horizontal, vertical, forward, backward integration and advantages and disadvantages

2. INTEGRATION
 Integration is the association, coordinating and
amalgamation of companies engaged in various
stages of production of a particular product or related
products.
 There will be smooth flow of inputs and outputs from
one unit to other leading to overall reduction in the
cost of production of the final product.
 An integrator will coordinate all the activities.

3.  An integrator is the owner of the
processing plant , hatchery and the feed
mill and pay commission to others for the
services rendered by them.
 They will control the entire poultry
production.
 The poultry farmers are only contract
growers, receiving commission for the
products produced by them.

4. • In INDIA integration was introduced in the broiler sector
by Suguna in Tamil Nadu during 1995.
• Later it spread mainly to,
– Karnataka (1995 to 2000),
– Maharashtra (2001)
– Andhra Pradesh (2002) and other states (WB and
Gujarat) of India.
• Today more than 85% of poultry meat in South India
comes from integrated farms.

5. Broiler integration:
• The integrator may be owning the
breeding farms , parent stock, growers
, hatchery , feed mill , rendering plant
and poultry processing plant.
• He will integrate with few contract
parent stock farms, who will supply
hatching eggs on commission basis.

6. Broiler integration organisation setup
Principle broiler
breeding farm
G. P. Stock
farm
Pet food
industry
Feed mill
Broiler
farm
Parent stock
farm
Rendering
plant
Poultry
processing
plant
Broiler
hatchery
Retailer
restaurant
consumers
Fast food mfg.
Wholesaler
or auctioner
Equipment
manufacturer
Supermarket and
retail outlet

7. Components of integration
• Integrator
– Absolute owner
• Contract farmer
– Care-taker role

8. Types of integration
1.Vertical integration
 It is the association between different stages of
production namely breeding , hatchery , commercial
farm , processing unit and marketing channel in
order to utilize the outputs of one unit as input of the
other.
 Reduces the cost of production of the final product.
 The profit margin of the integrator is unaffected.

10. SYSTEMS OF VERTICAL INTEGRATION :
A. Forward integration:
The integrator starts his own processing plant or
marketing centre in order to fetch a better price for
his output or product.
B. Backward integration:
The farmer or integrator in order to obtain his inputs
at a cheaper rate
Example : chicks will start his own hatchery and or
breeding farm.

11. 2.Horizontal integration
 It is the association , amalgamation or merging of
the companies and units engaged in the same
type of production , like merging together of two
or more hatcheries, commercial farms
,processing plants etc, resulting in increase in
the volume of operation and expansion in
production.
 The integrator can go for diversified fast foods
and advertisement in mass media for sales
promotion.

12. 3. Parallel integration
 Also called as diversification.
 Integrator may start allied industries.
Ex: feed mill , hatchery operator.
 Reduces the cost of production and additional
revenue by selling the diversified products.

13. Contract farming
 It is a wage contract between an integrator
and a poultry farmer.
○ Chick growing agreement, also known as contract
farming
 Broiler contract farming is most popular
 Vertical and backward integration are
routinely followed in poultry sector

14. Advantages
 Mushroom growth of independent small farms and
other production units can be avoided.
 Cost of the production of the final product will come
down, for the ultimate benefit of the consumer.
 The industry will grow in an organized way.
 It will be possible to go for diversified products and
fast foods.

15.  Advertisements to promote his products.
 All the main and by products will be utilized and
recycled therefore preventing environmental
pollution also reduces the cost of production of the
main product.
 It will stabilize the prices by balancing the supply
and demand

16. Success of integration
depends on..
 Efficient management at every level of
operation
 Breeder level
 Hatchery level
 Purchase of raw materials
 Feed preparation
 Commercial farm level
 Man power (field supervisors for 3 shifts)
 Marketing of final produce
 Transportation

17. Factors motivating the farmers towards contract farming
 Less financial requirements
 No marketing risk
 Non-contract farming multiple batch rearing
unable to control diseases no uniformity in the
batch less profits no regular income
closure of the farms

18. Advantages to the farmer
 Lesser risk
 Farmer will get nominal prices in every batch
 Remunerative prices are given based on
performance (FCR and mortality) from 3 to 12
rupees/kg
 No need of working capital
 Farmer is not concerned about the profits

19. Constraints faced by the farmers
 Late / Early pick-up of the birds by the
integrators depending upon the market
conditions
 Farmer has to maintain the birds till the integrator
needs
 Limited growth opportunity
 Delay in receipt of payments, or receipt of
DOC’s
 Leads to fewer batches in a year and thus a lower
annual income.

20. INTEGRATOR
 Advantages
 Less burden in managemental practices
 Bulk production with reduced cost of
production
 only supervision is needed with no fixed
capital
 Disadvantages
 Marketing risk
 Malpractice of selling feed by the farmer

21.  Research results are showing that Contract
farming system is substantially more profitable
compared to the independent farming system,
because
○ More no. of birds per batch and more no. of batches per
year was made reality in contract farming
 Demand for chilled and frozen meat products
○ It requires input supplies (chicks and feed) at lower
rates and competitive prices for final products, which is
possible through Integrated production.

22. THANK YOU