Final Report for FNC12-850
Project Information
Our research was intended to answer one fundamental question: Can a commercial distribution channel be created for rabbit meat in Indiana such that would be profitable for small-scale producers?
Introduction:
Industrialization of farming in recent decades has rendered small farms un-profitable for traditional grain farming or livestock operations. Similarly, the barrier to entry for first-generation farmers is high considering the large amounts of acreage that are required to create a sustainable income from mainstream grain farming.
We set out to discover if meat rabbitries could become a major new revenue opportunity for small family farms in the next generation, as well as first-generation farmers entering the agricultural arena for the first time.
There were three questions that we wanted to answer through our research:
1) At what volume does rabbit production become economically sustainable for a farmer?
2) Is it cost-justifiable for a processor to tool and staff a shift for rabbits at that volume?
3) Will the market bear the costs in the end product?
Research
Our method was simply to arrive at a price and see if we could sell at that price. To do so, first, we started with the processor because that business was already established. Most of the variables in question such as operating costs and profitability were already known or could be surmised from existing operations. The processor, Moody Meats of Ladoga, was able to set their prices for processing and packaging of the product at a point they knew to be profitable.
Next, we made a hypothesis for the farmer—a hypothesis that the farmer would be profitable at a given market price for their livestock. Based on market prices from nearby states and similar commercial operations in the U.S. we hypothesized that a farmer could be profitable at $2.00 per pound live-weight. (Note: because Moody Meats does not have an inspected scale for live-weight, we had to make actual payment based on dressed weight. A calculation was used to determine that $3.39/lb. dressed weight would equal $2.00/lb. live weight using standard dress percentages.)
Once we had a set price for the animal, the processing, and the packaging we simply had to add standard wholesale and retail markups to determine the price that we would offer rabbit to consumers. The wholesale price was set at $5.39/lb. and the retail price was set at $6.99/lb.
As our objectives stated, we needed to determine whether the price offered to the farmer would be profitable and whether the consumers would buy at the determined retail price. We already knew that the processor was profitable because the prices were set as such.
The method for determining farmer profitability was a simple financial worksheet. We charted the income and expenses required to start a new rabbitry and operate.
The method for determining market viability was a combination of marketing and sales efforts with some simple research. We collected feedback from consumers who bought the product at retail, but we also relied on the obvious empirical data—that is, the sales numbers. Put simply, were people buying it?
Using our methods for research, our findings were as follows.
1) At what volume does rabbit production become economically sustainable for a farmer?
Based on the financial data we were able to collect from our farm operation, using the $2.00/lb price we hypothesized, a meat rabbitry will break-even on cash flow when they sell approximately 1500 fryers in a year. At 2400 rabbits per year, the operation can be expected to yield $4000 in positive cash flow. If combined with other farm operations, we feel that a $4000/year income is viable. If a farmer, however, were to attempt to make his/her primary income off of a rabbitry, the farm would need to produce and sell over 12,000 rabbits per year. Based on our projections, the income from a 12,000 rabbit-per-year operation would be approximately $55,000/yr. However, it is important to note that our findings on item 3 below indicate that the market would not sustain this level of production. So, at best, a part-time income could be created through a meat rabbitry.
In addition to these insights, we were also able to make several insightful observations about the sustainability of rabbit farming for others who may be interested in getting into the market. First, capital expenses for land or buildings would effectively eliminate any projected income from the rabbitry. A farmer interested in getting into this business must have existing land and an existing building that could be remodeled to suit a rabbitry. The costs of new construction simply aren’t feasible given the financial information we collected.
Second, the single highest overhead cost in a rabbitry is feed. Incidentally, this cost is also the most volatile. Feed costs at the time of this study were about $4.25 per rabbit sold at market weight. But, that cost is up by almost 50 cents from a year ago. If it continues to rise, the profitability of rabbit will diminish unless prices can also rise to the consumer without impacting sales dramatically.
2) Is it cost-justifiable for a processor to tool and staff a shift for rabbits at that volume?
Yes. Given that we allowed the processor to determine their price at a point of profitability from the beginning, this was a defacto “yes.”
3) Will the market bear the costs in the end product?
In the end, we discovered that the answer is a qualified “yes.” Our original thought was that much of the sales would be driven through retail outlets at the $6.99/lb. price. However, we discovered that retail sales were surprisingly low and the consumer surveys we conducted indicated that many shoppers were not adventurous enough to take the rabbit home and prepare it. Fortunately, wholesale sales were exceedingly successful. We discovered that chefs are very interested in getting a quality, locally-grown rabbit product that they can put on their menu. Nearly 75 percent of our sales during the course of this project was wholesale to restaurants.
Using a simple calculation of how many restaurants in Central Indiana could be a fit to have rabbit on the menu and how many restaurants we currently have sold to, we estimate that peak volume in Central Indiana would be approximately 600 rabbits per month, or 7200 per year. This is enough to sustain two farms with part-time income.
Impact of Results/Outcomes
Through working with Moody Meats and the Indiana Board of Animal Health, we were able to conduct the first ever state-inspected rabbit slaughter in Indiana, opening the door to other processors in the state potentially doing the same. Also, we now have several chefs excited about the potential of rabbit in Central Indiana on their menu, and two farmers excited and enrolled in growing to meet the current demand.
In short: we not only confirmed that a commercial distribution channel can indeed be created for rabbit meat in Indiana, but we also created it.
Educational & Outreach Activities
Participation Summary:
Our findings are being presented to the Value Add Committee of the Indiana Farm Bureau. We also were able to engage diners through an invitation-only event held at Plum’s Upper Room to let them try rabbit and learn a little more about its impact on local farmers. We had a similar event at Moody Meats’ retail store where we offered samples of rabbit to shoppers and shared with them about our project to create a new income stream for two local farmers.
A presentation was given at the 2014 NCR-SARE Farmers Forum, held in conjunction with the Ohio Ecological Food and Farm Association (OEFFA) Conference. A video recording of this presenation can be viewed online through NCR-SARE's YouTube channel at: https://youtu.be/y75Dmt2VOXs
Project Outcomes
Potential Contributions
Having discovered the temperament of the consumers in the marketplace toward rabbit meat, especially in the Midwest, we believe that the same way in which we established a wholesale market in Indianapolis could be reproduced in similar metropolitan areas around the Midwest. We intend to document the business process and make it available to farmers and processors in cities such as Cincinnati, Saint Louis, Detroit, and more.
Future Recommendations
In order to ensure the long-term viability of the rabbit market we have created, the next area for research and development is in the feed production. Feed costs have been volatile and threaten to drastically impact the costs to farmers, thereby impacting the costs to consumers and potentially the willingness of customers to continue to bear the already-high cost of rabbit meat. I recommend that pellet manufacturers seek alternative ways to produce rabbit food that stabilizes costs for farmers, or perhaps that research be conducted by farmers to find alternative feeds to pellets that would produce the same quality meat product at a lower or more controllable cost.