Profitability Analysis Of Layer Enterprise

Project and Seminar Material for Agricultural Economics and Extension

Profitability Analysis Of Layer Enterprise


This study examined the profitability of layers production in Esan North East and Ovia North East L.G.A’s of Edo State. A purposive and convenient sampling of 64 poultry farmers was carried out in the study area in order to generate data for the analysis. Results of the study showed that the respondents were predominantly males (56%) with good educational background and relatively long farming experience in poultry production. Data collected were analyzed using Regression Models.

The regression results indicated that the poultry farmers were spending too much credit on fixed capital in production from day old to spent layers with a high probability that increase in miscellaneous expenditure and layers mash will increase the profit from the production. It was observed that improvement in quality of layers mash, increase in efficiency of labour and increase in KW/h used in the production process will increase profit realizable from the production of day-old chicks to point of lay. As shown from the regression results, increase in fixed cost and layers mash will be necessary to maximize profit in production from point of lay to spent layers.

Viability analysis indicated that poultry business is profitable (average BCR =1.52, average Return/Naira=0.55). It was shown from the comparative analysis that production from day old chicks to spent layers was the most viable (BCR of 1.64, Return/Naira=0.67) from the three types of production. It was therefore recommended that more people, particularly youth, should be advised to go into layers production, and that Government should mandate commercial banks to reserve a certain percentage of the budget for the poultry farmers at low interest rate.

Chapter One

1.0 Introduction

1.1 Background to the Study

The problems of food insecurity and hunger in recent years have continued to attract the attention of experts and Government worldwide (Babatunde et al., 2007).

FAO (1995), asserted that the most critical in the global food basket crises is protein, especially of animal origin. However, Oluyemi and Roberts (2000) and Isika et al., (2006), postulated that poultry was strategic in addressing animal protein shortage in human nutrition.

In Nigeria, the production of food has not increased at the rate that can meet the increasing population. While food production increases at the rate of 2.5%, food demand increases at the rate of more than 3.5% due to high rate of population growth of 2.83% (CBN, 2004).

Animal scientists, economists and policy makers are of the opinion that the development of livestock (poultry) industry is the only option for bridging the generally known protein deficiency gap in a Nigerian’s diet (Mbanassor and Nwosu, 1998). Apart from its contribution to the Gross Domestic Product and provision of employment opportunities, poultry production (egg) is a major source of protein in the country (Ajibefun and Daramola, 1999).

Poultry production is predominant among livestock production in Edo State. People depend on poultry for food and poultry farming serves as an additional occupation to supplement the income of small and marginal farm families. Poultry occupies an essential position because of its vast potential to bring about rapid economic growth, particularly benefiting the weaker section (Ekunwe et al., 2006).

Egg is a rich source of protein, lipids, vitamins, phosphorus and other nutritionally important substances. Eggs are easily digestible and they are sources of raw materials for agro-allied industries that utilize them in the production of food, drinks, baking confectionery and in the propagation of viruses in vaccine production. Besides, egg marketing provides a source of income to those who engage in it.

1.2 Statement of Problem

For Nigeria to attain food security, there is the need for the development of all sectors of agriculture. There is the need for significant improvements in the livestock industry and poultry in particular. Events of the past decades indicate that the demand and supply gap for animal protein intake is so high (Yusuf and Malomo, 2007). Egg producers, like other producers are rational, thus, they would increase their supply if they are sure of making higher profit ceteris paribus (Emokaro et al., 2009). Higher profit thus ensures the sustainability of the industry.

The research is designed to address the following:

  1. Are poultry farmers in the study area really making profit from their poultry egg production?
  2. Can these farmers actually analyze the cost and returns from their enterprise?
  3. What are the major constraints faced by egg farmers in the study area?
  4. Do poultry farmers in the study area keep up to date records of their enterprise?

1.3 Objective of the Study

The broad objective of the study was to investigate the profitability of poultry egg production in Esan North East and Ovia North East Local Government Area of Edo State.

  1. To meet the general objective, the study focused on the following specific objectives:
  2. Examined the socio-economic characteristics of egg producers in the study area.
  3. Estimated the farmers’ current level of profit from egg production.
  4. Estimated the viability of egg production in Esan North and Ovia North East Local Government Areas.
  5. Identified the constraints faced by poultry farmers in the area of study.
  6. Analysed the relationship between input used and quantity of eggs produced by respondents.
  7. Estimated the farmers’ current level of profit from day old chicks to point of lay production.

1.4 Hypothesis

Ho; There is no significant relationship between the socio-economic characteristics of the respondents and the profitability from poultry production.

H1; There is a significant relationship between the socio-economic characteristics of the respondents and the profitability from poultry production.

1.5 Justification of the Study

Although much work has been done in the area of profitability analyses, poultry egg production requires a continuous research to meet the changing problems and constraints of the industry.

It is hoped that the information provided by the study will guide prospective poultry enterprise and contribute to effective policy formulation and implementation as regards improving the business.

Chapter Five

Summary, Conclusion and Recommendations

5.1 Summary

An attempt to examine the economics of poultry production in selected local government area of Edo State was the principal focus of this study. The specific objectives were to: describe the socio-economic characteristics of poultry farmers in the study area, estimate profitability of poultry production in the study area, and determine the relationship between inputs and output obtained in poultry production. Primary data were collected from 80 poultry farmers selected through multi-stage random sampling technique from Esan North and Ovia North East Local Government Areas, using structured questionnaire. Descriptive statistics, farm budgetary technique, benefit cost analysis and ordinary least square regression analysis was used to analyze the data.

The results of the analyses revealed that majority (72.5%) of the respondents were male with the mean age of 38.7 years. (63.8%) of these youths had keen interest in poultry production and chose poultry farming as their main occupation. Result of the cost and returns to estimate the profitability of poultry production in the study areas revealed that there is profit in poultry production in the study area with net farm income from layers production stood at ₦1,534,093.53 while that of broilers was ₦ 1,966,086.49 in one production cycle respectively. The finding reveals that poultry production is profitable in the study area. Analysis of the result also showed that inputs such as cost of day old chick, labour, feeds, depreciating cost of equipment and operating expenses have significant relationship with poultry output in the study area.

5.2 Conclusion

This study investigated the economics of poultry production in the selected local government areas of Edo state. Three important findings emerged; first, poultry production in the state is dominated by highly educated youths, a positive sign for future poultry activities. Second, poultry production is highly profitable in edo state; however, broiler production contributed the highest return in the area of study. Thirdly, the costs of inputs as revealed by the regression analysis were high and increasing with the size of production thereby depriving the farmers the full benefit of their efforts

5.3 Recommendations

  1. To reduce cost of production Farmers should form agricultural cooperative groups which will enable them to benefit from the economy of scale through bulk purchases of farm inputs.
  2. Government should encourage the youths involved by providing them technical knowledge in the area of resource management through the extension agents to assist in reduction of production cost.
  3. Government should try to provide the essential farm input such as drugs and vaccine to the farmers at the right time and at subsidized prices to reduce the cost of production in order to improve profitability.

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