1st Draft

PRE-FESIBILITY STUDY ON FATTENING OF BUFFALO/CATTLE CALVES

Animal Nutrition Program (ASI) NARC

PAKISTAN AGRICULTURE RESEARCH COUNCIL ISLAMABAD

MINISTRY OF NATIONAL FOOD SECURITY AND RESEARCH
Government of Pakistan
www.parc.gov.pk
January 2014

Contents
1-

DISCLAIMER..................................................................................................... 1

2-

PURPOSE OF DOCUMENT................................................................................. 1

3-

Introduction to scheme.................................................................................... 1

4-

EXECUTIVE SUMMARY...................................................................................... 1

5-

BRIEF DESCRIPTION OF PROJECT AND PRODUCT.............................................2

6-

CRITICAL FACTORS.......................................................................................... 2

7-

INSTALLED AND OPERATIONAL CAPACITY FOR FATTENING of CALVES..............3

8-

GEOGRAPHICAL POTENTIAL FOR INVESTMENT................................................3

9-

POTENTIAL TARGET MARKETS.........................................................................3

10-

PRODUCTION PROCESS FLOW......................................................................3

11-

PROJECT COST AND BENEFIT SUMMARY.......................................................3

12-

PROJECT ECONOMICS................................................................................... 3

10.1 Project Cost............................................................................................... 4

10.2 Space Requirement................................................................................... 4
10.4 Machinery and Equipment..........................................................................4
10.5 Furniture and Fixture.................................................................................. 5
10.6 Operational and Maintenance cost.............................................................5
10.7 Human Resource Requirement...................................................................5
10.8 Project Financing....................................................................................... 5
10.9 Revenue Generation.................................................................................. 6
13-

KEY ASSUMPTION......................................................................................... 6

14-

ANNEXURE................................................................................................... 7

1- DISCLAIMER
This information memorandum is to introduce the subject matter and
provide a general idea and information on the subject. Although, the
material included in this document is based on data / information
generated from experiments and field testing by a team of relevant
scientists; however, it is based upon certain assumptions which may differ
from case to case. The contained information may vary due to any change
in any of the concerned factors, and the actual results may differ
accordingly from the presented information. The PARC and its employees
do not assume any liability for any financial or other loss resulting from
this memorandum in consequence of undertaking this activity. The
prospective user of this memorandum is encouraged to contact qualified
consultant/technical expert, especially designated focal person(s) of this
enterprise for reaching to an informed decision.
2- PURPOSE OF DOCUMENT
The purpose of this document is to facilitate potential investors in by
providing them with a general understanding of the business, with the
intention of supporting potential investors in crucial investment decisions.
The project pre-feasibility may form the basis of an important investment
decision and in order to serve this objective, the document/study covers
various aspects of project concept development, start-up, production,
finance, and business management. The need to come up with prefeasibility reports for undocumented or minimally documented sectors
attains greater imminence as the research that precedes such reports
reveal certain thumb rules; best practices developed by existing
enterprises by trial and error, certain industrial norms and well established
research findings that become a guiding source regarding various aspects
of business set-up and its successful management. Apart from carefully
studying the whole document, one must consider critical aspects provided
later on, which form the basis of investment decisions.
3- Introduction to scheme
Prime Ministers Youth Business Loan Program, for young entrepreneurs,
with an allocated budget of Rs. 5.0 Billion for the year 2013-14, is
designed to provide subsidized financing at 8% mark-up per annum for
one hundred thousand (100,000) beneficiaries, through designated
financial institutions, initially through National Bank of Pakistan (NBP) and
First Women Bank Ltd. (FWBL). Loans from Rs. 0.1 million to Rs. 2.0 million
with tenure up to 8 years inclusive of 1 year grace period, and a debt:
equity of 90: 10 will be disbursed to SME beneficiaries across the Pakistan,
covering; Punjab, Sindh, Khyber Pakhtunkhwa, Balochistan, GilgitBaltistan, Azad Jammu & Kashmir and Federally Administered Tribal Areas
(FATA).

4- EXECUTIVE SUMMARY
Beef from young male calves (12-18 months old) of buffalo and cattle is
one of major source of proteins of high biological values and foreign
exchange through production of milk, meat and hides. However quality of
beef due to their stunted growth rate and poor carcass yield is not
satisfactory. Farmers prefer to feed to female calves for replacement of
herd. Male calves become neglected due to malnutrition, emaciation and
diseases leading to low weight at marketing age and less carcass yield
when slaughter. Growth rate and quality of beef and economic return from
calves can be improved by fattening. Domestic and international literature
has revealed a growth rate of 700 to 900 g/day when calves are fattened
with a variety of protein supplements along with appropriate health cover
and management.
Such fattening trials can be successfully carried in rural as well as urban
areas of Sindh, Punjab, Balochistan, Khyber Pakhtunkhwa, Gilgit-Balitistan,
AJ&K and FATA. Such a project can be easily completed by conducting
series of trials, each on 25 calves (12-18 months old) for a period of 120
days. Fattened calves can be sold as live or as carcass or cut pieces in any
part of the country. A loan of Rs 1.059 offers a good opportunity for an
economic investment not only for the production of quality beef but also
jobs for our talented youth. Given the cost assumptions, Net Present Value
(NPV), Internal Rate of Return (IRR), and payback period are Rs.3,308,171,
29% and, 4.63 years, respectively.
5- BRIEF DESCRIPTION OF PROJECT AND PRODUCT
Following key parameters must be addressed as per pre-feasibility study:
Techniques: Calves of respective breeds of buffalo and cattle in rural
areas on all over the country can be subjected to such fattening trials
under semi-intensive system. However protein supplements (of different
degradability) for fattening and green fodders harvested at bloom stage
can vary according to climatic conditions and cropping pattern.
Location: The business can be initiated in rural and urban areas having
access to marketing throughout the country.
Product: At the moment most of beef is coming from slaughtering of
spent animals which is and low quality compared with that from young
calves. Fattening of young calves with quality supplements will yield of
high grade. Production and use of quality will not only improve our own
health but also socioeconomic conditions with foreign exchange earned
through export of surplus.
Target Market: In addition to major cities, such as Quetta, Karachi,
Lahore and Islamabad, there is an enormous export potential for Middle
Eastern countries.
Employment Generation: The proposed project will provide direct
employment to two individuals. Financial analysis shows the profitability of
proposed business within first year of its operation.

6- CRITICAL FACTORS
The commercial viability of the proposed project depends on the following
factors:
Selection of calves of local breeds of buffalo and cattle, balanced
feeding, proper housing, management, appropriate health cover, well
defined marketing and dedicated supervisory staff will play very
important role in exploitation of genetic potential local breed and will
ensure the success of the project.
Farm may be positioned near to market so that supply of inputs and
disposal of final products could be managed easily.
It should have enough elevation, so it can be drained easily during the
off season.
Calves should preferably represent local breed and disease free with a
desirable body conditions.
Farm is required to maintain the complete record of inputs and out puts
(Calves, fodder production or purchase, Feed intake, body weight,
morbidity, mortality, sale of animals and manure) and infrastructure like
buildings, equipments and fuel for successful marketing and traceability.
Farm should have strong market linkages for effective disposal of
produce.

7- INSTALLED AND OPERATIONAL CAPACITY FOR FATTENING of

CALVES
This pre-feasibility suggests that quality beef can be produced by using
local genetic materials feed resources under scientific management in a
well defined marketing manner.
8- GEOGRAPHICAL POTENTIAL FOR INVESTMENT
Semi-arid and irrigated areas are more suitable for this investment as
regard availability of inputs and marketing of final products.
9- POTENTIAL TARGET MARKETS
The marketing of beef follows the traditional distribution channel, through
middlemen or wholesalers at farm who identifies potential buyers and
negotiate price, or directly to retailer in urban markets. The time spent in
transportation, from farm to the retail shop, varies from area to area. Over
the years, collection and transportation of fish has improved with the use
of loader vehicles. However, greater the distance between farm and
consumer, more complicated will be the marketing or distribution system,
due to the perishable nature of the product. The key factors in marketing
are availability of current market information, quality of beef produced
and supply & demand which will determine the selling price.

10- PRODUCTION PROCESS FLOW

Although both species are polyestrous but cattle will be more useful in
ensuring flow of production process due to higher fertility rate. However
intellectual planning will play an important role in arrangement, use of
inputs and their disposal.
11- PROJECT COST AND BENEFIT SUMMARY
A detailed financial model has been developed to analyze the commercial
viability of calf fattening under the Prime Ministers Small Business Loan
Scheme. Various cost and revenue related assumptions, along with results
of the analysis, are outlined in this section.
12- PROJECT ECONOMICS
All figures in the financial model have been calculated 30 animals. The
following table shows internal rates of return and payback period.

Table 1. Project Economics

Description
Net Present Value (NPV)
Internal Rate of Return (IRR)
Payback Period (years)

Details
3,380,171
29%

Factors that influence the profitability of calve fattening are farm

management, quality of inputs, environmental factors and market
situation.
10.1 Project Cost
Following requirements have been identified for operations of the
proposed business.
Table 2. Total Project Cost
Capital Investment
Capital Cost (one time investment)
Initial operational cost
Total

Amount (rupees)
736,636
1,077,847
1,814,483

10.2 Space Requirement

Table 3. Space requirement and its cost
Space Requirement
Cost
Quanti
(Sq. ft.)
Rs./
ty
Unit
(Nos.)
Veterinary dispensary
500
1
and office
Feed store
600
1
Shed
400
3 sheds
Loading area including
105
1
manager and water tank
loading
area
Miscellaneous
facilities
1 cattle
(cattle Crush)
Crush
Total:

Area
(Sq.
ft.)
100

Total
Cost
(Rs.)
75,000

70
625
1000

42,000
250,000
105,000
60,000
532,000

10.4 Machinery and Equipment

Table 4. List of Machinery & Equipments and its cost
Description
Quantit
Unit
Total
y (Nos.)
Price
(Rs.)
(Rs.)
Weighing scale
01
25,000
25,000
Chopper and other equipments

01

30000

30,000

Veterinary Kit

01

20,000

20,000

15000

15000

Misc Machinery

Total:

90,000

10.5 Furniture and Fixture

Following table provides list of Furniture and Fixture required for
fattening calves.
Table 5. List of Furniture & Fixture and its cost
Descriptio
n
Furniture and Fixture

Quantity
(Nos)
Lump
sump

Unit
Price
50000

Total:

Total
(Rs.)
50,000
50,00
0

10.6 Operational and Maintenance cost

Following table provides list of Consumable Requirement for fattening
calves.
Table 6. Operational & Maintenance cost
Description
Cost of purchase of animals (125kg
body weight)
Cost of feeding of animals @ Rs.
116/day (including fodder/silage and
concentrate)
Cost of Medicines
Electricity
Diesel Charges
Total:

Quantit
y
(Nos.)
25

Unit
Price
(Rs.)
23750

Total
(Rs.)
593,75
0
348,00
0
1,250
7,500
6,000
956,50
0

* Local livestock market.

10.7 Human Resource Requirement
The table below provides details of human resource required to manage
basic calves fattening. The staff salaries are estimated according to the
market trends. However, these requirements and pay scales may vary
area to area.
Table 7. Human Resource Requirement its cost
Descriptio

No. of

Salary/person/

Total salary per

n
Laborers

Employees
2

month
10000

year
240,000

10.8 Project Financing

Following table provides details of the equity required and variables
related to bank loan;

Table 8. Project financing

Description
Total Equity (10%)
Bank loan
Mark up to borrower (per annum)
Tenure of Loan (Years)
Grace Period (years)

Details
Rs. 180500
Rs. 1624500
8%
8
1

10.9 Revenue Generation

Final product of the trial is 25 fattened calves ready for sale in market that
will generate revenue. Trial will be repeated at least thrice a year with
sufficient generation of funds.
Table 9. Revenue of the Project
Produ Uni Surviv
Average
First Time
ct
t
al
Weight of Production
@100
calf
(Kg)
%
Fatten
25
215 kg
ed
calves
Farm
yard
manur
e
Total Sales Revenue:
KEY ASSUMPTION
Particulars
Sales Price Growth Rate
Increase in cost of raw material
Increase in utilities
Debt/Equity Ratio
Plant Building
Machinery and equipment
Office furniture & fixture
Loan Period
Grace Period
Loan installments
Financial charges (interest rate)

Sales
Price
(Rs./Uni
t)
215/kg
body
weight

First Time
Revenue
(Rs)
1,,155,625
16500

1,172,125

13-

Assumption
5% per year
10% per year
10% per year
90:10
5%
10%
10%
8 years
1 year
Monthly
8%

14-

ANNEXURE