Pre-Feasibility Study

LIVESTOCK SEMEN PRODUCTION UNIT

(Cattle & Buffalo)
Small and Medium Enterprise Development Authority Government of Pakistan www.smeda.org.pk
HEAD OFFICE Waheed Trade Complex, 1 st Floor , 36-Commercial Zone, Phase III, Sector XX, Khayaban-e-Iqbal, DHA Lahore Tel: (042) 111-111-456, Fax: (042) 5896619, 5899756 helpdesk@smeda.org.pk REGIONAL OFFICE PUNJAB REGIONAL OFFICE SINDH REGIONAL OFFICE NWFP REGIONAL OFFICE BALOCHISTAN Waheed Trade Complex, 1 st

Floor, 36-Commercial Zone, Phase III, Sector XX, Khayaban-e-Iqbal, DHA Lahore. Tel: (042) 111-111-456 Fax: (042) 5896619, 5899756 helpdesk@smeda.org.pk 5 TH Floor, Bahria Complex II, M.T. Khan Road, Karachi. Tel: (021) 111-111-456 Fax: (021) 5610572 helpdesk-khi@smeda.org.pk Ground Floor State Life Building The Mall, Peshawar. Tel: (091) 9213046-47 Fax: (091) 286908 helpdesk-pew@smeda.org.pk Bungalow No. 15-A Chaman Housing Scheme Airport Road, Quetta. helpdesk-qta@smeda.org.pk

PROJECT BRIEF

The proposed project is for establishing a semen production unit (SPU), where the adult bulls of good genetic background are maintained. Semen from the bulls is collected twice/thrice a week. After laboratory evaluation, semen is diluted and packed. The deep freezing of the semen in liquid nitrogen is carried out for the preservation of spermatozoa for longer periods. This semen is then utilized for artificial inseminating the female animals for improving the breed of the offspring, ultimately leading to better milk and meat yields. RATIONALE AND JUSTIFICATION OF THE INVESMENT OPPURTUNITY Reproductive efficiency is the most economically important trait in farm animals. The profit obtained from milk and meat is directly related to the fertility of the respective farm animal. There are two ways of breeding of farm animals, naturally and by artificial insemination. Presently, there are very few large farmers, who raise the breeding bulls specifically for their own herds. Most of them do not have access to any breeding bull. Artificial insemination (AI) program started during 1972-73 in the country has now gained much acceptance and popularity among livestock breeders and farmers with increasing demand for more AI services. Unfortunately, (AI) services of livestock and dairy development department hardly cover 5% livestock population of the Punjab. Punjab Livestock Census 2000 indicated hundreds of villages without proper AI service and breeding bull. The current status of availability of breeding buffalo bulls is presented in Table 1. The figures are based on complete census of livestock for the province of Punjab. The ratio of a breeding bull to available breed-able buffaloes in Punjab has been found to be 1:132, whereas, the recommended ratio of breeding bull to breed-able buffaloes to achieve optimum fertility levels should be 1:70. POSITION OF BREEDING BUFFALO BULLS Total Bulls (Breed-able Females) Breeding Bull Ratio to Breed-able Females Total Villages Villages Without

Breeding Bulls Density of Breed-able Buffaloes/Km 2 53,256 (7,056,091) 1:132 24,478 11,096 (46.0%) 41.0/Km 2 The acute shortage of buffalo breeding bulls has been identified in six districts of Punjab where the ratio ranged from 1:205 to 1:411

District Breeding Bull Ratio to Breed-able Buffalo Gujrat 1:411 Jhelum 1:297 Attock 1:256 Chakwal 1:232 Rawalpindi 1:216 Khushab 1:205 In view of the prevailing shortage of breeding bulls and 5% of the AI coverage, there is an immediate need to establish semen production units (SPU), for increase in buffalo production. These SPU will produce and supply semen to meet the demand of farmers & commercial entrepreneurs in the country. Quality semen is a prerequisite for breed improvement and to develop a viable and functional artificial insemination program.

PROPOSED CAPACITY Initially, a minimum of 10 bulls has been suggested for establishing SPU. Cow bulls have also been proposed in the SPU beside buffalo bulls. A mix of six buffalo bulls, two Friesian, a crossbred (50%) bulls and one Sahiwal/Dhanni bull depending upon the location of the SPU are recommended. PROJECT COST The cost of proposed project is approximately Rs 1 million. CURRENT INDUSTRY STRUCTURE Most of the SPUs are being operated in the public sector, which are catering to the needs of 5% livestock population of the country through its own network of artificial insemination centers. DEMAND There are four SPUs in the country at the following locations. Qadirabad, Distt. Sahiwal Karianiwala, Distt. Bahawalpur Kharimurat, Distt. Attock Kalourkot, Distt. Bakkhar These SPUs are producing 12 million semen doses annually, whereas, the population of breedable buffaloes and cows in Pakistan is over 25 million, which needs over 43 million doses annually. In the absence of desired number of breeding bulls, there is high demand of semen doses in the country.PreFeasibility Study Livestock Semen Production Unit (Cattle & Buffalo) MARKETING Marketing is the critical component for this project s success. The milk processing plants are in the process of establishing networks of artificial insemination services for the genetic improvement of Livestock. The proposed SPU will cater to the needs of breed-able population of cattle and buffaloes through these networks. There is an acute shortage of good quality frozen semen, both for buffalo and cattle breeds. For the marketing of semen, following groups will be approached: Large Livestock Farms. Artificial Insemination Technicians. Public Sector Breed Improvement Department.

Importers. ANIMAL REQUIRMENT The proposed number and details of the animals required for the project are given in the table: Description No of Animals Buffalo Bulls 6 Friesian 2 Crossbred (50%) Bull 1 Sahiwal/Dhanni 1 Total 10 The bulls would be used for reproduction activity for 7 years, and after that, they would be replaced with younger bulls. Young adult breeding bulls of known pedigree will be purchased from livestock experiment stations of the respective breeds or from livestock breeders listed in the progeny-testing program of Livestock and Dairy Development Department. A breeding soundness examination (BSE) of dairy bulls, to be selected and raised at SPU, will be required just before their purchase. For dairy bulls to be raised at SPU, it is an absolute requirement that bull is born to elite cow inseminated with the semen of progeny tested bull. TECHNICAL ASPECT EXAMINATION OF EXTERNAL REPRODUCTIVE ORGAN SCROTUM The scrotal shape of the bull controls testicular temperature. Optimum temperature is a few degrees below body temperature. This thermoregulatory function is essential for normal spermatogenesis. Normal bull scrotum should be pendulous, symmetrical and should have a distinct neck at point of attachment with the abdominal wall. Any deviation observed on inspection in size, shape or relative position should be reviewed with suspicion. All physiological (rounded, rotated, cleavage) and pathological (small hypoplastic, asymmetrical, straight sided, high pointed) variations must be observed. TESTES On each clinical examination, testes should be carefully examined and palpated entirely for their size, consistency and free mobility within scrotum and through the inguinal canal. In general, both normal testes are symmetrical in size, uniform in consistency, and are freely moveable up and down. Biometry of each testicle (length, width and thickness) is determined by holding the other pushed dorsally. While

doing this, the consistency of its texture is also checked with gentle pressure from thumb and fingers. Resonance and tonicity are the signs of normally developing tissues. Soft, firm and hard textures are indications of some kind of abnormality. Any defect observed (orchitis, asymmetry, excessive fat around testes, hernia, cryptorchidism, hypoplasia, etc.) need to be carefully diagnosed. EPIDIDYMIS The epididymes on the side of each testis consists of three parts; caput (head), corpus (body) and cauda (tail). Like the testis, it needs to be palpated to its entire length to record its size, form and consistency. Though the defects of epididymes are rare, yet it must always be scrutinized for segmental aplasia (part of the duct missing), epididymitis, adhesions, tumors, abscesses and spermatic granulomas. REPRODUCTIVE CORPULATORY GLAND This will include examination of sheath, prepuce and the penis. The young bulls should be examined for normal development of the penis and freedom from prepural adhesions and developmental anomalies such as persistent frenulum. The best time to examine the penis is at the time of semen collection. The preputial opening and sheath should be thoroughly palpated to record any abnormalities present. The veterinarian should always watch for the occurrence of persistent penile frenulum, hair ring around penis, fibropapilomas of penis, eversion of prepuce, penile hematomas, phimosis, paraphimosis and fibrotic preputial orifice. EXAMINATION OF VISION Good sight is important to the breeding bulls. The eyes for common problems, like pink eye, scars and squamous cell carcinoma need to be checked. Scars resulting from accidents and infections like keratitis should be treated promptly and properly. EXAMINATION OF TEETH The bull needs healthy, strong enough teeth to chew coarse fodder and concentrates. Overgrowth of molars and broken teeth must be diagnosed early through oral examination otherwise he shall loose weight rapidly and this may impair his reproductive performance. EXAMINATION OF SKELETAL DEVELOPMENT AND CONFIRMATION HIND LEGS STRUCTURE Sound rear legs are vital to the breeding capacity of a bull. Pain or deformity in rear legs will not allow bull to readily mount the cow/teaser properly and give good thrust. The bulls therefore should be evaluated for mobility, interdigital fibroma (corn) and foot abscess should be checked. Since the structural defects of the legs are heritable, and become more apparent and interfere more and more with the bull s breeding ability as the bull ages, such bulls should be culled right away. Special attention should be paid to hoof trimming in stall fed bulls.

Similarly, the conformation of fore legs may also be checked. Some bulls show outward direction of feet, which on walking swiftly may stumble by striking with opposite foot. CONFIRMATION OF BUFFALO ,SAHIWAL AND F1 CROSS BRED BULL The conformation of the bull is evaluated by checking the breed characteristics of the bull. Buffalo bulls should have Nili Ravi characteristics, black color with star at forehead white four feet and switch of tail, (Panj Kalian). Although such breed charms are not correlated with breeding soundness, yet buffalo breeders give a very high sentimental value to these phenotypic characteristics. Sahiwal bulls should be of dark brown color with black extremities. F1 crossbred bulls of different colors are found. Generally, the farmers prefer black or black and white spotted bull with good height. SECONDARY CHARACTERISTICS The developments of head and neck and hump muscles give a bull-like appearance to male animal. This masculine development takes place in bull as he approaches puberty and is said to be due to normal secretion of androgen hormone. A bull with well-developed body, heavy and deep at forequarters is generally liked. EVALUATION OF SEXUAL BEHAVIOR The sexual behavior of bull for convenience of understanding can be divided into; libido (sexual desire) and mating behavior (ability to complete the service).Pre-Feasibility Study Livestock Semen Production Unit (Cattle & Buffalo) a) Libido Index Libido of a bull is defined as the willingness and eagerness to mount the teaser/cow and attempt service. The libido is graded from 0 to 3, depending upon its performance; 0-for being shy i.e. no desire to move towards cow/teaser. 1- for being Dull, very reluctant to reach the teaser. 2- for being Active, willingly moves towards the teaser. 3-being Aggressive, moves towards teaser in an uncontrolled manner. b) Mating Behavior Index (MBI) After the bull has reached the teaser/cow, it mounts and hold the teaser/cow to complete the act of copulation or semen ejaculation. During this period, the veterinarian gets an opportunity to record and examine the sequence of events, holding erection of penis, seeking movements (for vagina or artificial vagina) of penis, thrust, ejaculation and dismounting. Any painful condition in the feet, hind legs, back,

penis, sheath, or in any part of the internal cavities (transmatic gastritis, peritonitis, nephritis, pleurisy, pneumonia, etc.) shall inhibit the desire of mating. In these situations, either bull will not mount the teaser at all or may step down after mounting without completing the act. In bulls, it is easy to grade bulls for their mating behavior on the basis of number of attempts taken to mount the teaser for completion of a successful ejaculate. The bull is ranked from 0-3; 0-Poor when the bull ejaculate after more than 4 attempts 1-Fair, when he takes 3-4 attempts 2-Good, if it takes between 2-3 attempts 3-Excellent, when the bull ejaculates in less than 2 attempts. The bulls falling in categories 0 and 1 for libido or mating behavior or both shall stand disqualified. Evaluation of semen ability It is now recognized fact that scrotal circumference of a bull is an accurate predictor of his sperm production ability (particularly in young bulls) and gives an accurate indication of future testicular function. In buffalo bulls, scrotal circumference has been found to be correlated with age, body weight, and sperm production. Similar correlation exists in cow bulls. MACHINERY EQUIPMENT The detail of the equipment required for running the project is given in below table: Description No Cost per Unit Total Cost (Rs.) Bulls 10 20,000 200,000 Refrigerator 5 Cubic 1 22,000 22,000 Microscope 1 25,000 25,000 Incubator 1 20,000 20,000 Water Distiller 1 5,000 5,000 Artificial Virginia 5 5,000 25,000 Sterilizer 1 18,000 18,000 Weighing Balance 1 5,000 3,000 Magnetic Stirrer 1 8,000 8,000 Cattle Crush with Installation 1 18,000 10,000

Fodder Chopper 1 10,000 10,000 Cart 1 8,000 8,000 Bull for Cart 1 15,000 10,000 Water Pump motor 1 10,000 6,000 Air Conditioner 1 25,000 25,000 Liquid Nitrogen Container (10 Liter) 1 70,000 70,000 Liquid Nitrogen Container (2 Liter) 1 30,000 30,000 Liquid Nitrogen Container (20 Liter) 1 100,000 100,000 Generator 1 30,000 30,000 Electricity connection 5 kvA 25,000 25,000 Total 669,000 HUMAN RESOURCE REQUIREMENT A bull attendant, veterinary technician and veterinarian will be required as a permanent staff, whereas, temporary labor will hired as and when required The detail of the human resource requirement for the proposed project is given in table: Description No Monthly/ Salaries Salaries/Annual in (Rs) Veterinarian 1 10,000 120,000 Technician 1 3,500 42,000 Bull Attendant 1 2,500 30,000 AREA REQUIREMENT LAND REQUIREMENT About 0.5 acres (4 kanal) of land will be required for a SPU of 10 adult bulls. The land will be used for building a shed for bulls, feed store, bull exerciser, cattle crush (semen collection), laboratory and open area for animals. DETAIL OF COVERED AREA REQUIREMENT Description Area in sq. ft Construction Rate per sq. ft Total Cost in (Rs) Bull Shed 360 150 54,000

Laboratory 150 360 54,000 Feed Store 150 150 22,500 Total 654 130,500 RECOMMENDED MODE FOR AQUIRING LAND Lease is a better option for a new investor. Land on lease is available in rural and suburban areas for a period of 5-15 years. The higher livestock population regions of the country will be suitable for establishing a SPU. Lease payment will be paid in advance and will be used till 10 years of the project. LEASE DETAIL Description Lease Payment per Kanal For 10 years Total Amount in (Rs) 4 kanal of Land 30,000 120,000 BULL HOUSING An airy shed will be constructed to protect the animals from extremes of climate to reduce stress. Trees will be planted on east & west sides of the open area to provide natural shades. A manger will be made in the shed and the bulls will be tied in head to head position. In the open area, the bull will be offered feed/forage in individual mangers and tied up separately. Chains on their neck or attached to legs will be used to tie all the bulls. The covered area and open area requirements for the breeding bulls are given below: FLOOR SPACE REQUIREMENT IN BREEDING BULLS Floor Space Requirement m 2 Type of Animals Covered area Open Paddock Height of Shed (cm) at eves Cattle/Buffalo Bull 4.0 40.0 175 in medium and heavy rainfall areas and 220 in semiarid and arid areas Project Costs Land Lease 120,000

Building & Infrastructure 130,500 Machinery & Equipment 469,000 Bulls 200,000 Total Capital Cost 919,500 Minimum Cash Balance 50,000 Raw material Inventory 34,460 Pre paid Insurance 20,070 Working Capital 104,530 Total Project Cost 1,024,030 Equity 50% 512,015 Debt 50% 512,015 Total 1,024,030 NPV 138,172 IRR 28% Payback Period (Years) 4.42Pre-Feasibility Study L

District Breeding Bull Ratio to Breed-able Buffalo Gujrat 1:411 Jhelum 1:297 Attock 1:256 Chakwal 1:232 Rawalpindi 1:216

Khushab 1:205 In view of the prevailing shortage of breeding bulls and 5% of the AI coverage, there is an immediate need to establish semen production units (SPU), for increase in buffalo production. These SPU will produce and supply semen to meet the demand of farmers & commercial entrepreneurs in the country. Quality semen is a prerequisite for breed improvement and to develop a viable and functional artificial insemination program. Initially, a minimum of 10 bulls has been suggested for establishing SPU. Cow bulls have also been proposed in the SPU beside buffalo bulls. A mix of six buffalo bulls, two Friesian, a crossbred (50%) bulls and one Sahiwal/Dhanni bull depending upon the location of the SPU are recommended. The cost of proposed project is approximately Rs 1 million. Most of the SPUs are being operated in the public sector, which are catering to the needs of 5% livestock population of the country through its own network of artificial insemination centers. There are four SPUs in the country at the following locations. Qadirabad, Distt. Sahiwal Karianiwala, Distt. Bahawalpur Kharimurat, Distt. Attock Kalourkot, Distt. Bakkhar These SPUs are producing 12 million semen doses annually, whereas, the population of breed able buffaloes and cows in Pakistan is over 25 million, which needs over 43 million doses annually. In the absence of desired number of breeding bulls, there is high demand of semen doses in the country

PROJECTED INCOME STATEMENT Year-1 Year-2 Year-3 Year-4 Year-5 Year-6 Year-7 Year-8 Year-9 Year-10 Semen Sales 1,037,400 1,156,660 1,289,629 1,503,890 1,603,184 1,787,486 1,862,812 2,076,961 2,315,728 2,581,944 Other Income (Dung) 4,216 4,427 4,648 4,880 5,124 5,380 5,650 5,932 6,229 6,540 Total Revenue 1,041,616 1,161,086 1,294,277 1,508,771 1,608,308 1,792,867 1,868,461 2,082,893 2,321,956 2,588,484

COST OF GOODS SOLD Fodder Cost 122,959 129,107 135,563 142,341 149,458 156,931 164,777 173,016 181,667 190,750 Feed Cost 128,663 135,096 141,850 148,943 156,390 164,210 172,420 181,041 190,093 199,598 Vaccination & Medication 5,500 5,775 6,064 6,367 6,685 7,020 7,371 7,739 8,126 8,532 Chemical 18,000 18,900 19,845 20,837 21,879 22,973 24,122 25,328 26,594 27,924 Plastic tubes for semen filling 29,640 31,122 32,678 34,312 36,028 37,829 39,720 41,706 43,792 45,981 Liquid Nitrogen Refilling 120,000 126,000 132,300 138,915 145,861 153,154 160,811 168,852 177,295 186,159 Miscellaneous Supplies 10,416 10,937 11,484 12,058 12,661 13,294 13,959 14,657 15,389 16,159 Direct Electricity 52,081 57,289 63,018 69,320 76,251 83,877 92,264 101,491 111,640 122,804 Total 487,259 514,226 542,802 573,092 605,213 639,286 675,444 713,830 754,596 797,908 Gross Profit 554,357 646,860 751,475 935,678 1,003,095 1,153,580 1,193,017 1,369,063 1,567,361 1,790,576 OPERATING EXPENSE Payroll (Admin) 222,000 244,200 268,620 295,482 325,030 357,533 393,287 432,615 475,877 523,464 Insurance Expense 20,070 18,063 16,257 14,631 13,168 11,851 23,559 21,203 19,082 17,174 Administrative Overheads 10,416 11,458 12,604 13,864 15,250 16,775 18,453 20,298 22,328 24,561 Promotional & Travelling Expense 20,832 22,916 25,207 27,728 30,501 33,551 36,906 40,596 44,656 49,122 Amortization (Lease payment of land) 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 Depreciation 73,425 66,409 60,078 54,364 49,208 44,553 83,325 75,232 67,937 61,360 Total 358,743 375,045 394,765 418,069 445,157 476,263 567,529 601,945 641,880 687,680 Gain/loss on Sale of Assets 106,288 -

Operating Profit 195,613 271,815 356,710 517,609 557,938 677,317 731,776 767,118 925,481 1,102,896 NON-OPERATING EXPENSE Financial Charges on Long-term Loan 81,922 65,538 49,153 32,769 16,384 -

Total 81,922

65,538

49,153

32,769

16,384

PROFIT BEFORE TAX 113,691 206,277 307,557 484,840 541,554 677,317 731,776 767,118 925,481 1,102,896 Tax 4,027 13,785 27,011 66,710 80,889 114,829 131,122 143,491 198,918 261,014 PROFIT AFTER TAX 109,664 192,493 280,545 418,130 460,666 562,488 600,655 623,627 726,562 841,882 Retained Earnings beginning of year 109,664 109,664 302,157 582,702 1,000,832 1,461,498 2,023,986 2,624,640 3,248,267 3,974,830 Retained Earnings end of year 109,664 302,157 582,702 1,000,832 1,461,498 2,023,986 2,624,640 3,248,267 3,974,830 4,816,712