Beef, Chicken, etc

[Deon]

Hey guys,

I finished reading the Millionaire Fastlane and this is my first post here.

It is a question that will help me make a decision for my business idea.

Does anyone know how much profit farmers make on meat, chicken, eggs, etc ?

For example, when Whole Foods sells local beef at $18.00, how much does the farmer sell it for ?

Thanks

 

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[Runum]

Hey guys,

I finished reading the Millionaire Fastlane and this is my first post here.

It is a question that will help me make a decision for my business idea.

Does anyone know how much profit farmers make on meat, chicken, eggs, etc ?

For example, when Whole Foods sells local beef at $18.00, how much does the farmer sell it for ?

Thanks

Welcome to the fastlane deon10. Farming, profit and losses are tough to figure out. I know many farmer families and it's a tough life but they have been doing it for generations. They are always telling anyone who listens about how bad things are but they keep on doing it. I do know that they get government subsidies for different produce. It depends on the year and the product. Some years they will get money to stop producing product. It is not true supply and demand business and price structure.

 

[Deon]

Thanks...

Well, I'm not gonna be farming myself...

So when you say that they complain, do you know the reason? Is it because they do not sell enough?

 

[Runum]

Thanks...

Well, I'm not gonna be farming myself...

So when you say that they complain, do you know the reason? Is it because they do not sell enough?

LOL, general complaining. Not enough rain, not enough appreciation for farmers from the public. The price of gas is too high, the wholesale price of goods at their level is too low, it's too windy, it's too cold. The complaining is good natured but it's always there.

 

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[John C.]

Deon,

I think MJ talks a lot about staying away from a commodity business. Mainstream Farming is certainly a commodity business. It is very cut throat pricing and as Runum mentioned the farmers are at the mercy of Mother Nature with respect to so many things - too much rain, too little rain, spring too early or too late, too many problems with insects.

I do not believe that framing or farm products are a fast lane business. You could have some variation of farming, range raised chickens for example - that picked up some aspects of the fast lane philosophy but it is extremely difficult to have a valid point of differentiation.

In addition farming and/or distribution of farm products is a capital intensive business. You need a lot of land and equipment to farm and it is tough to start on a small scale.

If you can give us a little more idea about your plans, we might offer some more specific insights. And don't worry about anyone stealing your plans. As MJ points out in the book, ideas are not worth much. It is the implementation that produces the money and there are very few people who capable or willing to implement.

 

[ChrisS417]

A fine example of a very successful, and from what I can put together from all he does, wealthy farmer is a man named Joel Salatin owner of Polyface Farms. He has been featured in the movie Food Inc. as well as the Michael Pollan book "The Omnivore's Dilema"

Polyface, Inc.

I saw him do a lecture at Webster University in St. Louis MO. Guy is brilliant. He utilizes natural and sustainable agricultural processes to produce beef, pork, poultry, eggs, rabbits, and forestry products. By properly herding and manipulating the combination of animals he has, he is able to constantly produce his meats and eggs with minimal external inputs.

Minimal external imputs + Maximum production = $$$

Edit: Just checked out his website, and it appears he has 6 books on the subject, one of which is entitled You Can Farm: The Entrepreneur's Guide to Start & Succeed in a Farming Enterprise. I think I'll be adding this one to my cart shortly!

 

[Deon]

In addition farming and/or distribution of farm products is a capital intensive business. You need a lot of land and equipment to farm and it is tough to start on a small scale.

Like I said, I will NOT be farming. So that doesn't really apply to me. So I am going to be working with farms that are already working.

You could have some variation of farming, range raised chickens for example

That is one of the points.

But going back to my original question... I found out that farmers usually make about 40%. So something that costs $10/lbs retail, is sold at around $6/lbs to markets, etc. I'm assuming natural farmers make less, since they do not use various things to fatten their animals.

@ChrisS417: Thanks for the info man... what do you mean by minimizing external input?

 

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[biophase]

I found out that farmers usually make about 40%. So something that costs $10/lbs retail, is sold at around $6/lbs to markets, etc.

Something sold for $10 that is $6 wholesale is 66% markup.

40% markup is something sold for $10 that wholesales for $7.

 

[MJ DeMarco]

I think MJ talks a lot about staying away from a commodity business.

Actually, I mean to stay away from a product that can be commoditized -- meaning, there are no differences among providers -- which means, the only difference is price. The environment lowers margins which lowers profits.

Surprisingly, the way the agri business is going nowadays, farming might very well become Fastlane. Granted, I don't know the industry well enough to say with confidence -- however, I do think that old farmers are NOT being replaced with new ones.

 

[bflbob]

But going back to my original question... I found out that farmers usually make about 40%. So something that costs $10/lbs retail, is sold at around $6/lbs to markets, etc. I'm assuming natural farmers make less, since they do not use various things to fatten their animals.

You're assuming that a farmer takes his cow, kills it, cuts it up, and then walks it down to the local grocer. Your also making the assumption that, if the farmer makes 40%, then that's the difference between wholesale and retail.

That's not how it (or much of anything) works.

If the farmer is making 40% (I think that's pretty high), then he's selling the cattle to a sales yard for 40% more than the cost of the calf, equipment, feed, fuel, barns, labor, veterinarian, mortality rate, etc. He doesn't make 40% of the selling price, but 40% of the costs.

In all reality, it is more likely that the farmer makes 40% on the cost of goods, meaning the calf and feed. Out of that 40% comes all the other costs, plus profits.

Then the cattle goes to a sales lot, where a mess of other costs get added to the cost. The cattle is then shipped to a processing plant, adding shipping costs to the mix.

At the processing plant, the cattle is killed, graded, and cut. Depending on the desires of their buyers, this could mean they are processed into steaks, roasts, ground beef, etc., or possibly only split in half if they are going to a butcher shop.

Next, the processed cattle is sent to (or sold by) a wholesaler. The wholesaler may also act as a distributor. These companies would normally warehouse the beef and other products. They then distribute them to stores, or local distributors.

Eventually, the beef makes it to your local grocery store. At this point, the beef is sold at retail (or one type of retail). Retail at a grocery store is much cheaper than retail at Ruth's Chris Steak House.

So let's assume everyone makes a similar markup.

The farmer has costs of $.95/pound and sells for $1.33/pound
The sales lot buys for $1.33/pound and sells for $1.86/pound.
The processing plant buys for $1.86/pound and sells for $2.60/pound.
The wholesaler buys for $2.60/pound and sells for $3.64/pound.
The distributor buys for $3.64/pound and sells for $5.10/pound.
The local distributor buys for $5.10/pound and sells for $7.14/pound.
The retailer buys for $7.14/pound and sells for $10.00/pound.

The fastlaner would try to figure out how to eliminate one or more of the layers and keep the profits.

 

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[Deon]

@MJ DeMarco: The Applegate Farms guy is a great example of Fastlane. I saw a story they made about him on TV once. But I'm not doing the same thing...

@bflbob: A lot of what you said is correct but doesn't apply to me. The only cost after the animal is raised is the processing unit. For example, there are farms that sell directly to restaurants... there's no wholesaler, distributor, retail, etc...

It's from the farm, to (maybe) the processing unit where the animal is butchered, to the restaurant/client/local store... which allows the farmer to make more profit this way, no ?

Am I wrong somewhere?

PS: If what you say is correct, then that's even better, because they would be making more profit if I get the meat directly from them. They won't have to incur all those other costs, no?

 

[ChrisS417]

@ChrisS417: Thanks for the info man... what do you mean by minimizing external input?

By this I mean minimizing expenses as it relates to stuff you need to buy to run your farm such as petroleum, cattle feed, animal waste management, fertilizers, and pesticides. These are all required inputs for most farms to achieve their output (the sellable meat, eggs, veggies etc.). In the closed sustainable system that Salatin uses, the cows eat the grass, then the chickens come through after the cows and eat the leftovers and little bits out of the cow poop. Pigs feed on the compost that is created on the farm. So basically they do everything they can to eliminate the need to purchase outside food for their animals. If done properly it becomes a closed sustainable cyclical system that can turn into a pretty good money printer.

click the "mimic nature" link in the video section here

 

[bflbob]

@bflbob: A lot of what you said is correct but doesn't apply to me. The only cost after the animal is raised is the processing unit. For example, there are farms that sell directly to restaurants... there's no wholesaler, distributor, retail, etc...

It's from the farm, to (maybe) the processing unit where the animal is butchered, to the restaurant/client/local store... which allows the farmer to make more profit this way, no ?

Am I wrong somewhere?

There is more potential profit there. But you have to understand that the entire reason all those layers are there is because they are efficient. If the farmer has to buy a truck to haul the cow, then his profit can also disappear.

You may be confusing profit percentage with profit dollars. Small, local farms that process themselves and deliver directly to retailers make bigger profit percentages. But they'll never become a farm that makes $5mil a year that way.

And if all there are is a farmer, processing plant, and retailer, how are you making money? Don't you become a layer?

 

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