Home Food for Thought Contract grower model 'fails smallholder poultry farmers'

Contract grower model ‘fails smallholder poultry farmers’

SA's poultry sector master plan seems to be missing the mark in its approach to get small-scale farmers into the commercial value chain


Kayalethu Sotsha, senior agricultural economist at the National Agricultural Marketing Council (NAMC) reveals vital information about South Africa’s poultry industry. Sotsha used the Smallholder Market Access Tracker tool initiated by the NAMC to measure the progress of smallholder farmers in achieving market access.

The Smallholder Market Access Tracker (SMAT) is a tool that was initiated by the NAMC to measure the progress of smallholder farmers in the achievement of the market access goal.

The tool relies heavily on primary data collected in line with certain market access indicators. The SMAT broiler baseline report (available here) reveals that smallholder broiler producers rely on the informal market due to numerous challenges.

Kayalethu Sotsha, senior economist at the National Agricultural Marketing Council. Photo: Supplied

In contrast, the South African poultry sector master plan aims to expand and improve poultry production through expanding the contract grower model as one of the strategic interventions to grow the sector.

- Advertisement -

South Africa’s poultry industry is dominated by a few companies that tend to be vertically integrated as a means to lower production costs, improve productivity growth and increase profitability. As such, smallholder producers do not actively participate in the mainstream value chain, despite some government attempts to provide initiatives that seek to address the imbalances.

One of the reasons is that the new entrants could suffer the consequences of a highly concentrated value chain which could eventually force them out of business.

Another reason is that government initiatives such as the Comprehensive Agricultural Support Programme (CASP) and others have not made the desired impact.

Smallholder producers often face numerous challenges such as limited access to day-old chicks, high feed prices, high mortality rate, heavy reliance on the informal market and poor cash flow, among others. Some of these arise from the lack of bargaining power, poor production infrastructure, application of informal risk management strategies, lack of marketing infrastructure, low production volumes and inconsistent demand, as well as low sales in the informal market.

The contract grower model is sold as a viable means to link smallholder producers into the mainstream value chain because it reduces transaction costs. It also provides growers with assurance to a regular supply of inputs and guaranteed market access, which provide regular income, other conditions remaining constant.

However, the model requires that the grower provides land, labour, infrastructure, equipment, water and electricity while the contractor provides inputs such as day-old chicks, feed, medicines, technical know-how as well as market opportunities.

Currently, of the 450 contract growers in the country, only 50 are fully-fledged black commercial growers.

The grower gets remunerated for growing the chicks and also gets incentives, but also gets penalised based on the production costs (e.g. feed conversion ratio) achieved and the mortality rate. Although it offers benefits for both parties, small producers often do not meet these requirements, leading the model to only accommodate the elite group of smallholder producers (i.e. those with access to huge capital investment) while entry proves to be impossible for the majority.

Currently, of the 450 contract growers in the country, only 50 are fully-fledged black commercial growers, with hundreds of thousands of smallholder producers not standing a chance of ever achieving the contract grower stage of development. In addition, there is no evidence from the industry that the model is capable of developing smallholder producers beyond the contract growers.

This implies that the model alone is not sufficient for the inclusive growth of the country’s poultry industry. Hence, transformation initiatives that; (i) allow for smallholder producers to grow independently; (ii) properly structure the informal market; and provide flexibility for small businesses to participate in the value chain when they desire to do so are rather required.

- Advertisement -
Kayalethu Sotsha
Kayalethu Sotsha
Kayalethu Sotsha, Senior Economist: Smallholder Market Access at the National Agricultural Marketing Council.


Must Read

Potato farmer and baby daddy: Is it time to call it...

Unrooted in Ficksburg, Free State writes Liewe Lulu I am engaged to be married to the father of my five-year-old son. In the seven years we...