Whilst the investment is very high, between £1m - £3m, the returns have been good. This has been driven by an increasing demand for free range eggs, the majority of supermarkets declaring that they will not stock eggs produced from caged hens post-2025, and what appears to be an ever-increasing consumer demand for chicken.
A poultry enterprise
Poultry systems are the most integrated of any agricultural supply chain, with the larger processors in particular involved at all stages from managing the supply of chicks or laying hens to providing feed. Processors will either rent the sheds and manage production with their own staff or offer a ‘managed contract’ whereby you, the farmer, would be responsible for operating the unit with varying degrees of input from the processor, often with a feed and broiler/egg price ratchet to reduce volatility in financial returns.
There have been recent acquisitions and mergers taking place in the processing sector, necessary to coordinate investment and facilitate growth in a highly competitive marketplace.
Whilst there is less demand for new units than in previous years there are still opportunities, particularly for new units in close proximity to factories. It is also recognised that a significant proportion of sheds will require replacing over the next few years, so investment must continue. If you are considering a poultry enterprise on your farm or estate, now is the time to start as it can be a long process and there are a number of early steps in determining if such an opportunity is feasible.
Gaining consent
One of the biggest hurdles is obtaining planning consent. Although modern broiler units are clean, odour free and provide very high welfare standards, do not expect your neighbours to turn a blind eye to your proposed construction. Expert advice and guidance will be necessary for both site selection and working through the planning and environmental consents.
Contracts
Just as important is finding a processor who will offer a contract. Your location and anticipated time frame to build the unit are key factors in securing initial interest from a processor but you will need to carefully evaluate the type and term of any contract.
Funding and staffing
Financial feasibility is, of course, crucial; how much will need to be borrowed? What will the cash flow and profitability look like? Sheds that are managed directly by the farmer should produce the best returns but will be sensitive to production performance such as growth rates, feed conversion and mortality. Furthermore, finding skilled staff to run the unit is now one of the biggest challenges as a significant proportion has, in the past, come from Europe. On the other hand, renting a new unit to a processor involves a fixed return and hence less risk but a lower return.
Bidwells has particular expertise in poultry production and can help with all these issues. In particular, we have created a Poultry Model which will provide all the physical and financial information required to help guide our clients through the business planning process.
