DETERMINATION OF RESILIENCE OF BROILER FARMS

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DETERMINATION OF RESILIENCE OF BROILER FARMS

ABSTRACT

The contributions of the poultry farms to Nigerian economic development will depend on its resilience to distortions in the ever changing economic scenario.This study evaluates the resilience status of poultry (broiler) farms in Delta state, Nigeria. Well structured questionnaire was used to collect primary data from randomly selected 200 broiler farms in Delta central and Delta north agricultural zones. Descriptive statistics, multiple regression and broiler enterprise budget techniques were used to analyze the data collected. The results from the descriptive statistics shows that the broiler farms in this study are dominated by literate (82%) male farmers (64%) within the age bracket of 40-45 years (35.5%). Majority of the farm operators are married (48%). The broiler enterprise budget analysis shows that the resilience threshold value for small scale farms is N 70,000 while the resilience threshold value for large scale poultry farms is N2,000,000. The percentage gap between observed revenue and breakeven revenue was used as a measure of broiler farms resilience status. The study reveals that the resilience status of the small scale broiler farms is 28% and the resilience status of the large scale farms is 31%. But the average resilience status for the broiler industry is 30%. The result from the study shows that the proportion of small scale resilient broiler farms is 106(58%) and the non resilient farms is 76(42%). The proportion of large scale resilient broiler farms is 13(72%) and the non resilient farms is 5(28%). The results of multiple regression show that finanial variables: retained earnings (2.98**), contingency fund (3.68**), liquidity ratio (5.67**) have a positive and a significant (P<0.05) relationship with the resilience status of broiler farms but and debt equity ratio(-2.89**) has a negative (P<0.05)relationship with the resilience status of the broiler farms. Non financial variables: stability of income(4.96**), social network membership(3.54**), access to basic amenities(3.88**), self motivation(4.18**), adaptive properties(2.590**), inherent properties (2.139**) have a positive and a significant (P<0.05) relationship with the resilience status of broiler farms.The result of the resilience threshold model shows that resilience threshold gap has a positive and a significant (P<0.05)relationship with the resilience status of the broiler farms. We recommended that Seminars, workshop and conferences should be organised periodically by the government and non governmental agencies to educate farmers on how to cope with the ever changing environment. The study recommends that Poultry farm operators should acquire skills and financial analysis in order to develop the ability to detect early signals of bankruptcy.

CHAPTER ONE

1.0 INTRODUCTION

1.1 Background Information

Agriculture remains a key sector in the global economy even as industrial and service sector continues to grow. African agriculture is affected by globalization and climate change but is still fundamental to economic and social development in Africa. Agriculture is regarded as the most important sector in the economies of most non oil exporting African countries.

Agribusiness refers to a business that is linked with agricultural production, the provision of finance, machinery, fertilizers, seeds, etc. Small scale agribusiness is a modern form of agricultural business ventures operated strictly for the purpose of achieving profit (Olayide and Heady, 1982; Downey and Erickson, 1987). Chukwuma, (1999) noted that the agribusiness sector is divided into small, medium and large scale enterprises. Agribusiness is the privately owned and operated. It may be characterized by the following features:

Ownership and management are often rested on the same individual,

They tend to have small share and have no control over the market,

Capital is usually small and made available by the owner(s),

They employ usually less than 100 persons

Agribusiness enterprises are vital for the growth and development of Nigeria economy. Omeresan (2004) stated that for the agribusiness sector to survive and grow in this present volatile business environment, appropriate strategies must be developed and adopted by entrepreneurs. Such strategies should be properly investigated. The survival and growth of the agribusiness enterprises could be highly constrained by the physical, institutional and economic shocks in Nigeria. (Adebayo et al, 2004). During the second half of the 19th century a growing number of African agribusiness firms became involved in the international trade with agricultural products. This occurs as a result of an increase in trade, improved incomes in Europe and increased demand for tropical products. Many local systems of production in sub-Saharan Africa (SSA) benefited from this trend (Mkpado, 2012). Global firm level of agribusiness may likely face multiple challenges over the coming decades. The centrality of agribusiness is the interface between agriculture, and the rural sector cannot be ignored. This is because agribusiness has the capacity to provide greater employment, higher incomes, poverty alleviation and provision of Corporate Social Responsibility (CSR) through their requisite infrastructure (Dike, 1991, Anyanwu, 1997, Dunmoye, 1997).

Agribusiness firm responsibility is to produce more food to feed an increasingly affluent and growing world population that will demand a more diverse diet, contribute to overall development and poverty alleviation in many developing countries, confront increased competition for alternative uses of finite land and water resources, adapt to climate change, and contribute to preserving biodiversity and restoring fragile ecosystems. Agriculture continues to contributed heavily to the incomes of the rural poor. Improving agribusiness productivity, while conserving and enhancing natural resources, is an essential requirement for increased global food supplies on a sustainable basis. The role of smallholder agribusiness in increasing agribusiness productivity growth sustainably is very crucial. The productivity of most agribusiness firms is generally lagging.

Agribusiness literature refers to resilience as either survival, whether the business is open after a disruption, or how long a business is able to remain open after a disruption (Wasileski et al, 2011; Stafford et al, 2010). Other business studies defined resilience as a recovery that is a return to pre-disaster levels of activity, like the level of employment and profits prior to the disaster (Brewton et al, 2010). According to Marshall and Schrank (2014) a business is characterized as either being closed or opened in the initial period following a disaster. In period two the business is considered demised if it cannot reopen. Businesses that are open can either be considered survived, recovered or resilient. A business is survived if it is operating below pre-disaster levels in terms of employment and profits. A survived business is one that can cover its variable and fixed costs and is operating at pre-disaster levels. Resilience is an adaptive process. Either the business was adequately prepared to withstand the impact of the disaster with little impact or has made adjustments to their operation in order to be prepared for any future shock that may occur in course of production. The first type of business is considered resilient. The second type of business may be considered resilient after they implement necessary changes, though this resilience is not tested until they experience a similar disaster.

Terney and Bruneau. (2007) defined resilience in two ways: they are the inherent resilience and adaptive resilience Inherent resilience refers to the ability of the poultry farms to function well during non crisis times. It has already been built within the system. Adaptive resilience refers to the ability of the poultry farms to demonstrate flexibility during and after disasters i.e the ability to adapt and exercise creativity in addressing disasters when they occur.

Vaitla et al. (2012) also describe the concept of resilience, and quote the following definition of resilience from DFID: as “the ability of an agribusiness firm to manage change, by maintaining or transforming living standards in the face of shocks or stresses—such as earthquakes, drought or violent conflict—without compromising their long-term prospects.” Some factors determine firms response or elasticity to shock, i.e. whether and why farm firms “bounce back better”; “bounce back”; “recover, but worse than before”; or “collapse.”

Frankenberger et al. (2012), provide an overview of guiding principles for developing resilience to crises, targeted at donor agencies. They defined resilience as the ability of countries, communities, households and firms to efficiently anticipate, adapt to, and recover from the effects of potentially hazardous occurrences (natural disasters, economic instability, and conflict) in a manner that protects livelihoods, increase and sustains recovery, and supports economic growth. They also emphasise the importance of developing multi-sectoral coordination in order to build resilience.

According to DFID approach paper (2011): Disaster Resilience is the ability of countries, communities, households and firms to manage change, by maintaining or transforming living standards or firm’s performance in the face of shocks or stresses – such as earthquakes, drought or violent conflict – without compromising their long-term prospects. Resilience framework includes analysis of the following four elements (i) the context ;(ii) the disturbance (shocks or long-term stresses);(iii) the capacity to deal with the disturbance (which depends upon the extent of exposure, sensitivity, and adaptive capacity); and (iv) the reaction to the disturbance. The concept of resilience has brought together efforts from different fields including (i) disaster risk reduction (ii) climate change adaptation, and (iii) social protection. Following DFID (2011) hypothesis, determination of resilience status of farms can be a useful strategic tool for dealing with fragility and bankruptcy of agribusiness firms. The success of these firms in producing resilient agribusiness will have a positive impact on agribusiness productivity which will subsequently have global implications in strengthening the resilience of food markets, enhancing food security, improving wellbeing, promoting sustainability and ensuring adequate raw materials for growing agribusiness enterprises (Interagency Report to the Mexican G20 Presidency 2012).

The economic importance of the poultry-based agribusiness sector, such as its contribution to gross domestic product (GDP) or employment creation has been well recognised in research and policy debates. More recently, positive social contributions of poultry businesses have been explored. There is the growing body of evidence recognising the potential role of poultry agribusiness sub-sector in contributing to enhance the national economic diversification drive and the overall national economic resilience against financial and non financial factors.

However, the extent to which poultry agribusiness can contribute to national economic development will depend on its resilience to financial and non financial variables i.e coping with the ever changing economic environment. It is important to investigate the resilience status, resilience features and assess how well entrepreneurs adopt features in shaping the resilience of poultry agribusinesses in Delta state, Nigeria.

The study of Steiner and Cleary (2014) suggest three domains that determine business resilience i.e context/location domain, business specific/profile domain and entrepreneurial innovative characteristics/risk taking domain. Location domain has to do with either the business is located in an urban area or a rural area. Profile domain depends on the type of business while the risk taking domain is the ability of the entrepreneur to undertake risk by making use of new innovations without considering the risk involve. These domains if well investigated will strengthen the resilience status of the poultry agribusiness sector against endogenous and exogenous factors.

Therefore, resilience-enhancing activities in agribusiness sector such as the development of social/human, technological/physical, financial/economic, natural/environmental, and political assets can be used to deal with stress or business shocks. This can only be justified through the evaluation of the resilience status of poultry farms in Delta state, Nigeria.

1.2 Statement of Problem

Bankruptcy has often plagued the poultry sector and has reduce the number of functional poultry farms and their contribution to national development. The Nigerian government has focused its attention on the bailout of the ailing poultry farms and make them resilient to disruptions. With the aim of contributing to national objective of resilience- building of poultry farms, this study investigates the determination of resilience of broiler farms in Delta state, Nigeria. Determination of firm’s resilience status is the starting stage of bailout mechanism for the ailing poultry farms. Poultry (broiler) agribusiness survival depends on financial and non financial attributes of the poultry farms. Some entrepreneurs lack the relevant knowledge of factors that cause business failure or lack the required knowledge of business resilience indicators for absorbing shocks or disruptions when they occur. Dealing with these attributes will require the analysis of domains of resilience. The essence to situate the sources of resilience capacity of poultry farms and how it can be enhanced for poultry sector development. However, an empirical study of the resilience status of poultry (broiler) farms is yet to be done in Delta state despite its contribution to economic development. As it stands, estimate model of resilience index has not been derived or developed to evaluate the continuous existence or sustainability of poultry farms. There is need for concerted efforts to determine the resilience status of the poultry (broiler) farms and associated factors.

The study was designed to provide answers to the following research questions.

(i) What is the resilience index for broiler farms Delta state?

(ii) What is the resilience status of the broiler farms in Delta state?

(iii) What is the proportion of resilient and non resilient broiler farms in the study area?

(iv) What are the financial factors underpinning resilience of broiler farms?

(v) What are the non financial factors underpinning resilience of broiler farms?

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