Broiler Production Systems in Georgia Costs and Returns Analysis

Transcription

1 Broiler Production Systems in Georgia Costs and Returns Analysis Dan L. Cunningham and Brian D. Fairchild Extension Poultry Scientists Department of Poultry Science Poultry Science Building Athens, Georgia Office: 706/ Contributors: Clark Beusse, County Extension Coordinator, Dawson County; Forest Conelly, County Extension Coordinator, Stephens County; Mike Dollar, County Extension Coordinator, Evans County; Norman Edwards, County Extension Coordinator, Walker County; Bill Hodge, County Extension Coordinator, Carroll County; Rick Jasperse, County Extension Coordinator, Pickens County; Lanier Jordan, County Extension Coordinator, Baker County; Ricky Josey, County Extension Coordinator, Franklin County; Jeremy Kichler, County Extension Coordinator, Macon County; Brad Mitchell, County Extension Coordinator, Mitchell County; Steven Moraitakis, County Extension Coordinator, Gordon County; Steven Patrick, County Extension Coordinator, Habersham County; Greg Sheppard, County Extension Coordinator, Lumpkin County; Roger Sinyard, County Extension Coordinator, Marion County; Billy Skaggs, County Extension Coordinator, Hall County; Bobby Smith, County Extension Coordinator, Morgan County; Tim Smith, County Extension Coordinator, Wilcox County; Reid Torrance, County Extension Coordinator, Tattnall County; Carl Varnadoe, County Extension Coordinator, Madison County; James Varnadoe, County Extension Coordinator, Colquitt County; Robert Waldorf, County Extension Coordinator, Banks County; Michael Wheeler, County Extension Coordinator, Gilmer County Acknowledgments: Appreciation is expressed to Clark Beusse, Forest Connelly, Mike Dollar, Norman Edwards, Bill Hodge, Rick Jasperse, Lanier Jordan, Ricky Josey, Jeremy Kichler, Brad Mitchell, Steven Moraitakis, Steven Patrick, Greg Sheppard, Roger Sinyard, Billy Skaggs, Bobby Smith, Tim Smith, Reid Torrance, Carl Varnadoe, James Varnadoe, Robert Waldorf, Michael Wheeler, County Extension Coordinators, the University of Georgia Cooperative Extension Service, for their assistance with data collection in Georgia. Appreciation also to Ms. Maureen Golia for her time and effort preparing this publication.

2 Introduction Poultry meat production has grown steadily over the years as consumption has increased. As a result, Georgia s poultry industry has experienced significant new growth and created expansion programs to meet consumer demands. Georgia is currently the number one broiler-producing state in the United States, growing approximately 5 percent of all broilers. Contract producers grow virtually all of the broilers produced in the U.S. and Georgia. Raising broilers via contractual arrangements with integrated companies has been a primary component of the poultry meat industry for more than 50 years. Contract production has played a significant role in continuing the tradition of the family owned and operated farm for poultry growers. While poultry contracts offer benefits to growers such as reduced market risk, reduced production responsibilities, lower operating capital and relatively predictable incomes, they do not guarantee success or eliminate all risks. Because poultry operations, especially poultry houses, represent substantial long-term investments (0 years or more), individuals need to understand the long-term business potential of these commitments before building. 009 Economic Conditions The general economic downturn experienced for most of resulted in very difficult business conditions for poultry producers. Poultry growers have experienced significant increases in operating costs, primarily due to increased heating fuel costs. Poultry growers reported propane gas prices ranging from a low of $.8 per gallon to a high of $.6 per gallon during Increased energy and feed costs combined with weak consumer spending produced negative returns for most broiler integrators. To combat this difficult business situation, many integrators reduced bird placements and/or bird weights for contract farmers, which in turn impacted returns for contract growers. In a few cases, growers lost their contracts due to company cutbacks in production or closing of processing facilities. However, as a result of production cutbacks, some companies returned to profitability during the summer of 009. The economic conditions experienced during are not typical of the history of this business. Contract broiler production has operated in Georgia as a commercial business for nearly 60 years. For the vast majority of those years, it has been a relatively successful agricultural enterprise providing positive returns for both integrators and contract growers. The recent unprecedented economic conditions, however, emphasize the fact that poultry contracts are not guarantees of success and that risks are associated with this business. Thus, prospective growers should investigate and consider carefully the risks and rewards of contract poultry production before committing the sizable investment required to participate in this business. The cash flow estimates provided in this analysis are designed to demonstrate potential cash flow scenarios for facilities constructed and financed with costs and contracts. The values used are considered reasonable representations of a grower s costs and returns for the situations presented, but they are not intended to be representative of all growers situations. Growers may do better or worse than the examples presented here. Considerations Before Investing Before investing in a poultry production unit, consider that unit s potential cash flow. Cash flow refers to the amount of income generated compared to expenses paid from cash accounts over time. Generating a positive cash flow is essential to the long-term success of any business, including poultry farming. Broiler production may represent either a primary or supplemental income for farmers, depending on the number of houses owned. As the attached cash flow projections indicate, returns to contract poultry producers may be modest while the units are being paid for. In addition, it is typical for contract growers to experience marginal cash flow situations during the later stages of debt retirement as a result of increases in taxable income. However, once the debt on a poultry house is retired, a substantial amount of what was returned to the bank as principal and interest payments are returned to the grower as additional income. As a result, many poultry producers in Georgia have started with smaller production units that have grown over time as equity and success in the business have accrued. It is also important to realize that during the productive life of a poultry facility, additional investments to upgrade the houses will be necessary to maintain production efficiencies and competitiveness. These up-

3 grades usually result in improved bird performances, reduced labor, increased contracts or a combination of these factors that offset the capital costs required. Cash Flow Projections Cash flow budgets can be set up in many ways. The loan repayment rates and depreciation methods (amortization schedules) used will influence the amount of interest and taxes paid. These factors, as well as individual grower performances, will influence an enterprise s cash flow. to a grower depends on how it is used. Some Georgia growers trade the manure to a removal business in exchange for cleanout and disposal service. This practice eliminates the necessity for additional farm equipment and labor associated with manure handling and application that can increase farm investments by $5,000 to $0,000. Many growers who do invest in manurehandling equipment for their farms also haul and sell this product as an additional income aspect of their operation, while others share the equipment to reduce these costs. Projecting cash flow into the future is further complicated by unforeseen circumstances such as changes in income and cash costs that normally occur yearto-year. Thus, any cash flow projection is only an estimate of what may be reasonably expected to occur given the input factors available at that time. A 0-year projection with a 5-year payback period has been used for the cash flow analysis in these example budgets. Thirty years is used to demonstrate a significant upgrade at the end of year 5. Poultry houses typically have productive lives of 0 years or more, so most of the returns are generated during the second half of their existence. The investments in these houses are financed at 00% of cost, assuming enough equity in land to secure the loan. It is common practice for poultry producers to invest in a substantial upgrade of their facilities at least once (and sometimes more often) during the life of the operation. The cash flow projections in these examples include a $5,000 upgrade per house in year 5 to demonstrate the effect of this recapitalization on the cash flow projections. Equipment replacement and repairs for poultry houses occur periodically as needed, but are difficult to project due to variability from grower to grower and differences in facility age. Nevertheless, an annualized charge for these expenses was included in the grower s cash costs in these examples. Value of Manure Broiler operations produce two products of value: meat and manure. The manure removed from poultry operations has significant value in Georgia as an organic fertilizer. Broiler litter contains the nutrients nitrogen (N), phosphorous (P) and potassium (K) at levels of approximately.5,.0 and.5%, respectively. Traditionally, this material has been applied to pastures and croplands as a replacement for commercial fertilizer; however, the value of poultry manure When poultry manure is used as a fertilizer, its value depends on the utilization of the nutrients N, P and K. Depending on the soil conditions and crop grown, P and K may have little or no nutrient value. In these situations, only the nitrogen value and enhanced soil productivity due to micronutrients is captured by manure application. If, however, the manure is used on cropland deficient in P and K, the application value is increased. A 00 study (Litchtenberg et al.) placed the value of poultry litter at zero to $.90 per ton net of costs when only nitrogen value is derived. When used on cropland utilizing N, P, and K components, the net value ranged from just under $.00 to almost $.00 per ton. More recently, Kissel, et al. (008) estimated that in addition to the N, P and K value, poultry manure has a liming value of $.00 per ton; thus, a reasonable average estimated net value for poultry litter statewide for most years would be $0.00 to $.00 per ton. The increased costs of commercial fertilizer in recent years have increased poultry litter values beyond these historic levels. During , poultry litter for crop production in Georgia has sold for $0.00 to $60.00 per ton delivered. As a result, the value of poultry litter at the farm has substantially increased for most poultry producers. The typical broiler house will produce approximately 70 to 00 tons of litter per year, depending on cleanout schedules. Thus, the net litter value added to poultry operations for most years may be in the range of $,700 to $,00 per house. Due to the variability in cleanout schedules and the utilization and value of poultry litter, the cash flow budgets here take a very conservative position on the value of the poultry litter. For these examples, it is assumed that the value of the litter removed from the houses only offsets the costs of

4 removal. As presented above, this will underestimate the value of this product for many growers. Example Budgets The budgets in these examples were designed to demonstrate potential grower returns with three different performance scenarios (i.e., () expected, () above expectation and () below expectation). The estimates provided in these budgets were derived from information provided by samplings of growers, integrators, bankers and contractors in Georgia. Above- and below-expectation budgets were derived by increasing and decreasing gross income projections each year by 5 percent from the expected values. An analysis of grower returns in Georgia from (Cash Flow Estimates for Contract Broiler Production in Georgia: A 0- Analysis, UGA Cooperativ Extension Bulletin 8) indicates an average annual increase of.0 percent in net incomes during this period. Thus, cash flow projections for years beyond year one were derived by increasing net incomes by.0 percent annually to account for changes over time. In addition, the following criteria and assumptions were employed: Annual Net Income. Derived by subtracting annual cash production expenses from gross income. Increased at an annual rate of percent to account for changes over time. Depreciation. Uses the Modified Accelerated Cost Recovery System (MACRS). Depreciation used only to determine taxable income. Interest. Calculated at a 7.5 percent fixed rate for 5 years. Taxable Income. Net income minus depreciation and mortgage interest. Taxes. Federal and state income and social security taxes combined at 5 percent. Net Cash Flow. Net to grower s land, labor and management (i.e., costs for land, labor and management not included). Obtained by subtracting interest, taxes and debt retirement from net income. Labor. Assumes use of family labor without the need for hired labor for the average-size poultry farm. The typical broiler farm in Georgia contains four houses, which can be maintained and managed by one operator. The trend in recent years, however, is for operations of more than four houses. Large operations (6- houses) are more likely to use hired labor, which can add an additional $,500 to $,000 per house to expenses. Land. Assumes land owned by grower with no associated cash cost. Land requirements for poultry houses are relatively small (e.g., four houses may be physically sited on as few as 5-6 acres. Local zoning ordinances, however, will generally require at least 0-0 acres to meet set-back requirements from property lines or dwellings). Value of Litter. The value of litter at cleanout is assumed to at least equal the cost of cleanout and is not counted as an income factor for this analysis. However, for many growers, used litter can result in additional net income ranging from $,700 to $,00 per house per year. Companion Publications: Cunningham, D. L., 008. Guidelines for prospective contract broiler producers. University of Georgia Cooperative Extension Bulletin 67, Revised October 009. Cunningham, D. L., 005. Guidelines for prospective contract hatching egg producers. University of Georgia Cooperative Extension Bulletin, Revised October 009. Cunningham, D. L., 00. Cash flow estimates for contract broiler production in Georgia: A 0-year analysis. University of Georgia Cooperative Extension Bulletin 8, Reviewed April 009. Kissel, D. E., M. Risse, L. Sonon, and G. Harris, 008. Calculating the fertilizer value of broiler litter. University of Georgia Cooperative Extension Circular 9. Lichtenberg, E., D. Parker, and L. Lynch, 00. Economic value of poultry litter supplies in alternative uses.

5 GEORGIA BROILER PRODUCTION UNIT (50 X 500 Houses) Four-house contract broiler production unit with tunnel ventilation, solid walls and cool pads (,500 capacity/ house); 5 year amortization. Initial Grower Investment: Housing and Equipment (includes grading, roads, well and generator) Fixed Costs (principal + 7.5%) $870,000 (8.70/sq ft) $96,780/year First Grower Income: First Grower Cash Expenses: House capacity 8,000 Shavings $,800 Batches/year 6.0 Electricity $,990 Bird weight (lb).5 Fuel $,900 Capacity marketed (%) 96.6 Insurance & property taxes $9,850 Contract payment ($/lb) Repair and miscellaneous $9,800 Fuel or electrical bonus $,00 Equipment replacement $,07 Total Gross Income $9,0 Total $68, The value of litter at cleanout offsets the cost of removal. First Net Return to Capital, Land, Labor and Management: (gross income - cash expenses) $,60 5

6 FOUR-HOUSE (50 X 500 ) BROILER CASH FLOW PROJECTIONS (Expected Performance) Tax Inc. Taxes Net Cash Flow,60 65,50 6,, ,80 6,08 0,756 6,60 5, ,0 8,60 0,57 58,879 7,90 0 0,8,76 87,7 55,9 0,8 0 0,99 5,799 76,08 5,766,0,995,78 5,7 6 6,75 76, ,,088,88 5,8 7 9,05 76,08 5,667 5, 7,500 6,5 6,00 8,989 76,08,698 55,08,5 8,89 6,7 9,89 76,08 7, 59,57,68 0,979 7, ,75 76,08,85 6,965 8,87,605 7,0 50,680 8,09 7,89 68,9 8,8 9,68,6 5,69 0,98 7,8,96 5,99 0,995 56, ,7 80,09 0,06 9,0 0,97 59,90 0 0,57 86,6 9,86 5,85 0,87 5 6,00 0,80 9,96 59,80 55,78 0, ,6,500,07,566 9,789 8,96 9, ,690,985,097,5,608 6, 97,68 8 7,08,,07,59 0,85 9,85 98, ,56 8,06 9,9 5,75 8,596 5,009 98, ,077 5,7 8,69 6,96 55,65 5,78 99,960 8,678 5,7 7,78 8,6 60,568 56,99 0,89 87,5 5,7 5,960 9,679 65,660 57,98 0,7 9,098 5,7,,07 70,95 59,87 05,6 9,90 5,7,786,85 75,0 6,9 07, ,89 5,7,0,68 8,075 6,76 09,5 6 0,795 7, ,99 68,5, , ,85 7,98, , ,988 7,86 7, 9 5, ,08 75, 9, , ,5 76,89,68 Total 5,0,69,050, ,095,050,000,06,57,57,8,9, State, federal and social security taxes calculated at 5%. 6

7 FOUR-HOUSE (50 X 500 ) BROILER CASH FLOW PROJECTIONS (Above Expectations) Tax Inc. Taxes Net Cash Flow 9,790 65,50 6,, ,87,86 0,756 6,60 5, ,605 5,0 0,57 58,879 7, ,5 7,75 87,7 55,97 0, , ,89 76,08 5,766,0,685,090 9,69 6,99 76,08 9,9 7, 7,9 6,69 0,50 7 6,65 76,08 5,667 5,,60 8,56 0,8 8 9,088 76,08,698 55,08,5 0,97,6 9 5,070 76,08 7, 59,57 8,609,5, , 76,08,85 6,965 6,59 6,9, 58, 8,09 7,89 68,9 9,6, 9, 6,78 0,98 7,8 8,880 8,608 5,990 6, ,7 80,09 7,875 5,756 6,070 67, ,57 86,6 57,8 55,08 6,0 5 7,56 0,80 9,96 67,6 58,60 5,87 6 7,68,500,07,566 8,07 5,87 97,0 7 78,75,985,097,5,09 9,8 0,5 8 8,78,,07,59 9,69 5, 0, ,7 8,06 9,9 5,75 57, 55,098 0, ,080 5,7 8,69 6,96 6,655 57,69 05,8 9,86 5,7 7,78 8,6 69,75 59, 07,809 96,79 5,7 5,960 9,679 75,07 6,59 09,8 00,65 5,7,,07 80,90 6,7,8 0,667 5,7,786,85 86,9 65,5, ,760 5,7,0,68 9,06 67,06 5,9 6,95 7, ,069 7,77,6 7 7, ,9 76,08,76 8, ,58 77,58, , ,968 79,089 6, , ,88 80,67 8,87 Total 5,65,5,050, ,09,050,000,557,59,5,0,,8 State, federal and social security taxes calculated at 5%. 7

8 FOUR-HOUSE (50 X 500 ) BROILER CASH FLOW PROJECTIONS (Below Expectations) (Gross-CashCosts) Tax Inc. Taxes Net Cash Flow 7,0 65,50 6,, ,650 9,779 0,756 6,60 5,7 0 0,998,7 0,57 58,879 7, ,9,68 87,7 55,97 0, ,88 5 7,0 76,08 5,766, ,0 6 9,65 76,08 9,9 7,,65,9,79 7,5 76,08 5,667 5, 0,50,689,776 8,890 76,08,698 55,08 7,5 6,00,07 9 7,588 76,08 7, 59,57,7 8,,6 0 0,0 76,08,85 6,965,87,00,50,7 8,09 7,89 68,9 77,79 7,08 9,9 6,009 0,98 7,8,5,9 6,000 8,90 0 6,7 80,09,99 6,70 5,880 5, ,57 86,6,9 8,87 6,60 5 5,96 0,80 9,96 5,6 5,89 5,7 6 58,05,500,07,566,7 6,05 86,90 7 6,06,985,097,5,, 9, 8 6,0,,07,59,6 6,56 9, ,79 8,06 9,9 5,75 9,769 8,99 9,6 0 7,07 5,7 8,69 6,96 6,68 5,6 9,08 7,95 5,7 7,78 8,6 5,85 5,985 95,870 77,985 5,7 5,960 9,679 56,9 5,70 97,6 8,5 5,7,,07 6,8 56,8 99, 85,75 5,7,786,85 66,657 58,0 0, ,879 5,7,0,68 7,5 60,7 0,99 6 9,656 7, ,790 6,677 7, , ,509 68,778 7, , ,0 70,5 0,86 9 0, ,9 7,557, , ,57 7,988 5,59 Total,76,908,050, ,095,050,000,055,8,069,55,986,78 State, federal and social security taxes calculated at 5%. 8

9 GEORGIA BROILER PRODUCTION UNIT (50 x 500 Houses) Six-house contract broiler production unit with tunnel ventilation, solid walls and cool pads (50 x 500 ) (,500 capacity/house); 5 year amortization. Initial Grower Investment: Housing and Equipment (includes grading, roads, well and generator) Fixed Costs (principal + 7.5%) $,05,000 (8.70/sq ft) $5,70/year First Grower Income: First Grower Cash Expenses: 6 House capacity 07,000 Shavings $6,600 Batches/year 6.0 Electricity $0,600 Bird weight (lb).5 Fuel $,00 Capacity marketed (%) 96.6 Insurance & property taxes $,800 Contract payment ($/lb) Repair and miscellaneous $,00 Fuel or electrical bonus $,600 Equipment replacement $6,000 Hired Labor $8,600 Total Gross Income $88,06 Total $05,000 The value of litter at cleanout offsets the cost of removal. First Net Return to Capital, Land, Labor and Management: (gross income - cash expenses) $8,06 9

10 SIX-HOUSE (50 X 500 ) BROILER CASH FLOW PROJECTIONS (Expected Performance) Tax Inc. Taxes Net Cash Flow 8,06 97,875 96,5 8, ,866 86,697 8, 9, 5, ,57 90,0 5,860 88,9 56, ,60 9,9 0,76 8,905 6, , ,,057 79,9 66,0,98,7 5, 6 0,086,057 7,0 7,6,005,90 5,0 7 06,8,057 68,500 76,670,57 8,50 5, ,5,057 6,58 8,6,66,776 5,05 9,56,057 56, 89,06,6 5,9 5,79 0 8,75,057 9, 95,98 55,66 9, 5,6,0 57,09,77 0,97,8,5,9 7,58 0,77, 9,85 67,8,569, 0 5,096 0,07 07,07 7,6,500 6, ,775 9,95,00 77,5,56 5,5 0 5,79 9, 5,78 8,5,87 6 6, 0,50 9,6 8,9 06,8 7,68 6,0 7 5,68 7,76 8,8 0, 95,6 68,75, 8 56,9,8 6,57,889 07,890 7,76 5,07 9 6,0 7,05,87,588 9,95 76,8 6,8 0 66,69,598,00 5,9 0,0 80,50 7,686 7,98,598,067 7,9 7,7 8,06 50,6 77,,598 8,90 9,59,88 85,709 5,5 8,970,598 6,69,8 5,7 88,5 56,057 88,69,598,79,80 60,85 9,98 58,87 5 9,0,598,58 6,9 69,86 9,50 6, ,90, ,9 00,97 99,8 7 06, ,95 07,0 99,09 8, 0 0 0, 09,7 0,07 9 8, ,670,55 07,5 0 5, ,0,765,78 Total 7,5,,575, ,,575,000,86,67,70,,6, State, federal and social security taxes calculated at 5%. 0

11 SIX-HOUSE (50 X 500 ) BROILER CASH FLOW PROJECTIONS (Above Expectations) Depr Tax Inc. Taxes Net CashFlow 9,88 97,875 96,5 8, ,08 96,0 8, 9, 5, ,06 99,95 5,860 88,9 56, ,78 0,95 0,76 8,905 6, , ,00,057 79,9 66,0,8 5,88 57,67 6,9,057 7,0 7,6,0 8,9 58,58 7 6,5,057 68,500 76,670,878,857 59,08 8 0,76,057 6,58 8,6,58 5,55 60,8 9 5,79,057 56, 89,06 5,988 9,6 60,76 0 9,68,057 9, 95,98 66,0, 6,7,76 57,09,77 0,97 5,7 7,6,690 8,96 0,77, 05, 7,85,965,7 0 5,096 0,07,865 7,65 90,98 8,65 0 5,775 9,95,80 8,9,95 5 5, ,79 9, 7,859 86,75, ,659 0,50 9,6 8,9 8,798 76,579,00 7 6,8 7,76 8,8 0, 08,09 7,87 5, ,09,8 6,57,889 0,705 77,7 5,0 9 7,9 7,05,87,588,567 8,98 5, ,98,598,00 5,9, 85,70 56,5 85,58,598,067 50,96 50,96 87,8 59,0 9,9,598 8,90 9,59 58,755 90,56 6,70 97,8,598 6,69,8 66,87 9,05 65,5 0,06,598,79,80 75,8 96,9 68,5 5 09,,598,58 6,9 8,006 99,0 7,6 6 5,0, ,506 06,7 09,077 7, ,6,56 09,07 8 8, ,0,85,8 9, ,60 7, 7,9 0, ,96 9,5,8 Total 7,796,69,575, ,,575,000 5,,57,8,09,0,55 State, federal and social security taxes calculated at 5%.

12 SIX-HOUSE (50 X 500 ) BROILER CASH FLOW PROJECTIONS (Below Expectations) Tax Inc. Taxes Net Cash Flow 7,88 97,875 96,5 8, ,7 77,6 8, 9, 5, ,9 80,909 5,860 88,9 56, ,75 8,57 0,76 8,905 6, , ,8,057 79,9 66,0 0 0,08 6 9,98,057 7,0 7,6,90,65 5,7 7 95,8,057 68,500 76,670,65,6 6, ,78,057 6,58 8,6, 8,097 6,7 9 0,7,057 56, 89,06,5,70 6,8 0 07,808,057 9, 95,98,59 5,585 7,05,96 57,09,77 0,97,6 9,607 7,87 6,0 0,77, 8,56 6,860 7,7 0,57 0 5,096 0,07 9, 68,05 7,06,98 0 5,775 9,95 09,6 7,07 6,56 5 9,7 0 5,79 9,,708 78,98 5,969 6,05 0,50 9,6 8,9 9,6 67,957 8, ,706 7,76 8,8 0, 8,08 6,079 6,67 8,80,8 6,57,889 95,076 68,77 6,7 9 8,9 7,05,87,588 06, 7,8 7,6 0 5,6,598,00 5,9 6,678 75,87 9,00 58,8,598,067 7,9,78 78,0,6 6,550,598 8,90 9,59,0 80,85,7 68,8,598 6,69,8 8,57 8,50 6,860 7,98,598,79,80 6, 86,7 9,9 5 79,68,598,58 6,9 5,566 89,098 5,5 6 85,75, ,77 95,77 89, , ,98 0,8 89,8 8 96, ,80 0,880 9,9 9 0, ,77 05,958 96, , ,79 08,077 00,7 Total 7,05,7,575, ,,575,000,9,00,57,0,99,80 State, federal and social security taxes calculated at 5%.

13 GEORGIA BROILER PRODUCTION UNIT (5 X 500 Houses) Four-house contract broiler production unit with tunnel ventilation, side walls and cool pads (0,000 capacity/ house); 5 year amortization. Initial Grower Investment: Housing and Equipment (includes grading, roads, well and generator) Fixed Costs (principal + 7.5%) $98,800 (8.60 sq ft) $0,/year First Grower Income: First Grower Cash Expenses: House capacity 0,000 Shavings $,00 Batches/year 5.0 Electricity $,60 Bird weight (lb) 6.50 Fuel $6,77 Capacity marketed (%) 95.0 Insurance & property taxes $8,000 Contract payment ($/lb) Repair and miscellaneous $,900 Fuel or electrical bonus $,900 Equipment replacement $,000 Hired Labor $,800 Total Gross Income $99,65 Total $78,787 The value of litter at cleanout offsets the cost of removal. First Net Return to Capital, Land, Labor and Management: (gross income - cash expenses) $0,78

14 FOUR-HOUSE (5 X 500 ) BROILER CASH FLOW PROJECTION (Expected Performance) Tax Inc. Taxes NetCashFlow 0,78 69,600 68,9, ,6,888 8,806 65,77 7, ,656 5,5 09, 6,80 0,8 0 0, 7,85 9,986 59,666, ,60 5 0,09 8,07 56,8 6, ,78 6,07 8,07 5,69 50, , ,678 8,07 8,7 5,5 5,860,05 0, 8 8,9 8,07,79 58,75,805,8 0,677 9,59 8,07 9,98 6, 0, 7,07 0,880 0,98 8,07 5,00 68,0 7,87 9,756 0,99 6,86 0,55 9,706 7,57 76,60 6,8 6,88 9,799 0,998 79,5 5,80,0,56 5, ,86 85,86,99 7,, 55,85 0,7 9,0,6 50,6, ,968 0,07 99,58 5,89 5,,5 6 6,7,500,07,566 5,57 7,5 89, ,90,985,097,5 8,08,908 9,8 8 68,698,,07,59 6,9 7,750 95,09 9 7,07 8,06 9,9 5,75, 50, 95, ,5 5,7 8,69 6,96 5,089 5,88 96,99 79,0 5,7 7,78 8,6 55,9 5,570 98,8 8,60 5,7 5,960 9,679 60,9 56,9 00,66 86,56 5,7,,07 66,09 58, 0,85 89,98 5,7,786,85 7,6 60,0 0, 5 9,78 5,7,0,68 77,07 6,96 06, ,657 7, ,79 66,7,0 7 0, ,60 70,56, , ,6 7,975, , ,755 7, 6, 0, ,950 7,88 9,067 Total,887,556,08, ,87,08,00,08,68,078,99,00,7 State, federal and social security taxes calculated at 5%.

15 FOUR-HOUSE (5 X 500 ) BROILER CASH FLOW PROJECTION (Above Expectations) Tax Inc. Taxes Net CashFlow 6,50 69,600 68,9,8 0 0,70 9,0 8,806 65,77 7, ,800,6 09, 6,80 0, ,8,5 9,986 59,666, ,0 5 6,90 8,07 56,8 6,98 0 0, ,668 8,07 5,69 50,59 5,9,07,6 7,6 8,07 8,7 5,5,6,5, , 8,07,79 58,75 9,75 6,90 5,75 9 8,7 8,07 9,98 6, 7,9 9,57 5,68 0 5,8 8,07 5,00 68,0 5,07,75 5,67 5,05 0,55 9,706 7,57 8,95 9,8,59 57,9 0,998 79,5,9 6,65 7,06 60,5 0 7,86 85,86,589 9,906 7,97 6,6 0,7 9,0 5,7 5,9 7, ,97 0,07 99,58 6,8 56,995 6, ,55,500,07,566,68 50,88 9,7 7 7,660,985,097,5 6,578 7,80 00,9 8 77,,,07,59,86 50,70 00, ,675 8,06 9,9 5,75 5,75 5,5 0,58 0 8,89 5,7 8,69 6,96 59,86 55,95 0,698 87,975 5,7 7,78 8,6 6,865 57,70 0,6 9,75 5,7 5,960 9,679 70,0 59,55 06,58 95,569 5,7,,07 75,05 6,9 08,58 99,8 5,7,786,85 80,96 6,7 0, ,70 5,7,0,68 86,76 65,, ,50 7, ,67 69,886 7,65 7, ,69 7,09 7, , ,9 75,57 0,5 9 0, , 77,085,58 0, ,68 78,67 6,0 Total 5,,9,08, ,87,08,00,7,070,6,75,6,595 State, federal and social security taxes calculated at 5%. 5

16 FOUR-HOUSE (5 X 500 ) BROILER CASH FLOW PROJECTION (Below Expectations) (Principle) Tax Inc. Taxes Net Cash Flow,5 69,600 68,9,8 0 0, 6,7 8,806 65,77 7,55 0 0,5 9,078 09, 6,80 0, ,86,60 9,986 59,666, ,8 5,889 8,07 56,8 6, , ,67 8,07 5,69 50,59 0 0,5 7 8,89 8,07 8,7 5, ,66 8,7 8,07,79 58,75 5,886,060 6,80 9,0 8,07 9,98 6,076,577 6,9 0 6,78 8,07 5,00 68,0 0,675 7,7 6,5 9,59 0,55 9,706 7,57 69,59,,05,09 0,998 79,5 8,,09 (,) 5,55 0 7,86 85,86 7,09,895 (,65) 8,059 0,7 9,0 6,8 7,895 (,067) 5 5,00 0,07 99,58 6,96 5, (,6) 6 5,00,500,07,566 7,66,6 8, ,,985,097,5 0,09,0 89, ,6,,07,59 7,99,798 89,86 9 6,69 8,06 9,9 5,75 5,59 7, 90, ,78 5,7 8,69 6,96, 9,80 9,89 70,07 5,7 7,78 8,6 6,96 5,7 9,996 7,7 5,7 5,960 9,679 5,78 5, 9,7 76,9 5,7,,07 56,779 5,87 96, 80,8 5,7,786,85 6,96 56,687 98,56 5 8,09 5,7,0,68 67,8 58,57 99, ,77 7, ,908 6,968, , ,50 67,06,9 8 95, ,60 68,76 6, , ,67 69,7 9,5 0 0, ,5 7,9, Total,6,8,08, ,87,08,00,88, 99,09,8,90 State, federal and social security taxes calculated at 5%. 6

17 GEORGIA BROILER PRODUCTION UNIT (0 X 500 Houses) Four-house contract broiler production unit with tunnel ventilation, solid walls and cool pads (6,700 capacity/ house); 5 year amortization. Initial Grower Investment: Housing and Equipment (includes grading, roads, well and generator) Fixed Costs (principal + 7.5%) $80,00 (0.8/sq ft) $9,75/year First Grower Income: First Grower Cash Expenses: House capacity 06,800 Shavings $,0 Batches/year 5.5 Electricity $9,60 Bird weight (lb) 5.60 Fuel $9,559 Capacity marketed (%) 96.0 Insurance & property taxes $5,900 Contract payment ($/lb) Repair and miscellaneous $8,00 Fuel or electrical bonus $,900 Equipment replacement $,500 Total Gross Income $67,688 Total $59,9 The value of litter at cleanout offsets the cost of removal. First Net Return to Capital, Land, Labor and Management: (gross income - cash expenses) $08,9 7

18 FOUR-HOUSE (0 X 500 ) BROILER CASH FLOW PROJECTIONS (Expected Performance) Tax Inc. Taxes Net Cash Flow 08,9 6,80 6,, ,06 0,608 5,60 58,805, ,,80 97,90 56,99 6, ,5 5,076 8,06 5,9 8,98 0 0,70 5 7,78 7,577 50,6, ,00 6 9,75 7,577 7,0 5, , 7,0 7,577,588 8,787 5,955,08 7,66 8,56 7,577 9,80 5,57,8,6 7,9 9 7,05 7,577 5,79 56,655 8,758 6,565 8,5 0 9,59 7,577, 6,05 5,696 8,99 8,5,87 6,88 6,58 65,79 69,8,6 5,55,80 0,7 70,90,57 9,675,780 7,57 0 5,970 76,06,557,55,606 0,77 0 0,08 8,7 0,9 5,58,8 5,08 0,66 88,79 9,7 8,80, ,95,500,07,566 9,7,780 78,55 7 8,86,98,097,5,78 9, 8,0 8 5,8,,07,59 9,57,850 8,5 9 5,878 8,06 9,9 5,75 6,98,5 8,8 0 57,975 5,7 8,69 6,96,550 6,7 85,59 6,5 5,7 7,78 8,6 8,05 8,09 87,86 6,57 5,7 5,960 9,679,665 9,9 88,785 67,6 5,7,,07 7,80 5,68 90,87 70,997 5,7,786,85 5,79 5,68 9, ,7 5,7,0,68 57,67 55,86 9, ,906 7, ,00 59,5 8,9 7 8, ,6 6,5 7, , ,09 6,78 0,0 9 88, ,795 66,078,77 0 9, ,57 67,00 5,7 Total,99,6,00,00 6,65,00,0,757,6 965,00,79, State, federal and social security taxes calculated at 5%. 8

19 FOUR-HOUSE (0 X 500 ) BROILER CASH FLOW PROJECTIONS (Above Expectations) Tax Inc. Taxes Net Cash Flow,86 6,80 6,,5 0 0,86 6,8 5,60 58,805, ,76 8,6 97,90 56,99 6, ,086 0,80 8,06 5,9 8, ,55 5,7 7,577 50,6, ,87 6 5,7 7,577 7,0 5,7 6,0,,6 7 8,6 7,577,588 8,787,06,,60 8 0,790 7,577 9,80 5,57 8, 6,,97 9,06 7,577 5,79 56,655 5,0 8,789, 0 6,07 7,577, 6,05,76,6,8 8,795 6,88 6,58 65,79 75,96 6,57 9,86,57 0,7 70,90 0,099,05 7,6,0 0 5,970 76,06 8,,95 7,075 7,9 0 0,08 8,7 7,5 8,09 6, ,6 0,66 88,79 6,68 5,6 6,57 6 5,,500,07,566 6,668, 8, ,06,98,097,5 9,5,79 88, ,,,07,59 7,6,507 89,87 9 6,6 8,06 9,9 5,75,67 7,5 89, ,87 5,7 8,69 6,96,9 9,507 90,78 69,9 5,7 7,78 8,6 6,08 5,8 9, 7,575 5,7 5,960 9,679 50,88 5,809 9,7 76,00 5,7,,07 55,866 5,55 95,88 79,57 5,7,786,85 6,09 56,60 97,58 5 8,8 5,7,0,68 66,9 58,8 99, ,80 7, ,95 6,67,7 7 90, ,57 66,688,89 8 9, ,8 68,0 6, , ,5 69,8 8,85 0 0, ,00 70,770,0 Total,69,9,00,00 6,65,00,0,977,,0,997,95,5 State, federal and social security taxes calculated at 5%. 9

20 FOUR-HOUSE (0 X 500 ) BROILER CASH FLOW PROJECTIONS (Below Expectations) Tax Inc. Taxes Net Cash Flow 0,07 6,80 6,, ,6 05,077 5,60 58,805, ,70 07,79 97,90 56,99 6,76 0 0,80 09, 8,06 5,9 8, ,98 5,509 7,577 50,6, ,5 6,79 7,577 7,0 5,7 0 0,6 7 6,0 7,577,588 8, ,69 8 8, 7,577 9,80 5,57 5,956,085,87 9 0,70 7,577 5,79 56,655,05,,985 0,5 7,577, 6,05 9,7 6,76,0 5,577 6,88 6,58 65,79 6,708,98,5 8,089 0,7 70,90 06,66 7,6 (,60) 0,65 0 5,970 76,06,68 0,9 (,86),6 0 0,08 8,7,6,9 (,0) 5 5,99 0,66 88,79,8 6,99 (,75) 6 8,67,500,07,566,07 9,6 7,78 7,0,98,097,5 0,9 6,59 79,6 8,9,,07,59,980 9,8 79,7 9 7, 8,06 9,9 5,75 9,8,7 79, ,076 5,7 8,69 6,96 5,65,978 80,59 5,078 5,7 7,78 8,6 9,968 5,89 8,99 56,9 5,7 5,960 9,679,7 7,056 8, 59,6 5,7,,07 9,098 8,68 8,99 6,7 5,7,786,85,99 50,75 86, 5 65,696 5,7,0,68 8,95 5, 87,9 6 69,00 7, , 56,00,60 7 7, ,90 60,7, , ,88 6,5, , ,55 6,77 6,58 0 8, ,9 6,00 8,9 Total,79,0,00,00 6,65,00,00,57,86 888,05,69,69 State, federal and social security taxes calculated at 5%. 0

21 GEORGIA HATCHING EGG UNIT (0 x 500 Houses) Two-house hatching egg unit with automated egg gathering, tunnel ventilation, separate male feeders and cool pads (0 x 76 hen space; 0,600 layers/house); 5 year amortization. Initial Grower Investment: Housing and Equipment (includes grading, roads, well, etc.) Fixed Costs (principal + 7.5%) $570,000 $6,08/year First Producer Income: First Grower Cash Expenses: House capacity,00 Litter $,800 Hatching eggs/hen 60 Electricity $,700 Contract payment ($/doz) $0. Repairs, replacement, misc. $,600 Pullet growout payment $,00 Hired labor $6,700 Insurance & property taxes $5,500 Total Gross Income $7,57 Total $9,00 Includes bonus payments. The value of litter at cleanout is assumed to offset the cost of removal. First Net Return to Capital, Land, Labor and Management: (gross income - cash expenses) Determined from cash flow projections on following pages. $88,7

22 GEORGIA HATCHING EGG UNIT CASH FLOW PROJECTIONS (Expected Performance) Tax Inc. Taxes Net Cash Flow 88,7,750,05,8,98,,6 90,09 79,6 0,65, ,6 9,89 67,0 8,576, , 9,676 57, 6,68 6, , ,550 9,88,57 8,87,6,906 8,6 6 97,6 9,88,,075 5, 5,59 8, ,0 9,88 9,90,88 9,67 6,885 9,7 8 0,98 9,88 7,0 6,088,60 8,9 9,99 9 0,6 9,88,58 8,889 9,090 0,8 9, ,9 9,88,99,098,77,96 0,5 07,60,909 8,6 5,6 6,9,557,69 09,756 0,70 8,668 95,06,56,09,95 0 0,96 5,6 00,990 5,7,97,9 0 6,890 56,58 07,0 7,555,8 5 6,7 0,50 60,905,97 9,890,76 6 8,80 6,750 6,57 6,8 05,57 6,9 69,05 7,80,9 6,09 6,77 0,69 5,9 7,6 8,60 0,6 5,5 7,96 07,69 7,6 7,70 9 6,076 9,08,957 7,86,0 9,5 7,0 0 8,597 7,866,7 8,7 6,8 0,7 75,0,69 7,866,689 9, 9,6,865 76,8,79 7,866,980 9,80,96,0 77,9 6,68 7,866,6 0,60 6,86,5 79, 9,98 7,866,9,7 9,99 5,79 80,899 5,98 7, ,,60 6,76 8,98 6,8, ,888 9, 95,50 7 7, ,78 5,70 96, , ,67 5,75 97,97 9 5, ,685 5,790 99, , ,759 5,866 0,89 Total,58, ,000 9, 660,000,50, ,6,66, State, federal and social security taxes calculated at 5%.

23 GEORGIA HATCHING EGG UNIT CASH FLOW PROJECTIONS (Above Expectations) Tax Inc. Taxes Net Cash Flow 9,687,750,05,8 7,9,769 6,50 9,50 79,6 0,65,0 0 0, 96, 67,0 8,576,8 0 0,0 98,60 57, 6,68 6,759,598,609, 5 00,7 9,88,57 8,87 5,98 5,578, 6 0, 9,88,,075 0,8 7,06,86 7 0,80 9,88 9,90,88,6 8,65,7 8 06,68 9,88 7,0 6,088 9,0 0,66, ,597 9,88,58 8,889,6,99,99 0 0,769 9,88,99,908 9,5,808,55,985,909 8,6 5,6 69,80, 5,6 5, 0,70 8,668 00,50 5,76 6,660 7,59 0 0,96 5,6 06,587 7,05 6,86 9, ,890 56,58,00 9,55 6,98 5,98 0,50 60,905 9,795,98 6,96 6,7 6,750 6,57 6,8,57 9,00 7,9 7 7,9,9 6,09 6,77 08,698 8,0 76,75 8 9,78 0,6 5,5 7,96,69 9,777 77,87 9,79 9,08,957 7,86 8,0, 78,8 0 5,07 7,866,7 8,7,8,985 79, 7,77 7,866,689 9, 6,7,60 80,77 0,8 7,866,980 9,80 9,66 5,7 8,89,9 7,866,6 0,60,0 6,6 8,88 6,58 7,866,9,7 6,899 7,95 85, 5 9,080 7, , 0,708 9,8 87,0 6 5,06, ,9 5,85 00,7 7 55, ,0 5,86 00, , ,06 55,7 0,8 9 6, ,70 56,80 0, , ,597 57,609 06,988 Total,760, 660,000 9, 660,000,680,808 98,8,7,55 State, federal and social security taxes calculated at 5%.

24 GEORGIA HATCHING EGG UNIT CASH FLOW PROJECTIONS (Below Expectations) Tax Inc. Taxes Net Cash Flow 8,859,750,05, ,5 85,57 79,6 0,65,0 0 0,9 87,7 67,0 8,576,8 0 0,89 88,99 57, 6,68 6, , ,77 9,88,57 8,87 6,8, 5,0 6 9,587 9,88,,075 0,7,65 5,57 7 9,9 9,88 9,90,88,70 5,5 5, ,8 9,88 7,0 6,088 9,90 6,77 6,0 9 98,55 9,88,58 8,889,99 8,7 6, ,0 9,88,99,908 8,90 0,6 6,697 0,,909 8,6 5,6 50,069 7,5,9 0,69 0,70 8,668 89,59,5 9,56 06,5 0 0,96 5,6 95,9,87 9,559 08,8 0 6,890 56,58 0,59 5,557 9,56 5 0,65 0,50 60,905 08,8 7,85 9,9 6,86 6,750 6,57 6,8 99,577,85 65,9 7 5,,9 6,09 6,77 96,580,80 68,98 8 7, 0,6 5,5 7,96 0,88,5 69,5 9 9,77 9,08,957 7,86 05,797 7,09 69,9 0,67 7,866,7 8,7 09,95 8,8 70,86,6 7,866,689 9,,056 9,570 7, 7,0 7,866,980 9,80 6,57 0,689 7,59 9,65 7,866,6 0,60 9,56,87 75,8,8 7,866,9,7,979,0 76,75 5,88 7, , 6,5,79 77,78 6 7,580,9 0 0,597 6,759 90,8 7 0, , 9,6 9,6 8, ,8 50,098 9,00 9 6, ,00 5,00 9,90 0 8, ,9 5, 96,799 Total,0,0 660,000 9, 660,000,,65 8,98,509,770 State, federal and social security taxes calculated at 5%. The University of Georgia and Ft. Valley State University, the U.S. Department of Agriculture and counties of the state cooperating. The Cooperative Extension Service, the University of Georgia College of Agricultural and Environmental Sciences offers educational programs, assistance and materials to all people without regard to race, color, national origin, age, sex or disability. An Equal Opportunity Employer/Affirmative Action Organization Committed to a Diverse Work Force Bulletin 0 Revised December 009