related to processing, and loss percentage (number of chickens received from abattoir/number of chicks initially purchased). Farmers were still experimenting with strategies to integrate pastured poultry efficiently into their larger operation. This has implications for labour, choice of pasture, number of batches, design of chicken tractor, marketing, and many other aspects. As such, the cost per pound of meat was chosen as the best production unit for cross-farm comparison.   

Those farms which chose the smallest flocks are the least profitable, but they chose this strategy to minimize risk while building capacity for an entirely new endeavour, and for learning about the relevance of secondary production objectives, namely pasture rejuvenation. At this early stage of the industry what can be learned is limited about fine-tuning production processes, however several aspects are apparent as outlined in the following text.

Feeding Time and Weight 

Generally, government agencies in Manitoba recommend 1.8 kg (4 lbs) body weight at 6 weeks of age for broilers, and 4 (8.8) to 4.5 (9.9) kg (lb) of body weight at 10 to 12 weeks of age for roasters. Recommended feed volumes are approximately 8.8 lbs (4 kg) for one broiler and 24.2 lbs (11 kg) for one roaster.

Feeding time and slaughter weight varied greatly as farmers produced for different markets. Feeding time ranged between 7.5 weeks up to 12.5 weeks. This decision was not only based on economic or market reasoning, but also on delivery dates of chicks and slaughter dates, which have to be booked about one year in advance. Both are difficult to plan for small flock producers as they are at the mercy of suppliers and the processor.

Accordingly, feed used per chicken ranged between eight and thirty pounds. This spread is similar to the range given by Government agencies, with slightly excessive feed consumption with the longest feeding times.

The total feed required to produce one pound of meat ranged between 2.58 lbs/lb and 5.15 lbs/lb.  One farmer who provided three years of data increased its feed per pound of meat over time, partly because customers have a preference for larger roasters and partly due to difficulties timing with their processor.

It is not possible to estimate how these numbers compare to indoor production. Literature values (e.g. from Joel Salatin) suggest that pasturing should reduce feed volume by up to 30% in a mature production system if there are no other process constraints (e.g. butchering access). Pasturing adds grasses and insects to the chicken’s diet but also increases feed demand because chickens move more, thus burning more calories. On one hand, the additional feed to support more movement increases feed costs. On the other hand, this also enhances chicken health and meat flavour. We cannot quantify this balance within the scope of this cost of production study. Moreover, some organic indoor producers are providing living feed to their broilers (e.g. mats of sprouted seeds), adding costs to indoor production. Next to factors associated with immature production systems, a systemic reason for increases in total feed requirement was access to abattoirs at the optimal time: several participants fed longer than optimal because they had to wait for their abattoir date.

Feed Costs and Purchasing Volume

Feed costs and feed volumes varied dramatically. Feed costs make up about one third of all production costs, and range from as low as 19% of production cost share to as much as 50% of production costs. The reason for the variability in costs includes (a) the amount of feed provided to the chicken, (b) the volume of feed purchased, and (c) transportation costs associated with getting the feed, especially for very small operations.

None of the farmers of our study, nor any other that we have initially interviewed, produce their own feed, so all rely on organic feed purchases. The most effective methods were to purchase large volumes (tons) with delivery, where volume discounts benefited prices. Smaller or new producers purchased smaller volumes at higher per-pound cost, and over-proportional delivery fees or labour costs for feed pickup. 

All farmers used non-medicated starter feed and switched to grower feed after about 10-12 days. 

Farm Size and Scale

The larger farms in the study tended to have a higher profit per pound. One component of this was that fixed overhead costs were lower per pound of meat sold on larger farms compared to smaller farms. Theoretically, production on a larger scale spreads out fixed costs over more units than smaller operations. However, larger scale didn’t necessarily guarantee the highest profitability per pound. The results appear to suggest that while scale can help increase profit per pound, management is the primary driver.

Labour Costs

Naturally, labour requirements varied considerably across farms. The study confirms that labour costs per bird fell significantly with a larger number of birds. This is what led to the new Artisanal program in the first place because “Family Use” volumes (defined as 300 or less birds per year) were found to be inherently inefficient.  This study demonstrates significant savings in labour costs with increasing quantities.

Using this COP Model on Your Farm

Pastured Organic Poultry COP Calculator

Considerations When Estimating Your Own Costs

When doing a Cost Of Production analysis, users must always be clear about the purpose of the analysis. What are you interested in accomplishing, what do you want to learn? 

Especially in mixed farms, pastured poultry is only one enterprise of a larger farming business. Pastured poultry can serve multiple purposes: attracting customers, rejuvenating pastures, dealing with parasites of ruminants, and optimally additional profits.  This Cost Of Production calculator does not quantify fertilization savings, nor biodiversity enhancements compared to other forms of fertility treatment. We also do not assign a financial benefit to parasite control. 

For accounting purposes, overhead costs are usually attributed to each enterprise. For other financial planning approaches (e.g. Holistic Management) overhead costs are not included in gross profit analysis. We recommend that users are clear about how different methods reflect different purposes of analysis.

Use Cost Categories Within Your Paper Trail

This COP budget calculator offers a list of potential costs and revenues. It is recommended to review this calculator and all cost categories before the beginning of the season, so you are aware of what types of numbers should be recorded. 

Your accounting should attribute costs by enterprise, or as overhead. Cost Of Production analysis then becomes an easy exercise at the end of the season that requires a minimum of time.

Considerations for New Operators 

Marketing Costs 

New and beginning farmers should be cautious when interpreting these numbers, and consider much higher marketing costs to initially establish a customer network.

Start Small

Your pastured poultry enterprise will have a learning curve. The analysis clearly shows that those farms with larger quota (2000 birds/year+) are more profitable because mileage costs are distributed over more birds, and variable costs (feed and labour) diminish per bird due to economies of scale. Nevertheless, we recommend starting small and accepting lower and even negative profitability - this minimizes your financial risk associated with disease, accidents, predation, error, and difficulties with your processor or marketing. 

Know your Market

Consumer preferences vary dramatically. Some will pay more for butterflied or specific cuts of chicken, others prefer whole birds. The implications are far-reaching and impact how long you feed and when you secure your processor.

Amortization Time

Capital costs are a fairly low component from a per-pound perspective, assuming that the farmer will continue production over the entire amortization period (typically 5 years). Capital costs increase drastically if equipment is only utilized once.

Salvaging or Buying New?

Many small farmers utilize salvaged materials for constructing their chicken tractors, their feeders and waterers, or storage bins for feed on the field. In theory, salvaging is ideal: it reduces the environmental burden and reduces capital costs. However, very few farmers consider the time they spend for salvaging materials and the opportunity costs it involves. Salvaging can take a lot of time and travel, or be very convenient - be conscientious.

Secure Markets and Contingency Plans

Many farmers start growing large quantities of poultry without a clear market. Be clear on what happens exactly after you return from the abattoir with a trailer full of frozen birds. Where will you store your products until customers pick them up? The COVID-19 crisis has taught restaurant suppliers that markets may change drastically and fast. Do you have contingency plans that safeguard your production efforts?

Secure Processing

With the new Artisanal Chicken program, Ontario experienced a dramatic rise in pastured poultry. At the same time, the number of abattoirs continues to decline. Wait times for butchering your chicken for markets range between one to two years. Make sure you line up butchering dates before you order your chicks. Remember: home butchering is acceptable for personal use, but not legal when selling to the public.

Storage

Storage temperatures must be at -20 degrees Celsius and in a Health Unit inspected premises if you want to sell to restaurants or wholesalers. You can rent storage but this is expensive and requires a lot of time, line up sales in advance to limit storage required.

Business Decisions Based on Your Cost of Production

Cost of Production helps you to improve your business practices. You can do that in several manners: you can add or drop an enterprise entirely, but more likely you will modify an existing enterprise to become more profitable. You can modify how you produce and sell a product so that the enterprise becomes more profitable.  

Cost of Production helps you determine your sales prices for your product at a given cost structure. Many customers will accept a higher price because they support you and your farm. But customers also have a price ceiling, so be mindful. By comparing your cost of production data to the “average farm” in this COP’s budget calculator, you can benchmark your own operation within your sector. How are you doing in different cost categories? If others produce much cheaper or faster, why is that? Where does your farm deviate most from other operations?

Cost of Production can hint where you should modify how you produce a product. Changes in infrastructure, set-up, timing, and any other business management may drastically reduce some of your production costs. This way, your enterprise can be profitable without changing sales prices. What are potential changes that you have thought of last year? How much impact will this have on your overall production costs and your profitability? Not every change is worth the effort, find those changes that give you the biggest return.

Glossary

Abattoir - Provincially licensed and inspected animal slaughter plants; a place where animals are butchered.

Broiler - Chickens that are bred and raised specifically for meat production, and typically harvested at a smaller bodyweight (4 lbs live, 2.5 lbs carcass) for hot broiling or BBQing.

Brooder - usually refers to some type of heated enclosure for raising baby poultry, whether they are baby chicks, turkey poults, or goslings.

Chicken Tractor - a cage-like structure lacking a floor that is moved over the pasture (usually by human power and with the assistance of wheels) and dependent on size can contain up to 300 birds.

Family Use and the Artisanal Chicken Program - Ontario’s Artisanal Chicken Program is administered by the Chicken Farmers of Ontario (CFO) and allows farmers to be granted production rights of more than 300 meat chickens annually through CFO regulation. It is directed at farmers interested in growing between 600 and 3,000 chickens annually for select target markets such as local farmer markets and restaurants. Since 2015, the Artisanal Chicken Program complements the older small flock or family use program, which allows farmers to grow up to 300 meat chickens on their farm. 

Pasture Fertility - Like in any other ecosystem, nutrients can be a limiting growth factor on a pasture. With proper management, pastured poultry will provide significant benefits for soil and pasture health. As the chickens move across the pasture, the manure is distributed into the soil creating a nutrient-rich material for grass and pasture crops to utilize.

Pastured - Raised on pasture. Chickens are given access to live on pasture and are moved regularly (ranging from twice a day to every other day) giving them access to forage on plants and insects. Chickens are constrained either by fences or in large cages that are called chicken tractors, both for their own protection from predators and to aid in pasture fertility. 

Roaster - Chickens that are bred and raised specifically for meat production, and typically harvested at a heavier bodyweight (9 lbs life, >5 lbs carcass) for slow roasting. 

Starter, Grower and Finisher Feed - Feed requirements of chickens vary by age. A starter feed has a higher protein content (~21-24%) and is strongly recommended for the first 10-14 days of young chicks. Grower and finisher feed have lower protein content (16-18%) and different nutrients. Many feed providers do not distinguish between grower and finisher feed.

Salvaged - equipment that is reused from your farm, from other infrastructure, or sourced from elsewhere for free.