Contract Farming and the Effect on Price Risk in Broiler Farming

Contract between grower and integrator has been used extensively in broiler industry all over the world. One important advantages of contract is risk management, in which contract shifts a portion of grower risk to integrator. Thus, this paper attempted to measure the amount of risk shifted from grower to integrator and the consequences of this benefit to grower. Using a panel data of actual production records of 46 Indonesian broiler growers for the period of January 2014 through December 2017, we systematically measure the amount of risk shifted to integrator and its consequences to grower. The results showed that 78.43% grower risk is shifted to integrator. However, to acquire this benefit grower receive 15% less income. Furthermore, grower face the possibility of losing their asset and stopping their production as the consequences of entering contract.

Caraka Tani: Journal of Sustainable Agriculture, 2020

The demand for broiler is rising rapidly due to its capability as the main animal protein source. In contrast, the production of broiler meat is unstable due to the possibility of farm risk. Contract Farming (CF) is one of the risk management tools for farmers but has not been used effectively. The purpose of this study was to analyze the factors that influence farmers’ decision to participate in CF. The analysis used six independent variables, namely farmer’s age, farm size, household size, education, farmer’s risk preference and risk aversion level. This study used primary data from 70 broiler farmers in Jember, which were divided into two groups, contract farmer and independent farmer. Each group had the same number of respondents. The results show that five among six independent variables significantly affected farmers’ decision to take part in CF. Farmer’s age decreased farmer’s probability to participate in CF, while education, farm size, household size and risk preference had...

2018

Contract between grower and integrator has been used extensively in broiler industry all over the world. One important advantages of contract is risk management, in which contract shifts a portion of grower risk to integrator. Thus, this paper attempted to measure the amount of risk shifted from grower to integrator and the consequences of this benefit to grower. Using a panel data of actual production records of 46 Indonesian broiler growers for the period of January 2014 through December 2017, we systematically measure the amount of risk shifted to integrator and its consequences to grower. The results showed that 78.43% grower risk is shifted to integrator. However, to acquire this benefit grower receive 15% less income. Furthermore, grower face the possibility of losing their asset and stopping their production as the consequences of entering contract.

The purpose of this study was to investigate risks source, threat potency of risk and risk management strategy in managing risk production, marketing risk, and financial risk of broiler farm in Regency of Minahasa Utara. The research's site was selected purposively in three Villages, representing three Districts as center of broiler production in Regency of Minahasa Utara. Those three Villages were Village of Dimembe, Village of Kauditan Satu and Village of Kolongan. In detail, 59 respondents of broiler's breeders were selected by total of sampling. Data regarding on source of production risk, marketing risk, and financial risk of broiler farming was gained through in-depth interview addressed to breeders guided by a list of questions. Value of risks was then analyzed by using Failure Mode and Effect Analysis (FMEA), Results study showed sources of production risk on broiler farming on the study sites comprise of: inclination to utilize chemical medicine, disease outbreak, bad weather and utilization of conventional tools. Marketing risks dealt by broiler's breeders consist of broiler's mortality, sold broilers in lived condition, most price determined by partner and performance index target-based profit. Financial risks, then, faced by broiler's breeders are minimal capital, fearsome to lend to bank and higher input price, Based on the value of Risk Priority Number (RPN), sources of primary risk becoming inhibiting factors on success of broiler farm in Regency of Minahasa Utara, consecutively, are performance index target-based profit, disease outbreak, broiler's mortality, sold broilers in lived condition and risk of capital loan from banking sector.

Cercetari Agronomice in Moldova, 2021

1 General Management Division, Agricultural Development Management Department, Agricultural and Rural Management Training Institute, Ilorin, Nigeria 2 Department of Agricultural Economics and Farm Management University of Ilorin, Ilorin, Nigeria 3 Agricultural Project Management Division, Agricultural Development Management Department, Agricultural and Rural Management Training Institute, Ilorin, Nigeria 4 Women and Youth Development, Department of Rural Development and Gender Issues, Agricultural and Rural Management Training Institute, Ilorin, Nigeria ABSTRACT. The study assessed the effect of contract farming on broiler production in Osun State, Nigeria. 120 farmers comprising of broiler farmers participating and not participating in contract farming were selected using multistage sampling technique. Information was elicited from the farmers with the aid of a structured questionnaire. The data were analyzed using descriptive statistics, Stochastic Production Frontier and Ordinary...

Tropical Animal Science Journal, 2020

Contract farming (CF) has been used extensively to integrate broiler value chain both in the developed and developing countries. Participation in CF is associated with the increased farm productivity and farmer income. Therefore, the purpose of this study was to analyze factors affecting Indonesian broiler farmers' participation in CF. This study used the nationally-representative data of smallholder broiler farmers in Indonesia. The data were the results of the 2014 Indonesian Livestock Farm Household Survey (ILFHS) and consisted of 1,142 farmers distributed in 20 provinces. Logistic regression was used to analyze thirteen factors that potentially affected farmers' decision to participate in CF. Those factors were age, gender, education, household size, farming experience, farm area, broiler population, cooperative membership, cooperative service, farmer group membership, farmer group service, farmer association, and agricultural extension. The results showed that six factors had statistically significant effects on farmers' decision to participate in CF. Education, land size, population, farmer group, and agricultural extension have a positive influence on farmers' decisions. Meanwhile, cooperative service has a negative effect. Farmer group and agricultural extension service have the strongest effect on participation in CF. The results suggest that farmer groups and extension services to small scale farmers are promising to improve their participation in CF.

E3S Web of Conferences, 2021

Contract farming is a form of business cooperation between two or more parties in a certain period of time to help farmers provide production facilities. The superiority of the partnership is as a partner to share the risk burden of production between core companies and small farmers. The risk of production in broiler chicken farming includes DOC quality, feed, and disease. Therefore, production risk management must be able to manage these factors well so they cannot cause losses. The material in this research is thirty partnership farmers in Blitar, East Java, Indonesia. The method used is a survey by observation and interview. The sources of data used are primary and secondary data sources from the results of interviews and observations. The analysis used is production risk analysis to determine the level of production risk in Blitar, East Java, Indonesia and descriptive analysis to find out the production risk management used by partnership farmers in Blitar, East Java, Indonesia...

The Pharma Innovation Journal, 2018

The present study was conducted to evaluate the economics of broiler production among non-contract and contract farms in Malappuram district of Kerala state. On detailed analysis of the economics of commercial broiler chicken production, the total production cost on non-contract and contract farms were was Rs.71.01 and Rs.5.34 respectively. The share of fixed cost in total cost was 3.82 and 53.13 per cent while variable cost was 96.18 and 46.87 per cent in non-contract and contract farms respectively. The gross returns per kilogram of live weight was Rs.78.59 and 6.85 in non-contract and contract farming respectively. Net returns over variable cost and net returns over total cost were found to be Rs.10.78 and Rs.8.09 in non-contract farms whereas in contract farms it was Rs.4.35 and Rs.1.51 respectively. Average flock size was 3415 and 3563 birds per batch, livability 97.18 and 96.65 per cent, average feed conversion ratio 1.67 and 1.68, average live weight per bird 2.15 and 2.15 kilogram in non-contract and contract systems respectively. Benefit-cost ratio was analyzed and found to be 1.11 and 1.28 in noncontract and contract farming system. In the present study it was observed that non-contract farming was profitable provided there was less fluctuation in the market price of chicken as well as demand and demand for chicken meat however, broiler farming does not look promising for investors in the contract farming system as the net return over total cost was very less.

Contract broiler farming is one the system used to increase poultry production in Malaysia. Broiler contract farmers (BCF) participate in this system for having some benefits. This paper has evaluated economic performance of the BCFs in Perak. An economic evaluation of 60 BCFs was conducted in Perak to determine the performance of the system using economic performance analysis. Panel regression model was used in the analysis. This model involves price per bird (PRM) as dependent variable and size of farm (SOF), feed conversion rate (FCR), average body weight(ABW), average marketing age (AMA), mortality rate (MOR), and rearing housing system (DU). The results show that all variables, except SOF, are significantly influence the performance of BCF at five percent level of significance. Key words: Contract broiler farming, economic performance, panel regression model

Journal of World`s Poultry Research, 2023

The development of broiler chicken farms in Indonesia has taken two forms, namely non-contract and contract farming. This study aimed to compare the technical efficiency levels of production in these two types of farming in Banten Province, Indonesia. Data were collected randomly from 180 broiler chicken farmers, consisting of 103 non-contract and 77 contract farmers. The study used the stochastic frontier production function to meet its objectives. The results showed that non-contract broiler chicken farmers were less efficient in their production than those under contract. The mean technical efficiency of the production factor for non-contract broiler chicken farmers was 0.689, ranging from 0.339 to 0.996. On the contrary, broiler chicken farmers under contract had a higher mean efficiency value of 0.893, ranging from 0.638 to 0.988. Moreover, the type of input supplier had a significant positive effect on technical inefficiency in non-contract farms. Non-contract farmers who purchased their production needs from a poultry shop showed higher technical efficiency compared to those who used distributors. This research sheds light on the efficiency of broiler chicken farms, both non-contract and contract, enabling all stakeholders, including the government, to devise appropriate policies for the development of broiler chicken farming. The study provided valuable insights into the technical efficiency levels of broiler chicken farming in Indonesia, which can help farmers identify areas that need improvement and develop strategies to increase productivity and profitability.