Introduction

Contract farming in developing countries has experienced mixed outcomes, yielding some successes and some failures. Contract farming has, over the years, been considered as one system that has considerable potential for providing a way to integrate small-scale farmers into the modern economy. It has been argued that via. contracts, agro-industrial firms can provide the credit, inputs, information and subsequently market to the product (Glover 1990 and Goldsmith, 1985). Well-managed contract farming has proven to be effective in linking the small sector to sources of extensive advice, mechanization, inputs and credit, and to guaranteed and profitable markets for the products (FAO, 2001). But the evidence from some countries, however, also suggests that the vast majority of contract farming schemes exclude small farmers (Singh, 2002). Generally, capital intensive large firms try to exclude small farmers from the contracting system due to high transaction cost and poor economies of scale. The total number of poultry farms has decreased in developed countries like Japan, USA and Canada after the introduction of vertically integrated contract faming systems (Begum et al., 2005). Hence, the success in developing contracting models or other forms of farm-firm linkages that are effective for smallholders will be a key challenge to the smallholder participation in the transformation of Indian agriculture in general and poultry sector in particular. CBF has played a major role in the growth of the broiler sector, especially in structure, size and number of broiler farms in southern and western India. Though commercial farming can yield substantial gains, the transition from subsistence farming to market-driven broiler production is burdened with marketing risk (Von Braun and Kennedy, 1994 and Ramaswami et al., 2006).  Though CBF contributed to the rapid growth of the Indian broiler industry, the study was conducted to assess the factors that influence the participation or non-participation of farmers in contract broiler farming in Karnataka.

Materials and Method

The three districts of central Karnataka viz. Shivamogga, Davanagere, and Chitradurga were purposively selected for the study and from these 3 districts, 6 taluks each were selected totaling 18 taluks and from these 18 taluks, 5 each, of contract and non- contract poultry farmers were selected from randomly selected  villages of each taluk.  Thus, arriving a respondent’s size of 30  contract broiler farmers and 30 non-contract broiler farmers, (5 farmers from 6 taluks of each district) totaling 60 from each district, forming a total respondent size of 90 contract broiler farmers and 90 non contract broiler farmers from the three districts. The study applied Bennett’s hierarchy model (Table 1) to conduct follow-up evaluation by adapting sets of methods (Bennett, 1976). By using data from individual surveys, this hierarchy evaluates CBF and NCBF systems, beginning at the bottom step with inputs and progressing to the top – end results. At level- 4 of the Bennett’s evaluation hierarchy model, farmer’s reactions   on the CBF and NCBF were measured by using farmer’s feedback on the factors of motivation to do CBF and NCBF and reasons to change integrator(s) or input providers in the past two years based on open ended questions.

Table 1: Conceptual model depicting Bennett’s hierarchy applied in the study

Results and Discussion

Factors of Motivation for CBF

‘No market risk’ (100 %), ‘Regular and quick returns’ (87.77 %) and ‘Less working capital required’ (83.33 %) were the top three motivations to participate in CBF, followed by other motivational factors such as ‘Good market demand’   (78.88 %), ‘Easy to operate’ (74.44 %), ‘Good subsidiary occupation’ (66.66 % ), ‘Employment’ (60.00 %), ‘Manure for crops’ (51.11 %), ‘High margins’ (35.55 %), ‘Less land required’ (30.00 %), ‘Chicken for home consumption’ (25.55 %), ‘Alternative to less profitable agriculture’ (20.00 %) respectively  (Table 2 ). The findings of the study are line with the findings of Shojarani (2007) Nagaraj et al. (2008), Gulati et al. (2009) and Sridharan and Saravanan (2013).

Factors of Motivation for NCBF

‘Regular and quick returns’ (94.44 %), ‘High margins’ (88.88 %) and ‘Ease of operation’ (85.55 %) were the top three motivations for farmers to do NCBF followed by other motivational factors such as ‘Good market demand’   (76.66 %), ‘Good subsidiary occupation’ (70.00 %), ‘Employment’ (68.88 %), ‘Manure for crops’ (63.33 %), ‘Less land required’ (41.11 %), ‘No market risk’ (35.88 %), ‘Chicken for home consumption’ (33.33 % ), ‘Alternative to less profitable agriculture’ (28.88 %) respectively(Table 2). The findings of the study are in line with the findings of Begum (2005), Sudha Narayanan (2012) and Wainaina et al. (2012).

Table 2:   Factors of motivation to do CBF and NCBF

Change of Integrator(s)/Input Provider(s)

About 38.89 per cent of contract farmers and 67.78 per cent of non-contract farmers had changed integrator(s) and input provider(s) respectively, in the past two years (Table 3). The findings of the study are in line with the findings of Fernando Rello and Marcel Morales (2002).

Table 3:  Changed integrator(s)/input provider(s) in the past two years (n=90)

Reasons for Changing Integrator(s)

‘Low Rearing charges’ (97.14 %), ‘Not providing chicks for six batches’ (91.42 %) and ‘Delay in chick delivery’ (82.85 %) were the top three reasons for changing integrator(s) by contract farmers. ‘Delay in chick delivery’ (96.72 %), ‘Low quality feed’ (91.80 %) and ‘Low FCR’ (83.60 %) were the top three reasons for changing input provider(s) by non-contract farmers (Table 4).  The findings of the study are line with the findings of Sudarshannaidu (2013) Nagaraj et al. (2008) and Gulati et al. (2009).

Table 4: Reasons for changing integrator(s)

Conclusion

Contract production is more efficient than non contract production. The efficiency surplus is largely appropriated by the processor. Despite this, contract growers still gain appreciably from contracting in terms of lower risk and higher expected returns. Improved technology and production practices as well as the way in which the processor selects growers are what make these outcomes possible.  Contract farming can be highly beneficial to rural poultry farmers. It increases access to credit and drives production scales, opens up markets which would have otherwise remained inaccessible to the rural farmer, promotes risk-sharing and risk reduction, improves extension support and use of new knowledge, increases income, creates employment and improves livelihood; and stimulates rural development. Contract farming can also be highly beneficial to poultry business companies and the public sector in general. This could be instrumental in providing the farmers much more than assured markets and fair prices, but also support in the form of risk mitigation, access to information on management technology of the growing of birds, and markets and access to credit and other inputs.

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