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University
Micrdfilms
International
3(10 N / t e n H O A D . A N N A R B O R . Ml /IK 1 0 0
18 HI D l O K I ) R O W . L O N D O N WC 1 R 41'.J. C N O L A N D

7917756
| HU I R U R 1 , J O S E P H K I R A G U
AN E C O N O M I C F E A S I B I L I T Y A N A L Y S I S OF
E S T A B L I S F I N G AN I N T E G R A T E D C H I C K E N EGG
P R O D U C T I O N AND P R O C E S S I N G C O M P L E X I N
MICHIGAN.
MI CHI GAN

STATE

UNIVERSITY,

University

Mtaorilrrts

International

300

n

? l e b h u a u .a n n

a m b o h .m i « b i o g

PH .D .,

1978

A N E C O N O M I C F E ASIBILITY ANALYSIS OF ESTABLISHING AN
INTEGRATED CHICK EN EGG PRODUCTION AND
P R OC ES SI NG COMPLEX IN MICHIGAN

By
Joseph Kiragu Muiruri

A DI SSERTATION

Submitted to
Mich i ga n State University
in parti al fulfillment of the requirements
for the degree of
DOC TO R OF PHILOSOPHY
D ep ar t m e n t of Poultry Science
1978

ABSTRACT

A N E C O NO MI C FEASI BI LI T Y ANALYSIS OF E ST AB LI SH I NG AN
I NTEGRATED CHIC KE N EGG PRODUCTION AND
P ROCESSING COMPLEX IN MICHIG AN
By
Joseph Kiragu Muiruri

This

study was undertaken to analyze the economic

f easibility of e s t a b li sh in g an egg production and proce ss in g
complex c a p a b l e of prod uc in g 28 0 eggs per capita a n n u a l l y for
M ic hi g a n ' s

9,000,000 residents.

O p e r a t i n g budgets for all phases connected w i t h the
enter p ri se w e r e m a d e based on data and assumptions der iv ed
from p e r s o n a l co m mu ni ca ti on s wi t h people in the egg industry
and from p u b l i s h e d literature on egg production and processing.
It was found that based on the conditions and
a s su mp ti on s of this study it is economically feasible to
e stablish such a complex.

The capital investment r e q u i r e d

w a s c a l c u l a t e d to be $105,100,000 during the first three
years.

A n n u a l op er a t i n g expenses were c alculated to be

$101,191,33 9 w h e n the complex was fully operational.

Annu al

income f r o m the sale of excess hatching eggs, spent fowl and
commercial

shell eggs was calculated to be $116,8 72 , 85 0

during the third year of operation,

$131,7 93,039 d u r i n g the

fourth year and $114,741,393 during the fifth year.

There­

fore, p r o f i t s before taxes were calculated to be $1 5,581,511

Jos ep h Kiragu Muiruri
in the third year,
$ 13,450,054

$3 0,501,7 00 in the fourth year and

in the fifth year.

Hence,

the rate of return on

owned capi ta l was calculated to be 14.62 perce nt in the third
year,

28.54 perc en t in the fourth year and 12.64 perc en t in

the fif th year.

T h e rate of return on owned capital

for egg

p ro d u c e r s in M i c h i g a n according to Telfarm records was
5.50 percent,
periods.

6.60 percent and 19.50 percent during the same

DEDICATION

This dissertation is dedicated to my father,
Muiruri wa Kiragu, my mother Agnes W a r u t h u wa Muiruri and
to my late sister, Veronica W ai t h i r a wa Ngigi.

ii

ACKNOWLEDGMENTS

Tha nk s to: Dr. C. J. Flegal for his g u i d a n c e and
assistance throu g ho ut this work.
Thanks also to D r . C. C. Sheppard,

Dr.

H. E. Larzelere

and Dr. C. H. Wamhoff for their constru ct i ve r e v i e w of this
m an us c r i p t and Dr.

H. C. Zindel, D ep ar t m e n t Chairman,

for

providing financial assistance.
My family,

Kathleen, Waruthu, M u i r u r i a n d Muthoni

for their patience and encouragement d u r i n g the course of
m y graduate study.

iii

TABLE OF CONTENTS

Page
LIST OF T A B L E S ..........................................

V

I N T R O D U C T I O N ..............................................

1

.......................................

3

L IT ER A T U R E REVIE W

P R O C E D U R E .................................................

7

R E S U L T S .................................................

22

D I S C U S S I O N ..............................................

62

S U M M A R Y .................................................

65

B I B L I O G R A P H Y ..............................................

67

iv

LIST OF TABLES
Table

Page

1.

A s su me d Cost of Raw Feed Ingred i en ts Per Ton

2.

Assumed Cost of Capital

3.

Assu me d Cost of Capital I n v e s t m e n t s — Second Year.

4.

Assu me d Cost of Capital

5.

Calcu la te d Annual Cost of O w ni ng L a n d

6

.

.

I n v e s t m e n t s — First Year

.

.

13

.

23
24

I n v e s t m e n t s — Third Year
.

.

.

.

26

Calculated Annual Cost of A d m i n i s t e r i n g the
C o m p l e x .............................................. 2 3

7.

Calculated Cost of Standby P o w e r .................. 2 9

.

Calculated Cost of Raw Feed I ngredients Use d to
Ma n u f a c t u r e a Ton of F e e d ......................... 3 0

8

9.

25

Calculated Cost of R a w Feed Ingredients.

.

.

.

32

10.

Calculated Cost of M i x i n g

F e e d — Fir st Year.

.

.

33

11.

Calculated Cost of M i x i n g

Feed--Second Year

.

.

34

12.

Calculated Cost of M i x i n g

F e e d — Third Year.

.

.

35

13.

Calculated Cost of K e ep in g B r e e d e r s — First Year

14.

Calcul a te d Cost of Keepi ng B r e e d e r s — Second Year.

38

15.

Calculated Cost of K e e pi ng B r e e d e r s — Third Year

.

39

16.

Calculated Cost of Ha t c h i n g E g g s — Fi r s t Y e a r

.

41

17.

Calculated Cost of H a t ch in g E g g s — Second Year.

.

42

18.

Calculated Cost of Ha t c h i n g E g g s — Third Year

.

43

19.

Calcul a te d Cost of G r o w i n g R e p l a c e m e n t P u l l e t s —
First Y e a r ............................................... 44

v

.

.

.

37

Table
20.

Page
C al cu la t ed C o s t of Growing R e p l a c e m e n t P u l l e t s —
Sec on d Y e a r .......................................

45

Calcul at ed Cost of Growing Re p l a c e m e n t P u l l e t s —
Thi rd Y e a r .......................................

46

Calcul at ed Cost of Keeping L a y i n g H e n s — Second
Y e a r ..............................................

47

Calcu l at ed Cost of Keeping Laying H e n s - - T h i r d
Y e a r ..............................................

48

A s s u m e d Rate of Egg Production, Egg Loss and
D is t r i b u t i o n According to S i z e ..................

49

Calcu la te d Egg Production, Egg Lo ss and Egg
D i s t r i b u t i o n by S i z e ............................

50

26.

C al cu l at ed Cost of Processing E g g s — Seco nd Year.

52

27.

Calcul at ed Cost of Processing E g g s — T h i r d Year

21.
22.
23.
24.

25.

28.
29.
30.

.

53

C al cu la t ed Total Cost of O p e r a t i n g the C o m p l e x —
Fi r s t Y e a r .......................................

54

Calcu la te d Total Cost of O p e r a t i n g t h e C o m pl ex -Second Y e a r .......................................

55

C alculated Total Cost of O p e r a t i n g the C o m p l e x —
Third Y e a r .......................................

56

31.

Cash F l o w S u m m a r y — First Y e a r .................

32.

Cas h F l o w S u m m a r y — Second Year

33.

Cash F l o w S u m ma ry — Third Y e a r .................

59

34.

Cash Flo w Summary--Fourth Y e a r .............

60

35.

Cash Fl ow Summary--Fifth Y e a r .................

61

vi

57

..............

58

INTRODUCTION

A gricu lt ur e in the United States has be en transformed
f r o m the traditional family-oriented farming into large
business-like agricultural complexes.

This has been brought

abo ut by increased technical complexity of farming,

the

tendency of farmers to take advantage of vol um e operations,
and the pressure put upon farmers to join large business
o rg an iz at io n s that are often built upon m a r k e t i n g strategies.
The egg industry has been affected by the same
p re s s u r e s that have affected the rest of agriculture.
The objective of this study was to analyze the
econo mi cs of producing, under one complex, e n o u g h eggs to
supply each of Michigan's 9,000,000 resi de n ts w i t h 280 eggs
annually.

The complex in this simulation was assumed to

b e g i n operations with no existing facilities but to build
them as they were needed.

The complex boug ht 2,0 00 acres

and all phases of the egg production complex were situated
on this farm.
W hen fully operational the synthesized comp le x had
d i r ec t control over the following phases of the egg produ c ti on m a r k e t i n g process:
1.

P roduction of hatching eggs

2.

Hatching replacement pullets

1

2

3.

Growing replacement pullets

4.

C ommercial egg production

5.

Shell egg processing

6

.

7.
8

.

W h ol es al e mark et in g of shell eggs
Whole sa l e marketing of spent fowl,

and

M a n u f a c t u r e of feed for all the birds
Co st structures were synthesized based on cost data

obtained from several sources such as p er so nn el from hatchery
c o m p a n i e s , cooperatives,

equipment companies,

the Departments

of A gricultural Economics, Agricu lt u ra l Engineering,
Poultry Science at Michigan State University,

and

as well as from

various agricultural experiment stations and U.S. Depart me n t
of A gr ic ul tu r e research studies w h i c h are listed in the
bibliography.
W he n fully operational the synth e si ze d compl e x would
have two feed mills each capable of prod u ci ng 150 tons of
feed per hour,
dozen eggs,

a hatchery with a setting c ap ac it y of 138,990

housing capacity of 14 0,000 breeders and their

replacements,

4,320,000 repla c em en t pullets and 10,400,000

layers at any time.

The complex wou ld p r o du ce 212,810,000

dozen salable eggs and 9,183,200 spent hens annually.

LITERATURE REVIEW

S p ecialization in farming both as a cau s e and a con­
sequence of g ro w t h in the economy has led to c on ce n tr at io n
either in the form of large industrial-type c o rp or a te farms
o r in the form of agribusiness firms

(Kyle et al. , 197 2) .

Co nc en tr at io n in farming usually brings about coordin a ti on of
v a ri ou s stages of production under one management; • Some of
the stages of p r od uc ti on might have formerly been in other
firms but after coordination they are no longer id entified as
separate.

M i gh el l and Hoofnagle

(1972) call this type of

c o o r d i n at io n verti ca l integration.
In the egg industry,

small and scattered flocks tend

to mean r el at iv e ly higher costs for d el i ve r i n g inputs.
A c c o r d i n g to Rog er s and Bluestone

(1967)

cost studies have

d et er m i n e d that e conomies of large-scale ex i s t in egg-packing,
feed-milling,

and chick hatching operations.

Th a t is, up to

the limits of technology, average cost per u n i t handled
declines as plant size increases.
Rogers

(1971)

reported that the egg indus tr y has gone

t h r ou gh several stages of structural evolution.

In the early

days it was common practice for many egg pr o d u c e r s to be
d i r ec tl y involved wit h other aspects of the egg industry such

3

4

as chick hatching and brooding, mixing feed,
d r e s s e d surplus poultry, and etc.

sell in g live or

That is, p o u l t r y farms

w e r e v er ti c a l l y integrated mainly due to necessity.
p r o d u c t i o n units increased in size and became m o r e

As egg
specialized,

s pe ci al iz at i on increased in other areas of the industry,
as input-supplying.

such

At this stage such functions as egg-

p a c k i n g were removed from the farm and situated ne a r consuming
areas.

But at present,

r ei ntegration of the vari ou s

c o n n e c t e d to egg production is occurring.

functions

E g g - p a c k i n g has

m o v e d away from consuming areas toward p r od uc ti on a r e a s ,
fe e d - m i x i n g on the farm is also on the increase and m o r e and
m o r e egg p roducers are becoming involved in market in g.

This

r e i n t e g r a t i o n of functions has resulted in heavy e m ph as is on
e i t h e r contract production or large-scale owner i nt e gr at ed
enterprises.
Concen t ra ti on of production due to v e r ti ca l

integra­

ti o n has led to a decline in the number of farms k e e p i n g
m a r k e t egg flocks.

A c c o r d i n g to Schrader et al.

(1978)

a b o u t 2 00,000 farms in the United States now have m a r k e t egg
flocks.

More than 96 percent of these farms have fewer than

3,200 birds and account for about 15 percent of egg production.
D u r i n g the 197 0s the p roportion of egg p ro du c t i o n c om i n g from
large -s ca le owner

integrated operations rose fro m

2 0

to

35 percent.
Dur i ng the 1950s the midwest began to lose its
d o m i n a t i o n in egg production perhaps because the egg industry
was b as e d on sideline flocks on many general farms and

5
m a r k e t i n g was done with little coordination.
to Schrader et al.

But,

according

(1978), the rapid growt h of larger

units and increased integration of produ ct io n has probably
pla ye d a maj or role in stopping the d e c l i n e of produc t io n in
the midwest.
A c c o r d i n g to Kelsey and Sheppard

(1974) , probably the

mo s t important trend in the egg indu s tr y today is that the
size of laying flocks is increasing.
Vert ic al integration in the egg industry can occur
for v a r i o u s reasons.

The assets of a wea k farm m a y be

acqui re d by a stronger farm during the time of low egg prices.
Compa ni es that are not in farming m a y w i s h to d i v e r s i f y their
earn i ng or companies already in the egg business m a y decide
to take advantage of economies of large scale.
of

2 0

With a savings

cents per pullet through growing their own versus

buying from other farms,
de l i v e r y dates,

and perhaps m o r e certa in control of

producers may elect to p r o d uc e their own

re pl ac em en t pullets.

Egg producers m a y w i s h to integrate into

m a r k e t i n g and feed processing to over co me the e f f e c t of v a r i ­
ability in egg prices by the m o r e nearly stable m a r k e t and
feed prices.

C oordination is also due to the ne e d to eliminate

too m a n y handling stages because the p r o d u c t — e g g s — is a very
p er is ha bl e commodity.
A lt h o u g h coordination in the egg i nd u s t r y has been
growing rapidly, very few feasibility studies have been
reported.

Haas

(197 5) reported on a study d o n e by the

U.S.D.A. wh o s e purpose w a s to de te r m i n e the v i a b i l i t y of a

6
c o o p e ra t iv el y coordinated egg-producti on - ma rk et in g system as
o p p o s e d to an owner-integrated complex.
simulated.

B o t h systems were

The study indicated that, a s s um in g equal p r o ­

d u c t i o n performance,

the decentralized co op e r a t i v e l y run

system wou ld have difficulty competing in an industry
domi n at ed by centralized owner-i nt eg ra te d complexes.

PROCEDURE

In synthesizing this egg p r o d u c i n g complex various
assum pt io ns were made in order to facilitate expense and
revenue calculations.

For purposes of accounting,

these

expenses were grouped into various segm en ts and financial
budgets presented

for each segment.

The segments were

designed such that all expenses were a l l o c a t e d to the proper
segments.

These segmented financial b u dg et s were

then

summarized into one budget for the wh o l e complex.

The

segments were:
1

.

Land

2

.

Adminis t ra ti on

3.

Standby power generation

4.

Feed manufact ur in g

5.

Hatching egg production

6

.

7.
8

.

9.

Hatchery
R e pl ac em en t pullet growing
Commercial egg production
Shell egg processing
In p reparing the financial b u d g e t s the complex was

assumed to begin operating in 1973 and be fully op erational
in 1975.

In this study the price paid for goods and services

was assumed to remain constant throug ho ut the life o f ’the
7

8

study.

That is, inflational effects were not taken in c o n ­

sideration in calculating the cost of operating the complex.
In this study the operat i ng cycle was assumed to be
364 days and was subdivided into 13 periods of 28 days each.
The periods we r e grouped into q ua r t e r s as follows:
second and third periods in the first quarter;
and sixth periods in the second quarter;
ninth periods in the third quarter;

fourth, fifth

seventh,

and tenth,

first,

eighth and

eleventh,

twelfth and thirteenth peri od s in the fourth quarter.
fore,

There­

all budgetary figures for the fourth quarter are

higher than for each of the other three quarters because the
fourth quarter is 28 days longer than the other quarters.
For purposes of this study the complex was assumed
to begin operations w i t h no facilities,
they were needed.

building them as

At the b e gi n ni ng of the first year of

operations the complex i n v es te d funds in

2,000

acres of land

and a feed mill capable of m a n u f a c t u r i n g 150 tons of feed
per eight hour day,

260 days per year.

factured a c ombination of chick starter,

The feed mill m a n u ­
chick grower,

chick developer, bre ed e r layer m a s h and chicken layer mash
diets.

The complex b o u gh t a 25-ton bulk feed truck to

transport feed from the feed mill to the birds.

Fourteen

breeder replacement houses were b u i l t to house 14 0,000 dayold chicks.

The complex also i n v es te d funds in an admi ni s ­

trative building and a standby p o w er ge ne r a t o r for the
breeder replacement pullets.

9
In the s e c o n d quarter of the first year the c o m pl ex
built 14 houses and p ur ch as ed a standby power generator
the adult breeders.

for

In the third quarter the c o mp le x bu i l t

a h a t ch er y and installed a standby power generator in it.
Funds were also inve st ed in four replacement pullet houses.
F ro m this po i n t on,

the third quarter of the first year,

hatching eggs w e r e set twice a week.

Starting in the third

quarter 216,000 repla ce me nt pullets were housed each week.
Therefore,

d u r i n g the last two quart er s of the first y e a r

the complex b u i l t eighty re p la ce me nt pullet houses each of
which wa s c a pa bl e of hous in g 54,000 pullets.
eight r ep la c e m e n t pullet houses,
power generator.

For every

the complex had a standby

In the fourth quarter the complex bought

another b u l k - f e e d truck and another group of d a y- o ld b r e e d e r
replacement pullets.

The complex also invested funds in

four laying hou se s capable of holding 50,000 birds each.
During the second year of operations the complex m a d e
additional c a p i t a l i n vestments in eig ht bulk-feed trucks,
second feed mill,
laying houses,

four r e p l a c em en t pullet houses,

a

208 c h i c k e n

standby power generators for layers and egg

p rocessing an d a third g ro u p of day-old breeder r eplacement
pullets.
In the third year the complex made capital i n v e s t ­
m en t s in twelve c h i ck e n laying houses,

a standby power

generator for t he layers and for egg processing and a f o u r t h
group of da y - o l d breeder re placement pullets.

10
F i n a n c i a l budgets for the various segments were
calculated a c c o r d i n g to the following assumptions a n d data:
1.

Land
T he comp le x bought 2,000 acres of land and eac h acre

was as s u m e d to cost $ 1 ,0 0 0 , therefore,
$2,000,000 i n v e s t m e n t in land.
lots, roadways,

driveways,

the complex had a

The complex built p a r k i n g

fences and prepared the sites for

buildings at a cost of $150,000.

This cost was d e p r e c i a t e d

in twenty ye a r s at an annual cost of $7,500.

A n n u al m a i n ­

tenance c o s t on the land and improvements was figur e d to be
2 perc e nt of the original total investment or $43,000 per
year.

P r o p e r t y taxes were assumed to be 1.5 p e r c e n t of the

original total inves tm e nt on land and improvements or
$32,250 p e r year.
2.

Administration
The c o mp le x built an administrative b ui l d i n g at a

cost of $60,000.

Equi pm en t for the building cost $40 ,0 00

while a u t o m o b i l e s

for use by complex officials c o s t

The annual d ep r e c i a t i o n rate on the building,

building,

,0 0 0 .

e q u i p m e n t and

automo bi le s was assumed to be 5, 10 and 20 percent,
tively.

$2 0

respec­

T h e a n n u a l m a i n t en an c e and repair cost on the
e q u i p m e n t and automobiles was figured to be 3,

and 5 percent,

respectively,

3

while insurance and p r o p e r t y

taxes w e r e figured to be 3 percent of the orig i na l total
investment in b u il d in gs and equipment and 5 p e r c e n t o n a u t o ­
mobi le s .

11
Ad mi ni st ra ti v e personnel salaries and the number of
p e o p l e requir ed were set as follows:
Gen er al M a n ag e r

(1)

$30,000

A s s i s t a n t General Manager
Mechanic

(1)

24,000

(1)

Accountant

20,800

(1)

20,800

Bookk ee pe rs

(7)

10,400

Secretaries

(4)

8,320

C ustod ia ns

(3)

F r i n g e b e n e f i t s — vacation,

7,653
sick leave,

co mp en sa t io n coverage,

soci al security,

etc.--for all employees of the complex were

a s s u m e d to be

p e r ce n t of gross pay.

20

Oth er annual costs associated with ad mi ni s t r a t i o n
w e r e assumed to be as follows:
Supplies

3.

$

6,000

Telephone

4,000

Util it ie s

2

Legal Fees and Auditing

5,000

,0 0 0

Public Relations

20,000

V e h i c l e Oper at io n

15,000

M i s c e l l an eo us

20,000

S t a n d b y Power Generation
S tand by power generators were installed and w i r ed in

such a way as to be able to supply powe r to any build in g of
the c o m pl ex housing birds or incubating eggs shou ld that
b u i l d i n g e ncounter a power shortage.

Standy p ow e r requirements

12
wer e assumed to be 1KW per 1,000 adult birds,
1,000 pull et s and 250KW per hatchery.

1/2KW per

A dd i ti on al

standby

power ge nerators with total o u t p u t of 3 6 0 K W were also
installed for breeder replac em e nt pullets , the adult breeder
flock and the hatchery just in case s om e t h i n g should happen
to the first standby generators.

The cost of standby power

g enerators was assumed to be $4 0 0 per KW.

Based on these

assumptions capital inves tm en t on g en er a t o r s was calculated
to be $56,000 for breeder r e p l a c e m e n t pullets,
adult breeders,

$200,000 for the hatchery,

$112,000 for

$864,000 for

r e p l a c e m e n t pullets and $8,320,000 for layers and egg p r o ­
cessing.

Annu al depreciation,

m a i n t e n a n c e and repairs,

insurance and property tax costs were a s um e d to be 5, 0.5,
1.5, and 1.5 percent,

respectively,

for a total of 8.5 p e r ­

cent of the original total investment.
4.

Feed Ma nu fa ct u ri ng
In this study it was assu me d that the complex bought

raw feed ingredients and m a n u f a c t u r e d all the feed as required.
The cost of the ingredients was a s s um ed to be as shown in
Table 1.

Fee d was mix ed a c c o r d i n g to the formulations c o m ­

pu t e d by Ada ms et al.

(1975).

The complex invested $1,800,000 durin g the first
q u a rt er of the first yea r of o p e r a t i o n o n a feed mill -$ 1 ,2 0 0 , 0 0 0
ment.

for the feed mil l buildi ng and $600,000 on e q u i p ­

The complex also b o u g h t a bulk feed truck for moving

feed from the mill to the birds.

The feed mil l m a n u f a c t u r e d

13

Table 1.--Assumed Cost of Raw F e e d Ingredients Per Ton.
Y e l l o w Corn

$

Corn Glutten Meal, 60%
Wheat Middlings

100
250
90

Alfalfa Meal,

17%

100

Soybean Meal,

44%

160

Soybean Meal,

49%

180

Me a t and Bone

Meal,

Fat

50%

(Stabilized)

Fish Meal,

60%

180
340
360

Dica lc iu m Phosphate

17 0

Phosphate Defluorinated

15 0

M on oc al ci um Phosphate

190

Limestone

15

Salt

30

(Iodized)

Trace Mineral-Vitamin Mixture
Methi on in e Dl

500
2,500

14
five different rations--chick starter,
developer,

breeder layer m a s h and chicken layer m a s h — at the

rate of 150 tons per hour,
year.

chick grower, chick

eig ht hours a day,

Later, when demand for feed increased,

2 60 days a
the complex

built another feed mill similar to the first one and purchashed nine more bulk feed trucks.
Labor costs including benefits were assumed to be
$1.31 per ton of feed p ro du ce d for caretakers and $59,904
annually for administrative personnel at the feed m i l l s —
$20,800 for a manager,

$12,480 for a laboratory technician,

$8,320 for an assistant l a bo r at or y technician and $8,320 for
a secretary.

Supplied,

utilities,

feed m i xi ng overhead

(shrinkage, demmurage and i nv e n t o r y cost),

vehicle operating

and miscellaneous expenses were figured to be $0.15,
$0.25,

$0.10 and $0.10 per ton,

respectively,

$0.22,

for a total of

$0.82 for each ton of feed m an ufactured.
5.

Hatching Egg P roduction
In this study it was assu me d that the complex bought

140,000 day-old breeder r e p l a c em en t chicks at $4.8 0 per chick
and housed them in 14 .houses

for 12 weeks.

The houses wer e

45 ft. by 225 ft. and their floors were 60 perc en t wire slats
and 4 0 percent litter.

The houses were assumed to cost $3.5 0

per bird for building and $3.00 per bird for equipment.
There were 10,000 birds in e a c h house.

Therefore,

investment

in houses was $65,000 per house for a total of $910,000.

15
Annual de p r e c i a t i o n cost on buildings was assumed to
be

10

cent.

percent and the e q u i p m e n t was depreciated at

20

per­

Mainte na nc e and repair costs were assumed to be 3 p e r ­

cent of the original total investment annually while
insurance and p r o pe r ty tax costs were assumed to be 1.5 p e r ­
cent each.

Labor costs were assumed to be $10.00 per hour

for managers,

$7.50 per hour for a ssistant managers and

$3.50 per hour for caretakers.

Labor requirements were

assumed to be full-time for manag er an d assistant mana ge r
during the three periods
m e n t pullet houses,
during the first

2

8

the pullets were in breeder r e p l a c e ­

m a n - h o u r s per day per

weeks

20,000

chicks

for caretakers and 16 man-hours

per day per 14 0,000 p u ll e ts during the next 10 weeks.
M e d i c a t i o n for breeders was assumed to be $0.08 per
breeder housed.

U ti l i t i e s were assumed to cost $200.00 per

period and m i s c e l l a n e o u s costs were assumed to be $1,400.00
per year.

Feed c o ns um pt io n for breeder replacement pullets

was assumed to be 0.35 pounds per pullet per week of chick
starter diet during the first

6

weeks and

0.68

pullet per week of chic k grower du ri n g the next

pounds per
6

weeks.

A t the end of 12 weeks the breeder replacement
pullets were moved into adu lt breeder houses where they were
housed at the rate of 10,000 pullets per 45 ft. by 450 ft.
house.
pullets.

Therefore,

14 houses were required to house all the

Houses were assumed to cost $3.50 per breeder for

building and $3.00 per breed e r for equipment.

Depreciation,

ma intenance and repair costs, co s t of insurance and p ro p e r t y

16
taxes were a s s u m e d to be the same as for breeder replacement
pullets.
Supplies and miscel la ne ou s costs were assumed to be
$0.01 per bird housed.

Salaries were assumed to be $20,800

annually for a manager,

$15,600 annually for an assistant

mana ge r and $3.50 per hour for caretakers.

Labor requ ir e­

men ts for 14 0,00 0 breeders were assumed to be one manager,
one assistant m a n a g e r and seven caretakers.

Adult breeders

were assumed to cons um e 1.4 pounds of chick developer diet
per bird per w e e k for eight weeks.

When the breeders were 21

weeks of age they were fed breeder layer mash at the rate of
0.22 pounds per b i r d per day.

Eggs for hatching were

collected start in g when the birds were 26 weeks old until
they were 72 week s old.
the

2 1 st

Eggs collected from breeders between

and 26th weeks and excess hatching eggs thereafter

were sold to consumers at $0.50 per dozen.
The co ef fi ci en t s expressed here on the basis of
pullets or adul t breeders included the males which were
housed at the rate of one mal e for every 15 females.
eggs were c ollected and incubated twice a week.
rate of lay was a s s um ed to be
housed.

6

Hatching

The average

5 percent of all the birds

Egg loss wa s assumed to be 5 percent of eggs laid

and the average number of settable eggs per week was assumed
to be 95 percent of all eggs collected.

Therefore,

53,000

dozen eggs wer e laid and 50,4 00 dozen eggs were collected
each week.

17

6

.

Hatching Eggs
The h a t c h e r y was assumed to have a setting capacity

of 138,990 dozen incub a t i n g eggs.
to be 80 percent of eggs set.
the chicks were sexed,

Hatchability was assumed

After the eggs were hatched,

graded, vaccinated, debeaked and

moved by van to r e p l a c e m e n t pullet houses where they were
housed for 20 weeks.

Two hundred and sixteen thousand day-

old replacement p u l l e t chicks were assumed to be housed each
week starting fr o m the ninth period of the first year of
operation.
Capital

i n v e s t m e n t in a hatchery was assumed to be

$600,000 for building,
for the van.

$400,000 for equipment and $12,000

A n nual depreciation, maintenance and repair,

insurance and p r o p e r t y tax costs were assumed to be 5 p e r ­
cent,

3 percent,

for a total of

11

1.5 perc e n t and
percent,

on the original total investment

in the building and equipment.
and repair,

1.5 percent, respectively,

Depreciation, maintenance

i nsuranc e and property tax costs were assumed to

be 2 0 percent,

5 percent,

2.5 percent and 2.5 percent on the

van, respectively for a total of 30 percent.
assumed to cost $ 0 . 0 1

Supplies were

per replacement pullet housed, van

operating expenses wer e assumed to be $500 per period,
utilities were assumed to cost $5,000 per period while m i s ­
cellaneous costs w e r e assumed to be $2,000 per period.

Labor

requirements were assu m e d to be $24,000 annually for a
hatchery manager,

$15,600 annually for an assistant hatchery

18
manager,

$6,240 annually for a typist and $4,410 per week

for caretakers

(1,260 m an hours or

22

1/2

people).

A total of 4 6,33 0 dozen eggs were set eac h week and
hatchability was assumed to be
After sexing,

80

percent of all eggs set.

3 percent of the chicks were culled and the

rest were m o v e d to replacement pullet houses.

The hatchery

when operating at full capacity produced 216,000 d a y - o l d
replacement pullet chicks every week.
7.

Growing Replacem e n t Pullets
Two hundred and sixteen thousand day-old replac e m e n t

pullets we r e m o v e d from the hatchery each week starting from
the third q u a r t e r of the first year of operation.

Twenty

pullet houses were built in the third quarter and 64 in the
fourth quarter for a total of 84 houses.

Four m o r e houses

were built in the first quarter of the second year of o p e r a ­
tion.

Each 45 ft. by 300 ft. house was assumed to hold

54,000 birds.

The houses were occupied for 20 wee k s and

then left v a c a n t for
sanitizing.

two weeks to facilitate c l e a n i n g and

W i t h this schedule,

2.3 6 flocks a year we r e

produced per house for a total of 10,400,000 r e p l a c e m e n t
pullets annually.
Investment in buildings and equipment was assu m e d to
be $3.50 per bird housed.
assumed to be

10

Depreciation on buildings was

percent and on equip m e n t

M a i n t enance and repair costs,

20

percent annually.

insurance and property tax

costs were figured to be 3, 1.5 and 1.5 percent of the

19
original total investment,
percent.

6

respectively,

for a total of

Labor requirements were assumed to be one man-

hour per week per house for manager and 28 man-hours for
caretakers.

Utility, m e d i c a t i o n and house cleaning expenses

were assumed to be $0.08,
respectively.

$0.05 and $0.04 per pullet housed,

Insurance for the pullets was assumed to be

$0.49 per 100 pullets.

The pullets were assumed to eat 0.35

pounds of chick starter diet per pullet per week for the
first six weeks,

0.68

pounds of chick grower diet per pullet

per w e e k for the next six weeks and 1.4 pounds of chick
d eve l o p e r per p u l l e t per wee k for the last eight weeks.

8

.

Egg Production
The r e p l a ceme n t pullets were moved into laying

houses at the end of 20 weeks.
200,000

Due to mortality and culling

pullets were transferred eve r y week.

layers were housed in a 45 ft.

Fifty thousand

by 450 ft. house where they

were kept for 364 days and another 28 days were allowed for
c l eaning and sanitizi n g the house.

Houses were erec t e d as

f o l l o w s — four during the last quarter of the first year,
per q u a r t e r during the first,
the second year,
year and

12

48

second and third quarters of

64 during the fourth quarter of the same

during the first quar t e r of the third year for

a total of 224 houses.
Investment in b uildings and equip m e n t was assumed to
be $2.50 per bird and $3.00 per bird,

respectively.

were deprec i a t e d at

percent per year,

10

p e r c e n t and

20

These

20
respectively.

M a i n t e n a n c e and repairs,

insurance and property

tax costs were a s s u m e d to be 3, 1.5 and 1.5 percent of the
original total i n v e s t m e n t per year, respectively,
of

6

percent.

for a total

I nsuran c e for the layers was assumed to be

$0.79 per 100 layers.
M o r t a l i t y w a s assumed to average
housed per period.

Therefore,

0.9 percent of birds

at the end of 13 periods

17 6,600 spent hens w e r e sold each week.

These birds were

assumed to weigh 4.2 pounds each and sell for $0.10 per
pound.

Labor r e q u i r e m e n t s were assumed to be one man-hour

per house per week for manager,
week for supervisor and
caretakers.

28

two m a n - h o u r s per house per

m a n - h o u r s per house per week for

A n n u a l utility, medication,

hen removal and

cleaning,

supplies a n d m i s c e l l a n e o u s costs were assumed to

be $0.15,

$0.02,

$0.05 and $0.02 per bird housed, r e s p e c ­

tively .
9.

Egg Processing
Eggs were m e c h a n i c a l l y transported by belts from

the laying houses to the p r o c e s s i n g plants.
were washed,

candled,

graded,

packed in 30-dozen cases,

There the eggs

cart o n e d according to size,

and m o v e d to a holding room.

One p r o c e s s i n g pla n t was bui l t for eve r y 400,000
layers.

The egg p r o c e s s i n g m a c h i n e was assumed to have a

rated capacity of

90 cases per hour bu t average output was

assumed to be 89 p e r c e n t of capacity.
six people to o p e r a t e it.

The machine needed

M a n a g e m e n t labor was figured to be

21

two hours per pla n t per w e e k for manager and two hours per
day per plant for s up e r v i s o r
Investment in b u i l d i n g and equipment was assumed to
be $165,000 and $93,000,

r e s p e c t i v e l y per plant.

ciation, m a i n t e n a n c e an d repairs,

Depre­

insurance and property tax

costs were assumed to be 5, 3, 1.5 and 1.5 percent of the
original total investment,
percent.

respectively,

for a total of

11

M a terials were assumed to cost $0.04 per carton,

$0.30 per case,
supplies.

and $0.10 for every case for mi s c e l l a n e o u s

Utilities w e r e a s s u m e d to cost $0.07 for every

case.
Revenue from the sale of commercial shell eggs,
spent fowl and e x cess h a t c h i n g eggs was calculated based on
the following assumptions:
1.

Commercial Shell E g g s - - T h e annual average hen-housed
egg p r o d u c t i o n was assumed to be 7 0 percent and the
average egg loss w as assu m e d to be 4 percent of all
eggs laid.

Egg pric e s per dozen were assumed to be

$0.51 in 1973,

$0.54

in 1974,

$0.53 in 1975,

$0.60

in 1976 and $0.52 in 1977.
2.

Excess H atchi n g E g g s — Hatching eggs were assumed to
sell at the same p r i c e s as commercial shell eggs.

3.

Spent F o w l — Spent fowl were assumed to w e i g h 4.2
pounds each and sell at $ 0 . 1 0

per pound.

RESULTS

At the end of the first year of operation

(1973)

the

complex had spent a total of $25,260,000 in major capital
investments
(1974)

(Table 2)i

D u r i n g the second year of operation

the c o mplex spent a total of $7 5,384,000 in major

capital investments

(Table 3) and in the third year

(1975)

the complex spent a total of $4,456,000 in major capital
investments

(Table 4).

Based on d a t a and assumptions stated previously the
cost of owning and opera t i n g the various segments of the
complex was calculat e d to be as shown in the following
tables.
1.

Land
The annual cost on land was calculated to be $82,750

(Table 5).

This cost was allocated to other segments within

the complex as site costs.

The d i s tribution was as follows:

Administration
Feed M a n u f a c t u r i n g
Hatching Egg Produ c t i o n
Hatchery
R e p l a c e m e n t Pullet Grow i n g
Egg P roducti o n
Egg Proce s s i n g
Total

22

$ 1,833
3.653
18,278
3.653
18.535
18.536
18 ,262
$82,750

Table 2.— Assumed Cost of Capital Investments— First Year.
Quarter
Type of Investment

Land Purchase and
Improvements
Administration
Standby Power
Generators
Feed Manufacturing
Hatching Egg
Production

Total

$2,150,000

-

120,000

-

56,000

1,875,000
910,000

Hatchery

-

Pullet Growing

-

Egg Production

-

Egg Processing

-

Total Investment

$5,111,000

$112,000

910,000

-

~

$2,150,000

120,000
$

372,800

-

$

691,200

1,232,000

75,000

1,950,000

-

1,820,000

-

1,012,000
3,780,000

-

12,096,000
1,100,000

1,012,000
15,876,000
1,100,000

$1,022,000

$5,164,800

$13,962,200

$25,260,000

Table 3.— Assumed Cost of Capital Investments— Second Year.

Quarter
Type of Investment

Land Purchase and
Improvements
Administration
Standby Power
Generators
Feed Manufacturing
Hatching Egg
Production
Hatchery

Total
1

2

3

4

-

-

-

-

-

-

-

-

-

-

$2,560,000

$ 8,320,000

$1,920,000

$1,920,000

$9,920,000

150,000

2,025,000

225,000

-

2,400,000

-

-

-

-

-

-

-

-

-

-

-

-

-

Pullet Growing

756,000

Egg Production

13,200,000

13,200,000

13,200,000

17,600,000

57,200,000

Egg Processing

1,548,000

1,548,000

1,548,000

2,064,000

6,708,000

$17,574,000

$18,693,000

$16,893,000

$22,224,000

$75,384,000

Total Investment

756,000

Table 4.— Assumed Cost of Capital Investment— Third Year.

Quarter
Type of Investment

Total

Land Purchase and
Improvements

-

Administration

-

Standby Power
Generators

-

-

-

$ 640,000

Feed Manufacturing

-

Hatching Egg
Production

-

Hatchery

-

Pullet Growing

-

$
-

-

640,000

-

Egg Production

3,300,000

-

3,300,000

Egg Processing

516,000

-

516,000

$4,456,000

-

$4,456,000

Total Investment

Table 5.— Calculated Annual Cost of Owning Land.

Quarter
Type of Expense

Total

Depreciation on
Improvements

$1,731

$1,731

$1,731

$2,307

$7,500

Maintenance and
Repairs

9,923

9,923

9,923

13,231

43,000

32,250

32,250

$78,557

$82,750

Property Taxes

Total Expenses

$34,731

$34,731

$34,731

27

2.

A d m i nistration
The annual cost of administering the complex was

calculated to be $362,4 01

(Table

6

) and was allocated to

other segments w i t h i n the complex as general adminis t r a t i o n
costs and was di s t r i b u t e d as follows:
Feed M a n u f a c t u r i n g
Hatching Egg P roduction
Hatchery
R e p l a cement Pullet Grow i n g
Egg Produ c t i o n
Egg Processing
Total
3.

$ 18,122
3 6,244
54,353
54,353
108,719
90,610
$362,401

Standby Power Gener a t i o n
The cost of own i n g a standby source of power

was calculated to be $36,880 during the first year of
operation

(1973),

$496,488 dur i n g the second yea r

$866,320 during the third year
4.

(1974)

(1975) of o peration

and

(Table 7).

Feed M a n u f a c t u r i n g
The cost of ra w feed ingredients requ i r e d to m a n u ­

facture a ton of eac h of the five rations needed by the
complex is shown in Table

8

.

Based on these figures the

total cost of r a w feed ingredients during the first three
years of o p e r a t i o n wa s calcu l a t e d bo be $2,301,561,
a n d $59,789,393,

respectively

$36,506,144

(Table 9).

The cost of m i x i n g these rations was calculated to
be $377,840 d u r i n g the first year

(1973) of operation,

$1,287,268 d u r i n g the second year

(197 4) of operation and

$1,874,255 d u r i n g the third yea r
10

,

11

and

12

).

(1975)

of opera t i o n

(Tables

Table 6.— Calculated Annual Cost of Administering the Complex.

Quarter
Type of Expense

Total
1

4

3

2

$2,538

$2,538

$2,538

$3,386

$1 1 , 0 0 0

Maintenance and Repairs

924

924

924

1,228

4,000

Insurance

462

462

462

614

2,000

-

-

-

2,000

2,000

Depreciation

Property Taxes
Salaries and Benefits

62,208

62,208

62,208

82,946

269,570

1,386

1,386

1,386

1,842

6,000

Telephone

924

924

924

1,228

4,000

Utilities

462

462

462

614

2,000

Legal Fees and Audit

1,155

1,155

1,155

1,535

5,000

Public Relations

4,615

4,615

4,615

6,155

20,000

Vehicle Operations

3,460

3,460

3,460

4,620

15,000

Miscellaneous

4,615

4,615

4,615

6,155

20,000

423

423

423

564

1,833

$83,172

$83,172

$83,172

$112,887

$362,403

Supplies

Site Costs
Total Expenses

Table 7.— Calculated Cost of Standby Power.

Quarter
Total

Type of Expense
2

1

First Year
Depreciation
Maintenance and Repairs
Insurance
Property Taxes
Total Expenses

Second Year
Depreciation
Maintenance and Repairs
Insurance
Property Taxes
Total Expenses

Third Year
Depreciation
Maintenance and Repairs
Insurance
Property Taxes
Total Expenses

3

4

195

$1,935
195
582

$4,138
416
1,243

$14,966
1,515
4,486
6,506

$21,684
2,192
6.506
6.506

$906

$2,712

$5,797

$27,473

$36,888

$28,989
2,907
5,054

$51,147
5,121
15,330

$73,306
7,335
21,972

$132,208
13,224
39,628
81,984

$285,650
28,587
81.984
81.984

$36,950

$71,598

$102,613

$267,044

$478,205

$117,600
11,760
35,280

$117,600
11,760
35,280

$117,600
11,760
35,280

$156,800
15,680
47,040
152,880

$509,600
'50,960
152.880
152.880

$164,640

$164,640

$164,640

$219,520

$866,320

$645
66

30

Table

8

.--Calculated Cost of Raw Feed Ingredients Use d to
M a n u f a c t u r e a Ton of Feed.

Ingredient

Amo u n t in
Pounds

Cost in
D ollars

1,288.61
6.65
537.20
134 .56
8 .77
10.35
12.00
1.86

$ 64.43
0.30
42 .98
12 .11
0.07
0.16
3 .00
2.33

2 ,000.00

$140.75

1,336.08
200.20
312 .47
117.65
10.81
9.86
0.94

$ 66.80
9.01
25. 00
10.59
0.08
0.15
3 .00
1.16

2 000.00

$118.91

1,359.97
307.12
203.29
96.77
10.30
9.81
0.74

68 . 00
13.82
16.26
8 .71
0.08
0.15
3. 00
0.93

2 ,000.00

$110.95

C h ick Starter
Y e l l o w Corn
W h e a t Middlings
S o y b e a n Meal, 4 4%
M e a t and Bone, 50%
L i mestone
Salt (Iodized)
Trace Mineral and V i t a m i n Mixture
M e t h i o n i n e D1
Total
Chi c k Grower
Y e l l o w Corn
W h e a t Midd l i n g s
S o ybean Meal, 44%
M e a t and Bone, 50%
Limestone
Salt (Iodized)
Trace Mineral and V i t a m i n Mixture
M e t h i o n i n e D1
Total

12 .00

,

Chick Developer
Y e l l o w Corn
W h e a t Midd l i n g s
S o y b e a n Meal, 44%
M e a t and Bone, 50%
Limestone
Salt (Iodized)
Tra c e M i neral and V i t a m i n Mixture
M e t h i o n i n e D1
Total

12.00

31

Table

8

.--Continued.

Ingredient

A m o u n t in
Pounds

Cost in
Dollars

1,335.00
450.00

$ 66.75
40.50
3.40

Breeder Layer Ma s h
Y e l l o w Corn
Soybean Meal, 49%
Fat (Stabilized)
Limestone
C a l c i u m Phosphate
Salt (Iodized)
Trace Mineral and Vitamin Mixt u r e
Total

20.00

135.00
35.00
5. 00
2 0 .0 0

1.01

3 .33
0 .08
5. 00

,0 0 0 . 0 0

$122.07

1,462.72
210.57
140.00
28 . 2 0

$ 73.14
18 .95
12.60
3 .53
0.47
0.99

2

Ch i c k e n Layer Ma s h
Yell o w Corn
Soybean Meal, 49%
Me a t and Bone Meal, 50%
Corn Gluten Meal, 6 0%
Phosphate, Defluor i n a t e d
Limestone
Salt (Iodized)
Trace Mineral and V i t a m i n Mix t u r e
M ethi o n i n e Dl
To tal

6.20

132 .59
6.51

0.10

12.00
1.21

3 .00
1.51

2 000.00

$114.29

,

Table 9.— Calculated Cost of Raw Feed Ingredients.

Quarter
Total

Type of Feed in Tons
1

First Year
Chick-Starter
Chick-Grower
Chick-Developer
Breeder Layer Mash
Chicken Layer Mash
Total Tons
Total Cost
Second Year
Chick-Starter
Chick-Grower
Chick-Developer
Breeder Layer Mash
Chicken Layer Mash
Total Tons
Total Cost
Third Year
Chick-Starter
Chick-Grower
Chick-Developer
Breeder Layer Mash
Chicken Layer Mash
Total Tons
Total Cost

147
190
-

-

2

3

4

-

380

3,738
5,037
5,436
1,724

95
784
216
-

-

1,293
-

-

4,265
5,322
6,220

3,233
-

337
$43,337

1,095
$124,681

2,768
$211,326

16,935
$1,922,217

19,040
$2,301,561

2,785
5,574
14,906
1,293

2,736
5,289
14,514
1,293
56,364

3,795
7,242
19,352
1,724
109,648

12,052
23,394
63,678
6,250

12,012

2,736
5,289
14,906
1,940
34,188

212,212

36,570
$4,237,671

59,059
$6,803,845

80,195
$9,209,463

141,761
$16,255,165

317,586
$36,506,144

2,736
5,289
15,298
1,509
96,096

2,736
5,289
14,514
1,724
96,096

2,736
5,289
14,514
1,293
96,096

3,795
7,337
19,744
1,724
128,128

12,003
23,204
64,070
6,250
416,416

120,928
$13,852,287

120,359
$13,791,493

119,928
$13,728,911

160,728
$18,416,702

521,943
$59,789,393

Table 10.— Calculated Cost of Mixing Feed— First Year.

Quarter
Type of Expense

Total
1

Depreciation
Maintenance and Repairs
Insurance
Property Taxes
Salaries and Benefits

2

3

4

$31,155

$31,155

$31,155

$45,002

$138,467

13,326

13,326

13,326

18,632

58,610

6,663

6,663

6,663

9,316

29,305

-

-

-

29,305

29,305

14,265

15,246

16,016

39,268

84,795

Supplies

50

163

252

2,387

2,852

Utilities

75

238

368

3,499

4,180

Overhead

84

272

419

3,976

4,751

Vehicle Operation

34

108

167

1,591

1,900

Miscellaneous

34

108

167

1,591

1,900

843

843

843

1,124

3,653

4,182

4,182

4,182

5,576

18,122

$70,711

$72,304

$73,558

$161,267

$377,840

Site
General Administration
Total Expenses

Table 11.— Calculated Cost of Mixing Feed— Second Year.

Quarter
Total

Type of Expense
1

Depreciation
Maintenance
Insurance
Property Taxes

2

3

4

$41,541

$56,542

$83,082

$120,008

$301,173

15,921

21,516

31,842

44,760

114,039

7,962

10,759

15,921

22,380

57,022

57,022

57,022

-

-

-

61,731

91,114

118,881

204,140

475,866

Supplies

5,486

8,850

12,029

21,264

47,629

Utilities

8,045

12,980

17,643

31,187

69,855

Overhead

9,143

14,750

20,049

35,441

79,383

Vehicle Operation

3,657

5,900

8,019

14,176

31,752

Miscellaneous

3,657

5,900

8,019

14,176

31,752

843

843

843

1,124

3,653

4,182

4,182

4,182

5,576

18,122

$162,168

$233,336

$320,510

$571,254

$1,287,268

Salaries and Benefits

Site
General Administration
Total Expenses

Table 12.— Calculated Cost of Mixing Feed— Third Year.

Quarter
Type of Expense

Depreciation

Total

$90,006

$90,006

$90,006

$120,008

$390,026

Maintenance and Repairs

33,570

33,570

33,570

44,760

145,470

Insurance

16,785

16,785

16,785

22,380

72,735

72,735

72,735

Property Taxes
Salaries and Benefits

-

-

-

172,213

171,444

170,931

228,985

743,573

Supplies

18,136

18,047

17,988

24,109

78,280

Utilities

26,600

26,471

26,385

35,360

114,816

Overhead

30,227

30,080

29,982

40,183

130,472

Vehicle Operation

12,091

12,033

11,994

16,073

52,191

Miscellaneous

12,091

12,033

11,994

16,073

52,191

843

843

843

1,124

3,653

4,182

4,182

4,182

5,576

18,122

$416,744

$415,494

$414,660

$627,366

$1,874,264

Site
General Administration
Total Expenses

36
Therefore,

the total cost of p r o d u c i n g 19,040 tons

of feed during the first year of o peration was calculated to
be $2,679,401.

D u ri n g the second year the cost of producing

317,586 tons of feed was calcu l a t e d to be $37,793,412 and
during the third year of o p e r a t i o n $61,663,657 was spent to
produce 521,943 tons of feed.

These costs wer e allocated to

other segments w i t h i n the complex according to the amount of
feed produced for that segment.

During

operation the dist r i b u t i o n was $761,805
production segment an d $1,917,595
growing segment.

the

first year of

for the hatching

for the replacement pullet

D u r i n g the second year of operation

$985,202 were alloca t e d to the hatching

egg production

segment,

pul l e t growing

$11,780,955 to the r e p l a c e m e n t

segment and $25,027,254
segment.

egg

to the commercial egg production

During the third year of oper a t i o n $976,264 were

allocated to the hatc h i n g egg p r o d u c t i o n segment,

$11,730,924

to the replacement p u l l e t g r o w i n g segment and $48,956,469 to
the commercial egg p r o d u c t i o n segment.
5.

Hatching Egg P ro d u c t i o n
The cost of p r o d u c i n g hatc h i n g eggs was calculated

to be $2,646,439 d u r i n g the first year,

$2,269,928 during

the second year and $ 2,266,121 d u r i n g the third year of
operation

(Tables 13,

14 a nd 15).

allocated to the h at c h e r y segment.

These costs were then

Table 13.— Calculated Cost of Keeping Breeders— First Year.

Quarter
Type of Expense

Total

$30,693

$61,386

$61,386

$81,848

$235,313

Maintenance and Repairs

6,300

12,600

12,600

16,800

48,300

Insurance

3,702

9,468

9,468

12,624

35,262

-

-

-

24,150

24,150

Depreciation

Property Taxes
Salaries and Benefits

14,793

29,838

29,838

44,715

119,184

600

600

600

1,000

2,800

1,632

1,632

1,632

2,721

7,617

324

324

324

432

1,404

Site

4,218

4,218

4,218

5,624

18,278

General Administration

8,364

8,364

8,364

11,152

36,244

Standby Power

1,100

3,295

3,295

4,391

12,081

Feed

114,048

196,985

219,564

231,209

761,806

Breeder Chicks

672,000

672,000

1,344,000

$1,108,666

$2,646,439

Utilities
Medication
Miscellaneous

Total Expenses

$857,774

$328,710

$351,289

Table 14.— Calculated Cost of Keeping Breeders— Second Year.

Quarter
Type of Expense

Depreciation
Maintenance and Repairs
Insurance
Property Taxes
Salaries and Benefits

Total

$61,386

$61,386

$61,386

$81,848

$266,006

12,600

12,600

12,600

16,800

54,600

9,468

9,468

9,468

12,624

41,028

-

-

27,300

27,300

-

39,700

29,838

29,838

39,784

139,160

Utilities

1,000

600

600

800

3,000

Medication

3,267

2,722

1,632

3,811

11,432

324

324

324

432

1,404

Site

4,218

4,218

4,218

5,624

18,278

General Administration

8,364

8,364

8,364

11,152

36,244

Standby Power

3,295

3,295

3,295

4,389

14,274

251,060

289,285

162,922

281,935

985,202

672,000

672,000

$1,158,502

$2,269,928

Miscellaneous

Feed
Breeder Chicks
Total Expenses

-

$394,681

-

$422,099

-

$294,646

Table 15.— Calculated Cost of Keeping Breeders— Third Year.

Quarter
Total

Type of Expense
1

Depreciation
Maintenance and Repairs
Insurance
Property Taxes
Salaries and Benefits

2

3

4

$61,386

$61,386

$61,386

$81,848

$266,006

12,600

12,600

12,600

16,800

54,600

9,468

9,468

9,468

12,624

41,028

27,300

27,300

-

-

-

29,838

29,838

29,838

54,577

144,091

600

600

600

1,400

3,200

3,267

2,177

1,632

4,356

11,432

324

324

324

432

1,404

Site

4,218

4,218

4,218

5,624

18,278

General Administration

8,364

8,364

8,364

11,152

36,244

Standby Power

3,295

3,295

3,295

4,389

14,274

279,016

216,275

162,219

318,754

976,264

672,000

672,000

$1,211,256

$2,266,121

Utilities
Medication
Miscellaneous

Feed
Breeder Chicks
Total Expenses

-

$412,375

-

$348,544

-

$293,943

40
6

.

Hatchery
The cost of operating the h a t c h e r y including the

cost of producing hatching eggs was c alculated to be
$3,021,984 during the first year

(1973)

$2,993,547 during the second year
during the third year

of operation,

(1974)

and $2,989,737

(1975) of o p e r a t i o n

(Tables 16,

17

and 18) .
7.

R eplacement Pullet Growing
The cost of growing r eplacement pullets i ncluding

the cost of operatin g the hatch e r y was calcu l a t e d to be
$6,187,079 during the first year

(1973)

$21,034,818 during the second year
during the third year
and

8

.

21

of operation,

(1974)

(1975) of o p e r a t i o n

and $20,998,998
(Tables 19,

20

).

Egg Production
The cost of keeping layers was c a l c u l a t e d to be

$54,472,230 during the second year of o p e r a t i o n
$88,129,808 during the third year

(1975)

(1974)

and

of operation

(Tables 22 and 24).
Egg production was calcu l a t e d acco r d i n g to the rates
shown in Table 24 and was 108,697,000 doz e n eggs during
the second year

(1974) of operation and 221,312,000 dozen

eggs during the third year

(1975)

of o p e r a t i o n

(Table 25).

Egg loss was assumed to average 4 p e r c e n t of all eggs
p roduced annually.

Therefore,

102,98 9,000 dozen eggs were

Table 16.— Calculated Cost of Hatching Eggs— First Year.

Quarter
Type of Expense

Total

Depreciation

-

-

$8,062

$16,124

$24,186

Maintenance and Repairs

-

-

3,938

7,876

11,814

Insurance

-

-

3,531

4,708

8,239

Property Taxes

-

-

-

7,062

7,062

Salaries and Benefits

-

-

50,798

101,596

152,394

Supplies

-

-

17,280

34,560

51,840

Utilities

-

-

10,000

20,000

30,000

Vehicle Operation

-

-

1,000

2,000

3,000

Miscellaneous

-

-

4,000

8,000

12,000

Site
General Administration
Standby Power
Cost of Producing Eggs
Total Expenses

$843

$843

843

1,124

3,653

12,543

12,543

12,543

16,724

54,353

3,924

3,924

3,924

5,232

17,004

857,774

328,710

351,289

1,108,666

2,646,439

$875,084

$346,020

$467 ,208

$1,333,672

$3,021,984

Table 17.— Calculated Cost of Hatching Eggs— Second Year.

Quarter
Type of Expense

Total

$12,093

$12,093

$12,093

$16,124

$52,403

Maintenance and Repairs

5,907

5,907

5,907

7,876

25,597

Insurance

3,531

3,531

3,531

4,708

15,301

-

-

-

15,301

15,301

Depreciation

Property Taxes
Salaries and Benefits

76,197

76,197

76,197

101,596

330,187

Supplies

25,920

25,920

25,920

34,560

112,320

Utilities

15,000

15,000

15,000

20,000

65,000

Vehicle Operation

1,500

1,500

1,500

2,000

6,500

Miscellaneous

6,000

6,000

6,000

8,000

26,000

843

843

843

1,124

3,653

12,543

12,543

12,543

16,724

54,353

3,924

3,924

3,924

5,232

17,004

394,681

422,099

294,646

1,158,502

2,269,928

$558,139

$585,557

$458,104

$1,391,747

$2,993,547

Site
General Administration
Standby Power
Cost of Producing Eggs
Total Expenses

Table 18.— Calculated Cost of Hatching Eggs— Third Year.

Quarter
Type of Expense

Total

$12,093

$12,093

$12,093

$16,124

$52,403

Maintenance and Repairs

5,907

5,907

5,907

7,876

25,597

Insurance

3,531

3,531

3,531

4,708

15,301

15,301

15,301

Depreciation

Property Taxes

-

-

-

Salaries and Benefits

76,197

76,197

76,197

101,596

330,187

Supplies

25,920

25,920

25,920

34,560

112,320

Utilities

15,000

15,000

15,000

20,000

65,000

Vehicle Operation

1,500

1,500

1,500

2,000

6,500

Miscellaneous

6,000

6,000

6,000

8,000

26,000

843

843

843

1,124

3,653

12,543

12,543

12,543

16,724

54,353

3,924

3,924

3,924

5,232

17,004

412,375

348,544

293,943

1,211,256

2,266,121

$575,833

$512,002

$457,401

$1,444,501

$2,989,737

Site
General Administration
Standby Power
Cost of Producing Eggs
Total Expenses

Table 19.— Calculated Cost of Growing Replacement Pullets— First Year.

Quarter
Type of Expense

Total
1

2

3

Depreciation

—

—

Maintenance and Repairs

-

Insurance

4

$32,712

$471,045

$503,757

-

6,106

94,210

100,316

-

-

3,891

56,670

60,561

Property Taxes

-

-

50,358

50,358

Salaries and Benefits

-

-

7,776

111,974

119,750

Utilities

-

-

12,096

186,624

198,720

Medication

-

-

7,560

116,640

124,200

Site Costs

$4,275

$4,275

4,275

5,710

18,535

General Administration

12,543

12,543

12,543

16,724

54,353

1,130

15,820

16,950

467,208

1,333,672

3,021,984

65,321

1,852,274

1,917,595

$620,618

$4,311,721

$6,187 ,079

Standby Power
Cost of Hatching Eggs
Feed
Total Expenses

-

875,084
$891,902

-

346,020
-

$362,838

-

Table 20.— Calculated Cost of Growing Replacement Pullets— Second Year.

Quarter
Type of Expense

Depreciation
Maintenance and Repairs
Insurance
Property Taxes

Total

$575,721

$575,721

$575,721

$767,628

$2,494,791

115,146

115,146

115,146

153,528

498,966

69,264

69,264

69,264

92,352

300,144

249,483

249,483

-

-

-

Salaries and Benefits

136,857

136,857

136,857

182,476

593,047

Utilities

228,117

228,117

228,117

304,156

988,507

Medication

124,560

124,560

124,560

166,080

539,760

Site Costs

4,275

4,275

4,275

5,710

18,535

General Administration

12,543

12,543

12,543

16,724

54,353

Standby Power

16,950

16,950

16,950

22,600

73,450

Cost of Hatching Eggs

558,139

585,557

458,104

1,391,747

2,993,547

Pullet Removal

103,680

103,680

103,680

138,240

449,280

2,727,717

2,714,874

2,716,452

3,621,912

11,780,955

$4,672,969

$4,687,544

$4,652,669

$7,112,636

$21,034,818

Feed
Total Expenses

Table 21.— Calculated Cost of Growing Replacement Pullets— Third Year.

Quarter
Type of Expense

Depreciation
Maintenance and Repairs
Insurance
Property Taxes

Total

$575,721

$575,721

$575,721

$767,628

$2,494,791

115,146

115,146

115,146

153,528

498,966

69,264

69,264

69,264

92,352

300,144

249,483

249,483

-

-

-

Salaries and Benefits

136,857

136,857

136,857

182,476

593,047

Utilities

228,117

228,117

228,117

304,156

988,507

Medication

124,560

124,560

124,560

166,080

539,760

Site Costs

4,275

4,275

4,275

5,710

18,535

General Administration

12,543

12,543

12,543

16,724

54,353

Standby Power

16,950

16,950

16,950

22,600

73,450

Cost of Hatching Eggs

575,833

512,002

457,401

1,444,501

2,989,737

Pullet Removal

103,680

103,680

103,680

138,240

449,280

2,703,831

2,704,056

2,704,206

3,618,831

11,730,924

$4,670,938

$4 ,607,332

$4,552,881

Feed
Total Expenses

$7,167,847 $20,998,998

Table 22.— Calculated Cost of Keeping Laying Hens— Second Year.

Quarter
Type of Expense

Total
1

Depreciation

2

3

4

$294,231

$765,003

$1,235,775

$2,380,012

$4,675,021

Maintenance and Repairs

57,114

148,500

239,886

462,004

907,504

Insurance

31,296

81,372

131,448

253,160

497,276

57,746

57,746

Property Taxes

-

-

-

Salaries and Benefits

50,976

132,534

214,092

412,324

809,926

Utilities

51,924

135,003

218,082

420,010

825,019

Medication

6,924

18,003

29,082

56,010

110,019

Miscellaneous

6,924

18,003

29,082

56,010

110,019

Hen Removal

-

-

-

-

-

4,275

4,275

4,275

5,711

18,536

General Administration

25,089

25,089

25,089

33,452

108,719

Standby Power

12,552

31,380

50,208

96,232

190,372

Growing Pullets

4,677,130

4,691,705

4,565,830

7,118,174

21,052,839

Feed

1,421,062

4,033,022

6,650,598

12,922,572

25,027,254

Site

Total Expenses

$6,658,418 $10,102,810 $13,412,368 $24,298,634 $54,472,230

Table 23.— Calculated Cost of Keeping Laying Hens— Third Year.

Quarter
Type of Expense

Depreciation

Total

$2,187,122

$2,196,930

$2,196,930

Maintenance and Repairs

424,547

426,450

426,450

568 ,600

1,846,047

Insurance

232,624

233 ,667

233,667

311,556

1,011,514

923,088

923,088

Property Taxes

-

-

-

$2,929,240 $9,510,222

Salaries and Benefits

378,922

380,622

380,622

507,496

1,647,662

Utilities

385,959

387,690

387,690

516,920

1,678,259

Medication

51,459

51,690

51,690

68,920

223,759

Miscellaneous

51,459

51,690

51,690

68,920

223,759

120,000

120,000

120,000

160,000

520,000

Site

23,196

23,196

23,196

30,928

100,516

General Administration

25,089

25,089

25,089

33,452

108,719

Standby Power

87,876

87,876

87,876

117,168

380,796

4,670,938

4,607,332

4,552,881

7,167,847 20,998,998

11,286,184

11,286,636

11,277,146

15,106,483 48,956,469

$19,925,375

$19,878,888

$19,814,927

$28,510,618 $88,129,808

Hen Removal

Growing Pullets
Feed
Total Expenses

Table 24.— Assumed Rate of Egg Production, Egg Loss and Distribution According to Size.

Quarter
________________________ _____________________________
1
2
3
4
Percent
Percent
Percent
Percent

Egg Production

.
Average
Percent

53.00

83.33

76.33

68.50

70.29

1.33

2.83

4.83

6.38

3.84

98.67

97.17

95.17

93.62

96.16

0.83

21.67

43.33

47.63

28.37

Large

22.67

49.83

40.33

35.50

37.08

Medium

46.00

18.83

5.50

2.75

18.27

Small

20.83

0.83

0.83

0.83

5.83

8.34

6.01

5.18

6.91

6.61

Egg Loss
Salable Eggs
Extra-Large

Undergrades

Table 25.— Calculated Egg Production, Egg Loss and Egg Distribution by Size.

Quarter
1

3

2

4

Total

Dozen

Second Year
Egg Production
Egg Loss
Salable Eggs
Extra Large
Large
Medium
Small
Undergrades
Third Year
Egg Production
Egg Loss
Salable Eggs
Extra Large
Large
Medium
Small
Undergrades

(x
(x
(x
(x
(x
(x
(x
(x

1000)
1000)
1000)
1000)
1000)
1000)
1000)
1000)

(x

1000)

(X
(X
(X
(X
(X
(X
(X

1000)
1000)
1000)
1000)
1000)
1000)
1000)

3,442
46
3,396
29
780
1,583
717
287

16,581
469
16,112
3,593
8,262
3,122
138
997

29,944
1,446
28,498
12,975
12,076
1,647
249
1,551

58,730
3,747
54,983
27,973
20,849
1,615
487
4,058

108,697
5,708
102,989
44,570
41,967
7,967
1,591
6,893

51,072
1,962
49,110
14,490
18,939
9,330
2,979
3,372

51,072
1,962
49,110
14,490
18,939
9,330
2,979
3,372

51,072
1,962
49,110
14,490
18,939
9,330
2,979
3,372

68,096
2,616
65,480
19,320
25,252
12,440
3,972
4,496

221,312
8,503
212,810
62,790
82,069
40,430
12,909
14,612

51
calculated to be salable during the second yea r

(1974)

of

oper a t i o n and 212,810,000 during the third year

(1975)

of

operation.
9.

Egg P rocessing
The cost of proce s s i n g eggs during the second year

(1974)

of o p e r a t i o n was calcu l a t e d to be $6,547,603 and

$13,161,694 d u r i n g the third year

(1975) of o peration

(Tables 26 and 27).
The summarized total cost of o perating the complex
was calculated to be $6,411,061 during the first year
of operation,

$60,912,576 during the second year

$101,191,339 duri n g the third
the fifth

(1977)

(1975),

years of o p e r a t i o n

(1974)

the fourth

(Tables 28,

(1973)
and

(1976) and
29 and 30).

Based on p r e v i o u s data revenue was calculated to be $129,339
d u ring the first year
year

(1974),

(1973),

$55,844,021 dur i n g the second

$116,872,850 during the third year

$131,793,039 duri n g the fourth year
during the fifth year
33, 34 and

(1976)

(1977) of o p e r a t i o n

(1975),

and $114,741,393
(Tables 31,

32,

35).

B as e d on these costs and revenues , profit b e f o r e
taxes was calcu l a t e d to be $-6,281,722 during the first year
(1973),

$-5,068,555 dur i n g the second year

during the third year
year

(1976)

operation.

(1975),

(1974),

$15,681,511

$30,60 1 , 7 0 0 duri n g the fourth

and $13,550,054 during

the fifth ye a r

(1977)

of

Table 26.— Calculated Cost of Processing Eggs— Second Year.

Quarter
Type of Expense

Total

$11,910

$29,775

$47,640

$91,310

$180,635

Maintenance and Repairs

7,146

17,865

28,584

54,786

108,381

Insurance

3,575

8,940

14,304

27,416

54,235

-

-

54,235

54,235

Depreciation

Property Taxes
Salaries and Benefits

-

61,632

154,080

246,528

472,512

934,752

Utilities

7,531

34,590

64,476

125,287

231,884

Site Costs

4,215

4,215

4,215

5,620

18 ,265

General Administration

20,910

20,910

20,910

27,880

90,610

Standby Power

12,558

31,395

50,232

96,178

190,363

142,018

652,260

1,215,828

2,362,561

4,372,667

10,759

29,726

92,109

178,982

311,576

$282,254

$1,003 ,442

$1,784,826

Supplies
Miscellaneous Costs
Total Expenses

$3,496,767 $6,547,603

Table 27.— Calculated Cost of Processing Eggs— Third Year.

Quarter
Type of Expense

Depreciation

Total

$83,355

$83,355

$83,355

$111,140

$361,205

Maintenance and Repairs

50,013

50,013

50,013

66,684

216,723

Insurance

25,005

25,005

25,005

33,340

108,355

108,355

108,355

Property Taxes

-

-

-

Salaries and Benefits

431,424

431,424

431,424

575,232

1,869,504

Utilities

108,498

108,494

108,494

144,664

470,158

4,215

4,215

4,215

5,620

18,262

General Administration

20,910

20,910

20,910

27,880

90,605

Standby Power

87,915

87,915

87,915

117,220

380,065

2,045,976

2,045,976

2,045,976

2,727,968

8,865,896

154,998

154,998

154,998

206,664

671,658

$3,012,309

$3,012,309

$3,012,309

Site Costs

Supplies
Miscellaneous Costs
Total Expenses

$4,124,767$13,161,694

Table 28.— Calculated Total Cost of Operating Complex— First Year.

Quarter
Type of Expense

Total
1

Depreciation

2

3

4

$66,762

$98,745

$141,722

$634,678

$941,907

Maintenance and Repairs

30,540

36,968

47,233

153,492

268,232

Insurance

11,022

17,175

25,258

85,418

138,873

151,631

151,631

Property Taxes
Salaries and Benefits

-

-

-

91,266

107,292

166,636

380,499

745,693

1,632

1,632

9,192

119,361

131,817

43,337

124,681

211,326

1,922,217

2,301,561

84

272

419

3,976

4,751

924

924

924

1,228

4,000

Legal Fees and Audit

1,155

1,155

1,155

1,535

5,000

Public Relations

4,614

4,615

4,615

6,155

20,000

Supplies

1,436

1,549

18,918

38,789

60,692

Vehicle Operations

3,496

3,568

4 ,627

8,211

19,900

Medication
Feed Ingredients
Feed Overhead
Telephone

Pullet Removal

-

-

-

-

-

Hen Removal

-

-

-

-

-

Utilities

1,137

1,300

23,526

211,737

237,700

Miscellaneous

4,972

5,047

9,106

16,178

35,304

672,000

1,344,000

Breeder Chicks
Total Expenses

672,000
$934,376

-

$404,923

-

$664,657

$4,407,105 $6,411,061

Table 29.— Calculated Total Cost of Operating Complex— Second Year.

Quarter
Total

Type of Expenses
1

Depreciation

4

3

2

$1,030,140

$1,555,936

$2,093,272

Maintenance and Repairs

227,588

337,502

452,147

767,437

1,784,674

Insurance

130,612

199,126

266,370

452,882

1,048,990

-

-

-

577 ,321

577,321

Salaries and Benefits

489,301

682,601

884,601

1,495,778

3,552,508

Medication

134,751

145,285

155,274

225,901

661,211

4,237,671

6,803,845

9,209,463

9,143

14,750

20,049

35,441

79,383

924

924

924

1,228

4,000

Legal Fees and Audit

1,155

1,155

1,155

1,535

5,000

Public Relations

4,615

4,615

4,615

6,155

20,000

174,810

688,416

1,255,163

2,420,227

4,538,616

8,619

10,860

12,979

20,796

53,254

103,680

103,680

103,680

138,240

449,280

-

-

-

-

312,079

426,752

544,380

902,054

2,185,265

32,279

64,568

140,149

263,755

500,751

-

-

-

672,000

672,000

Property Taxes

Feed Ingredients
Feed Overhead
Telephone

Supplies
Vehicle Operations
Pullet Removal
Hen Removal
Utilities
Miscellaneous
Breeder Chicks
Total Expenses

$3,594,831 $8,274,179

16,255,165 36,506,144

-

$6,897,367 $11,040,242 $15,144,221 $27,830,746$60,912,576

Table 30.— Calculated Total Cost of Operating the Complex--Third Year.

Quarter
Type of Expenses

Total
1

2

3

4

$3,131,552

$3,141,360

$3,141,360

$4,188,480

$13,602,752

Maintenance and Repairs

664,390

666,293

666,293

888,387

2,885,363

Insurance

392,419

393,462

393,462

524,614

1,703,957

-

-

-

1,583,392

1,583,392

Depreciation

Property Taxes
Salaries and Benefits

1,287,659

1,288,590

1,288,077

1,733,308

5,597,634

179,286

178,429

177,882

239,356

774,951

13,852,287

13,791,493

13,728,911

18,416,702

59,789,393

30,227

30,080

29,982

40,183

130,472

924

924

924

1,228

4,000

Legal Fees and Audit

1,155

1,155

1,155

1,535

5,000

Public Relations

4,615

4,615

4,615

6,155

20,000

2,091,418

2,091,329

2,091,270

2,788,485

9,062,502

17,051

16,993

16,954

22,643

73,691

Pullet Removal

103,680

103,680

103,680

138,240

449,280

Hen Removal

120,000

120,000

120,000

160,000

520,000

Utilities

765,236

766,838

766,752

1,023,114

3,321,940

Miscellaneous

229,487

229,660

229,621

306,244

995,012

-

-

-

672,000

672,000

Medication
Feed Ingredients
Feed Overhead
Telephone

Supplies
Vehicle Operations

Breeder Chicks
Total Expenses

$22,871,386 $22,824,899 $22,760,938 $32,734,116 $101,191,339

Table 31.— Cash Flow Summary— First Year.
Quarter
Total

Income

Commercial shell eggs
Excess hatching eggs
Spent fowl
Total Income
CASH EXPENDITURES ($)
Maintenance and Repairs
Insurance
Property Taxes
Salaries and Benefits
Medication
Feed Ingredients
Feed Overhead
Telephone
Legal Fees and Audit
Public Relations
Supplies
Vehicle Operations
Pullet Removal
Hen Removal
Utilities
Miscellaneous
Breeder Chicks
Total Cash Expenditures
Capital Investments
Cash Required
Cash Surplus-Quarter
Cash Surplus-Year

30,529
111,022

91,266
16, 32
43,337
84
924
1,155
4,615
1,436
3,494
-

1,137
4,973
672,000
867,614
5,111,000
5,978,614
-5,978,614
-5,978,614

$16,660

$79,231

$33,448

$129,339

$16,660

$79,231

$33,448

$129,339

36,968
17,175
107,292
16, 32
124,681
272
924
1,155
4,615
1,549
3,568

47,233
25,258
166,636
91, 92
211,326
419
924
1,155
4,615
18,918
4,627

153,492
85,418
151,631
380,499
119,361
1,922,217
3,976
1,228
1,535
6,155
38,789

268,232
138,873
151,631
745,693
131,817
2,301,561
4,751
4,000
5,000

-

1,300
5,047
306,178
1,022,000
1,328,178
-1,311,518
-7,290,132

-

23,526
9,106
-

522,935
5,164,800
5,687,735
-5,608,504
-12,898,636

8,211

211,737
16,178
672,000
3,772,427
13,962,200
17,734,627
-17,701,179
-30,599,815

20,000

60,692
19,900
237,700
35,304
1,344,000
5,469,154
25,260,000
30,729,154
-30,599,815

Table 32.— Cash Flow Summary— Second Year.
Quarter
XUWUlUe

Iw L C tl
1

3

2

4

Commercial shell eggs
Excess hatching eggs
Spent fowl

$1,833,840
26,562

$8,700,480
92,677
48,745

$15,388,920
26,562

$29,690,820

$55,614,060
181,216
48,745

Total Income

$1,860,402

$8,841,902

$15,415,482

$29,726,235

$55,844,021

227,588
130,612

337,502
199,126

425,147
266,370

-

-

-

767,437
452,882
577,321
1,495,778
225,901
16,255,165
35,441
1,228
1,535
6,155
2,420,227
20,796
138,240

1,784,674
1,048,990
577,321
3,552,508
661,211
36,506,144
79,383
4,000
5,000

CASH EXPENDITURES ($)
Maintenance and Repairs
Insurance
Property Taxes
Salaries and Benefits
Medication
Feed Ingredients
Feed Overhead
Telephone
Legal Fees and Audit
Public Relations
Supplies
Vehicle Operations
Pullet Removal
Hen Removal
Utilities
Miscellaneous
Breeder Chicks

489,301
134,751
4,237,671
9,143
924
1,155
4,615
174,810
8,619
103,680

682,828
145,285
6,803,845
14,750
924
1,155
4,615
688,416
10,860
103,680

884,601
155,274
9,209,463
20,049
924
1,155
4,615
1,255,163
12,979
103,680

20,000

4,538,616
53,254
449,280

-

-

-

-

312,079
32,279

426,572
64,568

544,380
140,149

—

—

—

902,054
263,755
672,000

2,185,265
500,751
672,000

24,235,915
22,224,000
46,459,915
-16,733,680
-72,178,376

52,638,397
75,384,000
128,022,397

5,867,227
9,484,306
Total Cash Expenditures
Capital Investments
17,574,000
18,693,000
23,441,227
Cash Required
28,177,306
Cash Surplus-Quarter
-21,580,825 -19,335,404
Cash Surplus-Year
-21,580,825 -40,916,229

13,050,949
16,893,000
29,943,949
-14,528,
-55,444,696

-

-

-72,178,376

Table 33.— Cash Flow Summary— Third Year.
Quarter
inhume
1

3

2

4

Commercial shell eggs
Excess hatching eggs
Spent fowl

$26,028,300 $26,028,300
90,961
26,070
938,809
890,064

$26,038,300
26,070
890,064

$34,704,400 $112,789,300
34,760
177,861
1,186,752
3,905,689

Total Income

$26,944,434

$27,058,070

$26,944,434

$35,925,912 $116,872,850

664,390
392,419

666,293
393 ,462

666,293
393,462

CASH EXPENDITURES ($)
Maintenance and Repairs
Insurance
Property Taxes
Salaries and Benefits
Medication
Feed Ingredients
Feed Overhead
Telephone
Legal Fees and Audit
Public Relations
Supplies
Vehicle Operations
Pullet Removal
Hen Removal
Utilities
Miscellaneous
Breeder Chicks

1,287,654
179,286
13,791,493
30,227
924
1,155
4,615
2,091,418
12,051
103,680

1,288,590
178,427
13,791,493
30,080
924
1,155
4,615
2,091,329
16,993
103,680

1,288,077
177,882
13,728,911
29,982
924
1,155
4,615
2,091,270
16,954
103,680

120,000

120,000

120,000

765,236
229,487

766,838
229,660

766,752
229,621

Total Cash Expenditures
Capital Investments
Cash Required
Cash Surplus-Quarter
Cash Surplus-Year

19,138,834
4,456,000
24,195,834
2,748,600
2,748,600

-

—

-

—

19,683,539
-

19,683,539
7,374,531
10,123,131

-

—

19,619,578
-

19,619,578
7,324,856
17,447,987

888,387
524,614
1,583,392
1,733,308
239,356
18,416,702
40,183
1,228
1,535
6,155
2,788,485
22,643
138,240
160,000
1,023,114
306,244
672,000

2,885,363
1,703,957
1,583,392
5,597,634
774,951
59,789,393
130,472
4,000
5,000

28,545,636

87,588,587
4,456,000
92,044,587

-

28,545,
7,380,276
24,828,263

20,000

9,062,502
73,691
449,280
520,000
3,321,940
995,012
672,000

-

24,828,263

Table 34.— Cash Flow Summary— Fourth Year.
Quarter
Income

Total
1

4

3

2

Commercial shell eggs
Excess hatching eggs
Spent fowl

$29,466,000 $29,466,000
29,513
102,974
890,064
938,809

$29,466,000
29,513
890,064

$39,288,000 $127,686,000
39,350
201,350
1,186,752
3,905,689

Total Income

$30,385,577 $30,507,783

$30,385,577

$40,514,102

$121,793,039

663,293
393,462

666,293
393,462

888,387
524,614
1,583,392
1,733,308
239,356
18,416,702
40,183
1,228
1,535
6,155
2,788,485
22,693
138,240
160,000
1,023,119
306,244
672,000

2,885,363
1,703,957
1,583,392
5,597,634
774,951
59,789,393
130,472
4,000
5,000

28,545,636
_
28,545,636
11,968,466
44,204,452

87,588,587

CASH EXPENDITURES ($)
Maintenance and Repairs
Insurance
Property Taxes
Salaries and Benefits
Medication
Feed Ingredients
Feed Overhead
Telephone
Legal Fees and Audit
Public Relations
Supplies
Vehicle Operations
Pullet Removal
Hen Removal
Utilities
Miscellaneous
Breeder Chicks

1,287,654
179,286
13,852,287
30,227
924
1,155
4,615
2,091,418
17,051
103,680

1,288,590
178,427
13,791,493
30,080
924
1,155
4,615
2,091,329
16,993
103,680

120,000

120,000

120,000

765,236
229,487

766,838
229,660

766,752
229,621

Total Cash Expenditures
Capital Investments
Cash Required
Cash Surplus-Quarter
Cash Surplus-Year

19,739,834
_
19,739,834
10,645,743
10,645,

664,390
392,419
-

-

-

-

19,683,539
_
19,683,539
10,824,244
21,469,987

-

1,288,077
177,882
13,728,911
29,982
924
1,155
4,615
2,091,270
16,954
103,680

-

19,619,578
_
19,619,578
10,765,999
32,235,986

_

20,000

9,062,502
73,691
449,280
520,000
3,321,940
995,012
672,000

87,588,587
44,204,452

Table 35.— Cash Flow Summary— Fifth Year.
Quarter
Torai.

income
1

2

3

4

Commercial shell eggs
Excess hatching eggs
Spent fowl

$25,537,200 $25,537,200
89,244
25,578
938,808
890,064

$25,537,200
25,578
890,064

$34,049,600 $110,661,200
34,104
174,504
1,186,752
3,905,689

Total Income

$26,452,842 $26,565,253

$26,452,842

$35,270,456 $114,741,393

CASH EXPENDITURES ($)
Maintenance and Repairs
Insurance
Property Taxes
Salaries and Benefits
Medication
Feed Ingredients
Feed Overhead
Telephone
Legal Fees and Audit
Public Relations
Supplies
Vehicle Operations
Pullet Removal
Hen Removal
Utilities
Miscellaneous
Breeder Chicks
Total Cash Expenditures
Capital Investments
Cash Required
Cash Surplus-Quarter
Cash Surplus-Year

120,000

120,000

120,000

765,236
229,487
—

766,838
229,660
—

766,752
229,621
—

888,387
524,614
1,583,392
1,733,308
239,356
18,416,702
40,183
1,228
1,535
6,155
2,788,485
22,643
138,240
160,000
1,023,114
306,244
672,000

19,739,834
19,739,834
6,713,008
6,713,008

19,683,539
19,683,539
6,881,714
13,594,722

19,619,578
19,619,578
6,833,264
20,427,986

25,545,636
25,545,636
6,724,820
27,152,806

664,390
392,419
1,287,659
179,286
13,852,287
30,227
924
1,155
4,615
2,091,418
17,051
103,680

663,293
393,462
1,288,590
178,427
13,791,493
30,080
924
1,155
4,615
2,091,329
16,993
103,680

663,293
393,462
1,288,077
177,882
13,728,911
29,982
924
1,155
4,615
2,091,270
16,954
103,680

2,885,363
1,703,957
1,583,392
5,597,634
774,951
59,789,393
130,475
4,000
5,000

87,588,587
87,588,587
27,152,806

20,000

9,062,502
73,691
449,280
520,000
3,321,940
995,012
672,000

DISCUSSION

The analysis was based upon the dat a pres e n t e d in
the preceding budgets.
(1973)

During the first year of operation

total revenue was calcu l a t e d to be $129,339 while

total operating expenses were calcu l a t e d to be $6,411,061.
Therefore,

the complex had an annual

loss of $6,2 81,7 22.

This loss was assumed to be the cost of starting up the
business and was capitalized.
first year

(1973)

Hence,

at the end of the

the complex had a total of $31,541,722

in

capitalizable assets.
During the second year

(1974)

of o p e r a t i o n the c o m ­

plex had $55,844,021 in total revenue and $60,912,576
total expenses.

Therefore,

in

total loss w as c a l c u l a t e d to be

$5,068,555 and was capitalized.

Hence,

second year the c o mp l e x had $111,994,277

at the e n d of the
in c a p i t a l i z a b l e

assets.
During the third year of o p e r a t i o n

(197 5) the complex

had $116,872,850 in total revenue and $101,1 9 1 , 3 3 9 in total
operating expenses.

Therefore,

c a l c u l a t e d to be $15,681,511.

p r o f i t bef o r e taxes was
At the end of the third year

net w o r t h was calcul a t e d as follows:
Capital investments
Capita l i z e d loss
D e p r e ciation

(1973)
(1973)
(1973)

62

$25,260,000
6,281,722
(-)
941,907

63

Capital Investments
C a p i t alized Loss
D e p r e ciation

(1974)
(1974)
(1974)

C a pital Investments
Depreciation
Re p l a c e m e n t Capital
Net Wor t h

(1975)
(1975)
(1975)
(1975)

75,384,000
5,068,555
8,274,179

(-)
(-)

4,456,000
13,602,752
13,602,752
107,229,441

The annual re placement capital wa s assumed to be
e q u i v a l e n t to the annual d e p r e c i a t i o n starting f r o m the
third year

(1975) of operation.

This wa s m o n e y pu t aside to

cover future expenses in the r e p l a c e m e n t of d e p r e c i a b l e
assets.

Since r eplac e m e n t capital w a s a s s u m e d to be e q u i v a ­

lent to depreciation,

net wor t h was c a l c u l a t e d to be the same

at the end of the third,

fourth and f i f t h years of operation.

The annual rate of r e t u r n was c a l c u l a t e d as follows:
Profit Before Taxes .. n
Net W o r t h
In 197 5 the annual rate of r e t u r n was c a l c u l a t e d to
be 14.62 percent ^ 1 q 7^22 9^4~4T x

looj •

D u r i n g the same period

the annual rate of return for M i c h i g a n ' s egg p r o d u c e r s was
5.50 p e rcent a ccordin g to Kelsey and B r o w n

(1977).

In 1976 the complex had $ 1 3 1 , 7 9 3 , 0 3 9 in total revenue
and $101,191,339 in total o p e r a t i n g expenses.

Therefore,

profit before taxes was c a l c u l a t e d to be $30,601,7 00.
w o r t h was $107,229,441,

therefore,

c a l c u l a t e d to be 28.54 p e r c e n t

(^ 7

Net

the rate of return was
*^'2 9 'T41 X

*

During

the same period the annual rate of r e t u r n for M i c h i g a n ' s egg
p rod u c e r s was 6.60 percent a c c o r d i n g to Kelsey and Brown
(1977) .

64
In 1977 the complex had $114,7 41,393 in total revenue
and $101,191,339 in total oper a t i n g expenses.

Therefore,

p r ofit before taxes was c a l c u l a t e d to be $13,550,054.
w o r t h was $107,22 9,441,

therefore,

calculated to be 12.64 p e r c e n t

Net

the rate of return was

|^1 q 7 'ff'f '441 x

.

During

the same period the annual rate of return for M i c h i g a n ' s egg
producers was 19.50 p e r c e n t a c c o r d i n g to Kelsey

(1978).

Since there was a loss d u r i n g the first two years
of operation

(1973 and 1974)

there was no return on i n v e s t ­

m e n t shown.

The d iff e r e n c e b e t w e e n the rate of return

realized by Michig a n ' s egg p r o d u c e r s an d the simulated c o m ­
plex may be due to the fact that,

a l t h o u g h the average price

for a dozen eggs m a y have been the same the cost of inputs
may have been different.

The cost of inputs wa s assumed

to be constant throug h o u t the life of this stu d y w h i l e in
reality the egg p r odu c e r s had d i f f e r e n t costs ea c h year.

SUMMARY

The objective of this study wa s to analyze the
economic feasibility of e s t a b l i s h i n g an egg producing complex
that would produce e n o u g h eggs to supply each of M ichigan's
9,000/000 residents w i t h 280 eggs annually.
sented in the prece e d i n g tables,
in the study,

The data p r e ­

based on assumptions given

provide the bas i c information neces s a r y to

maki n g a decision as to the feasibility of e s t ablishing such
an enterprise.

The data and a s sumptions upon whi c h the cost

and income were calcul a t e d were applicable to conditions in
Michigan.

Therefore,

it can be c o n c l u d e d that it is e c o n o m i ­

cally feasible to e s t a b l i s h a c o m p l e t e l y i ntegrated egg p r o ­
duction operation in M i c h i g a n prov i d e d the following c o n ­
ditions as shown by the data pres e n t e d in the study can be
met.
1.

A total w o r k force of 655 personnel in the skilled,
semi-skilled,

and u n s k i l l e d categ o r i e s are available

and can be employed.
2.

That investors are w i l l i n g and able to raise
$102,778,191 d u r i n g the first two years.

This

figure includes bo t h funds for capi t a l investment
and working c a p i t a l until the c o m p l e x can generate
enough income to prov i d e its own o p e r a t i n g capital.
65

66

At the e n d of the third year

(197 5) of o peration the

simulated proposed complex had a rate of return on net worth
of 14.62 percent.

During the same period Michi g a n ' s egg

producers had a rate of return on net worth of 5.5 0 percent.
At the end of the fourth ye a r

(1976)

of o p e r a t i o n the com­

p l e x had a rate of return on net w o r t h of 2 8.54 percent as
compared to

6.6

0 perc e n t for M i c h i g a n ' s egg producers.

the end of the fifth year

At

(1977) of o p e r a t i o n the complex

had a rate of return on net wor t h of 12.64 per c e n t as c o m ­
pared to 19.50 p e rcen t for M i c h i g a n ' s egg producers.

B IB L IO G R A P H Y

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