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APPRAISAL OF POULTRY FEEDS MARKETING

10,000 3,000

ANAMBRA STATE, NIGERIA  AS CASE STUDY

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CHAPTER ONE

INTRODUCTION

  • Background Information

The role of agriculture in the country’s economy cannot be over- emphasized. Prior to the oil boom period in the mid-1970’s, it had been the largest foreign exchange earner for the country. It has evolved from just a means of livelihood to a business for not only are modern techniques of production employed, but also the most sophisticated management and marketing techniques. Agriculture therefore is a wide discipline and poultry keeping is just one industry in the agricultural set-up (Okafor, 1984).

The main domesticated avians contributing in one way or the other to the economy of Nigeria are the domestic fowl, guinea fowls, turkeys, ducks, geese, pheasants and pigeons. The usefulness of these species are many and there are little or no religious, cultural and social barriers or prejudices to their rearing or use of their parts and products in Nigeria (Izunobi, 2002).

The level of animal protein intake in Nigeria represents only about 10% of the intake in countries like Denmark, U.S.A., New Zealand and the United Kingdom (Akin, 1976). According to Izunobi (2002), of the protein intake in Nigeria, poultry meat supplies only about 20% of the total meat needs of Nigerians. This is grossly inadequate.

Chicken contains quality proteins, lipids, carbohydrates, multitude of vitamins, minerals and pigments. They also possess natural aroma and flavor compounds. Eggs are excellent food, possessing quality proteins of high biological values (Izunobi, 2002). Egg, a product of the industry, gives about 3.5g of the total 7.2g animal protein required for individual dietary need per day (Adene and Oguntade,, 2006).

The poultry industry provides employment opportunity for the teeming population. The industry, if desired attention is paid to it by government at all levels, can successfully absorb a large number of unemployed youths across the country, currently roaming about in search of unavailable jobs, through its chain of agro-allied industry; commercial feed and toll milling, poultry products processing, poultry-marketing, veterinary pharmaceutical, hatchery operation and breeder farming (Eko, 2009). In addition, the industry, if properly harnessed, can also serve as source of foreign earnings, complementing the crude oil – the main source of foreign earnings presently which is responsible for over 90 percent of our exports. (Adene and Oguntade, 2006).

According to Ali (2011), since 1986, Nigeria’s import ban on corn has  contributed to steady decline in poultry production. He also observed that Nigerian poultry market had seen prosperous times. For two decades after the country achieved independence in 1960, poultry production grew, peaking in 1982 with 40 million commercially reared birds. Since then, he also stated, the population of birds dipped steadily reaching an estimated low rate of 6  million in 1997. Furthermore, Ali added that since production figures for poultry were not maintained by the government, the only way to estimate the number was by the amount of feed sold. In 1997, an estimated 225,000 metric tonnes of commercial poultry feed was sold in the Nigerian market down from 250,000 tonnes in 1995. The feed milling industry in Nigeria is only producing at about 15 percent of capacity (Ali, 2011). This faltering market can be traced back to the early 1980’s, when the Nigerian economy collapsed. An unstable government import bans and intervention efforts by the World Bank caused price realignments that weakened purchasing power and pushed up the cost of poultry inputs and products.

Poultry feeds are animal feed used to feed poultry birds. They are formulated from a mixture of ingredients, including cereal grains, cereal by-products, fats, plant protein sources, animal protein sources and by-products, vitamin and mineral supplements, crystalline amino acids and feed additives compounded in such a way as to provide essential nutrients for sustaining optimum growth and production. Poultry feed is a poultry input and its demand is derived from the demand for the poultry and/or its products. Poultry feeds are categorized in such a way as to provide specified nutrient, composition for different productive purposes (Standards Organization of Nigeria [SON], 1977).

The poultry feed is the nucleus of poultry industry and its development is directly related to that of the poultry industry. Poultry feed represents the major cost of poultry production, constituting about 70 percent of the total cost. Of total feed cost, about 95 percent is used to meet energy and protein requirements, about 3 to 4 percent for major mineral, trace mineral and vitamin requirements and 1 to 2 percent for various feed additives (Ravindran and Blair, 1992).

Compounded poultry feed can be in form of mash or pellets. There are three types of feed millers in the poultry industry, namely; custom, toll and integrated farms. The custom millers mill and market their feeds under registered trade names. The dominant trade names in the Nigerian market include Top Feeds, Livestock Feeds (Pfizer), Rainbow Feeds, Guinea Feeds, Animal Care Feeds and Vital Feeds. Some of these custom millers have adopted franchising as an operational method for achieving a wider reach across the country. The toll millers are spread across major locations with significant concentration in small-to-medium scale poultry farms. They mill feed to the specification of customers (poultry farmers) and charge a fee (toll) per quantity milled. The customers either bring their feed ingredients or purchase them from the millers, if the millers have them in stock. The third category of feed millers is the integrated poultry farmers, they own feed mills and produce feed for own use (Adene and Oguntade, 2006).

The feed millers acquire their grains from grain merchants/buying agents who source their grains mostly from the northern parts of the country. These merchants have established networks for aggregating grains from smallholder farmers and have mastered the logistics of grain transportation across the country. They also depends on importers for the supply of the imported feed ingredients such as fish meal, lysine, methionine and soya meal. These importers also use intermediaries to reach the feed millers that are spread across the country but with higher concentration in the south. The poultry shops generally market various inputs of the poultry sub-sector, one of which is branded feed obtained from custom feed millers. Poultry farms that do not have their own feed mills have the option of patronizing the toll millers, custom millers, or the poultry shops (distributors). The poultry feed supply chain is illustrated in figure 1.1

Figure 1.1:    Poultry feed supply chain

Source: Adene and Oguntade (2006)

 

  • Statement of the Problem

The Nigerian poultry and feed mill industry at the moment is bedeviled by enormous problems that hinder its growth and marketing of its products and inputs (Okafor, 1984; Aletor and Daramola 1989; Achoja, Ofuoku and Okoh 2006; Adene and Oguntade, 2006; Eko, 2009). Among these problems are lapses in government policies, insufficient marketing and production information, infectious diseases, increasing cost of medication, high cost of feed ingredients, lack of government funding and investment in the sector, lack of credit facility, poor road network, lack of storage facility and credit sales.

Aldetor and Daramola (1989) identified lapses and inconsistencies in government policies as modifying factors in the operation of the industry, for instance, the 1986 military government policy that led to the imposition of World Bank /IMF dictated  policy of Structural Adjustment Programme (SAP). This policy led to rapid collapse of the poultry industry. Only about 20% of the more than 5,000 commercial poultry farmers existing pre-SAP survived by  mid-1990s (Adene and Oguntade, 2006).

This policy led to the massive devaluation of the naira, ban on the importation of grains (a major raw material in poultry industry) and withdrawal of government direct investments and subsidies for the sector, leading to the collapse of farms owned by poor farmers across the country and resultant loss of jobs, due to prohibitive cost of production and marketing (Adene and Oguntade, 2006). This made it possible for big farms like Obasanjo Farms (Nig.) Ltd of Otta, Zartech Farms of Ibadan, CHI Ajala Farms of Ibadan, Animal Care Services Konsult (Nig) Ltd of Ogorein, Ogun State, Zarm Poultry and Feedmill Industry ltd of Ilemona in Kwara State and Sambawa Farms (Nig). Ltd of Kaduna in the northern part of the country to dominate the poultry business, amassing huge profits in the process, to the detriment of poor farms (Eko, 2009).

Another area that poultry and feedmill industry is  witnessing a setback is  the marketing of its feed input. Many poultry producers, marketing agents and consumers have limited information on feed formulation and manufacture, product processing and packaging, product handling, storage quality standards as well as marketing strategies. Okafor (1982) noted that the problem of reducing marketing and production costs remained high in Nigeria and that one of the more important marketing costs is that of poor market information. This, he supported, by saying that it was well known that while surpluses existed in some areas, there was scarcity in others, a fact reflected in prices.

Infectious disease is another major challenge to the industry because of the economic importance of disease causing organisms like bacteria, virus, fungus, and protozoa, which birds are susceptible to. These bring about devastating effects to flocks, the farmers and marketers (Eko, 2009). For instance, the outbreak of avian influenza, otherwise known as bird flu, in 2005/2006 led to the death of over 1.5 million birds across the country. It will be recalled that a large number of poor farmers lost their means of livelihood when their flocks were destroyed by government without compensation, while the rich farms (Obasanjo and Sambawa among others) made fortunes from both government and foreign door agencies (Ugwu, 2009).

Eko (2009) also noted another obstacle confronting the poultry industry in Nigeria as the inability of a large number of farmers and marketers particularly the poor ones, to secure loans from both commercial and micro finance banks across the country. This is because most of these banks attach conditions beyond the reach of the farmers including collateral (landed property), 25 per cent (%) interest rate, 3 – 6 months moratorium, and other sundry charges, making access to loans practically impossible for poor farmers, despite the banks’ much vaunted farmer-friendly agricultural loans in Nigeria.

Most of the access and rural roads leading to commercial poultry farms in the state are passable during the dry season but some are inaccessible during the rainy season. This attribute makes it difficult for poultry farmers to transport their production inputs such as feeds and marketers also find it difficult to reach those production area. Achoja, Ofuoku and Okoh (2006) observed that the quantity of poultry feeds sold and revenue generated decreased as the cost of transportation increased and vice versa. As marketers spend more money on transport, their capital decreases, reducing their purchasing power/capacity  and thus reducing the contribution of marketing input to output. Ahmed and Rustagi (1984) reported that a major cause of marketing problems often lies in defective infrastructure, particularly road and transport services. According to them, more than half of the higher marketing cost in Africa in comparison with those in Asia is due to inadequate marketing infrastructure. Omoruyi, Orhue, Akerebo, and Aghimien (1999) also asserted that in some villages, there were no good roads and most were accessible only in the dry season. Farmers/buyers, therefore, paid very high transport cost. High transportation cost may reduce the effectiveness of allocation of stock over space.

According to Ayodamola (2009), farmers complained that the amount they spent on feed kept rising regularly, either there is an increase in the price of maize, soyabean cake, groundnut cake or other ingredients used in processing the feeds. Most times, the price of buying feed from the mills was very expensive that the farmers wish to get out of the business. Many farmers are now finding alternative feeding means for their birds while others are getting out of the business. Achoja, Ofuoku and Okoh (2006) observed that the most prevalent socio-economic problems facing poultry feed marketing were high cost of procurement of poultry feeds at source (90%), poor road network (80%) and inadequate finance (70%). This implies that the marketing of poultry feed is capital intensive. The relatively high cost of poultry feed at source shows that a high proportion of funds invested in poultry feeds marketing is directed to this factor, and goes a long way in discouraging many marketers, particularly the resource – poor dealers. FAO (2007) also reported that investment in marketing by private and rural community sectors also depended upon the price levels and margins allowed.

Omoruyi et al, (1999) observed that storage problems accounted for the increasing cost of marketing and high retail price. They noted other socio-economic problems affecting poultry feeds marketing were credit sales (40%) and late arrival of stock (30%). According to Shepherd (1989), consideration of location can be important in supplying the product and reducing glut.

Different research works have been done on some of the problems of the poultry and feed mill industry but from the available information, little or nothing have been done to ascertain the most commonly used and the best communication/promotional mix to create awareness of the problems among the stakeholders and   proffer solution that can mitigate the problems in the industry. In addition, there is scarcity of published information on the nature and characteristics of poultry feeds business enterprises in Anambra state. It is the intention of the study to fill this gap.

This study concentrate on marketing of poultry feed produced by custom millers sold to poultry shops (distributors) and used in feeding domestic birds among other avian species. It is also based on marketing of poultry feeds in Anambra State, in Nigeria, which has high concentration of medium-to-small scale farmers with few large scale farmers. The study provides information that would assist the poultry feed dealers/marketers in effective marketing processes, and provides recommendations that answers the following research questions:

  • what are the socio-economic characteristics of poultry feed marketers in Anambra State, Nigeria?;
  • what are the marketing channels of poultry feed in the area?;
  • what type of communication mix appeals to the marketers and the end              users?;
  • what is the degree of market concentrations among the feed marketers in the area?;
  • what are the marketing margins of poultry feed wholesalers and retailers in the area?; and
  • what factors affect the selling price of poultry feed in the area?

 

  • Objectives of the Study

The broad objective of this study is to analyse the marketing of poultry feeds in Anambra State, Nigeria.

The specific objectives are to:

  • describe the socio-economic characteristics of the poultry feed marketers;
  • identify and describe the marketing channels of poultry feeds in the study area;
  • Describe the promotional activities adopted by these poultry feed marketers;
  • assess the degree of market concentration among wholesalers and retailers of poultry feed in the area;
  • determine the marketing margins for poultry feed at wholesale and retail levels;
  • ascertain the factors that determine the selling price by the marketers of  poultry feed; and
  • make policy recommendations based on the research findings.

 

  • Hypothesis of the Study.                                                                        
  • The null hypothesis below will guide the study:
  • There is no difference in the marketing margins of wholesalers and retailers of poultry feed.
    • Justification of the Study

The importance of the poultry industry cannot be over-emphasied because of the vital roles it plays in human nutrition. Of equal value is the employment opportunity it provides for the teeming population.

This study helps to highlight and design appropriate policies that brings about an efficient marketing of poultry feed. There is need to carry out an indebt study of poultry feed marketing in Anambra State, Nigeria, because of its high concentration of small to medium scale farmers. It is also hoped that the study will be useful to the researchers, farmers, marketers and policy makers to determine their needs/gaps in order to reach their stated goals.

Government and policy makers also benefits from the findings of this study by utilizing the information gathered from this study to address the problems of poultry feed marketing. This will be used as checks and balances by policy makers and academics in designing subsequent ways to make effective, as well as efficient, processes involved in poultry feed marketing in the study area. Furthermore, this study will complement other related studies conducted to guide appropria

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