Haramaya 

University, Sheep and Goat Fattening and Breeding 
Project: A template. 

Introduction 
Livestock population survey results conducted by CSA (2007/08) estimate the sheep and
goat population of Ethiopia to be about 26.1 and 21.7 million head, respectively. This
does not include seven zones of the Afar and Somali regions, mainly pastoral areas that
traditionally have high livestock numbers, which has the potential to substantially
increase these population estimates. Sheep and goats command a strong position in the
live animal and meat export trade to countries in the Middle East with future high market
opportunities. This is partly because Ethiopian meat can be categorized as high quality,
organic meat as it is not exposed to industrial pollutants like in industrialized nations.
However, low carcass weight and yield from both species limits potential for export as
well as the availability of meat to fulfill the increased domestic demand for small
ruminant meat. Due to poor muscle development, such carcasses have poor conformation
and quality, which results in a low price given in the competitive market. This and other
problems call for investment and improved management in many aspects of sheep and
goat production in order to improve the productivity of these species on a sustainable
basis. One needed improvement is the formation of planned business oriented breeding
and fattening programs. A planned breeding program may include selection within the
indigenous breed and a crossbreeding program between indigenous and adaptive exotic
breeds with better genetic potential. Fattening or finishing programs will improve the
animal body condition, carcass conformation and quality making these carcasses more
competitive in local and export markets.
Haramaya University (HU) is currently upgrading its livestock farms to the level of

™ To serve as a model farm for teaching

business enterprises to better provide three basic services:

™ To facilitate staff and student research activities

™ To generate revenue from the farms making them self-sufficient and profitable
enterprises

To achieve these objectives, the University is investing in its farms. Investing in a farm is

often an expensive undertaking and can be financially stressful. Taking this aspect in to
consideration, creating a business plan is an essential step for any enterprise regardless of
the size of the business. Business plans can serve as a road map to chart the course of the
business.
The most critical problem confronting low-income farmers today is the need to maintain
an adequate level of income. To combat this problem, farmers are diversifying into high
value specialty crops and animals. In the present scenario, globally, diversification into
alternative enterprises appears to be gaining popularity and economic importance as one
way to boost an enterprise or increase family income. This is supported by the national
policies of the Federal Democratic Republic of Ethiopia which encourages diversified

78 
 
activities. Diversified enterprises can be profitably integrated into small scale operations
benefiting both rural and urban groups of entrepreneurs. Haramaya University can benefit
through boosting its revenue generation and improving teaching and research quality
through sheep and goat breeding and fattening projects. Moreover, the surrounding
community will benefit from the breeding and fattening enterprises in various ways. 

The current business plan considered and addressed the following in order to improve

• Lesson: This project will help us to learn a lesson from earlier setbacks. In the
and transform the sheep and goat business into a profitable self supporting enterprise:

process of preparing this project, we learned how to negate factors that caused
earlier setbacks. The project, therefore, helped us improve and generate positive

• Pragmatic approach: In the past, these farms had a number of problems related
and sustainable results.

to finance and management. Therefore, with an optimistic approach we hope this

project will benefit from the introduction of innovative management, economic,
financial and advanced scientific measures to overcome those drawbacks and to

• Unreliable financial support: In the past, the sheep and goat farms funding was
make this venture a sustainable operation.

mainly dependant on short term projects. The financial structure of the farms
fluctuated with availability of project funds. This financial instability prevented
the smooth operation of the sheep and goat farms. The current project plan will
enhance the introduction of innovative management, economic and financial

• Mission objective: Resource optimization and maximization to achieve

measures to overcome those drawbacks and to produce sustainable business plan.

• Goal/Vision:
sustainable development goals.

™ To embark on a sustainable plan to achieve a reliable source of organic small

™ To be leader in the supply of organic small ruminant meat. This vision is

ruminant meat for the local, regional, national and international market

strongly supported by the conditions presently prevailing in Ethiopia, i.e., a

total agrarian based economy with low levels of release of industrial effluents
and other pollutants which are either directly or indirectly affecting meat

• Historical reasons: Historical evidence shows that Ethiopia was the “Bread
quality and its impact on health of the consumer.

Bowl” for the Roman Empire in ancient days. As in the past, Ethiopia can also be

• Linkage effect of the project: There is a possibility of linking this project with
a good quality meat exporter to show that history repeats.

the community in order to improve livelihood. The linkage effect of the current

™ Nutrition and health: To generate a source of nutritional and health

project could be reflected in the following areas.

™ Socioeconomic aspect: Poverty alleviation for disadvantaged farmers

improvement, especially for local population.

™ Sustainability aspect: Income generation, capacity building and human

especially women.

resource development.

79 
 
 ™ Innovation: Small ruminants breeding and fattening can be linked with
microfinance.

Haramaya University Goat and Sheep Enterprise history and ownership  
The Haramaya University Small Ruminant Farm consists of the Sheep and Goat Farms
both of which are situated on the main campus. The Sheep Farm was established way at
the opening of the Animal Science Department in the 1960s to support small ruminant
teaching and research activities. The Goat Farm was established in 1988 through an
agreement between FARM-Africa and the Ministry of Agriculture for a dairy goat
development project. The primary objective of the Goat Farm was to serve as a breeding
center. The center produced crossbred goats (Anglo-Nubian×Somali) that were
distributed to the community, particularly women, to increase income generation through
improved milk production.
 
The infrastructure and management of the Sheep Farm has been remained poor and has
served as a teaching and research center since its establishment. The Goat Farm has been
better equipped and managed. Unlike the Sheep Farm, the Goat Farm has impacted the
community during the last 20 years through distribution of crossbred goats to female
farmers. Further, different research activities have been undertaken by Haramaya
University and other university’s students using different goat breed crosses.

However, the capacity and service of the Goat Farm has diminished, particularly after the
FARM-Africa project ended. The decline was attributed to financial constraints and poor
management practices. These have resulted in decreased numbers of animals, particularly
purebred exotic animals. The new business plan aims to stimulate and transform sheep
and goat production into a sustainable self-supporting enterprise that generates revenue
and support quality research and teaching.
 
General objective  
™ The main objective of the project is to evaluate the economic potential of the
existing Sheep and Goat Farms by estimating the investment requirements,
production costs and returns for the purchase and sale of high quality sheep and
goat for fattening and for the breeding program of both sheep and goat farms for a

™ To provide baseline information and guidelines for future project development of

period of five years.

crossbred goats and sheep so as to provide an economic incentive for enterprising

™ To develop a project that will serve as a template to attract more investors towards
entrepreneurs in the rural and urban centers.

similar businesses.

80 
 
 
Specific objectives  
™ To make the goat and sheep project economically viable by regularly undertaking
fattening of purchased and farm-born male offspring having superior growth and

™ To generate herds of crossbred female and male kids for marketing and
carcass characteristics.

™ To provide modern research and developmental facilities for the scientists and
distribution to smallholder producers and private firms on a profitable basis

™ To make the goat and sheep project profitable by introducing effective

students of Haramaya University.

™ To harness the special skills of the staff related to animal sciences, veterinary
management practices.

science, management and social sciences for the development of both farms on a

™ To make Haramaya University a business hub with a vision and mission to

sustainable basis.

establish a Centre of Excellence in Sheep and Goat Research that will breed and
distribute animals of high genetic potential to enterprising groups from rural and

™ To promote an ultra-modern, state-of- the-art abattoir, meat and meat product

urban centers for rearing and consequently play the role of a buy-back facilitator.

production center meeting international standards for domestic consumption and

™ To identify and market other related product lines such as milk, manure, skin and
for international export.

™ To develop a model goat and sheep enterprise project which will attract more
other by-products from small ruminant production.

investors in sheep and goat breeding and fattening businesses to fulfill the large

™ To contribute towards the process of diversification of economic activities, that is

domestic and international demand for sheep and goat meat.

aligned with government policies, through this project and similar project which
use this as a model.

81 
 
 Rationale  for  establishing  a  small  ruminant  breeding  and  fattening 
enterprise 

™ To enhance the income generation potential of smallholder farmers.

™ To optimize the efficient use of pastoral and agro-pastoral lands for small

™ Create employment opportunities in farmer households by introducing community

ruminant production.

™ Link women farmers, small ruminants and microfinance in an innovative scheme

level adoption schemes based on community impact workshops.

by providing women entrepreneurs the opportunity to rear small ruminants in

open grasslands.

82 
 
 ™ Introduce systems of cooperatives to target village economic constraints of small

™ Use small ruminant products to enhance family nutrition and health of children.
ruminant production.

™ Poverty and gender alleviation for economically vulnerable groups, especially

™ Transfer and share technological improvements achieved through research and

women farmers

academic pursuits
 
Aspects of innovation 

Socio 
economic 
policy 

83 
 
Application of sustainomics to the project 

Sustainomics of 
the project 

The concept of sustainable development encompasses three main points (Munasinghe,

1993). This study identifies some of the key constituent elements of sustainomics and
how they help to build a strong linkage between these three aspects of sustainability.
1. Economic: Growth – Efficiency – Stability
2. Social: Empowerment – Inclusion/ Consultation - Management
3. Environmental: Resilience – Natural resources - Pollution

Economic: Economic welfare is evaluated in terms of willingness to pay for goods and
services consumed, especially for good quality products. Most economic policies are
directed towards enhancing income and induce more efficient production and
consumption which, in this project, is represented in both the short-run and long-run as
high quality products (animals) are distributed regularly to the community. This
economic efficiency will improve the welfare of the local farmers (Pareto Optimality).
Social: Social development is the improvement in both individual well-being and the
overall welfare of society, which is in line with equity and poverty alleviation. The social
aspect in this study is expected to be vulnerability and how to improve equity and ensure
that basic needs are met. The social domain focuses on the enrichment of social relations
by helping downtrodden farmers through the supply of genetically superior animals.

84 
 
These animals will have the ability to produce over an extended period of time, providing
products that will sell at a favorable price to provide sustained financial support. Another
aspect is reducing the vulnerability and maintaining health (resilience, vigor and
organization) of social and cultural systems by empowering rural women.
Environmental: The environmental domain emphasizes the protection of the integrity
and resiliency of ecological systems. This objective is very critical and important in the
view of the Ethiopian environment as it is suitable for the production of organic meat
which has a good marketing potential both domestically and internationally.

Strategic marketing and pricing policy 

85 
 
Proposed financing  

Haramaya University will finance the initial project investment and operating costs until
the end of the second year. Different projects conducted at the Sheep and Goat Farms,
such as the Breeding, Evaluatiion and Distribution Site at HU of the ESGPIP, are
considered as sources of financing since some of the fixed costs, such as buildings,
purchase of foundation stock etc., are made availble to the project as per the agreement
with HU. Starting from years three through five, the Sheep and Goat Farm is expected to
finance itself from its net income. The estimated funds that would be provided to the
proposed HU sheep and goat enterprise will enable it to meet its initial investment and
initial years’ operational costs. Funds will be used to finance land and forage
development, construction and maintenance of buildings, purchase of equipment and
purchase of breeding stock.

Management and organization  
The University Revenue Generation Department and the Department of Animal Sciences
are primarly responsible for the management and coordination of the sheep and goat
enterprise and research project. The project management will have a separate manager
accountable to the above departments. The Sheep and Goat Farm will have research and
teaching support and revenue generation mandates. The project will have its own
independent staff possessing technical as well as managerial skills. The project also
requires collaboration of several different faculties and departments in the University like
the Veterinary Medicine, Buisness and Economics, Finance and Budget Division,
Research and Extension Office, etc.

Products, service, market and competitors  
Products/services 
Taking the existing problems in to account, the project intends to offer a range of
breeding and fattening activities of small ruminants of different ages and breed types. The
main course of activity is divided into goat and sheep farming, which involves breeding,
fattening/meat production, milk production (in the intermediate period) as well as a range
of value addition and byproducts such as manure, skin, and offal. In addition, the project
will also provide training services for farmers groups, cooperatives, private investors or
others who are planning to enter sheep and goat businesses. The project will provide
research opportunities for University scientists and students and other national and
international institutions, NGO, universities and research centers, as well as an extension
service for local farmers and others.

86 
 
Market Analysis 
Opportunities, market inflow and out flow, target customers, past supply and present 
demand 
Livestock and livestock products marketing is one of the major activities in the project
region. Trading is almost entirely private, mainly smallholder producers, with no
involvement of the public sector. There are few restrictions and control of livestock
marketing, but local authorities have some regulations and charge fees. Traders and
brokers operate at all segments of the market. Moreover, stock movement between
markets is largely unregulated. The peculiar livestock production system in the project
region is the pastoral production system that is based on extensive grazing of communal
land. Animals supply milk for family subsistence. There is strong traditional livestock
fattening in the intensively cultivated mixed production system in the highland areas of
the region. These production systems are acknowledged for possessing better quality
indigenous sheep and goat breeds, which can serve as a supply of breeding stock for
breed improvement programs.

Currently, small ruminant production is one of the most profitable enterprises in Ethiopia.
There is a huge demand for small ruminant meat, milk, skin, manure and other
byproducts. However, there is little quantitative information on the milk and meat
production characteristics of Ethiopia's indigenous sheep and goat breeds. Goat milk is
highly valued among the societies where it is consumed entirely by the family. When
sold, goat milk fetches a higher price than cow milk. The amount of milk produced by
goats and sheep varies tremendously. The major factors as defined by the owners to
affect production are season and breed.
 
Sheep and goat meat is favored by many Ethiopians as a major component of their daily
diet and there appears to be a shortage of the product especially during religious holidays
and other festivals such as weddings. Thus, the local market for finished sheep and goats
is promising. The current local market price of these animals is reported to be highest
ever recorded. The local market does not restrict itself to selling in the project region but
also to major cities like Addis-Ababa where there is potential to market large numbers of
animals. Furthermore, the expansion of modern supermarkets in big cities and the
demand for processed and packed sheep and goat meat is encouraging increased interest
in meat processing and packaging. In Ethiopia, there are 6 export and 92 municipal
abattoirs. Traders and butchers usually purchase sheep, goats and cattle. Fattened sheep
and goats can be easily exported to Djibouti and the Middle East through Dire Dawa, a
town located about 40 km from the proposed project site, which can be facilitated
through contract farming with the existing potential exporters. The current improved
disease prevention measures and increase coverage of veterinary service will also
promote export of live animals and their products to the Gulf States and Middle East.
Moreover, establishing a contractual agreement between trading firms or with those
involved in the production of similar products can open access to new markets.

87 
 
Past Supply and Present Demand 

Table 1 depicts total exports of meat and meat products during the period 1997 - 2006.
Recent developments reveal remarkable growth in the exports of meat from the country.
According to the Ethiopian Meat Producers and Exporters Association, on average,
2979.21 tons of meat and 6396.19 tons of livestock were exported annually to the Middle
East from 1997 to 2006. The Association expects continued increases in meat and live
animal export in the coming years.

Table 1. Export of meat and live animals

Cattle, sheep and goat meat Cattle, sheep and goat live
export animal export

Year (metric tons) (Metric tons)

1997 1716.4 1304.7

1998 1529.4 1323.6

1999 2078.3 918.9

2000 1976.8 1766.3

2001 869.7 214.1

2002 662.5 165.7

2003 1722.2 607.1

2004 4007.0 3141.4

2005 7274.5 21226.0

2006 7955.3 33294.1

Total 29,792.1 63,961.9

Average 2979.21 6396.19

Source: National Bank of Ethiopia (NBE), Annual Reports.

Within the region, the focal points for small ruminant consumption are the towns of Dire
Dawa, Jijiga and Harer with populations of 822,000, 369,523 and 131,000, respectively.
This illustrates the potential market for small ruminant products in the region. However,
due to the long dry season, which lasts for more than 6 months in a year, insufficient
quantity and quality of animals is supplied to Harar, Dire Dawa, and the surrounding
small towns found in East and West Harerge zones. These types of animals have low

88 
 
market value since they are not demanded for immediate use by urban dweller, butchers
and exporters. If these animals are provided with health care and high energy ration under
feedlot conditions, their body weight and condition will be improved during the proposed
fattening period and hence, it is possible to supply improved quality products to the
residents at a reasonable price.

Market segmentation 

™ Female sheep and goats of improved genotypes to farmers around Harari region,
The project will supply:

™ Fattened goats and sheep for farmers, urban dwellers and export.
Dire-Dawa and East and West Harerge zones of Oromiya.

™ Goat milk for customers at Haramaya University and in Harar and Dire Dawa

™ Processed and packed mutton and chevon to consumers on Haramaya

beginning after the mid-term of the project.

University campus and supermarkets in the region starting during the last term
of the project.

Competitiveness on the market and competitors 
Since agricultural market is a proxy for competitive market, the expected market for the
products of the project will get high competition from local farmers, private farms
engaged in similar activities around East and West Haragghea region of Oromiya, Hareri
Region, Dire Dawa Town, Somali Region and other areas of the country. The major
difference between products supplied by the project and those supplied by competitors is
that the product supplied by the project will be well managed, free of dieses and at the
age and quality demanded by customers.
 
Technology 
In order to carry out its activity, the project will use exotic breeds for crossbreeding and
artificial insemination purposes. In addition, higher quality indigenous breeds of sheep
and goats will be used both for crossbreeding and fattening programs. Furthermore, best
management practices and veterinary service will be in place in order to supply superior
quality products and services to customers. In general, up-to-date technologies and
research results are assumed to be utilized by the project.

Competitive strategy  
Marketing functions or services include many phases such as assembling small ruminants
from local farmers, managing them to a required product, transporting to potential
markets and distributing them to customers, such as export agencies, hotels, and
restaurants. In economic terms, the utility of time, place and form will be added so that
acceptable products will be offered to the ultimate consumer at the required time.

Production and pricing strategy 
The major objective of the project is to produce small ruminants to maximize profit and
make the project sustainable. To achieve this objective, consideration of production and

89 
 
other costs that determine profitability is necessary. Haramaya University is situated in a
transitional zone between the lowlands of Eastern Ethiopia and the Eastern plateau,
where the Ogaden breed of sheep and goats are produced. Ogaden sheep and goats are
relatively larger in size and have acceptable conformation for meat production and
demand for export versus highland sheep and goats that have high demand in the local
market. Therefore, sheep and goats of Ogaden and Hararghe highland types can be
supplied for the project at a relatively lower cost for fattening and breeding purposes.
In addition, the profit from small ruminant production is attained by minimizing feed
costs which account for more than half of the total cost of production. Any attempt to
improve commercial small ruminant production and increase its efficiency, therefore,
needs to focus on better utilization of available feed resources. Accordingly, the
Haramaya University farm has 10 hectares of land used for grazing and forage
production. In addition, the project can also purchase feed from Haramaya University’s
feed processing. Through using these resources the cost of production will be lower than
that of commercial small ruminant farms in the country. In addition, the project will
adjust the price of products supplied to the consumers based on types of animal and
market research.

Promotion  
To promote its products, the project will use different promotion means such as handbills
and posters, press releases in local newspapers and magazines, and on radio and TV. In
addition, seasonal promotions will be done especially for religious holidays. The
promotion will be based on particular types of products prepared for each occasion.

Risk assessment 
Risk analysis 
A business oriented production approach will obviously encounter risks. However, the
level of risks may differ from business to business. Most agri-business are vulnerable
mainly because of the biological nature of their production system which makes them
susceptible to natural changes such as weather, disease, pests, etc. Though small ruminant
production is one of the most profitable businesses in the agriculture sector, there are
various kinds of associated risks. The major risks associated with small ruminant

™ Diseases
business are:

™ Change of weather condition

™ Market problems for inputs and outputs

The major risk emanates from disease hazards and these diseases are mostly contagious.
Once a disease event occurs, it is not only brings substantial physical loss of animals but
also a simultaneous loss of demand for the product because of consumer negativity
affecting tastes and product preference. Inputs for small ruminant businesses are labor,
feed and feed processing units, medicaments and others. A market should be available for
the inputs and for the outputs of the business, i.e., milk, crossbred and fattened live
animals. If there is time lag between demand and supply of products and importable

90 
 
inputs, the greater the risk for the business. In addition, during the dry season or if
drought occurs, the project could face feed shortages which can affect the project activity.
Instability of any kind may also disturb and have a negative consequent effect on the
implementation of this project. It may prevent the project from supplying products on
time and at the required quality as well as affecting marketing of the product to local and
export markets.
 
Exit strategies 
In order to protect animals from possible diseases outbreaks, preventive measures should
be put in place through proper management such as supplying proper feed and clean
water and supplying veterinary services such as vaccination, medicaments and flock
monitoring. In order to supply necessary input at required times, the project management
will work hand in hand with the University Farm Management Department for supplying
feed and processing service, with the Veterinary Faculty to get timely surveillance and
professional support and with other departments of the University as needed. Production
activity will be based on an annual plan in such a way that there will be no time lag
between demand and supply of products. In addition, the marketing plan will be
developed based on market research. In order to avoid feed shortages during possible
drought periods, the project will have a reserve feed stock.

Financial analysis 
Profit maximization is the overriding factor in most management decisions. Thus, an
economic profitability analysis is necessary to determine whether investing in a sheep
and goat production plan will result in profit in the long run. As a key component of a
business plan, budgeting is a management tool that helps the producer evaluate the
feasibility of a proposed venture and helps identify areas for improvement. Budgets can
identify the financial resources needed for both sheep and goat investment and annual
operating costs. Budgets can help managers make decisions based on realistic data.

Limitations in preparation of the budget: 
™ Budgets are generally constructed to reflect future actions and it is difficult to

™ Production and marketing risks will limit budget reliability. In spite of using
accurately predict future prices and yields.

best estimates, variability in production and prices may bring changes in

™ Even under careful use, errors can compound themselves to the point where
budget estimation.

™ In the farm sector in general, and in livestock production in particular,

budgets have little or no use.

business plan decision making is complex. This is especially true when

planning small ruminant production. Usually, margins are meager unless and

¾ Detailed assessment
until a strict regime is followed, i.e.,

¾ Effective management
¾ Avoidance of loss, i.e. loss making determinants should be assessed at an
early stage to avoid major losses at a later stage.
 
91 
 
Materials and methods used for analysis 
™ Two alternative production systems of fattening and breeding are considered in

™ Costs and returns for the two operations are calculated from biological and cost
the project for both goat and sheep.

™ Biological parameters are estimated for flock fertility at eighty percent and kid
and revenue estimates used in a separate manner.

™ Fixed costs are estimated only for equipment and maintenance as the farms have
mortality at 9 percent.

™ Under operating costs, the primary component is feed cost which has been
already been established.

estimated separately for the fattening and breeding units. For breeding units, feed
cost is estimated for early pregnancy, late pregnancy, lactation and during the
open/dry period. In addition to this, a separate cost analysis is made for

™ Revenue estimates are derived mainly from sale of kids, ewe/does and culled
Buck/Ram.

™ Project worth analysis is estimated by analyzing cash flow estimates and Net
ewes/doe and buck/ram.

™ The above procedure will be used for the breeding unit and the same can be
Present Value at 7.5 percent discount rate.

applied for preparation of a feasibility analysis report pertaining to the fattening

™ The expected returns for the fattening unit are encouraging whereas those for the
unit.

™ Returns are not even sufficient to cover variable costs.

breeding unit are below operating costs.

™ The enterprise would not be self-supporting in the short run

™ If breeding of small ruminants is for improving the livelihoods of vulnerable
populations, economics will play a lesser role in deciding whether to produce

™ Many organizations may sacrifice short run returns to achieve long term social
small ruminants.

™ If it is viewed only as a profitable enterprise, the best decision may be to exit the
benefits.

enterprise and employ the resources in a different enterprise or investment.

Project financial feasibility analysis  

 Financial feasibility of the goat fattening unit 
Estimations are presented for a goat fattening unit for 150 goats. Four cycles of
fattening will be conducted annually for a total of 600 goats fattened. In order to
know the feasibility of investing in a goat fattening business, costs are estimated as
follows.

92 
 
 Table 2. Estimated fixed costs for the fattening unit

No. Description Cost in ETB

1 Equipment & Machinery 50,000
2 Renovating of existing building 50,000
structure
3 Total 100,000

Table 3. Feed requirement and estimated costs per production cycle for fattening unit

No. Concentrate Forage Total

Type of feed
Amount of feed required per goat per day 0.2 0.5 0.7
No. of goats per production season 150 150
Total feed quantity required per day 30 75
Total feed quantity required per production 2700 6750
season (90 Days)
Cost per Kg of concentrate and forage in 2.80 1.00
ETB
Total estimated cost in ETB 7, 560 6, 750 14, 310
Cost per unit of goat in ETB 50.4 45 90.40

Each production cycle is for three months (90 days)

Table 4. Human resource requirements for the fattening unit

Job Description Supervisor Accountant Daily farm labor

No of Employees 1 1 4
Monthly Salary in 1, 500 500 450
ETB
Annual Salary 18, 000 6, 000 21, 600
Remark One person will One person will Four persons will
be employed to be employed to be employed for
manage all manage all feeding, cleaning
activities activities and guarding.
Total expenditure 45, 600
on all Labor per
Year in ETB
Half of the costs are shared by the fattening unit. Hence share of expenditure for
fattening unit is 22,800 in ETB.

93 
 
 Table 5. Operation cost estimates for goat fattening for one year

Cost per goat per Total cost per Total estimated

production Season production cost per Annum
ETB Season ETB ETB
Feed cost 90.40 13, 560.00
Labor Cost 56.00 8, 400.00 33, 600.00
Health Care 10.25 1, 537.50 6, 150.00
Machinery Rent 18.33 2, 750.00 11, 000.00
Purchase of goat 300.00 45, 000.00 180, 000.00
Marketing cost 15.00 2, 250.00 9, 000.00
Tax 12.60 1, 890.00 7, 560.00
Insurance 5.00 750.00 3,000.00
Miscellaneous 10.00 1,500.00 6,000.00
Total 517.58 77637.00 310548.00

Financial feasibility of the goat fattening unit 
A number of methods are used to study the feasibility of a unit. The most widely used
statements are balance sheet, income statement and cash flow statement. Even among
these, there are a wide variety of costs and revenues at different stages to be analyzed.
But, in our project which is a restricted study, all assets are the livestock only and all
revenues are derived from the sale of these animals. Hence, there are only two items in
the present balance sheet.
1. Costs of all types
2. Revenues derived from the sale of animals.

Table 6. Balance Sheet projections

No. Assets Liabilities Net revenue

1. 600 goats @ ETB 650 = 39, 0000 310, 548.00 79, 452.00

™ This particular balance sheet shows a surplus of net revenue equal to ETB 79,452.
™ One another method is used to provide additional information on financial

™ The usefulness of ratios depends to a considerable degree on a reliable basis for

progress, i.e. ratio analysis.

comparison. This will determine whether the ratio for a particular farm is good,
fair or poor. Here again, assets and liabilities are taken in terms of operating costs

™ A classical measure of financial condition used in balance sheet analysis is the

excluding other fixed costs.

current ratio, which indicates the extent to which current assets, if liquidated,

™ Current Ratio = Total Assets/ Current Liabilities

would cover current liabilities.

™ Current Ratio = 390,000/310,548.00 = 1.26

™ This ratio reveals that the current assets cover the current liabilities by 1.26 times.
Usually an ideal current ratio of two times or 2:1 is suggested in business which is

94 
 
 ideal to manufacturing industries, but in businesses like livestock farms, it

™ Higher ratios are always preferred.

depends on the sales generated.

Important terms 
™ Income Statement: An income statement is also a summary of receipts and

™ Receipts: Receipts are derived from annual sales. Here, the only source of
gains during a specified period, usually a year.

™ Expenses: All expenses involved in the operation of the business during the
revenue is through sales of goats.

™ Net income: The difference between the receipts and costs is considered as
year are considered. This includes fixed as well as variable costs.

net income. For large enterprises, three types of income are considered. i.e.,
net cash income, net operating income and net farm income. In our study net

™ Income statement ratios: One of the income statement ratios is expense to

cash income is considered as ETB = 79,452.

income ratio used to measure the input – output efficiency of the business, i.e.,
measure the margin by which the value of total production exceeds production

™ Operating ratio: Total operating expenses/Gross income

costs. Controlling expenses in relation to income is key to a profitable farm

™ In our present study, the operating ratio = 310, 548/390,000 = 0.80

™ Total operating expenses amounted to 80 cents per birr of gross income.
™ Fixed ratio: Fixed ratio = Fixed expenses/Gross income. Here it is
100,000/39, 0000 = 0.26. Fixed expenses amounted to 26 cents per Birr of

™ Cash flow Statement: It is all cash transactions affecting the business during
gross income.

a year which is obtained by cash receipts minus cash payments. This source is
also limited, i.e., goats are sold after every quarter. Projections for this unit

™ From all these statements, this unit is promising and hence we can start
equal ETB = 79,452.

™ Assuming the costs of inputs and the market price of output will rise
establishing the unit.

proportionately through the project life, the project feasibility analysis is was
performed using a discount rate of 7.5 percent to analyze the net present value
of goat fattening project. Using the NPV criterion for an investment with an
objective of profit generation, a NPV greater than zero is acceptable. Since

™ However, the project worth analysis for breeding unit is not so promising at
NPV in our study is positive, this investment is acceptable.

least for three years. The details of the breeding unit is furnished below

95 
 
 Financial feasibility of the goat breeding unit   

Table 7. Basic biological parameters for estimating costs and returns

Biological Estimation Maximum Limit

parameters
Flock fertility rate 85 % 100
Kid mortality rate 9% -

Operating costs are estimated separately for pregnant does, late pregnancy,
lactation period and the dry period. In addition, operating costs are separately
estimated for bucks and for kids.

Table 8. Consolidated summary of total feed costs for 215 goats and for 155 kids

No. Feed cost for Feed cost for Feed cost for Total costs
200 Pregnant 15 Bucks 155 Kids
Does
1. 50, 514.00 7, 172.25 17, 391.00 75, 077.25

96 
 
 Table 9. Operating cost estimates for pregnant does

No. Quantity Cost Feed Total Total cost

per cost feed for three
unit per cost months
goat for
200
goats
1. Feed cost Concentrate 0.10 2.80 0.28 56.00 5, 040 9,540
for early
pregnant Forage 0.25 1.00 0.25 50.00 4, 500
doe (ETB)
2. Feed cost Total cost for two months
for Does Concentrate 0.15 2.80 0.42 84.00 5040
in late 3000 8,040
pregnancy Forage 0.25 1.00 0.25 50.00

3. Feed cost Total cost for four months

for Does Concentrate 0.20 2.80 0.56 112.00 13, 440
during
nursing Forage 0.25 1.00 0.25 50.00 6, 000 19,440

4. Feed cost Total feed cost for three months

for does Concentrate 0.15 2.80 0.42 84.00 7, 560
during dry
season 0.50 1.00 0.50 100.00 9000 16,560
Forage
5. Feed cost Total feed cost for one year
for bucks
15 Concentrate 0.20 2.80 0.56 8.40 3, 066

Forage 0.75 1.00 0.75 11.25 4, 106.25 7,172.25

6. Total feed cost for does and bucks for one year 57, 686.25

97 
 
 Table 10. Operating cost estimates for kid feeding for six months

No. Type of Quantity Cost per Cost per Feed cost Total cost
feed unit kid for 155 during
kids lactation
period of four
months
Feed cost during nursing
1. Concentrate 0.05 2.80 0.14 21.70 2, 604.00
Forage 0.15 1.00 0.15 23.25 2, 790.00
2. Feed cost during post weaning period, three months
Concentrate 0.20 2.80 0.56 86.80 7, 812.00
Forage 0.30 1.00 0.3 46.50 4, 185.00
3. Total feed cost for 155 kids for seven months 17, 391.00

Table 11. Operating cost estimates for goat breeding unit for one year

Total No of goats Total cost for 200 goats

Purchase price of breeding goats 200 60,000
@ ETB300
Purchase price of breeding bucks 15 15, 000
@ ETB 1000
Labor cost for one year 215 + 150 22, 800
Health care for all goats@ 215 + 155 3, 792.50
ETB10.25 ( 215 + 155)
Total Feed cost 215 + 155 75, 077.25
Marketing costs @ ETB 15 for 155 2, 325.00
155 kids
Miscellaneous expenses for all 215 + 155 25, 000
goats
Total expenses 204,148.00

Unlike the fattening unit, the breeding unit generates a small amount of revenue per
year. This is partly because there is only one lamb/kid crop per doe/ewe per year.
However, after five years when breeding does and bucks are sold, a substantial
amount of revenue can be generated. The main objective of this project is to help the
farmers by distributing high quality animals.
1. Costs of all types= ETB 204, 148.00
2. Revenue derived from the sale of 155 kids= ETB 93,000

98 
 
 Table 12. Balance sheet projections

No Assets Liabilities
1 155 Kids@ ETB 600 = 93,000 204, 148.00
2 A Deficit of ETB-111,148 ---

™
™
Current Ratio = Total Assets/ Current Liabilities

™
Current Ratio = 93,000/204,148.00 = 0.46

™
This ratio reveals that the current assets do not cover current liabilities.

™
Operating ratio = Total operating expenses/ Gross income

™
In our present study operating ratio = 204,148.00/93,000.00 = 2.20
Usually this ratio should be as small as possible.

Due to the continuous deficit which has been estimated for the goat breeding unit, the

™ They are profitable if rangelands are sufficiently available.

possible remedies to minimize the losses are:

™ The only cost component is feed cost. If possible, make arrangements with the

™ Production can be improved by improvement in rangelands/cultivate pastures/

legal pastoral land occupants for continuous supply of feed at a subsidized rate.

™ Introduce buy-back facilities involving local dynamic potential farmers in

crop residue utilization.

™ Involve local villagers where 1-5 heads can be raised in intensive crop cultivation
arranging feed supply.

™ Improve overall, and particularly reproductive, management so that two crops or

areas.

™ Keep labor and breeding does and buck costs under fixed costs. Furthermore, one
at least three kids/two does in a year is possible.

other possibility to make the unit as profitable as possible is estimating only feed
costs as operating costs with the rest of the costs as fixed costs. This would
provide a margin.

Conclusion 
Based on the financial results from the two units, one of the critical components where
financial loss is occurring is the feed cost, which has a large influence on the performance
of the enterprise resulting in either loss or a small profit.

Possible remedy:  Feed resources and feed management.  
1. To make Haramaya University Sheep and Goat Production (HUSGP) a
sustainable unit, identification of feed production source is very important. The
availability of rangelands, which is around 62% of the total land area of the
nation, is an option for feed production. Involving the farming communities who
depend for their livelihood on these rangelands is a viable and good proposition.
2. Involve rural people in forage development by introducing training and assistance
by Haramaya University. One interventions of the university is to supply
strategically selected forage species with multiple uses (food, fuel and fodder)
which can withstand weather calamity.

99 
 
 3. Technological support for the maintenance of traditional sustainable natural
grazing land used by the local community who can enroll as beneficiaries and
members of HUSGP for sustainable and improved rangeland management.
4. Encourage rural people to use genetically superior HU animals.
5. Training facilities must be extended to local farmers especially with high school
education level to train them in para-veterinary skills to handle emergencies.
6. Transfer improved management practices to farmers to improve their livelihood.
7. Organize women’s groups to form cooperatives with a common objective of
establishing sheep and goat farms. Provide them with training improved
management.
8. Encourage and promote the traditional sustainable natural grazing lands to support
small ruminant production by local community. This is a neglected sector in
animal production in Ethiopia.
9. Encourage successful rangeland development through interventions of
technically, socially and economically advanced skills.
 
Establishment and building of brand image  
1. Establishment and building of a brand image is an important in making the sheep
and goat unit a sustainable business enterprise. This can be achieved by following
a strict regime of quality control and introduction of a wide variety of
standardization techniques and principles.
2. Use an awareness campaign focusing on the safety and nutrient content of small
ruminant meat, e.g., low cholesterol, low sodium, etc.
3. Slaughtering of animals in a modern and scientifically designed abattoir can add
to the establishment of a brand image.
4. Sales promotion through establishment of a logo to avoid imitation, tamper-proof
and attractive packaging should make customers aware of the benefits of quality
and the unique value linked with the product. Advertising as a sales promotion
tool to establish brand image is very important.
5. Finally, once the brand name is established there will be assured demand with a
commanding price with cascading results beneficial to all stakeholders.
6. Two crucial aspects, cost minimization and revenue maximization, are the two
components for the success of any enterprise from an economic point of view.
Note: Financial feasibility analysis for the sheep farm is similar to the example
demonstrated above for the goat farm and can be calculated by adjusting cost and
revenues pertinent to sheep fattening and breeding.

100