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.