Construction and establishment of a dairy and livestock complex for 1200 cows in the territory of Sporny farm, Izobilnensky district, Stavropol Krai

In modern conditions establishment of large-scale dairy and livestock complexes that are effective and profitable agricultural enterprises is a promising direction for development of the agro-industrial complex in many Russian regions. Development of such agricultural enterprises right from the start always suggests a necessity in preparing sound business plans and financial models, which could, alongside with solving other tasks, solve the main one – to justify and convincingly show the economic feasibility and effectiveness of implementation of a certain project with account for its peculiarities.

It should be noted that the return on investment of dairy complexes, first of all, depends on the technical and economic feasibility of the location of the complex, its size, equipment, cattle breed, the achieved yield rate, quality and full value of feed.

The analytical group Intesco Research Group has extensive experience in development of business plans and financial models of construction and establishment of agricultural and agro-industrial enterprises of various types. One of such projects was the business plan on construction and establishment of a dairy and livestock complex in Izobilnensky district of Stavropol Krai.

Structure of production under development

The complex under development was to include construction, modern equipment and organization of:

• a dairy and livestock farm for 1 200 milking cows – keeping and breeding of high-yield cows, milk production in the volume of 36 tons daily for regular supplies to the plant for its processing and cheese production;
• a (refrigerated) slaughter house – beef production and processing;
• a feed milling plant – growing cereals and production of feed in the volume of 3 000 tons annually to provide the cattle with feed;
• machine and tractor fleet and equipment;
• supplies from Germany and Holland of 1 200 livestock units of Holstein-Friesian breeding heifers;
• 46 jobs with the average wages of 22 thousand rubles.

Tasks of the complex

During its implementation, the project was to:

• become a supplier of milk for a workshop for milk processing and cheese production;
• provide deriving of income from milk and meat sales;
• since the fourth year – provide project profits based on sales of heifers.

Justification of strategic effectiveness

Strategic effectiveness of project implementation was justified by analysts of Intesco based on the following:

• the existing conditions, positive for establishment and development of large-scale agricultural complexes, in Russia and Stavropol Krai, as well as in the territory of Sporny farm, Izobilnensky district;
• complete provision of sales;
• introduction of the most effective and modern technologies at all production cycle stages: forage production, cattle handling, milk production;
• high quality and ecological cleanness of the products as the best competitive advantages in modern conditions.

Effectiveness estimates

The business plan and financial model reflected and justified through the conducted analysis and calculations the budget effectiveness of the project that expressed itself in the following estimates:

• net income/net present value – 569. 796 million/180.543 million rubles;
• simple/discounted pay-back period – 5.84/6.83 years;
• internal rate of return – 24.5%;
• breakeven point – 46% (29.847 million rubles/quarter);
• total payments of taxes and dues – 78.643 million rubles.

Project cost effectiveness rates

The project reflected the cost effectiveness of its implementation, which expressed itself in the following:

• cows, unlike other farm animals, are able to withstand, with no impact on yield and without a significant increase of feed expenditure, temperatures below zero well and can be kept in unheated rooms, which enables reducing power costs and at the same time obtaining viable progeny – that in future become high-yield and healthy cattle;
• free-stall housing of cows in rooms without summer grazing and the selected singly-type diet owing to mechanization of production contributes to reducing labour costs;
• initially low cost, which is provided by introduction of modern equipment and technologies at all stages: from growing and conservation of high-quality forage to milk production.

The above mentioned business plan and financial model were developed within the time period coordinated with the project initiator and were adopted for further implementation without any amendments.

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