Economics of 500 Birds and 1,000 Birds Commercial Broiler Poultry

Farms-Established under the

I-LED Value Chain Grant in District Bagh-AJK

Monitoring and Evaluation Section

CNFA Bagh
Improving livelihoods and Enterprise Development Project
_____________________________________________________
October 2008
Table of Contents

i
Executive Summary

The study was conducted in order to compare profitability and productivity of small (500 birds’)
and large broiler poultry farm (1,000 birds’) and the contribution of these farms in creating jobs.
For this purpose all of the 39 farms (13 of 500 and 26 of 1,000) were surveyed through
questionnaire and direct observation. Data was analyzed by applying simple statistical methods
of descriptive statistics and cost benefit analysis.

The study found all of the farmers were aware need of proper flock management and its role in
the health and production. They carried out regular vaccination schedule. The farmers had easy
access to public veterinary health facilities.

Small size farms had higher mortality (11.5%) as compared to large size farms (7.25%). Majority
of the farmers (58%) were disposing dead birds on technically sound terms, whereas 100% of the
farmers who have not attended commercial broiler poultry farm training were throwing away
dead birds in open space.

The flocks were feed about 3.5kg of feed per bird per production cycle with conversion ratio of
2.1. The 39 farms contribute 0.1% to the total yearly district poultry meat demand. Large farm
producers were getting higher price (Rs 3,941per mond) as compared to small farms (Rs 3,708
per mond). Large farms generated higher net income per bird (Rs 36) as compared to small farms
net income per bird (Rs 30). Birds in the large farms attained higher growth (39 days) as
compared to small farms (41 days). Normally producers sold their birds to whole sellers and
retailers.

Each farm created 0.6 full time equivalent jobs. In other words, 39 farms created 25 full time
jobs. Broiler commercial poultry farm was found a profitable business.

ii
 Economics of 500 birds’ and 1,000 birds’ Broiler Commercial Poultry Farms-
Established under the I-LED Value Chain Grants in District Bagh-AJK

Introduction

Poultry is one of the important sectors in VC component of the I-LED project. The sector is
committed to improving existing and establishing new poultry enterprises in the region and
providing managerial and professional services to ensure effective operation of these enterprises.

Bagh, the I-LED project area is one of the white meat deficit areas thus besides establishing
poultry business and restoring the lost livelihoods due to the disastrous earthquake; I-LED is also
concerned to meet these deficiencies in demand through local supply. Therefore, it has allocated
reasonable resources for the sector to meet these priorities.

During the first two years, I-LED established 39i commercial broiler poultry farms (13 of 500
birds and 26 of 1,000 birds). Among the total 39 farms/farmers, I-LED introduced 23 new farmers
into the poultry industry (9 of 500 and 14 of 1,000 birds farm) and supported in rehabilitating and
improving the poultry business for 16 farmers who were already in industry. The present study
focused on all of the farms in order to get a real and true information regarding fulfilling of the
objectives of the study- per sees.

At the time of survey, 19 out 39 (5 of 500 birds farms and 14 of 1,000 birds farms) were rearing
flock whereas the remaining were in
process of preparation of stocking.
Also majority of the farmers (38%) has
sold/reared 2 flocks and 2 farmers
(5%) reared 4 flocks after the
establishing of their farms. It was
observed that 3 farmers of 1,000 birds
had not reared any flock for want of
sufficient capital with them. Unlikely
other farmers, these 3 were to provide
with chicks and feed for the first flock
because the grantee share in the
package was not covering these costs.
The chart to right shows the number of
total flocks reared by each farm type.

Objectives of the Study

i
The fully operational farms were only selected for the study.

1
The study focused on:

• Evaluate productivity and profitability potential of the poultry farms

• Look into management practices of the farmers/grantees
• Identify constraints to the production
• Contribution of broiler farms in creation of full time equivalent jobs

Methodology

Primary data was collected through a pre designed & tested questionnaire of open and close ended
questions and direct observation of the farmers’ management practices. The data was analyzed in
MS Excel applying cost benefit analysis and pivot table technique to get descriptive statistics.
Also only weighted averages were applied in order to obtain more accurate central tendency.

Results and Discussions

Maintaining Shed

Management practice plays paramount part in the boiler poultry industry and it has direct effect
on occurrence of morbidity, mortality, feed conversion to body mass, profitability, and
productivity of the farms. Keeping poultry sheds properly is essential in all phases of broiler
production. Proper ventilation helps in air renewal, supply of oxygen and removal of metabolisms
products such as ammonia and carbon dioxide. On average, all of the farmers were maintaining
clean sheds and were aware of the importance of light availability, ventilation, covering floor with
litter/dub, litter thickness and keeping floor dry around the drinkers (see table-a in annexure).

Feeding

Placing adequate number of feeders, normal plastic and automatic drinkers are also very
important to get utmost returns from the broiler production. Standard numbers of these utensils
per 100 birds are 3-4 feeders, 1 automatic drinker and 3-4 normal plastic drinkers. It is
disappointing that some of these farmers were keeping inadequate number of these utensils as per
standards. The actual number of these utensils with respect to age in days is given in table-c in
annexure.
Table 1: Actual no. of feeding utensils against the standard
500 1,000
Utensil Statistics
Farm Farm
Average 12 28
Feeder Deviation from standard
-4 -12
(±)
Average 1.5 13
Normal
Deviation from standard
Drinker -10 -3
(±)
Average 4 6
Automatic
Deviation from standard
Drinker -1 -4
(±)
Source: Survey Data October, 2008

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Vaccination, Morbidity, Mortality and Disposal of Dead Birds

Proper vaccination is one of the effective ways to prevent occurrence of diseases, and minimize
economic losses. The study concluded all of the farmers were following regular vaccination to
prevent NDIB (Newcastle Disease Infectious Bronchitis), Gumboro-I, Gumboro-II,
Hydropercaridium and ND Lasota.

Farmers reported various disease outbreaks in their flocks. Gambaro, hydroperichardia, choriza,
chronic respiratory disease and coccidiosis were the major diseases flocks suffered from.
Mortality caused by these diseases in the flock has been presented in table-b in annexure.

Mortality in broiler farms represents number of birds died per 1,000 birds in one cycle of usually
40 days. Mortality of 80/1,000 birds or 8% is acceptable in these farms. The present study
focused on mortality in the last two flocks’ i.e. current flock and flock proceeding to the current
one. Farms of 500 birds suffered from high mortality (11.5%) as compared to farm of 1,000 birds
(7.25%). It is worthwhile to note that farmers of 1,000 birds’ farm performed very well and they
kept transience below the standard of 8%.

It is also evident that these farmers had easy access to health facilities (veterinary
hospital/dispensary) and on the average every 6 km such veterinary health infrastructure is
available to the farmers.

Like keeping proper sheds, disposing of dead

birds properly is another determinant of good 100
broiler farm management practices. The
farmers were told about technically disposing
the dead birds-burying or burning them
Training attended
during the commercial broiler poultry farm
Training not attended
management training. The study found that 41
not all of the farmers were following these
instructions and only 58% of the farms were 8
7.1
burying the dead birds whereas 42% are
throwing away in the open space. This is very
% Mortality % Throw away dead
undesirable situation in terms of birds
environmental ethics and spread of
contagious diseases.

The study also concluded that the performance of those farmers who took training on
management of commercial poultry farms was satisfactory, in terms of mortality and disposing off
dead birds properly.

Feed and Feed Cost

Feed is the most important component in any broiler business because of its impact on health,
productivity and economic returns and share in total production cost. Broiler birds need various
vital ingredients in their diet at various stages of the production cycle. Scientists have formulated

3
feeds and termed various names. In the Indo-Pak subcontinent they recommend feed no-4 for up
to 30 days of age and feed no-5 till slaughter time. I-LED farmers were using feed no-4 till 15
instead of 30 days. This could be one of the reasons for getting lower returns from their business
as compared to the rest of the region. Furthermore, the birds were getting 1.5 kg/bird of feed no-
4 in case of 500 birds’ farm (0.90 kg/bird in 1,000 birds’ farm). Similarly each bird in 500 birds’
farm was getting 1.9kg of feed no-5 (2.35 kg in case of 1,000 birds’ farm).

Table 2: Feed and Feed Cost

Feed type Description 500 1,000
farm farm
Days 15 15
Total bags 15 18
Feed no. 4 Price per bag 1,150 1,150
Transportation
24 21
cost per bag
Days 43 44
Total bags 19 47
Feed no. 5 Price per bag 1,160 1,160
Transportation
24 21
cost per bag
Mr. Muhammad Nazir Khan is an experienced and
Source: Survey data, October 2008 traditional broiler meat producer. Prior to
earthquake he was raising farm of 1,500 birds in a
Productivity and Feed Conversion Ratio rented shed and was earning a reasonable income.
The devastating earthquake of October, 2005
destroyed his prime source of livelihoods. He had
The study found that on average 500 birds farm lost hopes and was in constant contact with the
produced 20 mond (800 kg) of live bird weight Bagh poultry association. With the strong
and 1,000 birds farm produced 37 mond (1,480 recommendation of the Said association I-LED
granted the package of 1,000 broiler commercial
kg) live bird weight. These farmers sold the meat farm. He managed his farm properly and reduced
on Rs 3,708/mond and Rs 3,941/mond of 500 and the mortality from 8% to 3.4%, enhanced the net
1,000 size birds’ farm respectively. profit per bird from Rs 16.67 to Rs 35.5 and now
gets his mature flock in 40 days as compare to 45
days. During the survey he said,
With reference to the marketing plan study of
2,000 broiler poultry farm conducted by Mr. Nazir put: “I am extremely happy of the
decision I made to become the CNFA I-LED
Dr. Shahid-Poultry Specialist (2007), revealed that Value Chain grantee. I got a highly profitable
these farms contributed 0.1% to the total yearly business at my door step. Without such
regional poultry meat consumption out of 5 flocks wonderful intervention, I would have gone
abroad to earn my livelihoods. With this
per year. This means that there is a tremendous business, I am earning enough revenue and
scope exists to strengthen the poultry sector. look after my kids properly. Finally I do invite all
my relatives and friends who have no
In animal husbandry literature, the feed conversion permanent source of income to become part of
the program”.
rate/ratio (FCR) and feed efficiency are simultaneously
used. The FCR measures animal/bird efficiency of
converting feed mass into increased body mass. FCR is
calculated by:

FCR = Feed
liveweight

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FCR of 2.13 and 2.2 was found for 500 and 1,000 birds’ farm respectively and this was within
the standard rate of 2-4 (lower rate is preferred). From the calculated FCR it can be incurred that
the I-LED farmers were efficiently converting feed into meat (increased body mass).

Cost Benefit Analysis

Cost benefit analysis is widely used technique in evaluating quantitatively any course of action.
The technique involves quantifying all the benefits and cost (variable and fixed) in same unit and
then finding the ratio.

Table 4: Cost Benefit Analysis

PKR
Item Description 500 1,000
Farm Farm
Sales Revenue 74,160 145,817
Fleeces return 1,724 2,040
Feed and litter empty bags (Rs 8/bag) 376 840
Total Return 76,260 148,697
Variable Cost
Chicks (Rs 22/chick) 11,000 22,000
Feed No-4 17,250 20,700
Feed No-5 22,040 54,520
Litter (Rs 90/bag) 1,170 3,600
Transportation 1,128 2,205
Medicines 1,643 2,595
Labor 5,625 5,028
Total Variable cost 59,856 110,648
Gross Margin 16,404 38,049
Gross margin per bird 33 38
Fixed Cost
Shed depreciation/production cycle 1,038 2,035
Equipment depreciation 136 497
Total fixed 1,174 2,532
Net farm profit 15,230 35,517
Net profit per bird 30 36

Source: Calculation from the survey data (October 2008) and secondary data from Grants Section

Table 4 shows that major portion of the cost was associated with feed (64% and 66% for 500 and
1,000 birds farms respectively) followed by buying day old chicks. Farm of 500 and 1,000 sheds
cost was calculated through straight line depreciation method and assuming 16% salvage value
and 20 years useful life. Whereas the salvage value for the equipments and useful life was

5
assumed 10% and10 years respectively. The total annual depreciation was converted to
production cycle (42 and 44 days for 500 birds and 1,000 birds’ farm respectively). Also no
compounding and discounting was used due to the fact of lower time span involved between the
flow of cost and benefits (maximum of 44 days).

Labor cost was calculated by multiplying the number of labor hours per production cycle and
getting the minimum hourly rate (Rs 200/8 hours).

Flock Maturity and Marketing

Subject to proper feeding and maintaining other standards of diseases

prevention, proper temperature and proper sheds, commercial broiler
flock matures in 40-45 days. It was found that I-LED farmers’ flocks Farmer
reached to maturity within international standard period. Farm of
1,000 birds got maturity earlier (39 days) as compared to farm of
500 birds (41 days).

Due to high demand of poultry meat, these farmers normally sold Whole seller
their flocks soon after the maturity. The average selling period was
42 and 44 days for 500 and 1,000 birds’ farm. Hence farmers were
incurring a very minimal cost of keeping their flocks after maturity
period. Furthermore, these farmers sold their flocks mainly to whole
sellers followed by retailers; the channel is shown in the following Retailers
figure.

Creation of Full Time Equivalent Jobs

FTE is defined as number of total hours worked divided by the maximum number of
compensable hours in a work or FTE is also defined as total hours worked divided by average
annual hours worked in full-time jobs (full time work is job is 40 hours of work per week for 52
weeks in a year). Full-time equivalent (FTE) is a way to measure a worker's involvement in a
project, work or list of activities. An FTE carries value of 0-1 and 1 means that the person is
equivalent to a full-time worker, while an FTE of 0.5 signals that the worker is only half of full
time worker and 0.25 means a worker is quarter time of a full time worker.

I-LED commercial broiler farm package is one of the important I-LED grants which not only
benefit the farmers but has positive externalities on society as a whole by creating jobs and
reducing significant number of unemployed labor force. In the survey area, farmers were
involving in management of birds for 4.6 hours daily and hence one farm grant created 0.6 full
time equivalent jobs (4.6*7*40/40*52= 0.6)ii. This way all the 39 broiler farms created 25 full
time jobs (see table below please).

Table3: Creation of FTE Jobs

ii
Most of the I-LED farmers are of the view keeping no flock during the severe winter (Dec-Feb), so they are
involved for 40 weeks instead of 52 of weeks in a year in the enterprise.

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 500 1,000
Description
Farm Farm
Daily hours involved 5 4.47

FTE 0.7 0.6

Full time jobs created 9.1 15.6

Overall jobs created 25

Source: Survey data October 2008

Perception about Developing Local Hatchery

I-LED is aware of the need of

strengthening these enterprises
and has allocated reasonable
resources to establish a hatchery
in the region. Currently these
farmers are getting day old chicks
through the local agent from
Islamabad/Rawalpindi. The agent
supplies chicks when he gets order
for 10,000 chicks per truck so that
to keep transportation and labor
charges at the minimal. Mostly
this takes 15-20 days for the agent
to supply the chicks and hence
every farmer is loosing about one
cycle of the broiler production per
year. Therefore, it was perceived
important to get feedback from the
actual users of the hatchery to be
developed. The idea was widely
welcomed by the farmers and their
response is depicted in the chart above.

Study Limitations

Following are the major limitations of the present study:

• No information was gathered regarding poultry associations and their role in the
escalation of these farms.

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 • No data was gathered for utility cost (electricity, wood/fuel) and opportunity cost of the
shed’s area for lack of proper records by the farmers/producers.

Conclusion

The study surveyed all of the 39 established farms and concluded that broiler farming is a
reasonable source of income generation and plays an effective role in poverty alleviation. The
poultry farms established under I-LED program contributed 0.1% to the total yearly district
demand. Furthermore, large farms performed efficiently as compared to the small farms in terms
of producing net income, reduced mortality, feed conversion ratio and early maturity of the flock.

Both the gross margin and net farm income is positive indicating that broiler production is a
profitable enterprise and is therefore, can be taken as poverty alleviation tool. Furthermore,
larger farm size generates more net farm income because of the lower average cost. Therefore, it
is strongly recommended that I-LED should focus on establishing large farm size as it plans for
the third year of the project.

Recommendations

Following recommendations are suggested in light of the findings of the study:

i. All the 3 farms of 1,000 birds' that have not started rearing flock must be
mobilized to make the farm fully operational.
ii. Government and non-government organization should focus on the strengthening
of the poultry sector so as to raise at least 2% contribution of the local supply in
yearly district demand.
iii. Enough number of feeders and drinkers should be placed all the time in the shed
so as to avoid under nourishment of the birds and enhance productivity of the
farms.
iv. Feed no-4 should be provided for first 30 days and thereafter feed no-5.
v. Farmers, particularly of 500 farms, should focus on bringing birds’ mortality
within standard of 8%.
vi. Training section should arrange additional training on the commercial broiler
management in order to enhance the technical capacity of poultry farmers and
provide opportunity for those who have not attended such training before.

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Annexure:

Table a: Shed Management

Shed Status 500 1,000 Grand
Status Category Farm Farm Total
Satisfactory 2 3 5
Good 2 8 10
Cleanliness
Bad 1 3 4
NA* 8 12 20
Satisfactory 4 9 13
Light
Good 2 5 7
Availability
NA 7 12 19
Satisfactory 2 7 9
Ventilation Good 4 7 11
NA 7 12 19
Dryness around Yes 5 10 15
the drinker No - 4 4
NA 8 14 20
Floor covered Yes 5 14 19
With dub/litter No - - -
NA 8 14 20
Litter thickness Inches 2 2.4 -

Table-c: Actual Feeders and Drinkers

kept in shed as per age of birds
Farm Age Normal Automatic
Feeder
Type (days) Drinker Drinker
45 27 10 21
40 40 10 0
40 30 18 0
40 25 21 0
40 24 12 1
35 32 13 6
1000 35 30 21 8
size 33 28 0 10
28 26 0 9
24 25 20 0
22 29 12 10
22 29 12 10
* NA represents farmers who are not rearing flock currently 21 30 18 7
12 15 15 0
40 5 0 5
30 11 0 4
500
28 19 0 4
size
23 17 2 5
3 8 5 0
 Table-b: Mortality caused by various
diseases
%of birds died per
disease
Disease
500 1,000
Farm Farm
Ghumboro - 9.75
Hydorperichardia 8 3
Choriza 30 18.5
Chronic Respiratory
13 -
Disease
Coccidiosis - 5