Free-range poultry growth offers diversification opportunity

One of the UK’s largest free-range chicken producers is looking for arable farmers to invest up to £1m and diversify into contract poultrymeat production.

Traditional Norfolk Poultry (TNP) already operates more than 50 contract poultry-rearing sites across East Anglia.

Rising demand for high-welfare, free-range poultry means it is looking to continue its expansion in the area.

“From our conversations with the major retailers, we know there is no stopping the increase in popularity of free-range poultry,” said co-founder and joint managing director Mark Gorton.

See also: New farm enterprise – know the legal issues

“To meet this demand we need to bring a new generation of farmers into the industry by providing them with a strong business case for investing in production.

“This will generate a substantial addition to the farm income as well as returning their investment within 10 years,” said Mr Gorton.

Those interested can opt for one 40,000-bird unit costing about £400,000 or up to three units for a £1m investment.

Competition considerations from other poultry firms and retailers make Mr Gorton reluctant to give full costing details but these are available to interested farmers.

TNP’s assumptions include a requirement for three-quarters to one full-time labour unit, seven days a week.

Full planning permission is needed for the units which will take longer in some areas than others.

However, Mr Gorton estimates a fairly straightforward case would take between a year and 18 months from a farmer signing up to the deal to delivery of the first batch of birds.

He stresses the operation is at the premium end of the market, with welfare of the chickens the top priority, and that growers will need to align with this. 

Free-range chicken contract – what’s involved

  • Ideal site is 5ha with three buildings housing 13,333 birds each
  • Cost from £400,000 (one house) to £1m (three houses) to set up
  • Trees must be planted on site to encourage birds to range (or houses sited close to accessible woodland)
  • Contract package covers initial planning, house construction, range design, and training and support for new growers
  • Five-year growing contract
  • Labour requirement 0.75 to one full-time employee, seven days a week
  • 10-week production cycle – birds delivered as day olds, housed for first four weeks, ready for market at eight weeks, two-week clean down and rest period between batches
  • Feed to be ordered from one of TNP’s nominated suppliers, price can be fixed for up to a year
  • Birds supplied by TNP to grower, sold back to TNP at maturity, price can be fixed for up to a year
  • Feed paid for by TNP, cost deducted from final live bird weight total supplied, with farmer paid agreed price/kg liveweight, less cost of feed and chicks
  • Bedding, vet, meds, insurance, water and finance costs are on farmer’s account
  • Mortality target below 4%, in line with current contract grower performance
  • TNP will rent facility if farmer does not want to run the unit.

Consultant advice – Charles Baines, Laurence Gould

There are risks and benefits – this is not a bed & breakfast-type contract like those offered in the pig sector.

Risks

Taking ownership of the birds is a risk, even in a very short production cycle, disease probably being the biggest risk.

Ensuring the right husbandry skills, biosecurity and commitment to such things are important considerations.

Fixing the price of the chicks, feed and finished birds will mitigate price volatility, as long as the resulting margin over feed is sufficient to cover all other variables and overheads such as finance, which is often overlooked or underestimated.

As with any contract (but especially when considering an enterprise in which you are not experienced), look carefully at the detail and assess realistically your ability to perform to the requirements that will deliver an acceptable margin.

Turnover of birds is critical. Days when the sheds lie empty, or when the buyer does not take finished birds when they are ready, can ruin profitability, so be clear about commitments on both sides.

Benefits

This offers an opportunity to make use of marginal land, diversify income and intensify a farm that cannot otherwise spread its overheads over more acres.

It requires significantly less scale and capital than some of the more intensive broiler contracts, so is within reach of more farmers.

It could also offer a son or daughter or other new entrant, perhaps on a share basis, the opportunity to take responsibility for an enterprise that is ancillary to the main farm business.

Poultry litter is a potent fertiliser.

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