TABLE
OF CONTENTS
Title Page
i
Certification
ii
Dedication iii
Acknowledgement
iv
Table of Content
v
List of Tables
viii
Abstract
x
Chapter One: INTRODUCTION
1.1 Background Information
1
1.2 Problem Statement
6
1.3 Objectives of the Study
9
1.4 Hypotheses of the Study
9
1.5 Significance of the Study
10
Chapter Two: LITERATURE REVIEW
2.1 Theoretical/Conceptual
Framework 11
2.1.1. Agricultural Resource Use Productivity 11
2.1.2 Productivity Measurement
12
2.1.3 Determinants of Agricultural Productivity 13
2.2 Types and Measures of
Efficiency 14
2.2.1 Technical Efficiency
14
2.2.2 Allocative or pricing efficiency
15
2.2.3 Economic efficiency
15
2.3 Poultry Production 17
2.4 Evidence of Resource Productivity
Studies
20
2.5 Evidence of Relative Efficiency
Studies
22
2.6 Analytical Framework
25
2.6.1 The Profit Function Technique
25
2.6.2 Derivation of profit function from the
production function 26
2.6.3 Normalized profit function
27
2.6.4 Additive Mutiplicative Dummy Variable
Approach 28
2.6.5 Allocative Efficiency Indices
29
CHAPTER THREE: METHODOLOGY
3.1 The Study Area
31
3.2 Sampling Technique
31
3.3 Data Collection
32
3.4 Data Analysis 32
3.4.1 Model Specifications
33
CHAPTER FOUR: FINDINGS AND DISCUSSIONS
4.1 Average Characteristics of Brooding and
Rearing Farmers 38
4.2 Costs and Returns Analysis
39
4.2.1 Costs and returns of broiler brooding and
rearing enterprises 39
4.2.2 Costs and returns of average large-scale
and small-scale brooding enterprise 40
4.2.3 Costs and returns of average
small-scale and large-scale rearing enterprise 41
4.2.4 Costs and returns of average
small-scale and brooding enterprise and small-scale rearing enterprise 43
4.2.5 Costs and returns of average
large-scale brooding and large-scale rearing enterprises 44
4.3 Technical Efficiency
45
4.3.1 Technical efficiency of brooding and
rearing groups 47
4.3.2 Technical efficiency of large-scale and
small-scale rearing enterprise 49
4.3.3. Technical efficiency of
large-scale and small-scale brooding enterprise
50
4.4 Allocative Efficiency
50
4.4.1 Allocative efficiency of brooding and rearing
enterprises 50
4.4.2 Allocative efficiency of large-scale and
small-scale brooding enterprise
54
4.4.3 Allocative efficiency of
large-scale and small-scale rearing enterprise
58
4.4.4 Economic Efficiency
61
4.5.1 Economic efficiency of brooding
enterprise 61
4.5.2 Economic efficiency of rearing
enterprise 63
4.6 Returns to Scale
65
4.6.1 Elasticity of production for brooding
and rearing enterprises 65
4.6.2 Elasticity of production of
small-scale and large-scale brooding enterprise 66
4.6.3 Elasticity of production for
small-scale and large-scale rearing enterprise
67
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION
5.1 Summary
68
5.2 Conclusion
71
5.3 Recommendation s
71
5.4 Areas Needing Further Research
72
References 73
Appendices
83
LIST OF TABLES
Table Page
4.1: Average Characteristics of Broiler
Brooding and Rearing Farmers 39
4.2 Costs and returns of Broiler Brooding
Rearing Enterprises 40
4.3: Cost and Returns of Small-scale and
Large-scale Brooding Enterprise 41
4.4:
Cost and Returns of Small-scale and large-scale Rearing Enterprise 42
4.5: Cost and Returns of small-scale Brooding
and Small-scale rearing Enterprises
43
4.6: Costs and Returns of large-scale Brooding
and Large-scale Rearing
44
4.7: Estimated Pooled Production Function for
Brooding and Rearing Enterprise
46
4.8: Estimated
Production Function for Large-scale and Small-scale Rearing Enterprise
48
4.9: Estimated Production Function for
Large-scale and Small-scale Brooding Enterprise 50
4.10: Estimated Production Function for Brooding
Enterprises 51
4.11: Estimated Production Function for Rearing
Enterprise 52
4.12: Allocative Efficiency Indices for the
Brooding and Rearing Enterprises
54
4.13: Estimated Production Function for Large-scale
Brooding Enterprise 55
4.14: Estimated Production Function for Small-scale
Brooding Enterprise 56
4.15: Allocative Efficiency Indices for large-scale
and Small-scale Brooding Farmers
57
4.16: Estimated Production Function for Large-Scale
Rearing Enterprise 58
4.17: Estimated Production Function for Small-scale
Rearing Enterprise
59
4.18: Allocative Efficiency Indices of Large-scale
and Small-scale Rearing Farms 60
4.19: Estimated Zellner’s Seemingly Unrelated
Regression of Systems of Normalized Restricted Profit Function and Factor Share
Equations for Brooding enterprise 62
4.20: Statistical Test of Hypothesis on Economic
Efficiency in Brooding and between Lager-scale and Small-scale 63
4.21: Estimated Zellner’s seemingly unrelated
regression (SUR) of systems of normalized restricted profit function and factor
share equations for rearing enterprise 64
4.22: Statistical Test of Hypothesis on economic
efficiency in Rearing and Between Lager-scale and Small-scale 65
4.23: Elasticity of Production for Brooding and
Rearing Enterprises 66
4.24: Elasticity of Production for Small-scale and
Large-scale Brooding Enterprise 67
4.25:
Elasticities of Production of Large-scale and Small-scale Rearing Farmer
Groups 67
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:
four weeks brooded
(brood and sale);
seven to 12 weeks
reared (mature types); and
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:
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;
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;
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
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.