Can you really save money by raising your own organic chickens for the table?  JK Lawrence probes in to the costs and benefits of this Downsizer dream.

If you’ve ever looked at the price of a really good, organically reared chicken, you’ve probably thought – “surely I could save money by raising them myself?” Most people don’t get beyond that thought. But if you are one of the few brave souls doing it, or thinking of doing it, I want to ask you – are you sure you’re saving money? If not – is it a hobby you can afford? And do you actually know the answer to this, or do you just assume it’s all okay?

It’s not as easy as you might think to calculate the cost of a home grown chicken. Most people tot up what they’ve spent, and just see if the number looks acceptable. I call this the “shopping list” approach. It does tell you the cost of your shopping, but not the cost of your chickens.

Consider: suppose you bought everything you needed for your chickens in year one – enough to last you five years (say you put the feed in the freezer). And suppose you spend £400, and you slaughter 20 chickens in your first year. Does that mean that each of these chickens cost you £20? That’s pretty steep for a chicken! And does it also mean that the rest of your chickens, for the next four years, are free? In which case, why not skip the first year and just get the free chickens? Obviously this is the wrong way to look at it. If you have 100 chickens over five years for £400, then (ignoring the cost of spending the cash up front rather than putting it into savings) they cost you £4. Now you know that you’re making money, because a decent organic chicken from Sainsbury’s is about £8. This is not a hobby, this is you halving your food cost.

So if the “shopping list” approach isn’t helpful, what should we do instead? There is a way to do it: we need a “model”. We’ll also add a “cash flow forecast” at the end to look at when the cost will actually hit your wallet.

A cost model allows you to manipulate costs in a way that tells you not only what something really costs, but also how your costs would change if you changed what you did. I will give you a simple model, loosely based on my first experiment with raising chickens. Once you’ve understood how it works, you can easily modify it to do the figures for your own situation.

Production

The first thing your model must do is calculate your production. The model will use these numbers later.

Production statistics

Batch size * batches per year * (1 - % loss)

Production statistics are very simple: they tell you how many chickens you produce, and how long it takes to produce them. You’ll be using these numbers later so take the time to estimate what you’re doing, or what you plan to do.

Note that when I give you bits of the model, there are numbers in white boxes, and numbers in shaded boxes. The numbers in white boxes are the ones you need to add in. Those in shaded boxes are calculated. I give the calculation on the right.

Variable Costs

There are three kinds of cost: fixed, variable, and semi-variable. Fixed costs are with you no matter what size your production – an example would be a magazine subscription, or a membership fee. Variable costs are directly dependent on how much you produce – feed cost is a good example. Finally, semi-variable costs are partly fixed – but over a small amount of production. As you increase production, semi-variable costs will increase in steps. Most of the expensive items – such as electrical fences and chicken houses – go into this category.

We will tackle variable costs first, since they are the first thing most people think of when trying to calculate the cost of raising chickens.

Variable costs

If you haven’t raised chickens before, a lot of these numbers will be guesswork. Notice, however, the cost per chicken. If the number is low (for instance, with grit), then it doesn’t matter if you are out by a bit. For instance, I could end up needing double the amount of grit I estimated, and it would still only add 4p to the cost of a finished chicken. Don’t sweat the small stuff.

If you add up the column of variable costs, you come to £3.71 per chicken. However, this is not actually quite right.

We need to add a new line: the total cost, adjusted for losses (you estimated this back in the “Production” section). This gives us our final variable cost per chicken. These costs won’t change when you change your production, unless you increase so much that you can buy supplies more cheaply.

Semi-fixed costs

The next cost most people look at is the equipment, since these are typically big purchases. Coops, feeders and so on all cost money, and it quickly adds up. Someone starting out will find this is a particular pinch because you may need to buy something larger than necessary, to allow you to increase your flock later.

Broody Cost

First let’s look at the less obvious cost area – the broody. If you use an incubator, you don’t need this section of course.

The main cost of using a broody is not the feed, it’s the lost eggs. I’ve based the feed cost on an assumption of about 20% of what my layers normally eat. In fact, she appears to eat less. So out of the £15.29 that my broody costs per batch of eggs, only 32p is food, and the rest is the “opportunity cost” of the eggs. An opportunity cost is one where you don’t directly pay for an item, but you assume that by giving something up, it will cost you. In this case, I’m not getting eggs, and when I buy them from the store, I pay about 25p each, because I only buy organic eggs. Of course, I haven’t been buying eggs, but the opportunity cost still exists, because I’m probably using more of other protein sources in the family diet, and buying instead of making cakes. If you sell surplus eggs, the opportunity cost is the price you get – since you won’t be selling them.

The broody is a good example of the “stepwise” increase of semi-fixed costs. A broody costs the same, whether she sits on one egg or twelve. But get to 13 (at least in my model), and you need to add another broody.

Given the cost involved, it becomes fairly uneconomic to have a chicken sitting on only a few eggs – the economics drive you to maximise the number of eggs under each chicken, until that results in more unhatched eggs, of course. If, back in production, I changed the batch size to 11, I’d need to start with 13 eggs per batch (because of the loss rate). Then I’d need two broodies, and the cost per slaughtered chicken would rise from £1.61 to £2.93 – an increase of 82%, and a fairly big increase on my total cost per chicken as well.

Equipment

When you do it this way, investment in equipment does not look quite such a big problem – the broody is actually more expensive than all the other kit combined!

Fixed costs

Lastly we deal with costs that don’t normally change as you increase your flock. These are called fixed costs. My only fixed cost is for magazines.

Other costs

There are plenty of costs that do not appear in this simplified model. I haven’t included labour, rent, or electricity, for example. There are good reasons for this:

• There is no opportunity cost to my labour, since I look after the chickens in my spare time. If I weren’t doing this, I would probably be pursuing some other non-remunerative hobby. However, if I did this instead of paid work, or hired some help, I’d have to add in labour cost.

• The same argument goes for my land, since the chickens use the garden.

• I use very little electricity in looking after the chickens. If you were to use an incubator and brooder, or freeze your slaughtered chickens, you might want to include electricity costs.

To add other costs to the model, you need to work out how they vary. Do they increase with each chicken added to the flock? Then put them with the variable costs. Do they increase stepwise? The electricity would be a good example of this, since the brooder and incubator will use the same amount of energy regardless of batch size, and only increase as you add more batches. Are they fixed? An example of this would be the cost of registering for organic status, or having a chicken-sitter at holiday times (but don’t include your sitter if they’re already looking after your cat, and aren’t charging extra for the chickens).

And now for the exciting bit

Based on the above model, a chicken would cost £6.92 to produce, which compares favourably with Sainsburys. But can we do better? Here are the costs per chicken for the following variations on the above model. Are they as much as you expected?

The Big Picture

By creating a cost model, you’ve built yourself a valuable tool that not only shows what your current approach costs, but also helps you think through the financial impact of changes in practice. You only lack an idea of the immediate impact on your wallet. So now we move on to a twist on the “shopping list”, called a “cash flow forecast”.

First you need an equivalent to your chickens – the price of whatever you’d buy instead. Next you need a discount rate – this is normally your borrowing rate or savings rate (or something in between). The point of this is that cash now isn’t the same as cash next year. It’s called a “discount” rate because the same amount is “discounted” (worth less) next year vs this year. If you’re borrowing to fund this project, the bank will charge you interest, so you might need £107 to pay back a £100 loan. If you have the cash and would otherwise save or invest it, then your expected return on that money is your discount rate. In the long term, the stock market could be expected to return £107 next year for £100 invested this year. Hence I’ve chosen a 7% discount rate for myself.

What this shows is that I will need to come up with about £230 to fund my project this year. Over the following four years, I will save money, but only just enough (after discounting the value of those savings) to pay for the up-front cost of equipment. Over a five year horizon, I save a paltry £1.30 per year.

I’m glad I know this. If I can keep to my plan, and if my numbers are not wildly wrong (a small amount of error won’t affect the model much), then I will more or less break even. I’m able to borrow the £200-odd I need up front. I’m not out to make a profit, just to have my own, tasty chickens raised exactly the way I want.

Assuming you’ve been following along with your own version, you now have the big picture. You know what your chickens cost, and you know when you’ll have to pay. Best of all, you know whether your future plans will make financial sense before you’ve even tried them. So – now that you’ve got the hang of chickenomics – why not try applying it to your next project? I’m working on pigs….