PoultryFarm Project

FeasibilityStudy

Promoter:TilahunGirma(BSc,MSc,MSW,PhD)
(Email:tilahun@abamelaconsulting.org;Mobile+251930013075)

StudyConductedby:

March 2020

Jimma,Ethiopia
ExecutiveSummary
The poultry sector continues to grow in many parts of the world. Though the rate at which the
sector is developing is low, Ethiopia is not an exception in this regard. An increase in human
population, greater purchasing power and urbanization have been strong drivers of the growth
in the poultry sector. The Ethiopian Livestock Master Plan has put forward ambitious targets
of manifold increase in egg production showing a rapid growth in poultry as a national
priority. The government of Ethiopia, in this regard, has prioritized interventions to support
the sector, and is currently rolling out several initiatives including: importation of exotic
crossbred chickens with higher genetic potential, allocation of adequate land for poultry feed
production, promotion of private investments to increase the number and size of specialized
commercial scale layer units, and encouragement of private sector investment in poultry
agribusinesses. Considering the background situation of the poultry sector in the country in
general and the favorable investment climate and the sustainable economic progress of the
private investment sector in Oromiya region than ever before, the promoter of this project,
Tilahun Girma, planned to establish a 3500 layers capacity poultry farm.

• The project will be implemented in Oromiya region, West Guji Zone Abaya woreda at
Odomike town, where several opportunities to run development projects of the
various types is in place such as accessibility of the necessary infrastructure and
utilities, commitment of the local government to attract more investment, and
availability of supply and potential consumer market for the products.

• The egg production project is expected to be competitive in supplying table eggs to

the consumer in Odomike town and the neighboring communities. Products will be
supplied to supermarkets, hotels, restaurants, etc. via its sales workers.

• The total project cost is estimated to be ETB 3.9 million. Of which 60% will be
financed by the promoter’s own equity while 40% is planned to be covered from the
Development Bank of Ethiopia (DBE).

• The project will employ a total of 10 permanent employees during its operation for its
management, production, and marketing activities. The project has also opened
temporary working opportunity for over 15 workers during its construction phase.

• The socioeconomic, environmental, and financial analysis of the project revealed that
the project is socially desirable, economically feasible, and environmentally
sustainable.

i PoultryFarmProjectfeasibilitystudy,March2020
Table of Contents
EXECUTIVESUMMARY....................................................................................................................................I
TABLE OFCONTENTS......................................................................................................................................II
LISTOFTABLES.................................................................................................................................................II
LISTOFFIGURES.............................................................................................................................................III
1. BACKGROUND..........................................................................................................................................1
AN OVERVIEW OF THE POULTRY SECTOR IN ETHIOPIA.........................................................................................1
Breeds 2
Productive Performance........................................................................................................................................3
Poultry Production Systems..................................................................................................................................4
The Science of Poultry Feed..................................................................................................................................6
Supply of Feed.......................................................................................................................................................7
Poultry Health.......................................................................................................................................................9
Housing and Environment...................................................................................................................................10
POULTRY VALUE CHAIN ANALYSIS.....................................................................................................................11
POULTRY AND EGG MARKETS.............................................................................................................................12
Poultry Supply and Demand................................................................................................................................12
Trade, Marketing and Markets............................................................................................................................13
POLICIES AND LEGAL FRAME WORK....................................................................................................................13
STRENGTH AND WEAKNESS OF THE POULTRY SECTOR IN ETHIOPIA..................................................................14
FUTURE PROSPECTS OF THE POULTRY SECTOR IN ETHIOPIA...............................................................................15
KEY SECTOR STAKEHOLDERS..............................................................................................................................16
2. DEDOEGGS-POULTRYFARMPROJECTPROPOSAL.....................................................................18
INTRODUCTION.....................................................................................................................................................18
TECHNICAL STUDY...............................................................................................................................................18
Project description..............................................................................................................................................18
Project Site Development and Construction.......................................................................................................19
Purchase of Pullets, Equipment, Furniture.........................................................................................................20
KEY SUCCESS FACTORS AND POSSIBLE RISKS....................................................................................................21
Key Success Factors............................................................................................................................................21
Possible Risks......................................................................................................................................................22
SUPPLY AND DEMAND GAP ANALYSIS................................................................................................................22
ORGANIZATION AND MANAGEMENT....................................................................................................................23
WORKING CAPITAL REQUIREMENT......................................................................................................................25
3. FINANCIALSTUDY.................................................................................................................................25
INVESTMENT COST AND AMOUNT OF LOAN REQUIRED......................................................................................25
PRICING STRATEGY AND SALES FORECAST.........................................................................................................26
PROJECT FINANCIAL RESULTS..............................................................................................................................26
CONCLUSIONS.......................................................................................................................................................29

ii PoultryFarmProjectfeasibilitystudy,March2020
List of Tables
Table1: Equipment necessary for the project implementation.................................................20
Table2: Staffing plan of the dairy processing and dairy farm..................................................23
Table3: Working capital requirement.......................................................................................25
Table4: Summery of investment cost of the project.................................................................25
Table5: Projected cash flow statement for financial planning.................................................26
Table6Total operating cost schedule........................................................................................27
Table7: Projected cash flow for discounting............................................................................27
Table8: Projected profit and loss statement..............................................................................27
Table9: loan amortization schedule..........................................................................................28

List of Figures
Figure1: Site lay out of the poultry farm..................................................................................19
Figure2: Forecasted net profit of the business..........................................................................28

iii PoultryFarmProjectfeasibilitystudy,March2020
1. BACKGROUND
The poultry sector continues to grow and industrialize in many parts of the world. Though the
rate at which the sector is developing is low, Ethiopia is not an exception in this regard. An
increase in human population, greater purchasing power and urbanization have been strong
drivers of the growth in the poultry sector. The Ethiopian Livestock Master Plan has put
forward ambitious targets of manifold increase in egg production showing a rapid growth in
poultry as a national priority. The government of Ethiopia, in this regard, has prioritized
interventions to support the sector, and is currently rolling out several initiatives including:
importation of exotic crossbred chickens with higher genetic potential, allocation of adequate
land for poultry feed production, promotion of private investments to increase the number
and size of specialized commercial scale layer units, and encouragement of private sector
investment in poultry agribusinesses.

An Overview of the Poultry Sector in Ethiopia

Ethiopia, a country bordered by Eritrea, Sudan, South Sudan, Kenya, Somalia and Djibouti, is
the second most populous nation in Africa, after Nigeria, with a population of about 104.9
million growing at a rate of about 2.5 percent annually. Although it is the fastest growing
economy in the region, it is also one of the low-income economies, with a per capita GNI of
740 USD in 2017. Currently, about 20 percent of the population lives in urban areas. The
urban population increased from 9.7 to 19.3 million between 2000 and 2015. This number is
expected to rise further to 30.2 million by 2025 and 70.5 million by 2050 1. Agriculture is the
dominant sector of the Ethiopian economy. In the 2013/14 Ethiopian fiscal year, agriculture
contributed 40 percent of the national GDP and the contribution of livestock to the
agricultural GDP was estimated to be 20.7 percent 2. In 2016, agriculture contributed
approximately 37.2 percent of the GDP.

The total poultry population has shown a slower increase from around 30 million in 2005 to
about 60 million in 2016. The major reason for the stagnation of the poultry population
growth is the high poultry mortality due to diseases and predators prevalent in the scavenging
production systems. For instance, about 32 million birds died due to disease and close to 30
million birds were lost due to causes other than disease, e.g. mainly predators in 2016 3. The
other reason is the limited expansion of commercial poultry production, both in terms of
number of operators and volume of operation. Regarding the distribution of the total poultry
population among the different regions of Ethiopia Oromia region has the largest number of
chickens, followed by Amhara. The SNNPR, Oromia, Tigray and Amhara regions together
represent 96 percent of the total national chicken population. The remaining 4 percent are
mainly distributed among Afar, Somali, Benshangul Gumuz and Gambela regions. Almost all
of the exotic and hybrid chickens are found in the SNNPR, Oromia, Tigray and Amhara
regions.

1 UnitedNations,DepartmentofEconomicandSocialAffairs,PopulationDivision,2017
2 MoFEC,2018.EstimatesofGDPandotherrelatedmacroeconomicindicators-Ethiopia2006(2013–14EFY).
3 CSA, 2016. Report on livestock and livestock characteristics,Agricultural Sample Survey 2015/16
(2008 E.C.). Statistical bulletin No. 583, Vol II. Addis Ababa.
 Breeds

Use of improved genetics is one of the key elements to improving productivity in the poultry
sector. Lack of access to productive and adaptable chicken breeds still remain one of the most
critical challenges to increasing the economic contribution of the sector. Most of the chickens
kept by smallholder farmers are unimproved indigenous flocks, well-adapted to the local
environments but having slow growth rates and very poor egg productivity. Attempts to
increase productivity are mainly focused on the introduction of high yielding exotic chickens
to replace indigenous stocks. However, the success achieved in terms of improving
productivity in villages through the introduction of exotic breeds is still limited due to the
failure of imported breeds to adapt to local conditions. Other reasons include poor
management; lack of input and output markets; and shortage of quality feeds, vaccines and
veterinary inputs. Efforts to develop high yielding indigenous chicken breeds are still
insufficient.

Currently there are about 5.4million exotic and hybrid chickens, representing 9 percent of the
total national poultry population4. Exotic chickens were first introduced into Ethiopia in 1953
and 1956 by Jimma Agricultural and Technical School and Alemaya College of Agriculture,
respectively5. Four breeds of chickens (Rhode Island Red, Australorp, New Hampshire and
White Leghorns) were imported from Kenya, Denmark and the United States during this
time. Later, the Debre Zeit Agricultural Research Centre (DZARC) was also involved in
evaluating the performance of these breeds including additional introductions such as the
Brown Leghorn, Light Sussex and Barred Rock. Egg production, hatchability and mortality
rates of the breeds were evaluated over several years. The White Leghorn was rated the best
in terms of egg production, adaptability, disease tolerance and feed efficiency 6. In 1996, the
Ministry of Agriculture and Livestock introduced the Fayoumi chicken from Egypt. These
chickens were directly distributed to rural households throughout the country to improve the
extensive scavenging and small-extensive scavenging family poultry production systems.

In the mid 2000s, DZARC introduced the Lohman Silver and Koekoek breeds. The Lohman
Silver did not adapt to the village production system while Koekoek performed well in
several villages (Wondmeneh et al., 2016). In 2010, a layer grandparent (GP) generation was
imported and tested at the Debre Zeit poultry research farm for the first time. Two broiler
parent stocks from Hubbard breeders (Hubbard classic and Hubbard JV) were tested. The
parents and broilers of the classic line outperformed their JV counterparts. The GP was
generally found to be adaptive and suitable under on station conditions at Debre Zeit. In
addition to ensuring sustained supply of improved genetics to producers, the establishment of
the GP stock enabled the national poultry research program to develop the skill required to
manage larger breeder flocks and demonstrated the capacity of the research farm as a future
source of parent stock.

In 2015, additional introductions of exotic breeds known for their wider adaptation and high
performance were tested. Three dual purpose(Redbarred, Lohman Dual and Novocolor) and
three different layer breeds(Lohmanbrown, dominant Sussex and Novobrown) are being
4 CSA, 2017. Report on livestock and livestock characteristics, Agricultural Sample Survey 2016/17 (2009
E.C.).Statistical Bulletin No.585, Vol. II. Addis Ababa.
5 Wondmeneh, E., Van der Waaij, E.H., Udo, H.M.J., Tadelle, D. and Van Arendonk, J.A.M., 2016. Village
poultryproduction system: Perception of farmers and simulation of impacts of interventions. African Journal of
AgriculturalResearch, 11(24), pp.2075-2081.
6 DebreZeitAgriculturalResearchCentre(DZARC).1984.AnnualReport.DebreZeit,Ethiopia.

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 kept at Debre Zeit research centre. These six breeds are still under evaluation at the research
centre (Wondmeneh et al., 2016). The Rohde Island Red (RIR), Fayoumi and Koekoek were
among the chicken breeds widely distributed to village producers, although the supply of the
RIR and Fayoumi has almost ceased. Instead, several medium- and large-scale intensive
producers are involved in the distribution of exotic breeds to producers in the different family
poultry production systems. At present Ethio chicken is the largest supplier of exotic breeds
mainly to the extensive scavenging and semi-intensive family poultry producers, operating in
the four largest poultry producing regions (the SNNPR, Oromia, Tigray and Amhara).
Currently, the broiler and layer breeds kept by most of the intensive poultry farms in the
country include Cobb broilers, and ISA, Lohman and Ross layers with parents imported
mainly from the European Union (EU).

Productive Performance

Productive performance of flock evaluated by measuring egg production, feed consumption,

egg weight and egg shell thickness7 has shown that the tolerable temperature for the layer
chicken is 15-27°C while high temperature (above 27°C) affects feed consumption, egg
weight and egg shell thickness. Relative humidity has less impact on egg production, egg
weight and feed consumption. A study that reviewed the exotic chicken status, production
performance and constraints8 shows that egg production potential of local chicken is 30-60
eggs per annum per hen with an average of 38g egg weight under village management
conditions, while exotic breeds produce around 250 eggs per year per hen with around 60g
egg weight in Ethiopia. The study also indicated that the imported breeds of chickens
performed well under the intensive management system while the contribution of exotic
chicken to the Ethiopian economy is significantly lower than that of other African countries.
The study concludes weak agricultural extension service, feed shortage, disease and
predation, housing and other critical gaps that need to be filled to improve the productive
performance of exotic chicken breed in Ethiopia.

Poultry Production Systems

In this review, the poultry production systems of Ethiopia are classified in to the industrial
and integrated/medium and large-scale intensive systems and the different categories of
family poultry production systems (i.e. the small-scale intensive, semi-intensive, extensive
scavenging and small-extensive scavenging systems). Producers keeping over 500 layers are
generally considered as the medium intensive systems. Within such systems, there are large
variations among producers in terms of technology use, management level and scale of
operation. According to the estimates reported by USDAin 2017, approximately 35 farms in
the country are considered to produce over 1,000 broilers.

Medium and large-scale intensive poultry producers are mainly located in and around cities
and major towns. They are largely concentrated between Addis Ababa, Debre Zeit and
Adama. Broiler production is concentrated in Adama, Modjo and Debre Zeit; pullet rearing is
heavily concentrated in Debre Zeit; while egg production is mainly in Addis Ababa
(Vernooijet al., 2012). The total number of small-scale intensive poultry producers and their
specific contribution to the national poultry production is not known. However, they provide

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the largest share of poultry eggs and meat to the growing urban population (Boere et al., 2015).
Their distribution is similar to that of medium and large-scale intensive poultry producers. The
semi-intensive Current status of poultry production and supply chains family poultry producers,
instead, are also common in rural areas connected to urban markets. The distribution of the
extensive scavenging and small-extensive family poultry production systems is not limited to
any specific location. Family poultry systems are mostly found inthe highlands (both in the
mixed rainfall sufficient and mixed rainfall deficient typology zones) and more rarely in agro-
pastoral areas. Pastoral communities do not keep chickens at all.

Producers operating with a capacity of over 10,000 birds are very small in number and are
found in and around Addis Ababa, Debre Zeit, Modjo and Adama while they are also
emerging in the growing urban areas of Mekele, Bahir Dar, Gondar, Hawassa and Dire Dawa.
Currently, there are only a few poultry integrations in Ethiopia at this scale: ELFORA Agro-
Industries PLC, Alema Farms PLC, Ethiochicken, SAFE Poultry PLC, Astral Foods, and
Feedco Animal Feeds PLC9. ELFORA Agro-Industries PLC, located in Debre Zeit, Addis
Ababa and Chefa, was established in 1997 and is one of the largest companies engaged in
poultry operations. The company produces parent stock, hen table eggs, day-old chicks
(DOCs), pullets, broilers, and is also involved in meat processing and retailing for local and
export markets. In Ethiopia, both broiler and layer parent stock are imported from other
countries either in the form of day-old chicks (DOCs) or hatching eggs. The poultry
companies importing parent stocks own hatcheries and multiplication facilities for producing
DOCs for their own farms or for dissemination to other smaller farms. Alema Farms,
ELFORA Agro-Industries, Ethiochicken, SAFE Poultry PLC, Astral Foods and Feedco
Animal Feeds PLC are among the major companies importing breeding stock, supplying
DOCs and hatching eggs.

The parent stock farms at Alema Farms PLC rear 10,000 broilers and 5,000 layers of Ross
andLohmanbreeds,respectively.Thehatcheryproduces2.88millionbroilerandlayerDOCs per
year; approximately half of the broiler DOCs produced are used for own production, the
remaining half are for sale. The existing hatchery of ELFORA Agro-Industries can produce
112 000 DOCs per week and an additional four new hatcheries are being established with
capacity of 6 million DOCs per year. Although ELFORA has the largest DOC production
capacity, SAFE Poultry PLC, producing around 2 million DOCs per year, is probably the
largest supplier of layer DOCs to small-scale intensive family poultry producers having a
formal marketing chain with farmers for the DOCs they provide. The DOCs produced by the
former are mainly for use within its own farms. Ethiochicken is the other company engaged
in the introduction of parent stock and DOCs. It also operates through a tailor-made
distribution model with the government by supplying 40-day-old dual purpose chicken to
rural smallholder farmers. Its hatchery has a capacity of at least 2.4 million DOCs per year.
AstralFoodsPLCandFeedcoAnimalFeedsPLCalsoproducesubstantialnumbersofbroiler and
layer DOCs each with a hatching capacity of 50 000 DOCs per batch. None of these
companies are apparently engaged in the supply of fertile hatching eggs. Despite the growing
production of broiler and layer DOCs, the total output of the Ethiopian hatcheries is too low
and currently there is a severe shortage of DOCs in the country. Most of the hatcheries in
Ethiopiaarepoorlyfunctioning.Knowledgeonthehatchingprocessislowandmanagement

7 Boere, A., Vernooij, A., Duns, H., Mebratu, L. SDawit, K. 2015. Business opportunities Report. Poultry #3, in
theseries written for the Ethiopian-Netherlands business event, 5–6 November 2015, the Netherlands.

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standards in most of the hatcheries are poor. Management of parent stocks and hatcheries are
below global industry standards (Boere et al., 2015).

ELFORA produces about 112 million table eggs annually. The layer farms of Alema Farms
hold around 15,000 commercial layers. Ethiopia has around 10–20 medium-scale intensive
poultry producers keeping between 1,000–10,000 broilers and layers, e.g. Maranata, Almaz,
Abebaw Modjo, Genesis and Fanta poultry farms. Although data on their exact contribution
to national production is not available, they provide a large amount of eggs and poultry meat
to the growing towns (Boere et al., 2015). Most of the poultry companies described above
have their own feed mills. The feeds produced by most of these companies are intended
primarily for consumption within their own farms and only the surplus is sold to other
producers. However, not all intensive poultry producers own feed mills. Producers operating
at and around 1 000 birds purchase compound feeds from larger poultry producers and other
companies specialized in feed mill operations. Compound feeds are available mostly in the
form of mash. Pellets are not common. Feeding systems are rarely automated, including in
large-scale intensive farms operating over 10 000 birds.

Most intensive poultry farms in Ethiopia do not have clear waste management schemes. The
manure and processing by-products are usually disposed of right outside the towns where the
farms are located. Part of the poultry litter is sold to livestock producers, particularly to be
recycled as an ingredient of the feed mixtures for fattening cattle. The litter sold as feed
ingredient is untreated and carries many undesirable elements and contaminants such as
feathers, antibiotics and other poultry house wastes. Vegetable producers and gardeners are
also regular customers buying untreated poultry litter and manure for use as fertilizer. The
current practice of using untreated poultry litter by vegetable producers and gardeners inclose
proximity to poultry farms can potentially cause spread or recurrence of disease. Inspection
and regulation by environmental protection authorities is almost non-existent.

The Science of Poultry Feed

A poultry diet is expected to contain three essential nutrients of protein, vitamins, and
minerals as well as provides adequate metabolizable energy. The most easily available
sources of energy are the carbohydrates contained in common grains, grain by-products and
plants. The important and basic components of a laying hen diet include energy,
carbohydrates, protein and amino acids, fat, and vitamins and minerals. Most of the
carbohydrate in poultry diets is provided by cereal grains. Suitable quantities of fat may be
added to increase dietary energy concentrations and palatability. Protein is essential in all
animal life. The dietary requirement for protein is actually a requirement for amino acids. For
poultry, methionine is usually the first limiting amino acid and lysine the second limiting
amino acid. Protein sources can be of a plant origin such as soya and groundnut cake or of an
animal origin, such as fish meal. Some sources of minerals include limestones which are both
rich in calcium. Bone meal is a very good source of both calcium and phosphorus amongst
others. Common salt can satisfy the birds’ sodium and chloride requirements.

Since a laying hen draws upon the nutrients provided in its diet to produce eggs, the quality
and formulation of the diet is of most importance to a producer, especially consideringthat65
to 75% of the cost to produce eggs is due to feed costs. Due to this fact, it has become
increasingly important for producers to find a balance between feeding their birds on a least-

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cost basis as well as feeding the appropriate amounts of nutrients in the diet as the hen needs
them throughout her lay cycle10.

Poultry can derive energy from simple carbohydrates, fat and protein. They cannot digest and
utilize some complex carbohydrates, such as fibre, so feed formulation should use a system
based on available energy. Metabolizable energy requirements of commercial layers depend
on environmental temperature; it increases when the environment is cold or hot. Therefore,
under heat stress situations, increasing energy levels in the diet of commercial layers by the
inclusion of oil may compensate the low feed intake and supply the higher energy
requirements (Almeida et al., 2012). Minerals are the inorganic parts of feeds or tissues and
are divided into macro (major) minerals and micro (minor) minerals. Minerals are required
for skeletal formation, as cofactors of enzymes, and for maintenance of osmotic balance
within the body. Macro minerals that are required in the diet of a laying hen include calcium,
chlorine, magnesium, phosphorus, potassium, and sodium. Two macro minerals that are
particularly important in the diet of a laying hen are calcium and phosphorus.

The determinant of yolk colour is the xanthophyl (plant pigment) content of the diet
consumed (Silverside et al., 2006). Ethiopian consumers have a strong preference for eggs
with deep yellow yolk colour. Very small sized eggs from the scavenging local chicken with
deep yellow yolk colour fetch much higher prices compared to larger eggs of improved
strains with pale yolk (Tadelle et al., 2003). The eggshell thickness is an important trait for
hatchability.Forbestresultofhatchabilityeggshellthicknessshouldbebetween0.33and
0.35mm andfew eggs witha shellthickness less than0.27mm will hatch(Khanet al.,2004). The
differences in eggshell quality depend on the environmental conditions and the feed quality
and also of strain of layers (Zita et al., 2009).

Feed represents the major cost of poultry production, constituting up to 70 percent of thetotal.
Of total feed cost, about 95 percent is used to meet energy and protein requirements, about 3
to 4 percent for major mineral, trace mineral and vitamin requirements, and 1 to 2 percentfor
various feed additives. Poultry diets are formulated from amixtureof ingredients, including
cereal grains, cereal by-products, fats, plant protein sources, animal byproducts, vitamin and
mineral supplements, crystalline amino acids and feed additives. These are assembled on a
least-cost basis, taking into consideration their nutrient contents as well as their unit prices 11.

Supply of Feed

In small-extensive scavenging family poultry systems, production is almost entirely

dependent on the scavenging feed resources available within the local environment such as
household wastes and food leftovers, field crops, worms and insects. The quantity and quality
of the scavenging feed resources vary mainly depending on the season of the year.
Occasional supplementation exists for birds in the extensive scavenging family poultry
production system. In the intensive systems, poultry are fed compound rations and feed is the
single most important factor determining the cost of poultry production. The most common
poultry feed ingredients in the country are cereal grains, milling by products (e.g. wheat
shorts and middling) and oil seed cakes (e.g. Noug seed cake, cotton seed cake, sun flower
cake, sesame
8 DePersio, S.A., 2011. Effects of feeding diets varying in nutrient density to Hy-Line W-36 laying hens
onproduction performance and profitability.
9 Ravindran, V., 2013. Poultry feed availability and nutrition in developing countries. Poultry development
review,pp.60-63.

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cake, groundnut cake and linseed cake). The major cereals grown include maize, wheat,
sorghum, teff and barley. In 2014, maize, the major cereal crop used in poultry feeding,
covered about two million hectares of land with annual production of around 7.2 million
tonnes of grains. At the same time, soybean, the major oil seed used in poultry rations,
covered about 35,000 hectares of land with an annual production of around 72,000 tonnes of
grains12.

However, there are still substantial gaps in the supply of major feed raw materials used in
poultry feeding, particularly maize and soybean. For instance, the amount of poultry feed
required for semi-intensive family poultry production in the year 2020 is estimated at 266,600
tonnes of maize and 127,300 tonnes of soybean meal. This would imply that 5, 900 ha of
additional land would be required for maize production and 43,200 ha for soybean
production13. Intensive poultry systems also need significant quantities of these ingredients.
Some of the major commercial feed producers manufacturing specialized poultry feeds in the
country include Alema Koudijs Feeds, Ethiofeeds and Friendship Agro-industries. These
three companies use local feed raw materials. Premixes used in the feed formulations are
generally imported. However, a number of foreign companies, including Astral Foods and
Feed co, have recently gotten involved in feed manufacturing.

The feed mills of Astral Foods and Feed coproduce pellet lines and extruders. Feed co plans
to grow its annual capacity to 150,000 tonnes and to produce premixes in Ethiopia. The other
large poultry companies such as Ethiochicken and Elfora Agro-industries PLC also produce
significant quantities of compound poultry feeds but chiefly for their own consumption.
Moreover, Modjo feed company produces about 1,500 tonnes of feed per week. Much of the
poultry feeds used in small-scale intensive and semi-intensive family poultry farms comes
fromfeedproducerspreparingpoultryfeedsatthehouseholdlevel14.Asmostfeedcompanies require
payments in cash before or on delivery, the small- and medium scale poultry farmers who do
not have easy access to hard cash can be challenged. Despite the existence of several feed
companies in Ethiopia, the national supply of commercial feeds is very low,and most of the
feed mills in the country do not seem to operate at their capacities.

Feed cost accounts 60-70% of the total animal production cost. Any attempt to improve
commercial poultry production and increase its efficiency therefore, needs to focus on better
utilization of available feed resources. Scholars in the field suggests that knowledge of
nutritional characteristics of these feeds and its optimal levels of inclusion in rations and
optimum combination of ingredients composed locally available materials are very useful.
Utilization of by-products from beverage and food processing industries in the livestock
industry and particularly in poultry production has become one of the focal areas to consider.
According to several studies in Ethiopia, the quality of mixed feed used is generally poor.
Most formulations available do not have vitamin/mineral premixes. Ingredients andprocessed
feeds vary in nutritive value and there is no regular quality control mechanism in the country.
The principal raw materials required are oil cake, wheat bran, molasses, cereals, limestone,
bone - meal (blood - meal), vitamins, minerals and salt. All the raw materials are

10 CSA, 2015.Report on area andproduction ofcrops, Agricultural Sample Survey: Timeseriesdatafor national
andregional level from 1995/96 to 2014/15. Addis Ababa.
11 Shapiro,B.I.,Gebru,G.,Desta,S., Negassa,A.,Nigussie, K.,Aboset,G.SMechal,H.2015..
12 Ayele,G.SRich,K.M.2010.PoultryvaluechainsandHPAIinEthiopia.HPAIpro-poorHPAIriskreduction.Africa/
Indonesia Team Working Paper 25.

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locally available, except vitamins which have be imported. Proteins, largely of vegetable
origin, encourage the normal development of pullets and help them to lay eggs longer.

Poultry Health

In the last half century, significant increases in the productivity of modern poultry stocks
have been achieved for both the meat and the egg production sectors of the global poultry
industry. Synergies have resulted from advances made in all the major activities of poultry
management and housing, nutrition and ration formulation, applying poultry genetics
knowledge in commercial breeding programmes and better diagnosis and control of avian
diseases.

Highly Pathogenic Avian Influenza (HPAI) Currently, HPAI is reported in 11 African

countries (OIE, 2017).Although there have been no HPAI outbreaks in Ethiopia, the country
has experienced scares resulting in demand shocks in the past 15. With a few exceptions, the
bio security level is low in most of the intensive poultry farms in the country. In family
poultry production systems, there is almost no concern over bio security issues. Newcastle
disease (ND), Infectious bursal disease (IBD), Marek's disease, Mycoplasmosis,
Salmonellosis, Colibasilosis, Coccidiosis, Toxoplasmosis and Heliminthosis are poultry
diseases with significant economic importance both in the family poultry production systems
and intensive production systems in Ethiopia. ND is identified to be the most important
disease in all production systems, being responsible for the largest proportion of morbidity
and mortality in all parts of the country16.

The National Veterinary Institute (NVI) produces 16 types of livestock vaccines, including
against major poultry diseases such as ND and fowl pox. The institute produces a range of
ND vaccines (HB1, La Sota and I-2 strains) and provides them on request to large and small
poultry producers. The guidelines supplied to users along with the vaccines and the dosages
are suitable for intensive systems (including semi-intensive family poultry systems) but not
tailored for use in scavenging family poultry production systems. Although flocks in the
medium- and large-scale intensive systems appear to be vaccinated regularly, vaccination in
the extensive and small-extensive scavenging poultry systems is only carried out in times of
outbreak.

CSA(2017) reported huge losses of chickens due to disease and causes other than disease in
different parts of the country during the year 2016. The huge losses due to different diseases
(over 34 million birds in total) result from the little or no national programme for control and
prevention of poultry diseases. The CSA report shows that there was no vaccination
programme in all regions, and that some regions attempted to treat afflicted birds but with
poor results. During the same year, close to 30 million birds were lost due to causes other
than disease. The high number of poultry losses, severely impact the income and livelihood
of rural poultry farmers. A national major initiative would be required to reduce the incidence
of poultry losses.

13 Ntsefong, G.N., Shariati, M.A., Khan, M.U. S Hristova, V.K. 2017. Incidence of avian flu shocks on poor
householdlivelihoods of poultry farmers in Africa. Int. J. Avian and Wildlife Biol., 2(1):
00008.DOI:10.15406/ijawb.2017.02.00008.
14 Desalegn, J. 2015. Epidemiology of village chicken diseases: A longitudinal study on the magnitude
anddeterminants of morbidity and mortality- The case of Newcastle and infectious bursal disease. MSc Thesis,
AddisAbaba University, Ethiopia.

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The public clinics and animal health posts generally lack diagnostic capacities and drug sales
outlets. The capacity for diagnosis of poultry diseases, both physical and human, does not
exist even at regional and wereda/district levels. On the other hand, the private sector is
poorly involved in the provision of animal health services. The government is expected to
implement the recent initiative of the country to rationalize public and private sector roles in
the provision of veterinary services with the aim of transitioning to the private provision of
clinical services, wherever and whenever it is feasible. The high losses associated with causes
other than disease are mainly inclusive of predator attacks. Such losses can be largely
attributed to poor management practices and lack of poultry housing under semi extensive
and extensive scavenging family poultry systems.

Poultry Value Chain Analysis

Several studies have been conducted to map the poultry value chain of Ethiopia. Vernooij et
al.(2012)mapped the commercial poultry value chain for broiler chicken meat and table eggs
of exotic origin describing the challenges and opportunities in the supply chain by classifying
the producers based on the definition of farm sizes as small-scale (capacity of 50 to 1,000
birds), medium-scale (1,000 to 10,000 birds) and large-scale (over 10,000 birds). Both the
broiler and layer poultry value chains showed a low level of specialization with a limited
number of actors. There is a high level of integration of activities in the value chain of the
large-scale poultry producers, with feed, multiplication, hatching, production and retailing
often all in one business.

The number of actors on different scales in the broiler and layer poultry value chains follows
a pyramid structure, with only a few large-scale farms, a few tens of medium-scale farms and
a few hundred small-scale farms. The findings of the value chain mapping by Vernooij et al.
(2012), showed that the structure of both the chicken meat and table eggs value chains have
many features in common, as described below. The large-scale farms import parent stock to
produce DOCs and occasionally hatching eggs to produce layer hens. The large-scale farms
use the DOCs both for their own production and to supply other farms, mainly small- and
medium-scale farms. The government multiplication centres (most of which are now
privatized, leaving one or two out of the seven that existed a few years ago) distribute DOCs
and pullets to rural farmers. A few medium-scale farms operating their own hatcheries buy
fertile eggs from hatching egg exporters in Europe and hatch their own layer DOCs.

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Alllarge-scale layer neither farms rear pullets themselves, mostly from their own or imported
DOCs. Most small-scale farms and some medium-scale farms, on the other hand, specialize
either in pullet rearing or layer production. Some multiplication centres raise pullets to a
point of lay and sell to small-scale farms for egg production. Spent chickens, comprising
meat and egg producing females and males are usually marketed directly to the local
consumers mostly during festive occasions. However, some farms slaughter, process and sell
spent chickens to market vendors in minimarkets and specialized shops equipped with deep
freezing facilities.

Large-scale farms use several routes to market the eggs they produce. These include selling
through their own super/mini markets, sales to other super/mini markets, or direct sales to
market vendors. Primary collectors are another route to the market, playing the role of
middlemen within the distribution channel. The key market channels for small and medium-
scale farms are primary collectors. The latter collect the eggs from different farms and sell
them to market vendors or super/mini markets. Consumers buy eggs from local markets,
kiosks and shops in the case of villages or supermarkets in bigger cities.

Poultry and Egg Markets

Poultry and egg markets in Ethiopia are at an early stage of development. The scavenging
family poultry production systems are the principal providers for the domestic market,
supplying most of the marketable poultry products. The share of the intensive and semi
intensive poultry systems in the national market are currently on the rise. This section deals
with aspects related to poultry supply and demand, trade, marketing and markets and issues
related to policies and regulations. This section highlights the poultry sector’s gaps in
meeting the consumption needs of the population, the position of the country in the global
poultry export import trade, and issues related to policies and regulations influencing the
development of the sector.

Poultry Supply and Demand

The national poultry meat output in 2016 was estimated at about 13,000 tonnes. Ethiopia's
share of the total poultry meat outputs in East Africa, Africa and the world in 2016 was only
2, 0.2 and 0.01 percent, respectively17. Similarly, its share of total eggs production when
compared to East Africa, Africa and the world poultry eggs production in the same year was
11, 1.7 and 0.07 percent, respectively. According to FAOSTAT (2018) poultry meat and egg
consumption in Ethiopia is extremely low. In 2013, the per capita consumption of poultry
meat was about 0.66 kg. During the same year, the per capita annual poultry meat
consumption of East Africa and Africa was estimated to be 1.64 and 6.73 kg, respectively,
while the global average stood at 14.99 kg. The trends in consumption and the per capita
intake of energy and protein derived from poultry meat have not changed much since 2003.
The per capita consumption of eggs was also low, accounting for around 0.36 kg in 2013.The
per capita intake of energy and protein derived from poultry eggs in 2013 were only 1
kcal/day and 0.11 g/day, respectively.

Information on producer prices for production of hen eggs and chicken meat is presented in
Figure 8. The general trend on producer prices for production of hen eggs and chicken meat
is that producer prices have slightly increased from 2006 to 2008.The trends in producer
prices fluctuated until they showed sharp rises in 2016. Compared to 2006, the producer price
per tonne of hen eggs in shell increased five-fold in 2016, from 460 to 2,362 USD, while
prices
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15 FAOSTAT,2018

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for production of live weight chickens and chicken meat increased by about three-fold each.
Market prices of chicken in Ethiopia are seasonal. Consumer prices generally rise during
holidays such as Easter, New Year and Christmas. Consumer price information obtained in
June 2017 shows that price of a live bird weighing between 1.5 to 1.8 kg is between 9–10
USD while the retail price for frozen whole chicken produced locally was between 4–5 USD
per kg (USDA, 2017). The reason for this price difference is attributed to the preference of
Ethiopian consumers to buying live birds and slaughtering them at home.

Trade, Marketing and Markets

This section provides brief information on the import and export of poultry and poultry
products. It shows that import trades are largely based on introduction of parent stocks and
DOCs for broiler and egg production by large-scale intensive poultry producers from poultry
breeding and multiplication companies in Europe. Although the current consumption of
poultry products is among the lowest in the world, the domestic market is expected to take off
following the trends in the population growth and increasing income. The market share of
eggs and chicken meat from exotic breeds is growing. For instance, in 2014 the contribution
of exotic chickens to the total national egg output was less than 5 percent (CSA, 2015). In
2016, exotic breeds contributed to 27.3 percent of the total number of eggs produced
nationally (CSA, 2017).Although traditionally the eggs and meat from exotic breeds are less
preferred to the indigenous owing to the existing cooking and consumption habits, the trend
is changing. There are large numbers of bulk consumers such as full board public universities
and colleges (serving over half a million students), hospitals, hotels and restaurants.
Promotion and education on preparation of different food recipes is underway and public
awareness on diverse cooking styles is on the rise.

Poultry and poultry products are probably among the least traded commodities in Ethiopia.
Despite the lack of consistent and reliable statistics, some sources indicate that Ethiopia has
been importing parent DOCs for many years. All the breeding stock and DOCs used by
largescale intensive poultry producers and government multiplication centres are imported.
The largest quantity imported was in 2008 (398,000 heads), with no imports in
thesubsequenttwo years, and very smallquantities imported afterwards (FAOSTAT,
2018).The only significant volume of chicken meat imported was 130 tonnes recorded in
2013. Relative to chicken meat substantial volumes of canned chicken meat were imported
between 2014 (193 tonnes) and 2016 (141 tonnes). Importers of chicken meat and canned
chickens are not clear, but Ethiopian Airlines and some of the international brand hotels in
Addis Ababa that serve international customers are probably among the potential ones.
Ethiopia has almost no record of exporting either live poultry or any form of processed
chicken meat. The Ethiopian LMP aims to achieve exportable surplus of poultry meat by
2020. However, export during this planned period appears to be impractical because local
demand is expected to surpass supply and also it would be difficult for Ethiopia to compete
on price and quality terms with major exporters such as the United States and Brazil (USDA,
2017).

Policies and Legal Framework

Agricultural Development Led Industrialization (ADLI) strategy is the key guideline to the
overall economic development of the country. It elaborates the leading role of the agricultural
sector in industrial development and subsequent transformation of the national economy. It
sets the directions towards achieving structural transformation in the agricultural sector. One
of the key strategies in the Ethiopian agriculture and economic development is the Climate
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Resilient Green Economy (CRGE) strategy (CRGE, 2011). The strategy intends to foster
development of green economy through reduction of carbon emissions to near zero. The key
sectors identified for implementation of the green economy strategy include power
generation, transport, forestry, and livestock. With regards to the livestock sector, the strategy
stipulates consistent and significant reduction of the ruminant livestock population and a shift
towards increasing the share of poultry meat consumption in the total meat consumption.
Ethiopia has been implementing the Growth and Transformation Plan (GTP II, 2016–2020)
since 2010.The first phase lasted from2010 to 2015 and the second phase is ongoing (2016–
2020). The pillar of the GTP is achieving transformational change in all sectors of the
economy so that Ethiopia will attain the lower middle-income country status in 2025
(National Plan Commission, 2015).

Strength and Weakness of the Poultry Sector in Ethiopia

The development of the poultry sector should be viewed in the context of addressing
limitations and opportunities within the entire value chain. This section presents the current
strengths, weaknesses of the poultry sector in Ethiopia in both the large and medium-scale
intensive systems and the family poultry production systems in terms of technical
performance, feed availability and quality and marketing of products and inputs.

Strengths of the poultry sector and the opportunities are:

- Poultry keeping is widely known and practiced;

- Increased recognition of poultry production as a business and employment
opportunity both in rural and urban areas;
- Ethiopia has conducive climatic conditions;
- No cultural taboos in the consumption of poultry products;
- Investment opportunities exist;
- Growing per capital income;
- Growingproductionoffeedingredients(particularlycerealsandoilseeds)inthe country;
- Increasing urbanization and growing domestic market (Interest);and

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 - Growing number of bulk consumers (hotels, restaurants, universities, colleges,
hospitals, etc.) purchasing broiler meat and table eggs from exotic chicken breeds.

Weaknesses of the poultry sector and the challenges are:

- Irregular(Unreliable)supply of DOCs (irregular supply from abroad, low national

production);
- Lack of quality feed and poor enforcement of quality control regulations;
- No local production of premixes;
- No domestic production of veterinary drugs (except for some vaccines produced by
NVI);
- Limited access to services (extension support, finance, etc.) and supplies;
- Poor hatching conditions and management;
- Low level of education among primary producers, shortage of trained workers;
- Poor farm management leading to high morbidity and mortality;
- Lack of knowledge of management factors (health care, feeding, growing chicks);
- Lack of knowledge of regulations and requirements for getting (acquiring) a loan to
invest (mainly local large-scale intensive producers);
- Extended government bureaucracies for licensing new investments and facilitating
land;
- Inadequate availability of credit services;
- Inadequate availability of water and electricity;
- Fluctuation in demand (especially as demand declines drastically during the Orthodox
Christians' fasting periods);
- No reliable statistics and market information on poultry production and demand;
- Lack of competition in the value chain (monopolistic dominance of some big farms);
- Commercial poultry production is concentrated in a few poultry hubs, increasing the
risk of disease spreading;
- Poor coordination within the value chains: links among input suppliers, service
providers, producers, and actors in the marketing channel are poorly coordinated;
- Mostpotentialinvestorstendtoberiskaverseandinclinetowardsadoptingshortterm
investment strategies; and
- Preference for indigenous poultry products.

Future Prospects of the Poultry Sector in Ethiopia

Ethiopia aims to reach a lower-middle-income status by 2025. The likelihood of success

appears to be high given the sustained close to double digit economic growth the country
achieved during the past decade. Currently, around 20 percent of the population of Ethiopia
lives in urban cities, and a rapid rise is expected in urban populations and income in the
coming years, indicating a rising number of consumers. During the first five years of GTP I
(2010–2015), productivity of the main crops grown in Ethiopia (particularly cereals) has
increased at a rate of over 6 percent annually (National Plan Commission, 2015).This growth
is expected to continue due to the increasing use of modern agricultural technologies by
farmers, application of improved production practices and increased market access. The area
coverage and total output of oil seed crops is also increasing rapidly. At the same time, agro-
industrial parks are emerging in all parts of the country. Construction of several agro-
industrial parks is under way since 2016.Efforts to discourage export of raw agricultural

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commodities are stronger than ever before. As a result of these developments, a significant
rise in the supply of feed ingredients is expected and the poultry sector will benefit the most.

The prospects for the future growth of commercial poultry in Ethiopia is high, with an
average poultry meat consumption of about 0.66 kg per capita compared with about 1.64 kg
in East Africa and around 6.73 kg in Africa (FAOSTAT, 2018). Firstly, Ethiopia could and
should be considered as a logical expansion and or potentially a breeding hub in and for East
Africa especially given its fast-growing economy, urbanization, population and growing
domestic demand for poultry meat as a more sustainable and cheaper source of protein.
Forecasts indicatetheEthiopian poultry sector isexpected to grow annually bybetween 6–10
percent until 2025. According to a report produced in 2015 by Wageningen UR Livestock
Research, NABC and Agri-Business Support facility on the Ethiopia poultry sector,
opportunities in Ethiopia are almost endless and one of the promising areas is the agro-sector
of Poultry. Ethiopia is now going through constant multifaceted economic growth and
transformation. The country’s improved economic infrastructure, abundant and affordable
labour along with its excellent climate and fertile soil remains Ethiopia’s comparative
advantage attracting investors. Investors in Ethiopia are provided with various incentives
depending on the sectors such as custom duty payment exemptions on capital goods and
construction materials, along with income tax exemptions from two to seven years and carry
forward losses.

Key Sector Stakeholders

The following are the key stakeholders of the poultry sector development in Ethiopia

- Ministry of Agriculture: Government Ministry responsible for designing and

implementing policies and strategies for developing the national livestock sector. It
develops the national livestock development plan and oversees and leads its
implementation through the Bureaus and Agencies of Livestock in the regional states.
The Ministry is also responsible for developing policies and legislations on marketing
and trade of livestock and livestock products, inputs and services.
- Veterinary Drugs and Feeds Administration and Control Authority: The agency is
in charge of administering and controlling the quality and safety of veterinary drugs
and animal feeds in the country.
- Ethiopian Institute of Agricultural Research: Undertakes, coordinates and leads the
national research in agriculture including research in livestock and poultry. The
institute is responsible for availing agricultural and poultry technologies suitable for
producers at different levels and agro-ecologies.
- National Veterinary Institute: The National Veterinary Institute is the only institution
involved in the production of vaccines for livestock and poultry diseases in the
country. It also provides feed analyses services. However, it does not produce
vaccines for large-scale intensive poultry production.
- Agricultural Transformation Agency: The Ethiopian Agricultural Transformation
Agency is established to promote transformation of the agricultural sector by
supporting existing structures of the government, private sector and other non-
governmental partners to address systemic bottlenecks in the system. It works to
deliver on the growth and transformation agenda in the agricultural sector.

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 - National Animal Health Diagnostic and Investigation Centre: It is the most
important veterinary laboratory in Ethiopia owned by the state. It works as the centre
of excellence for animal disease surveillance, investigation, diagnosis and veterinary
research. The investigation centre has implemented ISO/IEC 17025–2005 in three
laboratories and six tests have been accredited so far.
- National Animal Genetics Improvement Institute(NAGII): It is responsible for
genetic improvement and dissemination of improved genetics of livestock in Ethiopia.
- International Livestock Research Institute (ILRI): A member of the CGIAR group
with global mandate for research in livestock, with particular emphasis on small
holder livestock production. Its headquarters are in Nairobi, Kenya.
- Producer Organizations: There are tens of thousands of primary cooperatives and
thousands of cooperative unions in the agricultural sector throughout the country.
However, the overwhelming majority of these cooperatives and unions are related to
crop production and marketing. Insignificant numbers of producer organizations exist
in the livestock sector and almost none exist in poultry. A limited number of
cooperatives have been organized in feed processing. In the SNNPR, there are six
cooperatives that established feed mills and started supplying feed mixes for chicken
and other livestock species. About the same number operate in the three other major
regional states, Oromia, Tigray and Amhara. The Ethiopian Poultry Producers and
Processors Association (EPPPA) was established as part of the Dutch support for the
Ethiopian poultry sector. However, EPPPA has not been very active since its
establishment and its contribution to the poultry sector has been negligible. The
Ethiopian Animal Feed Industries Association is relatively more active although its
roles and impacts on the feed sector are not clearly visible.

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2. Dedo Eggs-Poultry Farm Project Proposal
Introduction

The promoter of this project, Tilahun Girma, was born at a Odomike rural kebele ,Abaya
woreda of West Guji zone he attended his primary and secondary education at Odomike
Primary and Junior Secondary School then Ganguwa Comprehensive Secondary School. He
has a multifaceted professional and educational background. He received his BSc degree in
statistics earned post graduate training certificate in urban planning and management,
received an MSc in demography (2002 from AAU), earned Master’s Degree in Social Work (
2011 from IGNOU), and completed his PhD thesis in Development Studies entitled “ Coping
Mechanisms of food Insecure Urban Households in Ethiopia” (2019 from UNISA).

The promoter of this project is an experienced professional on fields of development for over
25 years. The drive for starting this small investment stems from findings within his dipiloma
and the experience he gathered while exploring the state of urban food insecurity in small,
medium, and big urban centers in Oromiya, SNNPR, and Sidama. The project will thus
benefit from the experience of the promoter who has also previously consulted on the
execution of development projects in several sectors that include real estate, agro-processing,
dairy-production, etc. all of which have met the economic motives and social commitments
of the promoters.

Dedo Eggs is a sole proprietorship private business established to advance the production of
table eggs, while aimed at contributing to the development of poultry sector as part of the
urban agriculture in Odomike town. The poultry farm will have a capacity of 3000 exotic
laying breeds for table egg production the business will be instituted in the Odomike town,
and it will one of its aims will be addressing the apparent supply gap in Odomike town and
the neighboring communities. The principal goal in this project is not only to benefit the
economic gains as a result of the gap in the supply of table egg in Odomik town, but to also
initiate others to invest in the poultry sector so as to ultimately improve the nutritional status
of the residents in Odomik town and its surrounding communities.

Technical Study

Project description

This project is designed to produce about 3000 table eggs per day keeping 3500 layers.
Studies in Ethiopia identified both Bovans Brown and Lohmann brown breeds as the most
productive and recommended breeds for egg production. Three-month-old pullets of either
breed will be purchased from suppliers (such as Friendship agro-industries plc.) and kept for
three months before they start laying eggs at the age of between5-6months.According to our
assessment one pullet at its current price would cost ETB 140. The pullets will be kept
indoors with a deep litter system to be latter transferred to their battery cage. Based on review
of experience, the number of birds is assumed to declineat0.02 percent at each quarter of the
year due to mortality. The products of the farm will then in due time be distributed to hotels,
restaurants, hospitals, supermarkets and educational institutions as deemed necessary.

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 Project Site Development and Construction

The project will be implemented on own leased plot of land with a total area of 660 square
meter in the Odomik town. The site development and fencing, construction of poultry houses
and other buildings, the development of a bio digester with a capacity of 30,000 liter is
estimated to cost ETB 850,000. The site layout is designed to accommodate for efficient flow
of activities while it provides space for future expansion and rearrangements.

Figure1: Site layout of the poultry farm

The poultry house is designed and will be continuously maintained to meet the following
standards and requirements:

• The surroundings will be well drained and will be kept free of any source of pollution
including decayed garbage, vermin, flies, insects or rodents;
• The water supply used in the farm will be of potable quality;
• The wall and ceiling of the shed in which birds are kept will be constructed from
hollow block and wire mesh;
• The floors will be covered with concrete and covered with litter with a recommended
thickness;
• Ventilation will be adequate to keep the walls and ceilings relatively free of the
condensation dust particles;

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 • Outside openings will be protected with wire mesh to prevent the entry of Predatory
birds;
• Every room in which birds will be contained Shall be well maintained, kept clean and
free of dust, debris or any other source of contamination; and
• Hand washing facilities complete with water, detergent, sanitary towels and covered
receptacles will be located convenient in all working areas and to all personnel.

In terms of environmental benefits, the project has planned to construct a 30,000 cubit liter
biodigester to contribute to the reduction of GHG emissions in two ways: by using poultry
manure to produce biogas instead of letting it decompose and emit methane into the
atmosphere and by replacing other energy source with biogas as the fuel source for energy
requirements. In addition, the residue from the anaerobic process is rich in nutrients and can
be used as an effective organic fertilizer.

The site will be planted with fruit trees to provide sufficient shade and to keep the
temperature as cool as possible during hot seasons. About 20% of the plot will be used for
planting grasses to feed birds to meet customer demands for eggs with brighter yolks.

Purchase of Pullets, Equipment, Furniture

The project plans to operate with 3500 exotic layer breeds, with the initial batch being 3-
months old pullets purchased from Friendship Agro-industries at Bishoftu. Based on our
assessment a pullet costs an average of about ETB140. It is therefore expected that a total of
ETB 490,000 will be required to purchase and transport pullets to the project site.

Other investments necessary at the startup will include purchase of feeders, drinkers,
purchase of egg tray, backup electric generator, water thank, and the necessary office
furniture and equipment which could cost ETB 215,500 as illustrated in the following table.

Table1: Equipment necessary for the project implementation

No. Item Quantity Unit price Total price

Feeders 40 200.00 8,000.00
Drinkers 40 150.00 6,000.00
Purchase of egg tray 300 100.00 30,000.00
Backup electric generator (5kv)low noise 1 50,000.00 50,000.00
Water tank(5,000liter) 2 15,000.00 30,000.00
Trolley cart 2 2,000.00 4,000.00
Office tables 3 5,000.00 15,000.00
Office chairs 8 1,500.00 12,000.00
Shelf 3 6,000.00 18,000.00
Metal shelf for egg storage 5 1000.00 5,000.00
Desktop computers 2 15,000.00 30,000.00
Printer 1 7,500.00 7,500.00
Total 215,500.00

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 Key Success Factors and Possible Risks

Key Success Factors

The key success factors are seen in two levels: macro level success factors and sector specific
success factors. The macro level significant factor includes creating a conducive environment
for investment while considering the political stability and overall security the country
experienced as a result of the recent political transition,that has laid down a fertile
environment for investment. Inevitably, investors require security for their investments to be
fruitful and this has been given significant attention by both the federal and regional
governments as policies and guidelines are being revised in the stated regard. Tax holydays
of 3-4 years for those investing in animal production Oromia and its surroundings, low
interest rates of loans from the development bank including provision of adequate grace
period, etc., are all incentive measures taken by the government and together with the above-
mentioned conducive circumstances, investment in the poultry sector is expected to be high.
The improved physical and institutional infrastructure that exists in Oromiya is essential for
any development investments to succeed. The on-going transformation program of public
institutions in improving service delivery is also a case in point that is indicative of the
general trend towards transforming institutions.

There are also some sector specific success factors that are worth mentioning. Various
incentive measures were taken by the government in order to attract investors. This has been
made practical by issuing policies concerning credit facilitation, consideration of projects
itself as a collateral, tax holidays, customs duty free import of capital goods, etc Being one of
the high priority sectors, investors engaged in agricultural projects are, for instance, given a
special access to DBE’s finance at a relatively lower interest rate and a grace period of up to
one and a half years. Existence of institutions currently providing technical and business
development support to the poultry sub-sector at all levels within the value chain are also of
paramount importance. They are strengthening the organizational and technical capacity of
producer groups and business associations, while they also work on developing the market
and improving the quality of the poultry products.

The current investment also has firm level success factors that are helpful in accessing loan
and improve efficiency in productivity and marketing. Managerial capacity and experience
are an important factor. In which regard, long years of experience in business management of
the promoter and manager of the farm it will not be difficult to foretell the positive outcomes
in managing this medium scale poultry project. Since poultry products need to get to market
quickly as the site of production is at the center of Odomik town, it will be of great advantage
that the farm products instantly reach potential consumers. Normally, the banks will hold
assets of the project itself as collateral. The Company has constructed the necessary buildings
and site development, mobilizing its own financial resource to provide the necessary
contributions that will serve as collateral in order to best secure a bank loan.

Possible Risks

Poultry investment is a lucrative business, however, there are many factors hindering its
success rate. Some of the major risk factors are listed below:

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 • Inadequate animal feed and diseases are one problem. To mitigate such problems
DEDO EGGS has effectively planned to train assistants and maintain dependable
veterinary medicine in stock. With regards to feed, the farm has planned to process
feed with supplies from local markets that are believed to reduce costs by about 40
percent.

• Low demand for eggs, during the Orthodox Christians fasting period might also pose
some challenge. Thus, there could be a need to explore areas of potential consumers
Within areas that are in close proximity to a higher population of Muslim residents.

• There will be an obvious competition with other farms: that will provide a chance to
enhance the quality of the products, and trig gera need to improve the efficiency of the
production process, the distribution plan, rate and quality of advertisement, and the
introduction of competitive prices.

• Shortage of the proposed breeds and the higher per-unit price of pullets is the other
major challenge. The problem, in this regard will be addressed by consulting research
centers and negotiating with suppliers, and finally facilitating the projects own
production of chicks.

Supply and Demand Gap Analysis

In more general terms poultry production at present has significant contribution to the total
agricultural production value in most developed countries and also in developing countries of
Africa (including the neighboring countries such as Kenya and Uganda). The specific
function of poultry within the production systems of tropical countries varies considerably in
relation to natural, economic and social conditions of production location which determine
the type of breeds kept, the production direction and production intensity.

The perspectives for livestock production in tropical countries during the initial stage of
development are mainly determined by ecological conditions: with a growing human
population to be fed and with overall economic development the livestock production
systems are increasingly influenced and shaped by economic and market forces. It is argued
that three main forces are driving change in the agriculture system and the livestock sub
sector. The major factors include population growth, changes in demand for poultry products,
and changes in availability of inputs and technology. The overall consequences of population
growth are: -

• A need to produce more food for urban dwellers who produce little for their own

• New markets for produce are created (such as the development of industrial parks and
universities with higher population size) which will stimulate market-oriented
production

• Increased land use intensity since more food needs to be produced and less land is
available per inhabitant which attribute to the engagement of more people attending
livestock instead of crop farming (require extensive land)

The egg supply to Odomik town comes from the available few small producers operating in
urban and peri-urban areas as well as households in the nearby districts. Several studies

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reported that poultry products are not part of the average daily nutrition of families in many
urban areas of Ethiopia due to the shortage in the supply and the resulting price hike.
Furthermore, the egg production potential of indigenous birds is very low. As the urban
population is increasing urban market centers like Odomik town are being severely affected by
shortage of the supply of eggs and other poultry products. Prices are also rising continually,
which is a reflection of the shortage of supply of dairy products.

In general poultry development projects with improved genetic breeds could have an immense
contribution to respond towards the ever-growing demand of poultry products in at Odomik
town and its neighboring communities. A number of studies attest that demand for poultry
products have never been satisfied in the areas.

Different studies have reported excess demand and the analysis done on the basis of the
available data revealed that there is a demand supply gap of poultry products in the target area.
As a result, there will be no lack of market for the eggs produced in the coming 5-10 years.
DEDO EGGS can initially cover only a fraction of the available gap while its coverage of the
gap is planned to grow to about 20 percent within the five years of the project life.

Organization and Management

The organizational structure of the farm will consist of the general manager (the promoter of the
farm project), vet health and nutrition consultant, accountant, sales personnel, guards, Stone
man, and general laborers. The general manager plans, organizes, directs and coordinates the
strategic business, the operation of the farm; reviews the overall operation to ensure
implementation of policies, procedures, strategic plans, annual programs and budgets; and gives
directions and decisions. There will be a total of 11 permanent staffs to effectively run the farm,
and a total annual budget demand of ETB 320,440 which is expected to grow by 10% per
annum.

Table2: Staffing plan of the Poultry farm

Basic Pension Monthly Annual

No. List of employs #
Salary (9%) Total Salary
1 General manager(the promoter) 1
2 Vet health and nutrition consultant 1 6,000 540 6,540 78,480
3 Accountant 1 3,500 315 3,815 45,780
4 Sales personnel 1 3,500 315 3,815 45,780
5 Guards 2 1,500 135 3,270 39,240
6 Store man 1 2,500 225 2,725 32,700
7 General labor 4 1,500 135 6,540 78,480
Total 11 26,705 320,460

Working Capital Requirement

Working capital requirement for the first six months is estimated to be about ETB 644,505,
details are indicated in the following Table.

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Table3: Working capital requirement

Item Required budget ETB

1 Poultry feed for three months 451,800
2 Poultry feed concentrate for three months 22,590
3 Vaccine and medication 35,000
4 Purchase of hay/sand wood 10,000
5 Purchase of uniforms 20,000
6 Utilities for three months 6,000
7 Maintenance cost for three months 9,000
8 Promotion for three months 10,000
Total 644,505

3. Financial Study
Investment Cost and Amount of Loan Required

Based on the analysis of the different components of the investment described in the previous
sections, the project will have a total investment cost of 3.9 million. The promoter has
financed the purchase of a 660 square meter plot of land in Odomika town costing 1,500,000.
Construction permit is obtained and construction of the poultry house and other necessary
premises is underway with an estimated cost of ETB 850,000.

Table4: Summery of investment cost of the project

Contribution
Description Total Amount
Bank Loan Equity
Purchase of plot of land 1,500,000 - 1,500,000
Site development, building and civil works 850,000 - 850,000
40 units battery cage with accessories 208,000 208,000 -
Purchase of 3500 pullets 490,000 490,000 -
Purchase of equipment and furniture 215,500 215,500 -
Initial working capital 644,505 644,505 -
3,908,005 1,558,005 2,350,000
Total Investment
100% 40% 60%

The remaining cost of the project, ETB 1,558,005 (about 40% of the total project cost)
necessary to cover the purchase of 40 units battery cage with accessories (ETB 208,000) from
abroad, purchase of 3500 pullets (ETB 490,000), and purchase of equipment and the
necessary furniture (ETB 215,500), and to cover the working capital requirement to
operationalize the project (ETB 644,505) is planned to be covered through a bank loan.
Leased plot of land of 660 square meter and buildings constructed at the premise for the
implementation of the project will serve as collateral for the bank providing the loan.

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 Pricing Strategy and Sales Forecast

Institutional buyers are big institutions like universities, training centers, hospitals etc. They
can be found in Dilla town. Cafés and restaurants are also categorized as institutional buyers.
The majority of these institutions are sourcing from collectors, retailing shops and processors.
Onsite delivery of quality eggs to these institutions will improve the efficiency of our
customers in terms of achieving both the quantity and quality of the products. The sales price
of eggs is estimated based on the cost of production. Feed contributes 60-70 percent of the
production cost of eggs. Therefore, the farm plans to produce feeds with the available
imputes from local sources.

Setting a price of the product might be difficult to calculate because the established rates has
to be seen to be affordable to the consumers and not too low for the business, so that it does
not run out of business. When it comes to setting the price of eggs, a lot of factors come into
play these are the cost of feed, supplemental feed, health care, and overhead costs. Despite
the current price of eggs in the market at Odomik being about ETB 4.25. DEDO EGGS plans
to enter the market with a unit selling price of ETB 3.85, which is about 10% lower than the
current market price.

Based on the current plan, the farm will produce about 770,000 table eggs in the first year of
its implementation and the annual production will eventually increase to about 1.1 million. In
addition to eggs, layer hens will also be sold at a point where their productivity will be lower
than 75% efficiency (which will be after 15 months of their age). The amount of sales is
estimated to be ETB 2.9 million during the initial year, ETB 3.2 million in the second year,
ETB3.6 million in the third year, and so on.

Project financial results

Table5: Projected cash flow statement for financial planning

ITEM\YEAR 0 1 2 3 4 5
Revenue 2,951,025 3,666,128 4,032,740 4,436,014 4,879,616
Owners’ Equity 2,350,000
Bank Loan 1,558,005
Total Cash Inflow 3,908,005 2,951,025 3,666,128 4,032,740 4,436,014 4,879,616
Investment Cost 3,908,005
Operating Cost 1,878,515 2,022,193 2,171,624 2,336,049 2,516,972
Loan Repayment 150,660 129,250 129,250 129,250 129,250
Profit Tax 375,379 575,377 651,391 734,988 826,925
Total Cash Outflow 3,908,005 2,404,553 2,726,820 2,952,265 3,200,287 3,473,148
Net Cash Inflow 546,472 939,307 1,080,475 1,235,727 1,406,468
Cumulative Cash Inflow 546,472 1,485,779 2,566,254 3,801,981 5,208,449

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Table 6. Total operating cost schedule

DISCRIPTION/YEAR 1 2 3 4 5
Salary and wage for three months 80,115 88,127 96,939 106,633 117,296
Purchase of hay for litter 10,000 11,000 12,100 13,310 14,641
Utilities 24,000 26,400 29,040 31,944 35,138
Maintenance 36,000 39,600 43,560 47,916 52,708
Poultry feed 1,355,400 1,490,940 1,640,034 1,804,037 1,984,441
Poultry feed supplement 90,360 99,396 109,336 120,269 132,296
Purchase of uniforms 20,000 22,000 24,200 26,620 29,282
Vaccine and medication 35,000 38,500 42,350 46,585 51,244
Total 1,650,875 1,815,963 1,997,559 2,197,315 2,417,046
Depreciation 76,980 76,980 76,980 76,980 76,980
Building 42,500 42,500 42,500 42,500 42,500
Equipment and furniture 34,480 34,480 34,480 34,480 34,480
Bank interest 150,660 129,250 97,086 61,755 22,946
Total operating cost 1,878,515 2,022,193 2,171,624 2,336,049 2,516,972

Table7:Projected cash flow for discounting

ITEM\YEAR - 1 2 3 4 5
Revenue 2,951,025 3,666,128 4,032,740 4,436,014 4,879,616
Total Cash Inflow 2,951,025 3,666,128 4,032,740 4,436,014 4,879,616
Investment Cost 3,908,005
Operating Cost 1,878,515 2,022,193 2,171,624 2,336,049 2,516,972
Profit Tax 375,379 575,377 651,391 734,988 826,925
Total Cash Out Flow 3,908,005 2,253,893 2,597,570 2,823,015 3,071,037 3,343,897
Net Cash Flow -3,908,005 697,132 1,068,558 1,209,725 1,364,977 1,535,718
NPV $425,753
IRR 13.5%

Table8: Projected profit and loss statement

YEAR\ITEM 1 2 3 4 5
Sales 2,951,025 3,666,128 4,032,740 4,436,014 4,879,616
Operating Costs 1,878,515 2,022,193 2,171,624 2,336,049 2,516,972
Gross profit 1,072,510 1,643,935 1,861,116 2,099,965 2,362,644
Profit Tax 375,379 575,377 651,391 734,988 826,925
Net Profit 697,132 1,068,558 1,209,725 1,364,977 1,535,718

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Table9: Loan amortization schedule
Quarter Payment Principal Interest Outstanding
Year Balance
0 1,558,005

QI 37,003 1,595,008
QII 37,881 1,632,889
QIII 114,000 75,219 38,781 1,557,670
QIV 114,000 77,005 36,995 1,480,665
1 Total 228,000 152,224 150,660
QI 114,000 78,834 35,166 1,401,831
QII 114,000 80,707 33,293 1,321,124
2 QIII 114,000 82,623 31,377 1,238,501
QIV 114,000 84,586 29,414 1,153,915
Total 456,000 326,750 129,250
QI 114,000 86,595 27,405 1,067,321
QII 114,000 88,651 25,349 978,670
3 QIII 114,000 90,757 23,243 887,913
QIV 114,000 92,912 21,088 795,001
Total 456,000 358,914 97,086
QI 114,000 95,119 18,881 699,882
QII 114,000 97,378 16,622 602,504
4 QIII 114,000 99,691 14,309 502,814
QIV 114,000 102,058 11,942 400,756
Total 456,000 394,245 61,755
QI 114,000 104,482 9,518 296,274
QII 114,000 106,964 7,036 189,310
5 QIII 114,000 109,504 4,496 79,806
QIV 71,243 69,348 1,895 10,459
Total 413,243 390,297 22,946
Total 2,009,243 1,622,430 461,697

Conclusions
The study used different parameters to determine the feasibility of developing a poultry farm
in Odomik town. The findings of the feasibility study have provided a clear picture of the
proposed project justifying reasons to undertake decisions. The study involving economic
analysis of the project has enabled us to determine its viability before financial resources are
allocated.

Project Profitability: Given all the necessary financial and technical support as has been
depicted in the study, the project shows weaker profitability in the first year of its
implementation however it will grow steadily throughout its operation.

Project Liquidity: The project exhibits positive net cash flows throughout its operational
life. This enables the promoter to pay back the loan, cover operational expenses and tax
obligations without any significant problems.

NPV and IRR Results: The cumulative net cash flow generated by the project is discounted
at 9.5% (cost of capital) gives a positive net present value (NPV) and a financial internal rate
(IRR) of 13.5%.This result implies that the project is viable and worthy of investment.

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We have therefore concluded that the project is technically feasible, economically justifiable,
and socially desirable, and that it is worth the investment.

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