Cost Function and Profitability Analysis of Broiler Production in Edo State, Nigeria.

Abstract

There has been a lingering problem of finding adequate means of increasing net returns to farmers in the broiler business. These farmers are largely untrained, and may not be able to determine the specific factors that constitute production cost and how these factors affect overall farm profit. This study therefore, carried out a cost function and profitability analysis of broiler production in Edo State, Nigeria. A multi-stage sampling procedure was employed in selecting the 140 broiler farmers interviewed for the study. The Cost function analysis was carried out using the Stochastic Frontier technique, while the Budgetary Analysis Technique was used in analysing the profitability of respondents in broiler production. Results obtained from the study indicated that all the explanatory variables, with the exception of medication cost, conformed to a priori expectation as the estimated coefficients for output, bird cost, feed cost and labour cost gave positive values. The result of the t – test showed that output and expenses on
stock size were statistically different from zero at 1% and 5% levels of significance respectively, indicating that these variables significantly affected production cost in the study area. The effects of output and stock size on
production cost suggest that there were significant economies to be exploited by broiler farmers in the study area. Broiler farmers on the average, reared about 666 birds per batch and produced about 1,785 kg of birds at an estimated total variable cost of N 659,683 and sold at an average price of N 811 per kilogram, earning an average gross margin per production period of N 624,158. The estimated gross margin per bird was N 937, indicating that
broiler production was profitable in the study area, with a return per naira invested of 95 kobo. The study concluded that, though broiler production enterprise was found to be profitable, significant gaps exist that could be
exploited by broiler farmers in the study area, in order to achieve the neoclassical assumption of optimum profit.