Good BizPlan Example: 444 Northwest Feeders Business Plan

7/27/2019 Good BizPlan Example: 444 Northwest Feeders Business Plan

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BUSINESS PLAN

PRESENTED BY:

JASON BASSET

DAVID LATENDRESSETYLERRUSSELL

JARED VENESS

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Executive Summary

Introduction

The following is a business plan outlining the development and feasibility of NorthWest

Feeders Ltd. NorthWest Feeders (NWF) is a farmer-owned beef feedlot committed to

marketing finished cattle, and also providing a custom feeding service for local area

producers. NWF will also create a new market for local feed grains, silage, straw and

hay. NWF is a corporation formed by 150 local shareholders. Each of the 150

shareholders will invest equity capital into the corporation, with the remainder of the

capital coming from long-term debt and credit line sources. NWF will be governed by a

board of directors consisting of 6 shareholders, the general manager and two external

directors.

NWF is a farmer owned 10,000 head beef feedlot that will purchase slaughter animals

from producers and auction yards across Saskatchewan and Manitoba. Animals

purchased will range from 400-900 lbs in weight. These animals will then be finished to

a weight of 1250 lbs by feeding a specific ration composed of a combination of grain,

silage, hay, and canola meal (protein supplement). In most cases, barley will represent

the grain portion of the ration, however depending upon different prices and market

conditions, other grains such as wheat, oats and screenings will also be used.

NWF has allocated 85% or approximately 14,800 animals to be purchased and sold in

one year. Animals will be bought and sold weekly with animals being shipped by truck

and trailer to the respective packing plant.

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NWF has also estimated custom feeding approximately 2,600 animals per year for local

producers. This represents 15% of the feedlots total capacity. Under this situation the

feedlot does not own the animal, but merely accepts payment for finishing the animal for

the customer. This payment is calculated by a set rate per animal per day. In our first

year of operation this rate will be $1.75/head/day.

The addition of more value added businesses in the agriculture industry is increasing in

popularity. By investing in a farmer owned feedlot, producers will not only create

another market for their commodities but may also earn some of the profit, in the form of

dividends, as a result of NWF marketing and business activities.

Operations Plan

NWF will be located approximately 4 miles North of Meadow Lake, SK on both the NE

and NW quarters of 16-60-17, W3 in the RM #588. This location offers many

advantages including easy access to feed grain, forage products and protein supplements.

The area also offers a large number of available slaughter animals in the local crop

district, a natural topography gradient of 3%, little competition, access to major

highways, power and natural gas, as well as a positive attitude and perceived need for a

beef feedlot in the Meadow Lake area by many residents.

NWF with a maximum capacity of 10,000 head, will either purchase animals with the

intent on finishing them to the desired weight of 1250 lbs, or accept delivery of custom

fed animals from local producers. Although custom fed animals will be kept separate

from the purchased animals, the finishing process is the same for either animal.

Figure 1 illustrates the flow of cattle through the feedlot. First, the animal is weighed and

sorted in order to get similar animals together so that feeding and other functions are

easier. Then cattle are implanted with growth hormones so that maximum weight gain is

achieved. Cattle are monitored twice a day, with feeding happening three times a day

under a restricted feeding system. This system does not allow an animal to eat too much

and thus reduces the risk of health problems and also reduces the quantity of feed


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required to finish an animal. The feeding ration for one head/day will consist of 0.4

bushels of barley + 10 lbs of silage + 3 lbs of hay + 4 lbs of meal.

Cattle initially coming into the feedlot may not be accustomed to a grain diet. Therefore,

new cattle will be eased into this diet slowly by only feeding of the grain for the first

couple of weeks. These cattle will also be monitoring very closely.

Figure 1. Flow of cattle through feedlot while being fed.

Depending on the weight of the purchased animal, it takes approximately 210 days tofinish an animal. Therefore, cattle inventory will be turned over approximately 1.7 times

per year.

Human Resource Plan

NWF human resources include a board of directors elected by the shareholders of the

company. This board of directors will hire a general manager, which will report to the

board of directors. The General Manager will then hire a marketing manager who will

report to the general manager. It will then be the responsibility of the general manager to

hire the rest of the staff, which will include a secretary, eight feedlot staff, and a

veterinarian to be held on retainer. This means that there will be 12 employees at NWF.

Cattle leave / arrive

via truck / trailer

Cattle are

weighed

Cattle are sortedinto pens according

to weight

Cattle aretagged

Cattle Implantedwith Growth

Hormones

Cattle sent to

small pens

Sick animalsmoved to

hospital and sick

pens

Animals moved into

general population

Finished Cattle1250 lbs

Animals with weightsbetween 450 and 850 lbs.fed backgrounding ration

Animals with weight over850 lbs. will be fed

finishing ration


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Experienced personnel are necessary in order to produce a high quality product

efficiently. If possible, feedlot staff and the secretary will preferably be hired from the

local area in order to improve the communitys economic and employment situation.

There will be training and orientation provided for all employees in order to decrease the

incidence of accidents and to provide a smooth entry into each position. There will also

be a regular performance review done by the general manager in order to provide

feedback to the employees and to allow for the fixing of any existing or unforeseen

problems.

Table 1 shows both the number of employees hired and their subsequent cost. Figure 2

shows the chain of command at the feedlot.

Table 1 Employee List and Subsequent Cost

Position GeneralManager

Marketing

ManagerSecretary /

Accountant

Feedlot

Staff

Veterinarian

(On Retainer)

Number 1 1 1 8 1

Annual Wage $55,000 $45,000 $25,000 $200,000 $10,000

EI $1,733 $1,418 $788 $6,300 $315

CPP $2,365 $1,935 $1075 $8,600 $430

Workers Comp $550 $450 $250 $2,000 $100

Other Benefits $400 $400 $400 $3,200 $400Total Cost $60,048 $49,203 $27,513 $220,100 $11,245

Figure 2. Chain of Command

Marketing Manager Secretary/Accountant

Board of Directors / Shareholders

GeneralManager

Feedlot Staff ( 8 ) Veterinarian(on retainer)


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Marketing Plan

Besides the primary objective of becoming a prosperous business, NWF would also like

to create a new market for commodities in and around Meadow Lake thereby stimulating

the local economy. Some of the initial financial objectives are to reach an IRR of greater

than 15% by the second year in business, and be in good enough financial shape to

expand the feedlot in 2007 and pay out dividends by 2010.

Locally there is a good market for feed grains, forage, and straw. With the disappearing

railroads, country elevators, and the higher transportation costs, producers in the Meadow

Lake area are looking for alternative markets for their grains. Shareholders will be the

preferred supplier of feed grains, straw and silage however if the price they are asking is

too high and feed can be brought in from elsewhere at a lower price, the feedlot will do

so.

The finished cattle market is the most important for NWF. Calves that are brought into

the feedlot will be fed in order to reach a desired finished weight of 1250 lbs. Once

finished there are three main plants in western Canada that will be primary targets for

NWF. These are the Cargill Foods plant in High River, AB, the IBP Lakeside Packers

plant in Brooks, AB, and the XL Foods plant in Moose Jaw, SK. After NWF has

established itself as a feedlot producing high quality finished calves, it will try to tap into

the American market and start selling calves to the IBP plants in Dakota City Iowa and

Pasco Washington, as well as the ConAgra Beef Company plant in Greeley Colorado.

Pricing finished cattle in a competitive market must be based on a market approach. The

markets that determine these prices are located at the Chicago Board of Trade and the

Winnipeg Commodity Exchange. Therefore NWF uses the price, which is based on these

two markets

NWF must take advantage of economies of size. New technologies or processes that can

cut costs a minimal amount on a per head basis has the potential to increase NWF bottom


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line a significant amount. This cost cutting will be portrayed by NWF manure

composting and limited feeding ration systems that it will already have in place.

NWF will advertise to its buyers by sending a fax or placing a phone call to the

respective packing plants every Monday. These faxes will consist of a list of cattle that

are to be at their finished weight in approximately 2 weeks. The initial advertising is

crucial as packers adjust to a new feedlot entity that they are not familiar with. NWF will

build a reputation for a consistent quality and quantity of product that is reliable week-in

and week-out.

There are two main forms of competition that will face NWF. These include the other

producers of finished cattle in Canada and the United States as well as other beef

producing countries. Other producers of finished cattle in Canada and the United States

compete directly with NWF. They compete in the purchasing of feeder calves and feed as

well as in the marketing of the finished product.

There are very few feedlots of comparable size in Saskatchewan that will be competing

with NWF. In 1999, only 370,350 out of 1,102,940 feeder calves raised in Saskatchewan

were fed here. That is, about 34% of feeder calves raised in Saskatchewan are finished

here. Of Saskatchewan feeder calves, over 50% are finished in Alberta. Therefore, there

is an opportunity for a feedlot of this scale to be located in Saskatchewan.

NWF location within Saskatchewan has many advantages as well as some disadvantages.

There is a large supply of feeder cattle in Saskatchewan and within crop district 9. Crop

district 9 is where the proposed feedlot is to be constructed; this district also has the

highest number of cattle per crop district within Saskatchewan. There is also plenty of

low cost feed available to the feedlot in the area. With a large beef herd in the area, it also

gives the opportunity to hire many skilled laborers.

There are some disadvantages to the placement of this feedlot. There is more moisture in

this area than desired. This comes into play because of the higher spring runoff and


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wetter summers thus resulting in a greater chance of pens becoming muddy and reducing

efficiency.

The livestock industry is being recognized as an important sector that significantly

contributes to prairie farm incomes, while at the same time provides important job

opportunities. If a feedlot is built, the economic spin-offs for Meadow Lake and the

surrounding area are plentiful.

The feedlot will attract 3-4 experienced and educated individuals into the community, as

NWF will be employing trained and experienced staff. The additional market for the

agricultural commodity grown in the area gives local farmers another option and the

opportunity to stay viable thereby remaining an integral part of the community

Businesses and stores in the area will also benefit as the estimated initial cost of the

feedlot will be substantial and has been estimated at over $4,750,000. Many, if not all of

these inputs will be purchased from within the surrounding area. Other stores will also

benefit from increased traffic as a direct result of the feedlot.

Whenever there is a potential intensive livestock facility starting up in a community there

are many questions that must be clarified, which can be done through various town

information meetings. In order for NWF to begin production they will have to follow the

Agricultural Operation Act, and obtain municipal approval and have community support,

evaluate water quality and quantity, complete soil tests prior to construction, and evaluate

manure storage facilities. Once these factors have been considered and passed, operations

can then begin.


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SWOT ANALYSIS

Strengths Up to date technologies

Trained, experienced employees

Located in West SK

Low cost of production do to cheap grain and other feed

Reputation for quality

Weaknesses Smaller size feedlot

Increased precipitation and cooler climate

Must transport cattle large distances

High start-up cost

Opportunities Local crop district 9B has largest amount of steers and heifers in need of finishing

Ability to expand and diversify into other products Favorable market conditions

Positive support from local area producers and potential shareholders

Increase in communication techniques

Threats Environmental safety issues

Subject to international tariffs and trade boycotts from the U.S.

Cost of shipping end product

At risk to possible cultural changes such as rise in vegetarianism and hormone free beef

Relatively few buyers of product


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Financial Plan

NorthWest Feeders will receive the required capital to commence operation from three

sources. These sources can all be classified as either debt or equity capital.

Initial shareholders will supply equity capital. These will be purchasers of Class A shares.

Equity capital will total $1.5 million, resulting from the issuance of 150 shares at $10,000

each.

Debt capital will come from two sources. The initial purchase of animals will be funded

by a $4 million line of credit from a Saskatchewan feeder association. Chartered banks

will provide the remaining $4 million in debt capital.

The following is a summary for the base case financial model:

Table 3 - Base Case Results

Key Variables:

Purchasing Price $ 107.41 Net Present Value $ 2,310,517

Selling Price $ 82.22 Internal Rate of Return 31.9%

Barley Price $ 2.25

Feeding Costs $ 4,531,608

Long Term Debt Rate 8.5%

Year: 2002 2003 2004 2005 2006

Gross Margin $ 1,912,822 $ 2,662,083 $ 2,799,695 $ 3,061,260 $ 3,286,600

Net Income $ (103,634) $ 154,572 $ 237,131 $ 420,932 $ 581,348

Net Cash from Operations $ (4,386,311) $ 635,496 $ 783,646 $ 809,639 $ 852,235

End of Year Cash $ 80,878 $ 423,824 $ 890,054 $ 1,355,297 $ 1,833,862

Dividends Paid $ - $ - $ - $ - $ -

Year: 2007 2008 2009 2010 2011

Gross Margin $ 3,486,590 $ 3,669,176 $ 3,837,683 $ 3,998,856 $ 4,153,284

Net Income $ 725,918 $ 860,199 $ 986,606 $ 1,109,903 $ 1,230,668

Net Cash from Operations $ 908,310 $ 975,666 $ 1,051,131 $ 1,135,259 $ 1,225,714

End of Year Cash $ 2,336,739 $ 2,872,512 $ 3,446,358 $ 4,063,763 $ 4,663,842

Dividends Paid - $ - $ - $ - $ 63,763


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The most critical variables for the success are the purchasing price of feeder animals and

the selling price of animals for slaughter. This model is run holding all variables constant.

Table 3 - Critical Variables

Critical Value Base Case IRR = 15% Allowable %Change

Purchasing Price $ 107.41 $ 135.30 26%

Selling Price $ 82.22 $ 76.44 -7%

Barley Price $ 2.25 $ 2.85 27%

Feeding Costs $ 4,531,608 $ 6,444,953 42%

Long Term Debt Rate 8.50% 24.30% 186%

Examination of these financial projections provides one with the necessary knowledge to

say that NWF is an excellent investment opportunity. This is based on financial analysis

of the internal rate of return. In the case of NWF, the IRR is 31.9%, much higher than the

required rate of return on investment of 15%.

The following tables show the break-even analysis of NWFs most critical variables,

feeder purchase price and slaughter selling prices.

Table 4 - Net Income Break-even Analysis

Net Income Break-even Net Income Break-even

Varying Selling Price Varying Purchase Costs

Year Net Income After-tax CashSellingPrice

Year Net Income After-tax Cash Purchase Costs

2002 $ - $ 181,673 $ 83.17 2002 $ - $ 181,673 $ 7,964,349

2003 $ - $ (250,496) $ 78.26 2003 $ - $ 238,551 $ 8,611,384

2004 $ - $ (268,074) $ 80.83 2004 $ - $ 329,560 $ 8,893,415

2005 $ - $ (307,056) $ 81.38 2005 $ - $ 238,640 $ 9,303,299

2006 $ - $ (454,757) $ 81.48 2006 $ - $ 418 $ 9,681,062

2007 $ - $ (718,107) $ 81.55 2007 $ - $ (358,053) $ 10,037,800

2008 $ - $ (1,085,745) $ 81.68 2008 $ - $ (817,738) $ 10,381,696

2009 $ - $ (1,085,745) $ 81.89 2009 $ - $ (1,365,512) $ 10,716,331

2010 $ - $ (1,545,743) $ 82.15 2010 $ - $ (1,992,635) $ 11,048,726

2011 $ - $ (2,087,659) $ 82.45 2011 $ - $ (2,693,673) $ 11,379,768


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Table 5 - After-tax Cash Break-even Analysis

After-tax Cash Break-even After-tax Cash Break-even

Varying Selling Price Varying Purchase Costs

Year Net Income After-tax CashSellingPrice

Year Net Income After-tax Cash Purchase Costs

2002 $ (199,857) $ - $ 80.97 2002 $ (199,857) $ - $ 8,163,004

2003 $ (439,897) $ - $ 79.86 2003 $ (432,729) $ - $ 8,814,520

2004 $ (456,016) $ - $ 80.14 2004 $ (456,156) $ - $ 9,118,660

2005 $ (271,614) $ - $ 80.86 2005 $ (271,611) $ - $ 9,342,645

2006 $ (126,473) $ - $ 81.57 2006 $ (126,473) $ - $ 9,573,884

2007 $ (8,181) $ - $ 82.28 2007 $ (8,181) $ - $ 9,810,909

2008 $ 91,198 $ - $ 82.98 2008 $ 146,072 $ - $ 9,999,102

2009 $ 177,529 $ - $ 83.70 2009 $ 337,267 $ - $ 10,141,060

2010 $ 255,174 $ - $ 84.41 2010 $ 449,924 $ - $ 10,359,284

2011 $ 413,256 $ - $ 85.60 2011 $ 556,619 $ - $ 10,582,088

This break-even analysis helps us determine the viability of the operations of NWF. In

the case of Net Income break-evens, the results indicate that selling prices can drop quite

far and a substantial rise in animal purchasing costs can be observed before NWF no

longer produces a positive net income. However cash flow deficits do occur under both

circumstances.

Under the case of after-tax cash break-even, it too shows us that NWF has quite a large

room for error before cash flows dip below 0. Net income is below base case levels and

does not rise as quickly.

The stability of these financial results can be observed more closely by looking at the

margins used in the calculations. It is safe to assume that margins will not fluctuate

outside the boundaries described below. If that is the case, then all scenarios have been

examined and NWF is a very promising financial opportunity.


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Table 6 - Base Case Variables

Key Variables: Margin

Purchasing Price $ 107.41

Selling Price $ 82.22$ (25.19)

Best Case Variables




Worst Case Variables




ConclusionOne can conclude that NWF would be a profitable and feasible business development in

the Meadow Lake area, as well as an excellent investment opportunity. Under our base

case situation NWF provides an internal rate of return of 31.9%, which is above the

industry requirement of 15%. In addition to another market for their commodities,

shareholders will also earn dividends by 2010. NWF will also benefit the local

community by creating new jobs and additional economic activity for local area

businesses. This farmer owned feedlot will add value to slaughter cattle and provide a

brighter future for the people in the area.


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TABLE OF CONTENTS

1.0 INTRODUCTION .................................................................................................................................. 1

1.1 ORGANIZATION OF COMPANY...................................................................................................... 1

1.2 MISSION STATEMENT ....................................................................................................................... 2

1.3 BACKGROUND FOR NWF..................................................................................................................2

1.4 LONG TERM GOALS...........................................................................................................................2

1.5 SHORT TERM OBJECTIVES .............................................................................................................3

2.0 HUMAN RESOURCE PLAN................................................................................................................ 3

2.1 EMPLOYEES NEEDED........................................................................................................................ 3

2.2 JOB DESCRIPTIONS............................................................................................................................ 4

2.2.1GENERAL MANAGER..........................................................................................................................42.2.2MARKETING MANAGER..................................................................................................................... 52.2.4FEEDLOT STAFF ................................................................................................................................. 62.2.5VETERINARIAN .................................................................................................................................. 7

2.3 HUMAN RESOURCE STRATEGY..................................................................................................... 7

3.O OPERATIONS PLAN...........................................................................................................................9

3.1 LOCATION OF NWF............................................................................................................................ 9

3.2 BUSINESS OPERATIONS..................................................................................................................11

3.3 ORGANIZATIONAL STRUCTURE .................................................................................................11

3.4 SITE PLAN ........................................................................................................................................... 12

3.4.1OFFICE ............................................................................................................................................. 143.4.2PENS ................................................................................................................................................ 143.4.3OTHER FEATURES............................................................................................................................. 14

3.5 AVERAGE BUSINESS DAY............................................................................................................... 15

3.5.1FLOW OF CATTLE THROUGH FEEDLOT .............................................................................................16

3.5.2 BACKGROUNDED CATTLE .........................................................................................................16

3.5.3 FINISHED CATTLE.........................................................................................................................16

3.6 AVERAGE BUSINESS WEEK........................................................................................................... 16

3.7 AVERAGE BUSINESS MONTH........................................................................................................ 17

3.8 AVERAGE BUSINESS YEAR............................................................................................................17


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3.9 PURCHASING ANIMALS.................................................................................................................. 18

3.10 FINISHING PROCESS......................................................................................................................18

3.11 CAPACITY OF FEEDLOT............................................................................................................... 19

3.12 SUPPLY ANALYSIS.......................................................................................................................... 193.13 LIST OF ASSETS...............................................................................................................................19

3.13.1LAND ............................................................................................................................................. 203.13.2EARTHWORKS ................................................................................................................................ 203.13.3WATERSUPPLY.............................................................................................................................. 20

3.13.3.1 Pipeline..................................................................................................................................203.13.3.2 Storage Pond.........................................................................................................................203.13.3.3 Pump House ..........................................................................................................................213.13.3.4 Pumps.................................................................................................................................... 213.13.3.5 Feedlot Distribution System .................................................................................................. 21

3.13.4FEEDLOT LAYOUT..........................................................................................................................213.13.5SHIPPING AND RECEIVING AREA .................................................................................................... 24

3.13.5.1 Work Chute and Crowd Pen..................................................................................................243.13.5.2 Sorting and Processing Barn.................................................................................................243.13.5.3 Horse Barn............................................................................................................................253.13.5.4 Scale ......................................................................................................................................25

3.13.6HOSPITAL AREA............................................................................................................................. 253.13.7FEED MILL .....................................................................................................................................253.13.8OTHERBUILDINGS .........................................................................................................................26

3.13.8.1 Office Building ......................................................................................................................263.13.8.2 Machine Shop........................................................................................................................ 26

3.13.9MOTORIZED MACHINERY............................................................................................................... 263.13.9.1 Payloader .............................................................................................................................. 263.13.9.2 Tandem Axle Feed Trucks ..................................................................................................... 263.13.9.3 Pickup Truck..........................................................................................................................26

3.13.9.3 Tractor...................................................................................................................................273.13.9.4 Mower....................................................................................................................................273.13.10COMPUTERS ................................................................................................................................. 27

4.0 MARKETING PLAN...........................................................................................................................27

4.1 INTRODUCTION ................................................................................................................................ 27

4.2 THE MARKETS...................................................................................................................................28

4.2.1PURCHASING MARKETS ................................................................................................................... 284.2.1.1 Feeds .......................................................................................................................................284.2.1.2 Feeder calves...........................................................................................................................29

4.2.2SELLING MARKETS ..........................................................................................................................304.2.2.1 Finished Cattle ........................................................................................................................304.2.2.2 Compost Manure.....................................................................................................................30

4.3 THE COMPETITION..........................................................................................................................31

4.4 COMPETITIVE ADVANTAGES / DISADVANTAGES .................................................................33

4.5 SALES AND PROFIT OBJECTIVES................................................................................................34


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4.6 CHANNELS OF DISTRIBUTION ..................................................................................................... 36

4.7 PRICING POLICY...............................................................................................................................37

4.8 SELLING AND ADVERTISING........................................................................................................ 39

4.9 SWOT ANALYSIS ............................................................................................................................... 414.10 COMMUNITY IMPACTS.................................................................................................................42

4.11 ENVIRONMENTAL IMPACTS....................................................................................................... 44

5.0 FINANCIAL PLAN.............................................................................................................................. 47

5.1 SOURCES OF FUNDING ................................................................................................................... 47

5.2 OPENING BALANCE SHEET...........................................................................................................49

5.3 SUMMARY TABLES ..........................................................................................................................50

5.3.1BASE CASE RESULTS........................................................................................................................505.3.2BEST CASE RESULTS ........................................................................................................................515.3.3WORST CASE RESULTS .................................................................................................................... 52

5.4 CASH CONVERSION CYCLE ..........................................................................................................53

5.5 SENSITIVITY ANALYSIS..................................................................................................................53

5.5.1NET INCOME BREAK-EVEN ANALYSIS .............................................................................................535.5.2AFTER-TAX YEAR-END CASH BREAK-EVEN ANALYSIS..................................................................... 545.5.3ECONOMIC BREAK-EVEN ANALYSIS ................................................................................................55

6.0 CONCLUSION .....................................................................................................................................55

7.0 REFERENCES......................................................................................................................................56

APPENDIX A. BASE CASE FINANCIAL RESULTS ....................................................................57

APPENDIX B. EXPANSION CASE FINANCIAL RESULTS .......................................................57

APPENDIX C. NOTES TO THE FINANCIAL STATEMENTS....................................................57


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List of Tables

Table 2.1 Employee List and Cost 3Table 3.1 Costs for Construction of Large Pen 23Table 3.2 Costs for Construction of Small Pen 24

Table 4.1 Transportation Costs by Crop District . 36Table 5.1 Opening Balance Sheet .49Table 5.2.0 Critical Variables ...50Table 5.2.1 Base Case Results ..50Table 5.2.2 Best Case Results ...51Table 5.2.3 Worst Case Results 52Table 5.3.0 Net income Breakeven Analysis 53Table 5.3.1 After Tax Cash Breakeven Analysis . 54Table 5.4 Economic Breakeven Analysis .54


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List of Figures

Figure 2.1 Chain of Command 4Figure 3.1 Organization Structure of NWF Ltd 12Figure 3.2 NWF Ltd feedlot design and layout 13

Figure 3.3 Flow of animals through feedlot ..16Figure 3.4 Finishing Process of Slaughter Cattle ..19Figure 4.1 Location of NWF and Western Canadian Packing Plants30Figure 4.2 Destination of Saskatchewan Feeder Cattle 1999 ...32Figure 4.3 Number of Feeder Calves by Crop District on SK Farms in 1998 ..34Figure 4.4 Livestock Prices in Saskatchewan from 1969 1999 .38Figure 4.5 Livestock marketing in Saskatchewan from 1987 1999 ...39Figure 4.6 The destination of Saskatchewan Feeder Cattle from 1992 1999 40


19/98

1

1.0 Introduction

1.1 Organization of Company

NorthWest Feeders (NWF) is a farmer owned beef feedlot to be developed in

Northwestern Saskatchewan. Similar to most feedlots, the nature of the business will be

to finish slaughter animals by feeding a mixed ration consisting of grain, silage, hay and a

protein supplement. NWF will purchase animals with weights ranging from 400 900

lbs. and sell the animals once they reach 1250 lbs. Cattle will be attempted to be

purchased using the following proportions: 40% of 400 - 500 lbs. animals, 30% of 500

600 lbs. animals, 20% of 600 - 700 lbs. animals, and 10% of 700 800 lbs. animals. This

farmer owned feedlot will also offer a custom feeding service to local area producers who

would like the opportunity to finish their cattle but dont have the time or resources to do

it themselves.

The market for these finished animals is packing plants located amongst the prairie

provinces and throughout the Western United States. Finished animals will be shipped to

their destination by truck and trailer with a price already agreed upon between the two

parties.

The organizational form will have a corporation with shareholders and a board of

directors. A total of 150 shareholders will each contribute capital to provide

approximately 27% of the initial equity. Other banking or credit institutions will provide

the remaining capital. A board of directors will be formed for NWF Ltd. and will consist

of:

Six of the 150 shareholders

The general manager

Two external directors with industry specialisation

All board members except the general manager will be elected by the initial 150

shareholders. Each board member will be elected to a 3-year term at an annual general

meeting. The board of directors will hire a general manager who will then become a

board member. The general manager will be responsible for overseeing the day-to-day


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Comm 492 College of Commerce, University of Saskatchewan 2

operations of the feedlot including purchases of feed and cattle, caring and feeding of

cattle, as well as capital expenditures and financial management. He/she will also be

responsible for hiring the proper personnel.

1.2 Mission Statement

The purpose of NWF is To achieve a profit by producing high quality finished animals

available to local area producers and for sale to packing plants.

1.3 Background for NWF

Value added products often create more profits than raw materials or primary agricultural

commodities such as wheat, barley, lumber or weaned calves. Therefore, it should not be

a surprise that many producers are looking to diversify and take a chunk of the profit pie

by investing or at least supporting further value added or processing facilities. An

intensive livestock operation is just that opportunity. With little competition in

Northwest Saskatchewan, and enough raw materials to support a profitable corporation,

NWF will not only become a successful investment, but will also create more economic

spin-offs for the local area producer. Crop District 9A not only has the most cattle per

crop district in SK, but is also a major barley and forage producing area in the province

(Saskatchewan Agriculture and Food, 2001). With an ideal location, 4 miles North of

Meadow Lake, SK, there are many advantages to setting up an intensive beef feedlot in

this area.

1.4 Long Term Goals

To develop and maintain market relations with packing plants

To make and maintain an economic profit by year 10

To provide a return on investment in the form of dividends to shareholders

To provide another market for grain and forage products in the Meadow Lake

area

To develop a loyal producer base in the Meadow Lake and surrounding area

To expand from a 10,000 head capacity to 20,000 or 30,000 in 15 20 years

To establish solid internal and external relations with employees and industry


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1.5 Short Term Objectives

To achieve an internal rate of return of at least 15%

To finish 2600 custom fed animals in year 2

To purchase and finish 15,000 animals beginning in year 3

To achieve a positive accounting profit by year 3

To compensate employees at fair market value

To create an economic spin-off for the community of Meadow Lake

2.0 Human Resource Plan

2.1 Employees Needed

NWF will be a corporation that will sell shares to raise equity capital. The shareholders

will in turn elect a board of directors, which will represent the shareholder in the

operation and financial dealings of the feedlot. The board of directors will then hire a

general manager. The GM will then take care of hiring the marketing manager, feedlot

staff, secretary and veterinarian. This gives NWF a total of 12 employees at the beginning

of the operations.

Table 2.1 includes the list and the cost of these employees. Figure 2.1 shows the chain of

command.

Table 2.1 Employee List and Subsequent Cost

Position GeneralManager

Marketing

ManagerSecretary /

Accountant

Feedlot

Staff

Veterinarian

(On Retainer)

Number 1 1 1 8 1

Annual Wage $55,000 $45,000 $25,000 $200,000 $10,000

EI $1,733 $1,418 $788 $6,300 $315CPP $2,365 $1,935 $1075 $8,600 $430

Workers Comp $550 $450 $250 $2,000 $100

Other Benefits $400 $400 $400 $3,200 $400

Total Cost $60,048 $49,203 $27,513 $220,100 $11,245


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When looking for employees, experience in their specified areas will be of great

importance. Salaries will be negotiated where they represent sufficient incentive to

attract skilled labour and management. Recruitment for employees will involve

communication with people involved in the industry as well as recruiting through local

and Western Canadian newspapers. Shareholders and other people from the Meadow

Lake area will have preference if qualifications and other criteria are met. This is

indicative of one of the goals of the feedlot, which is to provide a benefit for the local

community. Therefore, providing jobs for community members can go a long way to

strengthening support from the surrounding area.

Figure 2.1. Chain of Command

2.2 Job Descriptions

2.2.1 General Manager

The general manager (GM) will be carefully selected and sit on the board of directors.

The GM will be responsible for overseeing the day-to-day operations of the feedlot

including purchases of feed and cattle, caring and feeding of cattle, as well as capital

expenditures and financial management. He/she will also be responsible for reporting

back to the board on issues related to the feedlots success. The GM will most likely be

from outside the community for two main reasons. First of all, a great deal of experience

will be needed in order to effectively manage a feedlot. And secondly, NWF believes

Marketing ManagerSecretary/Accountant

Board of Directors / Shareholders

GeneralManager

Feedlot Staff ( 8 ) Veterinarian(on retainer)


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that bringing in a general manager from outside the local area would eliminate the

possibility of having reputations and community life get in the way of their work. The

GM will be in charge of hiring the feedlot staff, secretary, and the veterinarian and will

also have a large role in assisting the board of directors hire the marketing manager.

The GM will be paid an annual wage of $55,000, which should be successful in attracting

a well-experienced GM. The GM should possess a minimum of a degree in agriculture as

well as experience in running a business and preferably a feedlot of this size before. The

GM will more than likely work more than 40 hours a week due to his/her large

responsibility.

2.2.2 Marketing ManagerThe marketing manager for NWF will be responsible for the purchasing and sale of

livestock from the feedlot. The first responsibility of the marketing manager will be to

attract potential buyers of finished calves to the feedlot to see what kind of product the

feedlot has to offer. He/she will also need to inform the buyers that the feedlot will be

having a weekly sale involving about 300 finished calves every week. This will consist of

faxing out a summary of the calves for sale that week to all of the potential packing

plants buying the calves.

He/she will also have to stay in close contact with the order buyers informing them each

Friday of what calves will need to be purchased the next week. This takes some planning

due to the fact that different calves finish at different rates and there needs to be a

consistent flow of calves finishing each week. The marketing manager will report back to

the GM on how he/she is going to approach both the buying and selling of the calves.

The marketing manager will also be in charge of the purchasing of feed. He/she will haveto monitor the amount that each producer supplies in the form of silage so that the

secretary can issue the payments properly each week for the amount of silage used. The

marketing manager will also have to make sure that there is always a steady inventory of

feed grains and supplements available at all times.


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The last responsibility of the marketing manager will be the marketing of the composted

manure. This will be marketed to local area producers at the highest recovery price

possible.

The marketing manager will be expected to use and access all marketing mechanisms

available such as futures and option markets and any contracting done.

It will be a requirement that the manager have a lot of business experience as well as

some experience in the beef industry. He/she will be paid a salary of $45,000 per year

and will probably work 40 60 hours a week.

2.2.3 Secretary / Accountant

The secretary for NWF will be responsible for all clerical and book keeping tasks in the

office. This person will need excellent computer skills in order to manage their position

properly. The secretary will be in charge of developing feeding charts and margin results

on all buying and selling of animals from the feedlot. Payroll will also be a responsibility

of this position.

The applicants for this position will need a minimum of a Business Administration

Diploma. This position will be paid a starting salary of $25,000 per year and will be

expected to work 40 hours a week.

2.2.4 Feedlot Staff

There will be eight positions for feedlot staff. Their duties will involve monitoring pens

for sick calves, processing new and marketed calves, feeding and bedding of cattle,

mixing of rations, as well as general maintenance of the feedlot and equipment. These

employees will work on a shift so that there are at least 5 member on site on the

weekdays and at least 4 members on site on the weekends. They will be paid a salary of

$25,000 per year. When hiring for this position the GM will be looking for a mix of

people with different experience. He/she will need some with mechanical experience and

some with a lot of beef industry experience. These positions will most likely be filled

from the local community.


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2.2.5 Veterinarian

This position is not a full time position, however the veterinarian will be held on retainer.

He/she should be on site at least once per week or when the GM deems it important for

his/her presence. The responsibilities of this position are to monitor the overall health of

the cattle in the feedlot as well as recommend any special feeding or medical remedies

needed.

This position will probably be in the form of a contract with a local professional

veterinarian and will pay a salary of $10,000 per year or a set wage based on the number

of service hours performed.

2.3 Human Resource Strategy

There is often a high turnover rate in feedlot staff, which is something NWF dearly

wishes to avoid. By putting the feedlot staff on shift work, it allows the opportunity for

local farmers to have an off the farm job as well as take care of their own operation. By

doing this, there is a greater possibility of hiring local producers who may even have a

vested interest in the feedlot. There is also the opportunity of hiring local grain producers

as additional help over the winter as this is probably one of the busiest times at the

feedlot. Salaries offered to the employees are also fair which should help to keep the

drive and contentment within the staff relatively high.

There will be required training for all feedlot staff and the secretary in order to help them

ease into their positions and avoid any injuries or mishaps. There is also room in the way

the salaries are set to allow for pay increases as employees become more committed and

knowledgeable.

There should be a regular performance review done by the GM in order to give feedback

to the employees as well as to shed light on the overall running of the feedlot. With any

future expansion of the feedlot, the staffing and the chain of command may need to be

altered. Such things as an increase in the number of feedlot staff as well as position for a


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lot manager, who would be in charge of the feedlot staff and report back to the GM, may

need to be looked at.


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3.0 Operations Plan

3.1 Location of NWF

There are a number of things to consider when choosing a location for an intensive

livestock operation such as a beef feedlot. First of all, there must be a need for

establishing a feedlot within a given area. Whether this need is the result of providing an

additional grain market for local producers, the opportunity for local producers to finish

their own animals via a custom feeding basis, or merely as an additional profit seeking

venture, a need within the community must be established. Secondly, an adequate supply

of raw materials such as slaughter cattle, grain and forage as well as final product

markets, most often packing plants, must be readily accessible. Competitors in the area

must also be weak thus, allowing a newly establishing feedlot to survive and gain local

support. Finally, land must be available that does not have neighbours within a 1km

radius of the feedlot facilities. The land must also have excellent soil structure,

preferably clay that will not allow feedlot wastes to seep into the water supply or

contaminate any other natural resources within the surrounding area. Available services

such as veterinarians, transportation companies, as well as lumber, animal nutrition and

fuel supply outlets would also be needed within close proximity of the feedlot.

The proposed site for NWF operations is located on a half section of land 4 miles North

of Meadow Lake, SK. The legal land description is the NE and NW-16-60-17, W3 in the

RM of Meadow Lake #588. This site contains many of the predetermined requirements

of a successful feedlot operation.

First of all, local support, which includes many grain farmers, ranchers and industry

representatives are in favour of such a development. The addition of another market

would give them a greater competitive advantage in their own business. Although some

negative criticism is present in the community over the proposed venture, it is believed

these feelings are normal with any intensive livestock operation. Meadow Lake and the

surrounding area also offer many opportunities for purchasing raw materials needed for

operating a 10,000 head feedlot. Feed grain, especially barley, oats, and wheat are grown

in abundance in this moist black gray soil zone. In addition to high yielding crops, the


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majority of grain is now being shipped westward by truck due to the high basis for rail

transport and lack of an effective rail system. This creates an opportunity for cheaper

grain, as well as a competitive local market for community grain farmers. Forage

markets are also flourishing in the area, with hay bales being sold each year to support

Southern ranchers in need of hay. Finally, the availability of slaughter cattle should not

be a problem for two main reasons. First of all, Meadow Lake is located in Western

Saskatchewan and therefore slaughter cattle can be bought from a wide range of auction

marts in Eastern SK, and Manitoba. This should be possible, as the cattle tend to follow a

natural progression by moving closer to Alberta. Secondly, crop district 9, has the

highest number of slaughter cattle in the province with no major feedlot presently located

in the district. Therefore, custom feeding markets should flourish in this area.

The chosen land also provides many advantages as it is sloped naturally approximately

3% from East to West. This allows excavation costs to be much lower than if gradients

had to be created. Although RM #588 has the most acreages in SK. (Wilfing, 2001), this

parcel of land is also at least 1 km away from any other neighbours.

The chosen location also provides many necessary services for a feedlot operation.

Primary and secondary highways flow into Meadow Lake, making transportation to

packing plants and receiving animals easier. The location is also near a Sask. Energy

Natural gas line, and a Sask. Power power line although phase 3 electricity would have to

be installed. As well, phone services can easily be installed. These services are expensive

to acquire in a remote location and accessibility to such services will reduce capital costs

and unnecessary investment. Meadow Lake is 156 km north of North Battleford and has

a population of approximately 6,000 people. This residential area and surrounding rural

population will provide employees for NWF.

In summary, Meadow Lake, located in Northwestern SK, offers an excellent opportunity

for a farmer owned feedlot. There is a large amount of feed grain and forage produced in

the surrounding area as well as an attractive starting base for custom feeding cattle. In

addition, there is very little competition in the area, and the land offers a natural slope and


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good soil structure. Meadow Lake also offers a wide range of necessary services

including easy access to water, power, gas and phone. An excellent opportunity is

present at this chosen location.

3.2 Business Operations

NWF is a farmer owned 10,000 head beef feedlot that will purchase slaughter animals

from producers and auction yards across Saskatchewan and Manitoba. Animals

purchased will range from 400-900 lbs. in weight. These animals will then be finished to

a weight of 1250 lbs. by feeding a specific ration composed of a combination of grain,

silage, hay, and canola meal (protein supplement). In most cases, barley will represent

the grain portion of the ration, however depending upon different prices and market

conditions, other grains such as wheat, oats and screenings will also be used.

NWF has allocated 85% or approximately 14,800 animals to be purchased and sold in

one year. Animals will be bought and sold weekly with animals being shipped by truck

and trailer to the respective packing plant.

NWF has also estimated custom feeding approximately 2600 animals per year for local

producers. This represents 15% of the feedlots total capacity. Under this situation the

feedlot does not own the animal, but merely accepts payment for finishing the animal for

the customer. This payment is calculated by a set rate per animal per day. In our first

year of operation this rate will be $1.75/head/day.

NWF is planning on beginning operation in the summer of 2002. Since basic

construction and design of the feedlot will take at least a couple months, cattle will not be

purchased until June or July of 2002.

3.3 Organizational Structure

NWF will be a private community owned corporation with the official name being NWF

Ltd. Class A shares will be sold at a value of $10,000 per share in order to provide

necessary equity capital. Although not restricted, the majority of shareholders will be


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local area producers including farmers and ranchers with a few community residents and

businesses. The holder of these shares will have one vote per share, but in addition will

also be entitled to special rights and privileges. These rights include: the first opportunity

to sell silage, hay or grain at a specified price, the first opportunity to buy composted

manure at a specified price, and the first opportunity to fill the feedlot with custom fed

animals. Share transfer will be restricted and will only be allowed after approval by the

board of directors. A lawyer will be hired to draft the shareholders agreement.

A board of directors will be formed for NWF Ltd. consisting of a maximum of nine

members and a minimum of seven members. The general manager, six shareholders, as

well as two external directors will sit on the board. The eight board members will be

elected by the members holding Class A shares. The board itself will elect a chairman,

from the designated shareholders.

Shareholders

Board of Directors

General Manager Six Shareholders Two External Directors

Figure 3.1 Organization Structure of NWF Ltd.

3.4 Site Plan

Figure 3.2 provides the full site plan of NWF Ltd.


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3% slope in this direction

LegendA Drainage Alley with possible evaporation pods N Storage PondB Large pen of Wing C with cap of 250 head O OfficeC Watering bowls in fence lines P Processing barn and scaleD Feeding alley Q Loading chutesE Hay storage R Cattle handling alleyF Straw Storage S Feed bunks and apronsG Silage storage T Compost manure storageH Silage storage U HospitalsI Grain storage (bins) V Entrance to feedlot

J Meal storage W Large evaporation podK Feed Mill X Small pen with 200 headL Pump house Y Temporary fence lineM Machine shop and maintenance building

Figure 3.2. NWF Ltd. feedlot design and layout

T

A

A

B C

D

E

F

G

H

IJ K

M

L

O

U P

Q

R

S

U

North V

A

A

W

D

N

X

Y


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3.4.1 Office

Located in the NE corner of the feedlot, the office is the first building encountered when

driving on site. This will enable more effective monitoring of visitors as well as animals

entering the feedlot facilities. The office is also located close to the two loading chutes,

thus shortening the distance for truckers to report.

3.4.2 Pens

From figure 3.2, one can observe that NWF will have 3 main wings in the feedlot, A, B

and C. Due to government regulations, all of the pens will have a minimum stocking

density of 200 ft2/animal.

Wing A, which is next to the processing barn, consists of 10 smaller pens (200 ft x 200 ft)

and a couple of sick pens. These pens also have the luxury of being equipped with

temporary dividers in order to further divide the pens in 2. Due to their smaller capacity,

pens in wing A will be primarily used for custom feeding animals as well as animals

recently purchased by the feedlot. Smaller pens allows the feedlot to sort and separate

custom fed animals by producer and also keep a more watchful eye on animals that were

recently put on the finishing ration.

Wings B and C, located to the south, have a total capacity of 8,000 animals. The 32 pens

are all 225 ft X 225 ft, and therefore will accommodate 250 animals each.

3.4.3 Other features

Alleys located behind each pen will allow for efficient handling and moving of the

animals. Thus, animals can be easily pulled out and moved anywhere in the feedlot.

Aprons, or concrete pads at the front of each pen, will create added safety for the animals

by reducing the risk of slippery and muddy footing when feeding.

Watering bowls will also be placed in both fence-lines of all pens. Having two watering

bowls present in all pens should reduce line-ups, minimize damage to the bowls


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themselves, and also dramatically reduce the risk that a pen goes dry in the winter due to

bowl freeze up.

Feeding lanes are 27 ft wide, thus allowing feed trucks to pass one another while feeding.

For effective care and management of the animals, two hospitals are located on site. One

is situated between wings B and C, with the other next the processing barn in wing A.

3.5 Average Business Day

An average business day consists of feeding as well as checking and reading the bunks.

Feeding will occur three times a day following restrictive feeding practices. This method

conserves feed and also promotes weight gain with little waste. However, intensive

monitoring is required using this system. Thus, bunks are checked in the early morning

and in the late afternoon. This allows staff to analyze the effectiveness of the ration and

whether too much or too little is being fed. Adjustments can then be made very quickly.

Sick animals may also be recognized and pulled out of the pen where they can be treated

quickly. Cattle can also be moved to the larger pens after they have been acclimatized to

the feeding ration.

Cattle are also received, shipped and sorted every couple of days. In addition to daily

operational activities, the marketing manager will also be talking to packers, auction

marts as well as producers in efforts to develop customer relationships and obtain the best

possible prices.


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3.5.1 Flow of Cattle through Feedlot

Figure 3.3 Flow of animals through feedlot

3.5.2 Backgrounded Cattle

Weaned calves will be purchased from the feedlot ranging from 400 800 lbs. These

calves will be fed a high silage diet until they reach 850 lbs. This ration will consist of 10

lbs. of grain, 27 lbs. of silage, 3 lbs. of processed hay and 4 lbs. of meal. This will allow

the cattle to build full body frames with little fat so that they will be ready for accelerated

weight gain. After the desired weight of 850 lbs. is achieved, the backgrounded animals

will be kept in the feedlot and fed a high energy finishing ration.

3.5.3 Finished Cattle

Purchased and/or backgrounded cattle that weigh 850 lbs. will be fed a separate finishing

ration. This ration will consist of 25 lbs. of grain, 8 lbs. of silage, 3 lbs. of processed hay

and 4 lbs. of meal. This diet will be fed until the cattle reach a weight of 1250 lbs. At

that point they will be sold to packing plants using a number of different marketing

channels such as public auctions, sealed bids and order buyers.

3.6 Average Business Week

During an average business week, many other activities besides feeding are taking place.

First of all, approximately 300 slaughter cattle will be received in any given week with

approximately 300 finished animals leaving the feedlot. Every Monday a list of finished

animals set for sale will be faxed to potential buyers and packing plants with the sale of

Cattle leave / arrivevia truck / trailer

Cattle areweighed

Cattle are sortedinto pens according

to weight

Cattle aretagged

Cattle Implantedwith Growth

Hormones

Cattle sent tosmall pens

Sick animalsmoved to

hospital and sickpens

Animals moved intogeneral population

Finished Cattle1250 lbs

Animals with weightsbetween 450 and 850 lbs.fed backgrounding ration

Animals with weight over850 lbs. will be fed

finishing ration


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finished animals usually taking place 2 weeks from Wednesday. Grain inventory will

also arrive on a weekly basis in order to ensure at least a two week inventory for feed

grain. A veterinarian may also be asked to inspect sick cows, if frequency of sick

animals increases. Statistics are also analyzed in order to ensure maximum, efficient

weight gain of animals.

3.7 Average Business Month

During an average month, approximately 1,200 finished animals will be sent to packing

plants. Meal will also be delivered from the ADM terminal in Lloydminster, either once

a month or every two months depending upon the most effective way to reduce costs.

Interim financial statements will also be presented to board members so they can become

quickly aware of any developing problems, or opportunities that exist.

In the summer months, which are peak for silage production. Shipments of silage will

also be received right off the field. However, payment will not be made until silage is

used in the feedlot. Price per pound of silage is calculated by using the formula 10 x

price/bushel of barley + 4 dollars.

Once every spring and fall, the manure will be cleaned from the corrals and allowed to be

composted. Composted manure will also be spread on farmers fields at this time.

3.8 Average Business Year

In the initial year, NWF will only finish and sell half the amount of animals. This is a

result of the time needed to build the feedlot. However, in subsequent years, NWF will

approximately custom feed 2,600 animals with 15,000 animals being finished via the

purchasing method. This represents a turnover rate of approximately 1.7 times/year.

NWF will also provide detailed financial statements to the shareholders. Throughout the

year, the marketing manager will make several trips to packing plants in order to meet

with customers and also develop new relationships.


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3.9 Purchasing Animals

Animals will be purchased either direct from producers or from auction marts located

across Saskatchewan and Manitoba. The decision to purchase an animal will be based,

first of all on the price and secondly on the need for certain weight animals that will

enable the feedlot to consistently sell animals every week. Thus, if very few animals will

be ready for selling during February then animals will be specifically bought that will be

ready for sale in February. However, since greater profits are made off smaller animals,

because of the greater margins, there will be a preference for buying smaller animals.

However, initially when starting the feedlot a greater percentage of larger animals will

need to be purchased. This is due to the fact that NWF will not start operations until June

or July. Thus, finding small slaughter cattle will be unlikely. Having a greater

percentage of larger animals will also allow NWF to sell animals at the end of the 2002

fiscal year and therefore make first year profits.

3.10 Finishing Process

Cattle coming into the feedlot will be of many different weights and may or may not be

accustomed to a diet containing grain. Therefore, cattle arriving at the feedlot will be

watched closely in smaller pens and slowly eased into a grain diet. This may include

feeding only of the normal amount of grain per day for a week and increasing this

gradually over the first three weeks. Then after the animals have become used to a high

grain diet they can be moved into larger pens with the normal 0.4 bus/day/head ration.

Feeding the animals will take up a large portion of the day and will follow a general,

logical order. (Refer to figure 3.4).

Feeding rations for one head/day will consist of 0.4 bushels of barley + 10 lbs of silage +

3 lbs of hay + 4 lbs of meal.


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Figure 3.4 Finishing Process of Slaughter Cattle

3.11 Capacity of Feedlot

NWF will have a capacity to hold up to 10,000 cattle of which approximately 1,500 is reserved for custom

feeding. However, achieving 100% capacity is not realistic and 95% capacity is used.

Inventory of 56,000 bushels of barley is enough for 14 days, and 1,000 tonnes of canola meal, should last

for almost 2 months.

3.12 Supply Analysis

Although the purchase of supplies will be based in the best interest of the feedlot, buying from local

producers will be practiced when acceptable. In fact, NWF has estimated that 50% of grain purchased will

be from local shareholders with the remaining balance bought from other markets. 100% of silage will be

bought from local shareholders within close proximity of the feedlot. In order to reduce transportation

costs, canola meal or other protein supplements will be primarily purchased from ADM Industries in

Lloydminster. NWF has also estimated that 15% of the animals will be purchased from the local area with

the remaining supply being purchased from markets across Saskatchewan and Manitoba. Finally, NWF

will attempt to buy most capital expenditures from the Meadow Lake and surrounding area. This dedicated

effort will allow the local community to gain an economic benefit.

3.13 List of Assets

The physical assets of the feedlot are divided into five categories: land, buildings,

machines, equipment, and storage and concrete structures. Each item is listed in one of

the aforementioned categories in terms of their initial purchase price. The purchase prices

are estimates taken from various manufacturers and/or producers in the Meadow Lake

trading area or from larger companies that supply specialty items. In addition, these items

are listed along with their Capital Cost Allowance (CCA) class and rate. Canada Custom

and Revenue Agency CCA classes and rates are used as a guideline for depreciation.

Feed truck receives adetailed feed ration

for each pen

Feed truck filled

with loose hay

Feed truckfilled with

silage

ProteinSupplement

added

Grainsupplement

added

Mixed in

truckDriver follows

feeding scheduleCattle are fed with set

rations


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3.13.1 Land

The land upon which the feedlot is to be located (N-16-60-17, W3) is valued at

$125,000 per quarter section or $250,000 for the half section. The half section will be

purchased to allow for possible future expansions, but for the purposes of this plan only

one quarter section will be used. No depreciation is calculated on the land because it is

an undepreciable capital asset.

3.13.2 Earthworks

The land chosen has a natural 5% slope running from east to west. Assuming that the

topsoil is approximately 200 mm (8 inches) thick and that the lots are designed with a

2%cross slope, the earthworks to construct the desired 52 pens, buildings and runoffretention area consists of approximately 333,333 m3 (423,778 yds3). Excavation prices

are $1.50/m3 ($1.19/yd3) resulting in an earthworks cost of $500,000 plus an

engineering fee of $100,000. An additional $50,000 of contingency has been added

thereby resulting in a total cost of $650,000. The entire cost has been added to the

concrete and earthen structures section (CCA class 3) and depreciated at 5%.

3.13.3 Water Supply

3.13.3.1 Pipeline

The water supply system consists of approximately 5 kilometre pipeline running from a

well site to the feedlot. The delivery line is 200 mm (8 in) in diameter and made of

pressure rated PVC pipe. The design is based on a maximum flow demand of 1,892

litres per minute, which is the recommended fire flow for a small community. This

capacity is greater than that needed to supply 24,000 head of cattle. The daily demand

per animal is 45 litres supplied over a 12 hour period. The price of the pipe including

installation was $22.96/m ($7.00/ft.). The total pipeline cost is $114,750, which is addedto CCA class 8 and depreciated at 20%.

3.13.3.2 Storage Pond

The storage pond is sized for a 14-day supply of water and 15% losses due to

evaporation and seepage (Bolton, 2001). The bottom of the pond is 54 m x 54 m (177 ft


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X 177 ft) with a total depth of 5.2 m (16.9 ft) thereby resulting in approximately 12,500

m3 (9850 yd3). The unit price of excavation is $4.00/m3 ($3.15/yd3) resulting in a cost of

$50,000. The total cost of $50,000 is added to CCA class 3 and depreciated at 5%.

3.13.3.3 Pump House

The pump house is a 2.5 m x 5.0 m (8.0 ft. x 16.0 ft.), pre-engineered steel building with

2.4 m (8 ft.) insulated sidewalls and ceiling and cement floor. The cost of the building is

$3,000, which is added to CCA class 6 and depreciated at 10%.

3.13.3.4 Pumps

Multi-stage vertical turbine pumps are included, capable of delivering 316 litres per

second (500 US gallons per minute) at a head of 130.6 m (428 ft.). The pump is

equipped with a 55.9 kW (75 hp) VHS motor and 6.9 m (22.5 ft.) of shafting. The cost

of each pump is $16,600, with the shafting at $246/m ($75.68/ft.) resulting in a total cost

of $18,300, which is added to CCA class 8 and depreciated at 20%.

3.13.3.5 Feedlot Distribution System

The feedlot distribution system consists of plastic piping of 32 mm (1.25 in.) diameter

that is used as supply lines to the watering bowls and is included in the cost of the pens.

3.13.4 Feedlot Layout

The feedlot layout is shown in Figure 3.2 on page 13 Landscaping and grading consist

of general site grading and detailed grading in the pens and road areas, to direct water

toward the runoff retention area. The overall feedlot area is graded at a minimum 0.5%

slope toward the runoff retention area. Pens are graded at a 2% slope toward the rear of

the pen and subsequently into the drain alley. Cattle alleys are sloped at 2% toward the

drain alley. The drain alley centerline is located 7.3 m from the rear of the pen and is

sloped at 0.5% toward the runoff retention area. This runoff retention area consists of

one large evaporation pond, which is lined with clay to prevent seepage into the ground.

The area is also maximized to create a large evaporation co-efficient. Feed alleys are

constructed with a negative crown of 2% to the middle of the alley. The centerlines of

the feed alleys are sloped at 0.5% toward the runoff retention area. Culverts divert

around the hospital and processing areas. Culverts are also located at the intersections of


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the perimeter driveways and the feed alleys for adequate road drainage. There is a

perimeter interceptor ditch around the feedlot, sloped at 0.5% toward the retention area.

The feedlot has two separate pen sizes based upon a space allowance of 23.7 m2 per

animal (250 ft2/per animal). The large pens are 76.9 m X 76.9 m (250 ft X 250 ft) (250

head). Windbreak fences 3.0 m (10 ft.) high with 20% porosity are provided as pen

dividers, and along exposed ends of the pens and feedlot, approximately 153.9 m (500 ft)

per pen. Sheltered ends are 1.5 m (4.9 ft) high four rail fences. Two entrance gates 4.8

m (16 ft) long are provided at opposite corners of each pen. Feed bunks extend across

the front of the pens along the feed alleys. These are reinforced concrete pads, with

wood and steel troughs. A 2.46 m (8 ft) concrete apron is provided for improved footing

and positive local drainage. Water is supplied to the pens by watering bowls placed at

the midpoint of each pen divider. Yard lights are mounted in the pen dividers for an

average of one per pen. The cost of a 76.9 m X 76.9 m (250 ft X 250 ft) feedlot pen is

estimated as described below in Table 3.1.

Table 3.1 Costs for Construction of Large Pen

Large Pen Cost

Good BizPlan Example: 444 Northwest Feeders Business Plan

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