Excerpted with permission from Curtis, K. R.*, M. Cowee, A. Acosta, W. Hu, S. Lewis, T. Harris. 2007. Locally Produced Livestock Processing and Marketing Feasibility Assessment. Technical Report UCED 2006/07-13: University Center for Economic Development, Department of Resource Economics, University of Nevada, Reno.
Sensitivity Analysis
Changes in retail meat prices or the number of animals slaughtered will change revenues. The table below summarizes the effect on operating profit (percentages are the same for year 1 and the five year total).
NOTE As the authors have acknowledged, an important error was made in calculating revenue: carcass weight was used instead of cutting yield in calculating meat per animal (meat yield would actually be lower than estimated here). Making this adjustment has a significant effect on profitability -- the business actually would lose money, thus this sensitivity analysis is not correct. HOWEVER, many other figures in this estimate could be adjusted to local circumstances (e.g. cost of building construction), and this analysis should serve only as a starting place.
You can find the original Excel spreadsheets for the four scenarios in this pdf.
| Year 1 | 5 year total | % change over baseline | |
|---|---|---|---|
| Baseline | $1,013,615 | $5,600865 | -- |
| 10% Retail Price Rise | $1,463,887 | $8,088,900 | +44% |
| 10% Retail Price Fall | $553,443 | $3,058,123 | -45% |
| 10% More Animals | $1,212,359 | $6,699,051 | +20% |
| 10% Fewer Animals | $804,971 | $4,447,972 | -21% |