Feed the Future
This project is part of the U.S. Government's global hunger and food security initiative.

Integrated Contract Broiler Farming: An Evaluation Case Study in India (short)

This project evaluated integrated contract and non-contract broiler farming systems in India’s Karnataka, Telangana and Andhra Pradesh states by applying Bennett’s hierarchy of evaluation model. The data, collected in 2014 from the three states, came from in-depth personal interviews with 120 contract and 120 non-contract broiler farmers and the FGD with stakeholders. The overall findings indicated that though production cost was significantly low, the total returns were also significantly low in contract broiler farming (CBF) because efficiency surplus is largely taken by contract companies.  On the other hand, though production cost was high, farmers in non-contract broiler farming (NCBF) were gaining a margin of Rs. 5.99 per bird despite facing investment, production and marketing risks. This leads to the conclusion that contract and non-contract farmers incur significantly different production and marketing costs and earn different marketing margins. The extreme standard deviations on returns under both systems confirm that CBF does not enable contract farmers to make better profits than non-contract farmers; rather, it gives a lower but assured and almost fixed return. Despite low returns, farmers are participating in CBF largely because of low input costs, assured income, and the absence of marketing risk. On the other hand, through improved technology, low margins on inputs, economy of scale and stringent norms, the companies are reducing production cost, leading to lower retail chicken prices for consumers. All these factors resulted in successful value chain development through CBF. Nevertheless, in the absence of a regulatory body, all privileges and rights were in the hands of contract companies. With meager rearing charges, stringent production cost incentives and penalties, the agreements clearly favored the contract companies.

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The survey and FGD findings revealed that the value chain development and provision of inputs and extension advisory service (EAS) by large private poultry companies did not really result in a win-win situation for both integrators and farmers.  To make CBF profitable to the companies and to benefit farmers,  the specific policy interventions suggested and discussed include: further promotion and regulation of CBF farming through an authoritarian body; enhancement of rearing charges and increase in rate incentive norms to transfer part of market margins to the contract farmers; increased numbers of batches per year by contract farmers; transparency in executing contract agreements; more government support to CBF and NCBF and to other small farmers for equitable and inclusive development; and  replication of the EAS model of CBF/NCBF in other sectors as an example of modernization of EAS through the private sector’s participation to develop entrepreneurship among farmers.