MARKET AGE ENTERPRISE SIZE AND RELATIVE EFFICIENCY IN BROILER PRODUCTION IN IMO STATE OF NIGERIA

ABSTRACT

The study focused on market age, enterprise size and relative efficiency in broiler production in Imo State  . The main  aim  was to determine  resource  use efficiencies  in broiler  brooding  and  rearing enterprises  as well as large-scale  and small-scale  outfits  in the two enterprises.  Using  multi-stage

sampling technique, the study area was zoned into three using the existing zoning arrangement of the Imo  State  Agricultural  Development  Programme  (ADP).  A total  of nine  L.G.As  were  randomly selected and a total of 180 broiler farmers (made up of 90 brooders and 90 rearers) were selected. A set of structured questionnaire was administered  on the farmers to obtain required information. Data were  analysed  using  simple  statistical  tools,  regression  models,  additive  multiplicative   dummy variable  models,  profit  function  technique  and  enterprise  analysis.  Results  showed  that  broiler production was profitable but rearing birds to maturity was more profitable than brooding birds and selling at four weeks old.  Large-scale rearing of birds was more profitable than small-scale outfit. In brooding enterprise, no remarkable difference in profit margin existed between large-scale and small- scale. Broiler rearing farmers were found to be more technically efficient than the brooding farmers and small-scale rearers were more technically efficient than large-scale ones. The implication  is that technical efficiency may not increase by increasing size of operation in rearing broiler. In brooding, large-scale  outfit  was  more  technically  efficient  than  small-scale.  Technical  efficiency  may  be increased  by increasing  size of operation  in broiler brooding business.  None of the farmer  groups achieved absolute allocative efficiency. They therefore did not maximize  profit.  However brooding farmers  were  more  allocatively  efficient  than  the rearing  farmers.   Large-scale  rearers  were  more allocatively   efficient  while  small-scale   brooders  were  more   allocatively   efficient  in  brooding enterprise. The implication  is that in broiler rearing business, allocative efficiency may be increased by increasing size of operation. Brooding farmers were found to be more economically efficient than rearing farmers.  Small-scale brooders were more economically efficient than large-scale counterpart. Allocative efficiency may not be increased by increasing size of operation in broiler brooding. None of the farmer groups operated at constant returns to scale.  Brooding farmers operated at increasing returns to scale while rearing farmers operated at decreasing  returns to scale. Brooding farmers by operating  at  increasing  returns to scale means  that they grossly under-utilized  resources,  they had opportunity  to  increase  output  by  increasing  input  use.  The  rearing  farmers  over-utilized  some resources.  It was recommended  that farmers should brood and rear their stock to  maturity to avail themselves   the  opportunity  of  allocative  and  economic  efficiencies   of  brooding  and  technical efficiency and high profit margin of rearing.

CHAPTER ONE Introduction

1.1     Background Information

Nigeria,  one  of  the  developing  countries  of  the  world  with  rapid population growth, is faced with the task of providing adequate food for her citizenry.   While food production increased at the rate of 2.5%, food demand

increased  at the rate of more than 3.5% due to the high rate of population growth of 2.83% (F.O. S, 1996).The scenario induced increase in the country’s food import bills from about #8b in 1996 to over #183b in 2005 (CBN,2005). Apart from this problem, there is inadequate animal protein in the diets of a large proportion  of the population  especially in the rural areas (Ojo, 2003). Animal protein is essential in human nutrition because of its biological significance.

In realization of the importance of animal protein, various governments in Nigeria have inaugurated programmes at the national, state or community levels to encourage  mass  production  of livestock.   Such programmes  included  the micro-credit  scheme  for livestock  production  and  establishment  of livestock parent/foundation stock at the community level by the United Nations Development Programme (UNDP).

Poultry is an example of such community level livestock.   Poultry is a general name for several kinds of birds that are useful, mainly as food to man which include domestic fowl, duck, turkey, guinea fowl, and goose (Ayivor and Hellins, 1986) and they are reared for other useful purposes such as meat, eggs and feather  (Walter,  1976;  Eze,  1991).   Poultry is widely grown in Africa, Nigeria and Imo State.  Sonaiya (2000) pointed out that there were 82.4 million chickens in Nigeria, 11% (i.e. 10m) of which were for commercial purposes. Livestock statistics by RIM (1992) showed that there were 13.8m cattle, 34.4m goats, 22m sheep, 3.4m pigs, 104.3m local poultry, 20m exotic poultry, and

1.7m domesticated rabbits in Nigeria.  Also, Imo State Ministry of Agriculture and Natural Resource (MANR, 2004) showed that there were 6.35m poultry,

1.1m cattle, 1.5m sheep, 2.85m goats, 3.32m pigs and 54,000 rabbits in the

state.

Poultry has some advantages of being good converters of feed into usable protein  in  meat  and  eggs;  low  production  cost  per  unit  relative  to  other livestock; meat which is tender, palatable and acceptable; short production cycle

and the egg which has a biological value of 1.0, is one of the most nutritious and complete food for man (Orji , Igbodi and Oyeke, 1981).

In the recent time, there has been recorded improvement in poultry production  in  Nigeria  in  that  poultry  eggs’  and  meat’s  contribution  to  the livestock share of the Gross Domestic Product (GDP) increased from 26% in

1995 to 27% in 1999 (CBN, 1999).  This improvement can further be enhanced by proper analysis of resource use productivity and efficiencies in broiler production.

Broiler  is  a  meat  type  chicken  bred  for  marketing  at  early  age  and matures faster than other types of chickens (Williamson and Payne, 1977).  In the livestock market today, broilers are offered for sale at different ages and sizes depending  on circumstances  and purposes.   The market  age in broiler production is the age at which producers target to offer their stock for sale. Most outstanding among them are:

i.        four weeks brooded (brood and sale);

ii.       seven to 12 weeks reared (mature types); and iii.      above 12 weeks reared (over-aged).

Broiler producers show their interests in the production of one or a combination of any of these three.  On this, Oluyemi and Roberts (1979) pointed out that the exact time for marketing broilers depended on different marketing situations involving the relative costs of chicks and feeds and market preferences.   The broiler producers also operate at various scales and use various techniques and available   resources   to   achieve   their   production   goals.   Anthony   (2001) considered  those  farmers  producing  not  more  than  500 birds  as  small-scale farmers;  those producing  between 501 and 1000 birds as medium-scale  and those producing from 1001 and above as large-scale; farmers.   The definition of farm size or scale of operation has varied in efficiency literature, as what is considered large or small-scale is relative depending on the agricultural system setting (Ohajianya, 2002).   However, the most useful economic definition of

small-scale   business,   for   example,   is   the   one   that   emphasized   those characteristics which might be expected to make their performance and their problem different from large-scale businesses (Adebusuyi, 1977).  In addition, Nicholas  (1977)  described  a small-scale  business  as  one  that  had  relatively small share of its market and is managed by its owners in a personalized way and not through formalized structure of management.

Lawal   (1979)   and   Akison   (1982)   defined   small-scale   industry  or enterprise  as  one  with  total  capital  investment  less  than  N1m  or  one  that employed less than 15 workers. The National Directorate of Employment  in

1989, defined small-scale businesses to accommodate projects with capital investment as low as N5,000.00 and employing as few as three persons. To Albert  (1973),  small-scale  enterprises  were  those  which  had  relatively  little capital investment,  produced in small quantities  and as a result controlled a small share of the market and employed not more than 50 workers and had management,    marketing   and   entrepreneurial    functions   vested   in   their proprietors.   The definition according to Okafor (2000) is contextual as each country or public agency tends to adopt a definition criterion which accommodates the peculiar needs of public policy or which most appropriate for the intended policy objective or the agency concerned. Important operational variables like capital investment, turnover, employment level and relative size of a firm within any industry are common features in most definitions.   For example, in most developed economies like the U.S.A., UK and Canada, the definition criterion adopted is a mixture of annual turnover and employment level (Okafor, 2000).

In Nigeria, enterprise-size classification is based on a composite criterion of sales volume, capital or asset base and employment level.   The official definition of various scales of enterprise has undergone many revisions from

1973 to date.  At the 13th council meeting of the National Council on Industry in

July 2001, micro, small and medium enterprises (MSMEs) were defined by the council as follows:

i.        micro/cottage industry:  an industry with labour size of not more than

10 workers or total cost of not more than N1.5m excluding cost of land;

ii.       small-scale industry:  an industry with labour size of 11-100 workers or total cost of not more than N50m but excluding cost of land;

iii.      medium-scale industry: an industry with labour size of between 101 and 300 workers  or a total  cost  of over N50m but not  more than N200m, excluding cost of land; and

iv.      large-scale  industry:  an  industry  with  a  labour  size  of  over  300 workers or a total cost of over N200m, excluding cost of land (Udechukwu, 2002).

Large-scale business, therefore is one that is beyond the scope of small-scale business, having a formalized management structure with relatively large capital investment and personnels.

But for the purpose of this study, the definition assumed a different dimension.    It  was difficult  to come  across  a reasonable  number  of  broiler producers with stock up to 500 birds at the time in the study area.  Because of this, a small-scale outfit in the enterprise is taken to be one with less than 300 birds  per  production  period,  mainly  managed  by the  owner  and  sometimes employing one or two regular labourers.   The practice is that family labour is used for production.   Average investment is not more than N200,000 in most cases.   Therefore a large-scale outfit is one that has 300 birds and above in a production period.   Use of paid labour rather than family labour is rampant. This type is formalized in its management structure.   Average investment is above N200,000.

Efficiency is concerned with relative performance of the processes used in transforming given inputs into outputs.  It is the use of resources in achieving

organizational objectives (James and Freeman, 1992).  The aim of resource use efficiency is to find ways of increasing output per unit of input and attaining desirable inter-firm, intra-firm and inter-sector transfer of production resources in order to provide the means of raising our economic level (Awoke, 2003). Efficiency can be measured in a number of ways, but each has in common the notion that the value of output in the long-run must exceed, or at least be equal to the cost of inputs plus work  flow activities.   On this, Farrel (1957) and Carlson (1972) had earlier distinguished between two types of efficiency, technical and allocative.   Technical efficiency is borne out of the techniques used.   It is the ability of farmers to use the “best practice” in the production processes so that not more than the required or necessary inputs are used to produce  “best”  level  of  output  (Timmer,  1970;  Carlson,  1972).    It  can  be defined as the maximization of the ratio of physical output to physical input without taking into consideration factor input and product output prices (Bishop and Toussaint,  1958; Arene and Okpukpara,  2006).   Therefore  a production method  that  uses  more  of  physical  resources  than  the  alternative  in  the production of a unit output is technically    inefficient (Chukwuji, Inoni, Ogisi and Oyaide, 2006). The  measurement of firm’s specific technical efficiency is based   on   observed   output   from   the   best   production   (Okoruwa   and ogundele,2008). Allocative or price efficiency, on the other hand, deals with the choice of optimum combination of inputs consistent with relative factor prices. A farmer, therefore is considered allocatively efficient in the use of a resource if he is capable of equating  marginal value product (MVP) to its factor price. Onyenwuaku (1994) contended that allocative efficiency of any two groups of farms required that they were characterized by constant returns to scale, production function of similar slopes and the same configuration of input and output prices.

Economic  efficiency is the product  of technical  and price efficiencies

(Ohand and Kim, 1978) and it indicates the cost per unit of output for a farm

which perfectly attains both efficiencies.  It is the ability to maximize profit. In order to attain economic efficiency there must be necessary and sufficient conditions  (Arene and Okpukpara,  2006).   Necessary condition  involves  the attainment of the technical efficiency.   Sufficient condition is attained when price relationship of the factors and outputs are considered. An economically efficient input-output combination would be on both the frontier function and expansion path (Ogundari and Ojo,2006).   The level of technical efficiency is influenced by managerial characteristics such as technical knowledge and skills, education and extension contacts as well as institutional factors such as, farm size, tenancy, access to credit and supply of inputs (Ali and Byerlee, 1991).

1.2     Statement of Problem

Nigeria is faced with the problem of malnutrition particularly in terms of protein intake (Shaib, 1984).   The minimum protein intake per day of 65g, as recommended by the World Health Organization (WHO), is yet to be attained, instead, the per capita consumption  per day is about 6.5g representing  10% (Oluyemi and Roberts, 1979; Ibe, 2000).  The issue is that of protein availability and  its  configuration.    It  is  recommended  that  more  than  one  third  of  the minimum protein intake for an adult per day should be of animal origin.  This is because animal protein contains the essential amino-acids which are more balanced and readily available to meet nutritional needs than plant protein (Onyenuga, 1971; Ojo, 2003).

Regrettably, animal products contribute only about 15-20% of the protein intake  of  the  nation  (FRN,  1997).    Irrespective  of  the  fact  that  Nigeria  is endowed with abundant livestock production facilities, she has remained a net importer of livestock products (Abubakar, 1998).   Developing the poultry industry, especially the broiler sub-sector, is observed to be the fastest way of bridging the protein deficiency gap in Nigeria (Ikpi, 1979; Akinwumi, 1997). Though there have been some sincere efforts to increase the local production of poultry in general, the demand still far exceeds the supply.   One may start to wonder whether broiler farmers employ their production resources well or not? In an answer to this question, Branckaert and Gueye (2000) had asserted that most of the conditions required by the industrial poultry sub-sector are not met in poor countries, including Nigeria. There are inability to purchase most improved birds, drugs, vaccines, equipment, non-availability of highly skilled manpower, inability to control diseases and non-existence of national domestic market  to  absorb  poultry  products  at  attractive  prices  by consumers.  Infact Gueye (2003) admitted that before commercial or industrial poultry production can be developed to medium or large-scale units, either for broiler or egg production, it is important to achieve either self-sufficiency in cereal production or to generate the necessary hard currencies that may be needed to purchase necessary  but  expensive  inputs.  This  is  because,  the  need  to  produce  high quality  and  quick  maturing  broilers  has  been  militated  against  by  high competition between man and livestock over relatively lesser source of protein concentrate and basal energy feedstuff (Okeke, Usman and Anamayi, 2004). These problems can influence resource use efficiency in broiler production.

Equally,   there   are   controversies   over   enterprise   size   and   relative efficiency in agricultural policy formulation and implementation. For example, the implementation of agricultural policies most often favour large scale farmers under the presumption that they are more economically efficient than small- scale farmers (Dorner, 1972; Khan and Maki, 1979; Kydd and Christiansen,

1982; Lele and Agarwal, 1989; Deininger and Binswanger, 1995). However, some previous studies in Asia and Nigeria on farm sizes and relative efficiency have  shown  some  conflicting  results.  Lau  and  YotoPoulos  had  shown  that small-scale wheat farms in Indian Punjab were more economically efficient than large farms. In Nigeria Trosper (1979) and Awoke (2003) found that small-scale farms were economically more efficient than large farms.

Some research results showed that large farms were more economically efficient than small farms (Khan and Maki, 1979; Nehring et al., 1989; Bravo-

ureta and Rieger, 1990; and Kumbhakar, 1993). Okon (2005) blamed the inefficiency of resource use in small-holder farms on dominance of elderly men and women in agriculture.  There is, however, no evidence of differences in the relative economic efficiency or its technical and price efficiency components between  large and small  farms  (Sidhu,  1974;  Bagi,  1982; Bagi and Huang,

1983; Bravo-ureta, 1986; Moussa and Jones, 1991; Dittoh,1991; Ohajianya and Onyenwuaku,2002).

Awoke and Okorji (2004) observed that resource use in developing countries such as Nigeria is faced with the problem of under utilization of capacity which is associated with low returns.   For instance, problem of demand and supply militated against efficient use of land resources.

However, such information are lacking on farm size and enterprise type (i.e. broiler brooding and broiler rearing) in broiler production in Imo state of Nigeria. Literature was lacking in resource use efficiency in broiler brooding and rearing as well as relative efficiency in sizes of operation in them. A comparative analysis of efficiency of resource-use among broiler farmers in Imo state would therefore provide empirical evidence of gaps that may exist in the farmer’s current level of technology.   These gaps would serve as intervention points for relevant stakeholders for arresting any difference that may precipitate animal protein crisis in Imo state and Nigeria in general, as inefficiency directly translates  to  low  productivity  and  profitability.    Hence,  the  study  sets  to discover  resource  use  efficiencies  among  the  market  ages  in  production, otherwise called broiler brooding and rearing enterprises as well as large-scale and  small-scale  outfits  in  the  two  broiler  enterprises.    It  will  identify  and provide  better information  about  the  variables  of variations  in efficiency of resources  use  among  the  groups  of  farms.    It  will  try  to  formulate  policy measures that will reduce the difference if any.

1.3     Objectives of the Study

The broad objective of the study is to examine resource use efficiencies in the market ages of broiler brooding and rearing enterprises as well as in large-scale and small-scale outfits of the enterprises.

The specific objectives were to:

i.        compare costs and returns in the brooding and rearing enterprises as well as in large-scale and small-scale outfits of the enterprises;

ii.       determine  whether  there  are  differences  in the  technical  efficiency between  broiler  brooders  and  rearers,  and  between  large-scale  and small-scale producers;

iii.      ascertain   whether   there  are  differences   in  allocative   or  pricing efficiencies between brooders and rearers and between large-scale and small-scale producers;

iv.      determine  whether  there  are  differences  in  economic  efficiencies between brooders and rearers and between large-scale and small-scale producers;

v.       determine  whether  the  group  of  farmers  are  operating  at  constant returns to scale and

vi.      make policy recommendations based on outcome of the research.

1.4     Hypotheses of the study

Based  on  some  of  the  stated  objectives  of  the  study,  and  the  expected relationship between variables, the following null hypotheses were tested;

i.        there are no significant differences in economic efficiency of broiler brooders and rearers;

ii.        there is not significant  difference in economic  efficiency of large- scale and small-scale brooding;

iii.      there is no significant difference in economic efficiency of small-scale and large-scale rearing;

iv.      the brooding and rearing farmers were operating at constant returns to scale;

v.       the small-scale  and large-scale  brooding  farmers  were operating  at constant returns to scale;

vi.      the  small-scale  and  large-scale  rearing  farmers  were  operating  at constant returns to scale.

1.5     Justification of the Study

There is inadequate animal protein supply in Nigeria.  The livestock sub-sector is  dominated  by  small-holder  production  with  low  aggregate  output.    The livestock farmers neither optimize their input use and profit, nor minimize their production costs.

Three distinct enterprises exist in broiler production which are termed market ages in this study.  They are: four weeks brooded; four weeks to twelve weeks reared; and above twelve weeks reared.   Attention is focused on four weeks brooded and four weeks to twelve weeks reared. Broiler farmers engage in the production of one or a combination of any of the three.  Investigations are needed   in   these   enterprises   especially   production   efficiencies   between enterprises as well as between farm sizes.  The ultimate aim is to recommend best resource use levels and best enterprises for boosting broiler production. The result of the research will be useful to poultry farmers and intending ones in making investment decisions in broiler production.  As a new area in livestock management research, the result will serve as a bench-mark for further investigation in broiler production.

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