Non-Contract Broiler Poultry

Farming in Visakhapatnam
District: Problems
and Profitability
Sabbineni Poojitha* and Rajeshwari Panigrahi**

The present study is undertaken to identify the problems and the profitability of
non-contract poultry farmers in Visakhapatnam district of Andhra Pradesh. Data
is collected from 40 non-contract farmers in Visakhapatnam district using snow
ball sampling technique, and it is a descriptive research. Primary data is collected
for the study through interview using a pretested questionnaire. The questionnaire
consists of open-ended and closed-ended questions. Likert scale is used for
quantifying most of the qualitative variables, and detailed costing information is
collected through open-ended questions in the form of cost sheet. The data
collected is tabulated and analyzed statistically by using Likert scale, mean value
analysis, one-way ANOVA, Friedman rank test, correlation, multiple regression
and Structural Equation Modeling (SEM) techniques. Among the constraints
identified, unavailability of chicks was the major constraint, followed by lack of
insurance, cost of labor and labor problems, lack of government support, high
price of raw materials, inadequate financial support due to the high risk associated
with the business, and delay in payment by retailers/wholesalers.

Introduction
India with a growing population of 1.23 billion focuses on food development
intending to provide food and healthier living conditions to the vast growing
population. According to a report released by the Ministry of Statistics and Program
Implementation, per capita income increased by 9.7% from 94,130 in 2015-16 to
103,219 in 2016-17. This increase in the income provides business opportunity to
food industry. People tend to increase their expenses on food with the increase in

* Research Scholar, GITAM Institute of Management, GITAM (Deemed to be University),

Rushikonda, Visakhapatnam, Andhra Pradesh, India; and is the corresponding author.
E-mail: [email protected]
** Associate Professor, GITAM Institute of Management, GITAM (Deemed to be University),
Rushikonda, Visakhapatnam, Andhra Pradesh, India. E-mail: [email protected]

Non-Contract Broiler
© 2019 IUP. All Poultry
Rights Farming in Visakhapatnam District:
Reserved. 43
Problems and Profitability
income. In the present scenario, the government is also focusing on increasing the
availability of food and developing the food industry by providing support to farmers
and industrialists.

Poultry farms provide gainful employment to rural population and is an alternative

to agricultural sector which is already saturated. This sector provides meat, an
important form of protein, at reasonable price. This industry is among those agro-
based industries which suffer from high cost of input and labor problems.

This industry is quite efficient in terms of providing employment opportunities to

rural laborforce who are shifting from agriculture which is overburdened with
shrinking land size and is not able to provide employment opportunities to the
growing rural population. Broiler industry is adaptable to most types of climatic
conditions and is very convenient to start. Marketing of broilers generates regular
flow of income unlike agriculture, which mostly provides seasonal earnings. In spite
of an aggressive growth, this sector is not able to meet the demand, resulting in
huge demand-supply gap of poultry products (Balamurugan and Manoharan, 2013).

According to the 19 th Livestock Census 2012, the total poultry production in

India is 729.2 million consisting of three categories, namely, fowls, ducks and turkey.
Fowls contribute to 95% share in poultry, and Andhra Pradesh contributes 22.12%
share to poultry production (19th Livestock Census, 2012). National Sample Survey
Report (2014) presents 12% increase in chicken consumption every year, making
the country the fastest growing market in the world (National Sample Survey Report,
2014).

Year 2017 was expected to have about 7% (4.5 million tons) increase in broiler
production as an outcome of increased demand from middle class. Increased income
levels, changing food habits and increased consumer preference for meat were
the factors contributing to this increasing demand. 90% of this demand was for
frozen fish meat. Frozen food products have still not gained momentum.

Andhra Pradesh, Tamil Nadu, Maharashtra, Uttar Pradesh and Telangana are
the largest contributors to broiler production, the highest consumers being Andhra
Pradesh, Tamil Nadu, Kerala, Goa, Karnataka, Maharashtra, West Bengal, and Punjab
(GAIN Report, 2016).

Andhra Pradesh government has identified livestock sector as one of the growth
engines for the socioeconomic development, contributing 7% to the GDP and 26%
to agricultural domestic product. Poultry is the most active and fastest growing
agricultural segment (Poultry Development Policy, 2016) and generates alternative
employment opportunity to the rural masses across the year, helping in reduction
of poverty in villages, thus signifying the need for government policies and
regulations to support and develop this sector. The Government of India, in order
to develop the rural economy, has to stress on the development of poultry to
ensure adequate earnings (Agarwal, 1994).

44 The IUP Journal of Management Research, Vol. XVIII, No. 2, 2019

 The farm sector in India, despite support from the government, appears to be
neglected, thus the farmers are poverty-stricken. This paper makes an attempt to
examine the problems and the profitability of non-contract poultry farmers in
Visakhapatnam district. This sector, though an important revenue source for the
farmers, is not getting the required technical and non-technical support from
authorities. The outcomes of the study would help the policy makers in understanding
the problems of non-contract poultry farmers so as to develop suitable systems and
policies for the growth and development of a farmer as well as the sector.

Literature Review
Biswaneith (1996) tried to examine the financial constraints of the poultry farmers
in Midnapur district, West Bengal. The researcher suggested that necessary financial
assistance should be provided to the poultry farmers at a nominal rate of interest
so that the farmers can meet their necessary working capital requirements.

Iddamalgoda et al. (1998) made an attempt to investigate the present and

existing situation of the Sri Lankan poultry industry. Through the study, it was known
that poor marketing facility is the major constraint faced by many of the independent
farmers. Along with this, the other problem faced by the farmers is feed cost, which
constitutes one-third of the cost of production. And the researcher suggested that
proper marketing facilities and product price will facilitate expansion of poultry
industry in Sri Lanka.

Raut et al. (2002) made an attempt to study the livestock development in India
and found that in states like Punjab, Haryana, Rajasthan and Uttar Pradesh, there
are well-developed livestock development programs, whereas states like Assam,
Bihar, Andhra Pradesh and Odisha do not have proper livestock development
programs. The researcher suggested that livestock development should be
encouraged in these states by providing veterinary facilities.

Darko (2010) tried to understand the constraints of poultry industry in Ghana

and found that high interest rates, lack of subsidized feed, especially high maize
cost, and low productivity are the major constraints.

Sultana et al. (2012) examined the problems of rearing and marketing of broiler
in the study area and found that high price of chicks and feed, lack of quality of
chicks and feed, non-availability of training facilities, and unavailability of quality
vaccines are the major problems faced by the farmers. Farmers in that area expect
the government to fix and control the price and initiate insurance facilities for poultry
to enable the farmers face the uncertainties in the business. The farmers also
stated that training facilities are needed for better performance.

Isaac (2014) examined the problems faced by the poultry farmers in Wa

municipality in Ghana region and stated that high cost of feed and equipment,
inadequate capital, weather conditions, diseases, high cost of vaccines and

Non-Contract Broiler Poultry Farming in Visakhapatnam District: 45

Problems and Profitability
veterinary services are the major problems. The researcher suggested formation
of poultry farm association to help the farmers overcome the challenges in the
region.

Ali et al. (2015) focused on the major constraints faced by broiler production in
Bangladesh and found that limited access to credit, limited knowledge about disease
outbreaks, fluctuations in chick prices and live broiler prices, climatic conditions,
non-availability of chick and quality feed and marketing system are major
constraints. The study suggested that these constraints can be addressed by the
government, universities, research institutes, NGOs and the sectors which are
related to broiler production, by working together towards ensuring sustainability
of broiler production.

Islam and Nath (2015) examined the constraints faced by the poultry farmers
of Sivasagar District in Assam. The authors found marketing facilities, improper
veterinary services, unavailability of proper credit facilities and high cost are the
major issues. They suggested that the above constraints should be taken into
account while framing the policies, and to safeguard the interest of the small poultry
farmers, poultry cooperative societies and poultry special economic zones can be
established.

Hiralal (2015) focused on the problems faced by the poultry farmers such as
insufficient knowledge of farmers, high prices of feed and chicks, quality of feed
and chicks, breed, diseases, social problems and marketing problems, and suggested
that the government should take necessary steps in reducing the problems of
poultry sector as poultry is contributing 1% to India’s GDP and 10% to livestock
GDP. The author stated that loan facilities, subsidy, encouragement and support to
research activities for the poultry would address the problems in the sector. He
also suggested government involvement in solving marketing problems faced by
the farmers.

Amit et al. (2017) examined the constraints faced by non-contract broiler farmers
in parts of Uttar Pradesh and found that price fluctuations, low selling price, higher
prices of raw materials and delay in payment by retailers are the major constraints.

Objective
The present study aims to:

• Understand the problems and constraints faced by the non-contract broiler

farmers in Visakhapatnam district.

• Suggest a supply chain model that helps in safeguarding the interest of

the non-contract broiler farmers.

The results of the study are confined to Visakhapatnam district and cannot be
generalized to other parts of the country.

46 The IUP Journal of Management Research, Vol. XVIII, No. 2, 2019

Data and Methodology
Sampling Design
Snow ball sampling technique is used. The study is descriptive in nature, and data
is collected from both primary and secondary sources.

• Primary data is collected from 40 non-contract broiler poultry farmers in

Visakhapatnam district through interview process with the help of a
structured questionnaire (see Appendix). The questionnaire consists of a
list of constraints which includes social background, marketing, finance,
human resource input, logistics constraints and also the cost sheet.

Data is collected from the broiler farmers in the district by personally

visiting the farmers and recording the response in the questionnaire,
because most of the farmers are not so much educated to understand
the questionnaire. The researcher made the farmers understand the
questions in the local language and the responses are collected and
elicited by the researcher.

• Secondary data is collected from research publications, various handbooks

and Internet. Data relating to the expenses incurred in rearing a chick to
a bird are noted from the records of the poultry farmers.

Statistical Design
SPSS is used for tabulating and summarizing the raw data and extracting necessary
statistical output. The data collected is analyzed statistically by using Likert scale,
mean value analysis, one-way ANOVA, Friedman rank test, correlation, multiple
regression and Structural Equation Modeling (SEM) techniques. Likert scale is used
for quantifying most of the qualitative variables and detailed costing information is
collected through open-ended questions in the form of cost sheet. Correlation is
used to identify the relation between the constraints. The profitability of the farmers
is analyzed by using multiple regression analysis. SEM is used to analyze the
suitability of the model.

Cronbach’s alpha, developed by Lee Cronbach in the year 1951, is used for
measuring the reliability or internal consistency of the questionnaire (Table 1).

Table 1: Reliability Test (Cronbach’s Alpha)

Cronbach’s Alpha Number of Items

0.852 20

Results and Discussion

The problems faced by the non-contract broiler poultry farmers are reported in
Table 2. From the analysis, it is found that unavailability of chicks (4.33), followed

Non-Contract Broiler Poultry Farming in Visakhapatnam District: 47

Problems and Profitability
by lack of insurance (3.85), cost of labor and labor problems (3.70), lack of
government support (3.65), high price of raw materials (2.83), inadequate financial
support as high risk is associated with the business (2.80), and delay in payment
by retailers/wholesalers (2.58) are the major constraints. The low intensity
constraints such as low selling price (2.40), lack of organized marketing structures
(2.03), lack of adequate training facilities (1.83), inconsistent market information
(1.65), lack of skilled employees (1.58), providing spurious feed (1.55), transport
challenges (1.43), delay/irregularity in supply of inputs (1.28), long distance to

Table 2: Constraints Faced by the Non-Contract Broiler Poultry Farmers

S. No. Constraints Mean SD

1. Marketing Constraint:
(a) Transport challenges 1.43 0.501
(b) Low selling price 2.40 1.676
(c) Delay in payment by retailers/wholesalers 2.58 1.466
(d) Long distance to market 1.25 0.899
(e) Inconsistent market information 1.65 1.388
(f) Lack of organized marketing structures 2.03 1.702
2. Human Resource Constraint:
(a) Cost of labor and labor problems 3.70 1.772
(b) Lack of adequate training facilities 1.83 1.466
(c) Lack of skilled employees 1.58 1.083
3. Financial Constraint:
(a) Lack of government support 3.65 1.657
(b) Lack of insurance 3.85 1.703
(c) Inadequate financial support as high risk is 2.80 1.636
associated with the business
4. Input Procurement Constraint:
(a) High price of raw materials 2.83 1.752
(b) Timeliness in supply of feed 1.05 0.221
(c) Providing spurious feed 1.55 1.280
(d) Unavailability of chicks 4.33 1.071
(e) Delay/irregularity in supply of inputs 1.28 0.716
5. Logistics Constraint:
(a) Quality of the product 1.05 0.221
(b) Delay in lifting the bird 1.15 0.662
(c) Rejection of birds by the retailers/wholesalers 1.05 0.221
due to quality aspects

48 The IUP Journal of Management Research, Vol. XVIII, No. 2, 2019

market (1.25), delay in lifting the birds (1.15), timeliness in supply of feed (1.05),
quality of the product (1.05), and rejection of birds by the retailers/wholesalers
due to quality aspects (1.05), are faced by the non-contract broiler poultry farmers
in the study area.

The results presented in Table 2 help to identify the developments that the
poultry sector demands for further growth. The results of mean value analysis
show that unavailability of chicks is the major constraint faced by the farmers,
followed by insurance which is a tool that helps the farmers in mitigating the risk of
any kind of loss due to natural calamities and diseases of the livestock. The sector
will definitely become more profitable if these two constraints are taken care of.
These constraints present the scope to increase business opportunity of hatcheries
as well as insurance companies.

Hypothesis Testing
H01: There is no significant association between age of the poultry farmers and
the constraints faced by them.

H11: There is a significant association between age of the poultry farmers and the
constraints faced by them.

One-way ANOVA test is done for hypothesis testing. The results presented in
Table 3 show that as p > 0.05, the null hypothesis H01 cannot be rejected at 5%
level. Thus, there is no significant association between age of poultry farmers and
the constraints faced by them.

Table 3: One-Way ANOVA Test Results for Association Between

Age of Poultry Farmers and the Constraints Faced by them

Age Group (in Years)

Constraints
20-30 30-40 40-50 50-60 Above F-Value p-Value
60

Marketing 2.39 1.79 1.83 2.03 1.89 0.485 0.694

(1.540) (0.840) (0.589) (1.299) (0.825)

HR 2.89 2.64 2.14 2.40 2.37 0.695 0.561

(1.836) (1.059) (1.020) (1.362) (1.119)

Finance 3.22 3.67 3.25 3.80 3.43 0.317 0.813

(2.037) (1.265) (1.487) (1.609) (1.441)

Input 2.73 2.51 1.93 2.36 2.21 2.691 0.061

(1.007) (0.582) (0.570) (0.974) (0.702)

Logistics 1.00 1.30 1.00 1.00 1.08 3.175 0.036

(0.000) (0.526) (0.000) (0.000) (0.300)

Overall 12.23 11.90 10.16 11.59 10.98 0.862 0.469

(5.870) (3.252) (2.920) (4.235) (3.385)

Non-Contract Broiler Poultry Farming in Visakhapatnam District: 49

Problems and Profitability
 H02: There is no significant association between the educational status of the
poultry farmers and the constraints faced by them.

H12: There is a significant association between the educational status of the

poultry farmers and the constraints faced by them.

The results of one-way ANOVA test presented in Table 4 show that as p > 0.05,
the null hypothesis H02 cannot be rejected at 5% level. Thus, there is no significant
association between the educational status of the poultry farmers and the
constraints faced by them.

Table 4: One-Way ANOVA Test Results for Association Between

Educational Status of Poultry Farmers and Constraints Faced by them
Educational Status
Constraints F-Value p-Value
Below
SSC Intermediate UG
SSC
Marketing 1.75 1.68 2.02 2.60 1.929 0.142
(1.058) (0.514) (0.837) (1.245)
HR 2.72 2.14 2.30 2.93 0.893 0.454
(1.143) (0.848) (1.116) (1.921)
Finance 4.50 3.16 3.27 3.53 1.426 0.251
(0.753) (1.459) (1.497) (1.660)
Input 2.20 2.18 1.98 2.76 1.439 0.248
(0.738) (0.603) (0.786) (0.767)
Logistics 1.00 1.18 1.00 1.00 1.154 0.341
(0.000) (0.421) (0.000) (0.000)
Overall 12.17 10.33 10.56 12.83 1.032 0.390
(2.993) (2.851) (3.566) (5.148)

H03: There is no significant association between the experience of the poultry

farmers and the constraints faced by them.
H13: There is a significant association between the experience of the poultry
farmers and the constraints faced by them.

The results of one-way ANOVA test presented in Table 5 show that as p > 0.05,
the null hypothesis H03 cannot be rejected at 5% level. Thus, there is no significant
association between the experience of the poultry farmers and the constraints
faced by them.

Friedman Test
The results of Friedman test presented in Table 6 show the mean ranks of the
constraints faced by the non-contract broiler farmers.
It is observed that financial constraint is the most important factor (4.40),
followed by input procurement constraint (3.33), human resource constraint (3.25),
marketing constraint (2.73), and logistics constraint (1.30)

50 The IUP Journal of Management Research, Vol. XVIII, No. 2, 2019

 Table 5: One-Way ANOVA Test Results for Association Between
Experience of Poultry Farmers and Constraints Faced by Them

Experience (years)
Constraints
1 to 5 5 to 10 10 to 15 15 to 20 More than F-Value p-Value
20
Marketing 3.11 1.50 1.67 1.82 2.00 2.207 0.088
(1.417) (0.000) (0.678) (0.586) (1.459)

HR 4.22 1.00 2.38 2.26 2.25 3.650 0.014

(1.072) (0.000) (0.844) (0.910) (1.729)

Finance 4.56 1.17 3.63 3.57 2.58 2.438 0.065

(0.770) (0.236) (1.015) (1.405) (1.951)

Input 2.93 2.60 2.38 2.01 2.25 1.635 0.187

(1.026) (0.000) (0.495) (0.598) (1.226)

Logistics 1.00 1.00 1.17 1.09 1.00 0.306 0.872

(0.000) (0.000) (0.471) (0.288) (0.000)

Overall 15.82 7.27 11.21 10.74 10.08 2.616 0.052

(4.222) (0.236) (2593) (2.639) (6.002)

Table 6: Mean Rank of the Constraints

Mean Rank Chi-Square Value p-Value

Marketing Constraint 2.73 87.634 < 0.001**

HR Constraint 3.25
Finance Constraint 4.40
Input Procurement Constraint 3.33
Logistics Constraint 1.30
Note: ** denotes significance at 1% level.

Correlation Analysis
Table 7 shows the correlation among the constraints faced by the non-contract
broiler farmers.

• The correlation coefficient between marketing constraint and human

resource constraint is 0.714, which indicates a positive relation between
them. The percentage association between marketing constraint and
human resource constraint, 50.97% ((0.714)^2 = 0.5097), is significant
at 1% level.

This implies that if the marketing constraint like low selling price and delay
in payment by retailers/wholesalers is addressed, then human resource
constraint like labor problems can be mitigated.

Non-Contract Broiler Poultry Farming in Visakhapatnam District: 51

Problems and Profitability
 Table 7: Correlation Between the Constraints

Constraints Marketing HR Finance Input Logistics

Marketing 1.000 0.714** 0.351** 0.562** 0.177

HR – 1.000 0.784** 0.491** 0.161
Finance – – 1.000 0.170 0.086
Input – – – 1.000 0.355*
Logistics – – – – 1.000

Note: ** denotes significance at 1% level; and * denotes significance at 1% level.

• The correlation coefficient between marketing constraint and financial

constraint is 0.351, which indicates a positive relation between them.
The percentage association between marketing and financial constraint,
12.32% ((0.351)^2 = 0.1232), is significant at 1% level.

This implies that if the marketing constraint like low selling price and delay
in payment by retailers/wholesalers is addressed, then financial constraint
like lack of government support and inadequate financial support as high
risk associated with the business can be mitigated.

• The correlation coefficient between marketing constraint and input

constraint is 0.562, which indicates a positive relation between them.
The percentage association between marketing constraint and input
constraint, 31.58% ((0.562) ^2 = 0.3158), is significant at 1% level.

This implies that if the marketing constraint like inconsistent market

information and lack of organized marketing structures is addressed, then
input constraint like high price of raw materials can be mitigated.

• The correlation coefficient between human resource constraint and

financial constraint is 0.784, which indicates a positive relation between
them. The percentage association between human resource and financial
constraint, 61.46% ((0.784) ^2 = 0.6146), is significant at 1% level.

This implies that if the human resource constraint like cost of labor and
labor problems and lack of adequate training facilities is addressed, then
the financial constraint like lack of government support can be mitigated.
• The correlation between human resource constraint and input constraint
is 0.491, which indicates a positive relation between them. The percentage
association between human resource and input constraint, 24.10%
((0.491) ^2 = 0.2410), is significant at 1% level.
This implies that if the human resource constraint like cost of labor and
labor problems and lack of skilled employees is addressed, then the input
constraint like high price of raw materials can be mitigated.

52 The IUP Journal of Management Research, Vol. XVIII, No. 2, 2019

Regression Analysis
Profit is regressed on total cost and amount received after sale of the produce per
batch of non-contract broiler farmers.
Dependent Variable = Profit (y)
Independent Variable = (a) Total cost (x1)
(b) Amount received after sale of produce (x2)
The summarized regression results are presented in Table 8. Multiple R value of
0.982 (98.2%) shows that a strong linear relationship exists between profit, total
cost and income after sale of the produce.

Table 8: Summarized Regression Results

Multiple R value 0.982
R2 value 0.964
Adjusted R2 value 0.961
F-value 497.280
p-value <0.001**
Note: ** denotes significance at 1% level.

R2 value of 0.964 implies that 96.4% of total variation in the dependent variable,
profit, can be explained by the independent variables, total cost and income after
sale of produce.

Adjusted R2 value of 0.961 implies that the regression equation has 96.1% reliability.
The high adjusted R2 implies that the model is doing well in predicting profit.

The results of multiple regression analysis are presented in Table 9. Based on

the results the equation can be written as:

y = 8512.72 – 0.838x1 + 0.862x2

The profit (y) intercept b0 is obtained as 8,512.72. This indicates the expected
profit when total cost (x1) and amount received after sale of produce (x2) is equal
to zero. b1 the slope of profit (y) with independent variable total cost (x1) holding
variable the amount received after sale of produce (x2) constant is obtained as
–0.838. The negative sign of b 1 indicates an inverse relationship between the

Table 9: Multiple Regression Coefficients

Standard
Unstandardized
Variable SE of B Coefficient t-Value p-Value
Coefficient (B)
(Beta)
Constant 8,512.72 8,009.790 – 1.063 0.295

x1 –0.838 0.053 –3.627 15.795 <0.001**

x2 0.862 0.045 4.443 19.350 <0.001**

Note: ** denotes significance at 1% level.

Non-Contract Broiler Poultry Farming in Visakhapatnam District: 53

Problems and Profitability
dependent variable profit and the independent variable total cost, which implies
that holding amount received after sale of produce constant, unit increase in the
total cost will result in –0.838 (1000) = – 838.000 predicted decline in profit. b2 the
slope of profit (y) with independent variable amount received after sale of produce
(x2) holding the total cost (x1) constant is obtained as 0.862. This indicates that
holding total cost (x1) constant, an unit increase in amount received after sale of
produce will result in a 0.862 (1000) = 862.000 increase in profit.
Thus, the poultry farmers have to reduce their cost component to increase the
profit, and cost component of farmer mainly consists of cost of feed which constitutes
66% to the total cost, followed by cost of chicks. If the government takes an initiative
in providing infrastructure facilities to a group of farmers, they can produce their
own feed; then, the cost of feed can be reduced and farmers can make more
profit. The farmers should also test the water quality from time-to-time to know
about the nutrients present in water. If there is an absence of minerals and nutrients
in water provided to the birds/chicks, then the feed intake of the chick/bird will
increase leading to high feed cost. Chicks cost can be reduced if the government
fixes the price, then the farmers can get chicks at a reasonable price.
The profit of farmer can be increased with an increase in amount received after
the sale of produce. Support price of the farmer is less, and retailers/wholesalers
will communicate with the farmers to sell the produce at a price less than the
support price. If there is an organized marketing structure, then the farmers can
make better profits.

Structural Equation Model

SEM is used to analyze the suitability of the model. SEM is useful in assessing the
relationship between the variables and also helps in verifying the compatibility of
the model used (Peter, 2011). To evaluate the model, chi-square value/df, Goodness-
to-fit (GFI), Normed Fit Index (NFI), Incremental Fit Index (IFI), Comparative Fit
Index (CFI), Turkey Lewis Index (TLI), and Root Mean Square Error (RMSEA) are
obtained (Table 10).

Endogenous (Dependent) Variable: Profitability

Exogenous (Independent) Variables: Age, Experience, Educational status, Batch

size, Input constraint and Marketing constraint.

Table 10 shows the estimates of the model fit indices from the AMOS SEM.
According to Gerbing and Anderson (1992), the suggested values for an acceptable
model are as follows: RMSEA should be equal to or lower than 0.08, CFI should be
equal to or higher than 0.90, CFI compares the fit of a target model to the fit of an
independent model, and NFI should be equal to or higher than 0.90; if NFI index is
lower, then the model is regarded as less acceptable. The fit between the model and
the data can be tested through chi-square GFI test and the suggested value should
be greater than or equal to 0.9 which indicates a good fit (Hu and Bentler, 1999).

54 The IUP Journal of Management Research, Vol. XVIII, No. 2, 2019

 Table 10: Model Fit Summary
Indices Values Suggested Values
Chi-Square Value 7.608
df 8
p-value 0.473 >0.05 (Hair et al., 1998)
Chi-Square value/df 0.951 <5.00 (Hair et al., 1998)
GFI 0.951 >0.90 (Hair et al., 2006)
NFI 0.942 >0.90 (Hu and Bentler, 1999)
IFI 1.003 >0.90 (Bollen, 1989)
CFI 1.000 >0.90 (Hu and Bentler, 1999)
TLI 1.009 >0.90 (Hair et al., 1998)
RMSEA 0.000 <0.08 (Hair et al., 2006)
Note: As p-value is >0.05 the model is fit.

The GFI value obtained is 0.951 which is more than the recommended value,
0.90 and even the other measures have fitted satisfactorily, CFI = 1.000,
TLI = 1.009, IFI = 1.003, NFI = 0.942 and RMSEA = 0.000, which indicates a good
fit of the model.
SEM is presented in Figure 1 which shows the relation between the marketing
constraint, input constraint, batch size of the farm, educational status of the farmer,
experience of the farmer, age of the farmer and profitability of the farm.

Figure 1: Structural Equation Model for the Data

Non-Contract Broiler Poultry Farming in Visakhapatnam District: 55

Problems and Profitability
Existing Supply Chain Model
The marketing of broiler birds in the study area was known from the poultry farmers
during the interview process. Figure 2 presents the Type I channel.

Figure 2: Type I – One-Level Channel Used by the Farmers

to Sell the Produce

Input Farmer Retailers Consumer

Note: This arrow indicates payment flow.

The farmer gets input from different sources such as chick supplier, feed supplier
and medicine supplier, and the farmer grows the chicks for 40-45 days till the bird
reaches to the average weight of 2.0-2.5 kg. Once the birds reach the marketing
age, they are sold to the retailers at live price per kilogram which is fixed by the
BAG association members of Visakhapatnam, and this information is known to the
farmer through the newspaper or through call or message. The information is passed
to the retailers regarding the availability of birds and the retailers bargain with the
farmers to decrease price from the fixed price. In most of the cases, retailers get
their own transport, while in the remaining cases, the farmers arrange for the
transportation facilities to the retailers. Mostly, the sale of output of the farmers to
the retailers is on credit basis, and the retailers give the commitment of paying
back the amount within 7-10 days. And in some cases, the retailers are not in a
position to pay the amount to the farmers. Finally, the retailers slaughter the birds
and sell the chicken to the consumers based on the market rate per kilogram as
fixed in the newspaper separately for dressed and skinless chicken.

Advantages:
• The farmer can easily sell the produce to the retailer near to the farm
area and can easily capture the nearby market.
• The farmer can have a good rapport with a limited number of retailers
near to the farm.
• Whenever the farmer has the produce, it is easy to intimate the retailers
who buy the product from the farmer frequently.

Disadvantages:
• More chances of non-payment by retailers, which is a major risk for the
farmers.
• Delay in payment by retailers, who may take one month or more for the
payment.
• Retailers bargain with farmers to sell their produce at lesser prices than
market rate per kilogram.

56 The IUP Journal of Management Research, Vol. XVIII, No. 2, 2019

 • The farmer should always be in contact with the retailers, and at times,
the farmer has to go to their place for payment collection.

• The market rate of live bird fluctuates daily. When the farmer observes it
is decreasing over a period of time, if he communicates with the retailer
at that time, the retailer can only lift the birds according to his requirement
per day, and the farmer has to wait for some more days for the lifting of
the other birds present in the farm. Meanwhile, the rate will further
decrease, causing a loss for the farmer.

In Type II channel as presented in Figure 3, the farmer gets input from the chick
supplier, feed supplier and medicines supplier and the farmer rears the bird for
about 40-45 days till it reaches a specific weight. The farmer then communicates
with the trader/wholesaler/dealer. Retailers purchase depending on the flock size
available with the farmer. Smaller flock sizes are lifted immediately and larger ones
might need some time and ultimately sold at a pre-decided fixed price in the market.

Figure 3: Type II – Two-Level Channel Used by Farmers

for Marketing Their Produce

Input Farmer Trader/Wholesaler Retailer Consumer

Note: This arrow indicates payment flow.

Advantages:

• The farmer uses a distribution channel to supply the produce, thus he

need not take the burden of selling the produce.

• Payment is also taken care of by the channel members in the reverse

direction of the supply of the produce.

• Low risk in terms of payments and receipts.

• The trader once contacted by the farmer lifts the complete batch of the
produce.

Disadvantages:

• The live bird market suffers with a price lower than the support price. This
implies that the farmers are forced to sell the birds at a price less than
the support price. The expected payment cycle period consists of
15-20 days.

Suggested Model
The cooperative model suggested in Figure 4 is a successful model in developing
agro and home industry in India. Cooperatives are termed to be autonomous

Non-Contract Broiler Poultry Farming in Visakhapatnam District: 57

Problems and Profitability
 Figure 4: Suggested Model to Safeguard the Farmers’ Interest

Goods Cooperative Broiler

Input Farmer Consumer
Carrier Retail Outlets

Note: This arrow indicates the payment flow.

enterprises formed by an association of persons voluntarily united to meet their

common economic, cultural and social needs and aspirations through a jointly-
owned and democratically-controlled enterprise. Two such models, i.e., Anand Milk
Union Limited and a women’s cooperative called Shri Mahila Griha Udyog Lijjat
Papad are popular business models to prove the success stories of cooperatives
in India.

Anand Milk Union Limited, formed in 1946 in Anand District in the State of Gujarat,
India, is managed by Gujarat Cooperative Milk Marketing Federation (GCMMF) Ltd.,
and is jointly owned by milk producers of Gujarat. AMUL is instrumental in stimulating
the White Revolution in the country that made India the largest producer of milk
and milk products in the world. AMUL is a cooperative model which has farmers as
members and they collectively sell milk. Collective approach enhances the efficiency
of the farm, and economies of scale makes it economical and reduces the cost of
production.

This model has become a huge success, and the main reasons for the success
of this model are: low-cost strategy, strong distribution network, technology and
e-initiatives, diverse product mix, and robust supply chain (Ishan, 2016). The AMUL
model has a three-tiered structure with dairy cooperative societies at the village
level, federated under a milk union at the district level and a federation of member
unions at the state level. The profitability of the AMUL model depends on maintaining
a balance between farmers’ ownership in cooperative and the management (Ruchira
and Rupali, 2013).

Shri Mahila Griha Udyog Lijjat Papad is a worker cooperative organization,

popularly known as Lijjat. It was started by a group of seven people called ‘sisters’
with an investment of 80 each. This organization has a policy of self-reliance and
seeks no monetary help from any outsider and the members of the society
collectively share the profit and loss. It was started with the motive of women
empowerment intending to provide employment opportunities to rural women,
which initially started by only manufacturing Papad and subsequently expanded to
other products like spices, detergents etc. It is recognized by Khadi and Village
Industries Commission and today is a ISO 9001-2008 firm which has about 82
manufacturing units all over India (www.lijjat.com).

The suggested model in Figure 4 is also a cooperative model derived out of the
success stories of cooperatives in agriculture and village industries. The main

58 The IUP Journal of Management Research, Vol. XVIII, No. 2, 2019

purpose of this model is to serve the consumers with better quality of chicken
through poultry-owned cooperative retail shops, which in turn leads to increase in
the sale and directly contributes to the profit of the farmers. Cooperative model is
very successful in villages. This cooperative model will have farmers as members
and managers, which implies the entire poultry chain will be owned and managed
by the farmers.

Members working as managers will be selected by the cooperative member

farmers and the whole responsibility of managing the supply chain and distribution
channel will be taken care of by these selected cooperative managers. Every farmer
gets an opportunity to take part in the cooperative management group as the
managerial positions will be on rotation basis. This group is made responsible to
identify the market demand and provide information to the farmers. All the farmers
as a group decide the batch size and produce as per the demand, which then can
be easily sold in the market.

Transportation of produce in the above model can be self-managed or

outsourced. Goods carrier collects the product and through the cooperative store
directly sells to the end retail users both at small and large scale.

Advantages:

• Lower instances of pricing ‘less than the support price’.

• Increasing profitability.

• Consumers have direct access to farmer manned and maintained retail

outlet increasing the sale and directly contributing to the profit of the
farmer.

• This outlet can sell directly to consumers and also to large business
consumers and retailers.

Disadvantages:

• Quality standards need to be maintained to ensure continuous demand.

• Proper planning and demand estimation is needed for the success of this
model and profitability of the farmers.

• Absence of coordination among the members will lead to failure of the

model.

Conclusion
This study on non-contract broiler poultry farmers in Visakhapatnam district revealed
that farmers in this district are facing various constraints such as unavailability of
chicks, lack of insurance, cost of labor and labor problems, high price of raw materials,
lack of government support, inadequate financial support due to high risk associated
with the business and delay in payment by retailers/wholesalers. The above

Non-Contract Broiler Poultry Farming in Visakhapatnam District: 59

Problems and Profitability
constraints should be taken into consideration by the policy makers while framing
policies with regard to non-contract broiler poultry farmers. There is also a need
for structural change in the distribution channel.

Suggestions
• Unavailability of chicks is the major constraint faced by the farmers in the
study area. All the hatchery units are privately-owned and every month
these hatching units have one week crop holiday and this crop holiday is
declared to reduce the virus attacks on the flocks. As the demand for
chicken is increasing day-by-day, the farmers plan to meet the demand
by expanding their poultry capacity, but lack of availability of chicks is
posing problem. The government and research institutes should work
together to help the farmers by finding out proper vaccines to get rid of
the virus attacks and also the government should take steps in setting
up hatchery units so that farmers can get chicks at a reasonable cost.

• Livestock insurance is not provided for broiler poultry farms. If livestock

insurance is provided by the government in cases of virus attacks and
natural calamities it will be helpful for the poultry farmers.

• High cost of labor, shortage of labor and other labor problems are some
of the major constraints faced by the poultry farmer. Most of the farms
exist in rural areas, and because of less opportunities in farm sector, rural
people are migrating to urban areas to get better employment
opportunities and facilities. This in turn leads to scarcity of labor in farm
sector which probably can be minimized by automation and use of
technology which requires huge investment. Farmers would require
additional financial support for meeting the investment cost, which can
be resolved by the government.

• Poultry farms are not included in agriculture sector and the poultry farmers
do not get any aid or help from the government like other farmers. The
government should take necessary steps to include this sector also in
farming and provide necessary support and assistance like the farm sector.

• High input cost is a severe problem faced by the farmers. Subsidy for inputs
like maize, electricity and chick would be of great help to the farmers. In
the absence of any financial support, the government should take into
account the input cost before fixing the support price for the produce.

• The last major constraint faced by the farmers is delay in payment by

retailers/wholesalers. Financial support to the farms can be extended by
the banks and financial institutions to help in the progress of this sector.

A cooperative model is suggested to help the farmers overcome these

constraints.@

60 The IUP Journal of Management Research, Vol. XVIII, No. 2, 2019

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62 The IUP Journal of Management Research, Vol. XVIII, No. 2, 2019

 Appendix

Questionnaire
1. Age: 20-30 30-40 40-50
(in years)
50-60 Above 60

2. Educational Below SSC SSC Intermediate

Qualification:
UG

3. Experience: 1-5 5-10 10-15

(in years)
15-20 More than 20
4. Problems faced by non-contract broiler poultry farmers:
Highly Highly
S. No. Respondents’ Opinion Agree Neutral Disagree
Agree Disagree
(5) (4) (3) (2) (1)

i. Transport challenges
ii. Low selling price
iii. Delay in payment by retailers/
wholesalers
iv. Long distance to market
v. Inconsistent market information
vi. Lack of organized marketing
structures
vii. Cost of labor and labor problems
viii. Lack of adequate training facilities
ix. Lack of skilled employees
x. Lack of government support
xi. Lack of insurance
xii. Inadequate financial support as
high risk is associated with the
business
xiii. High price of raw materials
xiv. Timeliness in supply of feed
xv. Providing spurious feed
xvi. Unavailability of chicks
xvii. Quality of the product
xviii. Delay in lifting the bird
xix. Rejection of birds by the retailers/
wholesa lers due to quality
aspects.

Reference # 02J-2019-04-03-01

Non-Contract Broiler Poultry Farming in Visakhapatnam District: 63

Problems and Profitability
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