Will My Feed Processing Plant be Profitable? – Part IV – Market Value of Output
We’ve already established three key variables which will determine the ultimate profitability of your feed processing plant:
Today we’ll focus on the third variable, the market value of your output.
You’ll need to have a good idea of the price you can command for your finished product. Market price of your feed will depend upon a number of factors, including:
- Local demand – you’re always going to be able to compete more effectively if you have local demand for your product. The further you have to transport your feed, the more it’s going to cost your customers. And the more it costs your customers – well, you know – the harder it’s going to be for you to compete. (If you do find yourself transporting your feed longer distances, here is an article with some helpful tips on minimizing feed delivery costs.)
- Local availability of substitute feeds – if you’re planning to sell your feed for $550/ton and the guy down the road has a similar product going for $500/ton, it’s going to be tough to compete. Unless you can beat your competitor with…
- Nutritional performance – ultimately, the person purchasing your feed is also in business to make money. If their animals perform better on your feed, they’ll be willing to pay a premium for your feed.
You may have more than one product that you have to find a market for. For example, ExPress® soy processing produces both soybean meal and oil. In order to maximize your profit you’ve got to maximize your revenue from both products.
You may be planning to use the feed in your own feeding operations. In this case, you can use your cost of purchasing feed (as opposed to producing your own) as your market value.