Will My Feed Processing Plant Be Profitable? (Part 1)
So you’re thinking about starting a feed processing plant, or maybe you’ve already got one and you’re looking to expand. Chances are that this is going to require a substantial financial investment and that you’re not looking to make this investment out of the goodness of your heart. You, like most business people, are in business to turn a profit and that’s what this investment is intended to do.
As you prepare to make your investment, there are a few critical pieces of information that you must have in order to make sure that your feed processing plant pays off. Above all else – even the cost of your capital investment in the plant – these variables will determine whether or not your feed plant will be as profitable as you’d like:
- Feed formulation
- Raw material costs
- Market value of your output(s)
These three key pieces of information will ultimately determine how profitable your feed processing plant can be because they’ll determine your processing margin – the market value of your output(s) minus your raw material costs.
Processing margin must be large enough to provide for your other operating expenses, insulate against changes in raw material costs and output price fluctuations (a thorough sensitivity analysis is critical), and put enough money in your pocket to make your initial capital investment worthwhile.
