DALALEKUTUK

PROJECT PROPOSAL

BEEF FARMING

Prepared by:
MR. RICHARD SANKAU OLE KOYIET

@cJuly 2019

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TABLE OF CONTENTS
Executive Summary...................................................................................................................................1

PURPOSE OF THIS DOCUMENT..........................................................................................................4

1. MANAGEMENT PLAN OF DALALETUKUK RANCH...............................................................6

2. SITE SELECTION AND DESCRIPTION........................................................................................9

3. THE OPERATIONAL PLAN..........................................................................................................14

a. Understanding Cattle Fattening Operations.....................................................................................14

b. Design and Layout...........................................................................................................................14

c. Space Allocations.............................................................................................................................15

d. Environmental Plan..........................................................................................................................16

4. The Operational Strategy.................................................................................................................16

a. Filling the Feedlot............................................................................................................................16

b. Our Breed.........................................................................................................................................16

c. Sex....................................................................................................................................................17

d. Age...................................................................................................................................................17

e. Arrival..............................................................................................................................................17

f. Feeding System................................................................................................................................18

g. Home-made Feed.............................................................................................................................18

h. Complete Feeds................................................................................................................................18

i. Health Management & Disease........................................................................................................19

j. Production Cycle..............................................................................................................................19

5. THE MARKETING PLAN..............................................................................................................20

a. The Marketing Strategy....................................................................................................................20

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b. Product.............................................................................................................................................20

c. Price..................................................................................................................................................20

d. Target Market...................................................................................................................................20

6. INDUSTRY ANALYSIS..................................................................................................................21

4.1 Production System.............................................................................................................................22

7. FINANCIAL PLAN.........................................................................................................................27

a. Project Economics............................................................................................................................27

b. Project Cost......................................................................................................................................27

c. Project Financing.............................................................................................................................28

d. Space Requirement...........................................................................................................................28

e. Machinery and Equipment...............................................................................................................29

f. Raw Material Requirements.............................................................................................................29

g. Revenue Generation.........................................................................................................................29

h. Benefits............................................................................................................................................30

Financial Statements................................................................................................................................31

Projected Income Statement....................................................................................................................31

Projected Cash Flow Summary (Kshs, 000)..............................................................................................1

Projected Statement of Financial Position.................................................................................................2

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Executive Summary
Background
Dalalekutuk Ranch is a 100 head custom feedlot located in Dalalekutuk area, Kajiado Central
Constituency, Kajiado County. The feedlot provides professionally managed, specialized cattle
feeding and management services to its proprietors. D-Ranch incorporates approximately 100
acres of land. The Feedlot will source 95% of the animals to be fattened from the surrounding
pastoralist community therefore providing a continuous off take market. The remaining 5% will
be sourced from organic growth on the farm.

D-ranch will eventually target a 500 head cattle feedlot assuring access to competitive markets
for the local pastoralist community and emerging technology for pastoralist in Kajiado County
and the neighboring counties, thus improving their competitive position in this important value-
added industry of producing high quality beef.

Meat production is a capital intensive industry that requires significant investment in long-term
assets including land, feeding and meat processing infrastructure, machinery and plant and
equipment. It is therefore necessary for our project to have a significant amount of cash and cash
equivalent assets at the start. We are therefore seeking to finance the business with a credit
facility and a significant amount of owner’s equity. This will produce sufficient cash flow until it
can start making profit.

This Business Plan has been based on a series of assumptions with respect to design of the
project, size, costs, revenues, returns etc. However, these are indicative only and the investors
might require carrying out their own further analysis.

Working Assumptions
The business plan has been developed based on the following working assumptions:
 Animals are purchased at an average live weight of 250Kg, and are fattened for a period
of One hundred and Eighty (180) days.

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 An average daily weight gain of 1.5kg is assumed and animals are therefore finished at an
average market (live or on hoof) weight of 430 Kg.
 A yield of 62 % is assumed meaning that a typical finished steer will produce 267 Kg of
carcass (dressed weight).
 The dressed beef (or carcass) will yield approximately 213 Kg of red meat and trim
(which includes variety meat: liver, heart, tongue, tripe, sweetbreads and brains) and fat
and bone. This is roughly a yield of 80% from the dressed or hanging weight.
 Buying price of 250kg Steer is projected at Ksh. 30,000 A fully fattened steer will be sold
off at Ksh. 80,000
 Each fattening cycle will involve 100 steers in the first year and an ultimate of 250 steers
per cycle in the subsequent years. Two fattening cycles are assumed per year giving gross
revenue of Ksh. 17,600,000 in year 1.

Production costs have been calculated as per the table below:

Direct Costs of finishing 200 Steer

Particulars Per batch Kshs Per Animal Kshs per Animal

1 Purchase of 200 Steers 6,000,000 30,000
2 Transport to the feedlot 666,600 3,333
3 Veterinary Drugs & Related Expenses 41,600 208
4 Cost of feeds 4,000,000 20,000
5 Lairage 100,000 500
8 Selling Expenses 133,400 667
9 Transport to the market 666,600 3,337
Total 57,729,600 48,108

Summary of Start-up Costs

Start –up costs for the project are summarized in the table below:
Start-Up Expenses to Fund
Start-Up Expenses to Fund(Working
A) Kshs Remarks
Capital)

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Purchase of Immature Steers - 1st two batches

1 6,000,000 Debt Financing
of 100 each
2 Transport of Immature steers to the feedlot 666,600 Debt Financing
1 Feed Ingredients for steers (1st two batches) 4,000,000 Debt Financing
3 Veterinary drugs & related expenses (1st batch) 41,600 Debt Financing
4 Lairage Expenses @ 500 Kshs 100,000 Debt Financing
5 Payroll expenses for 12 months 3,432,000 Debt Financing
Transport to market and selling expenses @
6 400,000 Debt Financing
2000 Kshs
Insurance 4% of the cost of the equipment in the
7 farm, furniture and fittings 3,789,313 Own Contribution

8 Miscellaneous 125,000 Own Contribution

Own Contribution 3,914,313
Debt Financing 14,640,200
Total Start-Up Expenses to Fund 18,554,513

B Start-Up Assets to Fund

1 Cost of land 100 acres @5000,000 per acre. 500,000,000 Own Contribution
Construction of the feedlot & Auxiliary
2 10,000,000.00 Debt Financing
Equipment
3 5,000,000.00 Debt Financing
Construction of the Silo & Construction of hay barn
Construction of Water Reservoir and
4 16,500,000 Debt Financing
distribution system
6 3 Phase Electricity Installation & Wiring 3,200,000 Debt Financing
8 Civil Works 2,000,000 Debt Financing
9 Truck 1 @ 2,000,000 2,000,000 Debt Financing
11 Construction of office facilities 10,000,000 Own Contribution
12 Office Furniture, Equipment & Fixtures 3,000,000 Own Contribution
13 Borehole sinking 2 @ 2,500,000 Kshs 5,000,000 Debt Financing
14 Ranch Fencing Costs 40,000 per acre 4,000,000 Debt Financing
15 Construction of a Waste Management Plant 1,000,000 Debt Financing
Own Contribution 13,000,000
Debt Financing 48,700,000
Total Start-Up Assets to Fund 61,700,000
Summary:
Total Start-Up Fund Requirement 80,254,513
Total Own Contribution 516,914,313
Total Debt Financing 63,340,200
NB: The project requires funding to the tune Kshs 63,340,200 in the form of debt capital.

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Summary of Projected Financial Results

A break-even analysis has been carried out for the project. The analysis shows that the break–
even revenue is Kshs 19,869,077 for Year 1 and an average of Kshs 11,942,557 thereafter. This
is equivalent to processing at least 500 finished steers per year.

A projected income statement has been worked out based on the expected revenues and
expenses. The projection shows that the project will not return a profit in Year 1 of Kshs that is
the project will make a net loss of Ksh (1,983,764). Profitability will bounce back in year 2 to
settle at Ksh 4,141,569 this will increase in subsequent years to reach a level of Kshs 15,318,861
by year 5. The profit projection is 34.4% of gross revenue and therefore consistent with
profitability levels for a livestock industry based conservatively on fattening indigenous
livestock. This can improve remarkably were exotic breeds or their crosses to be introduced into
the model. The business plan therefore shows a sound business case and seeks funding to the
tune of Kshs 50,000,000 payable in Semi Annual instalments over a period of 5 years with an
initial grace period of six (6) months.

PURPOSE OF THIS DOCUMENT

The objective of this proposal document is primarily to enable Agricultural Finance Corporation
(AFC) identify with our project and to provide the start-up capital we seek. The project pre-
feasibility may form the basis of an important investment decision. In order to serve this
objective, the document covers various aspects of project concept development, start-up, and
production, finance and business management. The document also provides sectorial
information, brief on government policies and international scenario, which have some bearing
on the project itself. Beef farming could provide employment and business investment
opportunities for youth and mid-age people in Kajiado County. Beef production can be managed
by people who have lower level education in semi-rural area and they may need short time
training on bull rearing.

Vision Statement

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Our Vision is to become one of the leading beef cattle rearing business brands not just in Kajiado
County and in Kenya at large.

Mission Statement
Our mission is to sell our produce (beef cattle), in commercial quantities both locally, nationally
and internationally. We want to build a cattle rearing business that can favorably compete with
other leading beef farms.

Keys to Success
Purchasing good breeds of cattle for fattening
Feeding the cattle high quality feed
Providing the required disease management practices and vaccination to our cattle
Purchasing cattle at the lowest price possible
Minimizing feeding costs

1. MANAGEMENT PLAN OF DALALETUKUK RANCH

a. Introduction

D-Ranch is a 100 head custom feedlot located in Dalalekutuk area, Kajiado Central Constituency
Kajiado County. The farm is off Kitengela –Namanga highway about one hour drive from

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Namanga town. The feedlot intends to provide professionally managed, specialized cattle feeding
and management services to its proprietors. D-Ranch 100 acres of land. The Feedlot will source
95% of the animals to be fattened from the surrounding pastoralist community therefore
providing a continuous off take market. The remaining balance will come from on farm ogarnic
raising.

The ranch will eventually target a 500 head cattle feedlot assuring access to competitive markets
for the local pastoralist community and emerging technology for pastoralist in Kajiado County
and the neighboring counties, thus improving their competitive position in this important value-
added industry of producing high quality beef.

b. Ownership
D-Ranch Commercial Feedlot is owned by Mr. Richard Sankau Ole Koyiet, an entrepreneur who
has been successful in livestock farming and agriculture. Mr. Richard Sankau Ole Koyiet a
retired officer with Kenya National Treasury. He is a tried and tested philanthropist having
supported numerous initiatives in the education sector, in environmental conservation, in youth
empowerment and equipping farmers with pedigree cattle.

c. Management Structure
Central to the success our Ranch is a competent management and staff. The overall management
of the operation will be undertaken by a qualified and experienced team in area of livestock
production, processing and marketing. Mr. Richard Sankau Ole Koyiet will be the manager in
charge and will oversee all the farm operations.

d. Organizational Structure
The following organizational structure is envisaged:

Figure 1: High Level Organizational Structure

General Manager

FeedlotBUSINESS
Manager PLAN Feed Production Manager 6
Marketing Manager
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e. Human Resource Requirement

As per the table above, the farm will have 8 full time employees, majority of whom will be hired
from the local community, and one vet on call.

f. Employee Plan and Job Roles

Job Title Responsibilities
Farm Manager / Ass. Overall farm management including;
Manager  Feed management planning,
 Farm safety and hygiene
 Machinery maintenance,
 Animal checks
 Cattle stocking
 Represents the company in strategic meetings

 Develops, executes and evaluates new plans for

Sales and marketing expanding increase sales and marketing in order to
increase sales and growth for the company
 Identifies, and reaches out to new business partners
 Maintain customer contact and information
 Build the Brand

 Cattle herd record keeping,

 Financial statements,
Bookkeeper  Feed stock management
 Hay stock production records
 Accounting and banking

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 Responsible for feeding cattle and other livestock as

instructed by the supervisor
 Responsible for cleaning the cattle ranch
Field workers  Change the water in the water trough / trench as
instructed by the supervisor on a regular basis
 Handles farm implements and machines as instructed
by the section manager / supervisor
 Assists in handling the breeding of cattle
 Carries out task in line with the stated job description
 Assist in transport working tools and equipment from
the farm and back to the designated store room
 Handles any other duties as assigned by the farm
manager

g. Recruitment of Key Staff

We have already sourced key management staff experienced in the area of animal production and
feedlot operations. We will in consultation with the current management team similarly
recruit managers to fill the remaining positions.

h. Recruitment of Other Staff

The feedlot will require other auxiliary staff including, technicians, herdsmen, security personnel
and other support staff. The management teams will competitively source personnel to fill

these positions on need basis.

Description No. of Salary/ month (Kshs) Total salary per
Employee year (Kshs)
s
Farm manager 1 150,000 1,800,000
Ass. Farm Manager 1 80,000 960,000
Vet 1 30,000 360,000
(On call) (Monthly retainer)
Sales/Marketing 1 20,000 844,000
(Monthly retainer + 1%
Commission on sales)
Book keeper/Storekeeper 1 65,000 780,000
Field workers 4 40,000 480,000
Total 5,220,000/=

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2. SITE SELECTION AND DESCRIPTION

a. PLOT KJD/ DALALEKUTUK/609

GPS CO-ORDINATES

261285 9797388 1° 49' 54.4613" S 36° 51' 14.9157" E PB1 1° 49.90769' S 36° 51.24860' E
260998 9796462 1° 50' 24.5886" S 36° 51' 5.5964" E PB2 1° 50.40981' S 36° 51.09327' E
260867 9796512 1° 50' 22.9561" S 36° 51' 1.3610" E PB3 1° 50.38260' S 36° 51.02268' E
260740 9797722 1° 49' 43.5694" S 36° 50' 57.3001" E PB4 1° 49.72616' S 36° 50.95500' E

b. Plot Shape
The plot is trapezium in shape; appx area=38Ha Approximate lengths = 1217:970m
Approximate widths = 640:140m.

c. Grid Connections
Two phase power line is passing next to the plot. The mains grid is 6.1Km away along the
Namanga –Athi River Road.

d. Plot Features
The plot is fairly level with gentle inclinations. Vegetation is mainly grass with shrubs with soils
are sandy.

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Figure 1 Site view

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e. Topography
Kajiado County has an area of 21,105 km2. It is roughly triangular, and is bordered by the
Nairobi- Mombasa railway to the north-east, the border with Tanzania to the south, and the
western wall of the Rift Valley to the west. The eastern boundary is formed by the Chyulu Range
and western limit of Tsavo National Park. The County has been divided into four Eco zones: the
Rift Valley, the upland Athi Kapiti Plains, the Central Hills, and the Amboseli Plains.

The main physical features in the county are plains, and occasional hills and valleys. Several
valleys dissect the plains and its physiography is influenced by geology. The land rises from
500m above the sea level around L. Magadi to 2500m above sea level in the Ngong hills area.

f. Climate
Most of Kajiado County lies in the semi-arid and arid zones (zones V and VI) (Table 2.4; Figure
2.4). Only 8% of the County's land is classified as having some potential for rain fed agriculture
(zone IV): most of this is in the Athi-Kapiti Plains, close to Nairobi, and in the south of the
County, along the Kilimanjaro foothills.

The county has a bimodal rainfall pattern. The short rains fall between October and December
while the long rains fall between March and May. Heavy rains occur around Ngong Hills,
Chyulu Hills, Nguruman escarpment and the foothills of Mt. Kilimanjaro. This is because the
rainfall in the county is strongly influenced by altitude.

The temperatures in the county also vary according to altitude. Mean maximum of 34ºC around
L. Magadi and a mean minimum of 10ºC on the foothills of Kilimanjaro have been recorded.
Moisture deficit is also observed in the greater part of the year. This gives the county a dry
season of between 7-9 months.

The climate scenario in the county indicates that the bulk of the area (with annual rainfall of 700-

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850mm), is suitable for ranching. Very small strips near Ngong, Sultan Hamud, Namanga and
Chyulu Hills and a larger one on the foothills of Mt. Kilimanjaro, however, have potential for
rain-fed agriculture.
g. Vegetation
The main vegetation type in the county is determined by altitude, soil type and rainfall received
in the different parts of the county. However, anthropogenic and animal causes have modified the
status significantly. Overgrazing, charcoal burning, extraction of fuel wood, forest fires and
quarrying activities are some of the leading causes of this trend. Ground cover in the county
varies according to seasons while the canopy cover ranges from 1% on the densely populated
areas to 30% on the steep slopes. For grazers there is need to move over large areas in order to
have enough grass for the animals while subdivision of land continue to restrict grazing capacity
considerably.

Presence of invader species to vegetation has been noticed in Central division (Ipomea
Kituensis) and in Namanga – Olkiramatian area (prosopis). These species not only colonises the
vegetation but also reduce the grazing potential available to the livestock and wildlife.

The main vegetation types in the county comprise wooded grassland, open grassland, wooded
bush land, bushed grassland and forest. Woody species include; Acacia tortilis, Acacia
xanthopholea, Acacia mellifera, Commifora schemperi, Balnites aegyptiaca, Balanites gabra, and
Salvadora persica. Grasses include; Pennisetum mezianum, Pennisetum stramineum, Chroris
roxburghiana and sporobulus angustifolia, Chloris guyana and Cenchrus ciliaris. Pennisetum
mezinium is good grazing grass when young but becomes stemmy and unpalatable as it grows.

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3. THE OPERATIONAL PLAN

a. Understanding Cattle Fattening Operations

Feedlotting (also called pen fattening) involves the feeding of beef cattle with a protein balanced,
high- energy diet for a period of 70 to 180 days under confinement to increase live weights
and improve degree of finish and thus obtain better grades at the abattoir. Pen fattening
enables the animals to express fully their genetic potential for growth. It also enables the
profitability of beef production to be maximized, provided the beef price to feed cost ratio is
favorable.

The aim of pen feeding is to transform feed into meat of a required quality as efficiently as
possible. The best measure we have of this in the live animal is food conversion
efficiency/ratio (FCE/FCR) i.e. kg of feed per kg live weight gain e.g. if 8Kg of feed leads to
1 Kg live weight gain of the cattle, then the FCR is 8:1. The lower the FCR, the more
profitable you become.

It is important to emphasize the efficiency of feed use as if you subtract the induction cost of the
animal; food constitutes some 90% of the remaining variable costs. So together with the
slaughter price of the animal, feed has the major influence on the profitability of a feedlot
operation. We aim at achieving the highest level of efficiency in feed use to ensure profit
maximization.

b. Design and Layout

We recognize that proper housing is important in a successful cattle fattening operation to
adequately protect animals against the adverse effects of weather. The structure will be designed
in such a way that it offers easy access to food and water, freedom of movement. The feedlot will
be close to feed stores, handling facilities and water supplies. Our typical Feedlot layout will be
as shown below.

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Figure 2 Typical desired Feedlot design layout

c. Space Allocations
A floor space allocation of 5-10 square meters/head is ideal and will be allocated to each animal.
Feeding space allocation will be 30-50cm/head as recommended by experts. Adequate drinking
water will be availed. A water reserve that carries 7-10 days’ supply will be installed in case of
pump or borehole failure.

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d. Environmental Plan
This involves manure storage and preparation from the paddocks which will be used as organic
fertilizers in the farm to enrich the grass production. Also, mortality management of the bull herd
by use of quarantine method to curb spread of diseases emanating from fresh stock procured.

4. The Operational Strategy

a. Filling the Feedlot

D-Ranch recognizes that in order to keeping a feedlot enterprise running, a continuous income is
needed. The only way this can be achieved is by having livestock to sell all the time. This is
a difficult part of feedlotting, because animals remain in a feedlot for 90 to 180 days. We
must therefore predict market demand, and consequently predict selling price of immature
steers at least three months ahead. Through our marketing Unit, we will ensure a continuous
source of immature steers.

Livestock will be obtained directly from livestock keepers as well as by private treaty through
agent or at livestock auctions. We will use experienced buyers in evaluating the potential for
fattening of different types of animal (maturity type, age, gender) in relation to the market
demand (price) of different grades of beef.

b. Our Breed

Our farm has prioritized to outsource improved breeds for Sahiwal, Zebu and Boran that are
good fatteners. Most native breeds also perform well for cattle fattening. Preference will
therefore be for the improved beef breeds where available.

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c. Sex
Heifers are earlier maturing than steers/Bulls. Bulls can do well in feedlots, but often cause
problems by fighting. Females can do well in feedlots, but often have poor growth rates partly
because they reach carcass finish at an earlier age and there is a tendency to be tardy in sending
them for slaughter. Disruptions caused by females coming on heat could be a contributory factor.
Heifers consume slightly less feed than steers and are about 7 % less efficient. They finish sooner
and their corresponding minimum mass should be approximately 10% less than for steers. Bulls
and short scrotum bulls grow faster, are most efficient and grade better than heifers. This is
provided they are sold at milk tooth. The above will be major considerations for our ranch when
selecting animals for fattening.

d. Age

Animals can be placed in the feedlot at any age, usually after weaning. In practice animals tend
to arrive at feedlots shortly after weaning (7 to 9 months of age), as yearlings (12 to 18
months of age) or at two and a half years of age. In most feedlots there is no differentiation
in feeding regime between animals of different ages and it has been found that irrespective
of the age, animals tend to gain about 150 kg and are then ready for slaughter. Cattle placed
on high energy rations at an early age tend to deposit fat more rapidly than if they are kept
on low energy diets for a time before being placed on a high energy ration. We will prefer
animals in the age bracket of 12-18 months.

e. Arrival

On arrival at the feedlot animals must be processed. D-Ranch will process animals as follows on
arrival at the feedlot:

 Dose and dip. Dipping is essential, but many people question the need to de-worm
animals arriving at a feedlot. A positive response to dosing is often not seen, possibly
because many farmers dose their animals before selling them.
 Supplementation of animals prior to putting them in the pens to get them used to feeding
on concentrates and boost animal growth to achieve target induction weight.

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 Vaccinate all animals against botulism, anthrax and any other diseases the veterinarian
considers essential in the area where the feedlot is situated.
 Identify and number the animals for record keeping purposes.
 Group the animals according to size and sex. Large animals tend to bully smaller animals
and keep them away from feed troughs.
 Record initial weight of the animals, preferably after 7 to 10 days in the feedlot. At this
time, careful observation will be made to identify poor performers and these can, at a
next weighing which ideally takes place two to three weeks later, be culled if the mass
gains confirm the earlier observations.
 Horned animals are a problem. Dehorning sets an animal back a great deal. Leaving
animals with horns can lead to severe losses resulting from damage to other animals and
bruising. D-Ranch will have a preference for buying animals that have been properly
dehorned.

f. Feeding System

Many feedlotters mix their own ration, usually a complete feed, using the most readily available
ingredients at the best price they can bargain for. Where home-produced feeds are available
at low cost e.g. silage, the profitability of a feedlot can be improved. There are principally
two types of feeds, complete feeds (commercial) and homemade feeds:

g. Home-made Feed
D-Ranch will consider making its own feeds, in order to reduce costs, and increase profitability
of the cattle fattening business. We will employ the services of a consultant nutritionist to
develop a formula for homemade feeds.

h. Complete Feeds
These are the easiest to use, though they are expensive compared to home-made feeds. They are
complete, balanced meals, designed for finishing cattle in pens over the normal 70-90 days. They
are high energy fattening meals containing all nutrients necessary for ad lib pen fattening.
Feeding rate will depend on factors such as live weight and age of the animal, but normally

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averages between 8-15kg per head per day or 3.4% of a steer’s live mass per day, and average
daily gain at 1.6Kg live mass is about 350Kg.

It is advised that even if you are feeding these complete feeds, make available a good quality
roughage source as an extra. The cattle might or might not nibble it, but when they do need it, it
will help if it is available. These feeds contain urea; hence it is advisable to introduce your cattle
to them gradually, preferably over a period of two weeks.
D-Ranch will consider the use of complete Feeds when ingredients for the formulation of its own
feeds are not readily available in order to keep the fattening operation on-going.

i. Health Management & Disease

A feature of crowded accommodation is the rapid spread of disease. Apart from the better known
cattle diseases that can appear in feedlots, there are a number of diseases associated with
feedlotting. Diseases such as rumen stasis, acidosis, laminitis and urinary calculi can be a
problem in a feedlot. D-Ranch recognizes that prevention is always better (cheaper, hustle free)
than cure in a feedlot operation. We will engage the services of a veterinarian to ensure that
she/he is always on call to advice on disease prevention and the treat sick animals.

Slurry disposal is a major issue in most feedlots and warrants attention. Waste can be wet or solid
and, if not properly taken care of, can result in a fly and insect problem. Flies and insects must be
combated in a feedlot because they worry animals and increase stress. Stress has a negative
effect on growth rate. Although deaths occur in feedlots, where losses exceed 2% prompt action
must be taken to find and eliminate the cause(s) of the mortalities in order to minimize losses. D-
Ranch will embrace this recommendation.

j. Production Cycle
Each production cycle is going to be 6 Months (180 days) long. This means D-Ranch will have 2
production cycles every year. D-Ranch will buy cattle from the ranchers and pastoralists where it
is competitively priced. We will buy 100 cattle at a time in the first cycle of the first year and
another 100 in the preceding cycle. There after we will consider buying 8 animals every month
until we hit an ultimate of 500 cattle at any given moment of operation. We target to be selling at

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least 500 cattle in our typical year. The cattle to be bought will weigh approximately 250 Kg
each, and finished at a weight of 430Kg live weight.

5. THE MARKETING PLAN

a. The Marketing Strategy

At D-Ranch we will attempt to rapidly achieve awareness in the country about our business in
the first year. To be successful in this business, we need as many customers as possible. Our
marketing strategy is based upon the marketing mix, which are the 4 P’s of marketing, which
are product (service), price, promotion and place (distribution).

b. Product
Our fattened cattle will be of high quality to produce super grade beef. Our business operates on
the assumption that it will do whatever is reasonably necessary to keep the customer happy. This
reflects the notion that if the customer is kept happy; long-term profits are ensured.

c. Price
We will try and minimize our production costs so that we can offer a more competitive price on
the market. The price of the cattle will be determined by market forces. It will depend on the
weight and grade of the beef. We will develop a competitive pricing strategy that ensures it is of
ease of breaking into the market and ensuring business sustainability. In pursuing this strategy,
the operation will seek to provide a competitive price to pastoralists for immature steers to
ensure less expensive and constant supply and to our consumers.

d. Target Market
Neighboring counties; Kajiado County Slaughter House, Nairobi, Private meat factories/
slaughter houses and Kenya Meat Commission (KMC) in Athi River, Nairobi. We are targeting
over 100 heads of constant production in the next one year which will be directed to the said
markets which are currently the highest consumers of beef.

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6. INDUSTRY ANALYSIS
Beef is a popular diet in Kenyan households as it is rich in protein. The plan outlines our
proposal to run a Steers farm with an initial stock of 100 steers with a monthly restock of 7 and
subsequently increase our eventual target of 500 steers in the first phase of the operation which
will be 5 years. This will entail the purchase of young bulls over 1 year old weighing
approximately 254kgs and fatten them for 3 to 6 months prior to selling at an average weight of
400Kgs. Current pricing for live weight bull stands on average at Sh. 100 per Kg. This will be a
phased project with the aim of achieving processing capabilities in the long run.

Currently, many farmers in Kenya are concentrating on dairy farming creating a shortage in the
supply of beef in the market. This has resulted in adverse effects such as high prices of beef
compared to international prices. A kilogram of meat in Kenya is retailing at more than Sh.400
locally but beef prices on the global market are going for as low as Sh.300 a kilogram according
to data from the International Monetary Fund (IMF). This is mainly due to harsh weather
conditions and many years that farmers go through trying to raise a small number of cattle as
opposed to large scale producers of the west.

Kenyans on Average consume 15-16 kg of red meat per capita annually. 1 Approximately 80 to 90
percent of the red meat consumed in Kenya comes from livestock that are raised by pastoralists,
with the remainder coming from highland cattle. Nairobi and Mombasa have the highest per
capita meat consumption within Kenya. Nairobi’s consumption estimate stands at 25.8 Kgs per
person, which would require a monthly supply of approximately 27,000 heads of cattle.

The major constraints to the growth of the beef industry are emerging livestock diseases,
recurrent droughts especially in ASALs, poor finishing, vulnerable traditional pastoral
production systems, diminishing animal genetics, poor marketing channels and static prices of
beef products.

Table 3. Production Plan

1
End Market Analysis of Kenyan Livestock and Meat, USAID 2016

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Following production process is generally followed:

Description Target Yields Barriers Response

Vet on call

Proper nutrition
Proper beef Specialist
breed
Appropriate bull
selection
Young bull
Production records
for selecting
Minimum Herd replacements
avg. weight management
of 200Kgs and nutrition
Correct herd health
program

Available
Use of farm manure
water & soil
nutrients
Select appropriate
Increase Seasonal variety of grass
Grass yields to weather
cover 50 patterns Harvest water in
Acres in 2yrs dam for irrigation

Reduced
quality and Harvest at
quantity appropriate
maturity

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4.1 Production System

Table 5. Year 1 Plan of Activities
Period Activity
1st Month  Preparation of land and planting of grass
 Construction of phase one paddocks
 Scout for Farmers /Open markets with quality young bulls
 Purchase of Young bulls aged between 1-2 years
 Administration of vaccines and vitamins
 Purchase of dairy meal and two month supply of hay
2 - 3rd Month  Scout for Farmers /Open markets with quality young bulls
 Bull weight monitoring
 Paddock bulls according to weight
 Feed in accordance to weight
 Marketing activities for sale of bulls
 Administration of vaccines and vitamins
4th Month  Scout for Farmers /Open markets with quality young bulls
 Bull weight monitoring
 Paddock bulls according to weight
 Sale and subsequent purchase of bulls
 Hay harvesting
 Administration of vaccines and vitamins
 Quarantine of new stock
th th
5 - 7 Month  Scout for Farmers /Open markets with quality young bulls
 Bull weight monitoring
 Paddock bulls according to weight
 Marketing activities for sale of bulls
 Sale and subsequent purchase of bulls
 Administration of vaccines and vitamins
 Quarantine of new stock
8th Month  Scout for Farmers /Open markets with quality young bulls
 Bull weight monitoring
 Paddock bulls according to weight
 Sale and subsequent purchase of bulls
 Hay harvesting

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 Administration of vaccines and vitamins

 Quarantine of new stock
9th – 11th Month  Scout for Farmers /Open markets with quality young bulls
 Bull weight monitoring
 Paddock bulls according to weight
 Sale and subsequent purchase of bulls
 Administration of vaccines and vitamins
 Quarantine of new stock
12th Month  Scout for Farmers /Open markets with quality young bulls
 Bull weight monitoring
 Paddock bulls according to weight
 Sale and subsequent purchase of bulls
 Hay Harvesting
 Administration of vaccines and vitamins
 Quarantine of new stock
 Construction of Phase 2 paddocks

a. Grass
105 acres will be disk ploughed, and roller harrowed in year 1. Then the grass seeds will be
planted through drill/broadcast method every five years. The mature hay will be cut, raked, and
stacked by us and will be baled into large square bales every 4 months’ time. It is anticipated that
these fields will produce an average total of 200 bales of hay per acre with an expected total
production of 63,000 bales per annum. Surplus hay will be available for sale to the local
community and others.

b. Replacement

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We aim to maintain a re-order level of 100 for the initial 6 months, with subsequently re order
levels increase by 250 cattle half yearly.

c. Risk Management
The following table elaborates on the farm risk management plan;

Table 7. Risk Management Analysis

Risk Event Consequence Present Risk Control Measures to
monitor risks
 Loss of herd  Insure the herd  Frequent Vet
 Emaciate stock  Vet Advice checks
Livestock
 Long duration to  Farm Supervision  Daily Farm
Health
fatten  Maintenance of high hygiene checks and
standards records
 Proper feeding regime

 Disease Outbreak  Quarantine the herd stock  Frequent Vet

 Restrict farm access through checks
fencing and admission.  Daily Farm
 Vet on Call checks and
records
Drought  Inadequate water  Maintain adequate hay stock  Proper stock
and Grass  Harvest rain water keeping and
 Disease outbreak  Sink Borehole in Year 2 forecast by farm
manager
Sales  No sales  Employ qualified sales  Sales targets
 Slow growth /marketing personnel
/Marketing
 Have sound sales/marketing
strategy plan
Lack of  Slow and or /no  Employ qualified personnel  Undertake
farm growth ( Farm Manager & Assistant, annual
qualified
leading to losses Sales/marketing, Bookkeeper, manpower
manpower to
Vet) personnel
manager the 
farm

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d. Quality Control
We will attend the relevant livestock seminars and field days in order to keep abreast with new
ways of beef farming.

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7. FINANCIAL PLAN
Below is a detailed financial model we have used to analyze the commercial viability of beef
farming. Various cost and revenue related assumptions along with results of the analysis are
outlined in this appendix.

a. Project Economics
All the figures in this financial model have been calculated for beef farming in 5 acres paddocks
with an initial annual production of 200 bulls. Stock levels will progressively increase by 8cattle
every month within the next 5 years.

The following table shows internal rate of return of beef production.

Table 8. Project Economics
Description Detail
Internal Rate of Return (IRR) yr1. -0.6%
Payback period (years) 3
Benefit Cost Ratio (BCR) 4.4:0.4

Returns on the scheme and its profitability are highly dependent on quality of bulls reared,
suitable location, good farming practices and availability of cheap labor. The project will not be
able to cover the potential demand of consumers and recover payments, if these factors are not
efficiently managed leading to increased operating cost. Similarly, good quality beef herd will
yield more profit in this business.

b. Project Cost
The total project cost will be Ksh. 80,254,513 based on all the assumptions that have been made
from the financial model and represented in table 1.

c. Project Financing
The following table provides our proposal details of the equity required and variables related to
the AFC loan we seek;
Table 10. Project financing

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Description Detail
Total equity (54%) Kshs. 63,340,200
Bank loan (78%) [10% of land cost] Kshs. 50,000,000
Mark up to the borrowers (%/annum) 10%
Tenure of loan (year) 5
0.5
Grace period (year)
(to negotiate)

d. Space Requirement

Basically beef production can accommodate 250 heads of bulls per acre. A space of 5 acres will
be available to partition as paddocks.

Table 11: Land Requirement

The land to be used will be fully owned by the proprietor. It is current fair market value is at
Kshs. 300 Million.
Area Required Area(Acres) Comments Costs (Kshs.)
Land 100 own 0
Year 1 450,000
5 Year 2 450,000
Paddocks Year 3 200,000
Shelter 2 One off 1,000,000
Total 2,100,000/=

e. Machinery and Equipment

Following table provides list of machinery and equipment required for rearing of the bulls.

Table 12: List of Machinery and Equipment

Description Quantity Cost Kshs. /unit Total Kshs.
Tractor - on need basis
- Tilling 100 acres Kshs. 1,800 per acre 189,000
- Harrowing 100 acres Kshs. 2,000 per acre 210,000
- Hay Harvest 63,000 bales Kshs. 50 per bale 3,150,000
lorry - lease 1 Kshs. 150,000 p.m. 1,800,000

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Total 5,349,000/=

f. Raw Material Requirements

Table 13: Cost of Raw Material
Description Comment Kshs. Total
Grass seeds
- Boma Rhodes 20 acres for 5 yrs. 285,000
- Lucerne 20 acres for 3 yrs. 155,000
- Desmodia 10 acres for 3 yrs. 126,000
Fertilizer one off 375,000
Vaccinations + Vitamins Kshs. 1,000/= per 5bulls 300,000
Dairy Meal 750 bags @Kshs.1,500 x 6 6,750,000
Total 7,991,000/=

g. Revenue Generation
Total expected kilos for bull matured for sell on farm would be approximately 80,000kg. The
marketing price of the bull is Kshs.250 per Kg which is the minimum rate. The total revenue of
the expected sell would be Kshs. 17,600,000 in the first year of production.

Table 14. Revenue Generation of the Project

Revenue Projections in KSH
Years 1 to 5
Year 1 Year 2 Year 3 Year 4 Year 5
Income from the Farm
Beef Steers 220 250 450 500 500
Price per head 80,000 80,000 80,000 80,000 80,000
Gross Revenue 17,600,000 20,000,000 36,000,000 40,000,000 40,000,000

h. Benefits
The beef farming project will have the following direct benefits to the community;

a) Create employment to the locality

b) Provision of ready and available market for young bulls
c) Act as a demonstration farm to the community and other counties

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d) Increase beef production to meet market demand thus reducing the need for importation
saving the country the much needed foreign exchange reserves.

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APPENDIX

Financial Statements

Projected Income Statement

Income Statement in KSH

Years 1 to 5
Year 1 Year 2 Year 3 Year 4 Year 5
REVENUES 17,600,000 20,000,000 36,000,000 40,000,000 40,000,000
COST OF REVENUE 16,367,764 8,709,229 10,919,461 11,613,433 11,854,066
% of Revenues 93.0% 43.5% 30.3% 29.0% 29.6%
GROSS PROFIT 1,232,236 11,290,771 25,080,539 28,386,567 28,145,934
% of Revenues 7.0% 56.5% 69.7% 71.0% 70.4%
OPERATING EXPENSES
Sales & Marketing 1,534,000 1,822,160 3,092,160 3,572,160 4,072,160
General and Administration 1,432,000 1,568,320 2,011,866 2,048,895 2,189,686
Total Operating Expenses 2,966,000 3,390,480 5,104,026 5,621,055 6,261,846
% of Revenues 17% 17% 14% 14% 16%
EARNINGS FROM OPERATIONS (1,733,764) 7,900,291 19,976,513 22,765,512 21,884,087
EARNINGS BEFORE INTEREST & TAXES (1,983,764) 7,900,291 19,976,513 22,765,512 21,884,087
NET EARNINGS BEFORE TAXES (1,983,764) 7,900,291 19,976,513 22,765,512 21,884,087
TAXES 0 (1,774,958) (5,992,954) (6,829,654) (6,565,226)
NET EARNINGS (1,983,764) 4,141,569 13,983,559 15,935,858 15,318,861
% of Revenues -11.3% 20.7% 38.8% 39.8% 38.3%

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Projected Cash Flow Summary (Kshs, 000)

Cash Flow Statement in KSH

Years 1 to 5
Year 1 Year 2 Year 3 Year 4 Year 5
OPERATING ACTIVITIES
Net Earnings (1,983,764) 4,141,569 13,983,559 15,935,858 15,318,861
Depreciation 13,421,429 4,521,429 4,521,429 4,421,429 4,421,429
Working Capital Changes
(Increase)/Decrease Accounts Receivable (2,629,440) 239,040 1,477,400 (664,000) (1,079,000)
(Increase)/Decrease Inventories (2,629,440) 239,040 1,653,400 (536,000) (871,000)
(Increase)/Decrease Other Current Assets (316,800) 28,800 178,000 (80,000) (130,000)
Increase/(Decrease) Accts Pay & Accrd Expenses 2,629,440 (239,040) (1,433,400) 696,000 1,131,000
Increase/(Decrease) Other Current Liab 316,800 (28,800) (178,000) 80,000 130,000
Net Cash Provided/(Used) by Operating Activities 8,808,225 8,902,038 20,202,388 19,853,287 18,921,290
INVESTING ACTIVITIES
Property & Equipment (32,750,000) 0 0 0 0
Net Cash Used in Investing Activities (32,750,000) 0 0 0 0
Increase/(Decrease) Curr. Portion LTD 14,202,258 0 0 0 (13,501,203)
Increase/(Decrease) Long Term Debt (10,622,484) (11,684,732) (12,853,205) (14,138,525) (701,055)
Net Cash Provided / (Used) by Financing 3,579,774 (11,684,732) (12,853,205) (14,138,525) (14,202,258)
INCREASE/(DECREASE) IN CASH (20,362,002) (2,782,694) 7,349,183 5,714,762 4,719,032
CASH AT BEGINNING OF YEAR 50,000,000 29,637,999 26,855,305 34,204,488 39,919,249
CASH AT END OF YEAR 50,000,000 29,637,999 26,855,305 34,204,488 39,919,249 44,638,281

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Projected Statement of Financial Position

Balance Sheet in KSH

Years 1 to 5
Begin Year 1 Year 2 Year 3 Year 4 Year 5
ASSETS
CURRENT ASSETS
Cash 50,000,000 29,637,999 26,855,305 34,204,488 39,919,249 44,638,281
Accounts Receivable 2,629,440 2,390,400 913,000 1,577,000 2,656,000
Inventories 2,629,440 2,390,400 737,000 1,273,000 2,144,000
Other Current Assets 316,800 288,000 110,000 190,000 320,000
Total Current Assets 50,000,000 35,213,679 31,924,105 35,964,488 42,959,249 49,758,281
PROPERTY & EQUIPMENT 308,900,000 328,228,571 323,707,143 319,185,714 314,764,286 310,342,857
TOTAL ASSETS 358,900,000 363,442,250 355,631,247 355,150,202 357,723,535 360,101,139
LIABILITIES & SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES
Accounts Payable & Accrued Expen 2,629,440 2,390,400 957,000 1,653,000 2,784,000
Other Current Liab 316,800 288,000 110,000 190,000 320,000
Current portion of long term debt 0 14,202,258 14,202,258 14,202,258 14,202,258 701,055
Total Current Liabilities 0 17,148,498 16,880,658 15,269,258 16,045,258 3,805,055
LONG TERM DEBT (less current portion) 50,000,000 39,377,516 27,692,785 14,839,580 701,055 0
STOCKHOLDERS' EQUITY
Common Stock 308,900,000 308,900,000 308,900,000 308,900,000 308,900,000 308,900,000
Retained Earnings (1,983,764) 2,157,805 16,141,365 32,077,223 47,396,084
Total Equity 308,900,000 306,916,236 311,057,805 325,041,365 340,977,223 356,296,084
TOTAL LIABILITIES & EQUITY 358,900,000 363,442,250 355,631,247 355,150,202 357,723,535 360,101,139

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Key Assumption

BUSINESS PLAN 3
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Particulars Assumption
Sales Price Growth Rate 5% per year
Increase in cost of raw material 10% per year
Increase in utilities 40%, 28%, 22%, and
18% from year 2 to 5
respectively.
Debt/Equity Ratio 46:54
Loan Period 5 years
Grace Period 0.5 years
Loan installments Bi- Annually
Financial charges (interest rate) 10%

BUSINESS PLAN 4