Farm Contracts and Biosecurity: The case of Broiler Farmers in Bali, Indonesia

The present study aims to first to investigate the factors influencing farmers' selection of contract companies and second to identify a bonus system that best reward farmers for biosecurity adoption. The study employed two approaches in the analysis to achieve the research objectives. First, an econometrics approach of three logit models was developed to examine the factors influencing famers' selection of contractor company. Second, the gross margin approach considering two main price conditions, namely generic and actual price schemes to evaluate the bonus system that best reward biosecurity implementation. The data used was cross-sectional data from 100 farmer respondents. Result of the study shows that there are six factors affecting farmers' choice of contractor company. These include farmer experience in chicken rearing, main occupation, farm size, company size, contract price and number of bonuses offered by the company. With regard to the gross margin analysis, this research presents that big companies do not necessarily provide better support for biosecurity implementation than smaller companies. The amount of bonus reward in the system together with the type of bonuses is important for consideration. Contract 6 with three types of bonuses best reward farmers for biosecurity adoption, under the generic price assumptions. While Contract 5 with four types of bonuses provided the best reward system under the actual price condition. Findings from this research are informative to both government and contractor companies in considering supports for biosecurity implementation. Although the analysis is limited to one production year, the study opens to future research on the evaluation of long term biosecurity benefits

Contract bonus systems to encourage biosecurity adoption on small-scale broiler farms in Indonesia

Ongoing economic losses in the poultry industry, due to endemic diseases such as highly pathogenic avian influenza and Newcastle disease, ensure that biosecurity adoption on small-scale broiler farms remains a priority for Indonesia. However, given their economic constraints and the nature of the market for their products, these smallholders need to be convinced that there is an economic benefit to them from investing in biosecurity. As the majority of smallholders manage their birds under a contract, these contract companies not only need to be involved in the discussion but, if they are not prepared to assist directly in assisting with improved biosecurity, need to ensure that the conditions of the contract do encourage this smallholder investment. Every contract includes price and performance bonuses and, although the nature of these vary between contract companies, they are designed to encourage productivity improvement. This study evaluates existing contract bonus systems in six major contract companies in Indonesia and their capacity to encourage investment in biosecurity. Results indicated that the price bonus plays a significant role in providing additional smallholder income. If higher than expected sale prices are obtained, contracts with companies 3, 5 and 6 ensure that a greater proportion of this price is passed on to smallholders. Contracts 2, 4, and 6 provide farmers with higher performance bonuses, indicating that these companies encourage farmers to improve production efficiency. Overall estimates after the initial year of biosecurity investment show improvements in returns, where farmers can receive up to USD 2.73 for every dollar invested in biosecurity

Developing a clean market chain for poultry products in Indonesia

Biosecurity on smallholder poultry farms in Indonesia is becoming increasingly important to the Indonesian poultry industry. Highly pathogenic avian influenza (HPAI- H5N1) and other poultry diseases continue to reduce poultry farm productivity, cause human mortalities and reduce consumer confidence in poultry products. Since HPAI was first diagnosed in Indonesia in 2004 (FAO 2004), it has become endemic in 31 of the 33 provinces and been responsible for 146 human fatalities (FAO 2012), the most recent in Bali in 2012

Cost effective biosecurity for NICPS operations in Indonesia

The project addressed issues of importance to the Indonesian poultry industry following the entry of HPAI into the country in 2003. Significant work was being undertaken with regard to village chicken systems but disease movement and poultry mortality issues within the non-industrial commercial poultry sector (NICPS) were not being examined. It was clear that the structure of the value chain was not encouraging farmers to improve their biosecurity with resultant continuation of human and chicken mortalities throughout Indonesia. The aim of the project was to use a value chain approach to reduce the risk of disease in NICPS farms through providing economic incentives for smallholders to invest in biosecurity. The project was managed by UNE in partnership with DGL & AHS, FMPI and IPB. Success required value chain development and ownership of project activities by both government (national, provincial and kabupaten) and the poultry industry. This project was the first to have an industry association (FMPI) as a formal project partner. Through the provincial industry partners, the project developed value chain stakeholder training and management programs which resulted in a total of 613 stakeholders including 317 smallholders being trained to better understand disease movement and how to reduce disease risk in and around the farm. These smallholders then had the opportunity to be part of a farm approval process which would allow them to participate in a trial which developed and implemented a 'clean market chain' and rewarded smallholders, through the receival of a premium price, for their investment in biosecurity