Economics of 500 Birds and 1,000 Birds Commercial Broiler

Poultry Farms-Established under the

I-LED Value Chain Grant in District Bagh-AJK

Monitoring and Evaluation Section

CNFA Bagh

Improving livelihoods and Enterprise Development Project

_____________________________________________________

October 2008

Table of Contents

Executive Summary.........................................................................................................................ii

Introduction......................................................................................................................................1

Objectives of the Study....................................................................................................................2

Methodology....................................................................................................................................2

Results and Discussions...................................................................................................................2

Maintaining Shed.............................................................................................................................2

Feeding............................................................................................................................................2

Vaccination, Morbidity, Mortality and Disposal of Dead Birds.....................................................3

Productivity and Feed Conversion Ratio.........................................................................................5

Cost Benefit Analysis......................................................................................................................6

Flock Maturity and Marketing.........................................................................................................7

Creation of Full Time Equivalent Jobs............................................................................................7

Perception about Developing Local Hatchery.................................................................................8

Study Limitations.............................................................................................................................8

Conclusion.......................................................................................................................................9

Recommendations............................................................................................................................9

i

Executive Summary

The study was conducted in order to compare profitability and productivity of small (500 birds’) and large broiler poultry farm (1,000 birds’) and the contribution of these farms in creating jobs. For this purpose all of the 39 farms (13 of 500 and 26 of 1,000) were surveyed through questionnaire and direct observation. Data was analyzed by applying simple statistical methods of descriptive statistics and cost benefit analysis.

The study found all of the farmers were aware need of proper flock management and its role in the health and production. They carried out regular vaccination schedule. The farmers had easy access to public veterinary health facilities.

Small size farms had higher mortality (11.5%) as compared to large size farms (7.25%). Majority of the farmers (58%) were disposing dead birds on technically sound terms, whereas 100% of the farmers who have not attended commercial broiler poultry farm training were throwing away dead birds in open space.

The flocks were feed about 3.5kg of feed per bird per production cycle with conversion ratio of 2.1. The 39 farms contribute 0.1% to the total yearly district poultry meat demand. Large farm producers were getting higher price (Rs 3,941per mond) as compared to small farms (Rs 3,708 per mond). Large farms generated higher net income per bird (Rs 36) as compared to small farms net income per bird (Rs 30). Birds in the large farms attained higher growth (39 days) as compared to small farms (41 days). Normally producers sold their birds to whole sellers and retailers.

Each farm created 0.6 full time equivalent jobs. In other words, 39 farms created 25 full time jobs. Broiler commercial poultry farm was found a profitable business.

ii

Economics of 500 birds’ and 1,000 birds’ Broiler Commercial Poultry Farms-

Established under the I-LED Value Chain Grants in District Bagh-AJK

Introduction

Poultry is one of the important sectors in VC component of the I-LED project. The sector is committed to improving existing and establishing new poultry enterprises in the region and providing managerial and professional services to ensure effective operation of these enterprises.

Bagh, the I-LED project area is one of the white meat deficit areas thus besides establishing poultry business and restoring the lost livelihoods due to the disastrous earthquake; I-LED is also concerned to meet these deficiencies in demand through local supply. Therefore, it has allocated reasonable resources for the sector to meet these priorities.

During the first two years, I-LED established 39 i commercial broiler poultry farms (13 of 500 birds and 26 of 1,000 birds). Among the total 39 farms/farmers, I-LED introduced 23 new farmers into the poultry industry (9 of 500 and 14 of 1,000 birds farm) and supported in rehabilitating and improving the poultry business for 16 farmers who were already in industry. The present study focused on all of the farms in order to get a real and true information regarding fulfilling of the objectives of the study- per sees.

At the time of survey, 19 out 39 (5 of 500 birds farms and 14 of 1,000 birds farms) were rearing flock whereas the remaining were in process of preparation of stocking. Also majority of the farmers (38%) has sold/reared 2 flocks and 2 farmers (5%) reared 4 flocks after the establishing of their farms. It was observed that 3 farmers of 1,000 birds had not reared any flock for want of sufficient capital with them. Unlikely other farmers, these 3 were to provide with chicks and feed for the first flock because the grantee share in the package was not covering these costs. The chart to right shows the number of total flocks reared by each farm type.

Objectives of the Study

i The fully operational farms were only selected for the study.

1

The study focused on:

Evaluate productivity and profitability potential of the poultry farms Look into management practices of the farmers/grantees Identify constraints to the production Contribution of broiler farms in creation of full time equivalent jobs

Methodology

Primary data was collected through a pre designed & tested questionnaire of open and close ended questions and direct observation of the farmers’ management practices. The data was analyzed in MS Excel applying cost benefit analysis and pivot table technique to get descriptive statistics. Also only weighted averages were applied in order to obtain more accurate central tendency.

Results and Discussions

Maintaining Shed

Management practice plays paramount part in the boiler poultry industry and it has direct effect on occurrence of morbidity, mortality, feed conversion to body mass, profitability, and productivity of the farms. Keeping poultry sheds properly is essential in all phases of broiler production. Proper ventilation helps in air renewal, supply of oxygen and removal of metabolisms products such as ammonia and carbon dioxide. On average, all of the farmers were maintaining clean sheds and were aware of the importance of light availability, ventilation, covering floor with litter/dub, litter thickness and keeping floor dry around the drinkers (see table-a in annexure).

Feeding

Placing adequate number of feeders, normal plastic and automatic drinkers are also very important to get utmost returns from the broiler production. Standard numbers of these utensils per 100 birds are 3-4 feeders, 1 automatic drinker and 3-4 normal plastic drinkers. It is disappointing that some of these farmers were keeping inadequate number of these utensils as per standards. The actual number of these utensils with respect to age in days is given in table-c in annexure.Table 1: Actual no. of feeding utensils against the standard

Utensil Statistics500

Farm1,000Farm

FeederAverage 12 28Deviation from standard ()

-4 -12

Normal Drinker

Average 1.5 13Deviation from standard ()

-10 -3

Automatic Drinker

Average 4 6Deviation from standard ()

-1 -4

Source: Survey Data October, 2008

2

Vaccination, Morbidity, Mortality and Disposal of Dead Birds

Proper vaccination is one of the effective ways to prevent occurrence of diseases, and minimize economic losses. The study concluded all of the farmers were following regular vaccination to prevent NDIB (Newcastle Disease Infectious Bronchitis), Gumboro-I, Gumboro-II, Hydropercaridium and ND Lasota.

3

7.1

41

8

100

% Mortality % Throw away deadbirds

Training attended

Training not attended

Farmers reported various disease outbreaks in their flocks. Gambaro, hydroperichardia, choriza, chronic respiratory disease and coccidiosis were the major diseases flocks suffered from. Mortality caused by these diseases in the flock has been presented in table-b in annexure.

Mortality in broiler farms represents number of birds died per 1,000 birds in one cycle of usually 40 days. Mortality of 80/1,000 birds or 8% is acceptable in these farms. The present study focused on mortality in the last two flocks’ i.e. current flock and flock proceeding to the current one. Farms of 500 birds suffered from high mortality (11.5%) as compared to farm of 1,000 birds (7.25%). It is worthwhile to note that farmers of 1,000 birds’ farm performed very well and they kept transience below the standard of 8%.

It is also evident that these farmers had easy access to health facilities (veterinary hospital/dispensary) and on the average every 6 km such veterinary health infrastructure is available to the farmers.

Like keeping proper sheds, disposing of dead birds properly is another determinant of good broiler farm management practices. The farmers were told about technically disposing the dead birds-burying or burning them during the commercial broiler poultry farm management training. The study found that not all of the farmers were following these instructions and only 58% of the farms were burying the dead birds whereas 42% are throwing away in the open space. This is very undesirable situation in terms of environmental ethics and spread of contagious diseases.

The study also concluded that the performance of those farmers who took training on management of commercial poultry farms was satisfactory, in terms of mortality and disposing off dead birds properly.

Feed and Feed Cost

Feed is the most important component in any broiler business because of its impact on health, productivity and economic returns and share in total production cost. Broiler birds need various vital ingredients in their diet at various stages of the production cycle. Scientists have formulated feeds and termed various names. In the Indo-Pak subcontinent they recommend feed no-4 for up to 30 days of age and feed no-5 till slaughter time. I-LED farmers were using feed no-4 till 15 instead of 30 days. This could be one of the reasons for getting lower returns from their business as compared to the rest of the region. Furthermore, the birds were getting 1.5 kg/bird of feed no-4 in case of 500 birds’ farm (0.90 kg/bird in 1,000 birds’ farm). Similarly each bird in 500 birds’ farm was getting 1.9kg of feed no-5 (2.35 kg in case of 1,000 birds’ farm).

1

Mr. Muhammad Nazir Khan is an experienced and traditional broiler meat producer. Prior to earthquake he was raising farm of 1,500 birds in a rented shed and was earning a reasonable income. The devastating earthquake of October, 2005 destroyed his prime source of livelihoods. He had lost hopes and was in constant contact with the Bagh poultry association. With the strong recommendation of the Said association I-LED granted the package of 1,000 broiler commercial farm. He managed his farm properly and reduced the mortality from 8% to 3.4%, enhanced the net profit per bird from Rs 16.67 to Rs 35.5 and now gets his mature flock in 40 days as compare to 45 days. During the survey he said,

Mr. Nazir put: “I am extremely happy of the decision I made to become the CNFA I-LED Value Chain grantee. I got a highly profitable business at my door step. Without such wonderful intervention, I would have gone abroad to earn my livelihoods. With this business, I am earning enough revenue and look after my kids properly. Finally I do invite all my relatives and friends who have no permanent source of income to become part of the program”.

Table 2: Feed and Feed CostFeed type Description 500

farm1,000farm

Feed no. 4

Days 15 15Total bags 15 18Price per bag 1,150 1,150Transportation cost per bag

24 21

Feed no. 5

Days 43 44Total bags 19 47Price per bag 1,160 1,160Transportation cost per bag

24 21

Source: Survey data, October 2008

Productivity and Feed Conversion Ratio

The study found that on average 500 birds farm produced 20 mond (800 kg) of live bird weight and 1,000 birds farm produced 37 mond (1,480 kg) live bird weight. These farmers sold the meat on Rs 3,708/mond and Rs 3,941/mond of 500 and 1,000 size birds’ farm respectively.

With reference to the marketing plan study of 2,000 broiler poultry farm conducted byDr. Shahid-Poultry Specialist (2007), revealed that these farms contributed 0.1% to the total yearly regional poultry meat consumption out of 5 flocks per year. This means that there is a tremendous scope exists to strengthen the poultry sector.

In animal husbandry literature, the feed conversion rate/ratio (FCR) and feed efficiency are simultaneously used. The FCR measures animal/bird efficiency of converting feed mass into increased body mass. FCR is calculated by:

FCR of 2.13 and 2.2 was found for 500 and 1,000 birds’ farm respectively and this was within the standard rate of 2-4 (lower rate is preferred). From the calculated FCR it can be incurred that the I-LED farmers were efficiently converting feed into meat (increased body mass).

2

Cost Benefit Analysis

Cost benefit analysis is widely used technique in evaluating quantitatively any course of action. The technique involves quantifying all the benefits and cost (variable and fixed) in same unit and then finding the ratio.

Table 4: Cost Benefit Analysis

Item Description

PKR

500 Farm

1,000Farm

Sales Revenue 74,160 145,817

Fleeces return 1,724 2,040

Feed and litter empty bags (Rs 8/bag) 376 840

Total Return 76,260 148,697

Variable Cost

Chicks (Rs 22/chick) 11,000 22,000

Feed No-4 17,250 20,700

Feed No-5 22,040 54,520

Litter (Rs 90/bag) 1,170 3,600

Transportation 1,128 2,205

Medicines 1,643 2,595

Labor 5,625 5,028

Total Variable cost 59,856 110,648

Gross Margin 16,404 38,049

Gross margin per bird 33 38Fixed Cost

Shed depreciation/production cycle 1,038 2,035

Equipment depreciation 136 497

Total fixed 1,174 2,532

Net farm profit 15,230 35,517

Net profit per bird 30 36

Source: Calculation from the survey data (October 2008) and secondary data from Grants Section

Table 4 shows that major portion of the cost was associated with feed (64% and 66% for 500 and 1,000 birds farms respectively) followed by buying day old chicks. Farm of 500 and 1,000 sheds cost was calculated through straight line depreciation method and assuming 16% salvage value and 20 years useful life. Whereas the salvage value for the equipments and useful life was assumed 10% and10 years respectively. The total annual depreciation was converted to production cycle (42 and 44 days for 500 birds and 1,000 birds’ farm respectively). Also no compounding and discounting was used due to the fact of lower time span involved between the flow of cost and benefits (maximum of 44 days).

3

RetailersRetailers

Whole sellerWhole seller

FarmerFarmer

Labor cost was calculated by multiplying the number of labor hours per production cycle and getting the minimum hourly rate (Rs 200/8 hours).

Flock Maturity and Marketing

Subject to proper feeding and maintaining other standards of diseases prevention, proper temperature and proper sheds, commercial broiler flock matures in 40-45 days. It was found that I-LED farmers’ flocks reached to maturity within international standard period. Farm of 1,000 birds got maturity earlier (39 days) as compared to farm of 500 birds (41 days).

Due to high demand of poultry meat, these farmers normally sold their flocks soon after the maturity. The average selling period was 42 and 44 days for 500 and 1,000 birds’ farm. Hence farmers were incurring a very minimal cost of keeping their flocks after maturity period. Furthermore, these farmers sold their flocks mainly to whole sellers followed by retailers; the channel is shown in the following figure.

Creation of Full Time Equivalent Jobs

FTE is defined as number of total hours worked divided by the maximum number of compensable hours in a work or FTE is also defined as total hours worked divided by average annual hours worked in full-time jobs (full time work is job is 40 hours of work per week for 52 weeks in a year). Full-time equivalent (FTE) is a way to measure a worker's involvement in a project, work or list of activities. An FTE carries value of 0-1 and 1 means that the person is equivalent to a full-time worker, while an FTE of 0.5 signals that the worker is only half of full time worker and 0.25 means a worker is quarter time of a full time worker.

I-LED commercial broiler farm package is one of the important I-LED grants which not only benefit the farmers but has positive externalities on society as a whole by creating jobs and reducing significant number of unemployed labor force. In the survey area, farmers were involving in management of birds for 4.6 hours daily and hence one farm grant created 0.6 full time equivalent jobs (4.6*7*40/40*52= 0.6)ii. This way all the 39 broiler farms created 25 full time jobs (see table below please).

Table3: Creation of FTE Jobs

Description500

Farm1,000Farm

Daily hours involved 5 4.47

FTE 0.7 0.6

ii Most of the I-LED farmers are of the view keeping no flock during the severe winter (Dec-Feb), so they are involved for 40 weeks instead of 52 of weeks in a year in the enterprise.

4

Full time jobs created 9.1 15.6

Overall jobs created 25

Source: Survey data October 2008

Perception about Developing Local Hatchery

I-LED is aware of the need of strengthening these enterprises and has allocated reasonable resources to establish a hatchery in the region. Currently these farmers are getting day old chicks through the local agent from Islamabad/Rawalpindi. The agent supplies chicks when he gets order for 10,000 chicks per truck so that to keep transportation and labor charges at the minimal. Mostly this takes 15-20 days for the agent to supply the chicks and hence every farmer is loosing about one cycle of the broiler production per year. Therefore, it was perceived important to get feedback from the actual users of the hatchery to be developed. The idea was widely welcomed by the farmers and their response is depicted in the chart above.

Study Limitations

Following are the major limitations of the present study:

No information was gathered regarding poultry associations and their role in the escalation of these farms.

No data was gathered for utility cost (electricity, wood/fuel) and opportunity cost of the shed’s area for lack of proper records by the farmers/producers.

Conclusion

5

The study surveyed all of the 39 established farms and concluded that broiler farming is a reasonable source of income generation and plays an effective role in poverty alleviation. The poultry farms established under I-LED program contributed 0.1% to the total yearly district demand. Furthermore, large farms performed efficiently as compared to the small farms in terms of producing net income, reduced mortality, feed conversion ratio and early maturity of the flock.

Both the gross margin and net farm income is positive indicating that broiler production is a profitable enterprise and is therefore, can be taken as poverty alleviation tool. Furthermore, larger farm size generates more net farm income because of the lower average cost. Therefore, it is strongly recommended that I-LED should focus on establishing large farm size as it plans for the third year of the project.

Recommendations

Following recommendations are suggested in light of the findings of the study:

i. All the 3 farms of 1,000 birds' that have not started rearing flock must be mobilized to make the farm fully operational.

ii. Government and non-government organization should focus on the strengthening of the poultry sector so as to raise at least 2% contribution of the local supply in yearly district demand.

iii. Enough number of feeders and drinkers should be placed all the time in the shed so as to avoid under nourishment of the birds and enhance productivity of the farms.

iv. Feed no-4 should be provided for first 30 days and thereafter feed no-5.v. Farmers, particularly of 500 farms, should focus on bringing birds’ mortality

within standard of 8%.vi. Training section should arrange additional training on the commercial broiler

management in order to enhance the technical capacity of poultry farmers and provide opportunity for those who have not attended such training before.

6

Annexure:

Table a: Shed ManagementShed

StatusStatus

Category500

Farm1,000Farm

GrandTotal

Cleanliness

Satisfactory 2 3 5Good 2 8 10Bad 1 3 4NA* 8 12 20

LightAvailability

Satisfactory 4 9 13Good 2 5 7NA 7 12 19

VentilationSatisfactory 2 7 9Good 4 7 11NA 7 12 19

Dryness aroundthe drinker

Yes 5 10 15No - 4 4NA 8 14 20

Floor coveredWith dub/litter

Yes 5 14 19No - - -NA 8 14 20

Litter thickness Inches 2 2.4 -* NA represents farmers who are not rearing flock currently

Table-c: Actual Feeders and Drinkers kept in shed as per age of birds

FarmType

Age(days)

FeederNormalDrinker

AutomaticDrinker

1000 size

45 27 10 2140 40 10 040 30 18 040 25 21 040 24 12 135 32 13 635 30 21 833 28 0 1028 26 0 924 25 20 022 29 12 1022 29 12 1021 30 18 712 15 15 0

500 size

40 5 0 530 11 0 428 19 0 423 17 2 53 8 5 0

Table-b: Mortality caused by various diseases

Disease

%of birds died per disease

500Farm

1,000Farm

Ghumboro - 9.75Hydorperichardia 8 3Choriza 30 18.5Chronic RespiratoryDisease

13 -

Coccidiosis - 5