AN ECONOMIC ANALYSIS OF POULTRY FARMS IN BELGAUM DISTRICT

Transcription

1 AN ECONOMIC ANALYSIS OF POULTRY FARMS IN BELGAUM DISTRICT Thesis submitted to the University of Agricultural Sciences, Dharwad In partial fulfillment of the requirements for the Degree of Master of Science (Agriculture) in Agricultural Economics By MAHESHBABU V. DEPARTMENT OF AGRICULTURAL ECONOMICS COLLEGE OF AGRICULTURE, DHARWAD UNIVERSITY OF AGRICULTURAL SCIENCES, DHARWAD JUNE, 2014

2 ADVISORY COMMITTEE DHARWAD JUNE, 2014 Approved by: Chairman: (S. S. GULEDGUDDA) CHAIRMAN (S. S. GULEDGUDDA) Members: 1. (A. BHEEMAPPA) 2. (M. D. MARTUR) 3. (M. Y. TEGGI)

3 CONTENTS Sl. Chapter Particulars No. CERTIFICATE ACKNOWLEDGEMENT LIST OF TABLES LIST OF FIGURES LIST OF APPENDICES 1. INTRODUCTION 2. REVIEW OF LITERATURE 2.1 Financial feasibility of investment in layer and broiler farms in Belgaum district 2.2 Cost and returns in layer and broiler farming 2.3 Price spread in the existing marketing system for eggs and broilers 2.4 Constraints in management of layer and broiler farms and to suggest suitable measures for improving both farms 3. METHODOLOGY 3.1 Description of the study area 3.2 Sampling procedure 3.3 Nature and source of data 3.4 Analytical tools and techniques 3.5 Definition of terms and concepts used 4. RESULTS 4.1 General characteristics of the poultry farmers (broilers and layers) in the study area 4.2 Investment pattern on poultry farms 4.3 Discounted cash flows on poultry farms 4.4 Feasibilities of investment in poultry farms 4.5 Total costs in broiler and layer production 4.6 Returns from poultry farming 4.7 Price spread for broilers and eggs 4.8 Problems in production and marketing of broilers and layers 5. DISCUSSION 5.1 General characteristics of the poultry farmers (broilers and layers) in the study area 5.2 Investment pattern on poultry farms 5.3 Discounted cash flows on poultry farms 5.4 Feasibilities of investment in poultry farms 5.5 Total costs in broiler and layer production 5.6 Returns from poultry farms 5.7 Price spread in egg and broiler marketing 5.8 Problems in production and marketing of broilers and layers 6. SUMMARY AND POLICY IMPLICATIONS REFERENCES APPENDICES

4 LIST OF TABLES Table No. Title 3.1 District wise total poultry population, chicken production and layer population in Karnataka 3.2 Taluk wise number of broiler and layer farms in Belgaum district 3.3 Number of broiler farm respondents selected from the study area 4.1 General characteristics of sample poultry farmers in the study area 4.2 Investment pattern of different size group of broiler farms 4.3 Investment pattern of layer farms 4.4 Discounted cash flow on different size group of broiler farms 4.5 Discounted cash flow on layer farms 4.6 Feasibility of investment on different size group of broiler farms and on layer farms 4.7 Cost of broiler production in different size group of broiler farms per year 4.8 Cost of egg production of layer farms per year 4.9 Returns from different size group of broiler farms 4.10 Returns from layer farm per year 4.11 Marketing cost, margin, price spread and marketing efficiency in marketing of broiler in channel-i 4.12 Marketing cost, margin, price spread and marketing efficiency in marketing of broiler in channel-ii 4.13 Marketing cost, margin, price spread and marketing efficiency in marketing of broiler in channel-iii 4.14 Marketing cost, margin, price spread and marketing efficiency in marketing of eggs in channel-i 4.15 Marketing cost, margin, price spread and marketing efficiency in marketing of eggs in channel-ii 4.16 Marketing cost, margin, price spread and marketing efficiency in marketing of eggs in channel-iii 4.17 Problems faced by broiler farmers during production and marketing 4.18 Problems faced by layer farmers during production and marketing

5 LIST OF FIGURES Figure No. Title 3.1 Map of Belgaum district showing the taluks selected for the study 3.2 Schematic representation of broiler farmers sampling plan for the study 4.1 General characteristics of sample poultry farmers in the study area 4.2 Investment pattern of different size group of broiler farms 4.3 Investment pattern of layer farms 4.4 Discounted cash flow on different size group of broiler farms 4.5 Discounted cash flow on layer farms 4.6 Cost of broiler production in different size group of broiler farms per year 4.7 Total costs of egg production of layer farms per year 4.8 Returns from different size group of broiler farms 4.9 Returns from layer farm per year LIST OF APPENDICES Appendix No. I II III IV Title Inter view schedule Cash inflows and cash outflows in broiler and layer farms Cost of broiler and layer production per batch Returns from broiler and layer farms per batch

6 INTRODUCTION Animal husbandry is an integral part of agriculture in India; it provides gainful employment particularly to small and marginal farmers and agricultural labourers. Livestock also provides a variety of raw materials for industrial use. It provides draught power for various agricultural and other operations. Recognizing the importance of animal husbandry in rural economy of the country and its contribution to national income both at central and state governments are devoting considerable attention to the development of animal husbandry. The poultry sector accounts for about two per cent of the gross domestic product (GDP) in India and about 10 per cent of the total gross national product (GNP) attributable to livestock sector. The poultry industry has made great progress after independence. It has grown rapidly at the rate of 4-6 per cent in layers and 8-10 per cent in broilers during the past two decades. With an annual output of 37 billion eggs and 1000 million broilers, it yields 5.75 lakh tonnes of poultry meat. Poultry adopt easily to any agro climatic condition, requires less land and capital and provides quick yields. This industry has provided direct employment to about nine lakh people and given rise to many allied industries like feed, equipment, pharmaceuticals etc. Fisheries account for 50 per cent of meat production, followed by 30 per cent through beef, eight per cent by sheep and goats and six per cent each by pig and poultry industries. (Bhende, 2006). Poultry is one of the important components of animal husbandry activities. Poultry refers to domestic fowl which are reared for flesh and egg and includes chickens, ducks, geese, turkeys, guinea fowl, etc. However, the most important member of the family is the chicken. There are two segments in the poultry industry comprising layers and broilers. Layers are the chickens reared especially for the production of eggs. These birds are kept in cages during their productive life cycle of 72 weeks. Once their productivity declines, they are sold in the market for human consumption. A layer is a thin, scrawny bird and fetches a lower price in the market compared with a broiler. Broilers are pumped with vitamins and proteins and have a life cycle of 10 weeks before they are sold as a quality chickens for table purpose. There are large variations in production and consumption of poultry meat and egg in India across various states. The consumption is affected by various factors including taste preferences, religious practices, per capita income, urbanization, etc. Higher urbanization and relatively stronger presence of organized players has supported rapid gains in commercialization of poultry farming in South and West regions. South India produces more than 45 per cent of total domestic poultry output led by state of Andhra Pradesh, while another 20 per cent comes from Western region. Tamil Nadu leads in terms of poultry consumption closely followed by other Southern states. The egg consumption in these states is also benefitted from inclusion of eggs in various Mid-Day meal programs. India is the third largest producer of eggs and sixth largest producer of poultry meat in the world. In , it produced over 66,450 million eggs and about 2,483 metric tonnes of poultry meat ( In the overall market for poultry products, India was positioned 17 in World poultry production. An analyst s estimate that the poultry sector in India has been increasing at a fast rate, along with other industries such as feed industry and the securities market. Over the past decade the poultry industry in India has contributed to approximately US $229 million GNP. Several technological breakthrough in poultry science have led to the development of genetically superior breeds capable of higher production, even under adverse climatic conditions that offer opportunities to expand the export of poultry products on a large scale. The poultry business in India provides employment to an estimated over 2 million people among which around 80 per cent are directly employed, while the rest 20 per cent is engaged with its allied areas like in feed, pharmaceuticals, equipment (other services as required by the poultry industry. Moreover, this sector also involves an additional workforce of around 1.6 million, primarily engaged in marketing and sales of poultry products. India exports poultry products like table-eggs, meat, live birds, egg powder and frozen yolk to various countries ( The major export destinations ( ) are Afghanistan, Saudi Arabia, Indonesia, Germany and Netherland. The country has exported 5,77, MT of poultry products to the world for the worth of Rs crores during the year as per the Agricultural and Processed Food Products Export Development Authority ( apeda.gov.in/).

7 Poultry meat is an important source of high quality proteins, minerals and vitamins to balance the human diet. The technological breakthrough in livestock sector results in quick growth and higher feed conversion efficiency of broiler breeds are now available. Depending on the farm size, broiler farming can be the main source of family income or can provide subsidiary income and gainful employment to farmers throughout the year. Poultry manure has high fertilizer value and can be used for increasing the yield of any crop. Although India has all the necessary inputs for the healthy growth of poultry farming, its contribution to the total livestock output is only about 10 per cent. This indicates some crises in the activity. It would not be an exaggeration to say that the escalating demand for protein and growing unemployment in the country would definitely keep this industry on a high growth path. But the constraints under which it has been operating should be removed. In the livestock sector, poultry is the most efficient converter of plant products into high quality animal protein. However, the development of poultry has been lopsided. Most of the poultry farms are concentrated near cities and metros where there are well-organized markets. Today, per cent of eggs and poultry meat are consumed by just 25 per cent of the population in urban areas. Presently, the per capita per annum consumption of poultry eggs and meat was 53 eggs and 2.2 kg, respectively. According to the National Institute of Nutrition recommends 180 eggs and 11 kg of poultry meat ( Rapid industrialization, economic liberalization and monetization of the rural economy have induced demand for poultry products in domestic markets. Karnataka state accounted for about 5 per cent and 1.5 per cent to the country s total egg and poultry meat production respectively. The state has occupied 6 th place in egg production and 10 th place in poultry meat production. In , the egg production was 34,699 lakhs in number and 38 metric tonnes of poultry meat production ( The poultry meat production in Belgaum district has increased from 804 tonnes in 2009 to 3,334 tonnes in 2011 and egg production has decreased from 545 lakhs in 2009 to 403 lakhs in According to Department of Animal Husbandry, Karnataka the position of Belgaum district with respect to poultry meat and egg production was first and fourth place, respectively in Northern Karnataka. The present day poultry is facing number of problems. The cost of feeds has prohibitive. There is persistent outbreak of epidemics among the birds. The marketing system cannot meet the demand of the poultry producers. The monopoly control of the market by middlemen coupled with unremunerative prices for eggs and meat has further worsened the situation. These problems seem to be frequently faced by the poultry farmers in Karnataka as much as in the other parts of the country. Inspite of these problems, majority of poultry farmers in Belgaum district of Karnataka continue to operate in the poultry industry. They are exploring all the avenues for expanding the poultry enterprise, so as to minimize the risk per unit. They are hesitant to leave the industry in view of the lack of alternative source of income. Hence, poultry enterprise offers both incentives for investors and at the same time pose a risk of losses to the farmers. It may be taken up both as main enterprise as well as a subsidiary occupation. However, a farmer businessman who ventures into this enterprise must have knowledge of the estimates of investment, probable costs and returns, profits so as to make decisions on sound economic principles. Hence, the present study was taken up with the following specific objectives. Specific objectives of the investigation are, 1. To analyze financial feasibility of investment in layer and broiler farms in Belgaum district; 2. To estimate the cost and returns in layer and broiler farming; 3. To study the price spread in the existing marketing system for eggs and broilers; and 4. To study the constraints in management of layer and broiler farms and to suggest suitable measures for improving both farms. Hypotheses 1. The investment in layer and broiler farms is financially feasible; 2. Production of broilers and layers is profitable; 3. Producer s share in consumer s rupee is more in broilers and layers; and 4. There are many constraints in management of layer and broiler enterprises.

8 Presentation of the study The entire study is presented in six chapters. The chapter I gives an introductory note highlighting the rationale of the study, specific objectives and its hypotheses, while chapter II represents reviews of the studies conducted in the past that are relevant to the objectives of the present investigation. Chapter III explains the methodology adopted for the study, including description of the study area and cropping pattern, sampling frame, nature and sources of data, analytical tools and techniques used. The results of the study are presented in chapter IV and are discussed in chapter V. The summary and policy implications are presented in chapter VI. At the end important references have been listed related to the present study. Need for the study The poultry enterprise can help to meet the nutritional requirements of the community besides providing income and employment to the weaker sections of the society. In view of this, it is felt essential to critically study the economic variation of poultry enterprise. Further, the information on the cost of production of broiler would be useful in indicating the share of various factors incurred in the production of poultry enterprise. This would also provide an in-sight into the cost structure so that efforts can be made to lower the expenditure and increase the margin of profit to the producer. This study will give indication of optimum use of different resources used for production of broiler. Study will be useful in rational use of modern inputs so as to have consistency in production. It also includes analysis of channel wise price spread and estimates on producer s share in consumer s rupee, which will help to find way to increase the efficiency of marketing of produce with which farmers dispose the produce to their greatest advantage. Limitations of the study Due to the limitation of the time and other resources, the present investigation has restricted the selection of the study area, sample size and the variables. Hence, the findings have to be viewed in the specific context of the conditions prevailing in the study area and cannot be generalized for wider geographical area. However, careful and rigorous procedures have been adopted in carrying out the research. In spite of the individual bias made by the sample farmers in providing the necessary responses, it is believed that the findings and conclusions drawn in the present study would form the basis for future research study.

9 REVIEW OF LITERATURE A review of past research helps in identifying the conceptual methodological issues relevant to the study. This would enable the researcher to collect information and subject them to sound reasoning and meaningful interpretation. A brief review of the earlier research work related to the present study is presented in this chapter. Keeping in view the objectives of the study, the reviews are presented under the following headings. 2.1 To analyse financial feasibility of investment in layer and broiler farms in Belgaum district 2.2 To estimate the cost and returns in layer and broiler farming 2.3 To study the price spread in the existing marketing system for eggs and broilers 2.4 To study the constraints in management of layer and broiler farms and to suggest suitable measures for improving both farms 2.1 To analyze financial feasibility of investment in layer and broiler farms in Belgaum district Shiva Prasad (1991) studied on production and marketing of eggs and broilers in Bellary district. The financial feasibility analysis revealed that the per farm net present value (Rs. 2,77,632.94), benefit cost ratio (2.83) and pay back period (2 years 6 month) was highest in broiler farms compared to layer farms. The internal rate of return was lowest in broiler farms (46.21 %) compared to layer farms (50.22 %). Thus, the layer farms are more viable than the broiler farms. Shanmugan (1991) studied on production and marketing aspects of broilers in Salem district of Tamil Nadu. He observed that the benefit-cost ratio at total cost was The pay back period estimated was comprised of eight production cycles to repay the total investments. Bajantri (1998) studied on financial feasibility of investment in poultry enterprise in Dharwad district. He revealed that the net present value was Rs. 8, per unit on small farms and Rs. 6, on large farms. The benefit cost ratio was 1.54 on small farms and 1.40 on large farms. The internal rate of return was and per cent on small and large farms, respectively. The payback period on small farms was three years and five months and on large farms, it was three years and ten months. Thus, the investment made on poultry enterprise was found to be financially feasible for irrespective size of the farms. Nair and Ghadoliya (2000) conducted study on economic viability of layer farming in Goa state. They revealed that layer poultry farming is economically viable in the State of Goa. The benefit cost ratio was found to be higher (1.25) for the large size group farms and lower (1.11) for the small size farms. The net cost of maintenance was found to be more in the small size group farms. The net return per layer per year was calculated to be Rs for the large farms followed by Rs for the medium size farms and Rs for the small farms. Anon (2005) in the ex-post evaluation study on poultry farming in Uttar Pradesh reported that, the internal rate of return worked out to 14.1 per cent and per cent in case of 500 bird models and 1000 bird model, respectively. The net present values were estimated negative at Rs. (-) 2614 and Rs. (-) 4901 in case of 500 birds model and 1000 birds model, respectively. Kumar and Rai (2006) studied on economic status of poultry farming enterprises in Andaman and Nicobar Islands. They revealed that the benefit cost ratio for large, medium and small broiler farms was 1.24, 1.19 and 1.13 and for layers farms was 1.14, 1.10 and 1.03 respectively. Gnanakumar (2007) studied the financial feasibility of investment in contract poultry farming in Tamil Nadu region. He concluded that on an average, farmers received a growing cost Rs per kg of bird with profitability per chick of Rs in the beginning. The estimated returns on investment was found to be 11.5 per cent in the beginning and increased up to 20 per cent. Shiraz Zakir (2008) conducted study on management of contract farming in livestock a case of poultry industry in Dharwad district. He concluded that the benefit cost ratio in case of contract system was 1.52 as against 1.02 for non-contract system. This clearly indicates that the non-contract system near profitability but at equilibrium of input and output. On the other hand, the B.C ratio of contract system was slightly encouraging and profitable.

10 Abdul et al. (2008) studied the profitability analysis of broiler production in Rawalpindi district. They revealed that the benefit cost ratio was highest in large farms (1.34) followed by medium (1.10) and small farms (0.95). The net present worth also highest in large farms (Rs ) followed by medium (Rs ) and small farms (Rs ), showing an increasing trend with the increase in farm-size. However, the investment on all farm-sizes turned out to be an economically viable as the net present worth was positive in all the farms. Firdaus and Komalasari (2010) observed that the feasibility analyses of integrated broiler production in Caringin village, Dramaga district, Bogor. The financial feasibility analysis revealed that for 10,000 bird capacity NPV, BC ratio, IRR and payback period was -40,43,98,629 (IDR), 0.65, 7.12 per cent and 7.91 years respectively, which was not financially feasible. While increasing the production capacity to 25,000 broiler chickens the NPV, BC ratio, IRR and payback period was 18,38,51,649 (IDR), 1.08, per cent and 4.50 years respectively, which was financially feasible. Varinder Pal Singh et al. (2010) studied an economic analysis of broiler production in Punjab. They revealed that the net present value, BC ratio and IRR was highest on large farms (Rs , 1.12 and 33.32%), followed by medium (Rs , 1.08 and 29.07%) and small (Rs , 1.04 and 23.30%) farms. The payback period was highest in small broiler farms (4.24 years), followed by medium (3.14 years) and large farms (2.26 years). Thus, the investment in broiler farming is financially viable on all categories of broiler farms. Shaikh and Zala (2011) conducted study on production performance and economic appraisal of broiler farms in Anand district of Gujarat. They found that, the benefit-cost ratio has been found 1.11 for the sample as a whole and it increases with increase in farm-size, indicating that as the size increases, the net margin over the rupee invested on broilers also increases. The break-even analysis has revealed that the producers have to maintain a minimum of 1531, 2611 and broilers, respectively on small, medium and large farms to meet the cost incurred in production of broilers. Sehar et al. (2012) undertaken to analyse the economic analysis of investment and income pattern of broiler production in Kashmir Valley. Three groups containing 51 broiler entrepreneurs as per flock size were studied. The average bird size of Group I was followed by in Group II and in Group III. The overall average investment came to be Rs lakhs. The overall per farm cost of production of broiler was worked out to be Rs lakhs. The overall percentage mortality worked out to be 3.92 per cent with monetary loss as Rs thousand per hatch. After mortality, the left over production came to be birds with the net income of Rs lakhs, gross margin of Rs and family labour income of Rs lakhs. The benefit-cost ratio was worked out to be 1.37 over cost C 1, 1.28 over cost C 2 and over C 3 it came to be 1.16 for overall farm. It was thus concluded that the broiler rearing was profitable in the region. 2.2 To estimate the cost and returns in layer and broiler farming Chikara and Singh (1989) studied on cost structure of poultry farming in Gurgaon district of Haryana and showed that, the major item in the total cost was feed (70.12%) followed by interest on working capital (10.72%). The other components of costs were 6.82 per cent, 5.42 per cent and 2.24 per cent, respectively towards cost of day old chick, fixed cost and labour cost. The total cost per bird per year was at Rs , Rs and Rs for small, medium and large farms, respectively. The gross income per bird was Rs , Rs and Rs for small, medium and large farms there by giving a net return of Rs. 9.39, Rs and Rs per bird per year, respectively. Shiva Prasad (1991) in his study on production and marketing of eggs and broilers in Bellary district of Karnataka concluded that total variable costs formed about 7.20 per cent of the total costs. The variable costs comprised of the chicks (29.50%), feed (45.48%) and interest on working capital (10.37%), medicine and veterinary charges accounted for 8.17 per cent and electricity charges account for 1.30 per cent of the total costs. He also concluded that 98 per cent of the returns from broiler farming were through sale of broilers. Ranga Reddy et al. (1997) made an economic analysis of broiler production in Kamarajar district of Tamil Nadu and revealed that Rs per broiler was invested to start a broiler farm. The total cost of broiler production per bird was Rs of which variable and fixed costs constituted per cent and 6.76 per cent, respectively. Cost of feed alone accounted for more than 50 per cent of the total cost followed by cost of chicks (25%). There is a wide scope to reduce the total cost by substituting the least cost farm mixed rations. Amount realized by sale of broilers formed the major source of return (96.21%) in broiler enterprise. The net return per broiler and per kg of live-weight of broiler produced were Rs and Rs. 3.01, respectively.

11 Riaz and Taufique (2000) studied the economics of broiler farming in Kamrup district of Assam. They reported that a typical farm had to incur about Rs of cost to produce one Kg of broiler and earn a net income of Rs from the same in a cycle of eight weeks. The income of the farmers increased with an increase in size groups. They also reported that both break even production and breakeven price were lower than the respective average production and average price received. Rajendran and Samarendu (2003) studied on comparative economic analysis and constraints on egg production in India. They reported that the total returns per bird from egg and other sources was Rs , Rs and Rs for small, medium and large groups respectively in deep litter system and in cage system the total returns were Rs , Rs and Rs for small, medium and large groups respectively. They found the increasing net return with the increase in farm size groups for deep litter system. Deka et al. (2004) reported that the profit of intensive system increased from 6th week to 8th week of age but at 9th week, it declined slightly. However, in semi-scavenging system, profit increased from 6th week to 9th week of age. At 6th week, profit was Rs in intensive system and Rs in semi-scavenging system. The corresponding profit at 9th week was Rs and Rs The highest profit was achieved at 8th week of age (Rs ) in intensive system and at 9th week of age (Rs ) in semi-scavenging system. Selvam (2004) conducted study in Namakkal district, to find out the economic potentials of free range desi poultry rearing by rural women. The farms were post-stratified into small (41 farms), medium (40 farms) and large (14 farms). The average annual farm income from sale of eggs and birds were Rs , Rs and Rs for small, medium and large farms respectively. The sale price of eggs and birds on free range rearing were much higher than the sale price of commercial eggs and broilers. Pant et al. (2004) revealed that total cost per bird was Rs and fixed and variable cost accounted for 3.34 and per cent, respectively. Expenses on the depreciation on buildings, equipment s and interest on fixed capital contributed 1.48, 0.73 and 1.12 per cent, respectively to the production cost. The average gross return per bird was Rs The income from the sale of birds, manure and empty gunny bags contributed 97.89, 1.48 and 0.61 per cent respectively to the total returns. The flock size had significant effect on all the cost and return components except the components such as cost of medicine and vaccine, total variable cost, total cost, return from bird, return from empty gunny bags and gross return. Anon (2005) reported that the average net return per bird over variable cost in case of smaller and larger units was Rs and Rs respectively. The average net return per unit per annum over variable cost in case of smaller and larger units was Rs. 15,966 and Rs. 35,994 respectively and the average net return per unit per annum over gross cost including family labour in case of smaller and larger units was Rs. 3,666 and Rs. 11,934 respectively. Bhende (2006) studied on production and cost of broiler meat in Karnataka. He reported that the average gross returns per kg of live weight of birds produced on medium farms are higher than small and large counterparts. On the other hand, the average cost per kg of live weight is inversely related to the size of the unit i.e., the average cost per kg of live weight is the highest in small farms and the lowest in large farms. The average net returns over total cost per kg of live weight are the highest (Rs. 5.84) in medium farm and the lowest (Rs. 2.92) in small farms. Kumar and Rai (2006) studied on economic status of poultry enterprises in Andaman and Nicobar Islands. They revealed that overall total fixed costs have been found to be 5.49 per cent, 7.38 per cent and 4.15 per cent of the total cost for small, medium and large farms, respectively, while the total variable costs have accounted for per cent, per cent and per cent, respectively. The costs on feed and chick have been the main components of variable cost. The cost of production of broilers has been found as Rs , Rs and Rs and the net return per bird as Rs. 8.36, Rs and Rs for small, medium and large farms, respectively. In layer farming, per cent of the total investment is incurred on construction of buildings, cages, plumbing, feeding system etc. The fixed cost has been observed as per cent and the variable cost as per cent of the total cost. Singh et al. (2009) conducted study in Tehri District of Garhwal Himalyas to find out the economic potentials of free range indigenous fowl reared by rural women. The poultry units were post stratified into small (40 units), medium (38 units) and large (12 units). The flock sizes for these units

12 were 6, 12 and 25 birds respectively. The egg production was 48, 52 and 56 respectively. The average annual farm income from sale of eggs and birds were Rs. 7452, and Rs for small, medium and large units, respectively. Shanaz et al. (2010) in a study to assess the different management practices adopted by commercial broiler farmers in the Ganderbal district of Jammu and Kashmir. They noticed that majority of the farmers earned a profit of Rs per bird. It was concluded that the majority of broiler farmers maintained a flock size of more than 2100 birds reared on deep litter system adopting all-in-all-out system fed broiler mash earning a profit of Rs per birds. Navadkar et al. (2010) revealed that contract farmers borne major portion of their total cost on variable inputs. Among the variable cost, the feed cost alone covers per cent in the case of contract farmers and per cent in the case of non-contract farmers. The per bird per cycle variable cost for non-contract farmers has been worked out to be Rs as compared to Rs in the case of contract farmers. In the case of broiler, the profit margin in a period of 8 weeks has been found much higher (nearly double) for contract farmers than non-contract farmers. Varinder Pal Singh et al. (2010) studied an economic analysis of broiler production in Punjab. The study concluded that, the total cost of broiler production per bird was highest on small broiler farms (Rs 83.82), followed by medium (Rs 74.25) and large (Rs 67.56) farms. The gross returns per kg of live weight were highest on large farms (Rs 59.61), followed by medium (Rs 58.92) and small (Rs 57.90) farms. Shaikh and Zala (2011) in the study on production performance and economic appraisal of broiler farms in Anand district of Gujarat found that, the average total cost was Rs per broiler and Rs per kilogram live weight of broiler for the sample as a whole. It was also observed that on an average variable cost formed 84.5 per cent and fixed cost 15.5 per cent of total cost. On reviewing the size-wise total average cost per broiler, it can be seen that it was highest Rs on small farms, followed by Rs on medium farms and Rs on large farms. This finding shows that the cost of production per bird decreased with increase in farm size. Sehar et al. (2012) had undertaken a study to analyse the economic analysis of investment and income pattern in broiler production in Kashmir valley. Three groups containing 51 broiler entrepreneurs as per flock size were studied. The average bird size of Group I was followed by in Group II and in Group III. The overall average investment came to be Rs lakhs. The overall per farm cost of production of broiler per farm was worked out to be Rs lakhs. The overall percentage mortality worked out to be 3.92 per cent with monetary loss as Rs thousand per hatch. After mortality, the left over production came to be birds with the net income of Rs lakhs, gross margin of Rs and family labour income of Rs lakhs. The benefit-cost ratio was worked out to be 1.37 over cost C 1, 1.28 over cost C 2 (over C 3 it came to be 1.16 for overall farm. It was thus concluded that the broiler rearing was profitable in the region. 2.3 To study the price spread in the existing marketing system for eggs and broilers Singh (1995) in his study on broiler marketing in Ambala and Gurgaon districts of Haryana state concluded that the most important channel was producer-wholesaler-retailer-consumer and price spread was found to decrease with the elimination of intermediaries. Two indices (concentration ratio and the Hirschman Herfindahl index) were used to analyse market structure. The indices revealed an absence of monopoly in broiler marketing. Ashutosh and Srivastava (1999) studied the economics of poultry production and marketing in Jabalpur district. Results revealed that commercial layer and broiler units, particularly the larger farms, were well managed and cost effective as compared to the small and medium farms. Among the four main marketing channels, two account for a 75 per cent share of egg marketing and one account for a 90 per cent share of broiler marketing. Poultry farming is considered to have good prospects in the district due to relatively cheaper land and labour input originating from tribal areas. It was recommended that efforts should be made to exploit this potential. Kumar and Mahalathi (2000) conducted study on price-spread, marketing costs and margin in eggs in different marketing channels in South-West M.P. The most prominent channel in the organized egg market noticed were-

13 i. Producer Consumer ii. Producer Wholesaler Retailer Consumer Further they revealed that the price spread in channel II was more Rs and Rs per hundred eggs, during peak and lean periods, respectively followed by channel I Rs and Rs per hundred eggs. Ashutosh et al. (2002) conducted a study on production and marketing of broilers in Jabalpur district of Madhya Pradesh. For the purpose of analyzing the marketing aspects of broiler production 12 broiler farms, 3 wholesalers and 5 retailers were selected. In Jabalpur district broiler market is not as organized as the egg market and mainly 3 channels are operating such as- i. Producer Consumer ii. Producer Retailer Consumer iii. Producer Wholesaler Retailer Consumer The producers share in consumer's rupee was highest in channel I (99.70%). In this channel the broiler farmer s especially smaller farmers sold their produce (broiler) directly to consumers, because they operated within the thickly populated areas like consumers or hotels etc. As the intermediaries like retailers and wholesalers increase, the share of broiler farmers decreased in channel II (80%) and it further declined to 79 per cent in Channel III, which is the most active channel and commanded 90 per cent share of the total broiler market. Anon (2005) reported that the producer's share was found to be varying from 71 to 78 per cent in case of 'Producer-Wholesaler-Retailer-Consumer' channel and from 77 to 81 per cent in case of 'Producer - Retailer - Consumer' channel. The wholesaler's margin was found to be ranging between 7.5 to 13 per cent in the only channel seen in the study area, i.e., 'Producer-Wholesaler- Retailer-Consumer' channel. The retailer's share was found to be ranging between 14 to 23 per cent upon different channels available in the study area. Mandal et al. (2006) study on backyard poultry farming in Bareilly district of Uttar Pradesh. The study reveled that majority of the poultry owners (88.89%) marketed the eggs at own home, followed by consumers' doorstep (69.44%) and village shopkeepers (55.56%). Only, 8.33 per cent and 5.56 per cent poultry owners stated that they sold the eggs to feriwala and at village market, respectively. An almost similar picture was seen in marketing channels of birds, where, majority of the poultry owners (94.41%) sold birds at home, followed by consumers' doorstep (59.26%), village shopkeepers (55.09%), feriwala (4.17%) and village market (3.70%). Tahir (2007) conducted a study on marketing margins of broiler in Azad Jammu Kashmir. For the purpose of analyzing the marketing aspects of broiler 60 poultry producers, 10 collection agents, 10 poultry retailers and 100 poultry consumers were selected from Mirpur district of Azad Jammu Kashmir. The study reveled that marketing chain comprised of collection agent and poultry retailer in which collection agent collected the poultry birds from producers and supplied to retailers. Poultry producers incurred Rs. 41/- per kg as production cost, while collection agent and retailer spent Rs. 0.45/- and Rs. 1.15/- per kg (live weight) as marketing cost respectively. Percentage margin of poultry producers was 15 per cent that was very nominal as compared to collection agent and retailer i.e.78 and 89 per cent, respectively. Ahmad and Hakim (2010) conducted a study on economics of broiler marketing in Allahabad district of Uttar Pradesh. The study revealed that the broiler enterprise is a remunerative enterprise and those involved in marketing get a substantial share to remain in a trade. Among the five marketing channels studied, channel I (Producers- consumers) accounted for maximum producer s share in consumer s rupee (96.36%) followed channel II (Producer-Retailer- Consumer) as per cent. The least producer s share in consumer s rupee was found in channel V (Producer- wholesaler- Hotels and Institutions-consumer) as per cent. The highest marketing efficiency was found in channel I (27.50) and lowest marketing efficiency in channel V (2.36). Gangwar et al. (2010) conducted a study on broilers supply value chain in the national capital region Delhi. They noticed that most prominent channel in the organized broiler market has been found as- i. Producer Commission agent Mechanical Processor Distibuters Shopping Malls/ Hotels/ Retailers Cosumers.

14 ii. Producer Commission agent Suppliers Distibuters Shopping Malls/ Hotels/ Exclusive Retailers Cosumers. iii. Producer Mechanical Processor Shopping Malls/ Hotels/ Exclusive Retailers Cosumers. The total price spread was found to be Rs , Rs (Rs per tonne live weight in Channel-I, II and III respectively. The producer s share was found to be highest in Channel-I (43%) and lowest in Channel-III (34%), whereas it was 38 per cent in case of Channel-II. Ramdurg et al. (2010) conducted a study on marketing costs and margins of chicken and eggs in Dharwad district. For the purpose of analyzing the marketing aspects of poultry eggs and chicken, 35 poultry farmers, 30 market intermediaries (10 wholesalers + 20 retailers) and 90 consumers (60 households and 30 bulk consumers) were selected. Tabular approach was used to analyze the data in the marketing of poultry eggs and chicken, the prominent marketing channels for chicken identified in Dharwad Hubli area were as follows: Channel-I: Integrator wholesaler retailer consumer Channel-II: Integrator wholesaler consumer Channel-III: Integrator retailer consumer Channel-IV: Integrator retailer bulk consumer They revealed that producer s share in consumer s price was highest in channel IV (69.48%), followed by channel II (62.59%), channel I and cannel III (57.27%). Further, they identified the prominent marketing channels for eggs identified in Dharwad Hubli areas were as follows: Channel-I: Producer wholesaler retailer consumer Channel-II: Producer wholesaler consumer Channel-III: Producer retailer consumer Channel-IV: Producer retailer bulk consumer Channel-V: Producer (outsiders) wholesaler retailer consumer. They revealed that producer s share in consumer s price was highest in channel IV (76.05%), followed by channel II (69.30%), channel I and cannel III (67.25%) and lowest in channel V (59.35%). 2.4 To study the constraints in management of layer and broiler farms and to suggest suitable measures for improving both farms Bhattu et al. (1999) made an attempt to study region-wise constraints encountered by broiler farmers in Haryana. The major constraints observed were high cost and poor quality of inputs, oligopsony marketing structure, high electricity charges, incidence of diseases, non-remunerative prices of broilers, existence of rigid procedure for government grant or bank loans and lack of broiler insurance schemes. Bajantri (1998) found that the major poultry farming associated problems were non-availability of required breeds, non-existence of disease diagnostic laboratories, high initial investment, losses due to occurrence of diseases, high cost of production, non-availability of feed analysis facilities and non-availability of required breeds. The marketing problems were high price fluctuation, lack of organized marketing facilities, lack of transport facilities, lack of poultry product manufacturing unit, involvement of more middlemen and uncertainty of demands for eggs throughout the year. Kumar and Mahalathi (2000) studied in price spread, cost and margin of the egg in different marketing channels was carried out on 50 respondents in south-west M.P. It showed that producer's share of consumer's rupee in egg marketing was highest under producer-consumer direct channel than other channel where in one or more middlemen existed. Rajendran and Samarendu (2003) found that, the feed cost to be a major problem faced by the poultry farmers (89.94%), followed by high cost of medicine and vaccine (78.17%), poor quality of feed and feed ingredients (66.20%), low egg price (54.12%), lack of facility of disease control (40.22%) and high electricity tariff (34.15%).

15 Singh and Sharma (2003) studied on constraints encountered by broiler farmers in Haryana. They reviewed that an association between background variables and major constraints (availability of quality chicks, feed and veterinary aid, cost of chick and feed, middleman involvement and high transportation charges etc.) encountered by broiler farmers was studied. For this purpose districts of Kurukshetra, Bhiwani and Panipat of Haryana, respectively (a total of 150 farmers, 50 from each district, were selected. The results revealed that education status of farmers in the districts significantly associated with majority of the constraints encountered by the poultry farmers. Singh and Jilani (2005) conducted study in Garhwal Himalayas with sample size of 100 backyard poultry farmers showed that most farmers belong to old age category, having medium family size, low annual income and high social participation. Among the constraints perceived nonavailability of day old chicks/lack of suitable germplasm, infrastructure facility, high price rate of day old chick, lack of technical know-how, non-availability of vaccine and medicines, Government policy and credit facility of farmers were ranked as most important. The total improvement of this sector needs proper planning, creation of adequate infrastructure and monetary support. To make backyard poultry rearing a profitable venture the farmers should be adequately trained in scientific poultry rearing. Bhende (2006) reported that 93 per cent of the sample farms complained about higher input prices, followed by 52 per cent reporting problems associated with the supply of spurious poultry feed by the dealers and traders in the study area. Similarly, 95 per cent of all the sample farms complained about low prices for broilers and 68 per cent reported delay in payment by the whole-sellers and traders. About 60 per cent of the farms reported no problem in lifting of produce whereas 40 per cent reported delay. The proportion of farms reporting various problems in selling of output is higher among small farms than medium and large farms. The problem of rejection of birds by the buyers is reported by only 8.3 per cent of the farms. Mane et al. (2007) revealed that poultry farming was adopted as a subsidiary occupation with agriculture. The main problems encountered by the poultry farmers were high cost of chicks, high cost of feeds, unstable market rates for broiler and difficulties in obtaining loans. The major suggestions were remunerative price should be given for birds and eggs, poultry feed should be available in time and at cheaper rates, organization of poultry units on co-operative basis and collection, transportation of eggs and broiler through co-operative societies. Thus, suggested ways to poultry keepers mean to give boost to poultry industry in North Konkan region. Sasidhar et al. (2008) the data were collected from 74 participants and 60 non-participants of the sixth farm school programme conducted by Central Avian Research Institute, Izatnagar and All India Radio, Rampur. Key evaluation questions were on opinion, knowledge, attitude and adoption of changes in backyard poultry farming brought in by farm school programme. Overall, it was found that farm school on radio with registered participants can have a major impact by creating awareness, improving knowledge, change in attitude and involving end-users in extension. Singh et al. (2009) studied the assessment of quantitative losses of eggs between farm and household consumer. They revealed that the magnitude of the losses of table eggs at layer farms, wholesalers, retailers, cold store, egg processing unit and household family level was found to be 0.98, 1.39, 3.26, 2.11, 1.24 and 3.24 per cent respectively which together constituted an overall annual loss of per cent eggs. However, the combined annual loss of eggs from poultry farms to household consumers via wholesale and retail channel was found to be 8.87 per cent in the survey area. The losses were comparatively more in summer (1.31%) than in rainy (0.88%) season or winter (0.75%) season at layer farms. Swain et al. (2009) conducted study to know the various constraints of poultry farmers and ways and means to minimize constraints. The study revealed that main problems encountered by the farmers, in making their poultry a successful enterprise was high feed cost followed by competition with outside farmers, high labour cost and trading, high cost of electricity, high cost of chicks and nonavailability of health services. The major suggestions were provision of subsidized feed, electricity and water and establishment of feed mill with subsided equipment s, remunerative price for broiler and eggs through co-operative marketing societies. Borthakur et al. (2009) studied on constraints faced by the poultry farmers in rearing and marketing of poultry in Dibrugarh district of Assam. They revealed that lack of suitable marketing facility to receive remunerative price of the poultry products was the major constraints reported by 100% farmers, followed by high cost of chick and feed (80%), incidence of disease like chronic respiratory disease (CRD) and Ranikhet (60%).

16 Senthilkumar and Khandekar (2009) carried out study in Namakkal District of Tamil Nadu with an objective to ascertain the constraints perceived by the poultry entrepreneurs. For this, purposive sampling was adopted to select two blocks each from two talukas having more poultry population. By stratified random sampling with proportionate allocation, a total of 200 respondents were selected from the four blocks. The study revealed that financial constraint was major constraint followed by raw materials, marketing, electricity and labour constraints. Nerkar et al. (2010) studied on adoption of sanitary measures by layer farmers in Marathwada region of Maharashtra. They revealed that the minimum score is 75 per cent for excellent grade, per cent for optimum and less than 50 per cent for poor grade farms. Under the cleanliness of premises the excellent farms followed sprinkling of water around the poultry shed and hygienic disposal of poultry waste which was not followed by poor and optimum grade farms and also lacked fumigation of shed. Any scientific system of disposal of dead birds was not observed on any poultry farm and majority of farms lack foot bath system. Mohanraj and Manivannan (2012) studied on satisfaction level and problems faced by poultry farm owners in Namakkal district of Tamilnadu. They revealed that based on a review of available evidence the organizational solutions to minimize public health risks and government provide appropriate extension support on issues like disease prevention, predation, improving hatchability, etc,. Unfortunately most government extension programs in the developing countries are not oriented towards addressing the needs of poor advice to poultry farmers.

17 METHODOLOGY This chapter deals with the description of the study area, sampling procedure adopted, the nature and sources of data and the various analytical tools and techniques employed in analysing the data. Few new concepts used in the study are defined and explained to facilitate a clear understanding of the issues with which the present study is concerned. The methodology is presented under the following headings: 3.1 Description of the study area 3.2 Sampling procedure 3.3 Nature and source of data 3.4 Analytical techniques employed 3.5 Definition of terms and concepts used 3.1 Description of the study area The study was conducted in Athani, Raibag and Hukkeri taluks of Belgaum district where poultry enterprise is taken up extensively by the farmers of the area. Belgaum district comes under northern transitional zone of Karnataka and consists of ten taluks namely Athani, Bailhongal, Belgaum, Chikkodi, Gokak, Hukkeri, Khanapur, Raibag, Ramdurg and Savadatti. Belgaum district is located at North West region of Karnataka state between to N latitude and to E longitude. It is surrounded by Bijapur, Bagalkot, Dharwad and Karwar Districts of Karnataka and Sangli, Kolhapur, Ratnagiri Districts of Maharashtra state. The total geographical area of the district is 13,44,382 ha of which 10,14,549 ha is cultivable area. The average rainfall is 808 mm. The total population of the district is lakhs with the literacy rate of per cent. The major rivers flowing in the district are Krishna, Malaprabha and Ghataprabha. The main irrigation sources for the district are canals, followed by wells, bore-wells and lift irrigation. Geographically the district is divided into three regions, i.e., Hilly region, North semi malnad, and North dry zone. The Khanapur taluk lies under Hilly region, Chikkodi, Hukkeri, Bailhongal and Belgaum taluks fall under North semi-malnad region, while Athani, Raibag, Gokak, Ramdurg and Savadatti taluks fall under the north dry region. The major soils of these regions are medium to deep black, reddish sandy and red sandy loam. The climate is generally dry and healthy, except during the monsoon season. The hot season begins by March with the maximum temperature of 38 0 C and minimum temperature of 14 C during December, which is generally the coldest month. The climatic endowments are favourable for taking up of poultry enterprise and for the production of crops throughout the year if water is made available Factors favouring poultry industry in the area The poultry industry in Belgaum district has come up very well due to many favourable conditions. University of Agricultural sciences, Dharwad, Departmet of Animal Husbandry, Belgaum, Krishi Vignana Kendra, Tukanatti Gokak, Grameena Training Centre and Regional Agricultural Research Station, Bijapur are operating in the district, giving all the guidance and technical knowledge for the poultry farmers. There are many hatcheries and feed manufacturing units operating in the district to help the farmers in poultry farming. Due to these factors, Belgaum district is considered to be one of the leading poultry industry in the state. 3.2 Sampling procedure Selection of the district Belgaum district falls under Northern Transitional Zone of the state having immense potentialities for development of poultry farming by having healthy climate for production and good marketing infrastructure.

18 Table 3.1: District wise total poultry population, chicken production and layer population in Karnataka Sl. No. Districts Poultry Population Per cent Chicken production (tonnes) Per cent Layer population Per cent 1 Bagalkote Bangalore (U) Bangalore (R) Belgaum Bellary Bidar Bijapur Chickmagalur Chitradurga Chamarajnagar Chikkaballapur D.Kannada Dharwad Davanagere Gulbarga Gadag Hassan Haveri Kodagu Kolar Koppal Mandya Mysore Raichur Ramanagar Shimoga Tumkur U.Kannada Udupi Yadgir Total 4,24,43, , ,58, Source: Veterinary Department & District Statistical Office, Belgaum,

19 This district was purposively selected for the present study for the following reasons: i. Poultry infrastructure had grown up very extensively with number of farms engaging in eggs and broiler production and thus, had occupied first position in North Karnataka under UAS, Dharwad jurisdiction (Table 3.1). ii. The district is having the high population of improved layers and broilers still possess much potential for the development of poultry and even for the egg processing industries thus, creating a need for the research at micro level study Selection of sample farmers The secondary data collected from the Department of Animal Husbandry and District Statistical Office, Belgaum shows that there were 751 broiler and 30 layer farms spread across the district (Table 3.2 and Fig 3.1). Athani, Raibag and Hukkeri taluks were purposively selected, as these taluks have relatively large number of broiler farms as compared to other taluks of the district. A list of poultry farms located in each of the selected taluk in Belgaum district was prepared with the help of the staff of the Department of Animal Husbandry. From this list, the broiler farms in each taluk have been classified into three categories based on the number of birds viz., small with less than 3,500 birds, medium with 3,500-7,000 birds and large farms with above 7,000 birds. For the purpose of study, 30 samples of each small, medium and large broiler farms selected. All the 30 layer farms existing in the study area were selected without looking into the population. Hence, a total of 90 broiler farmers and 30 layer farmers were selected for the purpose of data collection for the agriculture year Thus, the total sample size was 120. The same is given in the Table 3.3 and Fig Selection of market functionaries For the purpose of analyzing the marketing aspects of eggs and meat, 10 wholesalers and 10 retailers were selected randomly. 3.3 Nature and source of data The present study is based on both primary and secondary data. For evaluating the specific objectives designed for the study, required primary data were collected from the sample farmers through personal interview method with the help of pre-tested schedule. The primary data collected from the sample farmers included the data on general information, poultry farm size, the capital invested, the quantity of inputs used and their value, number of eggs and broilers produced in the life cycle and other items through carefully structured and presented questionnaires. The data on the marketing aspects were collected from the wholesalers and retailers located in Belgaum city, a separate questionnaire were developed for collecting the data from the market functionaries. The secondary data was obtained from the Department of Animal Husbandry, Belgaum and poultry bazaar website regarding the egg and broiler production in the district and daily prices of egg and meat prices. 3.4 Analytical techniques employed The analytical techniques employed in this study area are given below. 1. Tabular analysis 2. Budgeting technique 3. Financial analysis 4. Garrett s ranking technique Tabular analysis The tabular presentation method was followed to study the general characteristics of sample poultry farmers, determine the resource structure, returns and profits. Simple statistical tools like averages and percentages were used in to arrive at meaningful results.

20 3.4.2 Budgeting technique The budgeting technique was employed to estimate the costs and returns in the production and marketing of eggs and broiler Financial analysis The techniques used for the financial analysis were: 1. Pay Back Period (PBP) 2. Net Present Value / worth (NPV or NPW) 3. Benefit-Cost Ratio (B: C Ratio) 4. Internal Rate of Return (IRR) Pay Back Period Pay back period represents the length of time required for the stream of cash proceeds produced by the investment to be equal to the original cash outlay i.e. the time required for the project to pay for itself. In the present study, pay back period was calculated by following formula Net Present Value The present value represents the discounted value of the net cash inflows to the project. In the present study, a discount factor of 12 per cent was used to discount the net cash inflows representing the opportunity cost of capital. It can be represented by Where, Y i = the net cash inflows in the year i r = the rate of discount i = Year of life period (1,2,3,.. n) I = Initial investment Benefit-Cost Ratio The benefit cost ratio (BCR) was worked out by using following formula Internal rate of return The rate at which the net present value of project is equal to zero is internal rate of return (IRR) to the project. The net cash inflows were discounted to determine the present worth by the following interpolation technique.

21 Table 3.2: Taluk wise number of broiler and layer farms in Belgaum district Sl. No. Taluks Broiler farms Total broilers population 1 Athani Layer farms Total layers population 2 Bailahongal Belgaum Chikkodi Gokak Hukkeri Khanapur Raibag Ramadurga Savadatti Total ,70, ,88,400 Source: Department of Animal Husbandry, Belgaum,

22 Fig 3.1: Map of Belgaum district showing the taluks selected for the study

23 Table 3.3: Number of broiler farm respondents Selected from the study area Number of farmers (N = 90) Sl. No. Taluks Small Medium Large Total 1 Athani Hukkeri Raibag Total Source: Field survey

24 Fig 3.2: Schematic representation of broiler farmers sampling plan for the study