Pre-Feasibility Study - AMIS

Pre-Feasibility StudyAnimal Feed Mill(Inclusive of Urea Molasses Block Preparation)Small and Medium Enterprise Development AuthorityGovernment of Pakistanwww.smeda.org.pkHEAD OFFICE6th Floor LDA Plaza Egerton Road, LahoreTel 111 111 456, Fax 6304926-7 Website www.smeda.org.pkHelpdesk@smeda.org.pkREGIONAL OFFICEPUNJAB8 th Floor, LDA Plaza,Lahore,Tel: (042) 111-111-456Fax: (042)6304926-7helpdesk@smeda.org.pkREGIONAL OFFICESINDH5TH Floor, BahriaComplex II, M.T. Khan Road,Karachi.Tel: (021) 111-111-456Fax: (021) 5610572helpdesk-khi@smeda.org.pkREGIONAL OFFICENWFPGround FloorState Life BuildingThe Mall, Peshawar.Tel: (091) 9213046-47Fax: (091) 286908helpdesk-pew@smeda.org.pkMarch, 2009REGIONAL OFFICEBALOCHISTANBungalow No. 15-AChaman Housing SchemeAirport Road, Quetta.Tel: (081) 831623, 831702Fax: (081) 831922helpdesk-qta@smeda.org.pk

Pre-Feasibility StudyAnimal Feed MillTable of content1INTRODUCTION TO SMEDA . 42PURPOSE OF THE DOCUMENT . 43CRUCIAL FACTORS & STEPS IN DECISION MAKING FOR INVESTMENT. 53.13.23.33.4STRENGTHS .5WEAKNESSES .5OPPORTUNITIES .5THREATS .64PROJECT PROFILE . 64.14.24.34.44.54.64.74.84.9OPPORTUNITY RATIONALE.6PROJECT BRIEF .9VIABLE ECONOMIC SIZE .9MARKET ENTRY TIMING .9PROPOSED BUSINESS LEGAL STATUS .9PROPOSED CAPACITY .9PROJECT INVESTMENT .10PROPOSED LOCATION .10KEY SUCCESS FACTORS/PRACTICAL TIPS FOR SUCCESS .115SECTOR & INDUSTRY ANALYSIS . 115.1 MAJOR PLAYERS .115.2 HUBS OF ANIMAL FEED MILLS .115.3 LEGAL ISSUES REGARDING ANIMAL FEED AND UMB MILL .126MARKET INFORMATION. 136.1 SECTOR CHARACTERISTICS .136.2 MARKET POTENTIAL .136.3 TARGET CUSTOMERS .157PRODUCTION PROCESS FLOW FOR COMPOUND FEED . 157.1 RAW MATERIAL REQUIREMENT .167.2 CLASSIFICATION OF FEED INGREDIENTS: .167.2.1Protein feedstuffs: .167.2.2Carbohydrate/energy feedstuffs: .177.2.3Mineral supplements: .177.2.4Fats and oils: .177.3 FEED FORMULA FOR CATTLE/BUFFALOES: .177.4 PACKING COST .187.5 MACHINERY REQUIREMENT .188RAW MATERIAL (UMB) . 198.1 CLASSIFICATION OF FEED INGREDIENTS: .198.1.1Protein Sources:.198.1.2Carbohydrate Sources:.208.1.3Mineral supplements: .209PRODUCTION PROCESS OF UREA MOLASSES BLOCK (UMB) . 209.1 PROCESS FLOW OF UMB .219.2 PREPARATION OF FEED INGREDIENTS .211PREF-85/March, 2009/Rev2

Pre-Feasibility StudyAnimal Feed Mill9.2.1Molasses .219.2.2Urea .229.2.3Salt .229.2.4Cement or quicklime.229.2.5Bran.229.2.6Equipment for mixing:.229.3 INTRODUCTION OF THE COMPONENTS .229.4 MOLDING .239.5 CUTTING THE BLOCKS.239.6 DRYING .231010.110.210.310.410.510.610.711UTILIZATION OF UMB . 23SPECIES OF LIVESTOCK .24FEEDING PERIOD .24MINIMUM ROUGHAGE REQUIREMENTS .24ADAPTATION OF ANIMALS .24FEEDING SYSTEM .24ESTABLISHING PRIORITIES .24MACHINERY REQUIREMENT .25LAND & BUILDING . 2511.1 COVERED AREA REQUIREMENT .2511.2 RECOMMENDED MODE .2612HUMAN RESOURCE REQUIREMENT . 2612.1 UTILITIES REQUIRED .261313.113.213.313.413.513.6FINANCIAL PROJECTIONS. 27PROJECT COSTS .27PROJECTED INCOME STATEMENT .28PROJECTED BALANCE SHEET .29PROJECTED CASH FLOW STATEMENT .30COST OF SALES .31OPERATING COST .3114KEY ASSUMPTION. 3215USEFUL TERMINOLOGY . 332PREF-85/March, 2009/Rev2

Pre feasibility StudyAnimal Feed MillDISCLAIMERThe purpose and scope of this information memorandum is to introduce the subject matterand provide a general idea and information on the said area. All the material included inthis document is based on data/information gathered from various sources and is based oncertain assumptions. Although, due care and diligence has been taken to compile thisdocument, the contained information may vary due to any change in any of the concernedfactors, and the actual results may differ substantially from the presented information.SMEDA does not assume any liability for any financial or other loss resulting from thismemorandum in consequence of undertaking this activity. The prospective user of thismemorandum is encouraged to carry out additional diligence and gather any informationhe/she feels necessary for making an informed decision.For more information on services offered by SMEDA, please contact our website:www.smeda.org.pkDOCUMENT CONTROLDo Document No.PREF-85Prepared bySMEDA-PunjabApproved byProvincial Chief PunjabIssue DateMarch, 2009Issued byLibrary Officer3PREF-85/March, 2009/Rev 2

Pre feasibility Study1Animal Feed MillINTRODUCTION TO SMEDAThe Small and Medium Enterprise Development Authority (SMEDA) was established withthe objective to provide fresh impetus to the economy through the launch of an aggressiveSME support program.Since its inception in October 1998, SMEDA had adopted a sectoral SME developmentapproach. A few priority sectors were selected on the criterion of SME presence. In depthresearch was conducted and comprehensive development plans were formulated afteridentification of impediments and retardants. The all-encompassing sectoral developmentstrategy involved recommending changes in the regulatory environment by taking intoconsideration other important aspects including finance, marketing, technology and humanresource development.SMEDA has so far successfully formulated strategies for sectors including, fruits andvegetables, marble and granite, gems and jewelry, marine fisheries, leather and footwear,textiles, surgical instruments, transport and dairy. Whereas the task of SME developmentat a broader scale still requires more coverage and enhanced reach in terms of SMEDA’sareas of operation.Along with the sectoral focus a broad spectrum of business development services is alsooffered to the SMEs by SMEDA. These services include identification of viable businessopportunities for potential SME investors. In order to facilitate these investors, SMEDAprovides business guidance through its help desk services as well as development ofproject specific documents. These documents consist of information required to makewell-researched investment decisions. Pre-feasibility studies and business plandevelopment are some of the services provided to enhance the capacity of individual SMEsto exploit viable business opportunities in a better way.This document is in the continuation of this effort to enable potential investors to makewell-informed investment decisions.2Purpose of the documentThe objective of the pre-feasibility study is primarily to facilitate potential entrepreneurs tofacilitate investment and provide an overview about processing of animal feed and ureamolasses blocks. The project pre-feasibility may form the basis of an important investmentdecision and in order to serve this objective, the document covers various aspects of feedmilling and urea molasses block concept development, start-up, and production, financeand business management. The document also provides sectoral information, brief ongovernment policies and international scenario, which have some bearing on the projectitself.This particular pre-feasibility is regarding “Animal Feed Mill with Urea Molasses Block(UMB) Preparation” which comes under “Livestock and Agriculture” sector. Beforestudying the whole document one must consider following critical aspects, which form thebasis of any investment decision.4PREF-85/March, 2009/Rev 2

Pre feasibility Study3Animal Feed MillCrucial Factors & Steps in Decision Making for InvestmentBefore making the decision, whether to invest in this project or not, one should carefullyanalyze the associated risk factors. A SWOT analysis can help in analyzing these factorswhich can play important role in making the decision.3.1 Strengths Investment in dairy and livestock sector is increasing day by day and quality feedis a pre requisite in profitable dairy and livestock farming.Feed and Urea Molasses Blocks (UMB) formulation according to moderntechniques with proper utilization of locally available cheaper feedstuffs leads tosuccess in dairy and livestock farming hence for feed business too.3.2 Weaknesses Limited availability of protein sources of standard quality due to low or staticproduction, processing technology, variable composition and adulteration.Comparatively poor nutrient composition of indigenous feed ingredients due todifferences in varieties and use of improper soil fertilizers.Improper use of pesticides, the residues of which result in poor feed utilization.Lack of proper storage facility. Due to this fact various agricultural productswhen produced under quite high moisture content, thus liable to be affected withinsect damage, auto-oxidation and fungal contamination.Lack of nutritional data of indigenous feed ingredients particularly for aminoacids, energy, vitamins, minerals and by pass protein value especially in highproducing cattle/buffalo.Improper storage, transfer, grading, feed milling and mixing of feed ingredientsmay also affect the quality of feed.Animal feed and urea molasses blocks (UMB) cannot be produced economicallyon a small scale. Cost of labour for each batch and cost of overhead keep ondecreasing with the increasing production.There is no quality standards and quality control for UMB. The excess intake ofUrea may be fatal to livestock resulting in urea toxicity.3.3 Opportunities The annual growth rate in livestock population of Pakistan was 3.8 percent(Economic Survey of Pakistan, 2007-08) due to which there is demand forcompound feed. The increased productivity would require better feed utilizationand increase in overall feed availability both from fodder crops and formulatedcompound feed.The agro industrial by products can be better utilized in formulated compoundfeed.In order to meet the rapidly increasing demand for the various kinds of livestockproducts (Milk & meats), the better rations with improved feed formula areneeded to get more meat and milk, for the same feed supplies. By increasing5PREF-85/March, 2009/Rev 2

Pre feasibility StudyAnimal Feed Milllivestock numbers, rather than their average weight, the feed requirements aremuch larger.3.4 Threats 4Implementation of WTO. Open and competitive commodity pricingThere is no feed ingredient quality control program as improper storage, transfer,grading, feed milling and mixing of feed ingredients may also affect the qualityof feed.The prices of different feedstuffs vary through out the year. Improper storage ofraw material can affect its nutritional value.There is limited availability of protein sources of standard quality due to low orstatic production, processing technology, variable composition and adulteration.Lack of proper labeling on product.Lack of awareness among dairy and livestock farmers to use compound feed &UMB for the high production of their animals is a constant threat for feed millbusiness as well.Project Profile4.1 Opportunity RationaleLivestock production is an integral part of Pakistan's agriculture sector and plays a vitalrole in national economy. At present, livestock is contributing about 52

Government of Pakistan www.smeda.org.pk HEAD OFFICE 6th Floor LDA Plaza Egerton Road, Lahore Tel 111 111 456, Fax 6304926-7 Website www.smeda.org.pk Helpdesk@smeda.org.pk REGIONAL OFFICE PUNJAB 8 th Floor, LDA Plaza, Lahore, Tel: (042) 111-111-456 Fax: (042)6304926-7 helpdesk@smeda.org.pk REGIONAL OFFICE SINDH 5TH Floor, Bahria Complex II, M.T .