Monday, December 22, 2008
In Canistota, SD, a group of family farmers have been experimenting with methods for adding value to their products and income to their operations.
Tom and Ruth Neuberger were traditional livestock farmers in '70's. During the credit crunch of early 80's they found themselves in debt “up to their ears.” They sold off their livestock to pay off debt, and then had to devise a new business plan.
They turned to poultry.
“We turned to poultry mainly because of the faster turnover,” explained Tom Neuberger. “Goose was especially profitable because Ruth could make pillows and comforters from the feathers and down, in addition to profit generated from the meat.”
The Neubergers had been raising, processing, and direct marketing poultry as whole birds for about two decades, and in 2001 they were looking for ways to add value to their products and income to their operations. They, along with a group of family farmers, submitted a proposal to the North Central Region Sustainable Research and Education Program’s (NCR-SARE) Farmer Rancher Grant Program and were awarded $14,513 for their project, “Developing Added Value, Convenience Products from Free-Range Pastured Chickens.”
Rather than purchasing more chickens, the group wanted to find ways to improve the chickens that they already had. On their farm, the chickens used for the project were raised in a free-range manner and cattle and sheep raised on the farm were rotationally grazed. The SARE grant assisted them in acquiring the equipment and supplies necessary to create products that would not only increase profits but also provide convenient food products for consumers.
Through further processing of the chickens, they were able to come up with several new products such as, cut-up chicken, split and quartered chicken, ground chicken, BBQ wings, and snack sticks. The products require a variety of processing techniques and involve different amounts of time and effort to produce.
“The exciting thing we learned from the project was that adding value to a whole bird was more profitable than raising and marketing more birds,” explained Neuberger. For example, we found we could double the value of a whole bird by simply cutting it up in a few minutes and selling the parts in pound packages.”
While this project did not produce a profit due to large labor costs and time spent producing the products, it did confirm that there is potential to add profits by adding value to products on the farm. It took 144 hours at $9 per hour ($1,296) to produce $6,301 worth of value-added products. The 781 processed whole chickens from which the value-added products were made were valued at $5 each ($3,905).
“Many of the birds were seconds and would have been sold at a discount if sold as whole birds,” said Neuburger. “However, the cost of bags and labels, equipment depreciation, and overhead added to the cost of the new products and eliminated any profits during the testing phase.”
Neuberger analyzed the labor and cost data for producing the 8 products and determined that a producer could further process 5.42 chickens per hour. Using a rate of $9 per hour for labor, he determined that a producer could add $1.66 worth of value to each bird raised on his farm. Neuberger noted that there are several factors that could alter the results of the project. A location with a high demand for value-added products would allow producers to charge a higher price and make the process more profitable.
“Our project should have convinced anyone interested in raising chickens that it is more expedient to increase income by adding value than to raise more chickens and selling them whole” said Neuberger.
Read more about the Nueberger’s project online or contact the NCR-SARE office for more information.
Posted on 12/22/2008