LUCKNOW

INDIAN INSTITUTE OF MANAGEMENT Management

Post Graduate Programme in Agribusiness
END TERM EXAMINATION

Subject: Agribusiness Environment II

PGPABM I
TERM: III,2024
MAX. MARKS: 60

Time: 2 hour

INSTRUCTIONS
minutes extra for case reading. questions/clarifications are
1. Candidates will get 30 simple and clear enough. No
paper is
2. Write to the point. The
case any doubts just write
your assumption
really necessary. In

20
Question 1. Agribusiness
Save Bodiya Farm" and prepare an
Analyse the enclosed case
Can Hens
use of an international poultry firm which is trying
is for the agribusiness environment analysis for
Environment Analysis report. Report method /tool of
to enter in Indian market.
Youcan use any choice of method of
environment but have to provide justification of your
analyzing agribusiness
agribusiness environment analysis.
..20
Question 2.
sector. Do you
company want to enter in Indian food and agribusiness investment
A USA based investment agribusiness? Explain prevailing agribusiness
suggest this company to invest in Indian
company.
environment in India to this

.20
Question 3.
7 cases,analysed and discussed in the ABE II from the perspective
Explain key learnings from all
of agribusiness environment.

Page l of 10
 NACRA
NORTH AMERICAN CASE
RESEARCH ASSOCIATION

Dodiya Farms?
Can HensSave
HBP# NA0799

Institute ofManagementStudies
Kinjal Jethwani, LJ
Institute ofManagementStudies
Kumar Ramchandani, LJ
district,
cloudlcss sk in Bantwa village, Junagadh tarm.
a
Midnight, May 20, 2021: Under started up the irrigation system to water his50
acre
ruined
Gujarat, India, Ranjit Dodiya In 2018 heavy rainfall
challcngesof the past three ycars. attack had
locustl
He retlccted on the 2019, drought reduced the vicld, and a 2020 consecutive
most of the harvest. In calanmities caused three
in minutes. These egg-producing
destroycd the standing crop considered whether to launch anmight offer an
unprofitable ycars. Now, Dodiya idea
his farm. He thought this
poultry business on one acre of lose less money) in years when bad weather or
(or at least
opportunity to earn a profit
saw potential operational and financial risks in this
pests hurt his crops; yct, he also
If
idea. Farms develop an egg-laying operation?
He needed to decide: Should Dodiya
farm?
not, what clse might he do to save his
FATHERS FoOTSTEPs AT DoDIYA
A SON FoLLOwS IN HIS
FARMS
father, Ranmal Dodiya. Ranjit
Dodiva Farms was started in 1987 by Ranjit Dodiya's
invest in techniques and modern
Dodiya admired his father's early decision to
possible for Dodiya to rent this machinery
agricultural tools and equipment(making itfew other fatms in the region owned two
to other farmers). Even in 2021, only a
threshers. on your OWn, so
Dodiya's father believed in the idea of "learning by doing; do every task helped after
age of seven, Ranjit Dodiya
that you don't need to depend on others. "From theharvesting
as removing weeds, crops, and caring for cattle. At
school with tasks such
by age thirteen he could drive a
age eleven he learned how to plow with cattle, and high-quality seeds,
tractot. His father taught him how to analyze soil chemistry, acquire
grow each season, when
apply fertilizers and pesticides, irrigate, select which crops to
to sow, and how to prevent (or cope with)
environmental challenges and pests. He also
emphasized the value of a good education.
In 1996 a heart attack killed Ranmal Dodiya. As his only son, Ranjit Dodiya took charge
Bantwa at that time. By then he knew
at age fourteen, and was the youngest farmer in
his father prepared him
how to carry out every task on the farm. He was thankful that
completed a Master in
so well. And, inspired by his father's advice, by age 23 Dodiya
Commerce (M.Com.) degtee.
Ramchandani.
Copyright © 2023 by the Case Researcb JoHrnal and by Kinjal Jethwani and Kumar

Can Hens Save Dodiya Farms?1

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Page 2 of 10
 Like most Indian farmers, Dodiya carefully planned around the likely onset of
monsoon scason. Kharif (summer/monsoon) crops like rice, maize, soybean, of cotton
were plantcd in thc Junc-August Southwest monsoon season. Wintet crops gown
Novembet-March) included cereals (e.&, wheat, barley, oats), pulses (e-g, chickpeas).
and oilsceds (c.g,, linsced, mustard.2
dam
Many farmers sourced their water fromn the Bantwa darm reservoir. Since this severely
was not connccted to a natural water flow or iver. a wcak monsoon couldirrigation
reduce thc water supply. Some farms (incuding Dodiyagovernment Farm) invested in
systems. Scheduled power outages, planned by the state to ration power,
irrigation and other farming tasks
as wcll as unscheduled outagcs, sometimes dclayed
that required clectricity. Ranjit Dodiya rotated
Consistent with his fathcr's lcgacy of agricultural innovation,short-duration summer
groundnut (a
Crops to kccp his soil hcalthy. Onc vear hc grcw next year he grew cotton 2 long
crop) and whcat (a short-duration wintcr crop).The Dodiya was proud of his farm,
age 40,
duration summcr crop). In 2021, and ncaringthan
to 15% higher farms that did not rotate crops.
and belicvcd its yicld was 10% farm badly. In
locust attack hurt the
Still, the 2018 floods, 2019 drought and 2020 of short-term working capital loans,
form
most ycars Dodiya borrowed money in the duginto his own savings to pay the interest
but in the thrcc mostreccnt 'tough' years he
on thosc loans.
worms) remained an ever-present thrcat.
Crop infcctions (fungus, bacteria, and and were dangetous to handle. If an
Pink-ball worms threatened cotton crops
growing stage, the entire cotton crop
appropriatc pesticide was not applied in the first
treatment could reduce the yield. Meanwhile,
might bc lost. Even a oneweck delay in
new treattments.
ncw germ mutations necessitated expensive considered alternative sources of
Realizing no farmer was lucky every year, Dodiya
income that might help offset future losses from droughts, floods, pests, and diseases.
that he set up an egg-laying
A childhood friend, Mahesh Patel, recommended that his own operation was
business(as Patel himself had, in 2019). He told Dodiya
needs to keep a constant watch on
performing well, but added a note of caution: One
80% of total egg-laying operational
feed cost," since chick feed constituted 70% to more.
Dodiya set out to learn
costs.3 .Intrigued by Patel's positive experience,
OVERVIEW
PoULTRY EGG PRODUCTION INDUSTRY
of poultry farming. Egg
Meat production and egg production were the two forms
production ranged from small backyard operations to large, integrated egg-laying
at a time to supply a family
operations. A backyard operation entailed raising a few henssold
eggs might be locally. Integrated egg
with eggs for their own use, and excesstemperature-controlled buildings, fed them
production operations housed hens in Many households had a few
specially formulated feed, and mechanized some tasks. at regional markets,
chickens and some farms raised a greater number of hens for sale
existed in India. Dodiva learnei
but far fewer integrated egg production operations lowest in the world.
that India's chicken-raising and egg laying costs were among the
The $25.4 billionpoultry market (in 2018) was projected to reach $ 63.1 billion by
(2,200 pounds per
2024.4 In 2019 world egg production reached 83 million tonnes
tonne), a 63% increase from levels in 2000.Asia produced 62% of the world's eggs,
produced the
followed by the Americas (21%), Europe (13%), and Africa (4).5 China and India
America (8%),
most cggs (35% of total) followed by the United States of
(7%).7

2Case Research JournalVolume 43eIssue 3eSum1ner 2023

PGPIT3/23/AE-|VETEXA2273 at Indlan Instituto of Management -Lucknow from Feb 2024 to Apr 2024.
This docurnott is authorlzod for uso only in Prof. M.K. Awasthl's
Page 3 of 10
 India and China werc thc largcst consumer markets in the world, with 2020
populations of almost 1.4 billion cach. Average annual cgg consumpion per person
more than doubled betwcen 2014 and 2019, from 30 to 68. Onc survey revealed that
in Gujarat, consumption of cggs increascd by 50% in the previous two decades.

INTEGRATED EGG LAYING OPERATIONS

Day-old chicks were purchased from local hatcheries. Through three stages of growth,
batches of chicks were shifted from smaller to larger cages as they grew larger and
hungrier (Exhibit ):
Brooder Phase (first 8 wecks): Chicks could not yet lay cggs.
Grower Phase (9-16 wecks): Chicks grew quickly and needed a lot of feed. It
was important to properly manage Growets, since their reproductive organs
devcloped during this period, and this could affect their egg production
capacity in the following phase..
Laycr Phasc (17-72 weeks): Laying hens required the most feed.
When a cohort of birds moved up to larger cages, their prior cages were emptied,
cleaned, sanitized, and left empty for the subsequent four weeks (Exhibit 2).
Factors that could affect egg production included climate, breed of hen, the laying
house design, lighting schedule, fced quantity and quality, and how and when eggs were
collected.9 A major risk was the highly contagious avian flu (bird flu). If detected in just
one bird on a farm it was necessary to destroy an entire flock to ensure that flu was fuly
eradicated there. After an infection, the farrm would have to be deep-cdeaned, and egg-laying
sheds might be required to sit empty for six months.
On average in India, wholesale egg prices (Rupees, or Rs, pen 100 eggs)10 were 335
(2015), 391 (2016), 382 (2017), 400 (2018), 414 (2019), and 428 (2020).1In 2020, wholesale
prices ranged from Rs 323 to Rs 548,12 International Egg Commission EC) chairman
Suresh Chitturi noted that Indian cgg pices had reached tecord highs. Fgg consumption in
India in 2021 was low compared to many countries, at 77 eggs per person per year, but was
expected to rise to 154 per person within five years, 13
Other than sales of eggs, egg-laying operations generated other revenues as well:
Unproductive hens, such as those older than 72 weeks, were sold for soup or other
purposes. Layer bird pices,at about Rs 54 per bird were about60% lower than
pices for chickens raised for their meat.
Poultry litter could be sold or used as organic fertlizer.15
Poultry feed gunny bags could also be sold, but at very low prices.
Prices of day-old chicks, previously Rs 30-40 roSe 50% to Rs 50-60 in 2020,16 Maize and
soya together comprised 90% of the total poultry feed ingredients.!17 Asharp increase in
soya meal cost (82Ù) caused this rapid price increase.

LEARNING MORE ABOUT EGG LAYING OPERATIONS

In March 2021, Dodiya visited Mahesh Patel's poultry farm to observe its operations,
from purchasing and growing day-old chicks to gathering and selling hens' eggs. Patel
suggested he also visit Junagadh Agricultural University (JAU)18 to learn about
subsidies provided by the state and central government. In an interactive seminar there,
Dodiya learned about the machinery required, government schemes, loan facilities,
subsidies, the market for eggs, export possibilities, and technology and human resoutce
Can Hens Save Dodiya Farmns?3
Can they?
This document is authorizod for use only in Prof. M.K, Awasth's PGPUT3/Z3/AE-VETEXAZ273 at Indlan instilute of Managemont Lucknow from Feb 2024 to Apr 2024,
Page 4 of 10
 rcquurcmcnts. JAUinstructors reported that in a hot and humid climate a commercial
hen might producc180 to 200 cygs per vear, whercas in a more temperate climate she
might producc 250 to 300 cggs per ycar. An instructor noted that in Gujarat, "where
the summer tenperature varies between 250C and 450C, while winter temperature
ranges betwccn 15°C and 350C degrees" cgg-laying farms produced at the high end of
that rangc.
Another JAU expert, discussing the risk of bird flu, said regular check-ups of chicks
and the use of vaccines and medicines were important to a successful egg-laying
operation, and that it was also advisable to purchase special-purpose bird insurance.
The expert referred participants to aPouliry Lyer Farming report, which helped Dociya
consider financial issues.
Heplanned to allocate one acte of farmland to the egg-laying operation. The cost
shed and
to level this land was estimated at Rs 250.000. He would need to build a
housing for four wotkers and would also have to purchase cages and other equipment.
Although Dodiya had never obtained a term loan to purchase items like these, he
believed he could get a Rs 3,000,000 term loan and also might be eligible for
government interest subsidies to help pay to improve and equip the property for a
laying operation. working
To finance day-to-day operating cxpenses, Dodiya planned to obtain a nced to
capital loan of Rs 3,500,000. Still, his investigation tevealed he would likely
spend about Rs 2,040,000 of his own money to launch the egg-laying operation. His
cxpected total financing was (see also Exhibit 3):
To acquire fixed assets:
Rs 3,000,000 tern loan
Rs 1,107,000 personal contribution by Ranjit Dodiya
Rs 4,107,000 fixed assets investment

Annual operating expenses of Rs 4,713,000 funded by:

Rs 3,500,000 working capital loan
Rs 931.000 personal contribution by Ranjit Dodiya
Rs 4,431,000 annual operating expenses
TotalRs 8,538,000financing necded for Year One (4,107,000 + 4,431,000)
Both the term loan and working capital loan chatged an annual interest rate of
12%. The term Ioan was to be tepaid in six equal annual installments (interest and
principal).The working capitál loan could be repaid at the discretion of the borrower,
but had to be repaid in full by the end of the sixth yeat. All farmers were eligible for
govenmnent-issued 6% interest subsidies on working capital loans, and fatmers were
not required to pay an income tax.
Unsure as to an appropriate discount rate for evaluating a potential egg-laying
operation, Dodiya teached out to some JAUinstructors and his own financial advisor,
achartered accountan). Based on their guidance and the model project report, he
decided ona 15% discount rate. Next, he set out to evaluate a baseline case (expected
costs and revenues), and worst and best cases. He was concerned that feed cost could
rise sharply; and knew that per-hen yearly egg producion was a key revenue driver
(Bxhibit 4).
Now Ranjit Dodiya needed to decide: was egg laying aviable business? How soon
could Dodiya Farms expect to recover its initial investment? What if actual revenues
from this operation were lower than he expected? What if operating expenses were
higher than he expected? Would egg laying income be sufficient to service the necessary
loans?

4Case Research Journal Volume 43eIssue 3eSummer 2023

This document is authorlzed for use only n Prof. M.K. Awasthl's PGPVT3/23/AE-IWETEXA2273 at Indian Institute of Management - Lucknow from Feb 2024 to Apr 2024.

Page 5 of 10
 Exhibit 1: Brooder, Grower, and Layer Sheds

1+1+5Cage Systenm of Poultry Farming

Brooder Grower Layer Layer Layer Layer Layer
Shed Shed Shed 1 Shed 2 Shed 3 Shed 4 Shed 5
Batch Wecks Wecks Weeks Weeks Weeks Wecks Weeks
1 0-8 9-16 17-72*

2 13-20 21-28 29-85

3 25-32 33-40 41-97
4 37-44 45-52 53-109

5 49-56 57-64 65-121

One Year = 52 wecks.
* Most lavers became unproductive by week 72 and were culled.
Source: Ranjit Dodiya, based on advice given by Mr. Mahesh Patel and the JAU
workshop.
Exhibit 2: Bird Flow Chart

Year I Year 2 Year 3 Year4Year 5 Year 6

1. Number of batches purchased 4 4 4 5 4 4
2. Number of brooder weeks 28 36 32 36 36 32
3. Number of grower weeks 24 32 36 36 32 36
4. Number of layer weeks 36 216 244 240 244 244
5. Number of batches culled 0 2 5 4 4 5
Assumption: On a calendar-year basis, Batch larrived the 13th week of yeat 1.
Source: Data provided by Ranjit Dodiya based on inputs given by Mahesh Patel and the
JAUworkshop instructor.

Exhibit 2 summarizes how day-old chicks were assigned to brooder shed batches (for
8 weeks), then moved to the grower shed (for 8 weeks) and subsequently to a layer
shed (for 56 wecks).
At age 72 weeks (Week 32 of year 2), that batch was culled (no batch needed to be
culled in year 1).
When a batch of chicks moved to a bigger cage, their previous cage remained empty
for four weeks, to help prevent undetected disease from spreading to new chicks.

Can Hens Save Dodiya Farms?5

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Page 6 of 10
 Exhibit 3: Fixed Assets and Operational Costs for
Proposed Egg-Laying Operation
Rs Rs
Per Total
I. Fixed Assets to be Unit (000)
a. Land DevelopmnentAcquired
250
b. Shed & Building
Construct brooder cum grower shed (2500 Sq. ft.) 320 800
Construct layer sheds (under cage system) (5000 Sq, ft.) 320 1600
Storeroom for Eggs and Storeroom for Feed (300 Sq. ft.) 320 96
Office Building (200 Sq. ft.) 350 70
Office Furniture Computer/ Printer 125
Generator Room (100 Sq. ft.) 320 32
Workers Quarters (4 workers) (200 Sq. ft.) 200 40
c. Cages &Equipment
Laying house (6250 cages) 75 470
Other equipment (packaging, manure handling) 200
Water system (bore well, I HP Electricmotor pump set, water tank,
pipeline) 225
Electrification/ Sprinkler/ Refrigeration/ Heating System 200
Total Fixed Assets (a+btc) 4107

II. Operational Costs

Cost of dav old Chicks (10,000 birds) 50 500
Feed Cost 2561
Medicine, vaccine, labour and miscellaneous charges 60
Insurance cost per bird 4 40
Other Expenses 1270
Total Operational Costs 4431

Total Cash Outlay (+II) 8537

Discount Rate/ Cost of Capital 15% for calculation purpose as reported by Ranjit Dodiya
Assume negligible or zero scrap value of machinery at end of Year 6
Source: Data provided by Ranjit Dodiya based on inputs given by Mr. Mahesh Patel and
wotkshop at JAU

6Case Research Journal Volume 43eIssue 3eSummer 2023

This doCument is authorized for use only in Prof, M.K. Awasthi's
PGPVT3/23/AE-||/ETEXA2273 at Indian Institute of Management -Lucknow from Feb 2024 to Apr 2024.

Page 7 of 10
 Case, Worst Case, Best Case
Exhibit 4: Egg-Laying Operations: Base
Grower Layer
Brooder
Assumptions based on stage 3% 5%
span 2% 2500
Mortality during normal 72 week life 2625 2575
Birds availability 0.40 0.70
(kg) 0.20
Feed Consumption per hen per week 0.30 0.50
0.30
Manure Output (kg per weck per bird) 0.30 0.25 0.25
Cost of Medicine per Bird per Week (Rs) Worst Base
Best
case
Assumptions for Worst, Base, Best cases Case Case
300
250
200
Eggs production per hen (annual) 3.80 4.80 5.77
Eggs production per hen (week) 35 25 18
Feed cost per Kg (BRs)
Other Assumptions
50
Cost of day-old chicks (DOC) (Rs) 2500
Numbers of chicks per Batch
considering
Additional Birds from supplier free of cost (5% of Batch 125
mortality rate 2375
Number of Birds available for Culling
54
Price per scllable culled bird (Rs)
Insurance per bird (Rs) (Provides indcmnity against death of bird, but not 4
production/ sale)
for any consequential loss or loss of 5.00
Selling price per Egg for Year 1,2, 3 (Rs) 6.00
Selling price per Egg for Year 4,5, 6 (Rs)
Wages 600,000
200,000,
1 Manager:Rs 400.000
4labourers:Rs 600,000
Power and fuel (average annualized) (Rs) 10,000
Property insurarnce (average annualized) (Rs) 75
Feed in one gunny bag (kg) 25
Selling ptice of gunny bag (Rs) 2
Selling price of 1 kg or manure
60,000
Misc Expenses 12%
Bank interest for Rs 3M Term Loan 6
Term Loan
Annual number of Payments for Rs 3M
Loan
Bank interest for Rs 3.5M Working Capital 12%
(principle to be repaid by end of Year 6) 6%
Government Working Capital Loan Subsidy percent
Capital Loan
See Note 2 re Deferred Payment of Working
(to be fully repaid in Year 6) 6 years
analysis)
Project Life (for purposes of ROI

NOTES
exempted from income tax.
1. In India, farm income was the following
repay the working capital loan in0.6M
2. Ranjit Dodiya decided tofirst in sixth
five years and remaining Rs.
manner:Rs. 0.58M each in
year. infornation from Mahesh Patel and JAU
Source: Ranjit Dodiya, based on
Can Hens Save Dodiya Farms?7

Lucknow from Feb 2024 to Apr 2024.

PGP/T3/23/AE-\ETEXA/2273 at Indian Institute of Managemernt -
in Prof. M.K. Awasthi's
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