Tom and Ruth Neuberger run a free-range poultry operation on their farm in Canistota, South Dakota. In search of additional income from their operation, they began looking at other value added products to serve their customers. What they learned through their SARE funded Farmer Rancher grant was that they could double the value of a whole bird by simply cutting it up and selling the parts in pound packages.
Using funding from their SARE Grant, they purchased the equipment and supplies to create convenient food products for their customers. They began selling cut-up chicken in pound packages, split and quarters chickens, ground chicken, BBQ wings, chicken snack sticks and dog food. Many of the birds were seconds and would have been sold at discount if sold as whole birds. Customers were able to buy the products at a local farmers market and on the farm. A newsletter to their customer list of over 3,000 people added to the marketing mix.
The start up costs of the project, including equipment depreciation and overhead, and cost of bus and labels meant they had no profit during the start-up phase of making and selling their products. But when Neuberger analyzed the labor and cost data for producing the 8 products, he found that a producer could further process 5.42 chickens per hour. Ten years ago, when this project was done, he figured 144 hours of additional processing at labor rates of $9 per hour ($1,296) to produce $6,301 worth of value-added products valued at $3,905 ($5 each) before processing. That means they netted an additional $1,100.
What can you take from this? Well, plug your own labor rates and the value of your birds into the equations at today’s rates. Then consider your market which could be quite a bit different than the Neuberger’s. Tom himself noted that a location with high demand for value-added products would allow producers to charge a higher price and make the entire process more profitable.
Just food for thought…or as a chicken might say grist for the gizzard.