Wednesday, June 10, 2009

Chicken Farming In The Philippines: A Good Idea?

I'm putting up this post as a bit of an open forum. If you have anything to add to it, let me know in the comments.

Yesterday, I went out to visit a chicken farm. I had heard before from two different expatriates that chicken farming is a great (and, more importantly safe) way to make money in The Philippines. Specifically, contract growing for big corporations.

The chicken farm I visited today was exactly the operation that had been described by these two expatriates: A chicken farm that grows chickens for the San Miguel corporation. (Yes: The beer company, and no, I don't know either.)

Here is how it works: You have a big chicken barn that holds, say, 15,000 chickens (exactly like the one in the photo below). The San Miguel corporation comes and drops off 15,000 one-day-old chicks and enough feed to raise them. In 30 days, the San Miguel corporation comes back and pays you 12.75 pisos (27 cents) per chicken. You have to return 96% of the chickens (i.e. a 4% mortality rate), or you are penalized 100 pisos per chicken over that number. After the chicken barn sits empty for 7 days, another 15,000 chickens will be dropped off... creating a 37-day cycle, or approximately 10 flocks per year. At a 96% delivery rate, that works out to 180,000 pisos ($3,800) per flock, or 1.8 million pisos ($38,000) per year.

(In addition, the chicken dung collected from one flock is worth about 30,000 pisos, or $6,300 per year.)


Building a barn like this, according to Mr. Lopez, the farm's owner, cost 1 million pisos ($21,000) about 7 years ago when it was built, including all the feeders, heaters, and other bits and pieces. Renting one hectare of land costs between $400 and $600 per year. Water is supplied by well. Other than a few lights, there is no electricity being used. The heaters that are used to keep the chicks warm during the first few days run on natural gas. It takes only 2 employees to manage the flock.

Another benefit of this business is that all of the money goes directly from the San Miguel Corporation to the farm owner, so employee pilferage is limited only to chickens... and with an accurate accounting of the flock plus deceased, that can be easily detected and thwarted.

So, there are the details. Any thoughts?


UPDATE, April 2010:

Okay. I've finished my year-long study of the chicken industry in The Philippines, and I now have my own business model put together, and I'm looking for investors. Here is my conclusion: Contract growing is the least profitable method of chicken growing in The Philippines. The numbers cited above are generally correct, however the barn requirements for San Miguel corporation are more stringent (and much more expensive) now for new growers. Also, with some growing contracts, the number of flocks per year is probably closer to 5 or 6, rather than 10.

I'm not going to give away the secrets I learned in my year of study, but I now am confident that I know the absolute cheapest way to grow a 1.2 kilogram chicken in The Philippines, and I know how to do it in a way that gets more business, higher profit, and better growth than any other farm in the country. I've had one Filipino chicken farmer and one American chicken farmer study my conclusions, and they both agree that I've found the secret. Now, I just need investors.

So, if you are interested in reading about how to make real money in chicken farming in The Philippines, click here for what I found out and my investment opportunity.

35 comments:

charish said...

This one looks very clean. But they are really stinky. Now would you be running it or would you hire someone to do it for you? Now is this really a venture you would want to do.

Anonymous said...

hi Jil, too much work for you, to much money up front that you don't have, and too much commitment. Why mess with what's working for you now?

Love, your sister.

Jungle Jil said...

Hello Sister Nancy,

What's working for me now will not work forever. The work for me actually is close to zero: This will be done by my (and Mike Bird's) family. Mike and I will just be handling the money and reinvesting it.

The money up front is actually variable based on the size of the barn. We figure that we could open up for as little as $10,000.

Anonymous said...

lol you are a fool if it was that easy all philipino's would be doing it. what happens if your flock dies you owe 15000 loser!

Jungle Jil said...

Anon,

Obviously you have never been to The Philippines and have no idea what you are talking about, but since you opted to open your mouth and prove that fact, I might as well take the time to respond:

To the average Filipino earning 3,000 pisos per month, opening a 1.5 million piso chicken farm is like the average American opening a 1.5 million dollar chicken farm.

If the average Filipino had 1.5 million pisos, there would indeed be a heck of a lot more chicken farms out there. Instead, it would take the average person in The Philippines about 40 years saving every penny they earned to open a small chicken farm, and only if they didn't spend a single centavo of their salary on anything else.

And, if you had ever been to The Philippines, you would also know that pretty much every rich person (that is, the people who do have 1.5 million pisos lying around) do own an agricultural operation of some sort, be it fruit, vegetable, meat, or seafood.

And as for losing a flock, San Miguel has a doctor on call at all hours to come rushing out if something goes desparately wrong with a flock.

Now, I hope you are less of an idiot because I took the time to answer your stupid comment. I suppose that you thanking me for making you less unintelligent would be too much to expect.

p.s. Anon, if you had ever been to The Philippines, you would have noticed that just about every Filipino family has a minimum of 3 or 4 chickens wandering around in their yard. It's the most they can afford, but yes... pretty much every Filipino is raising chickens here.

Anonymous said...

Interesting but almost sounds too good to be true. You know what they say "if it sounds too good to be true it usually is". Just the sceptic in me. But you only live once just dont invest your entire life savings in it if you decide to go for it. Good luck I hope it works out.

from Jakal

Jungle Jil said...

Jakal,

Two expatriates are already doing contract growing that I'm aware of. Another one (my friend Nelson, who used to own a chicken farm in Iowa) is seriously considering it.

The only thing I could see going wrong (and I do have to give a small credit to Anon, idiotic hyperbole of "total loss" notwithstanding) that instead of a 4% mortality rate, some number like 8% comes along and eats into the profits.

At 8% mortality rate on 15,000 chickens the profit would go down from 1.5 million to 1.15 million per year. At 12% mortality rate, it would go down to 483,000 per year. The breakeven point would be at (more or less) at 15% mortality. But if there was regularly that kind of loss, obviously commercial chicken farming would not be viable at its current level of compensation, and the dozens of chicken farms in the area would not be operating.

I asked Mr. Lopez about his mortality rate and he said it was always below 4%. I've considered the possibility that it could be higher. Of course, one can always grow and sell one's own chickens, and therefore not be liable for high mortality. The profit margin on that is substantially higher, but so are the costs. (A chicken costs about 60 pisos to raise, but sells for about 100 pisos or more... so 40 pisos profit instead of 12.75... once buyers are found.)

Additionally, any chickens that do not reach a certain size are rejected by San Miguel, and while you are not charged for them, you don't get paid for them, but you also get to keep them, and sell them when they are a proper size. That number is usually around 1%... 150 chickens per 15,000. Mr. Lopez gives those chickens to his workers in lieu of a salary.

The thing I've found about business opportunities in The Philippines is that almost all investments pay for themselves within the first year — fishing boats, taxis, chicken farms, bar-be-que stands, sari-sari stores, internet caf├ęs. Unfortunately, there is no such thing as small business loans, and nobody has any capital to open fair-sized businesses here. Therefore, all of those business opportunities are not taken advantage of.

The major problem with foreigners operating businesses here is that success breeds contempt. If you start making money here in a way that everyone can see, people will come after you. This is especially true if your competition is losing sales to you.

The safest bets for foreign-owned businesses here, therefore, are taxis, fishing boats, and farms: For starters, the business pool is much larger and bottomless, and the operation is much less public. (With a taxi or a fishing boat, a foreigner's taxis/boats are indistinguishable from a Filipino's taxis/boats; with a farm, being 5 miles out in the country is about as low-profile as you can get.) This is compared to standing behind a counter in a shop of some kind, running a business that puts pressure on the other business owners next door and around town.

Mike, my "cousin in law", who is going to partner with me, and I plan on sending out my mother-in-law and father-in-law and his uncle to Mr. Lopez' farm for a month to learn the ropes. Then, we (mom, pop, and uncle, that is) will rent some land from Auntie Puring and Uncle Bob, and build a small barn on it. Mike and I will probably go out to the farm once every couple of weeks to make sure that everything is okay, but overall it will be the family's business. Anyone who has ever met my mother-in-law knows that she is tough as rocks, and will make a good farm boss. My father-in-law has enough work ethic for 4 men, and between Mom and Dad (the uncle, I don't know as well), the farm will be well-supervised.

(Thoughts continued in next comment...)

Jungle Jil said...

(Continued from previous comment...)

What Mike and I are trying to do is create an income for the family and ourselves, so that if either Mike and I should lose our jobs, there will be something else we and our families can rely on for income. It would be nice to get to the point where we can rely on a business here 100%, and we do hope to reach that point, but for now what we are looking for is just a steady, safe, honest income to keep things on an even keel and provide a safety net for our families.

Issarat said...

I think that is is a viable idea; is there a way to do it where you can share some of the upfront costs with others? That may give them more of a push to do a good job; but the Pinoys are hard workers and seem to be business minded. Do the numbers and if they work out; go for it.
The cost of the barn seems a bit high; can you subcontract it out with family/local help to cut that down a bit?
Just some thoughts....good luck.

mikeisbored said...

Good luck with this business venture. I was actually thinking of putting up a poultry farm as well at our land at Bagak Bataan near Subic. We'll be using 1 hectare of land to start with. then if the business is successful, We might use the whole 12 hectare for it.

I'd just like to ask, what is the usual minimum requirement of land to be used for this type of business? Are you familiar with the process for growing chickens for San Miguel? since i heard not all proposals such as these are approved.

Also, I don't know if you are aware of this but depending on where you will putting up you're business, you might have to deal with the NPA and certain syndicates within your region of operation so good luck with that. This is the Philippines after all.

Centura said...

Interesting blog that you have set up here made more interesting perhaps knowing that you are a foreigner living in my country and I'm a Filipino living in the foreign land of Australia!

My brother and I are also thinking about this venture and I have a few questions to ask. In your enquiries, did you happen to know whether what the criteria is to be say, a chicken grower for San Miguel? Is there an application process that you need to go through? Do you need to pay something for your application to be considered along everyone else?
Is there any other chicks' source other than San Miguel? What about RFC or Jollibee?

Have you come across other gov't agencies that you need to license for environmental impact? Like what do you do with deceased chickens or waste management or even the smell/heat or even pollution that it will contribute to the area?

Appreciate if you can answer whatever you can.

Cheers!

Jungle Jil said...

Centura,

I don't know of any other contract growing companies. I do know that somewhere on the internet is a list of San Miguel's requirments for contract growers. Mike Bird found it, but I don't know where it is.

I did ask about environmental impact and stuff like that, and apparently the government has never inspected the farm that I visited. San Miguel does have regulations though.

Centura said...

Yes, I wouldn't be surprised if that was the case for the no inspection yet. However, as a responsible earth dweller be it here or there, I think it should be considered alongside everything else.

In my research about this I've come across different designs for chook houses.

Hope you can keep us updated if you get yourself going.

Cya later alligator! :-)

Anonymous said...

Im Christian P. Dizon, Filipino assigned Area Sales Manager for Philippines with Big Dutchman Agriculture Malaysia. We can help you with the housing, flooring equipment and new technology that may be of help for you to be considred one of contract growing of San Miguel Corporation. You can visit our website at www.bigdutchman.com or email me at christian@bigdutchman.com

Anonymous said...

wow i have spent 2weeks searching the net looking for someone to break this type of business open to me, thanks jil. i'd like for you to contact me at carlbrown434@yahoo.com. i'd like to talk with you concerning money matter's. i'll be coming there in march with my new wife.

Anonymous said...

i use to rent a farm in lipa, batangas raising hog or fattening pigs. Made friends with other raisers
engage in raising commercial chickens who have contracts with either San Miguel, Tyson or Robina Farms Corporation. The good thing about getting into a contract with big companies is they provide you with the chicks, food, medicine and technical know how and extended service such as vet on call if problem arise anytime of day. And then during harvest time there is no problem in selling the products because there is assurance that someones gonna buy the goods. as oppose to raising pigs there is money in it but the hard part is when it's time to sell there is no assurance that there is a buyer willing to buy at the current market price. it is the middlemen or market sellers who dictates the price. wish you well on your venture,

DJprecise said...

Hey guys,

Well I am in the same boat as you and I am extremely intereted in putting up my own Poultry building. My father inlaw actually just built his first building which sparked the idea with me also getting into the business. The profitability looks to be there and even pay itself off within the first year. (not including the price of the land)
However, I would like to know more info. If you actually did already start your business let us know! Id like to know how its going!

Cheers, Ryan

jon said...

Does anyone know where I can find information on where to buy equipment and materials to build a Poultry house. I am looking to get in to this...! please email me joncabungcal@googlemail.com

Thanks
Jon

randz said...

Hi Jil!

I just want to follow-up if you ever started the business or not yet... if you did, how did it go? A friend of mine just opened hers in Bataan province and she had more demands that's why she is trying to acquire more lands nearby her business to accommodate those demands by the distributors. And she is the one who told me bout this just two days ago. My e-mail is rlivelo@gmail.com. Hope it did work for you then. Thanks!

Randz

robert said...

Words of caution to all who has been reading all these blogs. The profits being mentioned here are way too high to be realistic. Rands mentioned in his post that the return of investment is one year which is a 100% profit (not including the land as expense). This is too good to be true and what do you think the corporations will do (who earns on the average %15%/year) if the ROI on chicken farm is close to 100%? Go figure. I own several chicken farms in the philippines and the average return is within 20% a year. So folks do your research and tread cautiously. You might just get burned. I just built one in February of this year that houses 7500 layers and cost me $26,000.00 for the building, $28,000.00 for the pullets and another $10,000.00 for the feeds before the chicken even starts to lay eggs. The time commitment on this business is tremendous. If you want weekends off then this is not your business. If you want to work 8 hours a day then this is not your business. If you want to make a profit of 20% a year ( way better than the stock market which has been a loser) and work hard to attain it then this is for you. Cheers to all!!!!

Jungle Jil said...

Hi Robert,

Could you e-mail me at jilwrinkle@yahoo.com? I have a bunch of questions to ask you about layers. Thanks.

Anonymous said...

Hi, my name is H.Peter and i am also very interested in your endeavor. I am soon to marry a Philipina and am soon moving to the philippines and hope to start several of these poultry farms thru my future Philipinas family with myself to provide the financing and the business to be run through thier name to alleviate foreign investor concerns with the government. I have also researched this for several years now and find the numbers as promising, not just on paper, but also in reality and I find it intriguing that so many others that are doing this kind of growers barn actually try to deter anyone else from trying! could that be the fear of competition factor? must be, or why would they still be doing it? inquiring minds want to know=) Jil, I'd love to hear from you about the possibility of investing and building...my email is hjoline@verizon.net or IMFLYINGHIGH68@AOL.COM....AS FOR THE Sasn Miguel program, here is the article and info posted online...Chicken growing is one of the many money-making opportunities for enterprising Filipinos. And one profitable project to take is the Poultry Contract Growing Operations of the San Miguel Foods, Inc., Poultry Business.

The poultry contract growers will provides agricultural land, poultry houses, feed bodega, water and electricity, security, labor, and proper management

On the other hand, San Miguel Foods Inc. shall provide day-old chicks, broiler feeds, vaccines and medicines, technical assistance, laboratory services and competitive payment scheme.

Requirements for new Poultry Contract Growers

Proposed Farm Site

* With a minimum lot are of one (1) hectare
* Within an agricultural zone
* One (1) km away from residential area
* One (1) km away from any nearest poultry of hog farm
* With reliable source of electricity and adequate potable water
* Must have all-weather road (to and from and within the farm), passable to a 10-wheeler truck
* Must be within the following radius from an SMFI dressing plant

Luzon: 100 km.
Visayas/Mindanao – 50 km.

Documents Required:
* Completely filled-up application form
* 2 pcs. 2×2 picture
* Clear photocopy of latest community tax certificate
* Clear photocopy of TIN card
* Proposed farm site and location map

Bond Collateral
* Cash (Pph 10.00 per bird)
* Real Estate Mortgage (REM)
* Original Transfer of Certificate of Title (TCT)
* Current Year’s Tax Declaration
* Tax Clearance
* Tax Receipt
* Special Power of Attorney (SPA), if property is not in applicant’s name

For further information, please contact:

For Luzon Operations:
* Dr. Luisa Recinto – 09175591804
* Dr. Orly Dela Cruz – 09178685462
* Dr. Jorge Manahan – 09178688356

Visayas/Mindanao Operations:
* Central-Eastern Visayas – Mr. Jonathan Escanilla – 09178658532
* Western Visayas – Mr. Eric Cariaso – 09178123161
* Northern Mindanao – Engr. Rodney Erasmo – 09209208770

Join and earn money with San Miguel Foods, Inc. Poultry Business, one of the big poultry operators in the country.

I hope to hear from you soon Jil and happy birding!!!

HARRY said...

I'm still hoping to hear from you Jil, and I just realized tha one of my email addresses was incomplete: hjoline68@verizon.net

Would still like to invest and possible chat more about life there and hopefully get together sometime.
Take care. H Peter

Barry said...

Hi Jill, are you still operating this forum, noticed the last post was June 2010.
My extended Filipino family has started a small chicken growing farm in Cebu and I'm negotiating currently with a local consortium in Negros to start a larger commercial concern. I would be greatful if you could email me and let me know how you have progressed so far.
barryplain@hotmail.com
Thanks.

Prem said...

Dear Mr. Wrinkle, have you already started the poultry farm, are you still in operation. I hoping to get in touch with you with regards to the poultry farm business, mostly about the finances, ROI and sensitivity of this kind of business. Hope you would reply. Thank you and GOD bless to you and your businesses.

prem
p.rangwani@gmail.com

Md M Hoque said...

HI Everyone,
I have been in poultry business in the Philippines over 1.5 years. I studied atleast 2 years before coming into the market. I must say it is not as easy as it sounds here also the profit margin is definitely not this high.
Factors that a foreigner will encounter i am doing
1) You would often encounter local official trying to bleed your money.
2) Often Manager would do cheating with flock counting or consumption of feeds
3) Please dont forget Philippines has one of the Highest rate of electricity since Summer is getting hotter and hotter every year it would cost lot of money to run the electrical fan.
4) San Miguel is much more strict than initially presented & honestly it would be difficult to manage less than 4% mortality in most cases if you have conventional type of poultry house. I often encounter 5-6% mortality.
5) Please don’t forget that your flock might get stolen when it become big
6) please note typhoon make such a big affect on the poultry house that it may wipe out the whole house.
7) Please consider high cost of medicine here the Philippines.

Conclusion is " It is profitable business in long term, Find a very good manager before you get involve to it. ROI provably 4-5 years, Better to build Tunnel Ventilated house, building cost may be around 250 pesos/head and regular conventional house would cost 150 pesos/head. Consider buying the land under corporation or if renting make sure you are dealing with honest land owner.”
Regards,
MD Hoque
Email admin@philgifts.com

vodkastyle said...

For the record the unit of currency in the Philippines is called peso, thus pesos, not pisos (though a piso is Php1.00). Good article though.

Jil Wrinkle said...

Obviously, Vodkastyle, you have never been to The Philippines... but I always enjoy posting comments from people who have no clue and then correcting them.

Now, look at this bank note from The Philippines and tell me again how it is "peso" and not "piso".

http://cm.eyp.ph/tiny_mce_photos/0006/1181/200_piso.jpg

anon said...

yes, i agree! Piso-tagalog, Peso-english. And please, just accept that you are wrong. ;)

Jil Wrinkle said...

That's about as dumb as coming on a blog about France and saying, "You shouldn't call it 'Francais'. The right way to say it is 'French'!"

poultrygal said...

Hello, can you describe or paste pictures of a simple house containing 5000 chicken and budget for building will be limited to $1500.

The poultry house will be located in a hot country with daily temperature running to 38- 40 centigrade. If you want to send a pm instead my email address is afelicia68@gmail.com
Many thanks.

jhoy said...

i would like to ask whos here knows where i can get the halal whole chicken , iam going to import to egypt and i need 1200 grams per chicken and i need 50 metric tons every 2 weeks, thanks

jhoy said...

please email me at tiffany.egypt2013@gmail.com

gly said...

Hello! I am very much ineterested to do poultry business especially my place in Cagayan de Oro City, Please email me at: glaizabaculio@gmail.com

MY URDU POETRY said...

I am from USA and work as a medical doctor. I am interested to do business in Philippines as I frequently comes to Philippines to do medical missions. I have been thinking of this business as well for a long time as my adopted sister is doing well in on a 4 hector land owned by her and her husband is the builder. I have heard of precautions and downfallsfrom several people here for which I want to thank them. I must say that a well planned and organized business will eventually pay off but the risks are always there. If one cannot overcome the fear of risks, then it will be hard for that person to do any kind of business. I will appreciate if someone from the San Miguel Food Inc or other company will give me information about how to start a business on one hector or smaller land and what are the costs involved. My brother in law can help me do the cunstruction. Thanks
inamr@msn.com