IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Profitability and Sustainability of the Emerging Poultry Business in Developing Countries: A Case of a Poultry Grower of Nepal

Listed author(s):
  • Bhatta, Kiran Prasad
  • Ishida, Akira
  • Taniguchi, Kenji
  • Sharma, Raksha

Poultry is an important part of rural life in several developing countries. Commercialization of this business appears more beneficial but has not obtained the expected momentum, mainly due to lack of information and perception of high cash requirements and thus risky nature. Although the technical knowhow may also be one of the barriers, it is not assumed to be restricting, as found from previous researches as well as pre-survey data of this research. Hence, we study the most frequently admitted problematic side of the business, that is, financial aspect. Discussion with the farmers of Chitwan district in Nepal formed the basis of this research, followed by a detailed business analysis of a commercial poultry grower. Analysis revealed the business to be profitable, sustainable, and less sensitive to adverse conditions. The positive and high value of net worth shows that the business is in a strong position. Again, the financial ratio, liquidity ratio, and solvency ratio showed that the business is on a strong foundation, is capable of repaying its loans anytime if demanded, has sufficient liquid balance, and is financially viable. Net cash earnings are also positive, along with considerable profits as shown by the profit margins. Simple rate of return on investments is also high, hence the business could be said to be earning high profits. A business analysis over a period of ten years showed that the net present value of the business is greater than zero. The internal rate of return is also higher than the market interest rates as well as the required rate of return for both total investment and the debt portion of investment. The benefit-cost ratio is higher than unity, an indicator of significant profits, hence showing that the business is acceptable. Sensitivity analysis of the business to adverse conditions like inflation or changes in the cost of input as well as price of output showed that the business is also viable under these unfavorable conditions. These analytical results, taken together, give sufficient evidence in favor of the profitability and sustainability of the commercial poultry business. Our analysis also showed that large-scale production is highly cash demanding, although the short business cycle of two months reduces the risks as well as possibly overcoming the difficulties of frequent cash requirements. Also, the high cash requirements may be substituted by integration with the local feed industries that are usually willing to provide poultry feed on credit. It is important since poultry feed shares around 70% of the cash requirements. Moreover, by use of contracts and for a small share of the profits, these industries may help the farmer find markets. These provisions may also help the establishment of new farmers, since assured marketing reduces risk during the initial phase of establishment. This unique relationship seen in the poultry market may explain the popularity of flourishing poultry enterprises in the selected area as well as showing scope for further growth. Hence, we also recommend farmers to integrate with these local industries to reap the benefits of their contacts, at least in the initial stages of business establishment. Also, for newcomers, appropriate policies for facilitating credit may again be required to break the entry barrier due to the considerable initial investment required for poultry houses and other outlays needed for commercial farming. From the analysis of the selected grower, there appears to be some slackness in management practice on the part of Nepalese growers and hence it is recommended to increase the volume of the business and reduce liquidity in hand. This means that with the same level of investment, profits can be increased by increasing the scale of the business. It is also recommended, since local feed industries are willing to provide their products on credit and growers may not need much cash. In other words, to maintain the same level of business, less capital investment might have sufficed and again this shows that capital may not be a barrier to entry. Since the business seems quite profitable, further research is recommended to identify the optimum levels of production and other factors for maximization of profits. Although this study is vital since there is a lack of information but it is only a preliminary one and assumed to be the first step that highlights a success story. However, we would like to recommend further research to verify our findings as this research is based on a single business as well as on a single year.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
File Function: original version
Download Restriction: no

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 40957.

in new window

Date of creation: 01 Aug 2008
Publication status: Published in Japanese Journal of Food, Agricultural and Resource Economics 1.59(2008): pp. 89-100
Handle: RePEc:pra:mprapa:40957
Contact details of provider: Postal:
Ludwigstra├če 33, D-80539 Munich, Germany

Phone: +49-(0)89-2180-2459
Fax: +49-(0)89-2180-992459
Web page:

More information through EDIRC

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:40957. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.