Poultry industry shifting towards contract farming

Bangladesh’s poultry industry – already a lucrative venture for thousands of entrepreneurs – is steadily shifting towards contract farming, with around 25 per cent of the country’s broiler farms now working under contracts.

A contract farmer is an independent business or individual who chooses to invest in chicken farming, working under contract with another company to raise poultry. Contract farming in the country’s poultry sector began in 1994, but it gained momentum in the last five years.

On the matter, Bangladesh Poultry Industry Central Council’s (BPICC) President Moshiur Rahman said, “Nearly one fourth of the broiler chicken farms in Bangladesh are currently engaged in contract farming.

“Contract farming will take up 50 per cent of this industry in the next few years, as their chances of incurring losses are very slim under this model.”

The demand for contract farmers is soaring due to the changing food habits of consumers, rising number of super shops, and increasing focus on the consumption of hygienic and safe food.

The Department of Livestock Services data shows that there are around 90,000 registered poultry farms in Bangladesh.

CP Bangladesh is one of the country’s biggest fast food franchises, and also the largest provider of contracts to poultry farmers, said industry insiders, adding that the company has contracts with at least 2,000 small and medium farmers. Its contract farms raise at least two lakh chickens across the country at any time of the year, and the company also hands out contracts for layer chicken farming.

Responding to a query, CP Bangladesh’s General Manager (Animal health and technical support service office) Mohammad Abdullah Al Mamun said, “The number of contract farmers has gone up significantly in the last five years.

“And this sector continues to grow because contract farming is a profitable venture for small farmers.”

He further elaborated, “We are providing farmers with chicks, feed, medicine, technical support, poultry healthcare and whatever else a farmer might need to raise chickens.

“The most important thing is that we buy all of the poultry, so contract farmers never have to bother with the sales or marketing process.”

Better profits at minimal risks

Aftab Bahumukhi Farms Ltd, in association with 20 small farmers, introduced contract farming in Bangladesh in 1994. CP Bangladesh is now the biggest provider of poultry farming contracts, followed by Paragon Group and Kazi Farms Group, industry insiders say.

According to a recent study of International Food Policy Research Institute (IFPRI) published in 2021, Contract farming in broiler production has a significant positive impact on unit profit in the range of Tk 16.09 to Tk 20.89 per kilogramme.

Paragon is providing around eight lakh one-day-old chicks to their contracted firms every month.

BPICC’s President Moshiur Rahman, also the managing director of Paragon Group, said, “Previously, farmers were dependent on dealers for feed, chicks, and marketing their poultry. But many were incurring losses and falling into debt traps.

“Nowadays, farmers are showing interest in contract farming. Profiting with contract farming is easier, but the farmers still have to shoulder losses if a batch of poultry is killed by diseases.”

In this system, the company that provides the contract takes most of the risks, and sales prices are always higher than the production costs, he added.

Mohammad Kawser, a farmer from Mymensingh, said, “I have a one year contract with a company named RRP, which I need to renew every year depending on the price trend of feed and one day old chicks.

“As per my contract, the price of feed and one-day-old chicks will remain the same for the entire year, regardless of any changes in market prices. Similarly, RRP will buy my poultry at the price fixed in the contract, regardless of any increase or decrease in market prices.”

He added, “Such conditions ensure a profit to farmers regardless of market circumstances. However, if diseases kill the poultry, I alone have to take losses.  In our locality, CP Bangladesh takes Tk 80,000 as collateral for every 1,000 birds considering poultry mortality issue.”

Challenges in the sector

Bangladesh Poultry Industries Association (BPIA) Joint Secretary Khondoker Md Mohsin said, “Contract farming did not grow enough in last three decades due to a lack of processing facilities of contractor companies, not having a fixed price, and a lack of workers with technical skills that can ensure safety and standard.”

“Farmers are now interested in producing standard, antibiotic free safe meat to meet the increasing demand. We trained some graduates with the help of the Indian Poultry Federation, and even sent some graduates to Thailand for training.”

He added that the sector will be able to fulfill its demand for workers trained with technical skills if the contractor companies expand the scope of their operations.

A recent research by the Bangladesh Agricultural University, UK’s University of Plymouth, and Belgium’s Ghent University reveals that on average, a contract poultry farm earns Tk 1,27,833 per year, significantly higher that a non-contract farm’s average earnings of Tk 76,653.

Contract farming is growing in Cumilla, Tangail, Pabna, Rangpur and Bogura along with other districts, industry insiders say, adding that the participation of farmers from the country’s poultry hub Gazipur and Mymensingh is low in this sector due to the debt trap of dealers.