The study was taken up to work out the production and marketing costs and marketing margins earned by contract and non-contract farmers. The study applied Bennett’s hierarchy of evaluation model by adapting sets of methods - individual surveys, SWOT analysis and focussed group discussion (FGD). The data collected from 90 contract and 90 non-contract broiler farmers and the FGD with key stakeholders from three districts, through personal interviews. The results revealed that, returns in contract broiler farmers were significantly low in spite of low production cost. On the other hand, though production cost was high, farmers in non-contract broiler farmers were gaining a margin of ` 5.25 per bird produced. This indicates that contract and non-contract farmers incur significantly different production and marketing costs and they earn different marketing margins. Through improved technology, low margins on inputs, the companies are reducing production cost, leading to lower retail chicken prices, resulting in successful value chain development.
A contract farming arrangement involves a wage contract between an integrator who supplies the intermediate inputs and procures the output (as per pre-decided terms) and a poultry farmer who provides inputs such as administration, rearing and care taking. The sector has evolved over the years from a backyard activity to an organized and scientific large scale poultry industry. Broiler poultry production accounts for about 0.66 percent of India’s GDP and 7.72 percent GDP from the livestock sector (Prabakaran, 2014) and (Rajendran et al., 2014). Integration has helped to propel poultry to a commercial level. The increase in scale has provided the ‘push factor’ to take care of the ‘pull factor’ caused by the growth in the per capita income thereby providing choices to the consumer and keeping the price in check. Approximately 40 percent of the broiler production in India comes from contract farming (Birthal et al., 2007). Large scale integrators started implementing contract broiler farming. Indian broiler meat consumption is growing at the pace of production, which is estimated at approximately 10 percent annually. India consumes nearly all of the broiler meat it produces. Major drivers of consumption are- an expanding middle class, increasing employment levels and incomes, new demand for ready-to-eat products and the growing presence of affordable quick service restaurants, and a general preference for poultry meat over other meats due to low prices and cultural and religious non-preferences for pork and beef. To find out whether the contract and non-contract farmers incur significantly different production and marketing costs and earn different marketing margins, the present study was conducted to assess the technical and economic performance of the contract broiler farmers (CBF) and non-contract broiler farmers (NCBF) of Shivamogga, Davanagere and Chitradurga districts of Karnataka.
Materials and Methods
The three districts of mid Karnataka viz. Shivamogga, Davanagere, and Chitradurga were selected for the study, 18 taluks were selected from these districts and from these taluks, 5 each of contract and non-contract poultry farmers were selected from randomly selected villages. Thus arriving a respondent’s size of 30 contract broiler farmers and 30 non-contract broiler farmers, totalling 60 from each district, and thus forming a total respondent size of 90 contract broiler farmers and 90 non-contract broiler farmers from the three districts. Based on pre-testing, necessary modifications were done in interview schedule. The study applied Bennett’s hierarchy model to conduct follow-up evaluation by adapting sets of methods (Bennett, 1976). By using data from individual surveys, this hierarchy evaluates contract broiler farming and non-contract broiler farming systems, beginning at the bottom step with inputs and progressing to the top-end results. At level 3 of the Bennett’s evaluation hierarchy model, the technical and economic performance of the contract broiler farmers and non contract broiler farmers were measured by using the broiler birds (flock size, mortality number, birds sold, sale age, sales rate and birds lifting days) productivity (mortality percentage, birds sold, feed consumption and body weight) and efficiency (feed conversion ratio, sale age, weight gain/day). Economics of inputs and outputs and extension advisory services were measured by frequency of information from various sources, as indicators. The results were drawn using suitable statistical tools for the data obtained from the study.
Results and Discussion
The outputs in contract broiler farmers and non-contract broiler farmers are presented in five sub-categories- Broiler birds, Productivity, Efficiency, Economics and Extension Advisory Services (EAS).
1. Broiler Birds
The mean scores for number of chicks housed/flock size, and birds sold (number) in contract broiler farmers were higher than those of non-contract broiler farmers, though the‘t’ value revealed non-significant differences between them. This finding is in line with the results of the study by Majid and Hassan. (2013).The mean score for mortality in contract broiler farmers was significantly (p<0.078) higher (299) than in non-contract broiler farmers (250).The mean score for bird lifting days in contract broiler farmers was significantly (p<0.002) lower (1.91) than in non-contract broiler farmers (2.83). The mean score of sale rate in contract broiler farmers was significantly (p< 0.010) lower (64.34) than in non-contract broiler farmers (69.13) (Table 1).
Table 1: Outputs per batch in CBF and NCBF
|Parameter||CBF (n=90)||NCBF (n=90)||t value||Sig. (2-tailed)|
|Chicks housed/flock size (no)||6346||2965||6229||3547||0.241||0.810 NS|
|Birds sold (no)||6046||2845||5978||3392||0.147||0.883 NS|
|Birds lifting days (no)||1.91||1.05||2.83||2.61||3.102||0.002**|
|Sale rate (rupees/kg live weight)||64.34||3.86||69.13||4.29||2.6||0.010**|
|Bird sold (kg)||14561||6818||13805||7598||0.703||0.483 NS|
|Feed consumed (kg)||26456||13039||25998||14432||0.224||0.823 NS|
|Birds’ sale weight (kg)||2.42||0.21||2.33||0.15||3.349||0.001**|
|Marketing age (days)||44.16||2.67||43.17||2.41||2.603||0.010**|
* Significant at 5 per cent level; **Significant at 1 per cent level; NS- Non-significant
The mean score for mortality (%) (kg) in contract broiler farmers was significantly (p< 0.004) higher (4.83) than in non-contract broiler farmers (3.98).The mean score for birds’ sale weight (kg) in contract broiler farmers was significantly (p< 0.001) higher (2.42) than in non-contract broiler farmers (2.33). (Table 1).This finding is in line with the results of the study by Masuku (2011).
The mean scores for feed conversion ratio in contract broiler farmers and non-contract broiler farmers were slightly different (1.80 and 1.81, respectively) with non- significant difference between them. This finding is in line with the results of the study by Kalamkar (2012). The mean scores for marketing age (44.16) and weight gain (grams/day) (54.70) in contract broiler farmers were higher than in non-contract broiler farmers (43.17 and 53.87), and ‘t’ values revealed significant (p<0.010 and 0.013) differences between them (Table 1). The decisions on the number of chicks to be supplied, the time of lifting the birds and the number of batches rest entirely with the contractor, not the farmer, a major setback for the contract farmer in comparison with the non-contract farmer. The results are in similar lines with that of Sasidhar and Murari Suvedi (2015).
Among the input costs, the mean score for chick cost (23.32) in contract broiler farmers was significantly (p<0.000) lower than that in non-contract broiler farmers (26.45). Among other costs, labour cost was significantly (p<0.000) higher in contract broiler farmers, whereas bedding material (p<0.001), electricity (p<0.000), EAS (p<0.000) and miscellaneous (p<0.002) costs were significantly higher in non-contract broiler farmers. All the outputs such as sale rate of birds, manure and feed bags, were significantly (p<0.000) higher in non-contract broiler farmers (Table 2). The mean score for total cost of production in contract broiler farmers (60.05) was significantly (p<0.000) lower than that in non-contract broiler farmers (62.70). On the other hand, the mean score for total returns in contract broiler farmers (65.06) was significantly (p<0.000) lower than that in non-contract broiler farmers (70.54) (Table 2). Overall, when input costs were included, the average net return per kg of live bird and per bird in contract broiler farmers were ` 5.01 and ` 11.95; in non-contract broiler farmers, ` 7.84 and 17.20, respectively, with a significant (p<0.000) difference between them (Table 2). This finding is in line with the results of the study by Kalamkar (2012) and Jabbar et al. (2007).
To see the margins that contract farmers were losing to avoid marketing risk, economics were also separately worked out by excluding input costs and by including rearing charges. In this scenario, the mean scores for total costs and net returns per kg live chicken production in contract broiler farmers were ` 1.95 and ` 4.51, respectively; in non-contract broiler farmers, the corresponding values were ` 62.85 and ` 7.83, respectively. Overall in this scenario, the mean net return per bird produced in contract broiler farmers was ` 10.76 and in non-contract broiler farmers, ` 18.43 (Table 3). The difference in net returns earned by contract broiler farmers with and without variable costs indicated that they are losing a margin of ` 1.19 per bird produced by participating in contract broiler farmers (Tables 2 and 3). However, the net returns in contract broiler farmers are assured and almost fixed, while in non-contract broiler farmers they vary widely depending on the market rate (Table 3).
Table 2: Economics of CBF and NCBF
|Input costs / returns
|CBF (n=90)||NCBF (n=90)||t value||Sig. (2-tailed)|
|Chick (per chick)||23.32||3.17||26.45||2.59||7.250||.000**|
|Chick (per kg of bird)||9.70||1.42||11.47||1.23||9.918||.000**|
|Feed (per kg)||25.88||1.49||26.34||2.29||1.578||.116NS|
|Feed (per kg of bird)||46.79||4.38||47.43||3.71||1.070||.286NS|
|Medicine (per kg of bird)||1.78||1.99||1.73||0.73||0.209||.835NS|
|Labour cost (per kg of bird)||1.07||0.48||0.47||0.52||8.064||.000**|
|Bedding material (per kg of bird)||0.57||0.10||0.66||0.25||3.381||.001**|
|Electricity (per kg of bird)||0.13||0.05||0.24||0.15||6.519||.000**|
|EAS (per kg of bird)||0.00||0.00||0.53||0.23||21.790||.000**|
|Miscellaneous-transportation charges, fuel charges for brooding, litter cleaning and disposal etc. (per kg of bird)||0.18||0.06||0.32||0.43||3.144||.002**|
|Total cost (per kg of bird)||60.05||5.61||62.70||4.20||3.581||.000**|
|Birds sale rate (per kg of bird)||64.35||3.86||69.13||4.29||7.848||.000**|
|Manure sale (per kg of bird)||0.59#||0.11||1.24||0.59||10.159||.000**|
|Feed bags sale (per kg of bird)||0.13#||0.04||0.16||0.09||3.227||.002**|
|Total returns (per kg of bird)||65.06||3.92||70.54||4.26||8.979||.000**|
|Net return / profit (per kg of bird)||5.01||3.47||7.84||5.48||4.136||.000**|
|Average body weight (kg)||2.387||0.16||2.352||0.16||1.389||.016**|
|Net return (Rupees/bird produced)||11.95||2.79||17.20||12.89||4.471||.000**|
*Significant at 5 per cent level; **Significant at 1 per cent level; NS- Non-significant; #Not a part of contract
5. Extension Advisory Services (EAS)
The integrator was the sole source (100 percent) of EAS in CBF. About 27.78 and 72.22 percent of contract farmers were very frequently and frequently getting EAS from the integrator, respectively. In case of non-contract broiler farmers, the main source of EAS was private poultry consultants (100 percent). However, self-service (58.88 percent), government veterinary doctor (on payment) (40 percent), government research station (6.66 percent) and government veterinary doctor (free) (5.55 percent) were mentioned as other sources of EAS. The results are in similar lines with that of Sasidhar and Murari Suvedi (2015) (Table 4).
Table 3: Economics of CBF and NCBF (with rearing charges)
|Parameter||CBF (n=90)||NCBF( n=90)|
|Miscellaneous i.e. transportation charges, fuel charges for brooding, litter cleaning and disposal etc. (per kg of bird)||0.18||0.05||0.32||0.43|
|Feed bags sale||0.13||0.04||0.16||0.09|
|Rearing charges (RC)||4.00||–||–||–|
|Gross returns (RC + manure sale +feed bags sale + incentives)||6.46||3.92||70.54||4.26|
|Net return per kg live chicken (gross return – total costs)||4.51||3.47||7.834||5.48|
|Average body weight||2.387||0.16||2.352||0.16|
|Net return (rupees/bird produced)||10.76||2.79||18.43||12.89|
Table 4: Sources of EAS provision in CBF and NCBF
|EAS Source||Frequency of Utilization — Frequency (%)|
|EAS by integrator||–||–||65 (72.22)||25 (27.78)||90(100)|
|EAS by private poultry consultants||–||23 (25.55)||48 (53.33)||19 (20.11)||90(100)|
|EAS by self-service
|20 (22.22)||6 (6.66)||27 (30.00)||–||53(58.88)|
|EAS by govt. veterinary doctor (on payment)||9 (10.00)||27 (30.00)||–||–||36(40.00)|
|EAS by govt. research station||6 (6.66)||–||–||–||6(6.66)|
|EAS by govt. veterinary doctor (free )||5 (5.55)||–||–||–||5(5.55)|
Contract farmers revealed that, from time to time, company supervisors visited the contract farms to provide EAS services, advise on medications, check the performance/growth of the birds, and record key performance indicators such as mortality, feed conversion ratio, body weight, etc. From the FGD and interactions with contract farmers, it was clear that the supervisors from the company are trained poultry technicians but not poultry veterinarians. Veterinarians from the contract company visited the farms only in case of disease outbreak or when unusual mortality was reported. In the case of non-contract broiler farmers, private poultry consultants were the major source for EAS on a payment basis. From the interactions with non-contract farmers, it indicated that farmers were managing the majority of day-to-day problems using their experience but sought the advice of poultry consultants during disease outbreaks.
In CBF flock size, mortality and number of birds sold were higher, whereas, birds lifting days and sales rate were significantly lower. Again in contract broiler farmers, Mortality per cent, birds sold (in kg) and the feed consumed (kg) were higher and birds sale weight (kg) were significantly higher. The feed conversion ratio was almost same in both contract broiler farmers and non-contract broiler farmers, whereas in contract broiler farmers marketing age and weight gain were significantly higher.