A farmer interested in engaging in poultry development activity has two options: Opt for Contract Farming also referred to as Integration
Non Contract Farming : In this scenario the farmer is responsible for all the activities viz procurement of day old chicks ( to rear them for the broiler market) or acquiring a pureline / good breed which will be able to produce eggs that have a ready market. In this case the farmer solely bears all the expense involved in procuring the: feed, overhead expenses for (water/heating/cooling/disinfecting the poultry farm) , medical costs transportation and marketing etc plus he is also exposed to the ‘market risk’ ( in other words to the possible risk of there being an unfavorable demand for the broilers/ eggs at the time that they are ready to be sold .In case of broilers the usual cycle of procuring day old chicks rearing them and selling them in the market is about 40 days. In case of eggs (layer) the sale can be immediate.
It is estimated that at present 36.7% of broiler production in India is under contract farming out of which about 78 % of the contracts are concentrated in Southern India. The Coimbatore-Salem belt is the front runner and leads the pack in broiler production in India. Another prominent belt for broiler production is the Pune-Nashik area (Maharashtra).Hyderabad and Bangalore have also seen a rapid growth of the contract broiler type of arrangements. The key players in this sector are Venkateshwara, Suguna, Godrej etc.
A contract farming arrangement involves a wage contract between an integrator who supplies the intermediate inputs and procures the output (as per pre decided terms) and a poultry farmer who provides inputs such as administration, rearing and care taking.
The process can be described as under:
Integrator supplies the ‘raw-material’ which in this case are the day old chicks (DOC)
He also supplies the feed, medications, veterinary supplies and implements that may be required (E.g. : Water dispensers, feeders etc)
The contract farmer provides his services (labor) and space for the shed and other related services or equipment that may be required
The integrator also bears the marketing responsibility (risk) and the expense involved in transportation ( to and from the farm)
Since the major chunk of the expense ( working capital) is borne by the integrator-he is the absolute owner of the moveable stocks ( broiler) on the farm
The farmer’s role is like that of a ‘care-taker’ who gets a pre determined wage which is listed in the contract
This wage paid to the farmer is linked to various parameters such as the ‘Feed Conversion Ratio’(FCR) or in other words the quantum of feed consumed by the bird to produce the weight, percentage of birds dead etc.
A farmer is rewarded for surpassing the set standards and penalized if any of the agreed criteria is not met
This penalty is deducted by calculating the loss incurred per bird and deducting that amount from the money to be paid ( wage bill)
Some Issues in Contract Farming & Recommendations:
A. Need for Suitable Status, Incentives & Support for the Poultry Sector by Policy Makers/Government
The status of the poultry sector has been a grey area for bankers and policy makers alike. While NABARD and commercial banks classify this sector under the ‘agriculture’ category most of the benefits viz concession in electricity, water costs, and tax benefits are not extended to this sector.
Most farmers (both contract and non-contract) treat this as a secondary occupation. This can be changed by encouraging poultry producer’s co-operatives and subsidizing the feed costs. Moreover such co-operatives will enable the participating farmers to get an avenue to voice common concerns, and seek solutions that can have a positive impact on all stakeholders.
Adequate infrastructure such as efficient cold chain system is required to ensure efficient forward and backward linkages. The perishable nature of the product requires minimal intermediaries (opposite situation prevails in the current scenario). The fate of the non contract farmers becomes even more difficult since grown broilers cannot be retained beyond a certain time.
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