This is an interesting scenario brought about by Dr. Samuel Sewagudde of Genesis East Africa Ltd in one of a poultry Whatsapp group that highlights the challenges poultry farmers face in their business choices. I will use this scenario to provide step-by-step analysis of how to build the data for decision making.
Speaking of Economics, Catherine usually buys layer feed from Matama Feeds Ltd at UGX 800 sh a kg and her birds lay averagely at 72%. At a recent Farmers Expo she met Augustine who works for Mulegi High Quality Feeds Ltd who convinced her that she would achieve 80% production if she uses Mulegi feeds. Mulegi layer feeds cost UGX 1000 sh per kg. Now if Catherine sells a tray of eggs at UGX 8000, Should Catherine switch and use Mulegi feeds?
In this computation the following assumptions have been made:
- Each bird eats 125g of feed per day
- The costs of the feeds include transportation so no additional costs are incurred with the feed
- There are no additional costs incurred in the sale of the eggs
Using the above information:
- Matama feeds cost UGX 100 per day while Mulegi Feeds cost UGX 125 per day
- At 72% production each bird generates UGX 192 per day (8000 * 0.72 divided by 30) while at 80% production the revenue per bird rises to 213/= (8000 * 0.8 divided by 30).
- The increase in cost of feed is UGX 25/= per bird per day while the increase in revenue is UGX 21/= per bird per day
Therefore changing feed providers means that Catherine will spend an additional UGX 4/= per bird per day, therefore the increase in production does not meet the increased costs of feed.
The moral of the story therefore is increased production does not always translate to increased profitability
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