Contract farming ensures growers’ profitability

Contract broiler farming for growing broilerchicken helps marginal farmers to reduce the cost of production, benefiting both growers and consumers.

Industry insiders say many small farmers are now becoming contract farmers supported by large poultry companies and are growing broiler chickens in a cost-effective manner. By becoming contract farmers, they avoid the risk of loss in the event of disease outbreak or an unexpected fall in broiler chicken price.

In more developed countries, including the US, Brazil, China, Thailand, and Indonesia, poultry companies outsource the growing of broiler chicken to independently owned small farmers. This system is now becoming common in Bangladesh, as farmers prefer to do business with companies directly instead of buying day-old chicks and feed through dealers (middlemen).

Companies engaged in contract farming enlist farmers who own broiler growing sheds and equipment. The companies provide the contract farmers with day-old chicks, feed and medicine. The writers of this report interviewed contract farmers of Kazi Farms. They receive chicks, feed, and vaccines free of cost from Kazi Farms, and earn a variable growing charge, which rewards them for higher productivity. Company officers monitor the broilers throughout the 35-day production cycle to help the contract farmers prevent diseases.

Independent marginal farmers sometimes face losses and are forced to shut down their farms after exhausting their capital. This is one reason why the production of broiler chicken sometimes falls and why the price sometimes increases. Contract farming is preferred by farmers as it does not require them to risk their limited capital.

Zahirul Islam (35), a farmer in Golda Para village in Sreepur, Gazipur, started contract farming about two years ago after making a loss of Tk 80,000 while doing poultry business with credit from a local dealer of chicks and feed. “Now, I rear around 1,000 birds and earn profit (growing charge) amounting to Tk 20,000 to Tk 40,000 in each production cycle,” he said. He mentioned that some independent farmers sold broiler chicken for Tk 136 per kilogramme in early March and incurred losses, but he was safe because his company paid him a growing charge even though the broiler price was low. “I have 1,100 broiler chickens now, which will be ready for selling during the Eid holiday. Many farmers are expecting to sell their chickens during Eid and expect to make a windfall profit, whereas my company will have to sell broilers at the maximum price of Tk 168 per kg ,which has been fixed by the authorities,” he told this author on 21 March.

Another contract grower of the same area, Mohammad Sumon (32), lamented that he lost a total amount of Tk 250,000 when he was growing broilers with inputs provided by a dealer. “At one stage, I had to work at a garment factory to support my family. I later joined with Kazi Farms under contract farming. Now, I draw Tk 30-40 thousand as profit for each batch and the money goes to my bank account without any hassle,” he added.

Bazlul Karim (62), a former expatriate worker of Dubail in Gafargaon, Mymensingh, said he failed in layer farming. “Currently, I am rearing broiler chickens under contract farming, and I get around 40,000 as profit in each cycle. I don’t need more profit; there is a risk of losing capital if I do it on my own,” he added.

Poultry expert Sumon Ali, who provides support to contract farmers, pointed out that inexperienced and ignorant farmers often make losses. After buying inputs from dealers, they often sell broilers at a low price. “Contract farming ensures guaranteed profit and also rewards  farmers who can grow heavier broiler chicken with less feed.”

Director of Kazi Farms Kazi Zahin Hasan argues that contract broiler farming benefits marginal farmers. “Independent farmers are not actually independent, they are always in debt to dealers who sell them feed and chicks. Sometimes, farmers lose their capital because of disease outbreaks or when the broiler price is low. However, our contract farmers do not lose their capital in case of disease outbreaks. Some chickens die of disease, but our contract farmers are still paid a growing charge for the chickens which survived. If the broiler price is low, Kazi Farms might make a loss, but we still pay our contract growers the growing charge. Our contract farmers are satisfied. If they are not satisfied, they are free to become independent once the broilers are sold,” he said.