By KC Soares, Contributor
If the farmers' interests are not protected and the broiler companies continue to have the upper hand, then we all should get ready to kiss the chicks goodbye. - File
THE BROILER industry is very important in the building of the national economy. It impacts directly on the lives of many small farmers and provides the cheapest source of meat (protein) at this time. There is no surprise then that poultry meat accounts for approximately 70 per cent of the total meat consumed in Jamaica during the year 2001. Increased protein intake is normally associated with improved living conditions. Unfortunately, all is not well with the broiler industry, which is dominated by two main players Jamaica Broilers Limited (JBL) and Caribbean Broilers Limited (CBL). Farmers contracted to these companies are becoming restive.
Chief among the grouses aired by the farmers is the fact that there is not a formal agreement between company and farmer. In the absence of a formal agreement, the companies can at any time terminate their relationship with any chosen farmer.
At this point, I would like, for the benefit of some readers, to outline generally how the industry presently operates. Essentially, the broiler companies provide the farmers with day-old chicks, feed for the chicks, medication and technical expertise. The farmers, in turn, provide houses for the chicks and labour throughout the growing period.
When the chickens are ready to be marketed, the companies buy these chickens and deduct from the price paid the costs of the items advanced (day old chicks, feed, etc.). The key elements in this association are the mortality rates (the number of chickens that die during each crop) and the conversion ratios (the amount of feed it takes to produce one pound of chicken meat). A mortality rate of five per cent and conversion ratio of 2:1 (meaning that it takes two pounds of feed to produce one pound of meat) is generally accepted throughout the industry.
In the early 1990s, the mortality rates among farmers reflected substantial increases. In some cases that I am aware of, rates reached as high as 37 per cent. The conversion ratios also deteriorated and this was mainly due to heat stress within the poultry houses.
To counteract this, a new system for rearing chickens was introduced. This system is the tunnel ventilation system and it reduces heat stress with the resultant effect of improved mortality rates (less than five per cent) and more efficient conversion ratios. Additionally, with this system, more birds can be accommodated per unit space.
I will not get into the technical aspects of this system, as it is not relevant to this discussion. What is of importance is that to construct poultry houses with this system or to upgrade old houses to get the effects of this system it will cost the farmer anywhere between $6 million and $10 million per house. To be profitable, each farmer must have at least two tunnel houses which translates into a capital investment of $12 to $20 million.
It is, therefore, clear that the tunnel system results in greater benefits to both the company and the farmer. In light of this, both broiler companies are insisting that farmers implement the tunnel system. Those farmers who refuse or who are tardy in doing so, tend not to receive allotments of chickens or reduced amounts on a regular basis. Farmers who want to stay in the business are forced to implement the tunnel system and most have to borrow the money in order to do so. Without a formal contractual agreement in place, the broiler companies can at anytime terminate their relationship with any given farmer.
Consider a farmer who has up-graded, say three poultry houses at a cost of $20 million borrowed from a bank at 17 per cent. If after six months such a farmer falls out of grace with the associated broiler company, how will he repay his loan? The matter is even more crucial if in accessing the loan the farmer had to use his matrimonial home as collateral. Even in light of this, the broiler companies have bluntly refused to give formal agreements.
While I do agree that improved technology should be implemented, the farmers' interest must be protected. Legislation should be passed to ensure that formal agreements be made between company and farmer. Such agreements should be made on an individual basis taking into consideration the duration of any loans accessed and with a termination clause.
If nothing is done in this respect then we all should get ready to kiss the chicks goodbye.
K. C. Soares is a former banker and is now a business consultant with Soledad Financial Services Limited. E-mail: soledad@netcomm-jm.com
