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ECONOMIC ANALYSIS OF BROILER PRODUCTION AT
MIANGO PLATEAU STATE, NIGERIA
D.J.U. Kalla, G. Barrier, U. Haruna, M. Abubakar, B.M. Hamidu, and
N. Murtala
Paper prepared for presentation at the Farm Management Association of
Nigria Conference, Ayetoro, Nigeria, September 4-6, 2007
ECONOMIC ANALYSIS OF BROILER PRODUCTION AT MIANGO PLATEAU STATE,
NIGERIA
D.J.U. Kalla * G. Barrier***, U. Haruna**, M. Abubakar*, B.M. Hamidu** & N. Murtala**
Animal Production Programme*, Agricultural Economics and Extension Programme**
Abubakar Tafawa Balewa University, P.M.B. 0248, Bauchi, Bauchi State, Nigeria
Formerly with: Works and Services Department*** Kent Academy, Miango, Plateau State
*Corresponding Author: Email:demokalla71@yahoo.com
ABSTRACT
This paper evaluate the economics of broiler production at Miango, Plateau State, Nigeria using a
– 9 years record (1992 – 2000). During the period, 76 batches of broilers were reared to point of
slaughter. The results shows that the enterprise incurred an average total variable cost of
N620,6333.31 out of which feeding cost, day old chicks (stock) and mortality cost represents
58.13%, 19.13% and of 9.64% of the total cost of production, respectively. Total revenue within
the period was estimated to be N763,969.44 which was mainly generated from the sales of broiler
birds. The gross margin was found to be N143,334.13 with N0.23 as the returns per naira
invested in the enterprise. Thus the broiler production is a profitable venture in the study area.
Key Words: Broilers, Income, Investment & Profitability
INTRODUCTION
Poultry production is unique in that it offers the highest turn over rate and the quickest returns to
investment outlay in the livestock enterprises (Sanni and Ogundipe, 2005). Funds invested in
poultry production are recovered faster than in any other livestock enterprise. The rate of growth
in production of poultry is the highest when compared with ruminants and other monogastric
animals (Braenkaert et al., 2002) and the cheapest, commonest and the best source of animal
protein (Ojo, 2002). Ogundipe and Sanni (2002) affirmed that returns to investment can be
improved by turning out batches in a year depending on the length of the production cycle.
The contribution of poultry production to total livestock output increased from 26% in 1995 to
27% in 1999, while increase in the production of table eggs accounted for about 13% during the
same period (CBN, 1999). The federal government in bid to encourage the poultry industry in
Nigeria, in 2002 banned the importation of poultry and products, therefore one way of bridging
demand and supply in the diets of average Nigerian is through the intensive rearing of poultry and
other domestic avians.
Profitable poultry farming mostly depends upon good parent stock, quality chicks and feed (Islam
et al., 2002) Nigeria’s poultry industry depend entirely on the importation of parent stock from
foreign countries (NAPRI, 1998). However, the major constraints in poultry production in
Nigeria is the high and rising cost of inputs, particularly feed which accounts for more than 85%
of the total cost of production day old chicks, and medication (Umeh and Udo, 2002). Analysis of
cost-returns structure in poultry production would facilitate appropriate knowledge of costs
implications in order to obtain optimum economic benefit from investment into the industry
(Sanni and Ogundipe, 2005). The present study was therefore focused on the economic analysis
of broiler production at Miango, Plateau State, Nigeria.
35
MATERIALS AND METHODS
Location and climate
Miango is located between latitude 9°45’N and 10°N and between longitude 8°35’E and 9°45’E.
It has an annual rainfall of about 1400 – 1600mm per annum. Rains starts around March ending
to April and extends upto early October. The highest precipitation are recorded in the month of
August or September. The mean ambient temperature of the area is 22.8°C with a range of 15.0
to 31.2°C. The coldest period is from November to January while the hottest period is from June.
The mean relative humidity of the area is about 50% with a range of 14 – 70% (Kalla et al.,
2003).
Data collection and analysis
The data used for this study were broiler production data from the Kent Academy Poultry unit
and it comprises of a 9 – years record (1992 – 2000). During the period 76 batches of broilers
were reared to point of slaughter. The data were analysed as follows:
Analytical techniques
1. Profitability:
Farm budgeting technique was employed to analysed the cost and return structure of the poultry
farm business. This was aimed at estimating the profitability of the enterprises. In this study the
model used for computing the cost and returns of the broiler enterprise is the gross margin which
is presented as follows:
n m
GM = ∑Pyi Yi - ∑PxiXj
i=1 j=1
Where:
GM = gross margin
Y
i = quantity of product (s)
Pyi = unit price of the product(s)
X
j = quantity of the variable inputs(j=1,2,3…n,m inputs)
Pxi = price per unit of variable input
∑ = summation sign
Also, return per naira invested was used to explain the extent to which a naira into broiler
production contributes to the gross margin.
2. Viability analysis
The viability of the poultry enterprise was determined using the benefit-cost ratio (BCR)
and the Net Present Value (NPV). The BCR measures how the revenue generated from the
broiler production covers the cost incurred from the same enterprise. It is expressed as follows:
n n
BCR = ∑ Bt ∑ Ct --- (2)
t=1 (1+r) t-1 (1+r)
where:
BCR = benefit cost ratio
Bt = discounted value of benefits
Ct = discounted value of cost
n = number of years
t=1,2,3…n number of years
r = rate of discount
∑ = summation sign
36
The net present value (NPV) discount the stream of cost and cash flow at a rate usually
determined as the opportunity cost of investing the capital into the business. It is computed as:
n n
NPV = ∑ Bt ∑ Ct --- (3)
t=1 (1+r) t-1 (1+r)
where NPV is the net present value and the other variables where as specific in equation
(2).
The computation of BCR and NPV where based on previous benefits (or revenue)
derived and cost incurred from the broiler production enterprise between the period: 1992 to
2000. These were discounted using 18% prevailing interest rate. The first year (1992) was taken
as the base year.
RESULT AND DISCUSSION
Profitability of broiler production
The costs, returns and profitability estimates of the broiler production enterprise is presented in
Table 1. Accordingly, it shows that the enterprise incurred an average total variable cost of
N620,6333.31 out of which feeding alone accounted for 58.13% of the cost of production. This is
in agreement with the findings of Haruna and Hamidu (2004) that feeding poultry birds accounted
for over 50% of the total cost of production. Also the table reveals that the sourcing of the day
old chicks (stock) represented 19.13% of the production cost. According to Sanni and Ogundipe
(2005) any management intervention towards cutting down the cost of production in any poultry
enterprise will need to lay emphasis on pullet and feed cost. Relatively high mortality rate of
9.64% was also recorded within the study period. This is however expected as managerial
changes occurred from time to time which could be liable to poor management as a result of
adjustments or due to natural epidemics.
Other major cost components in this enterprise are the over head and labour cost. However, the
average total revenue within the period was estimated to be N763,969.44 mainly generated from
the sales of broiler birds. The gross margin was found to be N143,334.13. Thus, the broiler
production is a profitable venture in the area. This is further confirmed by the computed value of
N0.23 as the returns per naira invested in the enterprise.
Table 1: Average annual cost and returns of broiler production (in naira)
Variable cost Amount (N) Percentage
Day old chicks (stock) 118,727.15 19.13
Feeds 360,774.15 58.13
Drug & Vaccinations 6,206.33 1.00
Labour 24,825.33 4.00
Utility 6,206.33 1.00
Transport 13033.30 2.10
Mortality cost 59,829.05 9.64
Overhead 31,031.67 5.00
Total 620,633.31 100.00
Returns
Total revenue 763,967.44
Gross margin 143,334.13
Returns per naira invested N0.23
37
Viability of broiler production
The viability of the broiler enterprise was assessed using cost-benefit ratio (BCR) and the net
present value (NPV). The results are presented in Table 2. It shows that a BCR of 1.2017 was
found indicating the viability of the enterprise, since it is greater than one. This is similar to the
findings of Mbanasor and Sampson (2004). Also the NPV of N430,286 was estimated. This
positive value shows that it is more profitable and viable to invest in the poultry business, than to
keep the money in a commercial bank at the prevailing interest rate of 18%.
Table 2: Benefit cost ratio and net present value of broiler production, 1992-2000
Year Cost(N) Revenue(N) Discount PVC value Present Value
Factor 18% Cost Rex.
1992 146683 187,667 0.847 124,241 158,954
1993 172,738 190,544 0.718 124,026 136,811
1994 571,857 509,255 0.609 348,261 310,136
1995 319,062 387,720 0.516 164,636 200,064
1996 547,704 651,860 0.437 239,348 284,863
1997 892,036 1,063,170 0.370 330,053 395,373
1998 936,573 1,013,040 0.314 294,084 318,095
1999 1,431,960 2,142,251 0.266 380,901 596,839
2000 567,085 730,200 0.225 127,594 164,295
Total - - - 2,133,144 2,563,430
BCR = 1.2017
NPY = 430,286
CONCLUSION
This paper has helped to highlight the major cost-returns components in the broiler production
under prevailing economic conditions. It is evident through this analysis that broiler production
enterprise is a profitable venture in the study area.
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