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An Analysis of Profitability and Resource Use Efficiency of Poultry Feed Mills in Bangladesh

M. A. Haque
Assosiate Professore
Economics division, Bangladesh Agricultural University and University of Tsukuba, Graduate School of Life and Environmental Sciences, Japan

T. Ahamed
Associate Professor
Tsukuba University, Japan

M. Akteruzzaman
Professor
Department of Agricultural Economics, Bangladesh Agricultural University, Mymensingh

A. Hashem
Professor
Department of Animal Science, Bangladesh Agricultural University, Mymensingh

S. Haque
Department of Animal Science, Bangladesh Agricultural University, Mymensingh

S. Akter
Department of Animal Science, Bangladesh Agricultural University, Mymensingh

M. M. Islam
Department of Animal Science, Bangladesh Agricultural University, Mymensingh

M. S. Alamgir
Department of Animal Science, Bangladesh Agricultural University, Mymensingh

M. M. Islam
Department of Animal Science, Bangladesh Agricultural University, Mymensingh

Abstract/ Executive Summary:

The study aimed at examining the profitability and resource use efficiency analysis of poultry feed mills of Bangladesh covering Dhaka, Gazipur, Narsingdi, Kishoreganj and Mymensingh district. To fulfill the objectives the study, 30 feed mills which categorized as; high, medium and low quality on the basis of feed conversion ratio (FCR) were purposively selected. The primary data were collected from March 2013 to March 2014 by using survey schedule and KII. In addition, the secondary data were collected from different government documents. The resource use efficiency in poultry feeds production along with factors affecting. The study also makes substantial contribution in quantitative analysis of poultry feeds in the framework of multiple regression models like Cobb-Douglas production analysis for different feed mills. Four out of six variables included in the model were significant in explaining the variation in high, medium and low-quality poultry feed production. The feed production cost was estimated Tk. 39295, Tk. 38643 and Tk. 37218 per metric tonne (MT) respectively for high, medium and low-quality feed mills. The cost of high-quality feed mills was more than medium and low-quality feed and the gross return was Tk. 43160, Tk. 42330 and Tk. 40500 per MT respectively for high, medium and low quality studied feed mills. The gross margin was Tk. 6486; Tk. 5957and Tk. 5285 per MT and net return were Tk. 3865, Tk. 3687and Tk. 3279per MT respectively. It indicates that gross return, gross margin and net return of high-quality feed mill was more than the medium and low-quality feed mill. Six variables were included in the Cobb-Douglas model and the results indicated that if the supply of quality of raw materials increased in low and medium quality feed mills, their efficiency would increase. It was also found that the four variables out of six, the ratio of MVP and MFC were less than one which indicated that the resources were over-utilized for high and three input out of six underutilized for medium and low-quality feed mill that means there opportunities to increased other variables for increasing output. In cases of high-quality feed millers, efficiency would increase if they are owner-operators. Feed is an important factor for poultry farming but applying high-quality feed indicates the direction of intensive farming, for which input improved is necessary because the study found that the ratio of MVP and MFC of all the inputs were not one. These inequalities indicate that the farmers in the study areas have failed to show their efficiency in using all the resources. As a concluding observation, it may be suggested that poultry have scope to attain full efficiency by reallocating the resources. Policymakers should fund the research of poultry feed production cost.

Keywords: Bangladesh, Poultry Feed Mills, Livestock, Raw Materials, Profit

Location: Dhaka, Gazipur, Narsingdi, Kishoreganj and Mymensingh districts, Bangladesh

Start Date: 00-03-2013

End Date: 00-03-2014

Program Area: Food Safety and Security

Commodity: Poultry, Feed

Objectives:

The specific objectives are to determine the profitability of different quality poultry feed mills and their resource use efficiency analysis.

Methodology:

The study was mainly based on field surveys in addition of some secondary information. Purposive sampling technique was used in selected 30 feed mills. It was categorized by high, medium and low-quality feed mill on the basis of feed conversion ratio (FCR). One more important part of research work is sample selection. In a complete enumeration, the essential information is collected from different stakeholders’. The field work conducted with feed miller, dealer, different sizes of poultry farm owners and farmers. 30 feed mills were selected on the basis of quality (FCR) from Dhaka, Gazipur, Narsingdi, Kishoreganj and Mymensingh districts. FCR categorized on the basis of collected from firms level data from feed performance. Table 1 shows that a multi-stage stratified sampling was adopted in this study. The selected 30 feed mills categorized on the basis of feed conversion ratio (FCR) that is high-quality feed mills (FCR; below 1.5 to 1.6), medium quality feed mills (FCR: 1.6 up to 1.7) and low-quality feed mills (FCR: 1.7 up). The selected commercial farms were categorized by flock size small scale: < 1000 birds, medium scale: 1001-2000 birds and large scale: above 2000 birds. In conformity with the objectives of the study, a structured questionnaire developed for collecting relevant primary data from the poultry feed miller and farmers. The present study covered approximately from March –December 2013 to July-December 2014 study period and data analyzed with a combination of tabular and statistical techniques. For analyzing the data, descriptive statistics such as sum, average, ratio, percentages, etc. was derived and calculated to present the results. In this study, profit was calculated by deducting total costs from total returns. The following equation was used to assess the profitability of poultry feed production. The profitability of feed production was derived in terms of gross return, gross margin, net return and benefit cost ratio (undiscounted) of different enterprises. Gross margin Gross margin calculated by the difference between gross return and total variable costs. That is, GM= GR- TVC Where, GM= Gross margin; GR= Gross return and TVC = Total variable cost. Net return Net return analysis considered fixed costs i.e., cost of land rent, interest on operating capital, etc. Net return calculated by deducting all costs (variable and fixed) from the gross return. Specifications of the model: To explore the effects of variable inputs, both linear and Cobb-Douglas production function were estimated initially. The result of the Cobb-Douglas production appeared to be superior on theoretical and econometric grounds. So the CobbDouglas production was chosen under ordinary least squares (OLS) methods. The coefficients understand this specification for production elasticity and if all the related to the production are taken into account as the independent variables, the sum of the output increasing constant or decreasing returns to scale. Alene, 2002 and Anene, et al., 2010) used Cobb Douglas production function to measure resource use efficiency. In this model, the factor inputs donated from X₁ to X6 representing; the implicit form of the model is as follows equation 1. Y = f (X₁, X₂, X₃, X₄, X₅, X₆, V_i-U_i) ……………………….. (1) Where, Y = Value of output; X₁= Cost of ingredients; X₂= Cost of additives X₃= Cost of machineries X4= Cost of human labour 10 X₅= Operational cost X₆ = Cost of electricity V_i= Symmetric disturbance term accounting for random shocks and other statistical noise. U_i = Non-negative random errors depicting inefficiency in production Among other fitted functional forms, the double log form was chosen based on goodness of fit depending on the highest value of adjusted R² and t-value. The form is presented below (equation 2): lnY = lnβ + β₁lnX1 + β₂InX₂ + β₃lnX₃ + β₄lnX₄ + β₅lnX₅ + β₆lnX₆ + βnlnXn + V_i-U_i …(2) Where, ln = Natural logarithm β= constant Y, X₁, X₂ … X₆, and V_i-U_i is as defined in equation (1).

Source of Information: International Association of Agricultural Economists, July-28 to August 2, 2018, VANCOUVER

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Achievement/Findings:

It could be concluded that the high-quality poultry feed production cost was higher than medium and low-quality feed production cost. Also, gross return, gross margin and net returns of high-quality feed mills were higher than medium and low-quality feed mills. The findings of the paper if low and medium-quality feed mills can increase ingredients and additives supply, then their efficiency will increase. In cases of high-quality feed mills, efficiency will increase if they are owner-operators. Feed is an important factor for poultry farming but applying high-quality feed indicates the direction of intensive farming, for which input improved is necessary because the study found that the ratio of MVP and MFC of all the inputs were not one. These inequalities indicate that the farmers in the study areas have failed to show their efficiency in using all the resources. As a concluding observation, it may be suggested that poultry feed mills have scope to attain full efficiency by reallocating the resources.

Knowledge Management: Journal