Managing a poultry enterprise alongside an existing dairy, beef or sheep business is the route many farmers in the Cavan/Monaghan region and across Northern Ireland have gone down to boost farm income. I sat down with Cormac McKervey, head of agriculture at Ulster Bank Northern Ireland, to discuss how the investment is financed and what he sees as the opportunities and risks involved.
What is the income risk in a poultry investment?
Compared with most other sectors, the poultry sector has been very stable in terms of income, etc. Investment at the outset is significant but returns are stable and unaffected by weather, grain price (the price of a dozen eggs or meat is linked to grain price), etc. Farmers will know in advance the price they can expect for eggs provided they meet certain performance standards.
Will new entrants get support?
The processors carry out good due diligence in assessing potential growers, their farm, site for housing, etc, and in general they provide good-quality backup/field staff. It’s not important that new entrants have no previous poultry experience – in fact, it’s better if they don’t. The processor can then train them in modern poultry husbandry. The system is vertically integrated with the processor having full control over breeding, feeding, health and house design. The farmer is paid a management fee for his work/investment in buildings. There is little volatility.
What is the biggest challenge for a farmer considering investing in poultry?
The main issues are in securing planning permission (again in NI there are specialist architects to help with this) and with disposal of poultry litter which can be an issue but, increasingly, this is being fed to anaerobic digesters. The sector doesn’t rely on CAP/farm payments so is not affected by forthcoming changes to payment schemes.
Is cashflow a problem for new entrants?
Cashflow is good in that the unit starts to repay once the building is stocked.
If a farmer is not doing a good job at cattle or sheep, what are the chances they will perform well at poultry?
Attention to detail is key – no big decisions needed – just do all the small things well. Poultry suits people who can monitor performance and adhere to procedure. For example, it’s not a matter of spending a few minutes feeding a pen of store cattle – it takes time to run a poultry unit to a high standard. If this is achieved, there are few sectors in farming that will give such a good return.
The hot water systems now in broiler units have made significant improvements to bird performance in terms of feed conversion efficiency, hock burn, etc. It also provides a much improved environment for the farmer.
What are the most popular poultry applications at the moment?
Probably free-range egg production. These are typically for a 16,000-bird unit and cost £400,000 to £450,000 (€509,000). These are built following agreement with an egg packer to buy the eggs from the farmer on a contract-type arrangement – normally one crop per 15-month rolling contract. With caged systems now banned and the enriched cage system due to be phased out over the next five to seven years, the majority of new houses are free-range but with some expansion in organic eggs. Hopefully, the market will grow in line with the proposed number of new houses planned. From a bank’s perspective the farmers have already been vetted by the egg packer, debt service cover is evident and security of the loan is by land-based security. Some value can be assigned to the building itself. Normally, funding can be up to 100% and usually on a 10-year term after an initial six-month interest-only period to allow the unit be built and stocked.
How does grant aid affect applications?
There are five main processors/egg-packers operating in Northern Ireland and, to date, the returns to farmers have been good. There has been a surge in applications for new housing this year. This is in part driven by a new grant scheme in Northern Ireland – the Farm Business Improvement Scheme which, for large-scale projects, can attract funding of up to £250,000 (€282,000).
What type of farmers are applying?
The surge is driven mainly by farmers currently in milk, etc, but who see the advantages of spreading their risk. By diversifying into another enterprise, which doesn’t require much land (approximately 20ac for a 16,000-bird unit). It means they are not as dependent on milk prices or, often, there is a son/daughter returning home from college and another income stream is needed.
If eggs are not an option, are there any other options?
The alternative option is a Moy Park broiler or breeder unit. Usually, a two-house site complete with office/changing area with capacity for 50,000 to 60,000 birds costs £600,000 to £650,000 (€735,000). Typically, a bank will fund up to 100% and this loan is normally secured with land but where land-based security is fully used, some value can be extended against the houses themselves.
Do producers get support?
Again, potential growers are vetted by Moy Park, given full training and are in regular contact with field staff. Nearly half of the farmer’s income is from an ‘‘additional housing payment’’, which represents 95% of the build cost and which is repaid to the farmer, quarterly in arrears, over 10 years.
What happens after 10 years?
At the end of 10 years, the payment ceases but so too should any associated debt. Banks like this comfort. Farmers know in advance the payments they should receive. Moy Park can alter production systems to suit various markets, eg bird weights. They also offer high-welfare, free-range, organic birds. Moy Park also has its own breeding sites, both parent and grandparent. They operate a similar system to that for broilers.
Can other sectors learn from the poultry job?
Other farming sectors have a lot to learn from poultry – the integrated approach, great communication along the supply chain, clear performance targets, bonuses and payments leave all involved parties with clear goals of what’s expected. It also allows underperformance to be identified early and necessary measures put in place to return to normal.
Poultry is becoming an option for Northern Irish farmers looking to de-risk the main enterprise or if another income is required for a son or daughter returning home to the farm.The most popular finance applications are for free-range egg production. These are usually for a 16,000-bird unit and cost £400,000 to £450,000 (€509,000). You need about 20 acres of land to manage the poultry litter. The alternative is a Moy Park broiler or breeder unit. This is usually a two-house site with office/changing area with capacity for 50,000 to 60,000 birds and costs £600,000 to £650,000 (€735,000). Read more
Moy Park - the rise of a poultry giant
Renaghan's vision for the poultry industry
Managing a poultry enterprise alongside an existing dairy, beef or sheep business is the route many farmers in the Cavan/Monaghan region and across Northern Ireland have gone down to boost farm income. I sat down with Cormac McKervey, head of agriculture at Ulster Bank Northern Ireland, to discuss how the investment is financed and what he sees as the opportunities and risks involved.
What is the income risk in a poultry investment?
Compared with most other sectors, the poultry sector has been very stable in terms of income, etc. Investment at the outset is significant but returns are stable and unaffected by weather, grain price (the price of a dozen eggs or meat is linked to grain price), etc. Farmers will know in advance the price they can expect for eggs provided they meet certain performance standards.
Will new entrants get support?
The processors carry out good due diligence in assessing potential growers, their farm, site for housing, etc, and in general they provide good-quality backup/field staff. It’s not important that new entrants have no previous poultry experience – in fact, it’s better if they don’t. The processor can then train them in modern poultry husbandry. The system is vertically integrated with the processor having full control over breeding, feeding, health and house design. The farmer is paid a management fee for his work/investment in buildings. There is little volatility.
What is the biggest challenge for a farmer considering investing in poultry?
The main issues are in securing planning permission (again in NI there are specialist architects to help with this) and with disposal of poultry litter which can be an issue but, increasingly, this is being fed to anaerobic digesters. The sector doesn’t rely on CAP/farm payments so is not affected by forthcoming changes to payment schemes.
Is cashflow a problem for new entrants?
Cashflow is good in that the unit starts to repay once the building is stocked.
If a farmer is not doing a good job at cattle or sheep, what are the chances they will perform well at poultry?
Attention to detail is key – no big decisions needed – just do all the small things well. Poultry suits people who can monitor performance and adhere to procedure. For example, it’s not a matter of spending a few minutes feeding a pen of store cattle – it takes time to run a poultry unit to a high standard. If this is achieved, there are few sectors in farming that will give such a good return.
The hot water systems now in broiler units have made significant improvements to bird performance in terms of feed conversion efficiency, hock burn, etc. It also provides a much improved environment for the farmer.
What are the most popular poultry applications at the moment?
Probably free-range egg production. These are typically for a 16,000-bird unit and cost £400,000 to £450,000 (€509,000). These are built following agreement with an egg packer to buy the eggs from the farmer on a contract-type arrangement – normally one crop per 15-month rolling contract. With caged systems now banned and the enriched cage system due to be phased out over the next five to seven years, the majority of new houses are free-range but with some expansion in organic eggs. Hopefully, the market will grow in line with the proposed number of new houses planned. From a bank’s perspective the farmers have already been vetted by the egg packer, debt service cover is evident and security of the loan is by land-based security. Some value can be assigned to the building itself. Normally, funding can be up to 100% and usually on a 10-year term after an initial six-month interest-only period to allow the unit be built and stocked.
How does grant aid affect applications?
There are five main processors/egg-packers operating in Northern Ireland and, to date, the returns to farmers have been good. There has been a surge in applications for new housing this year. This is in part driven by a new grant scheme in Northern Ireland – the Farm Business Improvement Scheme which, for large-scale projects, can attract funding of up to £250,000 (€282,000).
What type of farmers are applying?
The surge is driven mainly by farmers currently in milk, etc, but who see the advantages of spreading their risk. By diversifying into another enterprise, which doesn’t require much land (approximately 20ac for a 16,000-bird unit). It means they are not as dependent on milk prices or, often, there is a son/daughter returning home from college and another income stream is needed.
If eggs are not an option, are there any other options?
The alternative option is a Moy Park broiler or breeder unit. Usually, a two-house site complete with office/changing area with capacity for 50,000 to 60,000 birds costs £600,000 to £650,000 (€735,000). Typically, a bank will fund up to 100% and this loan is normally secured with land but where land-based security is fully used, some value can be extended against the houses themselves.
Do producers get support?
Again, potential growers are vetted by Moy Park, given full training and are in regular contact with field staff. Nearly half of the farmer’s income is from an ‘‘additional housing payment’’, which represents 95% of the build cost and which is repaid to the farmer, quarterly in arrears, over 10 years.
What happens after 10 years?
At the end of 10 years, the payment ceases but so too should any associated debt. Banks like this comfort. Farmers know in advance the payments they should receive. Moy Park can alter production systems to suit various markets, eg bird weights. They also offer high-welfare, free-range, organic birds. Moy Park also has its own breeding sites, both parent and grandparent. They operate a similar system to that for broilers.
Can other sectors learn from the poultry job?
Other farming sectors have a lot to learn from poultry – the integrated approach, great communication along the supply chain, clear performance targets, bonuses and payments leave all involved parties with clear goals of what’s expected. It also allows underperformance to be identified early and necessary measures put in place to return to normal.
Poultry is becoming an option for Northern Irish farmers looking to de-risk the main enterprise or if another income is required for a son or daughter returning home to the farm.The most popular finance applications are for free-range egg production. These are usually for a 16,000-bird unit and cost £400,000 to £450,000 (€509,000). You need about 20 acres of land to manage the poultry litter. The alternative is a Moy Park broiler or breeder unit. This is usually a two-house site with office/changing area with capacity for 50,000 to 60,000 birds and costs £600,000 to £650,000 (€735,000). Read more
Moy Park - the rise of a poultry giant
Renaghan's vision for the poultry industry
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