Strengths
Poultry farms are relatively immune from negative changes in the economy as chicken and eggs remain as a staple of the diets of most people. Once established, these businesses are able to generate highly recurring streams of revenue from the ongoing purchase orders that they receive from supermarkets and food related tailors within their respective markets. One of the major trends that has occurred over the past ten years is to source both chicken and eggs from local farms. These entities typically operate with higher gross margins as they are able to command a slightly higher price among people that are willing to pay a premium for sourcing their food on a local basis.
As it relates to the cost of starting a new poultry farm, this can vary widely depending on the scope and scale of the planned operation. A small farm could be started for as little as $50,000 while a large-scale poultry or chicken farm can cause as much as $1 million depending on the type of infrastructure that will be placed on the property. One of the positives about starting a chicken farm is that most financial institutions are willing to provide a substantial degree of capital support given that a majority of this funding is typically allocated towards real estate purchases as well as the development of onsite structures to carry out operations.
Weaknesses
As it relates to weaknesses, chicken and poultry farms have substantial degrees of complexity. Any business that deals with livestock is subject to have substantial issues especially if disease starts to spread on the farm. Additionally, there are numerous rules and regulations that must be adhered to on an ongoing basis giving that poultry and chicken farms are producing products that are meant for human consumption. As such, it is imperative that a chicken farm or poultry farm obtain proper legal guidance so that they can operate within the letter of the law at all times. Generally speaking, these businesses have moderately controllable operating costs. However these can spike depending on market conditions.
Opportunities
For opportunities, poultry/chicken farms are able to easily scale their operations by simply adding additional birds to their flock. However, there is a maximum capacity that can be dealt with at any given time. Generally speaking, there should be no more than 500 birds per acre of farmland. Beyond the simple expansion of the flock, chicken and poultry farms are able to easily secure ongoing capital to purchase additional land to expand their operations. There is also the possibility that an existing poultry farm can conduct an acquisition of a similar business which can then be integrated into the company’s ecosystem.
Threats
There are a significant number of threats that poultry and chicken farms face on an ongoing basis. Most importantly, inflation can cause the underlying operating costs of the business to increase especially as it relates to acquiring bulk chicken feed. This can become a very expensive endeavor if cost controls are not properly put in place to remedy these issues. Many chicken and poultry farms will maintain their feed production operations in house to a certain extent in order to reduce these risks.
As noted above, one of the other major issues that can occur is that disease can spread very quickly among poultry. This can decimate an entire flock of birds, which can cause significant economic disruptions for a poultry farm. As it relates to ongoing competitive issues, there are a number of national level providers of chicken and poultry products. These businesses typically benefit from economies of scale, and as such it is sometimes difficult to remain pricing competitive with competitors that are of much larger size. However, the current buying trend is benefiting small and local farms as most people want to source these products from family-owned businesses within their respective markets.