ADAS Cost Benefit Analysis Tool

 

Practice-led innovation supported by science and market-driven actors in the laying hen and other livestock sectors

HORIZON 2020 ISIB-02-2014 project, Grant no. 652638

 

ADAS Cost-Benefit Analysis Tool

IMPROVING FINANCIAL MARGINS IN EGG PRODUCTION WITH A COST-BENEFIT APPROACH

 

A cost-benefit model developed by ADAS specifically for egg producers helps to take the guesswork out of decision-making and can be used to improve business performance.Farmers are constantly looking for cost-effective practical solutions to problems and for ways of improving business efficiency and financial margins. In egg production, small gains can add up to significant improvements in performance. In a competitive situation, these can make the difference between businesses thriving and struggling but it can be difficult to know if changes planned will actually benefit the business or not. The worst case scenario is that a change made actually reduces financial margins rather than improving them.

ADAS has developed a cost-benefit program specifically for egg production as part of a wider decision-making tool. The emphasis is on careful planning of proposed changes and reducing reliance on guesswork and chance. Known as ‘Profile’, the cost benefit program has recently been refined and used by ADAS within the European study ‘Hennovation’1 which is being led by the University of Bristol.

 

Using the Profile program

The Profile program allows farm-specific information on the physical performance of flocks (egg numbers and weight, feed intake, downgrades etc.) to be used together with financial data such as egg, feed and pullet prices. The gross margin per laying hen for a 12 month period is calculated by the program on the basis of the data entered. The format of the program is set out below. The figures in the green-shaded cells are entered manually and so can be adjusted whilst those in white cells (on the right hand side) are calculated automatically. Changing any item in a green cell leads to changes in the white cells when ‘calculate now’ is pressed.

Cost Benefit Module for Laying Hens - green cells only to be completed by user.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Scenario testing

Various ‘what if’ scenarios can be compared by changing the input cells (green) and then assessing the implications of these on performance and margins (white cells). Changes can be made within a number of different cells at the same time, so more complex interactions can be considered together. When planning future business strategies, Profile is best used as part of a consultation process in which expert judgement is used to determine the most likely implications of a particular course of action. Such scenarios could include:

· Whether to extend or shorten the production cycle length in order to maximise annual returns;

· What benefits would be required (e.g. an increase in egg weight) in order to justify the use of a higher priced compound feed?

· The reduction in egg downgrading needed in order to justify investment in new egg collection equipment or additional labour.

 

Farmer innovation network groups

Within the Hennovation project, farmers are encouraged to work together in groups to identify problems, to develop solutions and to innovate. Input to the group is provided by a facilitator whose role is to offer guidance, challenge assumptions and ensure a clear and comprehensive approach. As part of this process, ADAS has demonstrated and used Profile to help groups to prioritise different problems and to evaluate possible solutions. The approach is ideally suited to small group meetings where different ideas can be discussed, with the program being displayed on a screen.

 

Future opportunities

ADAS can now run Profile for egg producer groups and for individual farmers and farming companies. This service is offered as part of our face-to-face consultancy work with farmers and egg packers or as part of remote input by webinar. It can also be used alongside our own group facilitation expertise.

ADAS has considerable experience in working with egg producers both individually and in groups. For further information, please contact Jason Gittins by email: Jason.gittins(at)adas.co.uk.