Livestock Research for Rural Development 28 (5) 2016 Guide for preparation of papers LRRD Newsletter

Citation of this paper

Profitability analysis of selected piggery businesses in peri-urban communities of Kampala Uganda

J Nabikyu and D R Kugonza1

Department of Agribusiness and Natural Resource Economics (DANRE), College of Agricultural and Environmental Sciences (CAES), Makerere University,
P.O Box 7062, Kampala, Uganda
janenabikyu@gmail.com
1 Department of Agricultural Production (DAP), College of Agricultural and Environmental Sciences, (CAES), Makerere University,
P.O. Box 7062, Kampala, Uganda

Abstract

This study was conducted to determine the drivers of profitability in pig farming in Wakiso district that surrounds Kampala city, the capital of Uganda. One hundred pig farms were sampled in a random and purposive procedure and data were collected using a standard pretested questionnaire.

Production and management of pigs was affected by lack of organizational strategies to achieve economies of scale at farm level, poor access to market information, limited use of fair and meaningful quality standards, feed shortages during the dry season, disease risks such as African swine fever, and limited access to extension services, agricultural insurance, credit and other financial services. We found that the profit per pig was UShs.17495. Experience in years, amount of land area under piggery use, number of workers, number of pigs sold, making and use of budgets, record keeping and availability of extension services were found to have a significant relationship at 5% with the profit made from piggery business. The piggery business can be made more profitable by establishing farmer groups through which they can save some money and build capital for further investment in their farms. Cooperatives from where farmers can borrow money to support their farming activities should also be introduced. Farmers should be provided with proper extension services, genetically better and more disease resistant pig breeds.

Key words: management, organizational strategies, quality standards, pig breeds


Introduction

Almost two thirds of rural households in developing countries are partially or fully reliant on livestock for their livelihoods (Pica-Ciamarra et al 2015). This is because livestock rearing provides them with a host of benefits, such as food, income, manure, savings and insurance, renewable energy, and social status (Kugonza et al 2012a; Pica-Ciamarra et al 2015). Despite falling behind the ruminants in the pecking order, largely due to religious and cultural restrictions on pork consumption, pig business plays a central role among urban and peri-urban farmers in many developing countries (Kugonza et al 2015). In Africa, Uganda is the leading pork consuming country with a consumption rate of 3.4 kilograms per person per year, and this could be due to rising incomes or shift in preferences (Dione et al 2013). About 1.1 million Ugandan farmers, most of whom are women keep over three million pigs in smallholder households with limited access to technology, information and services (Dione et al 2013). Pig farming is nevertheless becoming a big business in Uganda than ever before (Karaimu 2014). Indeed, over the past 40 years, the volume of pork consumed in developing countries has steadily increased up to 70% (Muhanguzi et al 2012). The pig industry in Uganda plays an important role in improving the standard of living by creating employment opportunities, providing a source of food and generating income (Ikanni and Dafwang 1995). Pigs are also assets that are often utilized to weather down the negative effects of unexpected shocks (Tatwangire 2013). They also play an important role in risk diversification and livelihood security of smallholder and poor households (Ouma et al 2013).

Despite the above rosy picture, the pig industry in Uganda is characterized by low output; with small-scale producers in the rural areas largely sustaining the industry (NAADS 2011). It is common for communities to have pigs rooting and roaming freely around the dwellings, to be sold as and when the household needs income (Muys and Westernbrink 2004). There are just a few commercial pig farmers in Uganda, as the pig industry has largely been unable to attract any big local or foreign investments (NAADS 2011). It is expected that the consumption of pork will increase further in the future owing to human population growth and increased per capita consumption (Galeboe et al 2009). Substantial research has been carried out on different aspects of piggery management, but little emphasis has been put on measuring profitability and hence ensuring that pig farmers attain maximum revenue from their piggery businesses. This study was therefore conducted to determine the factors affecting profitability and how incomes can be maximized in piggery enterprise.


Materials and methods

Study area and design

The study was conducted among pig farmers in Wakiso district in the sub-counties of Busukuma (n = 30), Gombe (n = 20), Kira (n = 25) and Nangabo (n = 25). Wakiso is the most populated district in Uganda and surrounds Kampala City, thereby playing a crucial role as a resident area for the city’s day population; is a dominant food basket for the capital city and is a significant supply point for pigs slaughtered and consumed in the city. Nangabo and Kira sub-counties are peri-urban while Busukuma and Gombe are rural.

A stratified survey design was used with stratification done at district, sub-county and parish administrative levels. All pig farmers in a parish were listed with the help of the local veterinary extension officer. The listing of farmers in a parish became the sampling frame from which the target number of farmers was randomly drawn.

Data collection and analysis

Quantitative data were collected by the use of a standard pretested questionnaire, administered through face to face interviews. Observations were also done as a way of triangulating information collected from the respondents. Data gathered in the survey were responses to pre-determined questions that were asked of a sample of respondents. The findings were generalized to the total group from which the sample came. The filled questionnaires were coded, and data entered and verified using the Statistical Package for Social Sciences (SPSS, version 16).

Data analysis was then performed using the descriptive statistics on production and marketing of pigs. The production parameters analysed were: family size, production system, herd size, feed supplementation, availability of veterinary inputs, record keeping, and availability of veterinary extension services. The marketing aspects analysed included availability of market for pigs, satisfaction on level of pig sales, ability for pig farmers to save money from pig sales, and willingness of farmers to invest proceeds from pig sales into expanding the business.

A multi linear regression model was used to measure the level to which each of a set of factors affect profitability among the farmers and a 5% level of significance considered for each of the factors. The independent variables analysed were: experience in pig farming (in years), land under use (acres), number of workers, pigs sold, use of budget, record keeping and availability of extension services while the dependent variable was the gross profit per pig. The multi linear regression model of the factors affecting profitability was specified as below:

Υ=α +β1X12X23X34X45X56X6+ β7X78X8 +

Where:

Υ= Gross profit per pig

α = Constant

X1 = Family size

X2 = Experience in pig farming (in years)

X3 = Used land (in acres)

X4 = No. of workers

X5= Pigs sold

X6 = Use of a Budget

X7 = Record keeping

X8 = Extension services

= Random error term

The gross profit per pig is expected to change by a certain factor (β) if any of the independent variables increase by one unit.


Results and Discussion

Pig producers demographics and production systems

Pig farms were mostly owned by the respective heads of households and for all, farming (both crop and livestock) was the main source of household income. Most pig farmers (85%) had small-scale operations that kept not more than 10 pigs (Table 1). Similarly, to Ouma et al (2014) reported that 80% of the pigs in Uganda are reared by smallholder farmers. Small herd sizes in this study would most probably lead to very limited sales, which will in turn lead to low profits. It would therefore be harder to accumulate profits out of such ventures as the little cash realized would be used to meet pressing domestic needs, leaving no surplus for saving. In the long term, such farmers might never be able to come out of poverty as envisaged (Kugonza et al 2012b). Previous studies of Ikanni and Dafwang (1995) and Muys et al (2004) found that pigs are mostly valued as a form of savings for the farmer, from where the farmer can tap in times of cash shortage and emergency needs. Tatwangire (2013) argued that keeping few pigs may be a result of farmers lacking capital to invest into the business, lack of space for expansion, or the lack of feeds. Overall, there were no variations between sub-counties in the present study, since all of them showed similar values for the various categories of respondents.

Interestingly, despite this study community being patrilineal, and in many ways male-dominated with most assets in an average household being male owned, it was found that the pig units and pigs were largely female-owned (62.5%) (Table 1). This finding is in agreement with Dion et al (2013) who reported that most of the smallholder pig farmers in Uganda are women who have limited access to technology, information and services. Women have been found to dominate the piggery industry probably because men are either doing other jobs in the nearby city, or they are rearing the more lucrative livestock species namely dairy cattle, layer or broiler chickens. We are cognizant of the position of women as having multiple household responsibilities and with all the household work they have to do, little time is left for pig farming activities. This has a direct impact on the health and nutritional status of pigs, thus resulting in less profit reflected at the end of the rearing period. Most households (58.1%) had 5 to 9 household members (Table 1), and these values appear to correlate with the pig herd size, indicating that labour for pig farming is largely available.

Table 1. Characteristics of the piggery businesses in Wakiso district

Category

Level

Sub-county

Total

Busukuma
(n = 30)

Gombe
(n = 20)

Kira
(n = 25)

Nangabo
(n = 25)

Family size

1-4

35.0

26.3

0.0

16.7

21.6

5-9

50.0

47.4

72.7

66.7

58.1

>9

15.0

26.3

27.3

16.7

20.3

Production System

Pens

50.0

95.0

73.3

100.0

81.2

Tethering

50.0

5.0

26.7

0.0

18.8

Pig herd size

1-5

70.0

50.0

40.0

48.0

52.5

6-10

15.0

35.0

33.3

44.0

32.5

11-20

5.0

10.0

13.3

8.0

8.8

>20

10.0

5.0

13.3

0.0

6.2

Supplementary feeding

Yes

35.0

40.0

40.0

36.0

37.5

No

65.0

60.0

60.0

64.0

62.5

Access to Veterinary services

Yes

52.6

68.4

40.0

80.0

62.8

No

47.4

31.6

60.0

20.0

37.2

Budgeting for piggery

Yes

15.0

10.0

6.7

32.0

17.5

No

85.0

90.0

93.3

68.0

82.5

Pig Record keeping

Yes

15.0

5.0

13.3

16.0

12.5

No

85.0

95.0

86.7

84.0

87.5

Access to Vet extension

Yes

10.0

20.0

6.7

12.0

12.5

No

90.0

80.0

93.3

88.0

87.5

A large proportion (81.2%) of the respondent farmers kept their pigs in full confinement. This is a good practice as pigs need shelter from the hot sun, rain and cold wind, in turn protecting them from stress and diseases. This promotes higher pig productivity and maximizes profits. Feed and water were provided in recommended troughs constructed inside the houses. However, most of the shelters were poorly maintained, with poor hygiene and this in turn was likely to have deleterious effect on pig performance. Cleaning and disinfection can help to control the most frequently occurring helminthes in sows (FiBL 2011), but this was not practiced by the farmers in the present study.

Only 37.5% of the farmers provided supplementary feeds to their pigs in order to promote faster growth rates. Supplementary feeds included fishmeal, cotton seed cake and soya among others. Most of the pigs were fed on vegetation and kitchen refuse/swill. Chazavachii (2012) and Irekhore and Olutemi (2012) noted that for pigs to attain optimum weight and stay in good health, they should be given balanced diets. A recent study showed that both diet and breed have very significant effects on pig growth (Kugonza et al 2015). Since supplementation was hardly practiced on the studied farms, it is not surprising that some farmers received poor results

About 63% of the farmers received veterinary support (Table 1). However, this was done occasionally because of the high costs incurred, relatively poor services rendered and also inaccessibility of farmers to the veterinarians. This was because most of the veterinarians were only available at the district and sub county headquarters therefore not accessible to the farmers in the villages. Infrequency of treatment explained the disease incidences and deaths that were reported among the farmers. Sick animals are not able to grow to their full potential and neither can they produce good quality products leading to economic losses. Approximately 37% of the farmers treated their animals by themselves. While this may be classified as being innovative, the practice is dangerous as farmers do not have enough knowledge about the diseases and drugs. Their actions ultimately could lead to problems such as over-dosing or poisoning, which will in turn lead to mortalities occurring.

Budgeting was not a common practice among the farmers and yet it is one of the most important factors that affect profitability of any business. Only 17.5% of the farmers kept budgets for their farms while the rest (82.5%) did not consider this practice. Budgeting helps farmers to apportion their finances appropriately and also keeps them aware of the flow of income and expenditure on the farms, thus preventing over spending and misallocation of funds. Furthermore, only 12% of the farmers kept farm records whereas the remaining mentioned that did not have an idea of the importance of record keeping. Records help farmers to keep track of the flow of their inventory, e.g., the number of animals born or sold on a particular day, amount of feeds bought or used among others. Making and keeping of a farm budget increases profits by Ushs.16744.294 while keeping of farm records increases farm profits by Ushs.2235.128 (table 3). Again, 12.5% of the farmers were able to attain extension services, indicating inadequacy of extension service. The farmers reported that there were hardly any extension workers available and that the few services were expensive.

Marketing of pigs

Approximately 96% of the farmers said it was easy for them to find market and sell their pigs (Table 2) while the remainder ranked the chances of finding market for their pigs as fair. This showed that it was possible to convert their pig products into cash. According to Dwight et al (2012), successful agricultural producers are those that excel at marketing and pricing their products. Kugonza et al (2015) that speculated on an explosively growing market pig market in central Uganda. Such results point to pigs having a very high demand and imply that the enterprise is profitable, and in a way may explain the high levels of pork consumption in Uganda that currently averages 3.4 kg per person per year (Dione et al 2013). Muys et al (2004) observed that despite the improvement on market opportunities for pigs, farmers are still being paid very low prices with market prices manifesting as not being stable.

Table 2. Pig markets and marketing in Wakiso district

Category

Level

Sub county

Total

Busukuma
(n = 30)

Gombe
(n = 20)

Kira
(n = 25)

Nangabo
(n = 25)

Market availability for pigs

Fair

0.0

0.0

13.3

4.0

3.8

Good

40.0

25.0

40.0

36.0

35.0

Very good

60.0

75.0

46.7

60.0

61.2

Prices offered for pigs

Fair

0.0

0.0

13.3

4.0

3.8

Good

40.0

25.0

40.0

36.0

35.0

Very good

60.0

75.0

46.7

60.0

61.2

Ability to save from pig farming

Yes

30.0

15.0

33.3

40.0

30.0

No

70.0

85.0

66.7

60.0

70.0

Willingness to invest further in

Yes

90.0

95.0

86.7

80.0

87.5

Piggery business

No

10.0

5.0

13.3

20.0

12.5

About 70% of the farmers did not make any savings from their on-going pig businesses (Table 2) probably due to the poor pig products presented to the market because of poor management. Efficiency of feed use (feed conversion) must be a key difference across profitability categories (Dwight et al 2012). Also, Khem et al (1997) reported that although garbage feeding reduced feed costs, garbage feeders did not realize full benefits.

The ability to save money depended on the income received and whether there was any surplus income from the animals sold. Household incomes are usually used to meet pressing needs of the households. On the other hand, 87.5% of the farmers were able to pay their children’s school fees, transport fees for their children, build their houses and start up other family businesses. These findings showed that with improvements in the business, savings will be able to improve. It is no wonder that despite the low incomes, respondents in all the sub-counties are committed to invest further into the piggery business.

Profitability analysis of pig businesses
Gross margin analysis

On average farmers attained a profit of UShs. 200,000 or US$65 from each pig. This was calculated by subtracting the average total variable costs from the average total revenue, the margin is quite high compared to the low inputs used on the pig farms implying that pig farming is relatively profitable. It appears that more profit would be attained with better management skills. Farmers in this study did not incur significant marketing and labour costs and they also had low cost access to basal feeds (vegetation and kitchen refuse), hence failing to attain maximum pig productivity. Khem et al (1997) stated that efficient use of inputs, especially feed and labour is more important to profitability than maximising productivity in terms of pigs weaned per sow. Also, Dwight et al (2012) reported that most profitable producers are characterized by production efficiency: greater output with the same amount of input.

Break even analysis

Farmers reported that they were able to break even, since they attained profits from their businesses. However, this was because many of them did not invest a lot in fixed capital since their farm structures were temporarily made of wood. Pig farms with smaller herds are characterized by wide variability in costs and low capital investments (Khem et al 1997).

Regression analysis

Regression analysis results are shown in the Table 3.

Table 3. Results of the multiple regression model

Model

B (in ‘000’)

Std. Error (in ‘000’)

Beta

T

p

(constant)

17.5

197

-0.088

0.930ns

Family size

5.702

7.29

0.016

0.782

0.437ns

Experience (years)

-9.37

53.3

-0.048

-1.76

0.084**

Used land (acres)

14.5

85.2

0.005

0.170

0.865ns

No. of workers

-67.1

86.8

-0.017

-0.773

0.442ns

No. Pigs sold

356

8.93

1.002

39.9

0.000*

Use of Budgeting

16.7

78.1

-0.006

-0.214

0.831ns

Pig record keeping

2.24

72.2

0.000

0.003

0.997ns

Extension service availability

14.8

70.16

0.004

0.211

0.833ns

Dependent Variable: Gross margin per pig; * Significant at 0.1%, ** Significant at 10%, ns Not Significant,


Table 4. Model summary

Mode

R

R Square

Adjusted R
Square

EMS Estimate
(in ‘000’)

1

0.989

0.978

0.975

169.0

The adjusted R square is nearly unity implying that the relationship between profit and the identified variables was a good fit, with profit levels from pig farming being explained by 97.5% of the total variation in the variables (family size, experience in years, land area used for piggery, number of workers, pigs sold, use of budget, record keeping and availability of extension services). Also, we report that pig farmers in Wakiso District get an average profit of Ushs.17495.945 from each pig as shown by the constant value.

Results show that increasing the family size by one member would result in an increase in the gross profit by Ushs.5701.679 ceteris paribus. This is because most of the farms were managed and maintained by family members showing that an increase in family size directly contributes to an increase in labour available on the farm. Sharma et al (1997) and Adetunji and Adeyemo (2012) reported that labour is a key factor in profitability of pig business in Haiti and Nigeria respectively. On the other hand, this study found that when the land used for pig farming is increased by one acre, profits are increased by Ushs.14520.350 This implies that increasing land under farming increases the scale of production since more pigs are reared and sold from the farm, and hence greater profits fetched. Previous studies in Uganda have also reported the significant effect of land size on other livestock species (Kugonza et al 2001; Natukunda et al 2011).

Making and keeping of a farm budget increases profits by Ushs.16744.294. A budget ensures that money is properly planned for and allocated on the farm so as to avoid wastage. Also the manager is able to easily follow up his spending expenses and this keeps him from making unnecessary losses. Keeping of farm records increases farm profits by Ushs.2235.128 Farm records help the farm manager to follow up activities that are going on for example, how many animals have been produced, how many have been sold, how much feed is in stock and this deals with careless management hence better results are realized on the farm.

Conversely, the use of hired labour on the farm may lead to decrease in profits by Ushs.67161.371. This is because the manager has to spend extra money to house, feed and also pay off workers on her farm. Many of the farmers in Wakiso District had dealt with this by using family labour on their pig farms since pigs do not require so much work. Khem et al (1997) reported that family labour was the major source of labour for swine production especially among medium and small herds, similar to studies elsewhere

Major factors affecting profitability

Marketing is one of the major factors that influence farm profitability among farmers. If it is easy to acquire market then income is easily generated hence profits; while if it’s harder to get market, then income is not easily accumulated hence less or no profits in the end are realized. It has been proved that the economic changes in the production can be explained by the change of the relationship between the selling and purchasing prices of the pigs (Babovic et al 2011).

Availability of extension services was another factor that affected profitability. Most of the farmers lacked knowledge on important management practices that would help them increase on their production. This was because extension services were not available to most of the farmers. Most of the farmers depended on knowledge from their own experiences which was not sufficient. The few farmers (12.5%) that had a chance to interact with extension officers gained better skills on how to manage their piggeries for better results (table 1). Also, some farmers were provided with better pig breeds that grew faster and were more tolerant to diseases which things could not be gained by the others. This was reported by the farmers that attained theses services.

Availability of veterinary services; pig health has a direct impact on weight and quality which also determines the price at which the pig will be bought or sold (Sharma et al 1997). As mentioned earlier, some of the farmers (37.2%) did not provide adequate veterinary services for various reasons. This was reflected in their final products as most of them sold their pigs at very low prices and hence attained less profit.

Major challenges faced by the farmers

Diseases were highlighted as a major challenge, especially among farmers in Nangabo sub-county whose animals were infested with African Swine Fever (ASF) towards the end of 2014 leading to high mortalities. The affected farmers were found with small stocks during this study as they had not yet replaced the lost animals. High feed expense was also highlighted as the reason why farmers fed their animals on vegetation and kitchen refuse. Khem et al (1997) and Babovic et al (2011) reported increase in feed costs as one of the major challenges in the pig enterprises, which in turn leads to reduction in profits.

Other farmers mainly fed their animals on refuse and vegetation in order to reduce feed costs. This in turn affected the quality of their products resulting in them not competing in the market. Lack of land for expansion is a problem as most of the farmers had the desire to expand their piggeries but could not do so because they had no land. Similarly, Khem et al (1997) reported limited land availability, rapid urbanisation and encroachment on urban lands to be major factors responsible for the shrinkage of the pig industry. This challenge was mainly faced by farmers in Gombe and Kira sub-counties as most of them were tenants in town tenements. Land has been fragmented leaving people with very small pieces that cannot support settlement and farming. Lack of capital to invest in permanent farm structures is another key hindrance as most of the farmers (70%) reported that they lacked capital due to lack of savings from the farms, despite their desire to construct permanent pig structures. Low market prices were also a key challenge as the farmers were offered very low prices on the market for their pigs because of the low quality of their products.


Conclusion


Acknowledgements

We acknowledge the farmers who participated in this study. The support of NARO CGS Diverse-Pig project for providing information, linkage to farmers and processing of this manuscript is also gratefully acknowledged. This paper originates from the BSc (Agribusiness) research dissertation of the first author. Special Thanks goes to the reviewer of this manuscript (Moreki J), for giving his time and wisdom in finalizing this study.


Conflict of interest statement

Authors declare no conflict of interest.


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Received 15 December 2015; Accepted 12 April 2016; Published 1 May 2016

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