Chickenomics – Is it worth keeping backyard chickens?

Chickenomics – Is it worth keeping backyard chickens?

Overview

So you want to keep chickens? Well is it worth doing so? Is it really cost effective to have chickens running around your backyard? We are going to examine the costs and benefits and by that we mean all the costs and benefits of keeping chickens. The simple question is how much do they eat and how many eggs do they produce, the more complex question is how much does that all cost. The numbers obviously add up for farmers and supermarkets and include a profit element but they're working on a much bigger scale than the backyard hobbyist and have bulk savings that we couldn't hope to achieve. So let's see if the numbers add up for us.

A few assumptions

We're going to have to make a few assumptions to work out if it's going to worth doing this and our first assumption is that you are keeping some chickens. Obvious you would think but there's a few other assumptions that implies.

Keeping chickens will require some space in your garden as your birds won't be happy unless they have space to roam and stretch, not a huge amount of space is needed but you can't shove them in a battery cage and expect the same production from them as if you let them have as close as possible to a natural environment. It will require some time from you, again not a lot but you will need to visit them to feed and water them and the occasional change of litter from hen houses and cleaning out of a hen house. It will require some enthusiasm from you, OK you feel like doing that now but will you have the same enthusiasm in six months? For most people that's not a problem as the time they take up is relatively low so it's not like committing yourself to taking hour long walks with a dog a miserable November morning in the teeming rain. Finally we assume that you are not interested in short term projects. There are going to be some costs in setting this up so it's going to be a little while before you can say there is a definite profit.

I'm not going to tell you how much time and space they will take up because there are other better books around which could give you some better guidelines than this short article and the honest answer is that they can take as much or as little space as you feel inclined to offer. Now I'm guessing that you have decided that you can do all that, otherwise why else would you be reading this, and so we are not going to have any costs for the time or space you need for this project. This is one area where the hobbyist wins over the supermarkets and farmers – we don't need to pay wages or rent for the space they take up.

So all of that said – will it add up?

The approach

If we're going to work out if any project is a worth while exercise then any approach is going measure our costs and benefits and, as long as out costs are outweighed by our benefits then we win and it, whatever it is, is worth doing. Of course that's a very simplistic view but it's also a very good view as anything that doesn't fit into that view is either so small that we can largely ignore it or so big that it's going to very quickly become obvious that we need a more sophisticated analysis.

Well for our chicken keeping project the benefits are easy enough to identify; eggs. Similarly our costs are easy to identify; the food that the chickens will eat. We have measured our costs in sacks of feed and our benefits in number of eggs which is not in itself useful for comparison so we'll turn that into prices and so get our first questions over which we can argue; how much is an egg worth and how much does chicken food cost?

The basic data and costs

Well eggs can be anything between battery chicken eggs from your nearest and cheapest supermarket up to free range organic eggs from a supermarket. Between those extremes there a whole range of options, mixed eggs from a farm gate, free range from a farmer's market etc. All of which means that the price of eggs can be anything between 90 pence per half dozen and £2.40 per half dozen. Those prices are from the extreme ends available at my local supermarkets. Farm gate prices around here are about £1.20 / half dozen for free range, market prices about £1.60 / half dozen for free range. For my purposes I'm costing the eggs at about £1.70 / half dozen large free range because that is the price I'd pay at the supermarket. I don't include a figure for travel to get them as my local supermaket provides free delivery.

Feed costs vary between nothing, for the traditional approach of let them fend for themselves and occasionally throw them some kitchen scraps, to £10 for a 20Kg bag of organic layers pellets. For my purposes I pay about £7 for a 20Kg bag. Again I'm not including a figure for travel to get that as I just buy some when I would be going past the feed merchant anyway.

One other basic cost we should count is litter for the hen house. Again a wide range of options but for my purposes I buy large bales of compressed chopped straw for about £3 which seems to last nearly forever.

Obviously other people may pay more or less than that depending on how they choose to keep their chickens and how much they would have paid for eggs anyway, or how much they think they can sell eggs for. Disagree with those figures by all means it just means you need to plug different numbers into deciding if it's worth while.

So now we have our costs and our benefits let's see if it adds up. Experience tells me that with four backyard chickens I am typically getting three eggs a day and typically getting through a sack of feed in about seven weeks. So I can make a simple spreadsheet and seen how it works out.

WeekNumber of eggsValue of eggsCost of feedRunning profit
0     £7.00 -£7.00
1 21 £5.95   -£1.05
2 21 £5.95   £4.90
3 21 £5.95   £10.85
4 21 £5.95   £16.80
5 21 £5.95   £22.75
6 21 £5.95   £28.70
7 21 £5.95 £7.00 £27.65
8 21 £5.95   £33.60

Well that's quite clearly making a profit and a very healthy profit at that. That simple view suggests that not only will it pay for itself but it will make about £350 a year. Is that really true? Well not quite because there are a lot of minor costs we haven't considered in all of this. Ne we have already mentioned is the cost of litter for the hen house. But there are also ongoing costs in minor maintenance nits and pieces such as red sprays to keep down the number of pests (red mite is the big one to control there) Not to mention that we haven't in fact counted the cost of buying the birds or housing them. So let us revise that model.

A more sophisticated approach

Capital costs and cost of capital

We have two types of costs to add to our simple spreadsheet; capital cost and the cost of capital. What on earth are those? Well a capital cost is the cost of buying something durable, something which you could sell again. So in our example a capital cost might be the cost of buying a hen house. If you decide that chicken keeping is not for you then you could sell the hen house again and so get back your money, or at least some of it because when you sell it will be second hand and so you won't get back the full price. The cost of capital is a little harder to explain.

Lets look at our little spreadsheet again. All the prices in that are regular expenses or benefits. They're costs which we can not recover and which will recur or benefits which will recur and even if they occur sporadically, such as buying a sack of chicken feed, we can average them out and say that we have an average weekly cost or expense. In our example above we have an average weekly profit of £4.95. Of course if there are any other regular expenses then that profit would be lower. Spending a lump sum, even though it might not be an expense that recurs weekly causes us to have a cost that recurs weekly. How does that happen?

Well let's look at the spreadsheet again. We make £4.95 a week. What would happen to our spreadsheet if we had to spend £495 on initial costs (a high figure which would be top of the range hen houses and so on but it makes the numbers easier). Well we would have to wait 100 weeks for out profit to pay for that expense.

WeekCapital costNumber of eggsValue of eggsCost of feedRunning profit
0
£495.00
 
 
£7.00
-£502.00
1   21
£5.95
 
-£496.05
2   21
£5.95
 
-£490.10
3   21
£5.95
 
-£484.15
4   21
£5.95
 
-£478.20
     
 
 
 
     
 
 
 
98   21
£5.95
£7.00
-£16.90
99   21
£5.95
 
-£10.95
100   21
£5.95
 
-£5.00
101   21
£5.95
 
£0.95
102   21
£5.95
 
£6.90

Exactly as we would expect we would have to wait until week 101 and then we are in profit. But what would happen if we didn't spend that £495? Well one thing is that we could put it into a savings account and might make 6% on that each year (a high figure which we will come back to later). 6% on £495 would earn £29.70 each year or nearly £60 over two years. If that is £60 we have not earned then that means that at week 101 instead of just being in profit we would be down by £60 and it would not be until about week 110 that we would be in profit. We have effectively an extra cost of 60 pence every week that we have not counted. That is the cost of capital; it is effectively the cost of a lost opportunity we could have taken if we had not spent the money on something else. In practice each week the money earned from keeping chickens can be offset against that capital cost so the cost of capital falls but nonetheless it does make it take longer to get to a profit.

So how does that affect our spreadsheet?

We add another column at the end of the spreadsheet for the cost of capital. This we calculate as the interest we would have earned on the running profit so far in one week. This we can calculate as Running profit x (1.06(1/52)-1). Don't worry about the maths too much that really just means how much money could I have earned in one week if I had done something else.

In the following week we then add that cost of capital to our running profit. How does that affect us?

WeekCapital costNumber of eggsValue of eggsCost of feedRunning profitCost of capital
0
£495.00
   
£7.00
-£502.00
-£0.56
1   21 £5.95
 
-£496.61
-£0.56
2   21 £5.95
 
-£491.22
-£0.55
3   21 £5.95
 
-£485.82
-£0.54
4   21 £5.95
 
-£480.42
-£0.54
       
 
 
 
       
 
 
 
103   21 £5.95
 
-£17.92
-£0.02
104   21 £5.95
 
-£11.99
-£0.01
105   21 £5.95
£7.00
-£13.05
-£0.01
106   21 £5.95
 
-£7.12
-£0.01
107   21 £5.95
 
-£1.18
£0.00
108   21 £5.95
 
£4.77
£0.01
109   21 £5.95
 
£10.73
£0.01

Now what we can see is that as we gradually recover the money we spent our cost of capital falls each week but nonetheless instead of taking 101 weeks to get to a profit it now takes us 108 weeks.

The full data

So much for the theory what about a complete example? Well lets take some real world figures and work through them and see what is really costing us the money and how much we really earn from these chickens.

We will redraw out spreadsheet. This time we’re going to add a few columns to break down our costs into running costs, which are items such as feed which we will have to buy regularly, and capital costs which are items we will not need to buy regularly, such as a hen house;

DayItemCapital costRunning costEggsValueCum. capitalCum. runningCum. incomeProfit
0 Hen house
£334.00
 
 
 
£334.00
£0.00
£0.00
£0.00
0 Wood preservative
£10.00
 
 
 
£344.00
£0.00
£0.00
£0.00
0 Feeders
£7.00
 
 
 
£351.00
£0.00
£0.00
£0.00
0 Layers pellets
 
£7.20
 
 
£351.00
£0.00
£0.00
£0.00
0 Grit
 
£1.55
 
 
£351.00
£7.20
£0.00
-£7.20
0 Corn
 
£3.00
 
 
£351.00
£8.75
£0.00
-£8.75
0 Straw
 
£3.00
 
 
£351.00
£11.75
£0.00
-£11.75
0 Birds
£57.00
 
 
 
£408.00
£14.75
£0.00
-£14.75
0 Feeders / drinkers
£24.50
 
 
 
£432.50
£14.75
£0.00
-£14.75

What is in the columns?

Day

Starts at day 1 and goes up one day at a time. Because we have several things to start before we can get the birds we cheat and put a lot of items in on day 0. To represent all the items we will buy before we start. Day 1 starts the day after we get the birds.

Item
Just notes what we spent money on.
Capital cost
how much we spent on a non recurring cost
Running cost
How much we spent on a recurring cost
Eggs
How many eggs did we get on that day
Value
What are those eggs worth?
Cumulative capital
How much have we spent in total on non recurring costs
Cumulative running
How much have we spent in total on recurring costs
Cumulative income
What is the total value of all the eggs we have collected which is; Profit minus Cumulative income minus cumulative running costs.
Note that at the moment we are not counting the capital cost so this is an ‘operating profit’. Basically a measure of whether we are making money on a day to day basis. We could still be running at a loss because of all the capital costs but this is this first figure we need to examine if this never gets to a positive value then regardless of any other costs it will never be proitable.

What are in these rows?

Basically all the items we needed to buy before starting which are;

Hen house
The birds need somewhere to live. This price is one of the more expensive hen houses one could buy which have advantages but obviously one could economise on this.
Wood preservative
Just to give an extra layer of protection to the hen house (NB although all these costs are noted as being on the same day in practice the hen house and wood preserve were bought a week or so in advance to allow time for the wood to be treated and then to get rid of any fumes from the preservative before putting the birds in.
Feeder / drinkers
Food and water dispensers
Straw
Will provide litter for the base of the hen house and nest box
Layers pellets
The basic food for chickens
Corn
a food supplement. Chickens like it, it doesn’t cost that much and there’s an argument that it improves egg production.
Grit
Chickens need grit in their crop to grind corn and other foods they might eat. This can be naturally found but I buy it as the bought version provides additional calcium which improves egg shells.
Birds
The chickens. I paid more than I could have but that was a deliberate choice to avoid having to go out of my way to get the birds or end up with some ex battery hens. (NB ex battery hens are a cheap option but may not be as good for producing eggs as they will be toward the end of the egg laying life and require additional feed supplements to get them back to a healthy state.

At these point we can immediately see two obvious points one is that we are out of profit by a lot and secondly that our running profit is also below zero. But that’s not surpsing because we have only just put the birds in there.

A few more rows of data

DayItemCapital costRunning costEggsValueCum. capitalCum. runningCum. incomeProfitEgg cost
         
 
 
 
 
 
 
0 Feeders / drinkers
£24.50
   
 
£432.50
£14.75
£0.00
-£14.75
 
1       1
£0.16
£432.50
£14.75
£0.16
-£14.59
16
2       1
£0.16
£432.50
£14.75
£0.32
-£14.43
16
3       1
£0.16
£432.50
£14.75
£0.48
-£14.27
16
4       1
£0.16
£432.50
£14.75
£0.64
-£14.11
16
5       2
£0.32
£432.50
£14.75
£0.96
-£13.79
16
6       2
£0.32
£432.50
£14.75
£1.28
-£13.47
16

Now we are in a state where we can start producing we can extend out spreadsheet a little. The first thing is that we add an extra column for ‘egg cost’. This is because we will not always value our eggs at the same amount. In our simple example above we estimated them to be worth about £1.70 per half dozen based on supermarket prices but prices change and we won’t always get eggs that size so we add an extra column to give a rough price per egg and set the value column to be Eggs x Egg cost / 100.

A surprise was that we started collecting eggs from day one. I had been told that the birds would take some time to settle down and start laying in their new home but we got eggs from day one. They were a little small because the birds were quite young and just starting to lay but none the less they were eggs. So we set the price at about 16 pence per egg, the price of small free range eggs in the supermarket at that time. But even so we can see our profit start to rise.

DayItemCapital costRunning costEggsValueCum. capitalCum. runningCum. incomeProfitEgg cost
         
 
 
 
 
 
 
12       2
£0.32
£432.50
£14.75
£3.36
-£11.39
16
13 Feed bin
£10.00
  1
£0.16
£442.50
£14.75
£3.52
-£11.23
16
14       3
£0.48
£442.50
£14.75
£4.00
-£10.75
16
15       2
£0.32
£442.50
£14.75
£4.32
-£10.43
16

Something we forgot – a feed bin. Not really essential but without it there is a risk of mice and other rodents creeping into the chicken feed.

Day
Item
Capital cost
Running cost
Eggs
Value
Cum. capital
Cum. running
Cum. income
Profit
Egg cost
32    
 
4
£0.80
£442.50
£14.75
£12.20
-£2.55
20
33 Layers pellets  
£7.20
3
£0.60
£442.50
£14.75
£12.80
-£1.95
20
34    
 
4
£0.80
£442.50
£21.95
£13.60
-£8.35
20
35    
 
3
£0.60
£442.50
£21.95
£14.20
-£7.75
20

Some more chicken feed. Note that we’re getting near to a profit now.

44       3
£0.60
£442.50
£21.95
£20.40
-£1.55
20
45 Wire mesh
£57.96
  3
£0.60
£500.46
£21.95
£21.00
-£0.95
20
46       3
£0.60
£500.46
£21.95
£21.60
-£0.35
20
47       4
£0.80
£500.46
£21.95
£22.40
£0.45
20

Another capital cost! We bought some wire mesh. That and some scrap wood we had around was used to make some movable fence panels. That allows us to give the chickens a much bigger area but still move tem around the garden without allowing them out to dig up the entire garden. Coincidentally at this point we have just gone into an operating profit. Unfortunately we’ve also spent £500 on hen houses and bits and pieces so counting just an operating profit is perhaps not the best way to work out if we are really making any money.

What is our real profit?

If we shouldn’t count just an operating profit then how should we measure this.

Let’s extend our spreadsheet. We will add a few columns to our spreadsheet and show a few more complete columns of real data.

Day Item Capital cost Running cost Eggs Value Cum. capital Cum. running Cum. income Profit Interest cost of capital Cum cost of capital Real profit Egg cost (p) 
333      
4
£1.08
£516.18
£118.28
£268.74
£150.46
6%
£0.06
£24.31
-£390.03
£0.27
334      
3
£0.81
£516.18
£118.28
£269.55
£151.27
6%
£0.06
£24.37
-£389.28
£0.27
335 feed / corn  
£14.60
2
£0.54
£516.18
£118.28
£270.09
£151.81
6%
£0.06
£24.43
-£388.80
£0.27
336