Vertical Integration and Profitability in Poultry Industry in Ogun and Oyo States, Nigeria


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Vertical Integration and Profitability in Poultry Industry in Ogun and Oyo States, Nigeria is a well-researched topic, it can be used as a guide or framework for your Academic Research.


This study examines the economics of vertical integration in the poultry industry in Ogun and Oyo States. The study examines the production systems and analyses costs and returns to non-integrated and vertically integrated poultry farms. Primary data were generated using structured questionnaires in a field survey of 100 non-integrated poultry farms, 70 partially integrated poultry farms, and 40 fully integrated poultry farms. The analytical techniques employed include descriptive statistics and budgetary analysis. The gross margin analysis reveals that the fully
integrated poultry production systems have the highest gross margin while the non-integrated poultry farms have the lowest gross margin per1000birds. The gross margin per 1000 bird realized by non-integrated poultry farms, partially integrated poultry farms, and fully integrated poultry farms are N758, 828.07, N909, 973.06 and N985, 645.12,
respectively. Likewise, the net farm income per 1000 birds for fully integrated poultry farms is higher than that of partially integrated poultry farms which is in turn higher than that of non-integrated poultry farms. The profitability indicators: value added-sales ratio, rate of return on investment, and rate of return on a fixed cost increase with the
extent of vertical integration, which confirms that vertical integration, is profitable in the poultry industry.


The business of rearing livestock especially
poultry is cost-sensitive. Feed cost, for instance,
accounts for between 65% and 70% of the total
cost of raising poultry (Bamiro et al. 2001). This
and other costs of poultry production has
increased the price of eggs and other poultry
products beyond the reach of most Nigerians.
The economic implication on the part of the
producer is that any producer who can lower his
costs by a few Naira per crate of eggs will gain a
large share of the market. The desired cost-saving
can be achieved via vertical integration
(Akinwumi 1976, Oueden et al. 1996).
Dependence on the use of the external market
to obtain input or to exchange an output may
be through the use of a contract or a spot market.
The quality of the input and the timeliness of the
supply cannot be guaranteed. The failure of the
external market creates profit and risk incentives
for the farm to integrate vertically (Kilmer 1986).
Feed, the major factor militating against the
poultry industry hampers production, not only
on the basis of high cost but also due to low
quality feeds supplied by the feed millers which
has a negative impact on productivity – low
level of egg production as well as rendering the
birds susceptible to diseases, hence, the need
for backward vertical integration via the
production of quality feeds by each poultry farm
– firm (Bamiro et al. 2001).


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Agricultural Economics

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