Broiler poultry is one of the cheapest sources of animal protein in India, and poultry farming is one of the fastest-growing sectors in Indian agriculture. From 2011 to 2020, poultry meat production increased at an average rate of 10.9%, around double the rate of increase for other types of meat.
Using the contract farming model of agricultural production, buyers and farmers agree on how to produce and market a farm product under an agreement that is usually renewable annually. More than 80% of poultry outputs are produced by organized commercial firms, or integrators who consolidate farmer outputs.
Brijendra Pal, 36, started poultry farming in 2019 to supplement his income as a school clerk in Sitapur, Uttar Pradesh, India. He operates two poultry sheds containing at least 3,600 birds.
His success inspired his younger brother and their father to start broiler poultry in 2020 and 2022, respectively. In the last 5 years, the Pal family secured a stable source of income for their family as one of the 40,000 farmers contracted by Suguna Foods Private Limited (Suguna Foods), one of India's largest poultry producers.
Poultry farming also improves the efficiency of land use. "We would have only earned around 130,000 rupees ($1,570) a year had we grown rice on our 10,000 square-foot (ft2) land used for our newest shed. With poultry farming, we can now earn around 400,000 rupees in profit," explained Mr. Pal.
The total investment cost for the 10,000 ft2 shed was around 1 million rupees, which can be recovered in a little over 2 years.
With the contract farming model, Suguna Foods provides farmers with most of the necessary inputs required for poultry farming, including day-old chicks, feed, medicine, and technical services. Farmers provide labor and nonmonetary capital such as land and farming sheds. Birds that reach slaughter weight are bought back by Suguna Foods and are either sold live via the wet market or processed as chicken meat.
Farmers are paid per chicken at a fixed fee plus a performance bonus. This means the survival rate of the chicks is a risk of the farmer while the fluctuations of feed prices and poultry market prices are borne by Suguna Foods. Contract farmers have relatively predictable incomes mostly dependent on their farming performance measured in terms of the chicken’s weight gain and mortality rate. With this model, Suguna Foods can expand its business without having to increase their own operations and without needing more land.
Due to the prospect of stable income, contract farming offers good potential for growth and employment generation in rural communities. Mr. Pal plans to build more sheds and work full-time on poultry farming.
Access to technical support for this type of business convinced Mohd Atiq, 27, from Sitapur, Uttar Pradesh, to also try contract poultry farming. Despite having no prior experience, he built a 5,400 ft2 shed in 2017 on land owned by his family. He recently purchased 6,000 ft2 of land for about 800,000 rupees, mainly with the savings from his annual income of around 200,000 rupees from poultry farming.
"I plan to double my operation by building a shed on this newly acquired land. From my savings, I can also buy a new motorcycle which I use to support day-to-day mobility," said Mr. Atiq.
He said that one of the benefits of contract poultry farming is that he can work without staying away from his family.
COVID-19 significantly impacted Mr. Atiq’s poultry business. When the pandemic began in March 2020, transport restrictions caused by lockdowns made it challenging to source feed for the birds. Mr. Atiq had to cull 4,000 birds to sustain his poultry operations. False information associating chickens with the spread of COVID-19 also contributed to the decline in poultry demand. This resulted in losses and tight liquidity conditions for Suguna Foods.
"ADB’s support strengthened the company’s capacity to help sustain the supply of poultry to consumers, allowing our agriculture sector to continue functioning despite the health crisis."
In June 2020, ADB provided a loan of $10 million to Suguna Foods as part of its Sustaining Poultry Farmer Income and Food Security Project in India. The financing served as liquidity support for Suguna Foods to help sustain the operations of its 40,000 contract poultry farmers despite the pandemic, including Mr. Atiq and Mr. Pal’s operations.
Despite the challenges of the COVID-19 pandemic, poultry farming provided a stable source of income for Mr. Pal and Mr. Atiq.
With ADB financing, Suguna Foods bore most of the losses caused by the sharp decline in demand for poultry meat. Mr. Atiq said the Suguna Foods’ assistance spared his business from incurring further losses after receiving 5 rupees per head, or 20,000 rupees, to cover the expenses he incurred in rearing chickens.
"We are grateful to have received financial assistance from Suguna Foods to pay for essential costs," said Mr. Atiq. "While other companies in the industry struggled to keep their contract farmers, Suguna Foods did its best not to leave us. They gave us a minimum income during the crisis which enabled us to cover basic costs like electricity, something we could not have done without this financial help."
Albeit at a reduced level, Suguna Foods could maintain the payments to the farmers during the first wave of the pandemic when the impact was most severe. The financing allowed them to build inventory buffers, retain employees, and make timely supplier payments, sustaining the company’s operations during the COVID-19 crisis.
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"ADB’s support strengthened the company’s capacity to help sustain the supply of poultry to consumers, allowing our agriculture sector to continue functioning despite the health crisis," Suguna Foods Managing Director G.B. Sundararajan said.
The support received by the farmers during that trying time improved their confidence in Suguna Foods and in contract farming in general.
The project was ADB’s first COVID-19 emergency assistance to an agribusiness in India. In averting potential disruptions caused by the pandemic, poultry farming continued to sustain rural livelihoods while helping to address the country’s nutritional needs.