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Optimum poultry enterprise combinations among small holder farmers in

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Nig. J. Anim. Prod. 2017, 44(3):167 - 177 Nigerian Journal of Animal Production
© Nigerian Society for Animal Production
Optimum poultry enterprise combinations among small holder farmers in Osun
State, Nigeria
1
Awogboro, T. T., 2Yusuf, W. A. and 3Yusuf, S. A.
Department of Agricultural Economics, University of Ibadan, Nigeria
1
Abstract Email: [email protected] (08065538702)
Poultry farmers are confronted with choice for efficient allocationof farm resources between
the different enterprises so as to optimize production objectives. The study therefore, was
focused on optimum poultry enterprise combinations among small holder farmers in Osun
State, Nigeria. Primary data were collected using questionnaires and were analyzed using
descriptive statistics, budgetary technique and linear programming model. Of the seven
poultry enterprises identified, the most profitable enterprise combination was that of
layers/broilers with a benefit cost ratio of ? 1.92 while the enterprise that yielded the least net
farm income was the sole cockerel which had a benefit cost ratio of ? 1.57.The profitability of
sole and combined poultry enterprises was limited by high cost of production in which the
feed cost constitutesmore than three-quarter of the total cost. Although, the optimal poultry
enterprise combination was layers/broilers, the farmers in the study area attested to the fact
that poultry business was still highly profitable.It is therefore recommended that both
farmers and government must partner to find a means of reducing feed cost by financing
poultry research. Also, poultry farmers should concentrate and intensify their poultry
combination practices especially that of layers/broilers, which may be the
appropriateoptimal combination enterprise.
Keywords: Poultry enterprise, small holder farmers

Introduction cattle, sheep, goat, pig and poultry are the

Livestock sector plays a crucial role in rural influencing factors for rearing them. The
economy and livelihood. This is one sector returns are quick; losses, if any, are
where the poor contributes to the growth recovered soon and the poor can afford
directly instead of getting benefit from them. The multiple species-animal
growth generated elsewhere. In Nigeria, the husbandry system is also environmental
livestock sector forms an important friendly. Income from livestock production
livelihood activity for most of the farmers, contributes a significant percentage of the
supporting agriculture in the form of total income of rural farm households
critical inputs, contributing to the health engaged in agricultural production.In
and nutrition of the household, Nigeria, livestock resources consists of
s u p p l e m e n t i n g i n c o m e s , o ff e r i n g about 14,000,000 cattle; 34,500,000 goats;
employment opportunities, and serving as a 22.000,000 sheep, 3,500,000 pigs;
store of wealth in times of need. It acts as a 100,000,000 poultry (Amos, 2006).
supplementary and complementary However, It was discovered that the number
enterprise. It is also an important part of as increased to approximately 160million
agriculture diversification and income birds, which produced 650, 000 metric
enhancement as it plays a vital role in the tonnes of eggs and 290,000 metric tonnes
overall economic development of the farm of poultry meat in 2013 (Sahel, 2015). From
households and nation as a whole. The this figure, poultry accounted for 58.2
prolificacy of livestock which include; percent of the total livestock production.

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 Optimum poultry enterprise combinations among small holder farmers

This indicates the important place of smallholder farmers' access to agricultural

poultry sub-sector in the livestock sector. innovations is often limited by unfavorable
Ezeibe (2010) reported that poultry economic, socio-cultural and institutional
production is a very important arm of the conditions, they have achieved some level
livestock sector as poultry has high feed of efficiency through deployment of their
conversion rate, high fecundity and indigenous knowledge (Afolabi et al.,
contributes high to economic gains of the 2013). If provided the right inputs, feasible
operators in Nigeria. He stressed further technology and relevant information, they
that poultry production enjoys high interest are capable of transforming traditional
among livestock production and the meat agriculture. Chukwuji (2008) shows that
has high demand in Nigerian markets small- holder farmers combine two or more
because of its nutritional facility. In enterprises because they are more profitable
Nigeria, poultry contributes about 15 than sole enterprises. Enterprise
percent of the total annual protein intake combination has been broadly defined by
with approximately 1.3kg of poultry Agboola (2004) as encompassing the
products consumed per head per annum. arrangements of crops, or the distribution of
The poultry industry has assumed greater plants and animals in time and space as
importance in improving employment dictated by some factors like ecological
opportunities and annual food production in situation, market forces, culture etc.
Nigeria (Ologbon et al.2012). An earlier However sustainable enterprise
report by Mbanasor (2002) showed that combination is the freedom to access and
about 10 percent of the Nigerian population combine on farm production factors and
is engaged in poultry production, mostly practices that are compliant with natural
subsistence and small or medium sized laws that lead to increased production of
farms. It is observed that apart from the crop and livestock products sufficient for
provision of direct employment and local and export markets. A sustainable
livelihood to thousands of people, the enterprise combination must ensure
laying birds industry provide remarkably increased food production, productivity and
high quality nutritious food especially income, while simultaneously protecting
animal protein in discrete convenient and the environment (Agboola, 2004). Creating
hand packets known as eggs. Meat and egg and increasing diversity plays a key role in
production has evolved as one of the most promoting resilience against unfavorable
efficient industries producing food. World and uncertain ecological and/or economic
chicken production was put at 8 billion per conditions. Therefore, greater emphasis
year and records further showed that each upon efficient utilization of the existing
person in USA consumes about 15kg of resources and combination of enterprises in
chicken meat and over 300 eggs per year an optimal manner in the Agricultural sector
(Ajibefun and Daramola, 2000). is paramount (Gunther et al., 2001). Many
Small holder farms are known for low level of the farm enterprises are associated with
of operations, illiteracy of operators and low incomes due to price fluctuations, poor
labor intensive production (Olatomide, utilization of scarce production resources
2010). Experience has shown that small and increasing land sub-division. To
farms out-yield large farms on calorie improve the low farm incomes, farmers
output per hectare and are therefore more have gradually diversified their farming
efficient (Olatomide, 2010). Even though activities by adopting other enterprises

168
 Awogboro, Yusuf and Yusuf

perceive to be high yielding with high targeted such as poultry. Theobjective of the
market value. Farm diversification at study wasto investigate the optimum
optimal level therefore remains one of the poultry enterprise combination among
best alternative strategies to alleviate small holder farmers in Osun State, Nigeria
poverty through increase and stable farm
income under conditions of resource Research methodology
constraints and price instability. Poultry Study area
farming in Nigeria is characterized by Osun-State is situated in the south western
mixed poultry farming. Several farmers part of Nigeria. The major sub- ethnic
diversify with the aim of reducing risk and groups in Osun-State are Ife, Ijesha, Oyo,
increasing profitability. The principles of Ibolo and Igbomina of the Yoruba tribe. The
enterprise combination in farm state comprises three agro-ecological zones
management is often confronted with the rain forest (Ife-Ijesha), derived savannah
problem of what enterprise should take up, (Oshogbo) and guinea savannah (Iwo)
how far should we go in combining the zones. Economically, the state is
enterprise with another or replacing an predominantly rural and agrarian in outlook
enterprise, depend partly on the with larger percentage of its people being
interrelationship between different farmers.The main hub of poultry production
enterprises and the price of products and in the country is located within the
inputs (Adejobi and Kormawa, 2003). It is a southwestern states of the country (Oyo,
known fact that a typical farmer anywhere Osun, Ogun and Lagos). Osun State was
in the world has limited level of resources. chosen for the study because of the special
He is faced with the problem of myriads of interest of the state Government as at the
choices for allocating farm resources time this study was conceived in poultry and
between the different enterprises so as to its products in her O'meal project which
optimize production objectives by making increased the demand for poultry and its
efficient utilization of the available products in the state.
resources and combining the enterprises in Data Collection and Sampling Technique
an optimal manner. Identifying the best The data for the study wereprimary data
farm plan is a difficult task for small scale collected from one hundred and seventy
farmers with low level of literacy nine (179) poultry farmers from five Local
(Ohajianya and Oguoma, 2009). In a Government Areas (Osogbo, Ede north, Ife
regional/ inter-regional frame work, linear central, Ifelodun and Atakumosa west). A
programming approach has been used for two-stage sampling technique was used to
studies in optimum resource allocation and collect data. The first stage involved a
resource requirement in many countries selection of five local government areas
(Onyenweaku, 1980; Alam, 1994; Alam et based on the population of poultry farmers,
al., 1995; Schipper et al., 1995 and Sama, size and availability of market for the
1997). Within Nigeria, application of linear poultry products. Osogbo, Atakumosa west,
programming models to farm enterprises in and Ife central are more densely populated
various states has also been reported (Osuji, than Ede-north and Ifelodun local
1978; Tanko, 2004; Igwe et al., government Areas. The second stage was
2013).However, the livestock component the random selection of thirty six (36)
particularly animals whose production poultry farmers from each local
cycles last within a year are yet to be fully Government who are engaged in broilers,

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 Optimum poultry enterprise combinations among small holder farmers

layers or cockerel or a combination of two the linear program matrix represents the
or three of the enterprises (i.e, broiler- profit maximizing poultry combination and
layers, broiler-cockerel or broiler-cockerel this solution can be tested for changes in
and layers). These poultry enterprises were resource availability under alternative
the major poultry enterprise from each local livestock combination. This same technique
government area. was utilized by Adesiyan et al. (2004) and
Method of data analysis Bamiro et al. (2012)
Descriptive statistics was used to describe Max Z = ÓPJX J = P1X1 + P2X2+…… +PNXN
the socio-economic characteristics of the J=1 i=1
respondents in the study area. These Where
characteristics include farming experience, Z= The objective function (gross margin)
age, level of education, marital status, PJ= price/unit of activity(contribution of Z
household size and motive for farming. for each unit of activity j for j = 1,2,…n)
Budgetary analyses was employed to XJ = level at which activity is to be
determine cost and returns to the produced/number of units of activity j,for j
combination categories on the farm using = 1,2,…n
gross margin analysis and net farm income Subject to;
analysis A11 X 1+ A12 X2+………….+ A1NXN ≤B1
Gross margin analysis A21 X1+ A22 X2+………….+ A2NXN ≤B2
GM = TR-TVC (i)
Where, A31 X1+ A32 X3+………….+ A3NXN ≤B3
GM = Gross margin (N); TR = Total AM1 X 1+ A M2X2+………….+ AMNXN ≤ BN
Revenue (N); TVC = Total variable cost (N) X 1 ,X 2 ,………….X N > 0 that is Non-
Net farm income analysis negativity restrictions
NFI=TR-TC (ii) Where; Z = The objective function (gross
Where, margin)
NFI = Net Income (N); TC = Total cost (N) m = Number of resources
Linear programming technique was n = Number of activities
employed to determine the optimum CJ = Net price/unit of activity (contribution
enterprise combinations among the poultry of Z for each unit of activity j for j = 1,2,…n)
farmers in the study area. The model was XJ = level at which activity is to be
used to obtain combination of enterprises produced/number of units of activity j,for j
that maximizes total gross margin (farm = 1,2,,…n
income) of an average poultry farmer in the BI = Amount or resources available for i =
study area subject to resource constraints. 1,2,…………..
Linear programming tools find easy AIJ = Amount of ith resource consumed by
application in optimization problem, where each unit of activity j.
the aim is to maximize or minimize a linear Subject to m constraints which can be
objective function subject to a set of linear express as follows:
constraints. For optimal poultry Activities in the model: the poultry
combination problem, the linear enterprise combinations are:
programming is considered appropriate X1 = sole layers
because the farmer is interested in a poultry X2 = sole broilers
enterprise combination that maximizes his X3 = sole cockerel,
or her gross margin. Thus, the solution of

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 Awogboro, Yusuf and Yusuf

X4 = layers/broilers broiler/cockerel only, 3.4% layers/cockerel

X5 =layers/cockerel only and 11.7% broiler/layers/cockerel.
X6= broilers/cockerel Resource constraint to the model
X7= layers/broilers/cockerel Three set of constraints / restriction were
The constraints were labour, capital and incorporated in the model. These are: Feed,
feed. labour and capital constraints.
Price coefficient “Pj” Linear programming model
M a x i m i z e Z =
The price coefficient “Pj” of a production
515938.17X1+142550.58X2+27492.500X3
activity in the model wasthe gross margin
+611577.385X4+283489.667X5 +39420X6
per production cycle of the jth activity.
+308447.1445X7
Input coefficients
T h e i n p u t c o e ff i c i e n t s w e r e t h e Subject to
requirements of a poultry activity in respect 6134.61X1+2106.26X2+228.50X3+4428.07
of the inputs of the different resources X4+3397.0X5 +414.40X6 +6046.67X7 KG
required per production cycle. The inputs (feed)
coefficients for all poultry activities were 1.478X1+1.25X2+1X3+1.67X4+1X5 +1X6
calculated on the basis of the actual +2.11X7 Man-days (labour)
quantities of different resources that were 682910.70X1+176134.2X2+34695X3+6167
used for those poultry activities. 85.3X4+354660X5 +1162.20X6
Capital +397151.2X7 N(capital)
Capital for the purpose of this study was
considered to be working capital required to Results and discussion
meet the day to day production expense. The results of descriptive analysis showed
These consist of veterinary services, that age influenced the capability to cope
transportation, and cost of stock e.t.c. with changes in farm operation, among
These were taken as a separate resource. others. Data revealed in Table 1 showed that
Feed 71.6 percent of the respondents were below
This was a constraint introduced into the the ages 50 years while 18.4 percent of the
model, this refers to the quantity of feed respondents were above 50 years. This
consumed by each poultry enterprise agrees with the findings of Bamiro et al.
combination in a production cycle and it (2013) that most poultry farmers are in their
was calculated in kilogram. productive years.The result also showed
Labor that poultry subsector was male dominated
Value of labor was gotten in naira per man- (70.4 percent) while 29.6 percent of the
day. That is, theamount paid for labor per respondents were female. This agrees with
day and the actual amount incurred on labor the findings of Ologbon et al. (2012) that
was then gotten by multiplying the amount majority of the poultry farmers are male.
paid per man-day by the number of days of This could be because femalesare more
production. involved in off farm activities such as
Activities in the model buying, selling and processing of farm
The poultry activities were seven poultry products, while their male counterpart are
enterprise combinations. 38.5%Broiler more involved in crop and livestock
only, 13.4% layers only, 4.5% cockerel production. Mean household size was
only, 25.7% broilers /layers only, 2.8% approximately 5 and almost 42 percent had

171
 Optimum poultry enterprise combinations among small holder farmers
a household size of less than 5, 54.7 percent since they had very high percentage of fixed
had household between 5 and 7 while about cost. The most flexible is broiler/cockerel
3.4 percent had household size above 7. production enterprise with the least
The result also showed that 62 percent of percentage of fixed cost. The result further
the respondents had higher education; 20.6 showed that cost of feed takes the lion share
percent had secondary school education, in all combinations. The result further
while only 3.9 percent had primary school revealed that the gross margin per
education. This is in consonance with the production cycle for sole layers, sole
findings of Ologbon et al. (2012), Bamiro broilers, and sole cockerel were ? 516,000,
et al. (2013) that majority of poultry ? 142,551, and ? 27,500, respectively.
farmers have higher education. Almost While the gross margin for layers/broilers,
about46.4 percent of the respondents were layers/cockerel, broiler/cockerel, and
farmers, 19.0 percent were artisan, 17.9 layers/broiler/cockerel were ? 611,600,
percent were traders, while 15.6 percent of ? 638,150, ? 39,420 and ? 308,450,
the respondents were civil servant/ paid respectively. The benefit cost ratio showed
worker. Furthermore, about 20.1 percent of for every ? 1 invested, ? 1.79 was realized
the respondents acquired their poultry farm on sole layers, ? 1.67 on sole broilers, ? 1.57
through inheritance, 35.2 percent obtained on sole cockerel, ? 1.92 on layers/broilers,
theirs through lease/ rent while 44.7 percent ? 1.71 on layers/cockerel ? 1.66 on
purchased their poultry farm. The table also broiler/cockerel and ? 1.64 on
indicated that majority (38.5 percentage) of layers/broilers/cockerel. Furthermore, the
the respondents wereinvolved in the Gross Ratio (GR) is expected to be less than
production of sole broilers, 25.7 percent one as any value greater than one means a
wereinvolved in the production of layers/ loss. Gross ratio for each of the enterprises
broilers, 13.4 percent wereinvolved in the were 0.56 for sole layer, 0.60 for sole
production of sole layers, 11.7 percent broiler, 0.62 for sole cockerel, 0.52 for
wereinvolved in the production of layers/ layers/broilers, 0.58 for layers/cockerel,
Cockerel/broilers,4.5 percent 0.60 for broiler/cockerel and
wereinvolved in the production of sole layers/broilers/cockerel. This implies that
cockerel, 3.4 percent of the respondents enterprise 4 is the most profitable while
wereinvolved in the production of enterprise 3 is the least profitable. The
layers/cockerel while 2.8 percent of the Operating Expense Ratio (OER) for each
respondent wereinvolved in the production enterprise shows that 54 percent of gross
of broilers/cockerel. revenue was used for operating expense by
Budgetary Analysis enterprise 1; 55 percent was used by
Costs and returns structure for each enterprise 2; 56 percent was used by
poultry enterprise enterprise 3; 50% was used by enterprise 4;
The cost-return structure of the poultry 55% was used by enterprise 5; 58 % was
firms in the study area was further used by enterprise 6; and 57% was used by
examined to ascertain the most profitable enterprise7. The Net Income Ratio (NIR)
enterprise and the results are presented in obtained indicates that 44 % of gross
Table 2. The result indicated that farmers revenue went into the equity of enterprise 1;
involved in sole layers production are about 40% went into enterprise 2; 36% went
likely to encounter problems in terms of the into enterprise3; 48% went into enterprise
ease of conversion into other combinations 4; 41% went into enterprise 5; about

172
 Awogboro, Yusuf and Yusuf

40%went into enterprise 6; and 39% went enterprise 4 is the most profitable while
into enterprise 7. These showed that enterprise 3 is the least.
Table 1: Distribution according to Socio-Economic characteristics of respondents
Variables Frequency Percentage
AGE
Below 30 46 25.7
31-40 65 36.3
41-50 35 19.6
51and above 33 18.4
SEX
Male 126 70.4
Female 53 29.6
RELIGION
Christianity 59 33
Islam 117 65.4
Traditional 3 1.7
MARITAL STATUS
Single 25 14.0
Married 139 77.1
Divorce 9 5.02
Separated 7 3.91
HOUSEHOLD SIZE
Below 5 75 41.9
5-7 98 54.7
8-10 3 1.7
Above 10 3 1.7
EDUCATION
No formal 18 10.1
Adult literacy 6 3.4
Primary 7 3.9
Secondary 37 20.6
Tertiary 111 62
MEANS OF FARM ACQUISITION
Purchase 36 20.1
Lease/rent 63 35.2
Inherited 80 44.7
PRIMARY OCCUPATION
Farming 28 46.4
Trading 32 17.9
Civil servant 83 15.6
Artisan 34 19.0
Others 2 1.1
POULTRY ENTERPRISES
Sole layers 24
Sole broiler 69
Sole Cockerel 8
Layers/Broilers 46
Layers/Cockerel 6
Broiler/Cockerel 5
Layers/ Cockerel/Broiler 21
Source field survey 2015
The cost-return structure results presented production wherein they concluded that
in Table 2 confirmed the findings feed cost is the major important single cost
ofBamiroet al. (2013) on livestock item associated with poultry

173
 Optimum poultry enterprise combinations among small holder farmers
production.However, all the indicators that poultry enterprise is still profitable in
employed in cost and return analysis show the study area.
Table 2: Return structure and profitability ratios of enterprise combinations inpoultry
among Small-holder farmers in Osun State
Variables Sole broilers Sole Layers/broil Layers/ Broiler/ layers/
cockerel er cockerel cockerel broilers/
cockerel
Cost of feed 101,754.5 24,325 332,285 281,960 35,840 288,017.9
Total fixed cost 14647.34 4975 19,777.81 19,320.83 3,880.02 32,248.41
Total variable cost 176,134.2 34,695 616,785.3 354,660 116,220 397,151.2
Total cost 190,781.53 396,70.00 636,563.09 373,980.83 433,899.60 429,399.6
Revenue from sales 318,684.78 450,975.61 146,000 100,000
of broiler
Revenue from sales 62,187.50 47,916.67 53,800
of cockerel
Revenue from sales 114,000 119111.11
of spent hen 187,434.15
Revenue from sales 589,952.91 476,233 478,592.779
of eggs
Total Revenue 318,684.78 62,187.5 1,228,362.67 638,149.67 199,800 710,098.34
Gross margin ( TR- 142,550.584 27,492.500 611,577.39 39,420 308,447.15
TVC) 283,489.67
Profit 127,903.24 22,517.50 591,799.58 264,168.84 79,699.99 276,198.74
Benefit cost Ratio 1.67 1.57 1.93 1.71 1.66 1.64
Operating expense 0.55 0.55 0.50 0.58 0.57
ratio 0.56
Net income ratio 0.40 0.36 0.48 0.41 0.40 0.39
Gross ratio 0.60 0.63 0.51 0.57 0.60 0.60
Source: field survey, 2015

Linear programming analysis of the as indicated by less than or equal sign ( ≤ ).

enterprise combinations The gross margin realized for the optimal
Table 3 presents the optimum farm plan for farm plan was ? 1,381,140 (programme
the seven identified enterprisesused by value). However, if each of programs X1, X2,
sampled farmers in the study X3, X5, X6and X7 were separately forced into
area.Enterprises X1, X2, X3, X5 and X6 did the optimum plan, the gross margin of the
not enter the final plan, since they have non- optimum plan would be reduced by
zero opportunity cost indicating that these ? 331,336, ? 148,353, ? 4066.49, ? 185683,
enterprises were not in the best competitive ? 17814.3 and ? 526589, respectively. The
positions as compared to enterprise X4.This opportunity cost of resources used in
result further corroborates the result of the poultry production in the area indicates that
gross margin analysis conducted for each feed is the only limiting resource unlike
enterprise and shows that the best/optimal labor and capital which are non-limiting.
enterprise combination which is capable of The shadow price of feed is ? 137.89
maximizing net farm income in poultry indicating that by increasing the quantity of
enterprise in the study area is layers/broiler feed available by 1 kg, the gross margin
enterprise. The optimal solution occurs would increase by ? 137.89.
with most of the resources not fully utilized

174
 Awogboro, Yusuf and Yusuf
Table 3:Sensitivity Analysisfor linear programming analysis
Variable Current COST Min COST Max COST Reduced Cost
X1 515938 -infinity 847274 331336
X2 142551 -infinity 290903 148353
X3 27492.5 -infinity 31559.0 4066.49
X4 611577 532773 +infinity 0
X5 638149.67 -infinity 469172 185683
X6 39420 -infinity 57234.3 17814.3
X7 308447 -infinity 835036 526589
Constraint Current RHS Min RHS Max RHS Dual Price
Feed 10000 0 15177.5 137.888
Labor 13 3.77139 +infinity 0
Capital 2117500 1395160 +infinity 0
Source: Field survey 2015

Conclusion Adejobi, A. O., kormawa, P. M.,

The study has shown that all the seven Manyong, V. M., and Olayemi, J.
identified poultry enterprise combination; K. 2003. Optimal crop
sole layers, sole broilers, sole cockerel, combinations under limited
layers/ broiler, layers/ cockerel, broiler/ resource conditions: Application of
cockerel, layer/broiler/cockerel in the linear Goal programming (LGP)
study area were profitable, but farm income Model to Smallholder farmers in
can be maximized if the farmer the Drier savanna zone in Nigeria.
concentrated on one of the enterprise Deutscher tropentog Gottingen
layers/ broiler. However the profitability of technological and institutional
poultry enterprises is limited by high cost of Innovations for sustainable Rural
production in which the feed cost Development, October 8-10
constitutes the lion's share. The study Afolabi, O. I., Adegbite, D. A. Ashaolu, O.
further revealed that farmers in the study F. and Akinbode, S. O. 2013.
area were not operating at optimal level Profitability and Resource-use
based on the available resources. These efficiency in poultry egg farming in
resources were not efficiently allocated in Ogun State., Nigeria. African
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