Contract farming catching on fast

Andhra Pradesh poultry story: While feed prices rise, contract farming gains ground

The poultry sector in Andhra Pradesh has undergone a silent but significant transformation during the last six years.

Small farmers have more or less been wiped out of the layers (egg-laying) segment and the 5,000 big farmers of broiler poultry units (for consumption) have taken to contract farming for big hatchery companies. Almost all the major hatcheries in the state now operate through the contract farming route.

As per the contract farming agreement with the poultry farmers, the hatcheries provide chicks, feed, medicines, expertise and guidance to the farmers.

The farmers, on behalf of the companies, will look after the chicks and rear them in their poultry sheds, while the consequences of price fluctuations and market vagaries are borne by the companies.

The farmers on their part meet the labour expenses, electricity bills and husk cost. The companies pick up the birds after 6-8 weeks, and pay about Rs 2.50-3.50 per kg to the farmer.

The firms will take into account the farmer's performance while fixing the remuneration. Later, the farmers will be supplied fresh batches of chicks. If the companies get better prices over and above Rs 30 per kg, they may pay some incentives also to the farmers.

The contract farming in poultry was first introduced in and around Coimbatore, Tamil Nadu, by Suguna Hatcheries, a leading firm in that state. The company is known for its 'Ross' brand of chicks. From there, the contract farming spread to Chittoor district in Andhra Pradesh.

Almost all the poultry units in Chittoor now function under this new system. A majority of poultry farmers in Hyderabad, Medak, East and West Godavari districts have also opted for contract farming.

But this trend isn't in vogue in Visakhapatnam district, where the farmers still run and manage almost all the broiler units. In Krishna, Guntur, Prakasam and Nellore districts also the farmers' self-managed broiler units outnumber contract farming units.

After Suguna Group had achieved unprecedented success in developing contract farming, other mega hatcheries such as Venkateswara Hatcheries, VSN Hatcheries, Crystal Hatcheries, Pioneer Hatcheries, Diamond Hatcheries, Sneha Hatcheries and other companies have also adopted the system and contract farming in the poultry sector is a big success now.

As to the layers segment, small farmers could not bear cost escalation during the transition of the industry from cottage industry stage to large-scale commercialisation of the sector.

When the old deep-litter system, involving laborious manual work in cleaning and keeping the bird sheds hygienic and infection-free, was in vogue, families of small farmers used to earn reasonable incomes from this allied segment of agriculture.

As part of modernising the sector, the cage system, which requires massive investments and keeping a minimum of 50,000 birds in one unit, bulldozed out the deep-litter system.

The cage system ensured production of clean and fresh eggs, and hygienic conditions of poultry sheds with the help of moving automatic platform system. Only big farmers, who had adequate resources, shifted to the cage system.

The small farmers reconciled themselves to setting up very small broiler units with meagre capital. Here again, they now face escalation of feed cost. Traditionally, some years ago small and marginal farmers all over the country contributed to 90 per cent of production in the Rs 10,000-crore poultry industry.

Industry sources said that contact farming is a logical sequence in the poultry sector as 90 per cent of the domestic production is consumed within the country. The sector now aims at increasing the poultry exports to Rs 1,000 crore.