Poultry Broiler Farming

1. Introduction Poultry meat is an important source of high quality proteins, minerals and vitamins to balance the human diet. Specially developed varieties of chicken (broilers) are now available with the traits of quick growth and high feed conversion efficiency. Depending on the farm size, broiler farming can be a main source of family income or can provide subsidiary income and gainful employment to farmers throughout the year. Poultry manure is of high fertilizer value which can be used for increasing yield of all crops. The advantages of broiler farming are

Initial investment is a little lower than layer farming. Rearing period is 5-6 weeks only More number of flocks can be taken in the same shed. Broilers have high feed conversion efficiency i.e. the amount of feed required for unit body weight gain is lower in comparison to other livestock. Faster return from the investment Demand for poultry meat is more compared to sheep/goat meat

2. Scope for broiler farming and its national importance India has made considerable progress in broiler production in the last three decades. The broiler production has sky rocketed at an annual growth rate of about 10% and stands at about 2.3 million metric tons of chicken meat (FAO 2005). The population of broiler poultry as per 2004-05 census is 199.73 million. Today India is the fifth largest producer of broiler meat in the world. Despite this achievement the annual per capita consumption in India is only 1600 grams of poultry meat as against the world average of 5.9 kg of meat.

Recommended per capita consumption of chicken meat by National Institute of Nutrition is 11 Kg. Owing to the considerable growth in broiler industry, high quality chicks, equipment, vaccines and medicines, technically and professionally competent guidance are available to the farmers. The management practices have improved and disease and mortality incidences are reduced to a great extent. Many institutions are providing training to entrepreneurs. Increasing assistance from the Central/ State governments and poultry corporations is being given to create infrastructure facilities so that new entrepreneurs are attracted to take up this business. Broiler farming has been given considerable importance in the national policy and has a good scope for further development in the years to come. 3. Integration in Broiler Farming: There is a growing trend of integration in broiler farming. In the early nineties, contract farming for broilers was introduced and in 1995 it spread all over Tamilnadu. Between 1995 and 2000, it spread to Karnataka. It gathered momentum and spread its wings to Maharashtra, Andhra Pradesh in the years 2001 & 2002 and after that, it gained inroads into West Bengal and Gujarat. The spread is due to built in strengths in integration system. Integrators will take care of all aspects of production, right from raising of grandparent and parent flocks, production of day old chicks for rearing, manufacturing and supply of concentrate feed, providing veterinary services and wholesale marketing of birds. Under integration all the previous profit centres of the broiler industry viz. chick selling, feed selling, hatching, medicine supply, transportation have become cost centres for the integrators who work as a single entity and distribute the benefits among the farmer, consumer and the integration company themselves. Under contract farming, poultry farmers invest only for poultry sheds / equipment on their existing land. The Integrator supplies chicks, feed, medicines, provides technical guidance and takes entire production after 5-6 weeks. The contract farmers are paid growing charges as per agreed rates. This has eliminated the middlemen. Farmer is benefiting from the lesser investment and production cost and also higher productivity which is achieved as a result of integration. However, the farmer may be at a disadvantage if the number of batches supplied in the year by the integrator is less. 4. Financial assistance available from Banks/NABARD for broiler farming For poultry farming schemes with very large outlays detailed project reports are required to be prepared. The items of finance would include construction of broiler sheds and purchase

of equipment, cost of one day old chicks, feed, medicine and labour cost for the first cycle. Cost towards land development, fencing, water and electricity, essential servants quarters, godowns, transport vehicles, broiler dressing, processing and cold storage facilities can also be considered for providing loan. Cost of land is usually not considered for loan. 5. Scheme formulation for bank loan 5.1 A scheme can be prepared by the promoter after consulting local technical persons of State Veterinary / Animal Husbandry department, Poultry Corporation or private commercial broiler hatcheries. If possible, they should also visit the progressive broiler farmers in the area and discuss the profitability of farming. A good practical training and experience on a broiler farm will be highly desirable, before starting a broiler farm. As broilers have to be sold within 35 to 40 days of age, regular and constant demand for broiler meat and nearness of the farm to the market should be ensured. 5.2 The scheme should include information on land, water and electricity facility, marketing aspects, training facilities, expertise of entrepreneurs and the type of assistance available from State government, Poultry Corporations, local hatcheries. It will also include data on proposed capacity of the farm, total cost of the project, margin money to be provided by beneficiary and requirement of bank loan, estimated annual expenditure, income and profit and the repayment of loan and interest. A format developed for project report preparation for a commercial broiler farm is given in Annexure -I 6. Appraisal of the project The bank officers can also assist in preparation of the scheme or filling in the prescribed application form. The scheme so formulated should be submitted to the nearest branch of the bank. The bank will then examine the scheme for technical feasibility and economic viability. A. Technical feasibility - this would briefly include: (a) Suitability of climate and potentiality of the area (b) Technical norms including schedule for replacement of flocks (c) Infrastructure and other facilities available for supply of inputs, veterinary aid, marketing etc., and training/experience of the beneficiary B. Financial viability - this would briefly include: (a) Unit cost and loan requirement (b) Input cost for chicks, feed, veterinary aid, labour and other overheads (c) Output cost i.e. sale of broilers, manure and other miscellaneous items. (d) Calculation of annual gross surplus (income-expenditure) (e) Cash flow analysis (f) Repayment schedule i.e. repayment of principal loan amount and interest Other documents such as loan application form, security aspects, margin money requirements etc. are also examined. A field visit to scheme area is undertaken for conducting techno economic feasibility study for appraisal of the scheme. 7. Sanction of Bank loan and its disbursement After ensuring technical feasibility and financial viability, the scheme is sanctioned by the bank. The loan is disbursed in kind in 2 or 3 stages, against the creation of specific assets, construction of sheds, purchase of equipment and machinery, recurring cost on purchase of

chicks, feeds, medicines, etc. The end use of the loan is verified and constant follow up is done by the bank. 8. Lending terms - General: 8.1 Outlay : Outlay of the project depends on the local conditions, unit size and the components included in the project. Prevailing market prices may be considered to arrive at the outlay. 8.2 Margin Money : Margin depends on the category of the borrowers and range from 5 to 25%. 8.3 Interest Rate: Banks are free to decide the interest rates within overall RBI guidelines. However, for working out financial viability and bankability of model project, we have assumed rate of interest as 12% p.a. 8.4 Security: Security will be as per NABARD / RBI guidelines issued from time to time. 8.5 Repayment of loan : The loan repayment is determined, on the basis of gross surplus generated in the scheme. Usually the repayment period of loan for broiler farming is 6 to 8 years. 8.6 Insurance : The birds and other assets (poultry shed, equipment) may be insured. Wherever necessary Risk/Mortality fund may be considered in lieu of poultry insurance. Annexure I Format for preparation of Project report Poultry - Commercial Broiler Farm

1. GENERAL i) Nature and objectives of the proposed scheme ii) Details of proposed investments iii) Specification of the project area iv) Name of the financing bank branch v) Status of beneficiary: (Individual)/Partnership/ Company/Corporation/ Co-operative Society/Others vi) Borrowers profile (a) Capability (b) Experience (c) Financial soundness (d) Technical/Other special qualifications (e) Technical/Managerial Staff and adequacy thereof 2. TECHNICAL ASPECTS: a) Location, Land and Land Development: i) Location details of the project ii) Total area of land and it's cost iii) Site map iv) Particulars of land development, fencing, gates etc.

b) Civil Structures: Detailed cost estimates along with measurements of various civil structures - Broiler Sheds - Store room - Dressing room - Office room - Quarters for staff - Others c) Equipment/Plant and machinery: (i) Feeders (ii) Waterers (iii) Generator (iv) Feed grinder and mixer (v) Debeaker (vi) Vaccinator (vii) Fridge/Deep Freezer (viii) Dressing equipment if necessary (ix) Truck/van/jeep (Price quotations for the above equipment) d) Housing: i) Type of housing - Deep Litter/Slat/Environment controlled) ii) Area required (sft./bird) e) Birds: i) Proposed strain ii) No. of birds to be purchased iii) Source of purchase iv) Cost of birds (Rs. per bird) v) Vaccination of purchased birds vi) Proposed programme of replacement f) Production parameters: i) Average body weight (kg.) ii) Feed efficiency (kg. of feed/ kg body weight gain) iii) Mortality (%) g) Flock Projection Chart: h) Feeding: i) Source of availability - Purchased or own feed manufacturing ii) If purchased a) Place of purchase b) Brand c) Cost (Rs./kg) - Starter - Finisher iii) If manufactured on farm a) Capacity of feed grinder and mixer b) Source of raw materials

c) Feed formula d) Cost of production (Rs./kg) - Starter - Finisher iv) Requirement (kg/bird) - Starter - Finisher i) Veterinary aid i) Source ii) Location iii) Distance (km.) iv) Availability of labour and other staff v) Type of facilities available vi) If own arrangements are made a) Employed a veterinary doctor/stock man /consultant b) Periodicity of visit c) Amount paid (Rs.) vii) Expenditure per bird per cycle (Rs.) j) Electricity i) Source SEB / Other ii) Approval from electricity board iii) Connected load iv) Problems of power failure v) Arrangements for generator k) Water i) Source ii) Quality of water iii) Availability of sufficient quantity for drinking and cleaning iv) If investment has to be made, type of structure, design and cost l) Marketing of broilers i) Source of sale ii) Place of disposal iii) Distance (km) iv) Basis of payment (number or weight) v) Price realised - (Rs. per kg live weight or live bird) vi) Periodicity of payment m) Marketing of other products i) Manure - Qty./bird, price per unit (Rs./Q) ii) Empty gunny bags - Number and cost/bag n) Beneficiary's experience o) Comments on technical feasibility p) Government restrictions, if any

3. FINANCIAL ASPECTS :

i) Project Cost

Sr. No.

Item Capital Costs

Physical Unit and Specification

Cost (Rs.)

Total Capital Costs(A) Recurring Costs

Total Recurring Costs (B) Total Project Cost (A+B)

ii) Down payment/margin/subsidy (Indicate source & extent of subsidy) iii) Financial viability ( comment on the cash flow projection on a farm model / unit and enclose the same ) Particulars : a) Internal Rate of Return (IRR): b) Benefit Cost Ratio (BCR) : c) Net Present Worth (NPW) : iv) Financial position of the borrowers (to be furnished in case of corporate bodies/partnership firms) a) Profitability ratio i) Gross Profit ratio ii) Net Profit ratio b) Debt equity ratio c)Whether Income tax & other tax obligations are paid upto date d) Whether audit is upto date (enclose copies of audited financial statements for the last three years) v) Lending Terms : a) Rate of interest b) Grace period c) Repayment period d) Nature of Security e) Availability of Government guarantee wherever necessary 4. INFRASTRUCTURE FACILITIES: a) Availability of technical staff with bank/implementing authority for monitoring b) Details of i) technical guidance ii) training facilities iii) Government support/ extension support c) Tie-up arrangements with marketing agencies for loan recovery : d) Insurance : Type of policy, Periodicity, Rate of premium

Annexure II ECONOMICS OF A COMMERCIAL BROILER UNIT

A. Project Cost

Capital Cost Construction of shed Cost of equipment Total Recurring Expenditure Cost of day old chicks Cost of feed Medicines, labour, miscellaneous charges Insurance of birds Insurance of sheds and equipment Total Grand Total (A+B) or say Margin (15%) Bank Loan

120000 16000 136000 21000 57222 8670 525 687 88104 224104 224000 33600 190400

B. Techno Economic parameters

Number of birds Batch strength Birds purchased per batch Birds considered for recurring expenditure Birds considered for selling Floor space per bird ( s.ft) Cost of construction of shed (Rs. per sft) Cost of equipment (Rs. per bird) Cost of day old chick (Rs. per bird) Feed requirement per bird ( Kg) Cost of feed (average price Rs. per kg) Medicines, vaccines, labour and misc. charges Insurance per bird (Rs. per bird)

1000 1000 1050 1020 1000 1 120 16 20 3.3 17 8.50 0.50

Insurance of sheds and equipment (Rs. per Rs.1,000/-) Live weight of bird (Kg per bird) Sale price (Rs. per kg) Value of manure per bird sold (Rs. per bird) Sale price of gunny bags (Rs. per bag) Margin (%) Interest on bank loan (% p.a) Rearing period Cleaning period of shed Flock Chart 1 Years No. of batches Rearing weeks Batches sold 7 40 6 7 42 7 2-8

5.05 1.6 60 0.50 10 15 12 6 weeks 2 weeks

C. Income and Expenditure Statement

Years 1 2-7 Income Sale of birds 576000 672000 672000 Sale of manure 3000 3500 3500 Sale of gunny bags 2992 3142 3142 Total 581992 678642 678642 Expenditure Cost of chicks 147000 147000 147000 Cost of feed 381480 400554 400554 Cost of medicines & misc. 57800 60690 60690 charges Insurance of birds 3675 3675 3675 Insurance of sheds and 687 687 687 equipment Total 590642 612606 612606 Surplus 79454* 66036 66036 * Capitalised recurring expenditure excluded while arriving at the surplus

D. Calculation of NPV, BCR & IRR

Years Capital Cost

1 136000

2-7

Recurring Cost Total Costs Income Residual value of shed Total Benefit Net Benefit Disc cost at 15% DF Disc benefit at 15% DF NPW at 15% DF BC Ratio IRR

590642 726642 581992 581992 -144650 2848122 2984778 136656 1.05 43.77%

612606 612606 678642 678642 66036

612606 612606 678642 72000 750642 138036

E. Repayment Schedule

Year 1 2 3 4 5 6 7

Loan 190400 165576 145823 123700 98922 71171 40090

Gross surplus 79454 66036 66036 66036 66036 66036 66036

Interest Principal 22848 24824 19869 19753 17499 22123 14844 24778 11871 27751 8541 31081 4811 40090

Total repayment 47672 39622 39622 39622 39622 39622 44901

Net surplus 31782 26414 26414 26414 26414 26414 21135