Will My Feed Processing Plant Be Profitable? – Part II – Feed Formulation
We’ve already established three key variables which will determine the ultimate profitability of your feed processing plant:
- Feed formulation
- Raw material costs
- Market value of your output(s)
Today, we’ll focus on the first variable, your feed formulation.
Before you can gauge your feed processing plant’s profit potential, you’ve got to know which ingredients you’ll need to produce your desired output, and in what quantities (the inclusion ratio). This formulation can be very simple – Full-Fat and ExPress(R) soy plants have soybeans as their only ingredient – or very complex if you’re producing a finished feed.
The formulation you use is going to be determined by a number of factors, including:
- What ingredients are locally available for processing? Local available ingredients are preferred, especially for key ingredients which will be used in large quantities because the cost to import large volumes of ingredients can be prohibitive.
- If ingredients are not locally available, is it feasible to import them? This may be an option for ingredients where import costs would not be too great.
- What are the demands of your customers? You have to be able to sell your finished product. Your formulation will impact the following variables that feed customers often have in mind when choosing the feed that they will purchase:
- Nutritional quality
- Physical characteristics
- Palatability
- Price
You may have a wide-ranging customer base which will require a variety of different formulations. I recently came across this article which discusses a very mature feed processing operation and the wide variety of formulations that they use. The article highlights why it is important to understand what your customers demand. In this case, each customer has different demands, resulting in a complex feed formulation strategy.
If you’re just starting out in the feed processing industry, you’re probably not going to be using 100+ ingredients so your formulation analysis should be much simpler.
