Economic and market analysis of smallholder farmers' broiler production in the Amatole district municipality, Eastern Cape, South Africa.

Abstract

South Africa is a major broiler producer in Sub-Saharan Africa (SSA) accounting for 80% of total broiler production in the region. Broiler production also dominates the agricultural sector in South Africa and remains the cheapest source of protein relative to other animal proteins. The broiler industry has a dual nature, which consists of both smallholder and commercial broiler farmers. Feed is a major cost issue in the broiler sector, accounting for more than 70%of a broiler producer's overall costs. Another obstacle faced by smallholder broiler farmers, especially those in the Amatole District Municipality (ADM) in the Eastern Cape, is the issue of market access. The aim of the study was to carry out the economic and market analysis of smallholder farmers broiler production in the Amatole District Municipality, Eastern Cape, South Africa .The main objectives of the study, which were used to address the research problem were; to identify and profile broiler farming, determine determinants of market participation among smallholder broiler producers, analyse the factors affecting smallholder broiler farmers’ profitability, and analyse the factors affecting smallholder broiler farmers’ profitability in the Amatole District Municipality in the Eastern Cape, South Africa. A sample of 150 smallholder broiler farmers was drawn and primary data was collected using a structured questionnaire. Descriptive statistics were used to profile the broiler farmers in ADM. The average smallholder broiler farmer in ADM was middle-aged and a female. The double-hurdle model was used to analyse factors affecting market participation decisions. The first stage made use of the probit model to analyse factors affecting the probability of market participation. The second stage involves the assessment of factors affecting market participation intensity by the smallholder broiler farmers in ADM. The marketing constraints were also analysed. Determining the factors affecting the profitability also involved two stages. The first stage made use of the budgetary technique (Gross margin and net farm income) to measure smallholder broiler profits. The results indicated that smallholder broiler production in ADM was profitable, this was indicated by the net farm income of ZAR 996.16 per production cycle. The second stage analysed factors influencing farm profitability. The stochastic production frontier together with the technical efficiency was used to measure the broiler farmers’ productivity. The average technical efficiency of farmers was found to be 0.81 indicating that the average smallholder broiler farmer in ADM is technically efficient. Broiler farmers in the ADM were encouraged to increase their stock size to allow for an increase in their probability to enter markets. Keywords: broiler market, market participation, productivity, profitability