System of integration in broilers

1. System of integration

2. Broiler supply chain
70 % sold
Value added packaging meat

3. Integration
• Association, coordinating and amalgamation of companies engaged in
various stages of a particular or related products.
• Smooth flow inputs and outputs from 1 unit to other leading to overall
reduction in production cost of final product.
• Integrator is owner of breeding farms, parent stock, grower, hatchery,
feed mill, rendering plant, processing plant and pay commission to
others for the services rendered by them.
• Broiler production from principal breeder farm to commercial farmers
are integrated
• Poultry farmers - contract growers but integrators – real owners
• Integrators have complete control on wholesale business.
• The firms have patronized retail outlet by promoting their brand name in
live bird retailing.

4. • Farmer gets growing charge linked to FCR, mortality and a performance linked incentive
• Integration - prominent in peri-urban areas compared to rural areas where independent
commercial broiler farming is popular

5. Integrated poultry production in south India
• Due to integration – retail price low
• Integrator reduced production cost and marketing margin between producer & retail
prices.
• Integrator replaced the wholesaler  established their own retail thus change from a
high margin, low - volume business to vice-versa
• Integration created regional oversupply condition  lowered retail price, squeezed
trade margin
• This process attribute to expansion plan that each integrator has planned and this
entails the required help from contractor to be loyal to them
• Key players in broiler industry have also moved into vertical integration by setting up
retail chains, processing, branding and aggressively marketing their products.
• National per capita consumption of poultry meat 2.4 kg per annum while Tamil Nadu’s
is 4.1 kg per annum.

6. Organization setup

7. Types
1. Vertical integration
 Association between different stages of production starting from a base
operation such as breeding, hatchery, commercial farm, processing unit and
marketing channel in order to utilise the outputs of one unit as input of the
other unit.
 Two or more steps of production, marketing and processing are linked together
usually by a contract between the producer and feed manufactures or between
producers and processors including all three
 When more than one stages of producing and marketing a poultry product are
controlled by the same individual or companyReduce production cost of final
product (meat) without affecting profit margin of integrator.
e.g. A hatchery supplying chicken and marketing the farmer’s final product.

8. a) Forward integration
 Integrators can go for forward integration with processing plant, marketing
channel, rendering plants etc. to fetch a fair price for eggs and broilers
 And to prevent exploitation by middle men.
 In order to fetch a better price for his output/product
 the integrator will start his own processing plant or marketing centre.
• Includes some sophistication in his dressing plant and extending his reach to
retail and institutional outlets.

9. b) Backward integration
 Farmer / integrator in order to obtain his inputs at a cheaper rate, say
chicks, he will start his own hatchery / breeding farm or broiler retailer will
start his own broiler farm to get greater profits by selling his own birds
 It involves the following steps:
a. Setting up his own /contract commercial farm.
b. Becoming chick agent for the hatchery to supply chicks to farms.
c. Setting up of a feed plant to supply feed to farmers.
d. Setting up of hatchery, purchasing of eggs and producing DOC for his
farmers.
e. setting up a breeding farm to supply the hatchery

10. 2. Horizontal integration
 Association, amalgamation or merging of companies and units engaged in same
type of production (like merging together of 2 or more hatcheries, commercial
farms, processing plants etc).
 Result in increase in volume of operation and expansion in production.
 Two or more companies at one level join together to follow a new marketing
opportunity.
 A completely integrated production and marketing system can also be organized
under the management of a grower ; wholesale processing co-operative, hence
called cooperative integration.
 Integrator go for diversified fast foods and advertisement in mass media for
sales promotion.
 Lead to either unhealthy competition among integrators or even monopoly
which are not good for industry.

11. 3. Parallel integration
 Diversification
 Integrator start allied industries
 Similarly, Hatchery operator may go for manufacturing of
incubators for own case and sales.
 It not only reduce cost of production but also obtain
additional revenue by selling diversified products.
Ex: broiler farmer may start a feed mill to reduce feed cost as
well as sell feed.

12. Advantages - integration
• Avoid Mushroom growth of independent small farms and other
production units
• Production cost of final product will come down for ultimate consumer
benefit
• Industry will grow in an organized way, after an initial struggle
• Possibility for diversified products and fast foods
• Integrator can advertise so as to promote his products due to large volume
of operation
• All main and byproducts will be utilized and recycled (no wastage) 
prevent environment pollution, reduce production cost product
• Stabilize the prices by balancing supply and demand

13. Mixed farming
• Integrated farming / eco-agricultural approach
• Practice that adopt and integrate crop, livestock, aquaculture and agro-
forestry mimic natural food cycle enhance overall synergy system.
• Minimize use external inputs
• Enhance recycling of material within system through value addition
• Achieved by including intermediate components that make use of by-
products (waste) from 1 component (poultry) as inputs (food, fertilizer)for
another.
symbiotic partnership between farming families and their natural resource
endowments.
• Alternative of natural friendly family system advocated as a basic food
production system among small scale producers.
• Integration nature include – horizontal element (knowledge based and
improved managemental practice) and vertical (value addition and
marketing)

14. Mixed / Integrated farming
Biogas
digester

15. Benefits – mixed farming
• Offer scope of getting income throughout the year
• Reduced dependency on external inputs
• Provides employment opportunity throughout the year
• Eco-friendly
• Reduce risk due to vagaries of nature
• Brings about a general level of self-reliance in community

16. Contract farming
• In south, contract growing of broiler is well established……
• Farmer - house, equipment to integrator specification, power, fuel, labor
and day-today management while Integrators responsible for removing
and marketing mature birds apart from their provision
• Integrator pay Rs 3/kg for harvested bird (based FCR- 2, mortality 4 %)
+ Rs. 0.50/kg incentive (lower FCR or mortality)
• Partnership between the agribusiness firms and farmers
• Success when both parties are profited on long term basis
• High production and price risk
– Outbreak of disease (mid 1990s) - Closure of many small poultry units
– Adversely affected hatcheries and feed industry
(40% broiler production is under contract) with TN, AP, Karnataka and
Maharashtra as the leading states